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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-7850
SOUTHWEST GAS CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 88-0085720
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5241 SPRING MOUNTAIN ROAD
POST OFFICE BOX 98510
LAS VEGAS, NEVADA 89193-8510
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 876-7237
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
9.125% Trust Originated Preferred Securities New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Stock Purchase Rights New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NONAFFILIATES OF THE REGISTRANT:
$593,172,077 at March 14, 2000
THE NUMBER OF SHARES OUTSTANDING OF COMMON STOCK:
Common Stock, $1 Par Value, 31,219,583 shares as of March 14, 2000
DOCUMENTS INCORPORATED BY REFERENCE
DESCRIPTION PART INTO WHICH INCORPORATED
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Annual Report to Shareholders for the Parts I, II, and IV
Year Ended December 31, 1999
Proxy Statement dated March 31, 2000 Part III
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TABLE OF CONTENTS
PART I
<TABLE>
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PAGE
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<S> <C>
ITEM 1. BUSINESS............................................................. 1
Natural Gas Operations............................................... 1
General Description............................................... 1
Rates and Regulation.............................................. 2
Recent Regulatory and Legislative Developments.................... 3
Competition....................................................... 4
Demand for Natural Gas............................................ 4
Natural Gas Supply................................................ 5
Environmental Matters............................................. 6
Employees......................................................... 6
Construction Services................................................ 6
ITEM 2. PROPERTIES .......................................................... 7
ITEM 3. LEGAL PROCEEDINGS.................................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................. 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................................. 11
ITEM 6. SELECTED FINANCIAL DATA.............................................. 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................ 11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........... 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................... 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE............................................. 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................... 12
ITEM 11. EXECUTIVE COMPENSATION............................................... 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...... 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................... 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K .... 13
List of Exhibits..................................................... 15
SIGNATURES ..................................................................... 19
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PART I
ITEM 1. BUSINESS
The registrant, Southwest Gas Corporation (the Company), is incorporated
under the laws of the State of California effective March 1931. The executive
offices of the Company are located at 5241 Spring Mountain Road, P.O. Box 98510,
Las Vegas, Nevada, 89193-8510, telephone number (702) 876-7237.
The Company is principally engaged in the business of purchasing,
transporting, and distributing natural gas to residential, commercial, and
industrial customers in geographically diverse portions of Arizona, Nevada, and
California (Southwest or the natural gas operations segment).
In April 1996, the Company acquired all of the outstanding stock of
Northern Pipeline Construction Co. (Northern or the construction services
segment) pursuant to a definitive agreement dated November 1995. The
construction services segment provides utility companies with trenching and
installation, replacement, and maintenance services for energy distribution
systems.
In July 1996, the Company completed the sale of the assets and liabilities
of PriMerit Bank, Federal Savings Bank, a wholly owned subsidiary, to Norwest
Corporation. The financial services activities are designated as discontinued
operations for consolidated financial reporting purposes.
Financial information with respect to industry segments is included in
Note 12 of the Notes to Consolidated Financial Statements which is included in
the 1999 Annual Report to Shareholders and is incorporated herein by reference.
In December 1998, the Board of Directors of the Company had announced an
agreement for the Company to be acquired by ONEOK, Inc. (ONEOK). The transaction
was subject to customary conditions, including approvals from the Company's
shareholders and state regulators in Nevada, Arizona, and California.
The shareholders and Nevada regulators approved the merger agreement
during the summer of 1999. However, the staff of the Arizona Corporation
Commission (ACC) issued a report in January 2000 indicating they were unable to
recommend approval of the merger due to concerns about ONEOK's actions and
fitness to serve in Arizona. On January 18, 2000, the Company sent a letter to
ONEOK demanding that ONEOK cure the deficiencies identified in the ACC staff
report. On January 21, 2000, ONEOK responded to the Company's January 18th
letter and stated that it was terminating the merger agreement with the Company.
(See ITEM 3. LEGAL PROCEEDINGS herein for information concerning the status of
litigation related to the proposed merger and Note 14 of the Notes to
Consolidated Financial Statements, which is included in the 1999 Annual Report
to Shareholders and incorporated herein by reference, for additional background
information on the now terminated merger.)
NATURAL GAS OPERATIONS
GENERAL DESCRIPTION
Southwest is subject to regulation by the ACC, the Public Utilities
Commission of Nevada (PUCN), and the California Public Utilities Commission
(CPUC). These commissions regulate public utility rates, practices, facilities,
and service territories in their respective states. The CPUC also regulates the
issuance of all securities by the Company, with the exception of short-term
borrowings. Certain accounting practices, transmission facilities, and rates are
subject to regulation by the Federal Energy Regulatory Commission (FERC).
Southwest purchases, transports, and distributes natural gas to 1,274,000
residential, commercial, and industrial customers in geographically diverse
portions of Arizona, Nevada, and California. There were 65,000 customers added
to the system during 1999.
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The table below lists the percentage of Southwest operating margin
(operating revenues less net cost of gas) by major customer class for the years
indicated:
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RESIDENTIAL AND OTHER
FOR THE YEAR ENDED SMALL COMMERCIAL SALES CUSTOMERS TRANSPORTATION
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<S> <C> <C> <C>
December 31, 1999 83% 4% 13%
December 31, 1998 84 5 11
December 31, 1997 83 5 12
</TABLE>
Southwest is not dependent on any one or a few customers to the extent
that the loss of any one or several would have a significant adverse impact on
earnings.
Transportation of customer-secured gas to end-users on the Southwest
system accounted for 53 percent of total system throughput in 1999. Although the
volumes were significant, these customers provide a much smaller proportionate
share of operating margin. In 1999, customers who utilized this service
transported 119 million dekatherms.
The demand for natural gas is seasonal. Variability in weather from normal
temperatures can materially impact results of operations. It is the opinion of
management that comparisons of earnings for interim periods do not reliably
reflect overall trends and changes in Southwest operations. Also, earnings for
interim periods can be significantly affected by the timing of general rate
relief.
RATES AND REGULATION
Rates that Southwest is authorized to charge its distribution system
customers are determined by the ACC, PUCN, and CPUC in general rate cases and
are derived using rate base, cost of service, and cost of capital experienced in
a historical test year, as adjusted in Arizona and Nevada, and projected for a
future test year in California. The FERC regulates the northern Nevada
transmission and liquefied natural gas (LNG) storage facilities of Paiute
Pipeline Company (Paiute), a wholly owned subsidiary, and the rates it charges
for transportation of gas directly to certain end-users and to various local
distribution companies (LDCs). The LDCs transporting on the Paiute system are:
Sierra Pacific Power Company (serving Reno and Sparks, Nevada), Avista Utilities
(serving South Lake Tahoe, California), and Southwest Gas Corporation (serving
North Lake Tahoe, California and various locations throughout northern Nevada).
Rates charged to customers vary according to customer class and rate
jurisdiction and are set at levels allowing for the recovery of all prudently
incurred costs, including a return on rate base sufficient to pay interest on
debt, preferred securities distributions, and a reasonable return on common
equity. Rate base consists generally of the original cost of utility plant in
service, plus certain other assets such as working capital and inventories, less
accumulated depreciation on utility plant in service, net deferred income tax
liabilities, and certain other deductions. Rate schedules in all of the
Southwest service areas contain purchased gas adjustment (PGA) clauses, which
allow Southwest to file for rate adjustments as the cost of purchased gas
changes. Generally, tariffs in Nevada and California service territories provide
for annual adjustment dates for changes in purchased gas costs. However,
Southwest may request to adjust its rates more often than once each year, if
conditions warrant. In Arizona, beginning in June 1999, Southwest adjusts its
rates monthly for changes in purchased gas costs. PGA rate changes affect cash
flows but have no direct impact on profit margin. Filings to change rates in
accordance with PGA clauses are subject to audit by state regulatory commission
staffs. Information with respect to recent PGA filings is included in the Rates
and Regulatory Proceedings section of Management's Discussion and Analysis
(MD&A), which is included in the 1999 Annual Report to Shareholders.
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The table below lists the docketed general rate filings last initiated
and/or completed within each ratemaking area:
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MONTH
FINAL RATES
RATEMAKING AREA TYPE OF FILING MONTH FILED EFFECTIVE
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Arizona........................ General rate case November 1996 September 1997
California:
Northern.................... Operational attrition November 1997 January 1998
Southern.................... General rate case January 1994 January 1995
Nevada:
Northern and Southern....... General rate case December 1995 July 1996
FERC:
Paiute...................... General rate case July 1996 January 1997
</TABLE>
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RECENT REGULATORY AND LEGISLATIVE DEVELOPMENTS
Nevada
In 1997, the Nevada Legislature passed, and the Governor signed into law,
Assembly Bill (AB) 366. AB 366 provides the statutory framework for
restructuring both the natural gas and electric industries in the State of
Nevada to allow competition. The legislature left most of the decision making on
restructuring to the PUCN. In addition to several organizational changes, AB 366
required the PUCN to create an alternative plan of regulation by July 1, 1998.
During 1998, the PUCN issued two natural gas-related restructuring orders.
The orders identified the distinct components of natural gas service and
established the procedures to request that a component of service be declared
potentially competitive. In 1999, the PUCN continued the restructuring effort by
adopting regulations for licensing requirements and fees for alternate sellers.
Large commercial and industrial customers who currently have competitive gas
supply purchase options can continue to be served by non-utility gas suppliers
if the suppliers obtain a license from the PUCN to provide discretionary
services. To date, three applications for discretionary service licensing have
been approved. No party has come forward to register as a provider of
competitive natural gas services or to request any utility services currently
provided by Southwest be declared potentially competitive. Further issues such
as unbundling of rates, licensing of alternative sellers, and recovery of
stranded costs have not yet been decided by the PUCN.
During the 1999 legislative session, the Nevada Legislature passed, and
the Governor signed into law, Senate Bill (SB) 438. SB 438 further refines the
statutory framework for restructuring established in 1997 by Assembly Bill 366.
The recent legislation did not specifically address the natural gas industry.
California
The CPUC continued its investigation, initiated in late 1997, to further
reform the California natural gas industry. The focus of the investigation is to
examine options to promote greater competition in the offering of gas commodity,
transmission, storage, balancing, and other services for all customers of
regulated natural gas utilities. Reports from working groups to examine the
options and evaluate statewide consistency were submitted to the CPUC in August
1998. Hearings on various settlement proposals and the options are scheduled for
the first quarter of 2000. In addition, legislation adopted in 1999 established
the incumbent utility as the provider of last resort and the provider of
safety-related services under any restructuring that the CPUC might adopt.
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Arizona
In July 1998, Southwest filed a proposal that would provide all customers
with the option of choosing their own gas suppliers. This filing was made as a
response to its prior agreement in the 1997 Arizona rate case settlement to
expand the eligibility for customers to qualify for transportation service. The
filing was indefinitely suspended to allow gas marketers and other interested
parties additional time to study the proposal. During 1999, Southwest received
ACC approval to allow for core aggregation transportation. Core aggregation
provides qualifying customers with multiple meters the opportunity to aggregate
their volumes and receive transportation service. There is currently one
customer with over 80 individual meters taking advantage of this service.
Southwest will continue to work with the ACC to accomplish the goals of natural
gas restructuring in the state of Arizona.
COMPETITION
Electric utilities are Southwest's principal competitors for the
residential and small commercial markets throughout its service areas.
Competition for space heating, general household, and small commercial energy
needs generally occurs at the initial installation phase when the
customer/builder typically makes the decision as to which type of equipment to
install and operate. The customer will generally continue to use the chosen
energy source for the life of the equipment. As a result of its success in these
markets, Southwest has experienced consistent growth among the residential and
small commercial customer classes.
Unlike residential and small commercial customers, certain large
commercial, industrial, and electric generation customers have the capability to
switch to alternative energy sources. Southwest has been successful in retaining
these customers by setting rates at levels competitive with alternative energy
sources such as electricity, fuel oils, and coal. As a result, management does
not anticipate any material adverse impact on its operating margin from fuel
switching.
Southwest continues to compete with interstate transmission pipeline
companies, such as El Paso Natural Gas Company (El Paso), Kern River Gas
Transmission Company (Kern River), and Tuscarora Gas Transmission Company, to
provide service to large end-users. End-use customers located in close proximity
to these interstate pipelines pose a potential bypass threat and, therefore,
require Southwest to closely monitor each customer situation and provide
competitive service in order to retain the customer.
Southwest has maintained an intensive effort to mitigate these competitive
threats through the use of negotiated transportation contract rates, special
long-term contracts with electric generation and cogeneration customers, and new
tariff programs. One such program provides an opportunity for potential bypass
customers in Arizona to purchase natural gas-related services as a bundled
package, including the procurement of gas supply. Southwest enters into gas
supply contracts for eligible customers, which are not included in its system
supply portfolio, and provides nomination and balancing services on behalf of
the customer. This program, as well as other competitive response initiatives
and otherwise competitive rates, has helped mitigate the financial impact from
the threat of bypass and the potential loss of margin currently earned from
large customers.
DEMAND FOR NATURAL GAS
Deliveries of natural gas by Southwest are made under a priority system
established by each regulatory commission having jurisdiction over Southwest.
The priority system is intended to ensure that the gas requirements of
higher-priority customers, primarily residential customers and nonresidential
customers who use 500 therms of gas per day or less, are fully satisfied on a
daily basis before lower-priority customers, primarily electric utility and
large industrial customers able to use alternative fuels, are provided any
quantity of gas or capacity.
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Demand for natural gas is greatly affected by temperature. On cold days,
use of gas by residential and commercial customers may be as much as eight times
greater than on warm days because of increased use of gas for space heating. To
fully satisfy this increased high-priority demand, gas is withdrawn from
storage, or peaking supplies are purchased from suppliers. If necessary, service
to interruptible lower-priority customers may be curtailed to provide the needed
delivery system capacity. Southwest maintains no backlog on its orders for gas
service.
NATURAL GAS SUPPLY
Southwest is responsible for acquiring (purchasing) and arranging delivery
of (transporting) natural gas to its system for all sales customers. Southwest
believes that natural gas supplies and pipeline capacity for transportation will
remain plentiful and readily available.
The primary objective of Southwest with respect to gas supply is to ensure
that adequate, as well as economical, supplies of natural gas are available from
reliable sources. Gas is acquired from a wide variety of sources and a mix of
purchase provisions, including spot market purchases and firm supplies over
short-term and longer-term durations. During 1999, Southwest acquired gas
supplies from approximately 60 suppliers. This practice provides security
against nonperformance by any one supplier.
Balancing reliable supply assurances with the associated costs results in
a continually changing mix of purchase provisions within the supply portfolios.
To address the unique requirements of its various market areas, Southwest
assembles and administers separate natural gas supply portfolios for each of its
jurisdictional areas. All natural gas purchases, firm and spot market, are made
in a competitive bid environment. California purchases are pursuant to both
index-based and fixed-price firm pricing arrangements as well as daily spot
market purchases. For the Nevada and Arizona portfolios, the majority of
purchases involve index-based firm pricing arrangements. However, at the
direction of the respective state regulatory commissions, a portion of the firm
supplies are contracted on a fixed-price basis. This process allows Southwest to
acquire gas at current market prices with some mitigation of price volatility.
In managing its gas supply portfolio, Southwest does not currently utilize
stand-alone derivative financial instruments, but may do so in the future to
hedge against possible price increases and help mitigate the regulatory risk of
a gas cost disallowance during periods of rising prices. Any such change would
be undertaken only with regulatory commission authorization.
Natural gas prices have historically demonstrated seasonal trends with
higher prices in the winter heating season and lower prices during the summer or
off-peak consumption period. However, the increased use of natural gas for
electric power generation, with power generation loads in the west generally
peaking during the summer, appears to be shrinking the historical winter/summer
price differentials.
Gas supplies for the southern system of Southwest (Arizona, southern
Nevada, and southern California properties) are primarily obtained from
producing regions in New Mexico (San Juan basin), Texas (Permian basin), and
Rocky Mountain areas. For its northern system (northern Nevada and northern
California properties), Southwest primarily obtains gas from Rocky Mountain
producing areas and from Canada.
Southwest arranges for transportation of gas to its Arizona, Nevada, and
California service territories through the pipeline systems of El Paso, Kern
River, Northwest Pipeline Corporation, and Southern California Gas Company.
Supply and pipeline capacity availability on both short- and long-term bases are
continually monitored by Southwest to ensure the continued reliability of
service to its customers. Southwest currently receives firm transportation
service, both on a short- and long-term basis, for all of its service
territories on the four pipeline systems noted above, and has interruptible
contracts in place that allow additional capacity to be acquired as needed.
The current level of contracted firm interstate capacity is sufficient to
serve each of the service territories. As the need arises to acquire additional
capacity on one of the interstate pipeline transmission systems, primarily due
to customer growth, Southwest considers available options to obtain the
capacity, either through the use of firm contracts with a pipeline company or by
purchasing capacity on the open market. While firm contracts provide stability
and guaranteed rights to capacity, they are generally a more expensive
alternative.
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Southwest continues to evaluate natural gas storage as an option to enable
it to take advantage of daily and seasonal natural gas price differentials and
as a resource to help meet both projected and unanticipated peak-day
requirements of its rapidly growing customer base.
ENVIRONMENTAL MATTERS
Federal, state, and local laws and regulations governing the discharge of
materials into the environment have had little direct impact upon Southwest.
Environmental efforts, with respect to matters such as protection of endangered
species and archeological finds, have increased the complexity and time required
to obtain pipeline rights-of-way and construction permits. However, increased
environmental legislation and regulation are also beneficial to the natural gas
industry. Because natural gas is one of the most environmentally safe fossil
fuels currently available, its use helps energy users comply with stricter
environmental standards.
EMPLOYEES
At December 31, 1999, the natural gas operations segment had 2,482 regular
full-time equivalent employees. Southwest believes it has a good relationship
with its employees. In May 1999, non-exempt employees in the Central Arizona
Division voted to have the International Brotherhood of Electrical Workers
(IBEW) represent them in employee-related matters with Southwest. Nearly half of
the approximately 500 eligible employees in the Central Arizona Division voted
against representation by the IBEW. The Company has filed objections to the
union's conduct during the organizing effort and has appealed to the National
Labor Relations Board in Washington, D.C. to set aside the election. The appeals
process could take up to two years to complete. No other natural gas operations
segment employees are represented by a union.
Reference is hereby made to Item 10 in Part III of this report on Form
10-K for information relative to the executive officers of the Company.
CONSTRUCTION SERVICES
Northern Pipeline Construction Co. (Northern or the construction services
segment) is a full-service underground piping contractor which provides utility
companies with trenching and installation, replacement, and maintenance services
for energy distribution systems. Northern contracts primarily with LDCs to
install, repair, and maintain energy distribution systems from the town border
station to the end-user meter. The primary focus of business operations is main
and service replacement as well as new business installations. Construction work
varies from relatively small projects to the piping of entire communities.
Construction activity is seasonal. Peak construction periods are the summer and
fall months in colder climate areas, such as the Midwest. In the warmer climate
areas, such as the southwestern United States, construction continues year
round.
Northern business activities are often concentrated in utility service
territories where existing gas lines are scheduled for replacement. An LDC will
typically contract with Northern to provide pipe replacement services and new
line installations. Contract terms generally specify unit price or fixed-price
arrangements. Unit price contracts establish prices for all of the various
services to be performed during the contract period. These contracts often have
annual pricing reviews. During 1999, approximately 94 percent of revenue was
earned under unit price contracts. As of December 31, 1999 no significant
backlog exists with respect to outstanding construction contracts.
Competition within the industry is limited to several regional competitors
in what can be characterized as a largely fragmented industry. Northern
currently operates in approximately 16 major markets nationwide. Its customers
are the primary LDCs in those markets. During 1999, Northern served 40 major
customers, with Southwest accounting for approximately 34 percent of their
revenues. With the exception of one other customer that accounted for
approximately 11 percent of revenues, no other customer had a significant
contribution to Northern's revenues.
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Employment fluctuates between seasonal construction periods, which are
normally heaviest in the summer and fall months. At December 31, 1999, Northern
had 1,523 regular full-time equivalent employees. Employment peaked in October
1999 when there were 1,824 employees. The majority of the employees are
represented by collective bargaining agreements, which is typical of the utility
construction industry.
Operations are conducted from 17 field locations with corporate
headquarters located in Phoenix, Arizona. All buildings are leased from third
parties. The lease terms are typically two to three years. Field location
facilities consist of a small building for repairs and acreage to store
equipment.
ITEM 2. PROPERTIES
The plant investment of Southwest consists primarily of transmission and
distribution mains, compressor stations, peak shaving/storage plants, service
lines, meters, and regulators which comprise the pipeline systems and facilities
located in and around the communities served. Southwest also includes other
properties such as land, buildings, furnishings, work equipment, and vehicles in
plant investment. The northern Nevada and northern California properties of
Southwest are referred to as the northern system; the Arizona, southern Nevada,
and southern California properties are referred to as the southern system.
Several properties are leased by Southwest, including an LNG storage plant on
its northern Nevada system, a portion of the corporate headquarters office
complex located in Las Vegas, Nevada, and the administrative offices in Phoenix,
Arizona. Total gas plant, exclusive of leased property, at December 31, 1999 was
$2.2 billion, including construction work in progress. It is the opinion of
management that the properties of Southwest are suitable and adequate for its
purposes.
Substantially all gas main and service lines of Southwest are constructed
across property owned by others under right-of-way grants obtained from the
record owners thereof, on the streets and grounds of municipalities under
authority conferred by franchises or otherwise, or on public highways or public
lands under authority of various federal and state statutes. None of the
numerous county and municipal franchises are exclusive, and some are of limited
duration. These franchises are renewed regularly as they expire, and Southwest
anticipates no serious difficulties in obtaining future renewals.
With respect to the right-of-way grants, Southwest has had continuous and
uninterrupted possession and use of all such rights-of-way, and the associated
gas mains and service lines, commencing with the initial stages of the
construction of such facilities. Permits have been obtained from public
authorities in certain instances to cross, or to lay facilities along, roads and
highways. These permits typically are revocable at the election of the grantor,
and Southwest occasionally must relocate its facilities when requested to do so
by the grantor. Permits have also been obtained from railroad companies to cross
over or under railroad lands or rights-of-way, which in some instances require
annual or other periodic payments and are revocable at the grantors' elections.
Southwest operates two primary pipeline transmission systems: (i) a system
owned by Paiute, a wholly owned subsidiary, extending from the Idaho-Nevada
border to the Reno, Sparks, and Carson City areas and communities in the Lake
Tahoe area in both California and Nevada and other communities in northern and
western Nevada; and (ii) a system extending from the Colorado River at the
southern tip of Nevada to the Las Vegas distribution area.
The following map shows the locations of major Southwest facilities and
transmission lines, and principal communities to which Southwest supplies gas
either as a wholesaler or distributor. The map also shows major supplier
transmission lines that are interconnected with the Southwest systems.
The information appearing in Part I, Item 1, pages 6 and 7 with respect to
the construction services segment is incorporated herein by reference.
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[MAP]
[DESCRIPTION: Map of Arizona, Nevada, and California indicating the
location of Southwest service areas. Service areas in Arizona include most of
the central and southern areas of the state including Phoenix, Tucson, Yuma, and
surrounding communities. Service areas in northern Nevada include Carson City,
Yerington, Fallon, Lovelock, Winnemucca, and Elko. Service areas in southern
Nevada include the Las Vegas valley (including Henderson and Boulder City) and
Laughlin. Service areas in southern California include Barstow, Big Bear,
Needles, and Victorville. Service areas in northern California include the north
shore of Lake Tahoe and portions of Truckee. Companies providing gas
transportation services for the Company are indicated by showing the location of
their pipelines. Major transporters include El Paso Natural Gas Company, Kern
River Gas Transmission Company, Northwest Pipeline Corporation, and Southern
California Gas Company. The location of the Paiute Pipeline Company transmission
pipeline (extending from the Idaho/Nevada border to the Reno/Tahoe area) and
Southwest's pipeline (extending from Laughlin/Bullhead City to the Las Vegas
valley) are indicated. The LNG facility is located near Lovelock, Nevada.]
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ITEM 3. LEGAL PROCEEDINGS
In December 1998, the Company entered into an Agreement and Plan of Merger
(the Merger Agreement) pursuant to which the Company agreed to be acquired by
ONEOK, Inc. (ONEOK). The Merger Agreement was amended on April 25, 1999
following the receipt of unsolicited offers to acquire the Company from Southern
Union Company (Southern Union) which were rejected by the Company. On January 4,
2000, the staff of the ACC issued a report that stated it was unable to
recommend approval of the merger of the Company and ONEOK due to concerns about
ONEOK's actions and fitness to serve in Arizona. On January 18, 2000, the
Company sent a letter to ONEOK demanding that ONEOK cure the deficiencies
identified in the ACC staff report. On January 21, 2000, ONEOK responded to the
Company's letter and stated that it was terminating the merger agreement with
the Company. Litigation is pending in California, Arizona, and Oklahoma relating
to the now terminated acquisition of the Company by ONEOK and the Company's
rejection of Southern Union's unsolicited offers which is described below.
California Litigation
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On December 16, 1998, Arthur Klein filed a purported class action
complaint on behalf of himself and shareholders of the Company (excluding
defendants and their affiliates and families) in the Superior Court of the State
of California in San Diego County (Case No. 726615) against the Company and its
directors. The complaint has been amended three times. As amended, the complaint
alleges breach of the duties of loyalty, due care, candor and good faith and
fair dealing and sets forth claims relating to the Company's proxy statement for
its annual meeting of shareholders in 1999, including allegations of
misrepresentations or omissions relating to the proposed acquisition of the
Company by ONEOK and the rejection of the Southern Union offers. The complaint,
as amended, further seeks to implement an auction of the Company or similar
process, unspecified damages, and a declaration that the action is properly
maintainable as a class action on behalf of all shareholders.
On March 31, 1999, the Court allowed John Mauricio to file a complaint in
intervention. On May 4, 1999, Southern Union intervened in the purported
shareholder class action and filed a complaint in intervention. Southern Union's
complaint was thereafter severed from the purported shareholder class action and
has been dismissed.
On June 9, 1999, the Company signed a Memorandum of Understanding (MOU)
with the shareholder plaintiffs' counsel to settle the purported shareholder
class action. The MOU set forth the parties' agreement in principle settling all
of the shareholders' claims arising out of the actions of the Company and its
directors relating to the proposed acquisition of the Company by ONEOK,
including allegations of misrepresentations or omissions in the proxy statement,
and was to be incorporated into a final Stipulation of Settlement. The MOU was
subject to several conditions, including the consummation of the acquisition of
the Company by ONEOK, a condition that will not be satisfied. The MOU was not an
admission of any of the plaintiffs' allegations. The Company and its directors
have denied and continue to deny that they have committed or attempted to commit
any wrongdoing or breached any duty owed to the Company or its shareholders.
The case has been removed from the California Superior Court in San Diego
to the U.S. District Court for the Southern District of California (Case No. 99
cv 1891B (JAH)). On October 6, 1999, GAMCO Investors, Inc. and Gabelli Funds LLC
filed a notice of appearance in this matter.
Nevada Litigation
- -----------------
On April 30, 1999, the Company filed a complaint against Southern Union in
the U.S. District Court, District of Nevada (Case No. CV-99-0530-JBF-LRL)
alleging a breach of the confidentiality and standstill agreement between the
Company and Southern Union, breach of the implied covenant of good faith and
fair dealing, misappropriation of trade secrets, intentional interference with
contract, intentional interference with prospective economic advantage and other
violations of California and Nevada law. The Company amended its complaint on
May 6, 1999, adding an additional claim against Southern Union pursuant to
Section 14(a) of the Securities Exchange Act of 1934. On July 22, 1999, Southern
Union filed a motion for leave to amend its answer in the Nevada federal action
and to assert counterclaims
9
<PAGE> 12
against the Company. The counterclaims mirror the contractual claims filed by
Southern Union in the Arizona action described below. Southern Union's motion
for leave to amend has been granted. On March 8, 2000, this action was
transferred to the United States District Court of Arizona.
Arizona Litigation
- ------------------
On July 19, 1999, Southern Union filed a complaint in the United States
District Court of Arizona (Civ '99 1294 PHX ROS), which was amended on October
11, 1999. As amended, the complaint alleges that the Company, Michael O. Maffie,
President and Chief Executive Officer of the Company, Thomas Y. Hartley,
Chairman of the Board of the Company, and Edward Zub, Senior Vice President
Regulation and Pricing of the Company, ONEOK, Larry W. Brummett, Chairman of the
Board and Chief Executive Officer of ONEOK, James C. Kneale, Chief Financial
Officer and Treasurer of ONEOK, John A. Gaberino, Jr., Senior Vice President and
General Counsel of ONEOK, Eugene Dubay, President and Chief Operating Officer of
Kansas Gas Service, a division of ONEOK, James Irvin, a Commissioner of the
Arizona Corporation Commission, and Jack Rose, a resident of the State of
Arizona, have conspired to block the Company's shareholders from voting upon
Southern Union's offer and have acted to ensure that the Company's Board of
Directors would approve and recommend the ONEOK offer to the Company's
shareholders and to influence the vote of members of regulatory commissions
required to approve the proposed acquisition of the Company by ONEOK in
violation of state and federal criminal laws. The complaint, as amended, further
alleges that the defendants fraudulently induced Southern Union to enter into
the February 21, 1999 confidentiality and standstill agreement, Southwest
breached the terms of that agreement and its covenant of good faith and fair
dealing, and all defendants, other than Southwest and Mr. Hartley, intentionally
interfered with a business relationship between the Company and Southern Union
and tortiously interfered with contractual relations between the Company and
Southern Union.
Southern Union seeks damages in an amount not less than $750 million to be
trebled for the alleged violations of state and federal criminal law,
compensatory damages in an amount not less than $750 million, plus interest,
rescission of the confidentiality and standstill agreement between the Company
and Southern Union and punitive damages.
On January 24, 2000, the Company filed a complaint against ONEOK and
Southern Union in the United States District Court for the District of Arizona
(Case No. CIV'00, 0119 PHX VAM). The lawsuit seeks unspecified damages from
ONEOK for breach of contract, breach of the implied covenant of good faith and
fair dealing, fraud in the inducement, and fraud related to its actions
connected to the Merger Agreement and its cancellation of the Merger Agreement.
The Company has also sued Southern Union seeking unspecified damages for
breach of contract, breach of the implied covenant of good faith and fair
dealing, and interference with a contract, all related to Southern Union's
attempts to block the proposed Southwest Gas-ONEOK combination after Southern
Union's unsolicited offer was rejected by the Company.
Oklahoma Litigation
- -------------------
On January 21, 2000, ONEOK filed a complaint against the Company in the
United States District Court for the Northern District of Oklahoma (Case No.
00CV063 K) seeking a declaratory judgment that ONEOK properly terminated the
merger agreement.
Other Proceedings
- -----------------
The Company has been named as defendant in various other legal
proceedings. The ultimate dispositions of these proceedings are not presently
determinable; however, it is the opinion of management that none of this
litigation will have a material adverse impact on the Company's financial
position or results of operations.
10
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal markets on which the common stock of the Company is traded
are the New York Stock Exchange and the Pacific Stock Exchange. At March 14,
2000, there were 22,759 holders of record of common stock, and the market price
of the common stock was $19. The quarterly market price of and dividends on
Company common stock required by this item are included in the 1999 Annual
Report to Shareholders and are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included in the 1999 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item is included in the 1999 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Southwest Gas Corporation and
Notes thereto, together with the report of Arthur Andersen LLP, Independent
Public Accountants, are included in the 1999 Annual Report to Shareholders and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors. Information with respect to Directors is
set forth under the heading "Election of Directors" in the definitive Proxy
Statement dated March 31, 2000, which by this reference is incorporated herein.
(b) Identification of Executive Officers. The name, age, position and
period position held during the last five years for each of the Executive
Officers of the Company are as follows:
<TABLE>
<CAPTION>
PERIOD POSITION
NAMEAGE POSITION HELD
------- -------- ---------------
<S> <C> <C> <C>
Michael O. Maffie 52 President and Chief Executive Officer 1995-Present
George C. Biehl 52 Senior Vice President/Chief Financial Officer and 1996-Present
Corporate Secretary
Senior Vice President and Chief Financial Officer 1995-1996
James P. Kane 53 Senior Vice President/Operations 1997-Present
Vice President/Southern Arizona Division 1995-1997
James F. Lowman 53 Senior Vice President/Central Arizona Division 1995-Present
Dudley J. Sondeno 47 Senior Vice President/Chief Knowledge and
Technology Officer 1995-Present
Edward S. Zub 51 Senior Vice President/Regulation and Product Pricing 1996-Present
Vice President/Rates & Regulation 1995-1996
</TABLE>
(c) Identification of Certain Significant Employees. None.
(d) Family Relationships. No Directors or Executive Officers are related
to any other either by blood, marriage, or adoption.
(e) Business Experience. Information with respect to Directors is set
forth under the heading "Election of Directors" in the definitive Proxy
Statement dated March 31, 2000, which by this reference is incorporated herein.
All Executive Officers have held responsible positions with the Company for at
least five years as described in (b) above.
(f) Involvement in Certain Legal Proceedings. None.
(g) Promoters and Control Persons. None.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires officers and directors, and persons
who own more than ten percent of a registered class of equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (SEC) and the New York Stock Exchange. Officers, directors,
and beneficial owners of more than ten percent of any class of equity securities
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
The Company has adopted procedures to assist its directors and executive
officers in complying with Section 16(a) of the Securities and Exchange Act of
1934, as amended, which includes assisting in the preparation of forms for
filing. For 1999, all required reports were filed timely.
12
<PAGE> 15
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth under the
heading "Executive Compensation and Benefits" in the definitive Proxy Statement
dated March 31, 2000, which by this reference is incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners. Information with
respect to security ownership of certain beneficial owners is set forth under
the heading "Securities Ownership by Nominees, Executive Officers, and
Beneficial Owners" in the definitive Proxy Statement dated March 31, 2000, which
by this reference is incorporated herein.
(b) Security Ownership of Management. Information with respect to security
ownership of management is set forth under the heading "Securities Ownership by
Nominees, Executive Officers, and Beneficial Owners" in the definitive Proxy
Statement dated March 31, 2000, which by this reference is incorporated herein.
(c) Changes in Control. None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-K:
(1) The Consolidated Financial Statements of the Company (including
the Report of Independent Public Accountants) required to be
reported herein are incorporated by reference to the information
reported in the 1999 Annual Report to Shareholders under the
following captions:
Report of Independent Public Accountants...........34
Consolidated Statements of Income..................35
Consolidated Balance Sheets........................36
Consolidated Statements of Cash Flows..............38
Consolidated Statements of Stockholders' Equity....39
Notes to Consolidated Financial Statements.........40
(2) All schedules have been omitted because the required information
is either inapplicable or included in the Notes to Consolidated
Financial Statements.
(3) See List of exhibits.
(b) Reports on Form 8-K.
The Company filed a Form 8-K, dated January 20, 2000 reporting that
the Arizona Corporation Commission delayed hearings regarding the proposed
merger between Southwest Gas Corporation and ONEOK to February 22, 2000.
13
<PAGE> 16
The Company filed a Form 8-K on January 26, 2000 reporting that ONEOK
had terminated the proposed merger between Southwest Gas Corporation and
ONEOK. The Form 8-K also reported that on January 24, 2000 the Company
filed a complaint against ONEOK and Southern Union Company in the United
States District Court for the District of Arizona seeking unspecified
damages against both companies.
The Company filed a Form 8-K dated February 3, 2000 reporting that the
California Public Utilities Commission approved the Joint Petition
relating to the Northern California Expansion Project.
The Company filed a Form 8-K, dated February 22, 2000 reporting
summary financial information for the quarter and year ended December 31,
1999.
(c) See List of exhibits.
14
<PAGE> 17
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
2.01(21) Agreement and Plan of Merger by and among ONEOK, Inc., Oasis
Acquisition Corporation, and Southwest Gas Corporation dated as
of December 14, 1998.
2.02(23) Amendment No. 1, dated as of April 25, 1999, to the Agreement
and Plan of Merger, dated as of December 14, 1998, by and among
ONEOK, Inc., Oasis Acquisition Corporation, and Southwest Gas
Corporation.
3(i)(17) Restated Articles of Incorporation, as amended.
3(ii)(22) Amended Bylaws of Southwest Gas Corporation.
4.01(1) Indenture between the Company and Bank of America National Trust
and Savings Association, as successor by merger to Security
Pacific National Bank, as Trustee, dated August 1, 1986.
4.02(6) Sixth Supplemental Indenture of the Company to Bank of America
National Trust and Savings Association, as successor by merger
to Security Pacific National Bank, as Trustee, dated as of June
16, 1992, supplementing and amending the Indenture dated as of
August 1, 1986, with respect to 9 3/4% Debentures, Series F, due
2002.
4.03(7) Indenture between Clark County, Nevada, and Bank of America
Nevada as Trustee, dated September 1, 1992, with respect to the
issuance of $130,000,000 Industrial Development Revenue Bonds
(Southwest Gas Corporation), $30,000,000 1992 Series A, due
2027, and $100,000,000 1992 Series B, due 2032.
4.04(8) Indenture between Clark County, Nevada, and Harris Trust and
Savings Bank as Trustee, dated December 1, 1993, with respect to
the issuance of $75,000,000 Industrial Development Revenue Bonds
(Southwest Gas Corporation), 1993 Series A, due 2033.
4.05(8) Indenture between City of Big Bear Lake, California, and Harris
Trust and Savings Bank as Trustee, dated December 1, 1993, with
respect to the issuance of $50,000,000 Industrial Development
Revenue Bonds (Southwest Gas Corporation Project), 1993 Series
A, due 2028.
4.06(13) Indenture between the Company and Harris Trust and Savings Bank
dated July 15, 1996, with respect to Debt Securities.
4.07(14) First Supplemental Indenture of the Company to Harris Trust and
Savings Bank dated August 1, 1996, supplementing and amending
the Indenture dated as of July 15, 1996, with respect to 7 1/2%
and 8% Debentures, due 2006 and 2026, respectively.
4.08(16) Second Supplemental Indenture of the Company to Harris Trust and
Savings Bank dated December 30, 1996, supplementing and amending
the Indenture dated as of July 15, 1996, with respect to
Medium-Term Notes.
4.09(3) Certificate of Trust of Southwest Gas Capital I.
4.10(10) Amended and Restated Declaration of Trust of Southwest Gas
Capital I.
</TABLE>
15
<PAGE> 18
<TABLE>
<C> <S>
4.11(10) Form of Preferred Security (attached as Annex I to Exhibit A to
the Amended and Restated Declaration of Trust of Southwest Gas
Capital I included as Exhibit 4.10 hereto).
4.12(4) Form of Guarantee with respect to Preferred Securities.
4.13(9) Southwest Gas Capital I Preferred Securities Guarantee by the
Company and Harris Trust and Savings Bank, dated as of October
31, 1995.
4.14(9) Form of Subordinated Debt Security (included in the First
Supplemental Indenture included as Exhibit 4.16 hereto).
4.15(9) Subordinated Debt Securities Indenture between the Company and
Harris Trust and Savings Bank, dated as of October 31, 1995.
4.16(9) First Supplemental Indenture between the Company and Harris
Trust and Savings Bank, dated as of October 31, 1995,
supplementing and amending the Indenture dated as of October 31,
1995, with respect to the 9.125% Subordinated Debt Securities.
4.17(2) Form of Deposit Agreement.
4.18(2) Form of Depositary Receipt (attached as Exhibit A to Deposit
Agreement included as Exhibit 4.17 hereto).
4.19(22) Amended and Restated Rights Agreement between the Company and
Harris Trust Company, as Rights Agent, dated as of February 9,
1999.
4.20 Indenture between Clark County, Nevada, and Harris Trust and
Savings Bank as Trustee, dated as of October 1, 1999, with
respect to the issuance of $35,000,000 Industrial Development
Revenue Bonds (Southwest Gas Corporation), Series 1999A and
Taxable Series 1999B, due 2038.
4.21 The Company hereby agrees to furnish to the SEC, upon request, a
copy of any instruments defining the rights of holders of
long-term debt issued by Southwest Gas Corporation or its
subsidiaries.
10.01(5) Participation Agreement among the Company and General Electric
Credit Corporation, Prudential Insurance Company of America,
Aetna Life Insurance Company, Merrill Lynch Interfunding, Bank
of America through purchase of Valley Bank of Nevada, Bankers
Trust Company and First Interstate Bank of Nevada, dated as of
July 1, 1982.
10.02(15) Amended and Restated Lease Agreement between the Company and
Spring Mountain Road Associates, dated as of July 1, 1996.
10.03(8) Financing Agreement between the Company and Clark County,
Nevada, dated September 1, 1992.
10.04(8) Financing Agreement between the Company and Clark County,
Nevada, dated as of December 1, 1993.
10.05(8) Project Agreement between the Company and City of Big Bear Lake,
California, dated as of December 1, 1993.
10.06(19) Southwest Gas Corporation Management Incentive Plan, amended and
restated January 1, 1995.
10.07(20) Form of Employment Agreement with Company Officers.
</TABLE>
16
<PAGE> 19
<TABLE>
<C> <S>
10.08(20) Form of Change in Control Agreement with Company Officers.
10.09(11) Merger Agreement among the Company and Northern Pipeline
Construction Co., dated as of November 13, 1995.
10.10(12) Southwest Gas Corporation 1996 Stock Incentive Plan.
10.11(18) $350 million Revolving Credit Agreement among the Company, Union
Bank of Switzerland, et al., dated as of June 12, 1997.
10.12 Southwest Gas Corporation Supplemental Retirement Plan, amended
and restated as of March 1, 1999.
10.13 Southwest Gas Corporation Executive Deferral Plan, amended and
restated as of March 1, 1999.
10.14 Southwest Gas Corporation Directors Deferral Plan, amended and
restated as of March 1, 1999.
10.15 Southwest Gas Corporation Board of Directors Retirement Plan,
amended and restated as of March 1, 1999.
10.16 Financing Agreement between the Company and Clark County,
Nevada, dated as of October 1, 1999.
12.01 Computation of Ratios of Earnings to Fixed Charges and Ratios of
Earnings to Combined Fixed Charges and Preferred Stock Dividends
of the Company.
13.01 Portions of 1999 Annual Report incorporated by reference to the
Form 10-K.
21.01 List of subsidiaries of Southwest Gas Corporation.
23.01 Consent of Arthur Andersen LLP, Independent Public Accountants.
27.01 Financial Data Schedule (filed electronically only).
</TABLE>
- ----------
(1) Incorporated herein by reference to the Registration Statement on Form
S-3, No. 33-7931.
(2) Incorporated herein by reference to the Registration Statement on Form
S-3, No. 33-55621.
(3) Incorporated herein by reference to the Registration Statement on Form
S-3, No. 33-62143.
(4) Incorporated herein by reference to Amendment No. 1 to Registration
Statement on Form S-3, No. 33-62143.
(5) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1982.
(6) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended June 30, 1992.
(7) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended September 30, 1992.
(8) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1993.
(9) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended September 30, 1995.
17
<PAGE> 20
(10) Incorporated herein by reference to the report on Form 8-K dated October
26, 1995.
(11) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1995.
(12) Incorporated herein by reference to the Proxy Statement dated May 30,
1996.
(13) Incorporated herein by reference to the report on Form 8-K dated July 26,
1996.
(14) Incorporated herein by reference to the report on Form 8-K dated July 31,
1996.
(15) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended September 30, 1996.
(16) Incorporated herein by reference to the report on Form 8-K dated December
30, 1996.
(17) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended March 31, 1997.
(18) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended June 30, 1997.
(19) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1997.
(20) Incorporated herein by reference to the report on Form 10-Q for the
quarter ended September 30, 1998.
(21) Incorporated herein by reference to the report on Form 8-K dated December
14, 1998.
(22) Incorporated herein by reference to the report on Form 10-K for the year
ended December 31, 1998.
(23) Incorporated herein by reference to the report on Form 8-K dated April
25, 1999.
18
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SOUTHWEST GAS CORPORATION
Date: March 24, 2000 By /s/ MICHAEL O. MAFFIE
-------------------------------------
Michael O. Maffie,
President and Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GEORGE C. BIEHL Senior Vice President, March 24, 2000
- ----------------------------------- Chief Financial Officer and
(George C. Biehl) Corporate Secretary
/s/ EDWARD A. JANOV Vice President, Controller and March 24, 2000
- ----------------------------------- Chief Accounting Officer
(Edward A. Janov)
</TABLE>
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GEORGE C. BIEHL Director, Senior Vice President, March 7, 2000
- ------------------------------------------ Chief Financial Officer and
(George C. Biehl) Corporate Secretary
/s/ MANUEL J. CORTEZ Director March 7, 2000
- ------------------------------------------
(Manuel J. Cortez)
/s/ LLOYD T. DYER Director March 7, 2000
- ------------------------------------------
(Lloyd T. Dyer)
/s/ THOMAS Y. HARTLEY Chairman of the Board March 7, 2000
- ------------------------------------------ of Directors
(Thomas Y. Hartley)
/s/ MICHAEL B. JAGER Director March 7, 2000
- ------------------------------------------
(Michael B. Jager)
/s/ LEONARD R. JUDD Director March 7, 2000
- ------------------------------------------
(Leonard R. Judd)
/s/ JAMES J. KROPID Director March 7, 2000
- ------------------------------------------
(James J. Kropid)
/s/ MICHAEL O. MAFFIE Director, President and March 7, 2000
- ------------------------------------------ Chief Executive Officer
(Michael O. Maffie)
/s/ CAROLYN M. SPARKS Director March 7, 2000
- ------------------------------------------
(Carolyn M. Sparks)
/s/ ROBERT S. SUNDT Director March 7, 2000
- ------------------------------------------
(Robert S. Sundt)
/s/ TERRANCE L. WRIGHT Director March 7, 2000
- ------------------------------------------
(Terrance L. Wright)
</TABLE>
20
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<C> <S>
4.20 Indenture between Clark County, Nevada, and Harris Trust and
Savings Bank as Trustee, dated as of October 1, 1999, with
respect to the issuance of $35,000,000 Industrial Development
Revenue Bonds (Southwest Gas Corporation), Series 1999A and
Taxable Series 1999B, due 2038.
10.12 Southwest Gas Corporation Supplemental Retirement Plan, amended
and restated as of March 1, 1999.
10.13 Southwest Gas Corporation Executive Deferral Plan, amended and
restated as of March 1, 1999.
10.14 Southwest Gas Corporation Directors Deferral Plan, amended and
restated as of March 1, 1999.
10.15 Southwest Gas Corporation Board of Directors Retirement Plan,
amended and restated as of March 1, 1999.
10.16 Financing Agreement between the Company and Clark County, Nevada,
dated as of October 1, 1999.
12.01 Computation of Ratios of Earnings to Fixed Charges and Ratios of
Earnings to Combined Fixed Charges and Preferred Stock Dividends
of the Company.
13.01 Portions of 1999 Annual Report incorporated by reference to Form 10-K.
21.01 List of Subsidiaries of Southwest Gas Corporation.
23.01 Consent of Arthur Andersen LLP, Independent Public Accountants.
27.01 Financial Data Schedule (filed electronically only).
</TABLE>
<PAGE> 1
EXHIBIT 4.20
================================================================================
INDENTURE OF TRUST
between
CLARK COUNTY, NEVADA
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee
-------------------------------
relating to
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SOUTHWEST GAS CORPORATION PROJECT)
SERIES 1999A
and
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SOUTHWEST GAS CORPORATION PROJECT)
TAXABLE SERIES 1999B
-----------------------------
Dated as of October 1, 1999
================================================================================
<PAGE> 2
<TABLE>
<S> <C>
GRANTING CLAUSE FIRST ...........................................................................................2
GRANTING CLAUSE SECOND ..........................................................................................3
GRANTING CLAUSE THIRD ...........................................................................................3
ARTICLE I DEFINITIONS AND RULES OF INTERPRETATION....................................................3
Section 1.01. RULES OF INTERPRETATION............................................................3
Section 1.02. DEFINITIONS........................................................................4
Section 1.03. NUMBER AND GENDER.................................................................14
Section 1.04. CONTENT OF CERTIFICATES AND OPINIONS..............................................14
ARTICLE II THE BONDS.................................................................................14
Section 2.01. AUTHORIZED AMOUNT OF BONDS........................................................14
Section 2.02. ISSUANCE OF BONDS.................................................................15
Section 2.03. DETERMINATION OF RATE PERIODS AND INTEREST RATES..................................17
Section 2.04. OWNERSHIP, TRANSFER, EXCHANGE AND REGISTRATION OF BONDS...........................30
Section 2.05. EXECUTION OF BONDS................................................................31
Section 2.06. AUTHENTICATION....................................................................31
Section 2.07. FORM OF BONDS.....................................................................31
Section 2.08. MUTILATED, DESTROYED, LOST OR STOLEN BONDS........................................33
Section 2.09. TEMPORARY BONDS...................................................................33
Section 2.10. CANCELLATION AND DISPOSITION OF SURRENDERED BONDS.................................33
Section 2.11. USE OF CERTAIN MONEYS IN THE BOND FUND UPON REFUNDING.............................34
Section 2.12. DELIVERY OF THE BONDS.............................................................34
Section 2.13. BOOK-ENTRY SYSTEM.................................................................34
Section 2.14. DELIVERY OF THE BONDS. DESIGNATION OF THE BONDS AS BOOK-ENTRY BONDS;
APPOINTMENT OF INITIAL SECURITIES DEPOSITORY FOR THE BONDS........................38
Section 2.15. CONVERSION OF SERIES 1999B BONDS TO TAX-EXEMPT SERIES.............................39
ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY.......................................................40
Section 3.01. REDEMPTION DATES AND PRICES.......................................................40
Section 3.02. NOTICE OF REDEMPTION..............................................................43
Section 3.03. DEPOSIT OF FUNDS..................................................................44
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 3.04. PARTIAL REDEMPTION OF BONDS.......................................................44
Section 3.05. SELECTION OF BONDS FOR REDEMPTION.................................................45
ARTICLE IV TENDER AND PURCHASE OF BONDS; REMARKETING; REMARKETING AGENT..............................45
Section 4.01. PURCHASE OF BONDS AT OPTION OF OWNERS.............................................45
Section 4.02. MANDATORY PURCHASE OF BONDS.......................................................47
Section 4.03. OBLIGATION TO SURRENDER BONDS.....................................................48
Section 4.04. REMARKETING OF BONDS..............................................................48
Section 4.05. PURCHASE OF BONDS TENDERED TO TRUSTEE.............................................50
Section 4.06. DELIVERY OF PURCHASED BONDS.......................................................51
Section 4.07. NO SALES AFTER DEFAULT............................................................51
Section 4.08. REMARKETING AGENT.................................................................51
Section 4.09. QUALIFICATIONS OF REMARKETING AGENT...............................................52
Section 4.10. TENDER AND PURCHASE OF BOOK-ENTRY BONDS...........................................52
Section 4.11. DRAWS UPON THE LIQUIDITY FACILITY.................................................53
ARTICLE V PAYMENT; FURTHER ASSURANCES...............................................................54
Section 5.01. PAYMENT OF PRINCIPAL OR REDEMPTION PRICE OF AND INTEREST ON BONDS.................54
Section 5.02. EXTENSION OR FUNDING OF CLAIMS FOR INTEREST.......................................54
Section 5.03. PRESERVATION OF REVENUES..........................................................54
Section 5.04. OTHER LIENS.......................................................................54
Section 5.05. COMPLIANCE WITH THE INDENTURE.....................................................54
Section 5.06. PERFORMANCE OF COVENANTS..........................................................54
Section 5.07. RIGHT TO PAYMENTS UNDER AGREEMENT; INSTRUMENTS OF FURTHER ASSURANCE...............55
Section 5.08. TAX COVENANTS.....................................................................55
Section 5.09. INSPECTION OF PROJECT BOOKS.......................................................56
Section 5.10. RIGHTS UNDER AGREEMENT............................................................56
Section 5.11. CONTINUING DISCLOSURE.............................................................56
ARTICLE VI REVENUES AND FUNDS........................................................................56
Section 6.01. SOURCE OF PAYMENT OF BONDS; LIABILITY OF ISSUER LIMITED TO REVENUES...............56
Section 6.02. CREATION OF THE BOND FUND.........................................................57
Section 6.03. PAYMENTS INTO THE BOND FUND.......................................................57
</TABLE>
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Section 6.04. USE OF MONEYS IN THE BOND FUND AND CERTAIN OTHER MONEYS...........................58
Section 6.05. CUSTODY OF THE BOND FUND..........................................................58
Section 6.06. CREATION OF THE CONSTRUCTION FUND; DISBURSEMENTS..................................58
Section 6.07. COSTS OF ISSUANCE FUND; DISBURSEMENTS.............................................59
Section 6.08. USE OF MONEYS IN CONSTRUCTION FUND UPON DEFAULT...................................59
Section 6.09. USE OF MONEYS IN CONSTRUCTION FUND UPON REDEMPTION................................60
Section 6.10. USE OF MONEYS IN CONSTRUCTION FUND UPON PAYMENT OF BONDS..........................60
Section 6.11. NON-PRESENTMENT OF BONDS..........................................................60
Section 6.12. TRUSTEE FEES, CHARGES AND EXPENSES................................................60
Section 6.13. MONEYS TO BE HELD IN TRUST........................................................60
Section 6.14. REPAYMENT TO THE BORROWER FROM THE BOND FUND......................................61
Section 6.15. REVENUES TO BE PAID OVER TO TRUSTEE...............................................61
Section 6.16. PAYMENTS OF PRINCIPAL AND INTEREST................................................61
Section 6.17. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN EXCEPTIONS.......................61
Section 6.18. REBATE FUND.......................................................................61
Section 6.19. BOND INSURANCE PAYMENTS...........................................................61
ARTICLE VII INVESTMENT OF MONEYS......................................................................63
Section 7.01. INVESTMENT OF MONEYS..............................................................63
Section 7.02. INVESTMENTS; ARBITRAGE............................................................64
ARTICLE VIII DEFEASANCE................................................................................64
Section 8.01. DEFEASANCE........................................................................64
ARTICLE IX DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS................................66
Section 9.01. DEFAULTS; EVENTS OF DEFAULT.......................................................66
Section 9.02. ACCELERATION......................................................................67
Section 9.03. REMEDIES; RIGHTS OF BONDHOLDERS AND BOND INSURER..................................67
Section 9.04. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS........................................68
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Section 9.05. APPLICATION OF MONEYS.............................................................68
Section 9.06. REMEDIES VESTED IN TRUSTEE........................................................69
Section 9.07. RIGHTS AND REMEDIES OF BONDHOLDERS................................................70
Section 9.08. TERMINATION OF PROCEEDINGS........................................................70
Section 9.09. WAIVERS OF EVENTS OF DEFAULT......................................................70
Section 9.10. NOTICE OF EVENT OF DEFAULT UNDER SECTION 9.01(e) HEREOF; OPPORTUNITY OF
BORROWER TO CURE DEFAULTS.........................................................71
ARTICLE X THE TRUSTEE...............................................................................72
Section 10.01. ACCEPTANCE OF THE TRUSTS BY TRUSTEE...............................................72
Section 10.02. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY...........................................75
Section 10.03. FEES, CHARGES AND EXPENSES OF TRUSTEE.............................................76
Section 10.04. NOTICE TO BONDHOLDERS IF DEFAULT OCCURS...........................................76
Section 10.05. INTERVENTION BY TRUSTEE...........................................................76
Section 10.06. SUCCESSOR TRUSTEE.................................................................76
Section 10.07. RESIGNATION BY THE TRUSTEE........................................................76
Section 10.08. REMOVAL OF THE TRUSTEE............................................................77
Section 10.09. APPOINTMENT OF SUCCESSOR TRUSTEE..................................................77
Section 10.10. CONCERNING ANY SUCCESSOR TRUSTEES.................................................78
Section 10.11. TRUSTEE PROTECTED IN RELYING UPON RESOLUTION......................................78
Section 10.12. SUCCESSOR TRUSTEE AS THE TRUSTEE, PAYING AGENT, TENDER AGENT AND REGISTRAR........78
Section 10.13. NOTICES TO BE GIVEN BY TRUSTEE....................................................79
Section 10.14. NOTICES TO RATING AGENCY AND LIQUIDITY PROVIDER; NOTICES TO BOND INSURER..........79
ARTICLE XI SUPPLEMENTAL INDENTURES...................................................................80
Section 11.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS (BUT
REQUIRING CONSENT OF THE BORROWER)................................................80
Section 11.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS AND THE BORROWER.........82
Section 11.03. CONSENT OF BORROWER AND BOND INSURER..............................................82
Section 11.04. CONSENT OF REMARKETING AGENT AND LIQUIDITY PROVIDER...............................83
Section 11.05. CONSENT OF TRUSTEE................................................................83
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Section 11.06. REQUIRED AND PERMITTED OPINIONS OF COUNSEL........................................83
Section 11.07. NOTATION OF MODIFICATION ON BONDS; PREPARATION OF MODIFIED BONDS..................83
ARTICLE XII AMENDMENT OF AGREEMENT....................................................................83
Section 12.01. AMENDMENTS TO AGREEMENT NOT REQUIRING CONSENT OF BONDHOLDERS......................83
Section 12.02. AMENDMENTS TO AGREEMENT REQUIRING CONSENT OF BONDHOLDERS..........................84
Section 12.03. CONSENT OF TRUSTEE................................................................85
Section 12.04. RELIANCE ON OPINIONS OF COUNSEL...................................................85
ARTICLE XIII MISCELLANEOUS.............................................................................85
Section 13.01. SUCCESSORS OF THE ISSUER..........................................................85
Section 13.02. CONSENTS OF BONDHOLDERS...........................................................85
Section 13.03. LIMITATION OF RIGHTS..............................................................86
Section 13.04. WAIVER OF NOTICE..................................................................86
Section 13.05. SEVERABILITY......................................................................86
Section 13.06. NOTICES...........................................................................86
Section 13.07. WAIVER OF PERSONAL LIABILITY OF ISSUER MEMBERS, ETC...............................87
Section 13.08. HOLIDAYS..........................................................................88
Section 13.09. OPINIONS OF BOND COUNSEL..........................................................88
Section 13.10. COUNTERPARTS......................................................................88
Section 13.11. APPLICABLE LAW....................................................................88
Section 13.12. CAPTIONS..........................................................................88
Section 13.13. DEALING IN BONDS..................................................................88
Section 13.14. IMMUNITY OF INCORPORATORS.........................................................88
Section 13.15. BORROWER MAY ACT THROUGH AGENTS...................................................89
Section 13.16. RECORD DATE FOR DETERMINATION OF OWNERS ENTITLED TO VOTE..........................89
EXHIBIT A1 FORM OF SERIES 1999A BOND...............................................................A1-1
EXHIBIT A2 FORM OF TAXABLE SERIES 1999B BOND.......................................................A2-1
EXHIBIT B FORM OF TAX-EXEMPT SERIES BOND...........................................................B-1
EXHIBIT C TRUSTEE CERTIFICATE......................................................................C-1
EXHIBIT D FORM OF COST OF ISSUANCE FUND REQUISITION................................................D-1
</TABLE>
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THIS INDENTURE OF TRUST, made and entered into as of October
1, 1999 (this "Indenture"), by and between CLARK COUNTY, NEVADA, a political
subdivision of the State of Nevada (the "Issuer"), and HARRIS TRUST AND SAVINGS
BANK, not in its individual capacity, but solely as Trustee (the "Trustee"), a
banking corporation organized, existing and authorized to accept and execute
trusts of the character herein set out under the laws of the State of Illinois.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Issuer is a public instrumentality and political
subdivision of the State of Nevada organized and existing under the County
Economic Development Revenue Bond Law Sections 244A.669 to 244A.763, inclusive,
of the Nevada Revised Statutes, as supplemented and amended (the "Act"), and is
authorized by the Act to issue its revenue bonds for the purpose of paying all
or any part of the costs of a "project" as defined in the Act; and
WHEREAS, Southwest Gas Corporation, a California corporation
(the "Borrower"), has duly caused an application to be filed with the Issuer and
has requested that the Issuer issue bonds to finance or refinance a portion of
the cost of the acquisition, construction and installation of a "project" within
the meaning of the Act consisting of the upgrade, improvement, addition and
replacement of facilities for local furnishing of natural gas located in Clark
County, Nevada as more particularly described in Exhibit A of the Agreement (the
"Project"); and
WHEREAS, the Issuer, after due investigation and deliberation,
has adopted a resolution approving said request and authorizing the issuance of
bonds to finance or refinance a portion of the cost of the acquisition,
construction, and installation of the Project; and
WHEREAS, concurrently with the execution and delivery of this
Indenture, the Issuer is entering into a Financing Agreement, dated the date
hereof (the "Agreement"), with the Borrower specifying the terms and conditions
of the financing or refinancing of a portion of the cost of the acquisition and
construction of the Project by the Borrower, the lending of the proceeds of the
Issuer's Industrial Development Revenue Bonds (Southwest Gas Corporation
Project) Series 1999A (the "Series 1999A Bonds") and the Issuer's Industrial
Development Revenue Bonds (Southwest Gas Corporation Project) Taxable Series
1999B (the "Series 1999B Bonds") to the Borrower for such purpose, and the
repayment by the Borrower of such loan; and
WHEREAS, in order to provide for the authentication and
delivery of the Series 1999A Bonds and the Series 1999B Bonds (as more fully
defined herein, the "Bonds"), to establish and declare the terms and conditions
upon which the Bonds are to be issued and secured and to secure the payment of
the principal thereof and of the interest and premium, if any, thereon, the
Issuer has authorized the execution and delivery of this Indenture; and
WHEREAS, the Bonds are to be issued in a total aggregate
principal amount not to exceed $35,000,000 and are to be sold and delivered to
provide proceeds, as a loan to the Borrower, to finance or refinance a portion
of the cost of the acquisition, construction, and installation of the Project,
including the refinancing of such cost by refunding the Refunded Bonds, as
defined herein; and
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WHEREAS, the Bonds and the Trustee's certificate of
authentication and the form of assignment to be endorsed thereon shall be in
substantially the forms set forth in Exhibit A to this Indenture, with necessary
and appropriate variations, omissions and insertions as permitted or required by
this Indenture;
WHEREAS, in order to further enhance the payments of principal
of and interest on the Bonds, the Borrower has obtained municipal bond insurance
or financial guaranty insurance with respect to the Bonds, and in order to
provide for the purchase of tendered Bonds, the Borrower has arranged for the
provision of a liquidity facility with respect to certain of the Bonds;
WHEREAS, all acts and proceedings required by law necessary to
make the Bonds when executed by the Issuer, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal limited obligations of the
Issuer, and to constitute this Indenture a valid and binding agreement for the
uses and purposes herein set forth, in accordance with its terms, have been done
and taken; and the execution and delivery of this Indenture have been in all
respects duly authorized;
NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH:
That the Issuer in consideration of the premises, the
acceptance by the Trustee of the trust hereby created, the purchase and
acceptance of the Bonds by the purchasers thereof, one dollar duly paid to the
Issuer by the Trustee at or before the execution and delivery of these presents
and of other good and valuable considerations, the receipt of which is hereby
acknowledged, and in order to secure the payment of the principal of and
premium, if any, and interest on all Bonds outstanding hereunder from time to
time, according to their tenor and effect, and to secure the observance and
performance by the Issuer of all the covenants expressed or implied herein and
in the Bonds, does hereby pledge and assign unto the Trustee and unto its
successors and assigns forever;
GRANTING CLAUSE FIRST
The Agreement, including all extensions and renewals of the
term thereof, if any, together with all right, title and interest of the Issuer
therein (except for the right of the Issuer to the payment of costs, expenses
and indemnification pursuant to Sections 4.2(d), 4.2(e), 4.2(h) and 6.4 of the
Agreement and any rights of the Issuer to receive any notices, certificates,
requests, requisitions or other communications, to make inspections and to give
consents under the Agreement) including, but without limiting the generality of
the foregoing, the present and continuing right to receive, collect or make
claim for any of the moneys, income, revenues, issues, profits and other amounts
payable or receivable thereunder, including payments made by the Borrower under
the Agreement (excepting only payments made by the Borrower pursuant to the Tax
Certificate (as defined herein) in order to make rebate payments to the United
States), to bring actions and proceedings thereunder or for the enforcement
thereof, and to do any and all things which the Issuer or any other person is or
may become entitled to do under the Agreement;
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GRANTING CLAUSE SECOND
All Revenues (as defined herein) received by the Issuer under
the Agreement and all moneys and earnings thereon held by the Trustee in the
Construction Fund, the Costs of Issuance Fund, or in the Bond Fund under the
terms of this Indenture; and
GRANTING CLAUSE THIRD
Any and all other property of each name and nature from time
to time hereafter by delivery or by writing of any kind pledged or assigned as
and for additional security hereunder, by the Issuer or by anyone on its behalf
or with its written consent, to the Trustee, which are hereby authorized to
receive any and all such property at any and all times and to hold and apply the
same subject to the terms hereof.
TO HAVE AND TO HOLD all and singular the Trust Estate, whether
now owned or hereafter acquired, unto the Trustee and its successors in said
trusts and assigns forever.
IN TRUST NEVERTHELESS, upon the terms and trusts herein set
forth for the equal and proportionate benefit, security and protection of all
present and future owners of the Bonds, from time to time issued under and
secured by this Indenture without privilege, priority or distinction as to the
lien or otherwise of any of the Bonds over any of the other Bonds (except only
as otherwise expressly stated herein).
PROVIDED HOWEVER, that if the Issuer, its successors or
assigns, shall cause to be paid, the principal of the Bonds and the interest and
premium, if any, due or to become due thereon, at the times and in the manner
mentioned in the Bonds, according to the true intent and meaning thereof, and
shall cause the payments to be made into the Bond Fund as required under Article
VI hereof or shall provide, as permitted by Article VIII hereof, for the payment
thereof, and shall keep, perform and observe all the covenants and conditions
pursuant to the terms of this Indenture to be kept, performed and observed by
it, and shall pay or cause to be paid to the Trustee all sums of money due or to
become due in accordance with the terms and provisions hereof, then this
Indenture and the rights hereby granted shall cease, determine and be void
except as set forth in such Article VIII.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is
expressly declared, that all Bonds issued and secured hereunder are to be
issued, authenticated and delivered and the Trust Estate hereby assigned and
pledged are to be dealt with and disposed of under, upon and subject to the
terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and
does hereby agree and covenant, with the Trustee and with the respective Owners
from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS AND RULES OF INTERPRETATION
SECTION 1.01. RULES OF INTERPRETATION. For all purposes of this
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
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(A) All references in this Indenture to designated "Articles",
"Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Indenture.
(B) The words "herein", "hereof", "hereto", "hereby", and
"hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section or other
subdivision.
(C) The terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular.
(D) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles as in effect in the United States from time to
time.
(E) Every "request", "order", "demand", "application",
"appointment", "notice", "statement", "certificate" , "consent",
"direction", "instruction" or similar action hereunder by the Issuer
shall, unless the form thereof is specifically provided, be in writing
signed by the Authorized Issuer Representative.
(F) All other terms used herein which are defined in the
Agreement shall have the same meanings assigned them in the Agreement
unless the context otherwise requires.
SECTION 1.02. DEFINITIONS. In addition to the terms defined in the
recitals hereto, for all purposes of this Indenture and the Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
"Act" means the County Economic Development Revenue Bond Law Sections
244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes, as amended and
supplemented.
"Administrative Expenses" means any and all reasonable and necessary
expenses (including the reasonable and necessary out-of-pocket expenses and fees
of Counsel) incurred by the Issuer in connection with the Bonds, the Agreement,
this Indenture and any transaction or event contemplated by the Agreement or
this Indenture, and any agency of the State selected by the Issuer to act on its
behalf in connection with the Bonds, including any and all reasonable expenses
incurred by the Attorney General of the State in connection with any litigation
which may at any time be instituted involving the Bonds.
"Agreement" means the Financing Agreement of even date herewith by and
between the Issuer and the Borrower, as from time to time amended and
supplemented.
"Alternate Liquidity Facility" means any standby bond purchase
agreement or other liquidity facility meeting the requirements of Section 5.14
of the Agreement.
"Authorized Borrower Representative" means the President, the Chief
Financial Officer, Treasurer or any Assistant Treasurer of the Borrower or any
person at the time
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designated to act on behalf of the Borrower by a written certificate furnished
to the Issuer, the Remarketing Agent, if any, and the Trustee containing the
specimen signature of such person and signed on behalf of the Borrower by any
officer of the Borrower. Such certificate may designate an alternate or
alternates.
"Authorized Denominations" means (i) with respect to any Term Rate
Period or Taxable Term Rate Period, $5,000 and any integral multiple thereof;
and (ii) with respect to any other Rate Period, $100,000 and any integral
multiple of $5,000 in excess thereof, except that one Bond may be in a
denomination of any amount in excess of $100,000.
"Authorized Issuer Representative" means the Chair of the Board of
Commissioners of the Issuer or any person at the time designated to act on
behalf of the Issuer by a written certificate furnished to the Borrower and the
Trustee containing the specimen signature of such person and signed on behalf of
the Issuer by the Chair of the Board of Commissioners of the Issuer.
"Available Moneys" has meaning herein with respect only to Taxable
Weekly Bonds and Taxable Term Bonds (except Taxable Term Bonds where the term
ends at maturity thereof) and means (1) moneys derived from drawings under a
Liquidity Facility that are not commingled with any other moneys, (2) moneys
held by the Trustee (other than in the Rebate Fund) and subject to a
first-priority perfected lien under the Indenture for a period of at least
ninety-one (91) days and not commingled with any moneys so held for less than
said period and during and prior to which period no petition in bankruptcy was
filed by or against, and no receivership, insolvency, assignment for the benefit
of creditors or other similar proceeding has been commenced by or against the
Borrower or the Issuer, or (3) moneys for which there has been delivered to the
Trustee an opinion of nationally recognized bankruptcy counsel to the effect
that the payment of such moneys to the holders of such Bonds would not
constitute transfers avoidable under 11 U.S.C. Section 547(b) and recoverable
from the holders of such Bonds under 11 U.S.C. 550(a) should the Issuer or the
Borrower be the debtor in a case under the United States Bankruptcy Code.
"Bond" or "Bonds" means any one or more of the bonds authorized,
authenticated and delivered under this Indenture.
"Bond Counsel" means nationally recognized municipal bond counsel
mutually acceptable to the Issuer, the Trustee and the Borrower, but shall not
include Counsel to the Borrower.
"Bond Fund" means the fund created by Section 6.02 hereof.
"Bond Insurance" means, collectively, a Municipal Bond Insurance Policy
and any endorsements thereto with respect to the Series 1999A Bonds and any
Tax-Exempt Series into which any Series 1999B Bonds may be converted, and a
Financial Guaranty Insurance Policy and any endorsements thereto with respect to
the Series 1999B Bonds, each issued by the Bond Insurer on the date of issuance
of the Bonds.
"Bondholder" or "holder" or "Owner" or "owner of Bonds" means the
Person or Persons in whose name or names a Bond shall be registered on books of
the Issuer kept by the
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<PAGE> 12
Registrar for that purpose in accordance with the terms of this Indenture;
provided, however, with respect to Book-Entry Bonds the term "Owner" shall mean
the beneficial owners of the Bonds as the context may require.
"Bond Insurer" shall mean Ambac Assurance Corporation, a
Wisconsin-domiciled stock insurance company, or any successor thereto.
"Book-Entry Bond" means a Bond authorized to be issued to and, except
as provided in subsections (c) or (d) of Section 2.13 of this Indenture,
restricted to being registered in the name of a Securities Depository.
"Borrower" means Southwest Gas Corporation, a California corporation
qualified to do business in the State, and its successors and assigns and any
surviving, resulting or transferee corporation as permitted in Section 5.2 of
the Agreement.
"Business Day" means a day on which banking institutions located in New
York, New York, or in the city in which the principal corporate trust office of
the Trustee is located or the payment office for the Bond Insurer or the office
of the Liquidity Provider, if any, at which demands for payment of the Liquidity
Facility are to be presented, are not required or authorized to remain closed
and on which the New York Stock Exchange is not closed.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated or proposed thereunder or (to the extent applicable) under prior
law, including temporary regulations.
"Completion Date" means the date of completion of the Project as
certified under Section 5.3 of the Agreement.
"Construction Fund" means the fund created by Section 6.06 hereof.
"Cost" or "Cost of the Project" means the sum of the items authorized
to be paid from the Construction Fund pursuant to the provisions of paragraphs
(a) to (g), inclusive, of Section 3.3 of the Agreement.
"Costs of Issuance" means all items of expense directly or indirectly
payable by or reimbursable to the Issuer or the Borrower and related to the
authorization, issuance, sale and delivery of the Bonds, including but not
limited to costs of preparation and reproduction of documents, printing
expenses, filing and recording fees, initial fees and charges of the Trustee,
legal fees and charges, fees and disbursements of consultants and professionals,
rating agency fees, fees and charges for preparation, execution and safekeeping
of the Bonds and any other cost, charge or fee in connection with the original
issuance of the Bonds which constitutes a "cost of issuance" within the meaning
of Section 147(g) of the Code.
"Costs of Issuance Fund" means the fund by that name established
pursuant to Section 6.07 hereof.
"Counsel" means an attorney at law or a firm of attorneys (who may be
an employee of or counsel to the Issuer or the Borrower or the Trustee, as
applicable) duly admitted
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<PAGE> 13
to the practice of law before the highest court of any state of the United
States of America or of the District of Columbia.
"Daily Rate" means the interest rate on the Bonds of a Tax-Exempt
Series established in accordance with Section 2.03(a) hereof.
"Daily Rate Period" means each period during which Bonds of a
Tax-Exempt Series bear interest at Daily Rates.
"Dated Date" means (i) with respect to the Series 1999A Bonds, the
first day of the month in which such Bonds are issued, (ii) with respect to the
Series 1999B Bonds, the date of issuance and delivery of such Bonds to the
Initial Purchaser thereof, or (iii) with respect to Bonds of a Tax-Exempt Series
other than the Series 1999A Bonds, the Tax-Exempt Conversion Date.
"Default" or "default" means any event which with the giving of notice,
the passage of time, or both, becomes an "event of default".
"DTC" means The Depository Trust Company, a limited purpose trust
company organized under the laws of the State of New York, and its successors
and assigns.
"Event of Default" or "event of default" means an occurrence or event
specified in and defined as such by Section 9.01 hereof.
"Exempt Facilities" means facilities for the local furnishing of
electricity or natural gas within the meaning of Section 142(a) of the Code.
"Expiration Date" means the earliest of (i) the stated expiration date
of the Liquidity Facility, (ii) the date on which the Liquidity Facility is
terminated pursuant to the terms of the Agreement or (iii) a Termination Date
under Section 7.2(b) of the Standby Bond Purchase Agreement.
"Flexible Rate" means the interest rate on any Bonds of a Tax-Exempt
Series established in accordance with Section 2.03(d) hereof.
"Flexible Rate Period" means each period, comprised of Flexible
Segments, during which Bonds of a Tax-Exempt Series bear interest at Flexible
Rates.
"Flexible Segment" means, with respect to each Bond of a Tax-Exempt
Series bearing interest at a Flexible Rate, the period established in accordance
with Section 2.03(d) hereof.
"Force Majeure" means acts of God, strikes, lockouts or other
industrial disturbances; acts of public enemies; orders or restraints of any
kind of the governments of the United States or of the State, or any of their
departments, agencies or officials, or any civil or military authority;
insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes;
volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or
accident to
7
<PAGE> 14
machinery, transmission lines, pipes or canals, even if resulting from
negligence; civil disturbances; or any other cause not reasonably within the
control of the Borrower.
The term "government obligations" means the obligations described in
Section 8.01(B)(a)(iii)(2) hereof.
"Indenture" means this Indenture of Trust, including any indentures
supplemental hereto or amendatory hereof.
"Initial Purchaser" means, collectively, Lehman Brothers Inc. and
Ramirez & Co., Inc.
"Insurer Default" means any of the following events: (i) the Bond
Insurer shall fail, wholly or partially, to make a payment when and as required
under the provisions of the Bond Insurance; (ii) the Bond Insurance is
surrendered, cancelled or terminated, or amended or modified in any material
respect, without the Trustee's prior written consent; (iii) a court of competent
jurisdiction enters a final nonappealable judgment that the Bond Insurance is
not valid and binding on or enforceable against the Bond Insurer; or (iv) the
occurrence and continuation of one or more of the following: (A) the liquidation
or dissolution of the Bond Insurer; (B) the commencement by the Bond Insurer of
a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect, including without
limitation the appointment of a trustee, receiver, liquidator, custodian or
other similar official for itself or any substantial part of its property; (C)
the consent of the Bond Insurer to or the acquiescence by the Bond Insurer in
any case or proceeding described in the preceding clause (B) that is commenced
against it; (D) the making by the Bond Insurer of an assignment for the benefit
of creditors; (E) the failure of the Bond Insurer or the admission by the Bond
Insurer in writing of its inability generally to pay its debts or claims as they
become due; (F) the initiation by the Bond Insurer of any actions to authorize
any of the foregoing; (G) the commencement of an involuntary case or other
proceeding against the Bond Insurer seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case remaining
undismissed and unstayed for a period of 60 days; or (H) the entering of an
order for relief against the Bond Insurer under the federal bankruptcy law as
now or hereafter in effect.
"Interest Payment Date" means (a) in the case of the Series 1999A
Bonds, each April 1 and October 1, commencing April 1, 2000, and (b) in the case
of all other Bonds (i) with respect to any Daily Rate Period, Weekly Rate Period
or Taxable Weekly Rate Period, the first Business Day of each calendar month,
(ii) with respect to any Term Rate Period or Taxable Term Rate Period, the first
Business Day of the sixth calendar month following the effective date of such
Term Rate Period or Taxable Term Rate Period and the first Business Day of each
successive sixth calendar month, if any, of such Term Rate Period or Taxable
Term Rate Period, (iii) with respect to any Taxable Flexible Rate Segment or
Flexible Segment, the Business Day next succeeding the last day thereof, and
(iv) with respect to each Rate Period, the Business Day next succeeding the last
day thereof.
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"Investment Securities" means any of the following: (1) Permitted
Investments; (2) obligations, debentures, notes or other evidence of
indebtedness issued or guaranteed by any of the following: Farm Credit System
Financial Assistance Corporation, Export-Import Bank, Federal Financing Bank,
Government National Mortgage Association, Farmers' Home Administration, or
Federal Housing Administration; (3) obligations of any state government the
interest on which is exempt from federal income taxation for which a nationally
recognized rating service is maintaining a rating within the top two ratings of
such rating service; (4) repurchase agreements with reputable financial
institutions fully secured by collateral security actually delivered to the
Trustee described in clauses (1) or (2) of this definition continuously having a
market value at least equal to 102% of the amount so invested and approved in
writing by the Bond Insurer and S&P and Moody's at the time of such investment;
(5) bankers' acceptances maturing not more than 360 days from the date of
issuance issued by a bank (including the Trustee and its affiliates) which are
rated at least Aa by Moody's or rated AA by S&P and eligible for purchase by the
Federal Reserve Bank; (6) interest-bearing demand or time deposits (including
certificates of deposit) in banks (including the Trustee and its affiliates),
provided such deposits are (a) secured at all times, and are issued by a bank
which has a rating on its short-term certificates of deposit of "A-1" or better
by S&P or P-1 or better by Moody's and mature no more than 360 days after the
date of purchase or (b) fully insured by Federal deposit insurance; and (7)
commercial paper (including both non-interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a specified date not more
than 270 days after the date of issuance thereof) which have been assigned the
rating of at least A-1 or better by S&P or P-1 or better by Moody's and approved
in writing by the Bond Insurer and S&P and Moody's at the time of such
investment.
"Issuer" means Clark County, Nevada, as issuer of the Bonds.
"Liquidity Facility" means, at any time as applicable, (i) the Standby
Bond Purchase Agreement among the Borrower, Bank One, NA and the Trustee, dated
as of October 1, 1999, as the same may be amended pursuant to its terms, and
(ii) in the event of delivery of an Alternate Liquidity Facility, such Alternate
Liquidity Facility, in each case acceptable to the Bond Insurer.
"Liquidity Provider" means at any time any commercial bank, savings
association or other financial institution providing a Liquidity Facility then
in effect.
"Liquidity Provider Bonds" shall have the meaning ascribed thereto in
Section 4.06(a)(i) hereof.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of California, its successors and their
assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Borrower, with notice to the Trustee and the Liquidity
Provider, if any.
"Outstanding" or "outstanding" or "Bonds Outstanding", in connection
with the Bonds means, as of the time in question, all Bonds authenticated and
delivered under this
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Indenture, including, without limitation, Bonds deemed not defeased or satisfied
after the payment by the Bond Insurer of principal and interest on such Bonds in
accordance with Section 8.01 hereof, except:
A. Bonds theretofore canceled or required to be canceled under
Section 2.10 or 6.16 hereof;
B. Bonds which are deemed to have been paid in accordance with
Article VIII hereof; and
C. Bonds (including Bonds which are deemed to have been
purchased pursuant to Section 4.03 hereof) in substitution for which
other Bonds have been authenticated and delivered pursuant to Article
II hereof.
In determining whether the Owners of a requisite aggregate principal amount of
outstanding Bonds have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions of this Indenture,
Bonds which are owned of record by the Borrower or any affiliate thereof or held
by the Trustee for the account of the Borrower shall be disregarded and deemed
not to be Outstanding hereunder for the purpose of any such determination
(except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Bonds which a Responsible Officer of the Trustee actually knows to
be so owned or held shall be disregarded) unless all Bonds are owned by the
Borrower or any affiliate thereof and/or held by the Trustee for the account of
the Borrower, in which case such Bonds shall be considered outstanding for the
purpose of such determination. For the purpose of this definition, an
"affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and "control", when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Owner" is defined under the term "Bondholder."
"Paying Agent" means the Trustee, acting as paying agent for the Bonds.
"Permitted Investments" means (i) direct obligations of the United
States of America (including obligations issued or held in book-entry form on
the books of the Department of the Treasury of the United States of America);
(ii) obligations the timely payment of the principal of and interest on which
are fully guaranteed by the United States of America; (iii) money market funds
registered under the Investment Company Act of 1940, as amended, whose shares
are registered under the Securities Act of 1933, as amended, which invest only
in securities of the type described in clause (i) or (ii) of this definition and
having a rating by S&P of at least Aam-G or AAAm, and by Moody's of at least Aaa
or P-1; or (iv) certificates or receipts representing direct ownership interests
in future interest or principal payments on obligations described in clause (i)
or (ii) of this definition which are held by a custodian in safekeeping on
behalf of the holders of such certificates or receipts and approved in writing
by the Bond Insurer and S&P and Moody's at the time of such investments.
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"Person" means natural persons, firms, partnerships, associations,
corporations, trusts, limited liability companies and public bodies.
"Plans and Specifications" means the plans and specifications for the
Project as prepared by the Borrower and heretofore approved by the Issuer.
"Principal Office" means, with respect to the Trustee, the principal
corporate trust office of the Trustee, which office at the date of acceptance of
the Trustee of the duties and obligations imposed upon it hereunder is located
for the purposes and at the addresses specified in Section 13.06 hereof.
"Project" means the facilities described in Exhibit A to the Agreement.
"Rate Period" means any Daily Rate Period, Weekly Rate Period, Flexible
Rate Period, Taxable Flexible Rate Period, Taxable Weekly Rate Period , Taxable
Term Rate Period or Term Rate Period.
"Rebate Fund" means the fund created by Section 6.18 hereof.
"Record Date" means with respect to any Interest Payment Date in
respect of a Daily Rate Period, a Weekly Rate Period, a Taxable Flexible Rate
Segment, a Taxable Weekly Rate Period or a Flexible Segment, the Business Day
next preceding such Interest Payment Date and, with respect to any Interest
Payment Date in respect of a Term Rate Period or Taxable Term Rate Period, the
fifteenth day of the calendar month next preceding such Interest Payment Date.
"Refunded Bonds" means the Issuer's Industrial Development Revenue
Bonds (Southwest Gas Corporation Project) Series 1998A.
"Registrar" means the Trustee, acting as registrar for the Bonds.
"Remarketing Agent" means the remarketing agent or agents appointed in
accordance with Section 4.08 hereof and any permitted successor or successors
thereto.
"Resolution" means the resolution duly adopted and approved by the
governing body of the Issuer on March 2, 1999, authorizing the issuance and sale
of the Bonds and the execution and delivery of this Indenture and the Agreement
and the other documents and transactions contemplated herein or therein, and any
subsequent resolution relating to any of the Bonds which have not been issued as
of the date of such subsequent resolution.
"Responsible Officer" means when used with respect to the Trustee, any
officer within the Principal Office of the Trustee including any Vice President,
Assistant Vice President, Secretary, Assistant Secretary or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Revenues" means the amounts pledged hereunder to the payment of
principal of, and premium, if any, and interest on the Bonds, consisting of the
following: (i) all amounts
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payable from time to time by the Borrower under Section 4.2(a) of the Agreement,
and all receipts of the Trustee credited under the provisions of this Indenture
against said amounts payable, (ii) any accrued interest on the Bonds deposited
with the Trustee under Section 6.03 hereof and (iii) any amounts paid into the
Bond Fund from the Construction Fund, including income or revenue derived from
the investment of moneys therein.
"S.E.C." means the Securities and Exchange Commission of the United
States of America.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
Hill Companies, its successors and their assigns, and, if such securities rating
agency shall be dissolved or liquidated or shall no longer perform the functions
of a securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the Borrower, with
notice to the Trustee, the Bond Insurer and the Liquidity Provider, if any.
"Series" means, as applicable, (i) the Series 1999A Bonds, (ii) the
Series 1999B Bonds or (iii) a Tax-Exempt Series other than the Series 1999A
Bonds.
"Securities Depository" means, with respect to a Book-Entry Bond, DTC
or any person, firm, association or corporation constituting a "clearing agency"
(securities depository) registered under Section 17A of the Securities Exchange
Act of 1934, as amended, which may at any time be substituted in its place to
act as Securities Depository for the Bonds, or its successors, or any nominee
therefor.
"State" means the State of Nevada.
"Tax Certificate" means the Tax Certificate and Agreement, dated as of
the Dated Date of the Series 1999A Bonds, executed by the Issuer and the
Borrower, as the same may be amended and supplemented from time to time, and
with respect to any Series 1999B Bonds, converted to a Tax-Exempt Series of
Bonds on a particular Tax-Exempt Conversion Date, the Tax Certificate and
Agreement, dated such Tax-Exempt Conversion Date, executed by the Issuer and the
Borrower, as the same may be amended and supplemented from time to time.
"Tax-Exempt" means, with respect to interest on any obligations of a
state or local government, including any Tax-Exempt Series of Bonds, that such
interest is excluded from the gross income of the Owners thereof (other than any
Owner who is a "substantial user" of facilities financed with such obligations
or a "related person" within the meaning of Section 147(a) of the Code) for
federal income tax purposes, whether or not such interest is includable as an
item of tax preference or otherwise includable directly or indirectly for
purposes of calculating other tax liabilities, including any alternative minimum
tax or environmental tax under the Code.
"Tax-Exempt Conversion Date" means any date on which all or a portion
of the Series 1999B Bonds are converted to a Tax-Exempt Series as described in
Section 2.15 hereof.
"Tax-Exempt Series" means, as applicable, the Series 1999A Bonds and
any Series 1999B Bonds as to which a Tax-Exempt Conversion Date has occurred.
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"Taxable Flexible Bonds" means any Bond that bears interest at a
Taxable Flexible Rate.
"Taxable Flexible Rate" means with respect to any Taxable Flexible
Bond, the rate of interest on such Bond established in accordance with Section
2.03(e) hereof.
"Taxable Flexible Rate Period" means with respect to each Taxable
Flexible Bond, each period, comprised of Taxable Flexible Rate Segments, during
which such Bond bears interest at a Taxable Flexible Rate.
"Taxable Flexible Rate Segment" means, with respect to any Bond bearing
interest at the Taxable Flexible Rate, the period established in accordance with
Section 2.03(e) hereof.
"Taxable Term Bond" means any Bond that bears interest at a Taxable
Term Rate.
"Taxable Term Rate" means, as to any Bond, the interest rate on such
Bond established in accordance with Section 2.03(g) hereof.
"Taxable Term Rate Period" means, as to any Taxable Term Bond, each
period during which a Taxable Term Rate is in effect.
"Taxable Weekly Bonds" means any Bond that bears interest at a Taxable
Weekly Rate.
"Taxable Weekly Rate" means with respect to any Taxable Weekly Bond,
the rate of interest on such Bond established in accordance with Section 2.03(f)
hereof.
"Taxable Weekly Rate Period" means each period during which Bonds bear
interest at Taxable Weekly Rates.
"TBMA Swap Index" means the TBMA Municipal Swap Index most recently
published in the Bond Buyer, or, if the Bond Buyer no longer publishes such
index or is no longer published, the variable rate index published in a
comparable periodical selected by the Remarketing Agent.
"Tender Agent" means the Trustee, acting as tender agent for the Bonds.
"Term Bond" means any Bond that bears interest at a Term Rate.
"Term Rate" means the interest rate on the Bonds of a Tax-Exempt Series
established in accordance with Section 2.03(c) hereof.
"Term Rate Period" means each period during which Bonds of a Tax-Exempt
Series bear interest at a Term Rate.
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"Trust Estate" means the property conveyed to the Trustee pursuant to
the Granting Clauses hereof.
"Trustee" means Harris Trust and Savings Bank, an Illinois banking
corporation, and any successor trustee appointed and qualified pursuant to
Sections 10.02, 10.06 and 10.09 hereof at the time serving as successor Trustee
hereunder.
"Weekly Rate" means the interest rate on the Bonds of a Tax-Exempt
Series established in accordance with Section 2.03(b) hereof.
"Weekly Rate Period" means each period during which Bonds bear interest
at Weekly Rates.
SECTION 1.03. NUMBER AND GENDER. The singular form of any word used
herein, including the terms defined in Section 1.02, shall include the plural,
and vice versa. The use herein of a word of any gender shall include all
genders.
SECTION 1.04. CONTENT OF CERTIFICATES AND OPINIONS. Every certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Indenture or the Agreement shall include (a) a statement that the person
or persons making or giving such certificate or opinion have read such covenant
or condition and the definitions herein relating thereto; (b) a brief statement
as to the nature and scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion are based; (c) a
statement that, in the opinion of the signers, they have made or caused to be
made such examination or investigation as is necessary to enable them to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and (d) a statement as to whether, in the opinion of the signers,
such condition or covenant has been complied with.
Any such certificate or opinion made or given by an officer of the
Issuer or the Borrower may be based, insofar as it relates to legal matters,
upon a certificate or opinion of or representations by counsel, unless such
officer knows that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should have known that the same
were erroneous. Any such certificate or opinion made or given by counsel may be
based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Issuer or the Borrower), upon the
certificate or opinion of or representations by an officer of the Issuer or the
Borrower, as applicable, unless such counsel knows that the certificate or
opinion or representations with respect to the matters upon which his opinion
may be based as aforesaid are erroneous, or in the exercise of reasonable care
should have known that the same were erroneous.
ARTICLE II
THE BONDS
SECTION 2.01. AUTHORIZED AMOUNT OF BONDS. No Bonds may be issued under
the provisions of this Indenture except in accordance with this Article. Except
as provided in Section 2.08 hereof, the total principal amount of Bonds that may
be issued
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hereunder is hereby expressly limited to $35,000,000, consisting of Series 1999A
Bonds in an amount not to exceed $12,410,000 and Series 1999B Bonds in an amount
not to exceed $22,590,000. It is hereby recognized that the Issuer and the
Borrower have reserved the right to provide for the issuance of other
obligations not constituting Bonds pursuant to Section 4.1(b) of the Agreement.
SECTION 2.02. ISSUANCE OF BONDS.
(a) Authorization of Issuance. The Bonds are hereby authorized to be
issued, and upon such issuance the Trustee shall authenticate the Bonds and
deliver them as specified in a written request of the Issuer, as more fully
provided in Sections 2.06 and 2.12. Series 1999A Bonds shall be designated
"Clark County, Nevada Industrial Development Revenue Bonds (Southwest Gas
Corporation Project) Series 1999A." Until converted on a Tax-Exempt Conversion
Date, the Series 1999B Bonds shall be designated "Clark County, Nevada
Industrial Development Revenue Bonds (Southwest Gas Corporation Project) Taxable
Series 1999B." The Bonds shall be issuable as fully registered bonds without
coupons, in Authorized Denominations. Unless the Issuer shall otherwise direct,
the Series 1999A Bonds shall be numbered A-1 and upwards and the Series 1999B
Bonds shall be numbered TB-1 and upwards. It is anticipated that all or a
portion of the Series 1999B Bonds will be converted from time to time to Bonds
of one or more Tax-Exempt Series at the option of the Borrower. On and after any
Tax-Exempt Conversion Date with respect to Bonds of a Tax-Exempt Series, such
Bonds, at the option of the Borrower, may either (i) have the same designation
except that the Series designation shall be changed from "Taxable Series 1999B"
to "Series 1999_," with the blank completed by the next consecutive letter
designation or (ii) be combined with any Bonds of a Tax-Exempt Series (other
than Series 1999A Bonds) that are Outstanding, such that such Bonds shall have
the same Series designation as the Outstanding Tax-Exempt Series. Unless the
Issuer shall otherwise direct, the Bonds of each Tax-Exempt Series shall be
numbered separately from 1 and upwards and shall bear a letter designation
corresponding to the series of such Bonds. Bonds of each Tax-Exempt Series shall
bear a distinct CUSIP number from the Series 1999A Bonds, the Series 1999B Bonds
and from Bonds of any other Tax-Exempt Series.
(b) General Terms. The Bonds shall be issued as fully registered bonds,
without coupons, in Authorized Denominations and shall be dated the Dated Date
and shall mature, subject to prior redemption or purchase upon the terms and
conditions hereinafter set forth, on December 1, 2038; provided, however, that
on any Tax-Exempt Conversion Date on which any Series 1999B Bonds may be
converted to a new Tax-Exempt Series, the Borrower may designate a new maturity
date for the Bonds of such Tax-Exempt Series, which maturity date shall be any
date on or prior to December 1, 2038. The Trustee shall insert the date of
authentication of each Bond in the place provided for such purpose in the form
of the certificate of authentication of the Trustee to be printed on each Bond.
(c) Manner of Payment. The principal of and premium, if any, and
interest on the Bonds shall be payable in any coin or currency of the United
States of America which, at the respective dates of payment thereof, is legal
tender for the payment of public and private debts (which shall be in
immediately available funds), and, except as otherwise provided in Section 2.13
hereof with respect to Book-Entry Bonds, such principal and premium, if any, and
interest thereon shall be payable at the Principal Office of the Trustee, as
Paying Agent. Payment of
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<PAGE> 22
interest on any Interest Payment Date on any Bond shall be made to the Owner
thereof as of the close of business on the Record Date immediately prior thereto
and, except as otherwise provided in Section 2.13 hereof with respect to
Book-Entry Bonds, shall be (i) made by check or draft of the Trustee, as Paying
Agent, mailed on the Interest Payment Date to the Owner as of the close of
business on the Record Date immediately preceding the Interest Payment Date, at
the Owner's address as it appears on the registration books of the Issuer kept
by the Trustee or at such other address as is furnished to the Trustee in
writing by such Owner not later than the close of business on the Record Date
for such Interest Payment Date, or (ii) transmitted by wire transfer to the
account with a member of the Federal Reserve System located within the
continental United States of America of any Owner which owns at least $1,000,000
in aggregate principal amount of the Bonds of any Series and which shall have
provided wire transfer instructions to the Trustee prior to the close of
business on such Record Date, but, in the case of interest payable in respect of
a Flexible Segment or a Taxable Flexible Rate Segment, only upon presentation of
such Bond (if such Bond is not a Book-Entry Bond) at the Principal Office of the
Trustee for exchange or transfer in accordance with the provisions hereof,
except, in each case, that, if and to the extent that there shall be a default
in the payment of the interest due on such Interest Payment Date, such defaulted
interest shall be paid to the Owners in whose names any such Bonds are
registered at the close of business on the fifth (5th) Business Day next
preceding the date of payment of such defaulted interest. All payments will be
made in immediately available funds.
(d) Interest. The Bonds shall bear interest from and including the
Dated Date until payment of the principal or the redemption or purchase price
thereof shall have been made or provided for in accordance with the provisions
hereof, whether at maturity, upon redemption or otherwise, at the rate or rates
per annum determined pursuant to Section 2.03 hereof. Interest on the Bonds
shall be paid on each applicable Interest Payment Date and at maturity or prior
redemption or purchase for the period commencing on the immediately preceding
Interest Payment Date (or if no interest has been paid thereon commencing on the
Dated Date) to but excluding such Interest Payment Date; provided, however, that
if, as shown by the records of the Trustee, interest on the Bonds shall be in
default, Bonds shall bear interest from the last date to which interest has been
paid in full or duly provided for on the Bonds or, if no interest has been paid
or duly provided for on the Bonds, from the Dated Date thereof. Each Bond shall
bear interest on overdue principal at the rate borne by the Bonds on the date on
which such principal became due and payable. During any Daily Rate Period,
Weekly Rate Period, Taxable Weekly Rate Period, Flexible Rate Period or Taxable
Flexible Rate Period, interest on the related Bonds shall be computed upon the
basis of a 365 or 366-day year, as applicable, for the number of days actually
elapsed. During any Term Rate Period or Taxable Term Rate Period, interest on
the Bonds shall be computed upon the basis of a 360-day year, consisting of
twelve (12) thirty (30) day months.
(e) Proceeds of Sale. The proceeds received by the Issuer from the sale
of the Bonds shall be deposited with the Trustee, who shall forthwith deposit
such proceeds as set forth in a written request of the Issuer acknowledged by
the Borrower. Such request shall provide for such proceeds to be deposited as
set forth in this Section, as follows:
(i) to the Bond Fund, the amount of interest accrued on the
Bonds from the Dated Date thereof to the date of issuance, such accrued
interest on the Series 1999A
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<PAGE> 23
Bonds to be deposited in the Series 1999A Account in the Bond Fund, and
such accrued interest on the Series 1999B Bonds, if any, to be
deposited in the Taxable Series 1999B Account in the Bond Fund;
(ii) to the Costs of Issuance Fund, the sum of $-0-,
consisting of $-0- from proceeds of the Series 1999A Bonds to be
deposited into the Series 1999A Costs of Issuance Account, and $-0-
from proceeds of the Series 1999B Bonds to be deposited into the Series
1999B Costs of Issuance Account;
(iii) to the Refunding Account created pursuant to this
Section, the sum of $720,000 from proceeds of the Series 1999A Bonds;
and
(iv) to the Construction Fund, the balance of such proceeds,
consisting of $11,248,343.37 from proceeds of the Series 1999A Bonds to
be deposited in the Series 1999A Construction Account and
$21,839,339.13 from proceeds of the Series 1999B Bonds to be deposited
in the Series 1999B Construction Account.
The Trustee shall create a separate account, designated the Refunding
Account, into which the Trustee shall deposit the amount specified in (iii)
above. Upon the deposit of such amount, the Trustee shall immediately transfer
such amount to Harris Trust and Savings Bank, as trustee for the Refunded Bonds,
and shall close such account.
SECTION 2.03. DETERMINATION OF RATE PERIODS AND INTEREST RATES. In the
manner hereinafter provided, the term of the Bonds will be divided into
consecutive Rate Periods during which the Bonds shall bear interest at the Daily
Rate, the Weekly Rate, the Flexible Rate, the Taxable Flexible Rate, the Taxable
Weekly Rate, the Term Rate or the Taxable Term Rate as the case may be. The
first Rate Period (i) with respect to the Series 1999A Bonds shall be a Term
Rate Period commencing on the Dated Date of such Bonds and ending on the date
prior to the maturity date of such bonds at the Term Rate indicated thereon per
annum; and (ii) with respect to the Series 1999B Bonds shall be the Taxable
Weekly Rate Period with the initial Taxable Weekly Rates established on or
before the Dated Date in accordance with the provisions of this Indenture. Each
Series of Bonds shall bear interest at the rate or rates per annum established
from time to time in accordance with the provisions of this Indenture. Prior to
the Tax-Exempt Conversion Date for any Series 1999B Bonds, all of the Series
1999B Bonds shall be in the Taxable Flexible Rate Period, Taxable Term Rate
Period or the Taxable Weekly Rate Period, and such Bonds shall bear interest
only at a Taxable Flexible Rate, Taxable Term Rate or a Taxable Weekly Rate;
however, Taxable Flexible Bonds may be in different Taxable Flexible Rate
Segments and may bear interest at different Taxable Flexible Rates.
(a) (i) Determination of Daily Rate. During each Daily Rate
Period for any Tax-Exempt Series of Bonds, such Bonds shall bear
interest at the Daily Rate, which shall be determined by the
Remarketing Agent not later than 10:00 a.m., New York time, on each
Business Day for such Business Day. The Daily Rate shall be the lowest
rate determined by the Remarketing Agent to be the interest rate which
would enable the Remarketing Agent to sell such Bonds on the effective
date of such rate at a price equal to 100% of the principal amount
thereof (without regard to accrued interest); provided,
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<PAGE> 24
however, that (1) with respect to any day which is not a Business Day,
the Daily Rate shall be the Daily Rate determined for the immediately
preceding Business Day, and (2) with respect to any other day for which
the Remarketing Agent shall not have determined a Daily Rate, the Daily
Rate for such day shall be 105% of the most recent TBMA Swap Index. In
no event shall the Daily Rate exceed the lesser of 15% per annum or the
maximum rate per annum then permitted by applicable law. The
Remarketing Agent shall provide the Trustee with immediate telephonic
notice by noon New York time (promptly confirmed in writing) of each
Daily Rate, as so determined; provided, however that no such notice
need be given if the Daily Rate so determined is the same Daily Rate
for the immediately preceding day.
(ii) Adjustment to Daily Rate. The Borrower, by written
direction to the Issuer, the Trustee, the Liquidity Provider, and the
Remarketing Agent, may elect that the Bonds of a Tax-Exempt Series
(including Series 1999B Bonds on a Tax-Exempt Conversion Date) shall
bear interest at a Daily Rate. Such direction shall (A) specify the
Series of Bonds and the effective date of such adjustment to a Daily
Rate, which shall be a Business Day not earlier than the fifteenth
(15th) day after the date of such direction (or such shorter period of
time to which the Trustee agrees), and shall be (1) in the case of an
adjustment from a Term Rate Period or Taxable Term Rate Period, the day
immediately following the last day of the then current Term Rate Period
or Taxable Term Rate Period or on any day on which the Issuer at the
direction of the Borrower would be permitted to redeem such Bonds
pursuant to, and at the redemption price described in, Section
3.01(A)(3) hereof, and (2) in the case of an adjustment from a Flexible
Rate Period or Taxable Flexible Rate Period shall be either the day
immediately following the last day of the then current Flexible Rate
Period or Taxable Flexible Rate Period or the day immediately following
the last day of the last Flexible Segment or Taxable Flexible Segment
for each such Bond in the then current Flexible Rate Period or Taxable
Flexible Rate Period all as determined in accordance with Section
2.03(d)(iv) or 2.03(e)(iv) hereof; and (B) in the case of an adjustment
from a Term Rate Period having a duration in excess of one year, be
accompanied by a form of opinion of Bond Counsel to the effect that
such adjustment (1) is authorized or permitted by the Act and this
Indenture and (2) will not adversely affect the Tax-Exempt status of
such Bonds. During each Daily Rate Period commencing on the date so
specified or determined (provided that an opinion of Bond Counsel
described in clause (B) above, if required, is delivered on such date)
and ending on the day immediately preceding the effective date of the
next succeeding Rate Period, the interest rate borne by the Bonds shall
be a Daily Rate.
(iii) Notice of Adjustment to Daily Rate. Except with respect
to an adjustment to a Daily Rate Period from a Flexible Rate or an
adjustment occurring on a Tax-Exempt Conversion Date with respect to
Taxable Flexible Bonds, the Trustee shall give notice of an adjustment
to a Daily Rate Period to Owners of such Bonds, by first class mail,
postage prepaid, not less than twelve (12) days prior to the effective
date of such Daily Rate Period. Such notice shall state (1) that the
interest rate on such Bonds will be adjusted to a Daily Rate (subject
to receipt of the opinion of Bond Counsel referred to in the
immediately preceding paragraph (a)(ii) if required, and to the
Borrower's ability to rescind its election as described in Section
2.03(i) hereof), (2) the effective date of such Daily Rate Period, (3)
that all such Bonds are subject to mandatory purchase on such
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<PAGE> 25
effective date, (4) the procedures of such purchase and the payment of
the purchase price and (5) if applicable, that the adjustment will also
be a Tax-Exempt Conversion Date.
(b) (i) Determination of Weekly Rate. During each Weekly Rate
Period for any Tax-Exempt Series of Bonds, such Bonds shall bear
interest at the Weekly Rate, which, in the case of the first Weekly
Rate determined for each Weekly Rate Period, shall be determined by the
Remarketing Agent not later than 10:00 a.m. New York time on the first
day of such Weekly Rate Period and thereafter no later than the
Business Day next preceding Wednesday of each week during such Weekly
Rate Period. The Weekly Rate shall be the rate determined by the
Remarketing Agent to be the lowest interest rate which would enable the
Remarketing Agent to sell such Bonds on the effective date of such rate
at a price equal to 100% of the principal amount thereof (without
regard to accrued interest); provided, however, that if the Remarketing
Agent shall not have determined a Weekly Rate for any period, the
Weekly Rate for such period shall be the same as 105% of the most
recent TBMA Swap Index. In no event shall the Weekly Rate exceed the
lesser of 15% per annum or the maximum rate per annum then permitted by
applicable law. The first Weekly Rate determined for each Weekly Rate
Period shall apply to the period commencing on the first day of such
period and ending on the next succeeding Tuesday. Thereafter, each
Weekly Rate shall apply to the period commencing on each Wednesday and
ending on the next succeeding Tuesday; provided, however, if a Weekly
Rate Period shall end on a day other than Tuesday, the last Weekly Rate
for such Weekly Rate Period shall apply to the period commencing on the
Wednesday preceding the last day of such Weekly Rate Period and ending
on such last day. The Remarketing Agent shall provide the Trustee with
written notification on the first day of each Weekly Rate Period of
each Weekly Rate as so determined.
(ii) Adjustment to Weekly Rate. The Borrower, by written
direction to the Issuer, the Trustee, the Liquidity Provider, and the
Remarketing Agent, may elect that the Bonds of a Tax-Exempt Series
(including Series 1999B Bonds on a Tax-Exempt Conversion Date) shall
bear interest at a Weekly Rate. Such direction shall (A) specify the
Series of Bonds and the effective date of such adjustment to a Weekly
Rate, which shall be a Business Day not earlier than the 15th day after
the date of such direction (or such shorter period of time to which the
Trustee agrees), and (1) in the case of an adjustment from a Term Rate
Period or Taxable Term Rate Period, shall be the day immediately
following the last day of the then current Term Rate Period or Taxable
Term Rate Period or on any day on which the Issuer at the direction of
the Borrower would be permitted to redeem such Bonds pursuant to, and
at the redemption price described in, Section 3.01(A)(3) hereof, and
(2) in the case of an adjustment from a Flexible Rate Period or Taxable
Flexible Rate Period, shall be either the day immediately following the
last day of the then current Flexible Rate Period or Taxable Flexible
Rate Period or the day immediately following the last day of the last
Flexible Segment or Taxable Flexible Segment for each such Bond in the
then-current Flexible Rate Period, all as determined in accordance with
Section 2.03(d)(iv) or 2.03(e)(iv) hereof; and (B) in the case of an
adjustment from a Term Rate Period having a duration in excess of one
year, be accompanied by a form of opinion of Bond Counsel to the effect
that such adjustment (1) is authorized or permitted by the Act and this
Indenture and (2) will not adversely affect the Tax-Exempt status of
such Bonds. During each Weekly Rate Period commencing on
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<PAGE> 26
the date so specified or determined (provided that an opinion of Bond
Counsel described in clause (B) above, if required, is delivered on
such date) and ending on the day immediately preceding the effective
date of the next succeeding Rate Period, the interest rate borne by the
Bonds shall be a Weekly Rate.
(iii) Notice of Adjustment to Weekly Rate. Except with respect
to an adjustment to a Weekly Rate Period from a Flexible Rate or an
adjustment occurring on a Tax-Exempt Conversion Date with respect to
Taxable Flexible Bonds, the Trustee shall give notice of an adjustment
to a Weekly Rate Period to Owners of the Bonds of a Tax-Exempt Series,
by first class mail, postage prepaid, not less than twelve (12) days
prior to the effective date of such Weekly Rate Period. Such notice
shall state (1) that the interest rate on such Bonds will be adjusted
to a Weekly Rate (subject to receipt of the opinion of Bond Counsel
referred to in the immediately preceding paragraph (b)(ii), if
required, and to the Borrower's ability to rescind its election as
described in Section 2.03(i) hereof), (2) the effective date of such
Weekly Rate Period, (3) that all such Bonds are subject to mandatory
purchase on such effective date, (4) the procedures of such purchase
and the payment of the purchase price, and (5) if applicable, that the
adjustment will also be a Tax-Exempt Conversion Date.
(c) (i) Determination of Term Rate. During each Term Rate
Period for any Tax-Exempt Series of Bonds (which shall be at least 180
days in duration), such Bonds shall bear interest at the Term Rate
determined by the Remarketing Agent on a Business Day selected by the
Remarketing Agent, but not more than sixty (60) days prior to the first
day of such Term Rate Period. The Term Rate shall be the rate
determined by the Remarketing Agent on such date, and filed on such
date with the Trustee and the Borrower, by written notice or by
telephone promptly confirmed by telecopy or other writing, as being the
lowest rate which would enable the Remarketing Agent to sell such Bonds
on the effective date of such Term Rate at a price equal to 100% of the
principal amount thereof; provided, however, that if, for any reason, a
Term Rate for any Term Rate Period shall not be determined or become
effective, then the Rate Period for such Bonds shall automatically
adjust to a Daily Rate Period. If a Daily Rate for the first day of any
such Daily Rate Period is not determined as provided in Section
2.03(a)(i) hereof, the Daily Rate for the first day of such Daily Rate
Period shall be 105% of the most recent TBMA Swap Index. In no event
shall any Term Rate exceed the lesser of 15% per annum or the maximum
rate per annum then permitted by applicable law.
(ii) Adjustment to or Continuation of Term Rate. The Borrower,
by written direction to the Issuer, the Liquidity Provider, the Trustee
and the Remarketing Agent, may elect that the Bonds of a Tax-Exempt
Series (including Series 1999B Bonds on a Tax-Exempt Conversion Date)
shall bear, or continue to bear, interest at a Term Rate, and if it
shall so elect that such Bonds shall bear or continue to bear, interest
at a Term Rate, then the Borrower shall determine the duration of the
Term Rate Period during which the Bonds shall bear interest at such
Term Rate. As a part of such election, the Borrower also may determine
that the initial Term Rate Period shall be followed by successive Term
Rate Periods and, if the Borrower so elects, shall specify the duration
of each such successive Term Rate Period as provided in this paragraph
(ii). Such direction shall (A) specify the Series of Bonds and the
effective date of each Term Rate Period,
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<PAGE> 27
which shall be a Business Day not earlier than the 15th day after the
date of such written direction (or such shorter period of time to which
the Trustee agrees), and (1) in the case of an adjustment from a
Flexible Rate Period or Taxable Flexible Rate Period, shall be either
the day immediately following the last day of the then current Flexible
Rate Period or Taxable Flexible Rate Period or the day immediately
following the last day of the last Flexible Segment or Taxable Flexible
Segment for such Bond in the then-current Flexible Rate Period or
Taxable Flexible Rate Period, all as determined in accordance with
Section 2.03(d)(iv) or 2.03(e)(iv) hereof and (2) in the case of an
adjustment from a Term Rate Period or Taxable Term Rate Period, shall
be the day immediately following the last day of the then current Term
Rate Period or Taxable Term Rate Period or any day on which the Issuer
at the direction of the Borrower would be permitted to redeem such
Bonds pursuant to, and at the redemption price described in, Section
3.01(A)(3) hereof; (B) specify the last day of such Term Rate Period
or, if successive Term Rate Periods shall have been designated, the
last day of each such Term Rate Period (which shall be for each Term
Rate Period either the date immediately preceding the final maturity
date of the Bonds, or a day which both immediately precedes a Business
Day and is at least 180 days after the effective date thereof); and (C)
unless the adjustment is from a Term Rate Period of equal duration, be
accompanied by a form of opinion of Bond Counsel to the effect that
such adjustment (1) is authorized or permitted by the Act and this
Indenture and (2) will not adversely affect the Tax-Exempt status of
such Bonds. The opinion of Bond Counsel described in clause (C) above,
if required, must be delivered on the effective date of such
adjustment. Notwithstanding the stated date of termination of any Term
Rate Period, the Borrower may elect to cause an adjustment to any other
Rate Period as of any date on which the affected Bonds are subject to
redemption pursuant to Section 3.01(A)(3) hereof.
If, by the fourteenth (14th) day prior to the last day of any Term Rate
Period, the Trustee shall not have received notice of the Borrower's election
that, during the next succeeding Rate Period, the Bonds of a Tax-Exempt Series
shall bear interest at a Daily Rate, a Weekly Rate, a Flexible Rate or a Term
Rate, the next succeeding Rate Period of such Bonds shall be a Weekly Rate
Period until the interest rate on such Bonds is adjusted to another Rate Period,
and the Bonds shall be subject to purchase pursuant to Section 4.02.
(iii) Notice of Adjustment to or Continuation of Term Rate.
Except with respect to an adjustment to a Term Rate Period from a
Flexible Rate or an adjustment occurring on a Tax-Exempt Conversion
Date with respect to Taxable Flexible Bonds, the Trustee shall give
notice of an adjustment to (or the continuation of) a Term Rate Period
to Owners of such Bonds, by first class mail, postage prepaid, not less
than twelve (12) days prior to the effective date of such Term Rate
Period. Such notice shall state (1) that the interest rate on such
Bonds will be adjusted to, or continue to be, a Term Rate (subject to
receipt of the opinion of Bond Counsel referred to in the immediately
preceding paragraph (ii), if required, and to the Borrower's ability to
rescind its election as described in Section 2.03(i) hereof), (2) the
effective date and the last day of such Term Rate Period, (3) that the
Term Rate for such Term Rate Period will be determined on or prior to
the effective date thereof, (4) how such Term Rate may be obtained from
the Remarketing Agent, (5) the Interest Payment Dates after such
effective date, (6) that all such Bonds are subject to mandatory
purchase on such effective date, (7) the
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<PAGE> 28
procedures of such purchase and the payment of the purchase price, (8)
the redemption provisions set forth in Section 3.01 hereof which will
apply during such Term Rate Period, and (9) if applicable, that the
adjustment will also be a Tax-Exempt Conversion Date.
(d) (i) Determination of Flexible Segments and Flexible Rates.
During each Flexible Rate Period for any Tax-Exempt Series of Bonds,
each Bond shall bear interest during each Flexible Segment for such
Bond as described herein. Different Flexible Segments and Flexible
Rates may apply to different Bonds of such Tax-Exempt Series at any
time and from time to time. The Flexible Segment for each such Bond
shall be a period of at least one day and not more than 270 days ending
on a day that immediately precedes a Business Day, determined by the
Remarketing Agent to be the period which, together with all such other
Flexible Segments for all Bonds of such Tax-Exempt Series then
Outstanding, will result in the lowest overall interest expense on the
Bonds of such Tax-Exempt Series over the next succeeding 270 days. The
Flexible Rate for each Flexible Segment for each Bond shall be
determined by the Remarketing Agent no later than 1:00 p.m., New York
time on the Business Day next preceding the first day of such Flexible
Segment (and in time to enable the Remarketing Agent to give to the
Trustee the notice required by Section 4.04(c) hereof) to be the lowest
interest rate which would enable the Remarketing Agent to sell such
Bonds on the effective date of such rate at a price equal to 100% of
the principal amount thereof. If a Flexible Segment or a Flexible Rate
for a Flexible Segment is not determined or effective, the Flexible
Segment for such Bond shall be a Flexible Segment of one day, and the
interest rate for such Flexible Segment of one day shall be 105% of the
most recent TBMA Swap Index. In no event shall the Flexible Rate for
any Flexible Segment exceed the lesser of 15% per annum or the maximum
rate per annum then permitted by applicable law. The Remarketing Agent
shall provide the Trustee with facsimile or telephonic notice of each
Flexible Segment and Flexible Rate, as provided in Section 4.04(c)
hereof.
(ii) Adjustment to Flexible Rates. The Borrower, by written
direction to the Issuer, the Trustee, the Liquidity Provider, and the
Remarketing Agent, may elect that the Bonds of a Tax-Exempt Series
(including Series 1999B Bonds on a Tax- Exempt Conversion Date) shall
bear interest at Flexible Rates. Such direction shall (A) specify the
Series of Bonds and the effective date of the Flexible Rate Period
during which such Bonds shall bear interest at Flexible Rates, which
shall be a Business Day not earlier than the fifteenth (15th) day after
the date of such direction (or such shorter period of time to which the
Trustee agrees), and shall be, in the case of an adjustment from a Term
Rate Period or Taxable Term Rate Period, the day immediately following
the last day of the then current Term Rate Period or Taxable Term Rate
Period or on any day on which the Issuer at the direction of the
Borrower would be permitted to redeem such Bonds pursuant to, and at
the redemption price described in, Section 3.01(A)(3) hereof; and (B)
in the case of an adjustment from a Term Rate Period having a duration
in excess of one year, be accompanied by a form of opinion of Bond
Counsel to the effect that such adjustment (1) is authorized or
permitted by the Indenture and the Act and (2) will not adversely
affect the Tax-Exempt status of such Bonds. During each Flexible Rate
Period commencing on the date so specified (provided that the opinion
of Bond Counsel described in clause (B) above, if required, is
delivered on such date) and ending on the
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<PAGE> 29
day immediately preceding the effective date of the next succeeding
Rate Period, each Bond shall bear interest at a Flexible Rate during
each Flexible Segment for such Bond.
(iii) Notice of Adjustment to Flexible Rates. Except with
respect to adjustment to a Flexible Rate Period from a Flexible Rate
Period or an adjustment occurring on a Tax-Exempt Conversion Date with
respect to Taxable Flexible Bonds, the Trustee shall give notice of an
adjustment to a Flexible Rate Period to Owners of the Bonds of a
Tax-Exempt Series, by first class mail, postage prepaid, not less than
twelve (12) days prior to the effective date of such Flexible Rate
Period. Such notice shall state (1) that the interest rate on such
Bonds will be adjusted to the Flexible Rate (subject to receipt of the
opinion of Bond Counsel referred to in the immediately preceding
paragraph (ii), if required, and to the Borrower's ability to rescind
its election as described in Section 2.03(i) hereof), (2) the effective
date of such Flexible Rate Period, (3) that all such Bonds are subject
to mandatory purchase on such effective date, (4) the procedures of
such purchase and the payment of the purchase price, and (5) if
applicable, that the adjustment will also be a Tax-Exempt Conversion
Date.
(iv) Adjustment from Flexible Rates. At any time during a
Flexible Rate Period, the Borrower may elect that the Bonds of a
Tax-Exempt Series shall no longer bear interest at Flexible Rates and
shall instead bear interest as otherwise permitted under this
Indenture. The Borrower shall give written notice to the Issuer, the
Trustee, the Liquidity Provider and the Remarketing Agent of such
election and shall specify the Rate Period to follow with respect to
such Bonds upon cessation of the Flexible Rate Period and instruct the
Remarketing Agent to (1) determine Flexible Segments of such duration
that, as soon as possible, all Flexible Segments shall end on the same
date, not earlier than the fourteenth (14th) day (or such shorter
period of time to which the Trustee agrees) after the date of such
written notice from the Borrower, and upon the establishment of such
Flexible Segments the day next succeeding the last day of all such
Flexible Segments shall be the effective date of the Rate Period
elected by the Borrower; or (2) determine Flexible Segments that will
best promote an orderly transition to the next succeeding Rate Period
to apply to such Bonds, beginning not earlier than the fourteenth
(14th) day (or such shorter period of time to which the Trustee agrees)
after the date of such written notice from the Borrower. If the
Borrower elects the alternative in clause (2) above, the day next
succeeding the last day of the Flexible Segment for each such Bond
shall be with respect to such Bond the effective date of the new Rate
Period elected by the Borrower. The Remarketing Agent, promptly upon
the determination thereof, shall give written notice of such last day
and such effective dates to the Borrower, the Liquidity Provider and
the Trustee. During any transitional period from a Flexible Rate Period
to the next succeeding Rate Period in accordance with clause (2) above,
the provisions of this Indenture shall be deemed to apply to such Bonds
as follows: such Bonds continuing to bear interest at Flexible Rates
shall have applicable to them the provisions hereunder theretofore
applicable to such Bonds as if all Bonds were continuing to bear
interest at Flexible Rates and such Bonds bearing interest in the Rate
Period to which the transition is being made will have applicable to
them the provisions hereunder as if all such Bonds were bearing
interest in such Rate Period.
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(e) (i) Determination of Taxable Flexible Rates and Taxable
Flexible Rate Segments. During the Taxable Flexible Rate Period, each
Taxable Flexible Bond shall bear interest during each Taxable Flexible
Rate Segment for such Bond at the Taxable Flexible Rate for such Bond
as described herein. Different Taxable Flexible Rate Segments and
Taxable Flexible Rates may apply to different Taxable Flexible Bonds at
any time and from time to time. The Taxable Flexible Rate Segment for
each Taxable Flexible Bond shall be a period of at least one day and
not more than 270 days, ending on a day that immediately precedes a
Business Day, determined by the Remarketing Agent to be the period
which, together with all other Taxable Flexible Segments for all other
Taxable Flexible Bonds then Outstanding, will result in the lowest
overall interest expense on the Taxable Flexible Bonds over the next
succeeding 270 days. The Taxable Flexible Rate for each Taxable
Flexible Rate Segment for each such Bond shall be determined by the
Remarketing Agent no later than 1:00 p.m., New York time on the
Business Day next preceding the first day of such Taxable Flexible Rate
Segment (and in time to enable the Remarketing Agent to give to the
Trustee the notice required by Section 4.04(c) hereof) to be the lowest
interest rate which would enable the Remarketing Agent to sell such
Bonds on the effective date of such rate at a price equal to 100% of
the principal amount thereof. If a Taxable Flexible Segment or a
Taxable Flexible Rate for a Taxable Flexible Rate Segment is not
determined or effective, the Taxable Flexible Rate Segment for such
Bond shall be a Taxable Flexible Rate Segment of one day, and the
interest rate for such Taxable Flexible Rate Segment of one day shall
be 105% of the Federal Reserve H.15 Non-Financial Commercial Paper
7-day rate until a new Taxable Flexible Rate and Taxable Flexible Rate
Segment shall be established. In no event shall the Taxable Flexible
Rate for any Taxable Flexible Rate Segment exceed the lesser of 15% per
annum or the maximum rate per annum then permitted by applicable law.
The Remarketing Agent shall provide the Trustee with facsimile or
telephonic notice of each Taxable Flexible Rate Segment and Taxable
Flexible Rate, as provided in Section 4.04(c) hereof.
If the Borrower has given notice of a Tax-Exempt Conversion Date with
respect to any Taxable Flexible Bonds, no new Taxable Flexible Rate Segment for
such Bonds shall be established unless the last day of such Taxable Flexible
Rate Segment occurs prior to such Tax-Exempt Conversion Date.
(ii) Adjustment to Taxable Flexible Rates. At any time while
the Taxable Weekly Bonds are bearing interest at Taxable Weekly Rates
or while the Taxable Term Bonds bear interest at Taxable Term Rates,
the Borrower, by written direction to the Issuer, the Liquidity
Provider, the Trustee and the Remarketing Agent, may elect that the
Taxable Term Bonds or Taxable Weekly Bonds shall bear interest at
Taxable Flexible Rates. Such direction shall specify the effective date
of the Taxable Flexible Rate Period during which such Bonds shall bear
interest at Taxable Flexible Rates, which shall be a Business Day not
earlier than the fifteenth (15th) day after the date such direction (or
such shorter period of time to which the Trustee agrees) and shall be,
in the case of adjustment from a Taxable Term Rate Period, the day
immediately following the last day of the then current Taxable Term
Rate Period, or on any day on which the Issuer at the direction of the
Borrower would be permitted to redeem such Bonds pursuant to, and at
the redemption price described in, Section 3.01(A)(3) hereof. During
each Taxable
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<PAGE> 31
Flexible Rate Period commencing on the date so specified and ending on
the day immediately preceding the effective date of the next succeeding
Rate Period, each Bond shall bear interest at a Taxable Flexible Rate
during each Taxable Flexible Segment for such Bond.
(iii) Notice of Adjustment to Taxable Flexible Rates. The
Trustee shall give notice of an adjustment to a Taxable Flexible Rate
Period to the Owners of Taxable Weekly Bonds or Taxable Term Bonds, by
first class mail, postage prepaid, not less than twelve (12) days prior
to the effective date of such Taxable Flexible Rate Period. Such notice
shall state (1) that the interest rate on such Taxable Weekly Bonds or
Taxable Term Bonds will be adjusted to a Taxable Flexible Rate (subject
to the Borrower's ability to rescind its election as described in
Section 2.03(i) hereof), (2) the effective date of such Taxable
Flexible Rate Period, (3) that all such Bonds to be adjusted are
subject to mandatory purchase on such effective date, and (4) the
procedures of such purchase and the payment of the purchase price.
(iv) Adjustment from Taxable Flexible Rates. At any time
during a Taxable Flexible Rate Period, the Borrower may elect that the
Taxable Flexible Bonds shall no longer bear interest at Taxable
Flexible Rates and shall instead bear interest at Taxable Weekly Rates
or Taxable Term Rates. The Borrower shall give written notice to the
Issuer, the Liquidity Provider, the Trustee and the Remarketing Agent
of such election and shall specify the Taxable Weekly Rate Period or
Taxable Term Period to follow with respect to such Bonds upon cessation
of the Taxable Flexible Rate Period and instruct the Remarketing Agent
to (1) determine Taxable Flexible Rate Segments of such duration that,
as soon as possible, all Taxable Flexible Rate Segments shall end on
the same date, not earlier than the fourteenth (14th) day (or such
shorter period of time to which the Trustee agrees) after the date of
such written notice from the Borrower, and upon the establishment of
such Taxable Flexible Rate Segments the day next succeeding the last
day of all such Taxable Flexible Rate Segments shall be the effective
date of the Taxable Weekly Rate Period or Taxable Term Rate Period, as
applicable; or (2) determine Taxable Flexible Rate Segments that will
best promote an orderly transition to the next succeeding Rate Period
to apply to such Bonds, beginning not earlier than the fourteenth
(14th) day (or such shorter period of time to which the Trustee agrees)
after the date of such written notice from the Borrower. If the
Borrower elects the alternative in clause (2) above, the day next
succeeding the last day of the Taxable Flexible Rate Segment for each
such Bond shall be, with respect to such Bond, the effective date of
the new Taxable Weekly Rate Period or Taxable Term Rate Period, as
applicable. The Remarketing Agent, promptly upon the determination
thereof, shall give written notice of such last day and such effective
dates to the Borrower, the Liquidity Provider and the Trustee. During
any transitional period from a Taxable Flexible Period in accordance
with clause (2) above, the provisions of this Indenture shall apply as
follows: such Bonds continuing to bear interest at Taxable Flexible
Rates shall have applicable to them the provisions hereunder
theretofore applicable to such Bonds as if all such Bonds were
continuing to bear interest at Taxable Flexible Rates and such Bonds
bearing interest in the Rate Period to which the transition being made
will have applicable to them the provisions hereunder as if all such
Bonds were bearing interest in such Rate Period.
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(v) Adjustment from Taxable Flexible Rate Period; Failure to
Convert to Tax-Exempt Series. All or a portion of the Taxable Flexible
Bonds may be converted to Bonds of a Tax-Exempt Series in accordance
with Section 2.15 hereof. If the conditions to such conversion are not
satisfied on a Tax-Exempt Conversion Date with respect to any Taxable
Flexible Bonds, such Bonds shall automatically adjust to a Taxable
Weekly Rate Period and shall bear interest at Taxable Weekly Rates from
and after the date of such failed conversion until a Tax-Exempt
Conversion Date, if any, occurs with respect to such Bonds, and shall
be in a Taxable Weekly Rate Period and bear interest at the Taxable
Weekly Rates established in accordance with paragraph (f)(i) below,
until adjusted to another Rate Period.
(f) (i) Determination of Taxable Weekly Rate. During each
Taxable Weekly Rate Period for any Taxable Weekly Bonds, such Bonds
shall bear interest at the Taxable Weekly Rate, which, in the case of
the first Taxable Weekly Rate determined for each Taxable Weekly Rate
Period, shall be determined by the Remarketing Agent not later than
10:00 a.m. New York time on the first day of such Taxable Weekly Rate
Period and thereafter no later than the Business Day next preceding
Wednesday of each week during such Taxable Weekly Rate Period. The
Taxable Weekly Rate shall be the rate determined by the Remarketing
Agent to be the lowest interest rate which would enable the Remarketing
Agent to sell the Taxable Weekly Bonds on the effective date of such
rate at a price equal to 100% of the principal amount thereof (without
regard to accrued interest); provided, however, that if the Remarketing
Agent shall not have determined a Taxable Weekly Rate for any period or
a Taxable Weekly Rate is not effective, the Taxable Weekly Rate for
such period shall be a rate per annum equal to 100% of the 30-day
London Interbank Offered Rate until a new Taxable Weekly Rate is
established. In no event shall the Taxable Weekly Rate exceed the
lesser of 15% per annum or the maximum rate per annum then permitted by
applicable law. The first Taxable Weekly Rate determined for each
Taxable Weekly Rate Period shall apply to the period commencing on the
first day of such period and ending on the next succeeding Tuesday.
Thereafter, each Taxable Weekly Rate shall apply to the period
commencing on each Wednesday and ending on the next succeeding Tuesday;
provided, however, if a Taxable Weekly Rate Period shall end on a day
other than Tuesday, the last Taxable Weekly Rate for such Taxable
Weekly Rate Period shall apply to the period commencing on the
Wednesday preceding the last day of such Taxable Weekly Rate Period and
ending on such last day. The Remarketing Agent shall provide the
Trustee with written notification on the first day of each Taxable
Weekly Rate Period of each Taxable Weekly Rate as so determined.
(ii) Adjustment to Taxable Weekly Rate. At any time while the
Taxable Flexible Bonds are bearing interest at Taxable Flexible Rates
or Taxable Term Bonds are bearing interest at Taxable Term Rates, the
Borrower, by written direction to the Issuer, the Trustee, the
Liquidity Provider and the Remarketing Agent, may elect that such Bonds
shall bear interest at a Taxable Weekly Rate. Such direction shall
specify the effective date of such adjustment to a Taxable Weekly Rate
Period, which shall be a Business Day not earlier than the fifteenth
(15th) day after the date of such written direction (or such shorter
period of time to which the Trustee agrees), and (1) in the case of an
adjustment from a Taxable Term Rate Period, shall be the day
immediately
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<PAGE> 33
following the last date of the then current Taxable Term Rate Period or
any day on which such Taxable Term Bonds are subject to redemption by
the Issuer hereunder at the direction of the Borrower, and (2) shall be
either the day immediately following the last day of the then current
Taxable Flexible Rate Period or the day immediately following the last
day of the last Taxable Flexible Rate Segment for each such Bond in the
then-current Taxable Flexible Rate Period, all as determined in
accordance with Section 2.03(e)(iv) hereof.
(iii) Notice of Adjustment to Taxable Weekly Rate. The Trustee
shall give notice of an adjustment to a Taxable Weekly Rate Period to
the Owners of Taxable Flexible Bonds or Taxable Term Bonds, by first
class mail, postage prepaid, not less than twelve (12) days prior to
the effective date of such Taxable Weekly Rate Period. Such notice
shall state (1) that the interest rate on the Taxable Flexible Bonds or
Taxable Term Bonds will be adjusted to a Taxable Weekly Rate (subject
to the Borrower's ability to rescind its election as described in
Section 2.03(i) hereof), (2) the effective date of such Taxable Weekly
Rate Period, (3) that all Taxable Flexible Bonds or Taxable Term Bonds
are subject to mandatory purchase on such effective date and (4) the
procedures of such purchase and the payment of the purchase price.
(iv) Adjustment from Taxable Weekly Rate; Failure to Convert
to Tax-Exempt Series. All or a portion of the Taxable Weekly Bonds may
be converted to Bonds of a Tax-Exempt Series in accordance with Section
2.15 hereof. If the conditions to such conversion do not occur on a
Tax-Exempt Conversion Date with respect to any Taxable Weekly Bonds, on
and after the date of such failed conversion until a Tax-Exempt
Conversion Date, if any, occurs with respect to such Bonds, such Bonds
shall continue in a Taxable Weekly Rate Period and bear interest at the
Taxable Weekly Rates established in accordance with paragraph (f)(i)
above until adjusted to another Rate Period.
(g) (i) Determination of Taxable Term Rate. During each
Taxable Term Rate Period for any Taxable Term Bonds (which shall be at
least 180 days in duration), such Bonds shall bear interest at the
Taxable Term Rate determined by the Remarketing Agent on a Business Day
selected by the Remarketing Agent, but not more than sixty (60) days
prior to the first day of such Taxable Term Rate Period. The Taxable
Term Rate shall be the rate determined by the Remarketing Agent on such
date, and filed on such date with the Trustee and the Borrower, by
written notice or by telephone promptly confirmed by telecopy or other
writing, as being the lowest rate which would enable the Remarketing
Agent to sell such Bonds on the effective date of such Taxable Term
Rate at a price equal to 100% of the principal amount thereof;
provided, however, that if, for any reason, a Taxable Term Rate for any
Taxable Term Rate Period shall not be determined or become effective,
then the Rate Period for the Bonds of such Series shall automatically
adjust to a Taxable Weekly Rate Period, and bear interest at a Taxable
Weekly Rate established in accordance with (f)(i) above until adjusted
to another Rate Period. In no event shall any Taxable Term Rate exceed
the lesser of 15% per annum or the maximum rate per annum then
permitted by applicable law.
(ii) Adjustment to or Continuation of Taxable Term Rate. At
any time the Borrower, upon written direction to the Issuer, the
Trustee, the Liquidity Provider, and
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the Remarketing Agent, may elect that the interest rate borne by the
Taxable Flexible Bonds, Taxable Weekly Bonds, or Taxable Term Bonds
shall be adjusted to or continued as a Taxable Term Rate, and if it
shall so elect that such Bonds shall bear or continue to bear, interest
at a Taxable Term Rate, then the Borrower shall determine the duration
of the Taxable Term Rate Period during which the Bonds shall bear
interest at such Taxable Term Rate. As a part of such election, the
Borrower also may determine that the initial Taxable Term Rate Period
shall be followed by successive Taxable Term Rate Periods and, if the
Borrower so elects, shall specify the duration of each such successive
Taxable Term Rate Period as provided in this paragraph (ii). Such
direction shall (A) specify the Series of Bonds and the effective date
of each Taxable Term Rate Period, which shall be a Business Day not
earlier than the fifteenth (15th) day after the date of such written
direction (or such shorter period of time to which the Trustee agrees),
and (1) in the case of an adjustment from a Taxable Flexible Rate
Period, shall be either the day immediately following the last day of
the then current Taxable Flexible Rate Period or the day immediately
following the last day of the last Taxable Flexible Segment for each
Bond in the then-current Taxable Flexible Rate Period, all as
determined in accordance with Section 2.03(e)(iv) hereof and (2) in the
case of adjustment or continuation of a Taxable Term Rate Period, shall
be the day immediately following the last day of the then current
Taxable Term Rate Period or any day on which the Issuer at the
direction of the Borrower would be permitted to redeem such Bonds
pursuant to, and at the redemption price described in, Section
3.01(A)(3) hereof and; (B) specify the last day of such Taxable Term
Rate Period or, if successive Taxable Term Rate Periods shall have been
designated, the last day of each such Taxable Term Rate Period (which
shall be for each Taxable Term Rate Period either the date immediately
preceding the final maturity of the Series 1999B Bonds, or a day which
both immediately precedes a Business Day and is at least 180 days after
the effective date thereof). Notwithstanding the stated date of
termination of any Taxable Term Rate Period, the Borrower may elect to
cause an adjustment to any other Rate Period as of any date on which
the affected Bonds are subject to redemption pursuant to Section
3.01(A)(3) hereof.
If, by the fourteenth (14th) day prior to the last day of any Taxable
Term Rate Period, the Trustee shall not have received notice of the Borrower's
election that, during the next succeeding Rate Period, such Bonds shall bear
interest at a Taxable Flexible Rate, Taxable Term Rate or a Taxable Weekly Rate,
the next succeeding Rate Period of such Bonds shall be a Taxable Weekly Rate
Period until the interest rate on such Bonds is adjusted to another Rate Period,
and the Bonds shall be subject to purchase pursuant to Section 4.02.
(iii) Notice of Adjustment to or Continuation of Taxable Term
Rates. The Trustee shall give notice of an adjustment to or
continuation of a Taxable Term Rate Period to the Owners of Taxable
Weekly Bonds, Taxable Term Bonds, or Taxable Flexible Bonds, by first
class mail, postage prepaid, not less than twelve (12) days prior to
the effective date of such Taxable Term Rate Period. Such notice shall
state (1) that the interest rate on such Bonds will be adjusted to or
continued in a Taxable Term Rate (subject to the Borrower's ability to
rescind its election as described in Section 2.03(i) hereof), (2) the
effective date and last date of such Term Rate Period, (3) that the
Taxable Term Rate for such Taxable Term Rate Period will be determined
on or prior to the effective date thereof, (4) how such Taxable Term
Rate may be obtained from the
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Remarketing Agent, (5) the Interest Payment Dates after such effective
date, (6) that all such Taxable Term Bonds, Taxable Flexible Bonds or
Taxable Weekly Bonds are subject to mandatory purchase on such
effective date, (7) the procedures of such purchase and the payment of
the purchase price, and (8) the redemption provisions that will pertain
to the Taxable Term Bonds during such Taxable Term Rate Period.
(iv) Adjustment from Taxable Term Rate Period; Failure to
Convert to Tax-Exempt Series. All or a portion of the Taxable Term
Bonds may be converted to Bonds of a Tax-Exempt Series in accordance
with Section 2.15 hereof. If the conditions to such conversion do not
occur on a Tax-Exempt Conversion Date with respect to any Taxable Term
Bonds, such Bonds shall bear interest at a Taxable Weekly Rate from and
after the date of such failed conversion until a Tax-Exempt Conversion
Date, if any, occurs with respect to such Bonds at Taxable Weekly Rates
established in accordance with paragraph (f)(i) above until adjusted to
another Rate Period.
(h) Determinations Binding. The establishment and determination by the
Remarketing Agent of each Daily Rate, Weekly Rate, Taxable Weekly Rate, Taxable
Term Rate and Term Rate, each Taxable Flexible Rate Segment and Taxable Flexible
Rate and each Flexible Segment and Flexible Rate shall, absent manifest error,
be conclusive and binding upon the Remarketing Agent, the Liquidity Provider,
the Trustee, the Issuer, the Borrower and the Owners of the Bonds.
(i) Rescission of Election; Automatic Adjustment. Notwithstanding
anything herein to the contrary, the Borrower may rescind any election by it to
adjust to or, in the case of a Term Rate Period or Taxable Term Rate Period,
continue a Rate Period pursuant to Section 2.03(a)(ii), (b)(ii), (c)(ii),
(d)(ii), (e)(ii), (f)(ii) or (g)(ii) hereof prior to the effective date of such
adjustment or continuation by giving written notice thereof to the Issuer, the
Trustee, the Liquidity Provider, and the Remarketing Agent prior to such
effective date. At the time the Borrower gives notice to rescind any election by
it to adjust to, or in the case of a Term Rate Period or Taxable Term Rate
Period, continue a Rate Period pursuant to Section 2.03(a)(ii), (b)(ii),
(c)(ii), (d)(ii), (e)(ii), (f)(ii) or (g)(ii) hereof, it may also elect to
continue the then effective Rate Period; provided, however, if the Rate Period
then in effect is a Term Rate Period, the subsequent Term Rate Period shall not
be of different duration than the Term Rate Period then in effect unless the
Borrower, prior to the expiration of the then-current Term Rate Period, provides
to the Trustee an opinion of Bond Counsel to the effect that the continuation in
a Term Rate Period of a different duration does not adversely affect the
Tax-Exempt status of the affected Bonds. If the notice of such rescission does
not become effective for any reason, and the Borrower does not elect to continue
the Rate Period then in effect, the Rate Period for (i) the Taxable Flexible
Bonds, the Taxable Term Bonds, or the Taxable Weekly Bonds shall be the Taxable
Weekly Rate Period, and (ii) the Bonds of a Tax-Exempt Series shall
automatically adjust to or continue in a Daily Rate Period. If a Daily Rate for
the first day of any Daily Rate Period to which a Rate Period is adjusted under
this Section 2.03(i) is not determined as provided in Section 2.03(a)(i) hereof
the Daily Rate for the first day of such Daily Rate Period shall be 105% of the
most recent TBMA Swap Index. The Trustee shall immediately give written notice
of each such automatic adjustment to a Rate Period pursuant to this Section
2.03(i) to the Owners in the form provided in Section 2.03(a)(iii) hereof.
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Notwithstanding the rescission of any notice to adjust or continue a
Rate Period, if notice has been given to Bondholders pursuant to Section
2.03(a)(iii), (b)(iii), (c)(iii), (d)(iii), (e)(iii), (f)(iii) or (g)(iii), the
Bonds shall be subject to mandatory purchase as specified in such notice.
(j) Liquidity Provider Bonds. Notwithstanding any other provision of
this Indenture, including any provision of this Section 2.03 relating to the
determination of interest rates on the Bonds, any Bond which is acquired by a
Liquidity Provider pursuant to a Liquidity Facility shall bear interest at the
rate, payable at the times and in the manner, specified by such Liquidity
Facility.
SECTION 2.04. OWNERSHIP, TRANSFER, EXCHANGE AND REGISTRATION OF BONDS.
The Issuer shall cause books for the registration and for the transfer of the
Bonds as provided herein to be kept by the Trustee, which is hereby constituted
and appointed the Registrar and transfer agent for the Bonds. The Issuer shall
prepare and deliver to the Trustee, and the Trustee shall keep custody of, a
supply of unauthenticated Bonds of each Series duly executed by the Issuer, as
provided in Section 2.05 hereof, for use in the transfer and exchange of Bonds
of such Series. The Trustee is hereby authorized and directed to complete such
forms of Bonds as to principal amounts and registered owners, in accordance with
the provisions hereof, in effecting transfers and exchanges of Bonds as provided
herein.
Upon surrender for transfer of any Bond at the Principal Office of the
Trustee, duly endorsed for transfer or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Trustee duly executed by the
registered owner or his attorney duly authorized in writing, the Trustee shall
date and execute the certificate of authentication on and deliver in the name of
the transferee or transferees a new Bond or Bonds of the applicable Series duly
executed by the Issuer of Authorized Denominations and for a like aggregate
principal amount.
Any Bond or Bonds may be exchanged at the Principal Office of the
Trustee for a new Bond or Bonds of like aggregate principal amount and Series in
Authorized Denominations. Upon surrender of any Bond or Bonds for exchange, the
Trustee shall date and execute the certificate of authentication on and deliver
a new Bond or Bonds duly executed by the Issuer which the Bondholder making the
exchange is entitled to receive.
Except in connection with the remarketing of any Bonds, the Trustee
shall not be required to transfer or exchange any Bond after the mailing of
notice calling such Bond or portion thereof for redemption, nor during the
period of ten days next preceding the mailing of such notice of redemption.
Except as provided in Section 4.03, hereof, the person in whose name
any Bond shall be registered shall be deemed and regarded as the absolute owner
thereof for all purposes, and payment of the principal of, premium, if any, or
interest on any Bond shall be made only to or upon the written order of the
registered Owner thereof or his legal representative, but such registration may
be changed as hereinabove provided. All such payments shall be valid and
effective to satisfy and discharge the liability upon such Bond to the extent of
the sum or sums so paid.
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The Issuer and the Trustee shall require the payment by the Bondholder
requesting exchange or transfer (other than an exchange upon a partial
redemption of a Bond) of any tax, fee or other governmental charge required to
be paid with respect to such exchange or transfer, but otherwise no charge shall
be made to the Bondholder for such exchange or transfer.
SECTION 2.05. EXECUTION OF BONDS. The Bonds shall be signed in the name
and on behalf of the Issuer with the manual or facsimile signature of the
Chairman of its Board of Commissioners and its Treasurer and attested by the
manual or facsimile signature of its Clerk or Deputy Clerk. The Bonds shall then
be delivered to the Trustee for authentication by it. In case any officer who
shall have signed any of the Bonds shall cease to be such officer before the
Bonds so signed or attested shall have been authenticated or delivered by the
Registrar or issued by the Issuer, such Bonds may nevertheless be authenticated,
delivered and issued and, upon such authentication, delivery and issuance, shall
be as binding upon the Issuer as though those who signed and attested the same
had continued to be such officers of the Issuer. Also, any Bond may be signed on
behalf of the Issuer by such persons as on the actual date of the execution of
such Bond shall be the proper officers although on the nominal date of such Bond
any such person shall not have been such officer.
SECTION 2.06. AUTHENTICATION. No Bond shall be valid for any purpose
until the certificate of authentication on such Bond shall have been duly
executed by the Trustee, and such authentication shall be conclusive proof that
such Bond has been duly authenticated and delivered under this Indenture and
that the Owner thereof is entitled to the benefits of the trust hereby created.
The Trustee's certificate of authentication on any Bond shall be deemed to have
been executed by it if manually signed by an authorized signatory of the
Trustee, but it shall not be necessary that the same signatory sign the
certificate of authentication on all of the Bonds issued hereunder.
Upon authentication of any Bond, the Trustee shall set forth on such
Bond (1) the date of such authentication and (2) if the Bonds are not Book-Entry
Bonds, in the case of a Bond bearing interest at a Flexible Rate or Taxable
Flexible Rate, such Flexible Rate or Taxable Flexible Rate, the day next
succeeding the last day of the applicable Flexible Segment or Taxable Flexible
Segment, the number of days comprising such Flexible Segment or Taxable Flexible
Segment and the amount of interest to accrue during such Flexible Segment or
Taxable Flexible Segment.
SECTION 2.07. FORM OF BONDS. The Series 1999A Bonds and the certificate
of authentication to be executed thereon and the Series 1999B Bonds and the
certificate of authentication to be executed thereon shall be in substantially
the forms attached hereto as Exhibit A1 and Exhibit A2, respectively, with such
appropriate variations, omissions and insertions as are permitted or required by
this Indenture. The Bonds of any Tax-Exempt Series other than the Series 1999A
Bonds and the certificate of authentication to be executed thereon shall be in
substantially the form attached hereto as Exhibit B, with such appropriate
variations, omissions and insertion as are permitted or required by this
Indenture.
Prior to conversion to a Tax-Exempt Series, each Taxable Flexible Bond,
Taxable Term Bond and Taxable Weekly Bond shall contain a legend substantially
to the following effect:
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"By its acceptance of this Bond, each purchaser of this Bond
will be deemed to have represented and agreed as follows: (1) the
purchaser understands that the Bonds are being issued only in
transactions not involving any public offering within the meaning of
the Securities Act; (2) the purchaser is (A) a sophisticated
institutional investor who (i) is an "Accredited Investor" as that term
is defined in Rule 501(a) of Regulation D under the Securities Act (or
is a fiduciary or agent (other than a U.S. bank or savings and loan
association) that is purchasing the Bonds for the account of an
Accredited Investor), (ii) has such knowledge and experience (or is a
fiduciary or agent with sole investment discretion having such
knowledge and experience) in financial and business matters that it (or
such fiduciary or agent) is capable of evaluating the merits and risks
of investing in such Bond, (iii) has had access to such information as
the purchaser deems necessary in order to make an informed investment
decision, and (iv) is purchasing the Bond for investment and not with a
view to distribution; or (B) in the case of sale of Bonds pursuant to
Rule 144A under the Securities Act, a "Qualified Institutional Buyer"
as defined in Rule 144A (or is a Qualified Institutional Buyer
purchasing the Bonds on behalf of one or more other Qualified
Institutional Buyers); (3) if in the future the purchaser (or any such
other investor or any other fiduciary or agent representing such
investor) decides to sell such Bond prior to the maturity date, any
redemption date, or the date fixed for mandatory purchase, it will be
sold only in a transaction exempt from registration under or are not
subject to the Securities Act and only to (i) [name of Remarketing
Agent] or through [name of Remarketing Agent] to an institutional
investor approved by [name of Remarketing Agent] as an institutional
Accredited Investor or a Qualified Institutional Buyer, or (ii) a
Qualified Institutional Buyer in a transaction made pursuant to Rule
144A under the Securities Act; (4) the purchaser understands that,
although [name of Remarketing Agent] may repurchase Bonds, [name of
Remarketing Agent] is not obligated to do so, and accordingly the
purchaser (or any such other investor) should be prepared to hold such
Bond until the mandatory purchase thereof at the end of the Taxable
Flexible Rate Segment, Taxable Weekly Rate Period or Taxable Term Rate
Period, as applicable or until a Tax-Exempt Conversion Date, if any;
and (5) the purchaser acknowledges that the Bond sold to the purchaser
by [name of Remarketing Agent] may be sold to it pursuant to Rule
144A."
The Trustee shall not transfer any such Bond to a new owner if a
Responsible Officer of the Trustee has actual knowledge that such transfer would
violate the terms of the legend set forth above. The Trustee may request
documentation from a transferor or transferee thereof, including opinions or
certificates, to ensure compliance with the terms of such legend prior to
effecting any such transfer.
Upon adjustment to a Term Rate Period or Taxable Term Rate Period, the
form of Bond may include a summary of the mandatory and optional redemption
provisions to apply to the Bonds during such Term Rate Period or Taxable Term
Rate Period, or a statement to the effect that the Bonds will not be optionally
redeemed during such Term Rate Period or Taxable Term Rate Period, and a
statement indicating the applicable Term Rate or Taxable Term Rate and the
duration of the applicable Term Rate Period or Taxable Term Rate Period,
provided that the Registrar shall not authenticate such a revised Bond form
prior to receiving an opinion of Bond Counsel that such Bond form conforms to
the terms of the Act and of this Indenture and
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that authentication thereof will not adversely affect the Tax-Exempt status of
such Bonds if such Bonds are Bonds of a Tax-Exempt Series.
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN BONDS. In the event
any Bond or temporary Bond is mutilated, lost, stolen or destroyed, the Trustee
may authenticate a new Bond duly executed by the Issuer of like date and
denomination as that mutilated, lost, stolen or destroyed; provided that, in the
case of any mutilated Bond, such mutilated Bond shall first be surrendered to
the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall
be first furnished to the Trustee evidence of such loss, theft or destruction
satisfactory to the Trustee, together with indemnity to the Issuer and the
Trustee satisfactory to them. In the event any such Bond shall have matured,
instead of issuing a duplicate Bond, the Trustee on behalf of the Issuer may pay
the same without surrender thereof. The Issuer and the Trustee may charge the
Owner of such Bond with their reasonable fees and expenses in this connection.
The Issuer shall cooperate with the Trustee in connection with the issue of
replacement Bonds, but nothing in this Section shall be construed in derogation
of any rights which the Issuer, the Borrower or the Trustee may have to receive
indemnification against liability, or payment or reimbursement of expenses, in
connection with the issue of a replacement Bond.
If, after the delivery of such new Bond, a bona fide purchaser of the
original Bond in lieu of which such new Bond was issued presents for payment or
registration such original Bond, the Trustee shall be entitled to recover such
new Bond from the person to whom it was delivered or any person taking
therefrom, except a bona fide purchaser, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expense incurred by the Trustee or the Issuer in connection therewith.
Each duplicate Bond delivered in accordance with this Section, except
as otherwise provided herein, shall constitute an original additional
contractual obligation of the Issuer and shall be entitled to the benefit and
security of this Indenture to the same extent as the Bond in lieu of which such
duplicate Bond was delivered.
All Bonds shall be held and owned upon the express condition that the
foregoing provisions are, to the extent permitted by law, exclusive with respect
to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and
shall preclude any and all other rights or remedies.
SECTION 2.09. TEMPORARY BONDS. Pending preparation of definitive Bonds,
or by agreement with the purchasers of all Bonds, the Issuer may issue and, upon
its request, the Trustee shall authenticate, in lieu of definitive Bonds, one or
more temporary printed or typewritten Bonds in Authorized Denominations of the
same Series and of substantially the tenor recited above. Upon request of the
Issuer, the Trustee shall authenticate definitive Bonds in exchange for and upon
surrender of an equal principal amount of temporary Bonds. Until so exchanged,
temporary Bonds shall have the same rights, remedies and security hereunder as
definitive Bonds.
SECTION 2.10. CANCELLATION AND DISPOSITION OF SURRENDERED BONDS.
Whenever any Outstanding Bond shall be delivered to the Trustee
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for transfer, exchange or cancellation pursuant to this Indenture, upon payment
of the principal amount represented thereby, or for replacement pursuant to
Section 2.08 hereof, such Bond shall be promptly canceled and disposed of by the
Trustee in accordance with its ordinary customs and practices.
SECTION 2.11. USE OF CERTAIN MONEYS IN THE BOND FUND UPON REFUNDING. In
the event that refunding bonds shall be issued by the Issuer to pay the
principal of or premium, if any, on all or any portion of the Bonds, the net
proceeds of the refunding bonds remaining after payment of expenses incident to
the refunding shall be deposited by the Issuer into the Bond Fund as provided in
Section 6.03 hereof. All moneys remaining in the Bond Fund on the date of the
refunding to be used to pay interest on the Bonds to be refunded shall be held,
as collateral for the payment of the Bonds to be refunded, by the Trustee, in
trust for and on behalf of the Owners of the Bonds to be refunded, together with
the portion of the proceeds of the sale of the refunding bonds so deposited and
any investments or reinvestments of such proceeds, in one or more separate
subaccounts in the Bond Fund irrevocably in trust for the respective holders of
Bonds to be refunded, and upon defeasance of the Bonds to be refunded as
provided in Article VIII hereof shall be held, invested and used as provided in
Article VIII hereof. Investment income or profit on any such investments or
reinvestments shall remain in the Bond Fund.
SECTION 2.12. DELIVERY OF THE BONDS. Upon or at any time after the
execution and delivery of this Indenture, the Issuer shall execute and deliver
to the Trustee and the Trustee shall authenticate the Series 1999A and Series
1999B Bonds and deliver them to the purchasers as directed by the Issuer as
hereinafter in this Section provided.
Prior to the delivery by the Trustee of any of the Bonds there shall be
filed with the Trustee:
(1) A copy of the Resolution, duly certified by the Clerk or
Deputy Clerk of the Issuer, authorizing issuance of such Bonds.
(2) Original executed counterparts of the Agreement, this
Indenture, the Tax Certificate, the Bond Insurance and, in the case of
any Bonds that may be remarketed from time to time, a Liquidity
Facility.
(3) A request and authorization to the Trustee on behalf of
the Issuer, signed by the Chairman and the Clerk or Deputy Clerk of the
Issuer and acknowledged by the Borrower, to authenticate and deliver
the Bonds pursuant to Section 2.14 hereof, registered in the names and
in the Authorized Denominations specified to the Trustee by the Initial
Purchaser, upon payment by the Initial Purchaser to the Trustee of the
sum specified in such request and authorization for deposit in the
Construction Fund and Costs of Issuance Fund, plus accrued interest, if
any, on the Bonds to the date of delivery.
SECTION 2.13. BOOK-ENTRY SYSTEM. (a) Anything in this Indenture to the
contrary notwithstanding, any Bond may be authorized and issued as a Book-Entry
Bond.
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(b) For all purposes of this Indenture, the Owner of a Book-Entry Bond
shall be the Securities Depository therefor and neither the Issuer, the Trustee,
the Paying Agent, the Tender Agent, the Remarketing Agent nor the Registrar
shall have any responsibility or obligation to the beneficial owner of such Bond
or to any direct or indirect participant in such Securities Depository, except
as expressly provided in this Indenture. Without limiting the generality of the
foregoing, neither the Issuer, the Trustee, the Paying Agent, the Tender Agent,
the Remarketing Agent nor the Registrar shall have any responsibility or
obligation to any such participant or to the beneficial owner of a Book-Entry
Bond with respect to (i) the accuracy of the records of the Securities
Depository or any participant with respect to any beneficial ownership interest
in such Bond, (ii) the delivery to any participant of the Securities Depository,
the beneficial owner of such Bond or any other person, other than the Securities
Depository, of any notice with respect to such Bond, including any notice of the
redemption or purchase thereof, or (iii) the payment to any participant of the
Securities Depository, the beneficial owner of such Bond or any other person,
other than the Securities Depository, of any amount with respect to the
principal, redemption price, if applicable, or purchase price of, or interest
on, such Bond. The Issuer, the Trustee, the Paying Agent, the Tender Agent, the
Remarketing Agent and the Registrar may treat the Securities Depository therefor
as, and deem such Securities Depository to be, the absolute owner of a
Book-Entry Bond for all purposes whatsoever, including, but not limited to, (1)
payment of the principal, redemption price, if applicable, or purchase price of,
and interest on, such Bond, (2) giving notices of redemption or purchase and of
other matters with respect to such Bond, (3) registering transfers with respect
to such Bond as permitted hereby and (4) except as expressly provided in this
Indenture, giving to the Issuer, the Trustee, the Paying Agent, the Tender
Agent, the Remarketing Agent or the Registrar any notice, consent, request or
demand pursuant to the Indenture for any purpose whatsoever. The Trustee, acting
as Paying Agent, shall pay the principal or redemption price, if applicable, of,
and interest on, a Book-Entry Bond, and the Trustee, acting as Tender Agent,
shall pay the purchase price of a Book-Entry Bond, only to or upon the order of
the Securities Depository therefor, and all such payments shall be valid and
effective to satisfy fully and discharge the Issuer's obligations with respect
to such principal or redemption price or purchase price, and interest, to the
extent of the sum or sums so paid. Except as otherwise provided in subsection
(d) of this Section 2.13, no person other than the Securities Depository shall
receive a Bond or other instrument evidencing the Issuer's obligation to make
payments of the principal, redemption price or purchase price thereof, and
interest thereon.
(c) The Issuer, by notice to the Trustee, the Paying Agent, the Tender
Agent, the Registrar, the Remarketing Agent, if any, and a Securities
Depository, may, with the prior written consent of the Borrower, and shall, at
the written direction of an Authorized Borrower Representative, terminate the
services of such Securities Depository with respect to the Book-Entry Bonds for
which such Securities Depository serves as securities depository if the Issuer
determines that (i) the Securities Depository is unable to discharge its
responsibilities with respect to such Bond or (ii) a continuation of the
requirement that all of the Bonds issued as Book-Entry Bonds be registered in
the registration books of the Issuer kept by the Trustee in the name of the
Securities Depository is not in the best interests of the beneficial owners of
such Bonds or of the Issuer.
(d) Upon the termination of the services of a Securities Depository
with respect to a Book-Entry Bond pursuant to clause (ii) of subsection (c) of
this Section 2.13, such
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Bond no longer shall be restricted to being registered in the registration books
kept by the Registrar in the name of a Securities Depository. Upon the
termination of the services of a Securities Depository with respect to a
Book-Entry Bond pursuant to clause (i) of subsection (c) of this Section 2.13,
the Issuer may, with the prior written consent of the Borrower, and shall, at
the written direction of an Authorized Borrower Representative, within ninety
(90) days thereafter appoint a substitute securities depository which, in the
opinion of the Issuer, is willing and able to undertake the functions of
Securities Depository under this Indenture upon reasonable and customary terms.
If no such successor can be found within such period, such Book-Entry Bond shall
no longer be restricted to being registered in the registration books of the
Issuer kept by the Trustee in the name of a Securities Depository. In the event
that a Book-Entry Bond shall no longer be restricted to being registered in the
registration books of the Issuer kept by the Trustee in the name of a Securities
Depository, (i) the Issuer shall execute and the Trustee shall authenticate and
deliver, upon presentation and surrender of the Book-Entry Bond, Bond
certificates as requested by the Securities Depository so terminated of like
principal amount, maturity and interest rate, in Authorized Denominations, to
the identifiable beneficial owners in replacement of such beneficial owners'
beneficial ownership interests in such Book-Entry Bond and (ii) the Trustee
shall notify the Remarketing Agent, if any, and the Borrower that the Bonds are
no longer restricted to being registered in the registration books of the Issuer
kept by the Trustee in the name of a Securities Depository; provided, however
that such registration shall not be terminated by the Issuer or the Borrower
without an opinion of Bond Counsel confirming that such termination of
registration will not adversely affect the Tax-Exempt status of any Bonds of a
Tax-Exempt Series.
(e) Anything in this Indenture to the contrary notwithstanding, payment
of the redemption price of a Book-Entry Bond, or portion thereof, called for
redemption prior to maturity may be paid to the Securities Depository by wire
transfer of immediately available funds. Anything in the Indenture to the
contrary notwithstanding, such redemption price may be paid without presentation
and surrender to the Trustee, as Paying Agent, of the Book-Entry Bond, or
portion thereof, called for redemption; provided, however, that payment of (a)
the principal payable at maturity of a Book-Entry Bond and (b) the redemption
price of a Book-Entry Bond as to which the entire principal amount thereof has
been called for redemption shall be payable only upon presentation and surrender
of such Book-Entry Bond to the Trustee, as Paying Agent; and provided, further,
that no such redemption price shall be so payable without presentation and
surrender unless such Book-Entry Bond shall contain or have endorsed thereon a
legend substantially to the following effect (or such other legend(s) of similar
content as may be determined to be necessary or desirable by the Issuer or the
Securities Depository):
"AS PROVIDED IN THE INDENTURE REFERRED TO HEREIN, UNTIL THE TERMINATION
OF THE SYSTEM OF BOOK-ENTRY-ONLY TRANSFERS THROUGH [NAME OF SECURITIES
DEPOSITORY] (TOGETHER WITH ANY SUCCESSOR SECURITIES DEPOSITORY
APPOINTED PURSUANT TO THE INDENTURE, "[NAME OF SECURITIES
DEPOSITORY]"), AND NOTWITHSTANDING ANY OTHER PROVISION OF THE INDENTURE
TO THE CONTRARY, (A) THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN
PART, ONLY TO A NOMINEE OF [NAME OF SECURITIES DEPOSITORY], OR BY A
NOMINEE OF [NAME OF SECURITIES DEPOSITORY] TO [NAME OF SECURITIES
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<PAGE> 43
DEPOSITORY] OR A NOMINEE OF [NAME OF SECURITIES DEPOSITORY], OR BY
[NAME OF SECURITIES DEPOSITORY] OR A NOMINEE OF [NAME OF SECURITIES
DEPOSITORY] TO ANY SUCCESSOR SECURITIES DEPOSITORY OR ANY NOMINEE
THEREOF AND (B) A PORTION OF THE PRINCIPAL AMOUNT OF THIS BOND MAY BE
PAID OR REDEEMED WITHOUT SURRENDER HEREOF TO THE PAYING AGENT. [NAME OF
SECURITIES DEPOSITORY] OR A NOMINEE, TRANSFEREE OR ASSIGNEE OF [NAME OF
SECURITIES DEPOSITORY] OF THIS BOND MAY NOT RELY UPON THE PRINCIPAL
AMOUNT INDICATED HEREON AS THE PRINCIPAL AMOUNT HEREOF OUTSTANDING AND
UNPAID. THE PRINCIPAL AMOUNT HEREOF OUTSTANDING AND UNPAID SHALL FOR
ALL PURPOSES BE THE AMOUNT DETERMINED IN THE MANNER PROVIDED IN THE
INDENTURE."
Anything in this Indenture to the contrary notwithstanding, upon any such
payment to the Securities Depository without presentation and surrender, for all
purposes of (i) the Book-Entry Bond as to which such payment has been made and
(ii) this Indenture, the unpaid principal amount of such Book-Entry Bond
Outstanding shall be reduced automatically by the principal amount so paid. In
such event, the Trustee shall notify forthwith the Remarketing Agent, if any, as
to the particular Book-Entry Bond as to which such payment has been made, and
the principal amount of such Bond so paid, and the Trustee shall note such
payment on the registration books of the Issuer kept by it, but failure to make
any such notation shall not affect the automatic reduction of the principal
amount of such Book-Entry Bond Outstanding as provided in this subsection.
(f) For all purposes of this Indenture authorizing or permitting the
purchase of Bonds, or portions thereof, by, or for the account of, the Issuer
for cancellation, and anything in the Indenture to the contrary notwithstanding,
a portion of a Book-Entry Bond may be deemed to have been purchased and
cancelled without surrender thereof upon delivery to the Trustee of a
certificate executed by the Issuer and a participant of the Securities
Depository therefor to the effect that a beneficial ownership interest in such
Bond, in the principal amount stated therein, has been purchased by, or for the
account of, the Issuer through the participant of the Securities Depository
executing such certificate; provided, however, that any purchase for
cancellation of the entire principal amount of a Book-Entry Bond shall be
effective for purposes of the Indenture only upon surrender of such Book-Entry
Bond to the Paying Agent; and provided, further, that no portion of a Book-Entry
Bond may be deemed to have been so purchased and cancelled without surrender
thereof unless such Book-Entry Bond shall contain or have endorsed thereon the
legend referred to in subsection (e) of this Section 2.13. Anything in the
Indenture to the contrary notwithstanding, upon delivery of any such certificate
to the Trustee, for all purposes of (i) the Book-Entry Bond to which such
certificate relates and (ii) this Indenture, the unpaid principal amount of such
Book-Entry Bond Outstanding shall be reduced automatically by the principal
amount so purchased. In such event, the Trustee shall immediately notify the
Remarketing Agent, if any, as to the particular Book-Entry Bond as to which such
payment has been made and the amount thereof and shall note such reduction in
principal amount of such Book-Entry Bond Outstanding on the registration books
of the Issuer kept by it, but failure to
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make any such notation shall not affect the automatic reduction of the principal
amount of such Book-Entry Bond Outstanding as provided in this subsection.
(g) Anything in this Indenture to the contrary notwithstanding, a
Securities Depository may make a notation on a Book-Entry Bond (i) redeemed in
part or (ii) purchased by, or for the account of, the Issuer in part for
cancellation, to reflect, for informational purposes only, the date of such
redemption or purchase and the principal amount thereof redeemed or deemed
cancelled, but failure to make any such notation shall not affect the automatic
reduction of the principal amount of such Book-Entry Bond Outstanding as
provided in subsection (e) or (f) of this Section 2.13, as the case may be.
(h) Anything in this Indenture to the contrary notwithstanding, in the
case of a Book-Entry Bond, the Issuer shall be authorized to redeem or purchase
(by or for the account of the Issuer) less than all of the entire Outstanding
principal amount thereof, and in the event of such partial defeasance,
redemption, purchase or refunding, the provisions of the Indenture relating to
the defeasance, redemption, purchase or refunding of a Bond or Bonds shall be
deemed to refer to the defeasance, redemption, purchase or refunding of a
portion of a Bond.
(i) The Issuer, the Trustee, the Paying Agent, the Tender Agent and the
Remarketing Agent may enter into an agreement with a Securities Depository for
the Bonds providing for procedures for the registration, payment, tender and
delivery of notices relating to the Bonds, provided that the terms of such
agreement shall not be inconsistent with the terms of this Indenture. Any such
agreement may provide that (i) such Securities Depository is not required to
present a Bond to the Trustee in order to receive a partial payment of
principal; (ii) a Bond need not be delivered to the Trustee in order for a
tender of such Bond pursuant to Article IV of this Indenture to be effective or
in order for the purchase price of such tendered Bond to be paid and that notice
of tender of a Bond for purchase pursuant to Article IV hereof may be given to
the Trustee by a beneficial owner of a Bond or a direct participant of the
Securities Depository; (iii) a legend with respect to the registration of the
Bond in the name of the Securities Depository shall appear on each Bond so long
as the Bonds are subject to such agreement; and (iv) different provisions for
notices to such Securities Depository may be set forth therein; and such
provisions shall be binding on the Issuer, the Trustee, the Paying Agent, the
Tender Agent and the Remarketing Agent for so long as such Securities Depository
is the Securities Depository for Book-Entry Bonds hereunder.
SECTION 2.14. DELIVERY OF THE BONDS. DESIGNATION OF THE BONDS AS
BOOK-ENTRY BONDS; APPOINTMENT OF INITIAL SECURITIES DEPOSITORY FOR THE BONDS.
(a) The Bonds are hereby authorized to be and shall be issued initially, subject
to the provisions of this Indenture, as Book-Entry Bonds within the meaning of
and subject to Section 2.13 hereof.
(b) DTC is hereby appointed as the initial Securities Depository for
the Bonds.
(c) The Bonds of each Series (including any Bond issued on a Tax-Exempt
Conversion Date) shall be initially issued in the form of a separate single,
fully registered Bond in the aggregate principal amount thereof. So long as DTC
serves as Securities Depository for
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the Bonds, the Owner of all Bonds shall be, and each of the Bonds shall be
registered in the name of, Cede & Co. ("Cede"), as nominee for DTC. Upon
delivery by DTC to the Trustee of written notice to the effect that DTC has
determined to substitute a new nominee in place of Cede, and subject to the
transfer provisions of the Indenture, the word "Cede" in the Indenture shall
refer to such new nominee of DTC. So long as any Bond is registered in the name
of Cede, as nominee for DTC in its capacity as Securities Depository for the
Bonds, all payments with respect to the principal, redemption price, if
applicable, or purchase price of, and interest on, such Bond and all notices
with respect to such Bond shall be made or given, as the case may be, to DTC as
provided in the Indenture and in the representation letter of the Issuer, the
Trustee, the Paying Agent and the Remarketing Agent, if any, delivered in
connection with the issuance of the Bonds and addressed to DTC, as such
representation letter may be amended and supplemented from time to time.
SECTION 2.15. CONVERSION OF SERIES 1999B BONDS TO TAX-EXEMPT SERIES.
The Borrower may give written notice at any time to the Issuer, the
Remarketing Agent, the Liquidity Provider, the Bond Insurer and the Trustee that
it intends to effect a conversion of all or a portion of the Series 1999B Bonds
to Bonds of a new or existing Tax-Exempt Series (other than Series 1999A Bonds)
on the day specified in such notice, which date shall be the Tax-Exempt
Conversion Date for such Bonds and shall be not less than 15 days after the date
of such notice (or such shorter period of time as to which the Trustee agrees)
and shall be the day following the end of a Taxable Flexible Rate Segment with
respect to any Taxable Flexible Bonds, the day specified in such notice with
respect to any Taxable Weekly Bonds, or the day following the end of the Taxable
Term Rate Period or a day on which such Bonds are subject to redemption pursuant
to Section 3.01(A)(3) with respect to any Taxable Term Bonds to be converted. If
less than all of the Taxable Flexible Bonds, Taxable Term Bonds or Taxable
Weekly Bonds are being converted to a Tax-Exempt Series, the notice shall state
the amount and the identity of such Bonds to be so converted as provided in
Section 2.02(a). Together with such notice, the Borrower shall file with the
Issuer, the Remarketing Agent, and the Trustee a form of opinion of Bond Counsel
acceptable to the Issuer, the Remarketing Agent, and the Trustee (which opinion
may be based on rulings of the Internal Revenue Service) to the effect that (i)
the conversion of such Bonds will not adversely affect the validity thereof,
(ii) the interest on such Bonds shall be Tax-Exempt, and (iii) that such
conversion is permitted by the terms hereof. No proposed conversion of such
Bonds to a Tax-Exempt Series shall become effective unless (i) the Borrower
shall also file with the Issuer, the Remarketing Agent, the Liquidity Provider,
and the Trustee such an opinion dated the Tax-Exempt Conversion Date, and (ii)
except in the case of a conversion to a Term Rate with a Term Rate Period fixed
to maturity, a Liquidity Facility meeting the requirements of Section 5.14 of
the Agreement will be in full force and effect after the Tax-Exempt Conversion
Date and the Borrower is not in default thereunder. Upon compliance with the
applicable provisions of Section 2.03 of this Indenture simultaneously with the
provisions of this Section 2.15, the Borrower may, on the Tax-Exempt Conversion
Date, either (i) convert the Rate Period of the Series 1999B Bonds to be
converted to a Tax-Exempt Series to a new Rate Period on the Tax-Exempt
Conversion Date, or (ii) convert the Rate Period of such Bonds to be converted
to an Outstanding Tax-Exempt Series (other than the Series 1999A Bonds) to the
existing Rate Period of such Outstanding Bonds, all as stated in the notice from
the Borrower to the Trustee, the Issuer, the Liquidity Provider and the
Remarketing Agent.
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ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
SECTION 3.01. REDEMPTION DATES AND PRICES. The Bonds shall be subject
to redemption prior to maturity in the amounts, at the times and in the manner
provided in this Article III.
(A) Optional Redemption.
(1) On any Business Day during a Daily Rate Period, a Weekly Rate
Period or a Taxable Weekly Rate Period for any Bonds, and on the day after the
last day of any such Rate Period, such Bonds shall be subject to redemption by
the Issuer, at the written direction of the Borrower to the Issuer and the
Trustee, in whole or in part, at 100% of their principal amount, plus accrued
interest, if any, to the redemption date (but, with respect to Taxable Weekly
Bonds, only to the extent of Available Moneys).
(2) On the day next succeeding the last day of any Flexible Segment or
of any Taxable Flexible Rate Segment with respect to any Bonds, such Bonds shall
be subject to redemption by the Issuer, at the written direction of the Borrower
to the Issuer and the Trustee, in whole or in part, at 100% of their principal
amount, plus accrued interest, if any, to the redemption date.
(3) During any Term Rate Period or Taxable Term Rate Period for any
Bonds, such Bonds shall be subject to redemption by the Issuer, at the written
direction of the Borrower to the Issuer and the Trustee, during the periods
specified below, in whole at any time or in part from time to time on any date
(but, with respect to Taxable Term Bonds, only to the extent of Available
Moneys), at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued interest, if any, to the redemption date:
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Length of Term
Rate Period
(expressed in years) Redemption Prices
-------------------- -----------------
greater than or equal to 15 after 10 years at 102%,
declining by 1% annually to
100%
less than 15 and 10 or greater after 8 years at 101.5%,
declining by 0.75% annually
to 100%
less than 10 and 5 or greater after 5 years at 101%,
declining by 0.5% annually
to 100%
less than 5 only on commencement of next
Term Rate Period or Taxable
Term Rate Period at 100%
With respect to any Term Rate Period or Taxable Term Rate Period, the Borrower
may specify in its notice of adjustment to or continuation of a Term Rate Period
or Taxable Term Rate Period redemption prices and periods other than those set
forth above for Bonds in such Rate Period not then called for redemption;
provided, however, that such notice shall be accompanied by an opinion of Bond
Counsel to the effect that such changes in redemption prices and periods (i) are
authorized or permitted by the Act and this Indenture, and (ii) if applicable,
will not adversely affect the Tax-Exempt status of the Bonds of any Tax-Exempt
Series.
(4) The Bonds shall be redeemed in whole at any time at a redemption
price equal to 100% of the principal amount thereof plus accrued interest, if
any, to the redemption date (but, as applicable, only to the extent of Available
Moneys) upon receipt by the Trustee of a written notice from the Borrower
stating that any of the following events has occurred and that it therefore
intends to exercise its option to prepay the payments due under the Agreement in
whole pursuant to Section 7.1 of the Agreement and thereby effect the redemption
of the Bonds in whole:
(a) all or substantially all of the Project shall be damaged or
destroyed and it is not practicable or desirable to rebuild, repair and restore
the Project;
(b) all or substantially all of the Project shall be condemned or such
use or control thereof shall be taken by eminent domain so as to render the
Project unsatisfactory for continued operation;
(c) unreasonable burdens or excessive liabilities shall be imposed upon
the Issuer or the Borrower with respect to the Project or the operation thereof;
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<PAGE> 48
(d) changes that cannot reasonably be controlled or overcome in the
economic availability of materials, supplies, labor, equipment and other
properties and things necessary for the efficient operation of the Project for
the purposes contemplated by the Agreement shall have occurred or technological
changes that cannot reasonably be overcome shall have occurred which, in the
judgment of the Borrower, render the continued operation of the Project
uneconomic; or
(e) legal curtailment of the use and occupancy of all or substantially
all of the Project for any reason, which curtailment shall prevent the carrying
on of normal operations at the Project for a period of three consecutive months.
(B) Mandatory Redemption.
(1) The Bonds are subject to mandatory redemption, at any time, at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the redemption date not more than 180 days after the
occurrence of the following event (of which a Responsible Officer of the Trustee
shall be given notice in writing by an Authorized Issuer Representative), upon
fulfillment by the Borrower of its obligation to prepay the payments due under
the Agreement in accordance with Section 7.2 of the Agreement, if, as a result
of any changes in the Constitution of the State or in the Constitution of the
United States of America or of legislative or administrative action (whether
state or Federal), or by final decree, judgment or order of any court or
administrative body (whether state or Federal) entered after the contest thereof
by the Borrower in good faith, the Agreement shall have become impossible of
performance in accordance with the intent and purposes of the parties as
expressed in the Agreement.
(2) The Bonds of any Tax-Exempt Series are subject to mandatory
redemption, at any time, at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any, to the redemption date not more
than 180 days after the occurrence of the following event (of which a
Responsible Officer of the Trustee shall be given notice in writing by an
Authorized Issuer Representative), upon fulfillment by the Borrower of its
obligation to prepay the payments due under the Agreement in accordance with
Section 7.2 of the Agreement, in the event a final determination by an
administrative agency or a court of competent jurisdiction occurs to the effect
that, solely as a result of failure by the Borrower to observe any covenant,
agreement or representation by the Borrower in the Agreement, the interest
payable on the Bonds of such Tax-Exempt Series or any of them is no longer
Tax-Exempt. No determination by any court or administrative agency will be
considered final unless the Borrower has participated in the proceeding which
resulted in such determination, either directly or, at the option of the
Borrower, through an Owner to a degree it reasonably deems sufficient and until
the conclusion of any appellate review sought by any party to such proceeding or
the expiration of the time for seeking such review. Subject to the foregoing,
the Tax-Exempt Series will be redeemed in whole unless, in the opinion of Bond
Counsel delivered to the Trustee, the redemption of a portion of such Tax-Exempt
Series would have the result that interest payable on the Tax-Exempt Series
remaining outstanding after such redemption would be Tax-Exempt.
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(C) Liquidity Provider Bonds. In addition to the foregoing provisions
for the redemption of Bonds, any Bond which is acquired by a Liquidity Provider
pursuant to a Liquidity Facility shall be subject to redemption at the time and
in the amount and at the price specified by such Liquidity Facility.
SECTION 3.02. NOTICE OF REDEMPTION. Notice of the call for any
redemption of Bonds or any portion thereof (which shall be in Authorized
Denominations) pursuant to Section 3.01 hereof identifying the Bonds or portions
thereof to be redeemed, specifying the Series of Bonds to be redeemed, the
redemption date, the redemption price, the place and manner of payment and that
from the redemption date interest will cease to accrue, shall be given by the
Trustee by mailing a copy of the redemption notice by first-class mail, postage
prepaid, to the Owner of each Bond to be redeemed in whole or in part, at the
address shown on the registration books, with a copy to the Tender Agent, if
any, the Bond Insurer, and the Liquidity Provider, if any. Such notice shall be
given at least thirty (30) days but not more than sixty (60) days prior to the
date fixed for redemption; provided, however, that failure to duly give such
notice, or any defect therein, shall not affect the validity of any proceedings
for the redemption of Bonds with respect to which no such failure or defect
occurred, and provided further that no notice of redemption shall be required
for any Bonds which are otherwise subject to mandatory purchase pursuant to
Section 4.02(a). Upon presentation and surrender of Bonds so called for
redemption in whole or in part at the place or places of payment, except as
otherwise provided in Section 2.13 hereof with respect to Book-Entry Bonds, such
Bonds or portions thereof shall be redeemed.
With respect to any notice of redemption of Bonds at the written
direction of the Borrower, unless upon the giving of such notice such Bonds
shall be deemed to have been paid within the meaning of Article VIII hereof,
such notice may state (if so directed by the Borrower in writing) that such
redemption shall be conditional upon the receipt by the Trustee, on or before
the date fixed for such redemption, of moneys sufficient to pay the principal of
and premium, if any, and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no further force
and effect and the Issuer shall not be required to redeem such Bonds. In the
event that such notice of redemption contains such a condition and such moneys
are not so received, the redemption shall not be made and the Trustee shall
within a reasonable time thereafter give notice to such Owners, in the manner in
which the notice of redemption was given, that such moneys were not so received.
Any notice mailed as provided in this Section shall be conclusively
presumed to have been duly given, whether or not the Owner receives the notice.
If a Bond is presented to the Trustee for transfer after notice of
redemption of such Bond has been mailed as herein provided, the Trustee shall
deliver a copy of such notice of redemption to the new Owner of such Bond.
In addition to the foregoing notice, further notice may be given by the
Trustee as set out below, but no defect in said further notice nor any failure
to give all or any portion of such further notice shall in any manner (i) defeat
the effectiveness of a call for redemption if notice thereof is given as above
prescribed or (ii) give rise to any liability on the part of the
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<PAGE> 50
Issuer, the Borrower, the Liquidity Provider, the Bond Insurer, the Trustee or
the Remarketing Agent:
A. Each further notice of redemption given hereunder may
contain the information required above for an official notice of
redemption plus (i) the CUSIP number of the Bonds; (ii) the date of
issue of the Bonds; (iii) the rate or rates of interest borne by the
Bonds; (iv) the maturity date of the Bonds; and (v) any other
descriptive information needed to identify accurately the Bonds being
redeemed.
B. Each further notice of redemption may be sent to all
registered securities depositories then in the business of holding
substantial amounts of obligations of types comprising the Bonds (such
depositories as of the date hereof being The Depository Trust Company,
New York, New York and Midwest Securities Trust Company, Chicago,
Illinois).
C. Each further notice of redemption may be published one time
in The Bond Buyer of New York, New York or, if such publication is
impractical, in some other financial newspaper or journal which
regularly carries notices of redemption of other obligations similar to
the Bonds, such publication to be made at the time the redemption
notice to the Owners is required to be given as provided in the first
paragraph of this Section 3.02.
D. Each further notice of redemption may be given to two of
the following services selected by the Borrower and at the address
provided to the Trustee by the Borrower:
(1) Financial Information, Inc.'s Financial Daily Called
Bond Service;
(2) Interactive Data Corporation's Bond Service;
(3) Kenny Information Service's Called Bond Service;
(4) Moody's Municipal and Government Called Bond Service;
or
(5) S&P's Called Bond Record.
SECTION 3.03. DEPOSIT OF FUNDS. For the redemption of any of the Bonds,
the Issuer shall cause to be deposited in the Bond Fund out of the Revenues, to
the extent available therefor, moneys sufficient to pay when due the principal
of and premium, if any, and interest on the redemption date.
SECTION 3.04. PARTIAL REDEMPTION OF BONDS. In case a Bond is of a
denomination larger than the minimum Authorized Denomination, all or a portion
of such Bond may be redeemed provided the principal amount not being redeemed is
in an Authorized Denomination. Upon surrender of any Bond for redemption in part
only, the Issuer shall execute and the Trustee shall authenticate and deliver to
the Owner thereof, without cost to the Owner, a new Bond or Bonds of Authorized
Denominations in aggregate principal amount equal to the unredeemed portion of
the Bond surrendered.
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SECTION 3.05. SELECTION OF BONDS FOR REDEMPTION. If less than all of
the Bonds of any Series are called for redemption, the Trustee shall select the
Bonds of such Series or portions thereof to be redeemed, from the Bonds of such
Series Outstanding not previously called for redemption, by lottery or in such
other manner as in the Trustee's sole discretion it shall deem appropriate and
fair, in either case in Authorized Denominations provided that Liquidity
Provider Bonds shall be the first Bonds selected for redemption and provided
further that the aggregate principal amount of each Bond remaining Outstanding
following such redemption shall be in an Authorized Denomination. The Trustee
shall promptly notify the Issuer and the Borrower in writing of the Bonds or
portions thereof selected for redemption, provided, however, that in connection
with any redemption of Bonds the Trustee shall select for redemption any Bonds
held by the Trustee for the account of the Borrower or held of record by the
Borrower prior to any Bonds other than Liquidity Provider Bonds. If, as
indicated in a certificate of an Authorized Borrower Representative delivered to
the Trustee, the Borrower shall have offered to purchase all Bonds of such
Series then outstanding and less than all such Bonds of such Series shall have
been tendered to the Borrower for such purchase, the Trustee, at the direction
of the Borrower, shall select for redemption all such Bonds of such Series
regardless of whether such Bonds have been so tendered. If it is determined that
one or more, but not all, of the units of principal amount represented by any
such Bond is to be called for redemption, then, upon notice of intention to
redeem such unit or units, the Owner of such Bond shall, except as provided in
Section 2.13 hereof with respect to Book-Entry Bonds, forthwith surrender such
Bond to the Trustee for (a) payment to such Owner of the redemption price of the
unit or units of principal amount called for redemption, and (b) delivery to
such Owner of a new Bond or Bonds in the aggregate principal amount of the
unredeemed balance of the principal amount of such Bond. New Bonds representing
the unredeemed balance of the principal amount of such Bond shall be issued to
the Owner thereof, without charge therefor. If the surrender of such Bonds is
required hereunder and the Owner of any such Bond shall fail to present such
Bond to the Trustee for payment and exchange as aforesaid, such Bond shall,
nevertheless, become due and payable, and interest thereon shall cease to
accrue, on the date fixed for redemption to the extent of the unit or units of
principal amount called for redemption (and to that extent only). Payment of the
redemption prices by the Borrower for any Series of Bonds called for redemption
constitutes full and complete payment of the Bonds of such Series.
ARTICLE IV
TENDER AND PURCHASE OF BONDS;
REMARKETING; REMARKETING AGENT
SECTION 4.01. PURCHASE OF BONDS AT OPTION OF OWNERS.
(a) Daily Rate Period. On any Business Day during any Daily Rate Period
for any Tax-Exempt Series of Bonds, any such Bond (or portion thereof in an
Authorized Denomination provided that the principal amount to be retained by the
Owner shall be in an Authorized Denomination) shall be purchased by the Trustee,
acting as Tender Agent, at a purchase price equal to 100% of the principal
amount thereof plus accrued interest, if any, thereon to the date of purchase,
upon, subject to Section 4.10 hereof, (i) delivery by the Owner of such Bond to
the Trustee, acting as Tender Agent, at its Principal Office by no later than
11:00
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a.m., New York time, on such Business Day, of an irrevocable written notice or
an irrevocable telephonic notice, promptly confirmed by telecopy or other
writing, which states the principal amount or portion thereof to be purchased
and number of such Bond (if such Bond is in certificated form) and the date on
which such Bond shall be purchased pursuant to this subsection (a), and (ii)
delivery of such Bond (if such Bond is in certificated form) to the Trustee,
acting as Tender Agent, at its Principal Office accompanied by an instrument of
transfer thereof, in form satisfactory to the Trustee, executed in blank by the
Owner thereof with the signature of such Owner guaranteed by a bank, trust
company or member firm of the New York Stock Exchange, at or prior to 1:00 p.m.,
New York time, on such Business Day.
(b) Weekly Rate Period. On any Business Day, during any Weekly Rate
Period for any Tax-Exempt Series of Bonds, any such Bond (or portion thereof in
an Authorized Denomination provided that the principal amount to be retained by
the Owner shall be in an Authorized Denomination) shall be purchased from its
Owner by the Trustee, acting as Tender Agent, at a purchase price equal to 100%
of the principal amount thereof plus accrued interest, if any, thereon to the
date of purchase, upon, subject to Section 4.10 hereof, (i) delivery by the
Owner of such Bond to the Trustee, acting as Tender Agent, at its Principal
Office of an irrevocable written notice or an irrevocable telephonic notice
promptly confirmed by telecopy or other writing, which states the principal
amount or portion thereof to be purchased and number of such Bond (if such Bond
is in certificated form) and the date on which the same shall be purchased,
which date shall be a Business Day not prior to the seventh day next succeeding
the date of the delivery of such notice to the Trustee, and (ii) delivery of
such Bond (if such Bond is in certificated form) to the Trustee, acting as
Tender Agent, at its Principal Office, accompanied by an instrument of transfer
thereof, in form satisfactory to the Trustee, executed in blank by the Owner
thereof with the signature of such Owner guaranteed by a bank, trust company or
member firm of the New York Stock Exchange, at or prior to 10:00 a.m., New York
time, on the date specified in such notice.
(c) Taxable Weekly Rate Period. On any Business Day, during any Taxable
Weekly Rate Period for any Taxable Weekly Bonds, any such Taxable Weekly Bond
(or portion thereof in an Authorized Denomination provided that the principal
amount to be retained by the Owner shall be in an Authorized Denomination) shall
be purchased from its Owner by the Trustee, acting as Tender Agent, at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest, if any, thereon to the date of purchase, upon, subject to Section 4.10
hereof, (i) delivery by the Owner of such Taxable Weekly Bond to the Trustee,
acting as Tender Agent, at its Principal Office of an irrevocable written notice
or an irrevocable telephonic notice promptly confirmed by telecopy or other
writing, which states the principal amount or portion thereof to be purchased
and number of such Taxable Weekly Bond (if such Taxable Weekly Bond is in
certificated form) and the date on which the same shall be purchased, which date
shall be a Business Day not prior to the seventh day next succeeding the date of
the delivery of such notice to the Trustee, and (ii) delivery of such Taxable
Weekly Bond (if such Taxable Weekly Bond is in certificated form) to the
Trustee, acting as Tender Agent, at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Trustee, executed in
blank by the Owner thereof with the signature of such Owner guaranteed by a
bank, trust company or member firm of the New York Stock Exchange, at or prior
to 10:00 a.m., New York time, on the date specified in such notice.
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SECTION 4.02. MANDATORY PURCHASE OF BONDS.
(a) Any Bonds, other than the Series 1999A Bonds, shall be subject to
mandatory purchase at a purchase price equal to 100% of the principal amount
thereof plus accrued interest thereon, unless the Mandatory Purchase Date is an
Interest Payment Date, on the dates stated below:
(i) As to each such Bond in a Flexible Rate Period or Taxable
Flexible Rate Period, on the day next succeeding the last day of each
Flexible Segment or Taxable Flexible Segment thereof applicable to such
Bond;
(ii) As to each Taxable Weekly Bond, on the effective date of
change from a Taxable Weekly Rate Period to a new Rate Period other
than a Taxable Weekly Rate Period;
(iii) As to each Term Bond or Taxable Term Bond, on the
effective date of change from a Term Rate or Taxable Term Rate, as the
case may be, to a new Rate Period, including a change from one Term
Rate Period or Taxable Term Rate Period to another Term Rate Period or
Taxable Term Rate Period, respectively, of the same duration; provided
that Bonds in a Term Rate Period or Taxable Term Rate Period which are
then redeemable pursuant to Section 3.01(A) hereof shall be purchased
at a purchase price equal to 100% of the principal amount thereof plus
a premium equal to the redemption premium, if any, that would have been
payable if such Bonds were to be redeemed on the date such Bonds are to
be purchased pursuant to the terms hereof, together with accrued
interest, if any, thereon to the date of purchase;
(iv) On the Business Day prior to the Expiration Date of the
applicable Liquidity Facility (including any such Expiration Date which
occurs by reason of the delivery of an Alternate Liquidity Facility);
and
(v) As to each Bond in a Daily Rate Period or Weekly Rate
Period, on the effective date of change to a new Rate Period, other
than a change from one Daily Rate Period to another Daily Rate Period
or a change from one Weekly Rate Period to another Weekly Rate Period.
Notwithstanding the foregoing, the Bonds will not be subject to
mandatory purchase under (iv) if the Borrower is no longer required to maintain
a Liquidity Facility under Section 5.15 of the Agreement. In addition,
notwithstanding the foregoing, the Bonds will not be subject to mandatory
purchase pursuant to Section 4.02(a)(iv) if at least 25 days before the
Expiration Date (i) the Trustee has received written notice from the Liquidity
Provider that the Liquidity Facility then in effect has been extended, or (ii)
an Alternate Liquidity Facility is delivered to the Trustee and is effective,
together with written evidence that the replacement of the Liquidity Facility
theretofore in effect with such Alternate Liquidity Facility will not result in
any suspension, withdrawal or reduction of the short-term ratings, if any,
assigned to the Bonds by S&P and Moody's.
(b) Subject to Section 4.10 hereof, an Owner must deliver each such
Bond subject to mandatory purchase as provided in Section 4.02(a) hereof to the
Trustee, acting as
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Tender Agent, at its Principal Office accompanied by an instrument of transfer
thereof, in form satisfactory to the Trustee, executed in blank by the Owner
thereof, with the signature of such Owner guaranteed by a bank, trust company or
member firm of the New York Stock Exchange at or prior to 10:00 a.m., New York
time, on the purchase date in order to receive payment of the purchase price on
such date.
(c) Notice of each mandatory purchase pursuant to the provisions of
Section 4.02(a) hereof is hereby required by the provisions of Section
2.03(a)(iii), 2.03(b)(iii), 2.03(c)(iii), 2.03(d)(iii), 2.03(e)(iii),
2.03(f)(iii) or 2.03(g)(iii), as the case may be, to be included in the notice
given pursuant to such Section or by delivery of an Alternate Liquidity Facility
which does not require a mandatory purchase. No notice of any mandatory purchase
pursuant to the provisions of Section 4.02(a)(i) hereof shall be given to the
Owners of the Bonds.
SECTION 4.03. OBLIGATION TO SURRENDER BONDS.
The giving of notice as provided in Section 4.01 hereof shall
constitute the irrevocable tender for purchase of each such Bond or portion
thereof with respect to which such notice shall have been given, irrespective of
whether such Bond shall be delivered as provided in Section 4.01. The occurrence
of any event specified in Section 4.02(a) hereof shall constitute the mandatory
tender for purchase of each such Bond or portion thereof, irrespective of
whether such Bond shall be delivered as provided in Section 4.02(b). Upon the
purchase of each such Bond or portion thereof so deemed to be tendered, such
Bond or portion thereof shall cease to bear interest payable to the former Owner
thereof, who thereafter shall have no rights with respect thereto, other than
the right to receive the purchase price thereof upon surrender of such Bond to
the Trustee, acting as Tender Agent, and such Bond or portion thereof shall be
no longer outstanding. If such Bonds are no longer Book-Entry Bonds, the Trustee
shall authenticate, register and deliver new Bonds in replacement of such Bonds
or portions thereof deemed so tendered and not surrendered on the date of
purchase.
SECTION 4.04. REMARKETING OF BONDS.
(a) By 11:30 a.m., New York time, on the date the Trustee receives
notice from any Bondholder in accordance with Section 4.01(a) hereof, and
promptly, but in no event later than 11:30 a.m., New York time, on the Business
Day following the day on which the Trustee receives notice from any Bondholder
of its demand to have the Trustee purchase Bonds pursuant to Section 4.01(b) or
(c) hereof, the Trustee shall give facsimile or telephonic notice, confirmed in
writing thereafter, to the Remarketing Agent specifying the principal amount of
Bonds which such Bondholder has demanded to have purchased and the date on which
such Bonds are demanded to be purchased, with a copy of such notice to the
Liquidity Provider, if a Liquidity Facility is in effect with respect to such
Series of Bonds.
(b) Upon the giving of notice to the Trustee by any Bondholder in
accordance with Section 4.01(a), (b) or (c) hereof and the giving of notice by
the Trustee to the Remarketing Agent as provided in Section 4.04(a) hereof with
respect to such notices, and on each date on which Bonds are to be purchased in
accordance with Section 4.02 hereof, the Remarketing Agent shall offer for sale
and use its reasonable best efforts to sell such Bonds on the date such Bonds
are to be purchased at a purchase price equal to 100% of the principal amount
thereof plus
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accrued interest, if any, to the purchase date; provided that Bonds in a Term
Rate Period or Taxable Term Rate Period which are then redeemable pursuant to
Section 3.01(A) hereof shall be purchased at a purchase price equal to 100% of
the principal amount thereof plus a premium equal to the redemption premium, if
any, that would be payable if such Bonds were to be redeemed on the date they
are to be purchased, together with accrued interest, if any, thereon to the date
of purchase. The Remarketing Agent shall only remarket Taxable Flexible Bonds,
Taxable Weekly Bonds and Taxable Term Bonds to investors who meet the
requirements described in the legend set forth in Section 2.07 hereof. The
Remarketing Agent shall not sell any Bonds to the Issuer or the Borrower.
(c) Not later than 1:00 p.m., New York time, on the Business Day next
preceding the date on which Bonds are to be purchased pursuant to Section 4.01
or Section 4.02 hereof, the Remarketing Agent shall give (i) facsimile or
telephonic notice to the Trustee, acting as Tender Agent, specifying the names,
addresses and taxpayer identification numbers of the purchasers of, and the
principal amount and denominations of, and, with respect to such Bonds which are
being purchased pursuant to Section 4.02(a)(i) hereof, the Flexible Segments and
the Flexible Rates for, or the Taxable Flexible Rate Segments and the Taxable
Flexible Rates for, as applicable, such Bonds remarketed by it pursuant to
subsection (b) hereof and shall transfer all remarketing proceeds it has
received to that time to the Trustee, acting as Tender Agent, and the amount of
remaining remarketing proceeds it will provide to the Trustee on the date on
which Bonds are to be purchased, as set forth in Section 4.04(d) hereof and (ii)
telephonic notice to the Borrower and the Trustee, acting as Tender Agent, of
the principal amount of and accrued interest on any such Bonds not remarketed by
such time.
(d) Upon the giving of the notice specified in Section 4.04(c)(i)
hereof, the Remarketing Agent shall be obligated to deliver to the Trustee,
acting as Tender Agent, the remaining amount of remarketing proceeds specified
in such notice to be received, as follows:
(i) in the case of Bonds which are being purchased pursuant to
Section 4.01 or 4.02(a)(ii), (iii), (iv) or (v) hereof, by 1:00 p.m.,
New York time, on the purchase date; and
(ii) in the case of Bonds which are being purchased pursuant
to Section 4.02(a)(i) hereof, by 3:00 p.m., New York time, on the
purchase date, subject only to timely delivery of Bonds by the Trustee,
acting as Tender Agent, as set forth in Section 4.04(e) hereof and
verification by the Remarketing Agent that such Bonds conform to the
instructions contained in the notice given by the Remarketing Agent to
the Trustee pursuant to Section 4.04(c) hereof.
Any remarketing proceeds received by the Remarketing Agent in excess of such
amounts so transferred shall be delivered as provided in Section 4.06 as soon as
practicable after the receipt thereof.
(e) Subject to Section 4.10 hereof, upon receipt by the Trustee, acting
as Tender Agent, of notice from the Remarketing Agent pursuant to Section
4.04(c) hereof, the Trustee shall authenticate and deliver new Bonds to the
Remarketing Agent, as follows:
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(i) in the case of Bonds which are being purchased pursuant to
Section 4.01 or Section 4.02(a)(ii), (iii), (iv) or (v) hereof, and
provided that moneys derived from the sources specified in Section
4.05(a) hereof in an amount equal to the purchase price therefor shall
have been received by the Trustee, acting as Tender Agent, by 1:00
p.m., New York time, such new Bonds shall be delivered by 2:00 p.m.,
New York time; and
(ii) in the case of Bonds which are being purchased pursuant
to Section 4.02(a)(i) hereof, such new Bonds shall be delivered by 4:00
p.m., New York time.
SECTION 4.05. PURCHASE OF BONDS TENDERED TO TRUSTEE.
(a) By the close of business on the date Bonds or portions thereof are
to be purchased pursuant to Section 4.01 or 4.02 hereof by the Trustee, acting
as Tender Agent, such Trustee, acting as Tender Agent, shall purchase, but only
from the funds listed below, such Bonds or portions thereof (in Authorized
Denominations) from the Owners thereof at a purchase price equal to the
principal amount thereof plus accrued interest, if any, to the date of purchase;
provided that Bonds in a Term Rate Period or Taxable Term Rate Period which are
then redeemable pursuant to Section 3.01(A) hereof shall be purchased at a
purchase price equal to 100% of the principal amount thereof plus a premium
equal to the redemption premium, if any, that would be payable if such Bonds
were to be redeemed on the date they are to be purchased, together with accrued
interest, if any, thereon to the date of purchase. Funds for the payment of such
purchase price shall be derived from the following sources in the order of
priority indicated:
(i) proceeds of the remarketing of such Bonds pursuant to
Section 4.04 hereof to any purchaser except the Issuer or the Borrower;
(ii) proceeds of a draw on the Liquidity Facility, if any;
(iii) moneys furnished by the Borrower to the Trustee, acting
as Tender Agent, pursuant to Section 4.2(b) of the Agreement or Section
4.5 of the Agreement, provided that such moneys shall not be used to
pay accrued interest, if any, on such Bonds.
(b) The Trustee, acting as Tender Agent, shall:
(i) hold all Bonds delivered to it pursuant to Section 4.01 or
4.02 hereof in trust for the benefit of the respective Bondholders
which shall have so delivered such Bonds until moneys representing the
purchase price of such Bonds shall have been delivered to or for the
account of or to the order of such Bondholders; and
(ii) hold all moneys delivered to it hereunder for the
purchase of such Bonds in trust for the benefit of the person or entity
which shall have so delivered such moneys in a separate and segregated
fund, and not commingle such funds with any other funds or invest such
funds, until such Bonds purchased with such moneys shall have been
delivered or deemed delivered to or for the account of such person or
entity; provided, that any moneys so deposited with and held by the
Trustee not so applied to the purchase of Bonds within one (1) year
after the date of purchase shall be paid by the Trustee to the Borrower
upon the written direction of the Authorized Borrower Representative
and thereafter the former Bondholders shall be entitled to look only to
the Borrower for
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payment of such purchase price, and then only to the extent of the
amount so repaid, and the Borrower shall not be liable for any interest
thereon and shall not be regarded as a trustee of such moneys, and the
Trustee shall have no further responsibility with respect to such
moneys. To the extent any moneys are held by the Trustee for the
payment of the purchase price of such Bonds which have not been
presented for payment, such moneys shall not be invested.
SECTION 4.06. DELIVERY OF PURCHASED BONDS.
(a) Bonds sold by the Remarketing Agent pursuant to Section 4.04 hereof
shall be delivered to the Remarketing Agent, as specified in Section 4.04(e)
hereof.
(b) Bonds purchased by the Trustee, acting as Tender Agent, hereunder:
(i) with moneys described in clause (ii) of Section 4.05(a)
hereof ("Liquidity Provider Bonds"), shall be held by the Trustee, as
Tender Agent (upon written directions from the Liquidity Provider) or
registered in the name of the Liquidity Provider on the registration
books of DTC, with respect to Book-Entry Bonds. The Remarketing Agent
shall seek to remarket any Liquidity Provider Bonds prior to
remarketing any other Bonds tendered for purchase. The proceeds of any
remarketing of Liquidity Provider Bonds shall be transferred by the
Trustee to the Liquidity Provider. Upon receipt by the Trustee of funds
representing the proceeds of the remarketing of Liquidity Provider
Bonds, Bonds in place of such Liquidity Provider Bonds so purchased
shall be made available for pick-up by the Remarketing Agent for
subsequent delivery to the purchasers thereof, or the ownership
interest shall be transferred to the new direct participants on the
books of DTC. Prior to or simultaneously with such delivery, the
proceeds of such remarketing shall have been or shall be transferred to
the Liquidity Provider, and the Trustee as Tender Agent shall have
received written confirmation from the Liquidity Provider of the
reinstatement of the Liquidity Facility; and
(ii) with moneys described in clause (iii) of Section 4.05(a)
hereof shall, at the direction of the Borrower, be (A) held by the
Trustee, acting as Tender Agent, for the account of the Borrower, (B)
canceled or (C) delivered to the Borrower.
SECTION 4.07. NO SALES AFTER DEFAULT. Anything in this Indenture to the
contrary notwithstanding, there shall be no remarketing of Bonds pursuant to
this Article IV if there shall have occurred and be continuing an event of
default under Section 9.01 hereof; provided, that nothing in this Section 4.07
shall be construed as prohibiting purchases of Bonds pursuant to Section 4.01 or
4.02 hereof.
SECTION 4.08. REMARKETING AGENT. The initial Remarketing Agent shall be
Lehman Brothers Inc., provided, however, that the Issuer may at its own
discretion, and shall, at the written direction of the Borrower, remove the
Remarketing Agent upon at least five (5) Business Days' notice in writing;
provided, further, the appointment of any Remarketing Agent shall terminate upon
the defeasance of all Series 1999B Bonds (and all Bonds of Tax-Exempt
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Series into which they may be converted) in accordance with the provisions of
Article VIII hereof, or the date in which all Series 1999B Bonds (and all Bonds
of Tax-Exempt Series into which they may be converted) are in a Term Rate Period
or Taxable Term Rate Period ending on the maturity date of such Bonds. The
Issuer shall, with the concurrence of the Borrower and the Liquidity Provider,
appoint a successor Remarketing Agent for such Bonds upon the removal or
resignation of a Remarketing Agent unless all Bonds are in a Term Rate Period or
Taxable Term Rate Period ending on the maturity date for such Bonds. The
Remarketing Agent shall signify its acceptance of the duties and obligations
imposed upon it hereunder by a written instrument of acceptance delivered to the
Issuer, the Trustee and the Borrower. No removal of or resignation by the
Remarketing Agent (whether at the direction of the Issuer or the Borrower, by
the Remarketing Agent as may be provided in the Remarketing Agreement, or by
automatic termination as described above) shall become effective until a
successor Remarketing Agent has delivered a written acceptance of appointment to
the Trustee and the Borrower has provided the notice required by Section 5.8 of
the Agreement.
SECTION 4.09. QUALIFICATIONS OF REMARKETING AGENT. The Remarketing
Agent shall be a member of the National Association of Securities Dealers, Inc.
and authorized by law to perform all the duties imposed upon it by this
Indenture. The Remarketing Agent may at any time resign and be discharged of its
duties and obligations created by this Indenture by giving at least thirty (30)
Business Days' notice to the Issuer, the Borrower and the Trustee or such
shorter period as the Issuer, the Borrower, the Trustee and the Remarketing
Agent agree. No resignation of the Remarketing Agent, however, shall become
effective until a successor Remarketing Agent has been appointed and accepted
such appointment as provided in Section 4.08 hereof.
SECTION 4.10. TENDER AND PURCHASE OF BOOK-ENTRY BONDS. Notwithstanding
any provisions of this Indenture to the contrary, at any time while any Series
of Bonds that are subject to tender are Book-Entry Bonds, the provisions of this
Article IV are modified as follows:
(a) Any notice pursuant to SECTION 4.01(a)(i), 4.01(b)(i) or 4.01(c)(i)
hereof may be given by any direct participant in the Securities Depository
acting on behalf of either any owner of a beneficial interest in such Bonds or
any indirect participant in the Securities Depository acting on behalf of such
an owner, provided that any such notice shall not be required to contain the
bond number of Bonds to be tendered for purchase and the Trustee may
conclusively rely on any written certification or representation by a person,
firm, corporation or other entity that it is acting as a direct participant in
the Securities Depository for such Bonds for the purposes of giving any such
notice.
(b) Delivery of such Bonds to the Trustee, as provided in Sections
4.01(a)(ii), 4.01(b)(ii), 4.01(c)(ii) and 4.02(b) hereof, shall be effected by
book-entry credit to the account of the Trustee on the records of the Securities
Depository, at or prior to 1:00 p.m., New York time, on the date such Bonds or
portions thereof are required to be tendered to the Trustee for purchase, of a
beneficial interest in such Bonds to be purchased on such date.
(c) The Remarketing Agent shall give the information required by
Section 4.04(c) hereof to the Securities Depository instead of to the Trustee,
but shall at the same time give facsimile or telephonic notice to the Trustee
specifying the principal amount of such Bonds which it has been unable to
remarket (if such be the case).
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(d) The Remarketing Agent shall deliver remarketing proceeds in
accordance with the provisions of Section 4.04(d) hereof to the Securities
Depository instead of to the Trustee, acting as Tender Agent.
(e) SECTION 4.04(e) hereof shall be inapplicable.
(f) The provisions of Sections 4.05 and 4.06 hereof shall apply only if
Bonds are purchased with moneys described in clauses (i) and (iii) of Section
4.05(a) hereof; the beneficial interests in Bonds purchased with moneys
described in clause (ii) of Section 4.05(a) shall be transferred in accordance
with the procedures of the Securities Depository.
SECTION 4.11. DRAWS UPON THE LIQUIDITY FACILITY.
(a) The Trustee or Tender Agent, as applicable, shall draw funds under
any Liquidity Facility supporting a Series of the Bonds in an amount necessary
and in sufficient time (as set forth by the terms of such Liquidity Facility) so
as to provide to the Trustee the balance of the funds needed to purchase
tendered Bonds of such Series, taking into account the remarketing proceeds
received by the Trustee or Tender Agent, as applicable, in the Remarketing
Agent's notice pursuant to Section 4.04(c) hereof not later than 1:00 p.m., New
York City time, on the Business Day prior to the date on which Bonds are to be
purchased. If the Remarketing Agent remarkets Bonds after 1:00 p.m. New York
City time on the Business Day prior to the date on which Bonds are to be
purchased, the Trustee shall still draw on the Liquidity Facility for such Bonds
in an amount necessary and in sufficient time (as set forth by the terms of such
Liquidity Facility) so as to provide the balance of the funds needed to purchase
tendered Bonds, without taking into account any remarketing proceeds other than
those specified in the Remarketing Agent's notice pursuant to Section 4.04(c)
hereof. The Trustee shall transfer to the Liquidity Provider any excess moneys
received from a draw on the Liquidity Facility for such Bonds that are not
needed to pay the purchase price of such series of Bonds on the date on which
Bonds are to be purchased.
(b) If a commitment to renew the Liquidity Facility for the Series
1999B Bonds (or any Tax-Exempt Series into which such Bonds may be converted) or
to provide an Alternate Liquidity Facility for such Bonds shall not be provided
prior to the 30th day before the scheduled expiration date of such Liquidity
Facility, then such Bonds shall not be remarketed after the 15th day prior to
such expiration.
(c) (i) Whenever the Borrower has delivered to the Trustee a commitment
for the delivery of an Alternate Liquidity Facility for a Series of Bonds
pursuant to Section 5.14 of the Agreement, the Trustee shall mail by first class
mail a notice to all Bondholders (and the Bond Insurer) stating: (i) the name of
the issuer of the Alternate Liquidity Facility; (ii) the date on which the
Alternate Liquidity Facility will become effective, which date shall not be less
than five (5) calendar days prior to the stated expiration date of the existing
Liquidity Facility for the Bonds; and (iii) the rating expected to apply to such
series of Bonds after the Alternate Liquidity Facility is delivered. Such notice
shall be mailed at least ten (10) days prior to the effective date of the
Alternate Liquidity Facility.
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(ii) Upon receipt of any Alternate Liquidity Facility, the
Trustee shall provide notice thereof to the Issuer, each rating agency
then rating the Bonds and the Borrower.
ARTICLE V
PAYMENT; FURTHER ASSURANCES
SECTION 5.01. PAYMENT OF PRINCIPAL OR REDEMPTION PRICE OF AND INTEREST
ON BONDS. The Issuer shall promptly pay or cause to be paid the principal of and
premium, if any, and interest on, every Bond issued hereunder according to the
terms thereof, but shall be required to make such payment or cause such payment
to be made only out of Revenues or the proceeds of Bond Insurance. The Issuer
hereby appoints the Trustee to act as the Paying Agent for the Bonds, and
designates the Principal Office of the Trustee as the place of payment for the
Bonds, such appointment and designation to remain in effect until notice of
change is filed with the Trustee.
SECTION 5.02. EXTENSION OR FUNDING OF CLAIMS FOR INTEREST. In order to
prevent any accumulation of claims for interest after maturity, the Issuer shall
not, directly or indirectly, extend or assent to the extension of the time for
the payment of any claim for interest on any of the Bonds, and shall not,
directly or indirectly, be a party to or approve any such arrangement by
purchasing or funding such claims or in any other manner. In case any such claim
for interest shall be extended or funded, whether or not with the consent of the
Issuer, such claim for interest so extended or funded shall not be entitled, in
case of default hereunder, to the benefits of this Indenture, except subject to
the prior payment in full of the principal of all of the Bonds then outstanding
and of all claims for interest which shall not have been so extended or funded.
SECTION 5.03. PRESERVATION OF REVENUES. The Issuer shall not take any
action to interfere with or impair the pledge and assignment hereunder of
Revenues and the assignment to the Trustee of rights under the Agreement, or the
Trustee's enforcement of any rights thereunder, without the prior written
consent of the Trustee. The Trustee may give such written consent only in
accordance with the provisions of Article IX hereof.
SECTION 5.04. OTHER LIENS. So long as any Bonds are outstanding, the
Issuer shall not create or suffer to be created any pledge, lien or charge of
any type whatsoever upon all or any part of the Revenues, other than the lien of
this Indenture.
SECTION 5.05. COMPLIANCE WITH THE INDENTURE. The Issuer shall not
issue, or permit to be issued, any Bonds secured or payable in any manner out of
Revenues in any manner other than in accordance with the provisions of this
Indenture, and shall not suffer or permit any default to occur under this
Indenture, but shall faithfully observe and perform all the covenants,
conditions and requirements hereof.
SECTION 5.06. PERFORMANCE OF COVENANTS. The Issuer covenants that it
will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder and in all of its proceedings
pertaining thereto; provided,
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however, that except for the matters set forth in Section 5.01 hereof the Issuer
shall not be obligated to take any action or execute any instrument pursuant to
any provision hereof until it shall have been requested to do so by the
Borrower, or shall have received the instrument to be executed and at the
Issuer's option shall have received from the Borrower assurance satisfactory to
the Issuer that the Issuer shall be reimbursed for its reasonable expenses
incurred or to be incurred in connection with taking such action or executing
such instrument. The Bonds and interest and premium, if any, thereon, and any
obligation of the Issuer under the Agreement or this Indenture, shall never
constitute a debt or indebtedness of the Issuer within the meaning of any
constitutional or statutory provision or limitation and shall not constitute nor
give rise to a pecuniary liability of the Issuer or a charge against its general
credit or taxing powers.
SECTION 5.07. RIGHT TO PAYMENTS UNDER AGREEMENT; INSTRUMENTS OF FURTHER
ASSURANCE. The Issuer covenants that it will defend its right to the payment of
amounts due from the Borrower under the Agreement to the Trustee, for the
benefit of the Owners of the Bonds against the claims and demands of all persons
whomsoever. The Issuer covenants that it will do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered, such
indentures supplemental hereto and such further acts, instruments and transfers
as the Trustee may reasonably require for the better assuring, transferring,
conveying, pledging, assigning and confirming unto the Trustee all and singular
the rights assigned hereby and the amounts pledged hereto, to the payment of the
principal of and premium, if any, and interest on the Bonds. The Issuer
covenants and agrees that, except as provided herein and in the Agreement, it
will not sell, convey, mortgage, encumber or otherwise dispose of any part of
the Revenues or its rights under the Agreement.
SECTION 5.08. TAX COVENANTS. The provisions of this Section 5.08 shall
only apply to the Series 1999A Bonds or any portion of the Series 1999B Bonds
which have been converted to Bonds of a Tax-Exempt Series pursuant to Section
2.15.
(a) Pursuant to the Agreement and the Tax Certificate, the Borrower
covenants to maintain the Tax-Exempt status of such Bonds pursuant to Section
103(a) of the Code, and will take, or require to be taken, such acts as may be
reasonably within its ability and as may from time to time be required under
applicable law and regulation to continue the Tax-Exempt status of such Bonds;
and in furtherance of such covenants, the Issuer agrees to comply with the Tax
Certificate.
(b) Pursuant to the Agreement and the Tax Certificate, the Borrower
covenants that it will not take any action or fail to take any action with
respect to the Bonds which would cause such Bonds to be "arbitrage bonds" within
the meaning of such term as used in Section 148 of the Code.
(c) Pursuant to the Agreement and the Tax Certificate, the Borrower
shall make any and all payments required to be made to the United States
Department of the Treasury in connection with such Bonds pursuant to Section
148(f) of the Code from amounts on deposit in the funds and accounts established
under this Indenture and available therefor.
(d) Pursuant to the Agreement and the Tax Certificate, the Borrower
covenants that it will not use or permit the use of any property financed with
the proceeds of
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such Bonds by any person (other than a state or local governmental unit) in such
manner or to such extent as would result in a loss of the Tax-Exempt status of
such Bonds.
(e) Notwithstanding any other provisions of this Indenture to the
contrary, so long as necessary in order to maintain the Tax-Exempt status of
such Bonds under Section 103(a) of the Code, the covenants in this Section 5.08
shall survive the payment of such Bonds and the interest thereon, including any
payment or defeasance thereof pursuant to Section 8.01 hereof.
SECTION 5.09. INSPECTION OF PROJECT BOOKS. The Issuer and the Trustee
covenant and agree that all books and documents in their possession relating to
the Project and the Revenues shall at all times be open to inspection by such
accountants or other agencies as the other party may from time to time
designate.
SECTION 5.10. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed
counterpart of which has been filed with the Trustee, sets forth the covenants
and obligations of the Issuer and the Borrower, and reference is hereby made to
the same for a detailed statement of said covenants and obligations of the
Borrower thereunder, and the Issuer agrees that the Trustee in its name or in
the name of the Issuer may enforce all rights of the Issuer and all obligations
of the Borrower under and pursuant to the Agreement for and on behalf of the
Bondholders, whether or not the Issuer is in default hereunder. Nothing herein
contained shall be construed to prevent the Issuer from enforcing directly any
and all of its rights under Sections 4.2(d), 4.2(e), 4.2(h) and 6.4 of the
Agreement.
SECTION 5.11. CONTINUING DISCLOSURE. Pursuant to Section 5.12 of the
Agreement, the Borrower shall undertake to satisfy the continuing disclosure
requirements promulgated under S.E.C. Rule 15c2-12, as it may from time to time
hereafter be amended or supplemented, if applicable. The Issuer shall have no
liability to the holders of the Bonds or any other person with respect to such
disclosure matters. Notwithstanding any other provision of this Indenture,
failure of the Borrower to comply with the requirements of S.E.C. Rule 15c2-12,
as it may from time to time hereafter be amended or supplemented, shall not be
considered an Event of Default; however, the Trustee, subject to Article X, may
(and, at the request of the Remarketing Agent or the holders of at least 25%
aggregate principal amount of Outstanding Bonds, shall), or any Bondholder or
beneficial owner of any Bonds may, take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order,
to cause the Borrower to comply with its obligations under Section 5.12 of the
Agreement.
ARTICLE VI
REVENUES AND FUNDS
SECTION 6.01. SOURCE OF PAYMENT OF BONDS; LIABILITY OF ISSUER LIMITED
TO REVENUES. The Bonds and all payments required of the Issuer hereunder are not
general obligations of the Issuer but are limited obligations of the Issuer. The
Trust Estate is pledged and assigned to the payment of the principal of and
interest and premium, if any, on the Bonds. The payments provided in subsection
(a) of Section 4.2 of the Agreement are to be remitted directly to the Trustee
for the account of the Issuer and deposited in the Bond
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Fund. Such payments, sufficient in amount to insure the prompt payment of the
principal of and premium, if any, and interest on the Bonds, are pledged to such
payment.
All Revenues shall be held in trust for the benefit of the holders from
time to time of the Bonds, but shall nevertheless be disbursed, allocated and
applied solely for the uses and purposes hereinafter set forth in this Article
VI. Notwithstanding the foregoing provisions of this Section 6.01, that portion
of the Revenues permitted to be returned to the Borrower under Section 6.14
hereof shall not be subject to the pledge and lien of this Indenture.
The Bonds shall not constitute a debt or liability or a pledge of the
faith and credit of the Issuer or the State of Nevada, but shall be payable
solely from the funds herein provided therefor. The issuance of the Bonds shall
not directly or indirectly or contingently obligate the Issuer, the State of
Nevada or any political subdivision thereof to levy or to pledge any form of
taxation whatever therefor or to make any appropriation for their payment.
Notwithstanding any provisions of the Agreement or this Indenture to
the contrary, the Issuer shall not be required to advance any moneys derived
from any source other than Revenues and other assets pledged under this
Indenture for any purposes mentioned in this Indenture, whether for the payment
of the principal or purchase price of, or redemption premium, if any, or
interest on the Bonds or otherwise; provided, however, the Issuer may, but shall
not be required to, advance funds of the Issuer which may be available to it for
such purposes.
SECTION 6.02. CREATION OF THE BOND FUND. There is hereby created by the
Issuer and ordered established with the Trustee a trust fund to be designated
"Clark County, Nevada Industrial Development Revenue Bonds (Southwest Gas
Corporation Project) Series 1999 - Bond Fund" (the "Bond Fund"), which shall be
used to pay the principal of and premium, if any, and the interest on the Bonds
and accounts within the Bond Fund which shall be designated the "Series 1999A
Account" and the "Taxable Series 1999B Account" of the Bond Fund. The Trustee is
hereby authorized to create additional accounts as necessary upon conversion of
any Series 1999B Bonds to Bonds of a Tax-Exempt Series.
SECTION 6.03. PAYMENTS INTO THE BOND FUND. There shall be deposited
into the corresponding Account of the Bond Fund from time to time the following:
(a) all accrued interest, if any, paid by the Initial Purchaser of the
applicable Series of Bonds;
(b) any amounts transferred from the Construction Fund pursuant to the
provisions of Sections 6.06, 6.08, 6.09 and 6.10 of this Indenture;
(c) all payments specified in Section 4.2(a) of the Agreement; and
(d) all other moneys received by the Trustee under and pursuant to the
provisions of Section 2.11 of this Indenture or the Bond Insurance or by any of
the provisions of the Agreement, when accompanied by directions from the person
depositing such moneys that such moneys are to be paid into the Bond Fund.
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The Issuer hereby covenants and agrees that so long as any of the Bonds
issued hereunder are outstanding it will cause to be deposited in the Bond Fund
sufficient amounts from Revenues promptly to meet and pay the principal of and
premium, if any, and interest on the Bonds as the same become due and payable.
Nothing herein shall be construed as requiring the Issuer to use any funds or
revenues from any source other than the Trust Estate.
SECTION 6.04. USE OF MONEYS IN THE BOND FUND AND CERTAIN OTHER MONEYS.
Except as provided in Sections 4.11, 6.11, 6.14 and 10.03 hereof and subject to
the provisions of the Tax Certificate, moneys in the Bond Fund shall be used
solely for the payment of the principal of and premium, if any, and interest on
the respective Series of Bonds as the same shall become due and payable at
maturity, upon redemption or otherwise. Funds for such payments of the principal
of and premium, if any, and interest on the Bonds held by Owners other than the
Bond Insurer or the Borrower shall be derived from the following sources in the
order of priority indicated:
(a) from moneys paid into the Bond Fund pursuant to Section 6.03(a)
hereof which shall be applied to the payment of interest on the Bonds;
(b) from moneys held by the Trustee pursuant to Article VIII hereof,
such moneys to be applied only to the payment of the principal of and premium,
if any, and interest on Bonds which are deemed to be paid in accordance with
Article VIII hereof;
(c) from proceeds of refunding bonds pursuant to the provisions of
Section 2.11 of this Indenture and from income from the investment of such
proceeds;
(d) from moneys retained in the Construction Fund following the
Completion Date pursuant to Section 6.06 of the Indenture and amounts withdrawn
from the Construction Fund and deposited into the Bond Fund pursuant to the
provisions of Sections 6.06, 6.08, 6.09 or 6.10 of this Indenture; and
(e) from all other amounts on deposit in the Bond Fund, including
amounts paid by the Borrower pursuant to the provisions of Section 4.2(a) or
Article VII of the Agreement, and proceeds from the investment thereof.
SECTION 6.05. CUSTODY OF THE BOND FUND. The Bond Fund shall be in the
custody of the Trustee but in the name of the Issuer and the Issuer hereby
authorizes and directs the Trustee to withdraw in accordance with the provisions
of Section 6.04 of this Indenture sufficient funds from the Bond Fund to pay the
principal of, premium, if any, and interest on the Bonds as the same become due
and payable, which authorization and direction the Trustee hereby accepts.
SECTION 6.06. CREATION OF THE CONSTRUCTION FUND; DISBURSEMENTS. There
is hereby created and established with the Trustee a trust fund in the name of
the Issuer but for the account of the Borrower, such fund to be designated
"Clark County, Nevada, Industrial Development Revenue Bonds (Southwest Gas
Corporation Project) Series 1999 - Construction Fund" (the "Construction Fund")
and accounts within such fund to be designated "Series 1999A Construction
Account" and "Series 1999B Construction Account". The Trustee shall create
further accounts as necessary upon conversions of the Series 1999B
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Bonds from time to time. Proceeds from the sale of a Series of Bonds shall be
deposited in the account of the Construction Fund relating to such Series of
Bonds in the amount specified in a written request of the Issuer acknowledged by
the Borrower delivered to the Trustee in connection with the issuance of such
Series of Bonds.
Moneys in the Construction Fund shall be disbursed to the Borrower, or
such other Person as may be designated, on requisitions signed by the Authorized
Borrower Representative and delivered to the Trustee, stating with respect to
each payment to be made:
(1) The amount of such disbursement and from which account it
is to be paid; and
(2) That each obligation mentioned therein (i) has been
properly incurred, (ii) is a proper charge against the indicated
account of the Construction Fund in accordance with the provisions of
the Agreement (including Section 3.3 thereof) and this Indenture, and
(iii) has not been the basis of any previous requisition.
A copy of each such requisition shall be furnished to the Authorized
Issuer Representative by the Borrower. The Trustee is hereby authorized and
directed to make each disbursement required by the provisions of the Agreement
and to issue its check therefor or to transfer funds (by wire or otherwise) in
accordance with directions contained in such requisition (or a supplement
thereto). The Trustee shall have no duty or obligation to verify the content of
any requisition provided to it hereunder. Moneys in the Construction Fund on the
Completion Date shall be transferred to the appropriate account of the Bond Fund
and the Construction Fund shall be closed.
SECTION 6.07. COSTS OF ISSUANCE FUND; DISBURSEMENTS. The Trustee shall
establish the Southwest Gas Corporation Project Costs of Issuance Fund (the
"Southwest Gas Corporation Project Costs of Issuance Fund") and accounts within
such fund to be designated the "Series 1999A Costs of Issuance Account" (the
"Series 1999A Costs of Issuance Account") and another account within such Fund
to be designated the "Series 1999B Costs of Issuance Account" (the "Series 1999B
Costs of Issuance Account" and, collectively, the "Costs of Issuance Accounts").
The moneys in each account of the Costs of Issuance Fund shall be held by the
Trustee in trust and applied to the payment of Costs of Issuance for the related
Series of Bonds upon a requisition filed with the Trustee, in the form attached
hereto as Exhibit D, signed by an Authorized Borrower Representative. All
payments from the Costs of Issuance Fund shall be reflected in the Trustee's
regular accounting statements. Any amounts remaining in any account within the
Costs of Issuance Fund six months following the date of issuance of the Bonds
shall be transferred to the Construction Fund.
SECTION 6.08. USE OF MONEYS IN CONSTRUCTION FUND UPON DEFAULT. Upon an
Event of Default pursuant to Article IX of this Indenture and an acceleration of
the Bonds pursuant to Section 9.02 hereof, any balance remaining in the
Construction Fund shall without further authorization be transferred to the Bond
Fund with advice to the Issuer and the Borrower of such action.
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SECTION 6.09. USE OF MONEYS IN CONSTRUCTION FUND UPON REDEMPTION. In
the event the Borrower shall be required under Section 7.2 of the Agreement, or
in the event the Borrower elects under Section 7.1 of the Agreement, to prepay
all the amounts due under the Agreement, the Trustee shall deposit in the Bond
Fund, on the date on which such prepayment is due, all amounts remaining in the
Construction Fund, except as otherwise provided in Section 6.10 of this
Indenture. Upon the making of any deposit pursuant to the provisions of this
Section, the Trustee shall advise the Issuer and the Borrower of such action.
SECTION 6.10. USE OF MONEYS IN CONSTRUCTION FUND UPON PAYMENT OF BONDS.
Any balance remaining in the Construction Fund after the payment in full of all
Bonds issued under the provisions of this Indenture shall be deposited into the
Bond Fund, except that if the Issuer has issued a series of refunding bonds for
the purpose of refunding all of the Bonds at or prior to their stated maturity,
any moneys remaining in the Construction Fund at the time of such refunding may
be deposited by the Issuer and the Trustee into a special fund created in the
proceedings authorizing the issuance of the refunding bonds and used to pay
costs of the Project not paid out of the Construction Fund prior to such
refunding.
SECTION 6.11. NON-PRESENTMENT OF BONDS. In the event any Bond shall not
be presented for payment when the principal thereof becomes due, either at
maturity or otherwise, or at the date fixed for redemption thereof or in the
event any interest payment thereon is unclaimed, if moneys sufficient to pay
such Bond or interest shall have been deposited in the Bond Fund, all liability
of the Issuer to the Owner thereof for the payment of such Bond or interest
shall forthwith cease, determine and be completely discharged, and thereupon it
shall be the duty of the Trustee to hold such moneys, without liability for
interest thereon, for the benefit of the Owner of such Bond who shall thereafter
be restricted exclusively to such moneys, for any claim of whatever nature on
his part under this Indenture or on, or with respect to, said Bond. Any moneys
so deposited with and held by the Trustee not so applied to the payment of Bonds
or such interest, if any, within one (1) year after the date on which the same
shall have become due shall be paid by the Trustee to the Borrower upon the
written direction of an Authorized Borrower Representative and thereafter
Bondholders shall be entitled to look only to the Borrower for payment, and then
only to the extent of the amount so repaid, and the Borrower shall not be liable
for any interest thereon and shall not be regarded as a trustee of such moneys
and the Trustee shall have no further responsibility with respect to such
moneys.
SECTION 6.12. TRUSTEE FEES, CHARGES AND EXPENSES. The Trustee agrees
that the Issuer shall have no liability for any fees, charges and expenses of
the Trustee, and the Trustee agrees to look only to the Borrower for the payment
of all fees, charges and expenses of the Trustee as provided in the Agreement
and in this Indenture.
SECTION 6.13. MONEYS TO BE HELD IN TRUST. All moneys required to be
deposited with or paid to the Trustee for deposit into the Bond Fund or into the
Construction Fund or Costs of Issuance Fund under any provision hereof, all
moneys withdrawn from the Bond Fund and held by the Trustee and any moneys
withdrawn from the Construction Fund or Costs of Issuance Fund and held by the
Trustee shall be held by the Trustee in trust, and such moneys (other than
moneys held pursuant to Section 6.11 hereof) shall, while so held, constitute
part of the Trust Estate and be subject to the lien hereof. Moneys held for the
payment
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of the purchase price of Bonds pursuant to Article IV hereof shall not
constitute part of the Trust Estate and shall be held in a special purpose trust
account which will be established and maintained by the Trustee and held for the
exclusive benefit of the holders of Bonds with respect to which such purchase
was made.
SECTION 6.14. REPAYMENT TO THE BORROWER FROM THE BOND FUND. Any amounts
remaining in the Bond Fund after payment in full of the principal of and
premium, if any, and interest on the Outstanding Bonds (or provision for payment
thereof as provided in this Indenture), the fees, charges and expenses of the
Issuer, the Trustee, the Liquidity Provider, if any, the Remarketing Agent, if
any, and all other amounts required to be paid under the Agreement, the Bond
Insurance, the Liquidity Facility, if any, and this Indenture shall be paid to
the Borrower as provided in Section 9.5 of the Agreement.
SECTION 6.15. REVENUES TO BE PAID OVER TO TRUSTEE. The Issuer will
cause the Revenues to be paid to the Trustee for deposit in the Bond Fund in
accordance with the terms of this Indenture to effect payment of the principal
of and premium, if any, and interest on the Bonds as the same become due.
SECTION 6.16. PAYMENTS OF PRINCIPAL AND INTEREST. The Trustee shall pay
from Revenues received by the Trustee, in the order of priority indicated in
Section 6.04 hereof, the principal of and premium, if any, and interest on, the
Bonds as the same become due and payable. If, prior to the maturity of any Bond,
the Borrower surrenders such Bond to the Trustee for cancellation, the Trustee
shall cancel such Bond.
SECTION 6.17. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN
EXCEPTIONS. Revenues and investments thereof shall, until applied as provided in
this Indenture, be held by the Trustee for the benefit of the Owners of all
Outstanding Bonds, except as provided by Sections 2.11, 6.11 and 6.14 hereof and
except that any portion of the Revenues representing principal of and premium,
if any, and interest on, any Bonds previously called for redemption in
accordance with Article III of this Indenture or previously matured or
representing unclaimed interest on the Bonds shall be held for the benefit of
the Owners of such Bonds only and shall not be deposited or invested pursuant to
Article VII hereof, notwithstanding any provision of Article VII.
SECTION 6.18. REBATE FUND. There is hereby created by the Issuer and
ordered established with the Trustee a custodial fund to be designated the
"Clark County, Nevada Industrial Development Revenue Bonds (Southwest Gas
Corporation Project) Series 1999 - Rebate Fund" (the "Rebate Fund"). The Trustee
shall establish within the Rebate Fund a separate account designated
"Tax-Exempt". The Trustee covenants and agrees to deposit to the Rebate Fund
amounts paid to the Trustee by the Borrower pursuant to Section 4.2(g) of the
Agreement and, at the written direction of an Authorized Borrower
Representative, to withdraw from such Rebate Fund such amounts at such times in
order to pay the Rebate Requirement (as defined in the Tax Certificate) in
accordance with the Tax Certificate. Funds on deposit in the Rebate Fund are not
part of the Trust Estate.
SECTION 6.19. BOND INSURANCE PAYMENTS. As long as the Bond Insurance
shall be in full force and effect with respect to a Series of Bonds hereunder,
the Issuer,
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the Trustee and any Paying Agent for such Series of Bonds agree to comply with
the following provisions:
(a) at least one (1) day prior to all Interest Payment Dates the
Trustee or Paying Agent, if any, will determine whether there will be sufficient
funds in the Bond Fund to pay the principal of or interest on the Bonds of such
Series on such Interest Payment Date. If the Trustee or Paying Agent, if any,
determines that there will be insufficient funds in such Bond Fund, the Trustee
or Paying Agent, if any, shall so notify the Bond Insurer. Such notice shall
specify the amount of the anticipated deficiency, the Series of Bonds to which
such deficiency is applicable and whether such Bonds will be deficient as to
principal or interest, or both. If the Trustee or Paying Agent, if any, has not
so notified the Bond Insurer at least one (1) day prior to an Interest Payment
Date, the Bond Insurer will make payments of principal or interest due on the
Bonds on or before the first (1st) day next following the date on which Bond
Insurer shall have received notice of nonpayment from the Trustee or Paying
Agent, if any.
(b) the Trustee or Paying Agent, if any, shall, after giving notice to
the Bond Insurer as provided in (a) above, make available to the Bond Insurer
and, at the Bond Insurer's direction, to the United States Trust Company of New
York, as insurance trustee for the Bond Insurer or any successor insurance
trustee (the "Insurance Trustee"), the registration books of the Issuer
maintained by the Trustee or Paying Agent, if any, and all records relating to
the funds maintained under the Indenture.
(c) the Trustee or Paying Agent, if any, shall provide the Bond Insurer
and the Insurance Trustee with a list of registered owners of Bonds entitled to
receive principal or interest payments from the Bond Insurer under the terms of
the Bond Insurance, and shall make arrangements with the Insurance Trustee (i)
to mail checks or drafts to the registered owners of such Bonds entitled to
receive full or partial interest payments from the Bond Insurer and (ii) to pay
principal upon such Bonds surrendered to the Insurance Trustee by the registered
owners of Bonds entitled to receive full or partial principal payments from the
Bond Insurer.
(d) the Trustee or Paying Agent, if any, shall, at the time it provides
notice to the Bond Insurer pursuant to (a) above, notify registered owners of
Bonds entitled to receive the payment of principal or interest thereon from the
Bond Insurer (i) as to the fact of such entitlement, (ii) that the Bond Insurer
will remit to them all or a part of the interest payments next coming due upon
proof of Bondholder entitlement to interest payments and delivery to the
Insurance Trustee, in form satisfactory to the Insurance Trustee, of an
appropriate assignment of the registered owner's right to payment, (iii) that
should they be entitled to receive full payment of principal from the Bond
Insurer, they must surrender their Bonds (along with an appropriate instrument
of assignment in form satisfactory to the Insurance Trustee to permit ownership
of such Bonds to be registered in the name of the Bond Insurer) for payment to
the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv)
that should they be entitled to receive partial payment of principal from the
Bond Insurer, they must surrender their Bonds for payment thereon first to the
Trustee or Paying Agent, if any, who shall note on such Bonds the portion of the
principal paid by the Trustee or Paying Agent, if any, and then, along with an
appropriate instrument of assignment in form satisfactory to the Insurance
Trustee, to the Insurance Trustee, which will then pay the unpaid portion of
principal.
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(e) in the event that the Trustee or Paying Agent, if any, has notice
that any payment of principal of or interest on a Bond which has become due for
payment and which is made to a Bondholder by or on behalf of the Issuer has been
deemed a preferential transfer and theretofore recovered from its registered
owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy
in accordance with the final, nonappealable order of a court having competent
jurisdiction, the Trustee or Paying Agent, if any, shall, at the time the Bond
Insurer is notified pursuant to (a) above, notify all registered owners that in
the event that any registered owner's payment is so recovered, such registered
owner will be entitled to payment from the Bond Insurer to the extent of such
recovery if sufficient funds are not otherwise available, and the Trustee or
Paying Agent, if any, shall furnish to the Bond Insurer its records evidencing
the payments of principal of and interest on the Bonds which have been made by
the Trustee or Paying Agent, if any, and subsequently recovered from registered
owners and the dates on which such payments were made.
(f) in addition to those rights granted the Bond Insurer hereunder, the
Bond Insurer shall, to the extent it makes payment of principal of or interest
on Bonds, become subrogated to the rights of the recipients of such payments in
accordance with the terms of the Bond Insurance, and to evidence such
subrogation (i) in the case of subrogation as to claims for past due interest,
the Trustee or Paying Agent, if any, shall note the Bond Insurer's rights as
subrogee on the registration books of the Issuer maintained by the Trustee or
Paying Agent, if any, upon receipt from the Bond Insurer of proof of the payment
of interest thereon to the registered owners of the Bonds, and (ii) in the case
of subrogation as to claims for past due principal, the Trustee or Paying Agent,
if any, shall note the Bond Insurer's rights as subrogee on the registration
books of the Issuer maintained by the Trustee or Paying Agent, if any, upon
surrender of the Bonds by the registered owners thereof together with proof of
the payment of principal thereof.
ARTICLE VII
INVESTMENT OF MONEYS
SECTION 7.01. INVESTMENT OF MONEYS. The Trustee shall invest and
reinvest any moneys held as part of the Bond Fund, the Costs of Issuance Fund,
and the Construction Fund upon the written direction of an Authorized Borrower
Representative in Investment Securities. Any such investments shall be held by
or under the control of the Trustee and shall be deemed at all times a part of
the fund for which they were made. The interest accruing thereon, any profit
realized from such investments and any loss resulting from such investments
shall be credited or charged to such fund in accordance with Section 3.4 of the
Agreement. The Trustee shall sell and reduce to cash a sufficient amount of such
investments of the Bond Fund, the Costs of Issuance Fund and the Construction
Fund, each in accordance with written directions or oral directions promptly
confirmed by telecopy or other writing of an Authorized Borrower Representative,
whenever the cash balance in the Bond Fund is insufficient to pay the principal
of and premium, if any, and interest on the Bonds when due and whenever the cash
balance in the Construction Fund is insufficient to pay amounts due from the
Construction Fund. Moneys comprising proceeds of a draw on a Liquidity Facility,
and other moneys held for the payment of the purchase price of Bonds pursuant to
Article IV hereof or the payment of Bonds pursuant to Section 6.11 and 6.17
hereof, shall be held uninvested. Moneys
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that are "Available Moneys" under the definition thereof may be invested in (1)
cash (insured at all times by the Federal Deposit Insurance Corporation or
otherwise collateralized with obligations described in clause (2) following), or
(2) direct obligations of (including obligations issued or held in book entry
form on the books of) the Department of the Treasury of the United States of
America maturing as to principal and interest at such time as will insure
availability at the time of the required payments.
SECTION 7.02. INVESTMENTS; ARBITRAGE. The Trustee may make any and all
investments permitted by the provisions of Section 7.01 hereof through its own
bond department. The Trustee may act as principal or agent in the making or
disposing of any investments, and may act as sponsor, advisor or manager in
connection with any such investments. The provisions of this subsection shall
apply to affiliates of the Trustee. As and when any amount invested pursuant to
this Article may be needed for disbursement, the Trustee may cause a sufficient
amount of such investments to be sold and reduced to cash to the credit of such
funds.
The Borrower has covenanted in Section 5.11 of the Agreement that it
will not take any action or fail to take any action with respect to the Bonds to
cause the Bonds of any Tax-Exempt Series to be treated as "arbitrage bonds"
within the meaning of Section 148(a) of the Code.
ARTICLE VIII
DEFEASANCE
SECTION 8.01. DEFEASANCE. (A) If the Issuer shall pay or cause to be
paid, or there shall be otherwise paid or provision for payment made to or for
the Owners of the Bonds the principal, premium, if any, and interest due or to
become due thereon at the times and in the manner stipulated therein, and if the
Issuer shall keep, perform and observe all the covenants and promises in the
Bonds and in this Indenture expressed as to be kept, performed and observed by
it or on its part, and shall pay or cause to be paid to the Trustee all sums of
money due or to become due according to the provisions hereof, then this
Indenture and the lien, rights and interests created hereby shall cease,
determine and become null and void (except as to any surviving rights of
payment, registration, transfer or exchange of Bonds herein provided for),
whereupon the Trustee upon written request of an Authorized Issuer
Representative shall cancel and discharge this Indenture, and execute and
deliver to the Issuer such instruments in writing as shall be requested by an
Authorized Issuer Representative and requisite to discharge this Indenture, and
release, assign and deliver unto the Issuer any and all the estate, right, title
and interest in and to any and all rights assigned or pledged to the Trustee or
otherwise subject to this Indenture, except amounts in the Bond Fund required to
be paid to the Borrower under Section 6.14 hereof and except moneys or
securities held by the Trustee for the payment of the principal of and premium,
if any, and interest on, and purchase prices of, the Bonds. Notwithstanding the
foregoing, under no circumstances may the Issuer or the Borrower receive any
funds derived from a draw on any Liquidity Facility, Bond Insurance or moneys
held for the payment of particular Bonds.
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(B) Any Bond or Authorized Denomination thereof shall be deemed to be
paid within the meaning of this Indenture when (a) payment of the principal of
and premium, if any, on such Bond or Authorized Denomination thereof, plus
interest thereon to the due date thereof (whether such due date is by reason of
maturity or upon redemption as provided herein) either (i) shall have been made
or caused to be made in accordance with the terms thereof, (ii) shall have been
provided for by depositing sufficient amounts as described in clause (1) and/or
(2) below for such payment with the Trustee and the due date of such principal,
interest and premium, if any, has occurred, or (iii) in the case of a Bond which
bears interest at a Flexible Rate, a Taxable Term Rate, a Taxable Flexible Rate
or a Term Rate, shall have been provided for by irrevocably depositing with the
Trustee in trust and irrevocably setting aside exclusively for such payment on
such due date (which due date shall be in the case of a Bond bearing interest at
a Flexible Rate or Taxable Flexible Rate no later than the Interest Payment Date
for the then current Flexible Segment or Taxable Segment, as applicable, for
such Bond and in the case of a Bond bearing interest at a Term Rate no later
than the last Interest Payment Date for the then current Term Rate Period or
Taxable Term Rate Period for such Bond) (1) cash (insured at all times by the
Federal Deposit Insurance Corporation or otherwise collateralized with
obligations described in clause (2) following), or (2) direct obligations of
(including obligations issued or held in book entry form on the books of) the
Department of the Treasury of the United States of America maturing as to
principal and interest in such amount and at such time as will insure the
availability of sufficient moneys to make such payment, and (b) all necessary
and proper fees, compensation and expenses of the Trustee pertaining to any such
deposit shall have been paid or the payment thereof provided for to the
satisfaction of the Trustee; provided, however, that no Bond shall be deemed
paid pursuant to this Article VIII prior to the due date for the payment of
principal, premium if any, and interest thereon unless there shall have been
delivered an opinion of Bond Counsel to the effect that such treatment will not
adversely affect the Tax-Exempt status of any Tax-Exempt Series of Bonds
hereunder and will not cause such Bonds to be treated as sold or otherwise
disposed of for the purposes of Section 1001 of the Code (or any successor
provision). At such times as a Bond or Authorized Denomination thereof shall be
deemed to be paid hereunder, as aforesaid, such Bond or Authorized Denomination
thereof shall no longer be secured by or entitled to the benefits of this
Indenture (other than Sections 2.04 and 2.08 hereof in the case of a deposit
under clause (a)(iii) above), except for the purposes of any such payment from
such moneys or government obligations referred to in clause (2) above.
(C) Notwithstanding the foregoing paragraph, in the case of a Bond or
Authorized Denomination thereof which by its terms may be redeemed prior to the
stated maturity thereof, no deposit under clause (a)(iii) of the immediately
preceding paragraph shall be deemed a payment of such Bond or Authorized
Denomination thereof as aforesaid until: (a) proper notice of redemption of such
Bond or Authorized Denomination thereof shall have been previously given in
accordance with Article III of this Indenture, or in the event said Bond or
Authorized Denomination thereof is not to be redeemed within the next succeeding
seventy-five (75) days, until the Borrower shall have given the Trustee on
behalf of the Issuer, in form satisfactory to the Trustee, irrevocable
instructions to notify, as soon as practicable, the Owner of such Bond or
Authorized Denomination thereof in accordance with Article III hereof, that the
deposit required by (a)(iii) above has been made with the Trustee and that said
Bond or Authorized Denomination thereof is deemed to have been paid in
accordance with this Article and stating the maturity or redemption date upon
which moneys are to be available for the payment of the principal of and the
applicable premium, if any, on said Bond or Authorized
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Denomination thereof, plus interest thereon to the due date thereof, or (b) the
maturity of such Bond or Authorized Denomination thereof.
For purposes of paragraph (B) above, if the Bonds to be deemed paid are
Taxable Weekly Bonds which are rated by S&P, such Bonds shall not be deemed paid
unless the Trustee shall receive, prior to the defeasance thereof, written
evidence from S&P that the short-term rating on such Taxable Weekly Bonds will
not be reduced or withdrawn due to such defeasance pursuant to Section 8.01(B)
hereof.
(D) Notwithstanding any provision of any other Article of this
Indenture which may be contrary to the provisions of this Article, all moneys or
government obligations set aside and held in trust pursuant to the provisions of
this Article for the payment of Bonds or Authorized Denominations thereof
(including interest and premium thereon, if any) shall be applied to and used
solely for the payment of the particular Bonds or Authorized Denominations
thereof (including interest and premium thereon, if any) with respect to which
such moneys and government obligations have been so set aside in trust.
(E) Notwithstanding anything herein to the contrary, in the event that
the principal and/or interest due on the Bonds shall be paid by the Bond Insurer
pursuant to the Bond Insurance, the Bonds shall remain Outstanding for all
purposes, not be defeased or otherwise satisfied and not be considered paid by
the Issuer, and the assignment and pledge of the Trust Estate and all covenants,
agreements and other obligations of the Issuer to the registered owners shall
continue to exist and shall run to the benefit of the Bond Insurer, and the Bond
Insurer shall be subrogated to the rights of such registered owners.
(F) Anything in Article XI hereof to the contrary notwithstanding, if
moneys or government obligations have been deposited or set aside with the
Trustee pursuant to this Article for the payment of Bonds or Authorized
Denominations thereof and the interest and premium, if any, thereon and such
Bonds or Authorized Denominations thereof and the interest and premium, if any,
thereon shall not have in fact been actually paid in full, no amendment to the
provisions of this Article shall be made without the consent of the Owner of
each of the Bonds affected thereby.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
SECTION 9.01. DEFAULTS; EVENTS OF DEFAULT. If any of the following
events occurs, it is hereby defined as and declared to be and to constitute a
default or an Event of Default:
(a) Failure to make payment of any installment of interest upon any
Bond after such payment has become due and payable;
(b) Failure to make payment of the principal of and premium, if any, on
any Bond at the stated maturity thereof or upon the unconditional redemption
thereof;
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(c) A failure to pay an amount due pursuant to Article IV hereof when
the same shall have become due and payable;
(d) The occurrence of an "Event of Default" under the Agreement;
(e) Failure on the part of the Issuer to perform or observe any of its
covenants, agreements or conditions in this Indenture or in the Bonds contained
and failure to remedy the same after notice thereof pursuant to Section 9.10
hereof; and
(f) Receipt by the Trustee of notice of an Insurer Default.
SECTION 9.02. ACCELERATION. Upon the occurrence and continuance of an
Event of Default under Section 9.01 hereof, the Trustee may with the consent of
the Bond Insurer, and upon the written request of the Owners of not less than a
majority in aggregate principal amount of Bonds then Outstanding with the
consent of the Bond Insurer, shall, by notice in writing delivered to the
Borrower, with copies to the Issuer, the Bond Insurer, the Liquidity Provider,
if any, and the Remarketing Agent, if any, declare the principal of all Bonds
then outstanding and the interest accrued thereon to the date of such
declaration immediately due and payable, and such principal and interest shall
thereupon become and be immediately due and payable. Upon any such declaration,
the Trustee shall declare all indebtedness payable under Section 4.2(a) of the
Agreement to be immediately due and payable in accordance with Section 6.2 of
the Agreement and may exercise and enforce such rights as exist under the
Agreement and this Indenture. The above provisions are subject to waiver,
rescission and annulment as provided in Section 9.09 hereof.
SECTION 9.03. REMEDIES; RIGHTS OF BONDHOLDERS AND BOND INSURER. Upon
the occurrence and continuation of an Event of Default under Section 9.01
hereof, the Trustee may pursue any available remedy at law or in equity by suit,
action, mandamus or other proceeding to enforce the payment of the principal of
and premium, if any, and interest on the Bonds then outstanding and to enforce
and compel the performance of the duties and obligations of the Issuer as herein
set forth. In addition, the Trustee may, without notice to the Issuer or the
Borrower, exercise any and all remedies afforded the Issuer under Article VI of
the Agreement in its name or the name of the Issuer without the necessity of
joining the Issuer.
If an Event of Default under Section 9.01 hereof shall have occurred
and be continuing and if requested so to do by the Owners of not less than a
majority in aggregate principal amount of Bonds then outstanding and indemnified
as provided in Section 10.01(i) hereof, the Trustee shall be obliged to exercise
such one or more of the rights and powers conferred by this Section 9.03 and
Section 9.02 hereof as the Trustee being advised by Counsel shall deem most
expedient in the interests of the Bondholders.
No remedy by the terms of this Indenture conferred upon or reserved to
the Trustee (or to the Bondholders) is intended to be exclusive of any other
remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given to the Trustee or to the Bondholders
hereunder or now or hereafter existing at law or in equity or by statute.
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No delay or omission to exercise any right, power or remedy accruing
upon any Event of Default shall impair any such right, power or remedy or shall
be construed to be a waiver of any such Event of Default or acquiescence
therein; and every such right, power or remedy may be exercised from time to
time and as often as may be deemed expedient.
No waiver of any Event of Default hereunder, whether by the Trustee or
by the Bondholders, shall extend to or shall affect any subsequent Event of
Default or shall impair any rights or remedies consequent thereon.
Anything in this Indenture to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default other than an Insurer Default,
the Bond Insurer shall be entitled to control and direct the enforcement of all
rights and remedies granted to the Bondholders or the Trustee for the benefit of
the Bondholders hereunder including, without limitation: (i) the right to
accelerate the principal of the Bonds as described herein, and (ii) the right to
annul any declaration of acceleration, and the Bond Insurer shall also be
entitled to approve all waivers of Events of Default hereunder.
SECTION 9.04. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS. Other than as
provided in Section 9.03, the Owners of not less than a majority in aggregate
principal amount of Bonds then Outstanding shall have the right, at any time, by
an instrument or instruments in writing executed and delivered to the Trustee,
to direct the time, method and place of conducting all proceedings to be taken
in connection with the enforcement of the terms and conditions of this
Indenture, or for the appointment of a receiver or any other proceedings
hereunder; provided, that such direction shall not be otherwise than in
accordance with the provisions of law and of this Indenture and could not
involve the Trustee in personal liability.
SECTION 9.05. APPLICATION OF MONEYS. All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article
or pursuant to 6.08 hereof shall, after payment of the costs and expenses of the
proceedings resulting in the collection of such moneys and of the expenses,
liabilities and advances incurred or made by the Trustee and its Counsel, be
deposited in the Bond Fund and all such moneys in the Bond Fund shall be applied
as follows:
(a) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied:
FIRST - To the payment to the persons entitled thereto of all
interest then due on the Bonds (other than interest due on Bonds for
the payment of which moneys are held pursuant to the provisions of this
Indenture), and, if the amount available shall not be sufficient to pay
said amount in full, then to the payment ratably, according to the
amounts due, to the persons entitled thereto, without any
discrimination or privilege;
SECOND - To the payment to the persons entitled thereto of the
unpaid principal of and premium, if any, on any of the Bonds which
shall have become due (other than Bonds matured or called for
redemption for the payment of which
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moneys are held pursuant to the provisions of this Indenture), and, if
the amount available shall not be sufficient to pay in full such unpaid
principal and premium, then to the payment ratably to the persons
entitled thereto without any discrimination or privilege; and
THIRD - To the payment to the persons entitled thereto of
interest on overdue principal of and premium, if any, on any Bonds
without preference or priority as between principal or premium or
interest one over the others, or any installment of interest over any
other installment of interest, or of any Bond over any other Bond, and
if the amount available shall not be sufficient to pay such amounts in
full, then ratably, without any discrimination or privilege.
(b) If the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such moneys shall be applied to the
payment of the principal and premium, if any, and interest then due and unpaid
upon the Bonds (other than Bonds matured or called for redemption or interest
due on Bonds for the payment of which moneys are held pursuant to the provisions
of this Indenture), without preference or priority of principal, premium or
interest one over the others, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably, according
to the amounts due respectively for principal and interest, to the persons
entitled thereto without any discrimination or privilege.
(c) If the principal of all the Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and
annulled under the provisions of this Article, then, subject to the provisions
of Section 9.05(b) hereof in the event that the principal of all the Bonds shall
later become due or be declared due and payable, the moneys shall be applied in
accordance with the provisions of Section 9.05(a) hereof.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times, and from time to time, as
the Trustee shall determine. Whenever the Trustee shall apply such moneys, it
shall fix the date upon which such application is to be made and upon such date
interest on the amounts of principal to be paid on such date shall cease to
accrue. The Trustee shall give such notice as it may deem appropriate of the
deposit with it of any such moneys and of the fixing of any such date.
Whenever all principal of and premium, if any, and interest on all
Bonds have been paid under the provisions of this Section 9.05 and all expenses
and charges of the Trustee have been paid, any balance remaining in the Bond
Fund shall be paid to the Borrower as provided in Section 6.14 hereof.
SECTION 9.06. REMEDIES VESTED IN TRUSTEE. All rights of action
(including the right to file proofs of claims) under this Indenture or under any
of the Bonds may be enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any trial or other proceedings relating
thereto and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee without the necessity of joining as plaintiffs or
defendants any Owners of the Bonds, and any recovery of judgment shall be for
the equal and ratable benefit of the Owners of the Outstanding Bonds.
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SECTION 9.07. RIGHTS AND REMEDIES OF BONDHOLDERS. No Owner of any Bond
shall have any right to institute any suit, action or proceeding in equity or at
law for the enforcement of this Indenture or for the execution of any trust
thereof or for the appointment of a receiver or any other remedy hereunder,
unless (i) a default has occurred of which a Responsible Officer of the Trustee
has actual knowledge or has been notified as provided in subsection (g) of
Section 10.01 hereof, (ii) such default shall have become an Event of Default
hereunder and be continuing, (iii) the Owners of more than a majority in
aggregate principal amount of Bonds then Outstanding shall have made written
request to the Trustee, either to proceed to exercise the powers herein granted
or to institute such action, suit or proceeding in its own name, and shall have
offered to the Trustee indemnity as provided in Section 10.01(i), and (iv) the
Trustee shall for sixty (60) days after such notice, request and offer of
indemnity fail or refuse to exercise the powers herein granted, or to institute
such action, suit or proceeding in its own name; and such notification, request
and offer of indemnity are hereby declared in every case at the option of the
Trustee to be conditions precedent to the execution of the powers and trusts of
this Indenture, and to any action or cause of action for the enforcement of this
Indenture, or for the appointment of a receiver or for any other remedy
hereunder. No one or more Owners of the Bonds shall have any right in any manner
whatsoever to enforce any right hereunder except in the manner herein provided,
and all proceedings at law or in equity shall be instituted, had and maintained
in the manner herein provided and for the equal and ratable benefit of the
Owners of all Bonds then outstanding. Nothing in this Indenture shall, however,
affect or impair the right of any Bondholder to enforce the payment of the
principal of and premium, if any, and interest on any Bond at and after the
maturity thereof.
SECTION 9.08. TERMINATION OF PROCEEDINGS. In case the Trustee shall
have proceeded to enforce any right under this Indenture by the appointment of a
receiver or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case the Issuer, the Trustee and the Bondholders shall be restored to
their former positions and rights hereunder, respectively, and all rights,
remedies and powers of the Trustee shall continue as if no such proceedings had
been taken.
SECTION 9.09. WAIVERS OF EVENTS OF DEFAULT. Subject to the next
paragraph and to the last paragraph of Section 9.03, the Trustee may in its
discretion waive any Event of Default hereunder and rescind its consequences and
shall do so upon the written request of the Owners of not less than a majority
in aggregate principal amount of all Bonds then Outstanding; provided, however,
that there shall not be waived any Event of Default in the payment of the
principal of, or premium on, any Outstanding Bonds when due (whether at maturity
or by redemption), or any Event of Default in the payment when due of the
interest on any such Bonds, unless prior to such waiver and rescission, all
arrears of principal of and interest upon such Bonds, and interest on overdue
principal at the rate borne by the Bonds on the date on which such principal
became due and payable, and all arrears of premium, if any, when due, together
with the reasonable expenses of the Trustee and of the Owners of such Bonds,
including reasonable attorneys' fees paid or incurred, shall have been
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paid or provided for; provided further, there shall not be waived any Event of
Default in the payment when due of any purchase prices of any Bonds pursuant to
Article IV hereof unless prior to such waiver and rescission all arrears of such
purchase prices, together with reasonable expenses of the Trustee and of the
Owners of such Bonds, including reasonable attorneys' fees paid or incurred,
shall have been paid or provision therefor made. In the case of any such waiver
and rescission, or in case any proceeding taken by the Trustee on account of any
such default shall have been discontinued or abandoned or determined adversely,
then and in every such case the Issuer, the Trustee and the Bondholders shall be
restored to their former positions and rights hereunder, respectively, but no
such waiver and rescission shall extend to any subsequent or other default, or
impair any right consequent thereon. All waivers under this Indenture shall be
in writing and a copy thereof shall be delivered to the Issuer, the Borrower and
the Remarketing Agent, if any.
The provisions of Sections 9.01 and 9.02 hereof are subject to the
conditions that if, after the principal of all Bonds then Outstanding shall have
been declared to be due and payable, all arrears of principal of and interest
upon such Bonds, and the premium, if any, on all Bonds then outstanding which
shall have become due and payable otherwise than by acceleration, and all other
sums payable under this Indenture, except the principal of, and interest on, the
Bonds which by such declaration shall have become due and payable, shall have
been paid by or on behalf of the Issuer, together with the reasonable expenses
of the Trustee and of the Owners of such Bonds, including reasonable attorneys'
fees paid or incurred, and if no other defaults shall have occurred and be
continuing, then and in every such case, the Trustee shall annul such
declaration of maturity and its consequences, which waiver and annulment shall
be binding upon all Bondholders; but no such waiver, rescission and annulment
shall extend to or affect any subsequent default or impair any right or remedy
consequent thereon. In the case of any such annulment, the Borrower, the Issuer,
the Trustee and the Bondholders shall be restored to their former positions and
rights under this Indenture. All waivers and annulments under this Indenture
shall be in writing and a copy thereof shall be delivered to the Issuer, the
Bond Insurer, the Borrower and the Remarketing Agent, if any.
SECTION 9.10. NOTICE OF EVENT OF DEFAULT UNDER SECTION 9.01(e) HEREOF;
OPPORTUNITY OF BORROWER TO CURE DEFAULTS. Anything herein to the contrary
notwithstanding, no default described in Section 9.01(e) hereof shall constitute
an Event of Default until actual notice of such default, requiring that it be
remedied and stating that such notice is a "Notice of Default" hereunder, by
registered or certified mail shall be given to the Issuer and the Borrower by
the Trustee or to the Issuer and the Borrower and the Trustee by the Owners of a
majority in aggregate principal amount of all Bonds Outstanding, and the Issuer
or the Borrower on behalf of the Issuer shall have had ninety days after receipt
of such notice to correct said default or cause said default to be corrected,
and shall not have corrected said default or caused said default to be corrected
within the applicable period; provided, however, if said default be such that it
cannot be corrected within the applicable period, it shall not constitute an
event of default if corrective action is instituted within the applicable period
and diligently pursued until the default is corrected and the fact of such
non-correction, corrective action and diligent pursuit is evidenced to the
Trustee by a certificate of an Authorized Borrower Representative or an
Authorized Issuer Representative.
Whenever, so long as the Borrower is not in default under the
Agreement, after a reasonable request by the Borrower, the Issuer shall fail,
refuse or neglect to give any direction to the Trustee or to require the Trustee
to take any other action which the Issuer is required to have the Trustee take
pursuant to the provisions of the Agreement or this Indenture, the Borrower
instead of the Issuer may give any such direction to the Trustee or require the
Trustee to take any such action. Upon receipt by the Trustee of a written notice
signed by the Authorized Borrower
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Representative stating that the Borrower has made reasonable request of the
Issuer, and that the Issuer has failed, refused or neglected to give any
direction to the Trustee or to require the Trustee to take any such action, the
Trustee is hereby irrevocably empowered and directed to accept such direction
from the Borrower as sufficient for all purposes of this Indenture. The Borrower
shall have the direct right to cause the Trustee to comply with any of the
Trustee's obligations under this Indenture to the same extent that the Issuer is
empowered so to do.
Certain actions or failures to act by the Issuer under this Indenture
may create or result in an event of default under this Indenture and the Issuer
hereby grants the Borrower full authority, to the extent permitted by law, for
account of the Issuer to perform or observe any covenant or obligation of the
Issuer alleged in a written notice to the Issuer and the Borrower from the
Trustee not to have been performed or observed, in the name and stead of the
Issuer with full power to do any and all things and acts to remedy any default.
ARTICLE X
THE TRUSTEE
SECTION 10.01. ACCEPTANCE OF THE TRUSTS BY TRUSTEE. The Trustee hereby
accepts the trusts imposed upon it by this Indenture, represents and covenants
that it is fully empowered under the applicable laws and regulations of the
State to accept said trusts, and agrees to perform said trusts, but only upon
and subject to the following express terms and conditions, and no implied
covenants or obligations shall be read into this Indenture against the Trustee:
(a) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, custodians, nominees,
receivers or employees and shall not be responsible for the supervision of, or
the acts of any attorneys, agents or receivers appointed by it in good faith and
without negligence, and shall be entitled to advice of Counsel concerning all
matters of trusts hereof and the duties hereunder, and may in all cases pay such
reasonable compensation to all such attorneys, agents and receivers as may
reasonably be employed in connection with the trusts hereof. The Trustee may act
upon the opinion or advice of Counsel. The Trustee shall not be responsible for
any loss or damage resulting from any action or non-action in good faith in
reliance upon such opinion or advice.
(b) Except for its certificate of authentication on the Bonds and the
other information the Trustee is required to set forth on the Bonds pursuant to
Section 2.06 hereof, the Trustee shall not be responsible for any recital herein
or in the Bonds, or the validity, priority, recording, or rerecording, filing,
or refiling of this Indenture or any financing statement, amendments to this
Indenture, or continuation statements, or for reviewing any annual reports,
financial statements or audits, or for insuring the Project or collecting any
insurance moneys, other than the Bond Insurance, or for the validity of the
execution by the Issuer of this Indenture or for any supplements hereto or
instruments of further assurance, or for the sufficiency of the security for the
Bonds issued hereunder or intended to be secured hereby, for the value or title
of the Project or as to the maintenance of the security hereof. The Trustee
shall not be bound to ascertain or inquire as to the performance or observance
of any covenants, conditions or agreements on the part of the Issuer or on the
part of the Borrower under the Agreement, except
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as hereinafter set forth, but the Trustee may require of the Issuer or the
Borrower full information and advice as to the performance of the covenants,
conditions and agreements aforesaid. Except as otherwise provided in Sections
9.02 and 9.03 hereof, the Trustee shall have no obligation to perform any of the
rights or obligations of the Issuer under the Agreement. The Trustee shall not
be liable for participating in any act directed by the Issuer or the Borrower
which might cause the Bonds of any Tax-Exempt Series to be "arbitrage bonds"
within the meaning of Section 148(a) of the Code. The Trustee shall not be
responsible or liable for the selection of any investment or for any loss
suffered in connection with any investment of funds made by it in accordance
with Article VII hereof including, without limitation, any loss suffered in
connection with the sale of any investment pursuant to Article VII hereof.
(c) The Trustee shall not be accountable for the use of any Bonds
authenticated or delivered hereunder. The Trustee may become the Owner of Bonds
and otherwise transact banking and trustee business with the Borrower with the
same rights which it would have if it were not Trustee.
(d) The Trustee shall be fully protected in acting in good faith upon
any notice, request, resolution, consent, certificate, affidavit, letter,
telegram or other paper or document, or oral communication or direction,
believed to be genuine and correct and to have been signed or sent or given by
the proper person or persons. Any action taken by the Trustee pursuant to this
Indenture upon the request or authority or consent of any person who at the time
of making such request or giving such authority or consent is the Owner of any
Bond shall be conclusive and binding upon all future owners of the same Bond and
upon Bonds issued in exchange therefor or upon transfer or in place thereof.
(e) As to the existence or non-existence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the Trustee
shall be entitled to conclusively rely upon a certificate signed on behalf of
the Issuer by an Authorized Issuer Representative as sufficient evidence of the
facts therein contained, and prior to the occurrence of a default of which the
Trustee has been notified as provided in subsection (g) of this Section, or
subsequent to the waiver, rescission or annulment of a default as provided in
Article IX hereof, shall also be at liberty to accept a similar certificate to
the effect that any particular dealing, transaction or action is necessary or
expedient, but may at its discretion secure such further evidence deemed
necessary or advisable, but shall in no case be bound to secure the same. The
Trustee may accept a certificate signed on behalf of the Issuer by an Authorized
Issuer Representative to the effect that a resolution or ordinance in the form
therein set forth has been adopted by the Issuer as conclusive evidence that
such resolution or ordinance has been duly adopted, and is in full force and
effect.
(f) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty and the Trustee shall not be liable
in the performance of its obligations hereunder except for its negligence or
willful misconduct.
(g) The Trustee shall not be required to take notice or be deemed to
have notice of any default or Event of Default hereunder, except failure by the
Issuer to cause to be made any of the payments to the Trustee required to be
made by Article IV hereof and all defaults under Section 9.01(a), (b) or (c)
hereof, unless a Responsible Officer shall be
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specifically notified in writing of such default by the Issuer, the Bond Insurer
or the Owners of at least a majority in aggregate principal amount of all Bonds
then outstanding or the Remarketing Agent.
(h) The Trustee shall not be required to give any bonds or surety in
respect of the execution of its trusts and powers hereunder.
(i) Before taking any action under Article IX hereof at the request or
direction of the Bondholders, the Trustee may require that a satisfactory
indemnity bond be furnished by the Bondholders, for the reimbursement of all
expenses to which it may be put and to protect it against all liability, except
liability which is adjudicated to have resulted from its negligence or willful
default in connection with any action so taken.
(j) All moneys received by the Trustee shall, until used or applied or
invested as herein provided, be held in trust for the purposes for which they
were received and shall not be commingled with the general funds of the Trustee
but need not be segregated from other funds except to the extent required or
permitted by law. Neither the Trustee nor any Paying Agent shall be under any
liability for interest on any moneys received hereunder except such as may be
agreed upon.
(k) The Trustee, prior to the occurrence of an Event of Default
specified in Section 9.01 of this Indenture and after the curing or waiving of
all Events of Default which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture and, in the
absence of bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture. In
case an event of default has occurred (which has not been cured or waived) the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(l) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) This subsection shall not be construed to limit the effect
of subsection (k) of this Section;
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by an officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent
facts;
(iii) The Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Owners of a majority in aggregate principal
amount of the Bonds outstanding relating to the time,
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method and place of conducting any proceeding or any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture; and
(iv) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(m) Notwithstanding anything elsewhere in this Indenture contained, the
Trustee shall have the right, but shall not be required, to demand, in respect
of the authentication of any Bonds, the withdrawal of any cash, the release of
any property, or any action whatsoever within the purview of this Indenture, any
showings, certificates, opinions, appraisals or other information, or corporate
action or evidence thereof, in addition to that by the terms hereof required as
a condition of such action by the Trustee, deemed desirable for the purpose of
establishing the right of the Issuer to the authentication of any Bonds, the
withdrawal of any cash, or as a condition to the taking of any action by the
Trustee.
(n) In the event the Trustee incurs expenses or renders services in
connection with an event of bankruptcy, reorganization or insolvency, such
expenses (including the fees and expenses of its counsel) and the compensation
for such services are intended to constitute expenses of administration under
any bankruptcy, reorganization or insolvency.
(o) To the extent that the Trustee is also acting as Paying Agent,
Registrar or Tender Agent hereunder, the rights and protections afforded to the
Trustee pursuant to this Article X shall also be afforded to such Paying Agent,
Registrar and Tender Agent.
Notwithstanding any other provision of this Indenture, in determining
whether the rights of the Bondholders will be adversely affected by any action
taken pursuant to the terms and provisions hereof, the Trustee (or Paying Agent)
shall consider the effect on the Bondholders as if there were no Bond Insurance.
SECTION 10.02. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at
all times be a Trustee hereunder which shall be a corporation organized and
doing business as a commercial bank or trust company in good standing under the
laws of the United States of America or any state or territory thereof, duly
authorized under such laws to exercise corporate trust powers, be authorized to
accept and exercise the trusts herein provided, have a combined reported capital
and surplus of at least $75,000,000, be subject to examination by Federal or
state authority and have such offices and agencies in such locations as are
required under the Act and as are required to enable it to perform the functions
herein contemplated and acceptable to the Bond Insurer. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 10.02, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
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SECTION 10.03. FEES, CHARGES AND EXPENSES OF TRUSTEE. The Trustee shall
be entitled to payment and/or reimbursement from the Borrower for reasonable
fees for its services rendered hereunder and all advances, fees of counsel and
other expenses reasonably and necessarily made or incurred by the Trustee in
connection with such services hereunder; provided, that if such expenses are
occasioned by the negligence or willful misconduct of the Trustee it shall not
be entitled to compensation or reimbursement therefor. The Trustee shall have a
first lien with right of payment prior to payment on account of principal of or
premium, if any, or interest on any Bond upon all moneys in its possession under
any provisions hereof for the foregoing advances, fees, costs and expenses
incurred; provided, however, that the Trustee shall not have a first lien with
right of payment prior to payment on account of principal of or premium, if any,
or interest on any Bond with respect to moneys in the Bond Fund held for the
payment of the principal of and premium, if any, and interest on particular
Bonds or moneys held for the payment of the purchase price of particular Bonds.
The Trustee's rights under this Section 10.03 shall survive the termination or
expiration of this Indenture.
SECTION 10.04. NOTICE TO BONDHOLDERS IF DEFAULT OCCURS. If a default
occurs of which the Trustee is by subsection (g) of Section 10.01 hereof
required to take notice or if notice of default be given as in said subsection
(g) provided, the Trustee shall within fifteen (15) days thereafter (unless such
default is cured or waived), give notice of such default to each Owner of Bonds
then Outstanding, provided that, except in the case of a default in the payment
of the principal of or premium, if any, or interest on any Bond, the Trustee may
withhold such notice to the Bondholders if and so long as a trust committee of
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interests of the Bondholders and provided further that
nothing in this Section 10.04 shall be deemed to limit the notice required by
the second to last paragraph of Section 9.05 hereof.
SECTION 10.05. INTERVENTION BY TRUSTEE. In any judicial proceeding to
which the Issuer or the Borrower is a party and which in the opinion of the
Trustee and its Counsel has a substantial bearing on the interests of Owners of
the Bonds, the Trustee may intervene on behalf of Bondholders and, subject to
the provisions of Section 10.01(i), shall do so if requested in writing by the
Owners of a majority in aggregate principal amount of all Bonds then
outstanding.
SECTION 10.06. SUCCESSOR TRUSTEE. Any corporation or association into
which the Trustee may be merged or converted, or with which it may be
consolidated, or to which it may sell, lease or transfer its corporate trust
business and assets as a whole or substantially as a whole, shall be and become
successor Trustee hereunder and shall be vested with all the trusts, powers,
rights, obligations, duties, remedies, immunities and privileges hereunder as
was its predecessor, without the execution or filing of any instrument on the
part of any of the parties hereto.
SECTION 10.07. RESIGNATION BY THE TRUSTEE. The Trustee may at any time
resign from the trusts hereby created by giving sixty (60) days written notice
by registered or certified mail to the Issuer, the Borrower, the Liquidity
Provider, if any, the Bond Insurer, the Owner of each Bond and the Remarketing
Agent, if any, and such resignation shall not take effect until the appointment
of a successor Trustee pursuant to the provisions of Section
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10.09 hereof and acceptance by the successor Trustee of the trusts created
hereby. If no successor Trustee shall have been so appointed and have accepted
appointment within forty-five (45) days of the giving of written notice by the
resigning Trustee as aforesaid, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee or any
Bondholder who has been a bona fide holder of a Bond for at least six months
may, on behalf of itself and others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and may prescribe, appoint a successor
trustee meeting the qualifications set forth in Section 10.02.
SECTION 10.08. REMOVAL OF THE TRUSTEE. (a) In case at any time either
of the following shall occur:
(1) the Trustee shall cease to be eligible in accordance with
the provisions of Section 10.02 hereof and shall fail to resign after
written request therefor by the Issuer or by any Bondholder who has
been a bona fide holder of a Bond for at least six months, or
(2) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Issuer may remove the Trustee and appoint a
successor Trustee (with the advice of the Borrower and the consent of the Bond
Insurer) by an instrument in writing, or any such Bondholder may, on behalf of
itself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee, in each case, meeting the eligibility standards set forth in Section
10.02. Such court may thereupon, after such notice if any, as it may deem proper
and may prescribe, remove the Trustee and appoint a successor Trustee.
(b) The Issuer, in its sole discretion or upon the written request of
an Authorized Borrower Representative, or the Owners of a majority in aggregate
principal amount of the Bonds at the time outstanding or the Bond Insurer, for
any failure by the Trustee to fulfill its obligations hereunder may at any time,
with or without cause, remove the Trustee and appoint a successor Trustee by an
instrument or concurrent instruments in writing signed by the Issuer (with the
advice of the Borrower and the consent of the Bond Insurer) or such Bondholders,
as the case may be.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee, pursuant to any of the provisions of this Section shall not
become effective until the acceptance of appointment by the successor Trustee as
provided in Section 10.09 and acceptance by the successor Trustee of the trusts
created hereby.
SECTION 10.09. APPOINTMENT OF SUCCESSOR TRUSTEE. In case the Trustee
hereunder shall:
(a) resign pursuant to Section 10.07 hereof;
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(b) be removed pursuant to Section 10.08 hereof; or
(c) be dissolved, taken under the control of any public officer or
officers or of a receiver appointed by a court, or otherwise become incapable of
acting hereunder,
a successor shall be appointed by the Issuer at the direction of the Borrower
and with the written consent of the Bond Insurer; provided, that if a successor
Trustee is not so appointed within ten (10) days after notice of resignation is
mailed or instrument of removal is delivered as provided under Sections 10.07
and 10.08 hereof, respectively, or within ten (10) days of the Issuer's
knowledge of any of the events specified in (c) hereinabove, then the Owners of
a majority in aggregate principal amount of Bonds then outstanding, by filing
with the Issuer, the Borrower and the Remarketing Agent, if any, an instrument
or concurrent instruments in writing signed by or on behalf of such Owners, may
designate a successor Trustee meeting the eligibility standards set forth in
Section 10.02.
SECTION 10.10. CONCERNING ANY SUCCESSOR TRUSTEES. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the Issuer and the Borrower, an instrument in writing
accepting such appointment hereunder, and thereupon such successor shall become
fully vested with all the trusts, powers, rights, obligations, duties, remedies,
immunities and privileges of its predecessor; but, nevertheless, and upon
payment of its charges (1) such predecessor shall, on the written request of the
Issuer, execute and deliver an instrument transferring to such successor Trustee
all the trusts, powers, rights, obligations, duties, remedies, immunities and
privileges of such predecessor hereunder and (2) such predecessor shall deliver
all securities and moneys held by it as Trustee hereunder to its successor and
transfer any Liquidity Facility to such successor. Should any instrument in
writing from the Issuer be required by any successor Trustee for more fully and
certainly vesting in such successor the trusts, powers, rights, obligations,
duties, remedies, immunities and privileges hereby vested in the predecessor any
and all such instruments in writing shall, on request, be executed, acknowledged
and delivered by the Issuer at the expense of the Borrower. The resignation of
any Trustee and the instrument or instruments removing any Trustee and
appointing a successor hereunder, together with all other instruments provided
for in this Article, shall be filed or recorded by the successor Trustee in each
recording office, if any, where the Indenture or a financing statement relating
thereto shall have been filed or recorded. No Trustee hereunder shall be liable
for the acts or omissions of any successor Trustee.
SECTION 10.11. TRUSTEE PROTECTED IN RELYING UPON RESOLUTION. The
resolutions, ordinances, opinions, certificates and other instruments provided
for in this Indenture may be accepted by the Trustee as conclusive evidence of
the facts and conclusions stated therein and shall be full warrant, protection
and authority to the Trustee for the release of property and the withdrawal of
cash hereunder.
SECTION 10.12. SUCCESSOR TRUSTEE AS THE TRUSTEE, PAYING AGENT, TENDER
AGENT AND REGISTRAR. In the event of a change in the office of the Trustee, the
predecessor Trustee which has resigned or been removed shall cease to be
Trustee, Tender Agent, Registrar and Paying Agent, and the successor Trustee
shall become such Trustee, Tender Agent, Registrar and Paying Agent.
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SECTION 10.13. NOTICES TO BE GIVEN BY TRUSTEE. The Trustee shall
provide the Issuer, the Borrower and the Liquidity Provider, if any, with the
following:
(A) On or before December 15 of each year during which any of the Bonds
are outstanding, commencing December 15, 1999, or upon any significant change
that occurs which would adversely impact the Trustee's ability to perform its
duties under the Indenture, a written disclosure of any such change, or if
applicable, of any conflicts that the Trustee may have as a result of other
business dealings between the Trustee and the Borrower. If there are no such
instances of a significant change, or of a conflict existing, then a statement
to that effect shall be provided on such date.
(B) If there is a failure to pay any amount of principal of, premium,
if any, or interest on the Bonds when due; or if there is a failure of the
Borrower to provide any notice, certification or report specified in Section 5.3
of the Agreement; or if there is an occurrence of an Event of Default hereunder,
of which the Trustee has knowledge, the Trustee shall provide written notice to
the Issuer within five (5) Business Days of such occurrence and such notice
shall include a statement setting forth the steps the Trustee is taking to
remedy such failure or Event of Default, as applicable.
(C) As of June 30 and December 31 of each year (beginning December 31,
1999) in which Bonds are Outstanding, a Trustee's report in the form of Exhibit
C attached hereto. This report shall be received no later than January 15 or
July 15 next following each such June 30 or December 31, as the case may be.
SECTION 10.14. NOTICES TO RATING AGENCY AND LIQUIDITY PROVIDER; NOTICES
TO BOND INSURER. (a) The Trustee shall provide any rating agency then rating the
Bonds and the Liquidity Provider with written notice upon the occurrence of: (i)
the expiration, termination, extension of or substitution for any Liquidity
Facility; (ii) the discharge of liability on any Series of the Bonds pursuant to
the terms hereof; (iii) the resignation or removal of the Trustee, Tender Agent,
or Remarketing Agent; (iv) acceptance of appointment as successor Trustee,
Tender Agent, or Remarketing Agent hereunder; (v) the redemption of all Bonds;
(vi) any conversion of the Series 1999B Bonds to a Tax-Exempt Series, or to a
Rate Period not requiring a Liquidity Facility; (vii) a material change in the
Indenture, the Agreement, or Liquidity Facility; (viii) any mandatory tender of
a Series of Bonds hereunder and (ix) when a Series of Bonds is no longer
Outstanding. The Trustee shall also notify any rating agency then rating the
Bonds of any changes to any of the documents to which the Trustee is a party,
upon its receipt of notification of any such changes.
(a) While the Bond Insurance is in effect with respect to a Series of
Bonds, the Trustee shall furnish to the Bond Insurer (to the attention of its
surveillance department, unless otherwise indicated):
(i) as soon as practicable after the filing thereof, a copy of
any financial statement of the Issuer and a copy of any audit and
annual report of the Issuer;
(ii) a copy of any notice to be given to the registered owners
of such Series of Bonds, including, without limitation, notice of any
redemption of or defeasance of such
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Series of Bonds, a copy of any notice provided to the Liquidity
Provider, and any certificate rendered pursuant to this Indenture
relating to the security for the Bonds; and
(iii) such additional information it may reasonably request.
(c) The Trustee shall notify the Bond Insurer of any failure of the
Issuer to provide relevant notices or certificates required to be provided by
the Issuer hereunder.
(d) Notwithstanding any other provision hereof, the Trustee shall
immediately notify the Bond Insurer if at any time there are insufficient moneys
to make any payments of principal and/or interest as required and immediately
upon the occurrence of any Event of Default hereunder.
(e) The Issuer will permit the Bond Insurer to discuss the finances and
accounts of the Issuer or any information the Bond Insurer may reasonably
request regarding the security for the Bonds with appropriate officers of the
Issuer. The Trustee will permit the Bond Insurer to have access to and to make
copies of all books and records relating to the Bonds at any reasonable time.
(f) The Bond Insurer shall have the right to direct an accounting at
the Issuer's expense, and the Issuer's failure to comply with such direction
within thirty (30) days after receipt of written notice to the Issuer and the
Borrower of the direction from the Bond Insurer shall be deemed a default
hereunder; provided, however, that if compliance cannot occur within such
period, then such period will be extended so long as compliance is begun within
such period and diligently pursued, but only if such extension would not
materially adversely affect the interests of any registered owner of the Bonds.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF
BONDHOLDERS (BUT REQUIRING CONSENT OF THE BORROWER). The Issuer and the Trustee
may without the consent of, or notice to, any of the Bondholders, but with the
consent of the Borrower and the Bond Insurer pursuant to Section 11.03 hereof,
enter into an indenture or indentures supplemental to this Indenture for any one
or more of the following purposes:
(i) to add to the covenants and agreements of, and limitations
and restrictions upon, the Issuer in this Indenture, other covenants,
agreements, limitations and restrictions to be observed by the Issuer
which are not contrary to or inconsistent with this Indenture as
theretofore in effect;
(ii) to grant to or confer or impose upon the Trustee for the
benefit of the Bondholders any additional rights, remedies, powers,
authority, security, liabilities or duties which may lawfully be
granted, conferred or imposed and which are not contrary to or
inconsistent with this Indenture as heretofore in effect;
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(iii) to cure any ambiguity or omission or to cure, correct or
supplement any defective provision of this Indenture in each case in
such manner as shall not adversely affect the Bondholders;
(iv) to evidence the appointment of a separate trustee or a
co-trustee or to evidence the succession of a new trustee or a new
co-trustee hereunder;
(v) to comply with the requirements of the Trust Indenture Act
of 1939, as from time to time amended;
(vi) to subject to this Indenture additional revenues,
properties or collateral;
(vii) to provide for the issuance of coupon bonds (provided,
however, that the Issuer and the Trustee have received an opinion of
Bond Counsel to the effect that the issuance of such coupon bonds
complies with all applicable laws and will not adversely affect the
Tax-Exempt status of the Bonds of a Tax-Exempt Series);
(viii) to provide for the use of an uncertificated book entry
system (provided, however, that the Issuer and the Trustee have
received an opinion of Bond Counsel to the effect that the use of an
uncertificated book entry system complies with all applicable laws and
will not adversely affect the Tax-Exempt status of the Bonds of any
Tax-Exempt Series);
(ix) to modify, alter, amend or supplement the Indenture in
any other respect, if the effective date of such supplement or
amendment is a date on which all the Bonds affected thereby are subject
to mandatory purchase or if notice by mail of the proposed amendment or
supplement is given to the Owners of the Bonds at least 30 days before
the effective date thereof, and, on or before such effective date, such
Owners have the right to require purchase of their Bonds (provided,
however, that the Issuer and the Trustee have received an opinion of
Bond Counsel to the effect that any such amendment complies with all
applicable laws and will not adversely affect the Tax-Exempt status of
the Bonds of any Tax-Exempt Series);
(x) to authorize different Authorized Denominations of the
Bonds and to make correlative amendments and modifications to this
Indenture regarding exchangeability of Bonds of different Authorized
Denominations, redemptions of portions of Bonds of particular
Authorized Denominations and similar amendments and modifications of a
technical nature;
(xi) to modify, delete or supplement any provision, term or
requirement relating to Bonds that may bear interest at Flexible Rates
to the extent deemed necessary or desirable further to protect or
assure the Tax-Exempt status of the Bonds; provided, however, that the
effective date of any such modification, deletion or supplementation
with respect to any Bond shall be no earlier than the day next
succeeding the last day of any then current Flexible Segment with
respect to such Bond;
(xii) to preserve the Tax-Exempt status of the Bonds of a
Tax-Exempt Series; or
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(xiii) to modify, alter, amend or supplement this Indenture in
any other respect which is not adverse to the Bondholders and which
does not involve a change described in clause (a), (b), (c), (d) or (e)
of Section 11.02 hereof.
SECTION 11.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS
AND THE BORROWER. Exclusive of supplemental indentures covered by Section 11.01
hereof and subject to the terms and provisions contained in this Section, and
not otherwise, the holders of not less than a majority in aggregate principal
amount of the Bonds then Outstanding (and with the consent of the Borrower
pursuant to Section 11.03 hereof) shall have the right, from time to time,
anything contained in this Indenture to the contrary notwithstanding, to consent
to and approve the execution by the Issuer and the Trustee of such other
indenture or indentures supplemental hereto for the purpose of modifying,
amending, adding to or rescinding, in any particular manner, any of the terms or
provisions contained in this Indenture; provided, however, that nothing in this
Section contained shall permit or be construed as permitting amendments of this
Indenture, without the consent of the holders of 100% of such Series of the
Bonds then Outstanding affected by such amendment, to effect (a) an extension of
the maturity date of the principal of or the interest on any Bond of such Series
issued hereunder, or (b) a reduction in the principal amount of, premium, if
any, on any Bond of such Series or the rate of interest thereon, or (c) an
adverse change in the rights of the Owners of the Bonds of such Series to the
purchase thereof pursuant to Article IV hereof, or (d) a privilege or priority
of any Bond or Bonds of such Series over any other Bond or Bonds, or (e) a
reduction in the aggregate principal amount of the Bonds of such Series the
Owners of which are required to consent to such supplemental indenture.
If at any time the Issuer shall request the Trustee to enter into any
such supplemental indenture for any of the purposes allowed by this Section, the
Trustee shall, at the request of the Issuer and upon being satisfactorily
indemnified with respect to expenses and upon receiving from the Borrower forms
of notices and any other related solicitation materials, cause notice of the
proposed execution of such supplemental indenture to be mailed in substantially
the manner provided in Section 3.02 hereof with respect to redemption of Bonds.
Such notice shall briefly set forth the nature of the proposed supplemental
indenture entitled to so consent and shall state that copies thereof are on file
at the Principal Office of the Trustee for inspection by all Bondholders. If,
within sixty (60) days or such longer period of time as shall be prescribed by
the Issuer following the mailing of such notice, the Owners of a majority or
100%, as the case may be, in aggregate principal amount of the Bonds Outstanding
at the time of the execution of any such supplemental indenture entitled to so
consent shall have consented to and approved the execution thereof as herein
provided, no Owner of any Bond shall have any right to object to any of the
terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the Issuer from executing the same or from taking any
action pursuant to the provisions thereof. The Issuer shall have the right to
extend, with the prior written consent of the Borrower, from time to time the
period within which such consent and approval may be obtained from Bondholders.
Upon the execution of any such supplemental indenture as in this Section
permitted and provided, this Indenture shall be and be deemed to be modified and
amended in accordance therewith.
SECTION 11.03. CONSENT OF BORROWER AND BOND INSURER. Anything herein to
the contrary notwithstanding, a supplemental indenture under this Article XI
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shall not become effective unless and until the Borrower and Bond Insurer shall
have consented to the execution and delivery of such supplemental indenture.
SECTION 11.04. CONSENT OF REMARKETING AGENT AND LIQUIDITY PROVIDER.
Anything herein to the contrary notwithstanding, a supplemental indenture under
this Article XI which affects any rights, duties or obligations of the
Remarketing Agent or which affects any Liquidity Facility shall not become
effective unless and until the Remarketing Agent or the Liquidity Provider, as
applicable, shall have consented to the execution and delivery of such
supplemental indenture.
SECTION 11.05. CONSENT OF TRUSTEE. The Trustee may, but shall not be
obligated to, enter into any supplemental indenture which adversely affects the
Trustee's own rights, liabilities, duties or immunities under this Indenture or
otherwise.
SECTION 11.06. REQUIRED AND PERMITTED OPINIONS OF COUNSEL. The Issuer
and the Trustee may receive and rely on an opinion of Counsel to the effect that
any supplemental indenture entered into by the Issuer and the Trustee complies
with the provisions of this Article XI and an opinion of Bond Counsel that any
such supplemental indenture does not adversely affect the Tax-Exempt status of
the Bonds of a Tax-Exempt Series. No supplemental indenture or amendment or
modification to the Agreement or the Bonds shall be effective until the Issuer
and the Trustee shall have received an opinion of Bond Counsel to the effect
that such supplemental indenture or such amendment or modification is permitted
by the Act and will not adversely affect the Tax-Exempt status of the Bonds of a
Tax-Exempt Series.
SECTION 11.07. NOTATION OF MODIFICATION ON BONDS; PREPARATION OF
MODIFIED BONDS. Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article XI may bear a
notation, in form approved by the Trustee, as to any matter provided for in such
supplemental indenture, and if such supplemental indenture shall so provide, new
Bonds, so modified as to conform, in the opinion of the Trustee and the Issuer,
to any modification of this Indenture contained in any such supplemental
indenture, may be prepared by the Issuer, authenticated by the Trustee and
delivered without cost to the holders of the Bonds then outstanding, upon
surrender for cancellation of such Bonds in equal aggregate principal amounts.
ARTICLE XII
AMENDMENT OF AGREEMENT
SECTION 12.01. AMENDMENTS TO AGREEMENT NOT REQUIRING CONSENT OF
BONDHOLDERS. The Issuer and the Borrower may, with the written consent of the
Trustee, the Bond Insurer and the Liquidity Provider, if a Liquidity Facility is
in effect, but without the consent of or notice to any of the Bondholders, enter
into any amendment, change or modification of the Agreement (a) as may be
required by the provisions of the Agreement or this Indenture or any Liquidity
Facility, (b) for the purpose of curing any ambiguity or formal defect or
omission, (c) so as to add additional rights acquired in accordance with the
provisions of the Agreement, (d) to preserve the Tax-Exempt status of the Bonds
of a Tax-Exempt Series, or any
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of them, (e) to make any modification or amendment in any other respect if the
effective date of such amendment is a date on which all the affected Bonds are
subject to mandatory purchase pursuant to Section 4.02(a) hereof or if notice by
mail of the proposed amendment or supplement is given to the Owners of the Bonds
at least 30 days before the effective date, and prior to such effective date
such Owners have the right to require purchase of their Bonds pursuant to
Section 4.01 hereof, or (f) in connection with any other change therein which is
not materially adverse to the Bondholders and which does not involve a change
described in clauses (a) or (b) of Section 12.02 hereof and which in the
reasonable judgment of the Trustee is not to the prejudice of the Trustee;
provided that any amendment or supplement to Exhibit A to the Agreement
contemplated in Section 3.1 of the Agreement shall not be deemed to be an
amendment of the Agreement for any purpose of this Article XII.
SECTION 12.02. AMENDMENTS TO AGREEMENT REQUIRING CONSENT OF
BONDHOLDERS. Unless otherwise specifically provided in this Section, the Bond
Insurer's consent shall be required in addition to required Bondholder consent,
when required, for the execution and delivery of any amendment, supplement or
change to or modification of the Agreement. Except for the amendments, changes
or modifications as provided in Section 12.01 hereof, neither the Issuer nor the
Borrower shall enter into any other amendment, change or modification of the
Agreement without mailing of notice and the written approval or consent of the
Owners of not less than a majority in aggregate principal amount of the Bonds at
the time Outstanding given and procured as provided in this Section; provided,
however, that nothing in this Section or Section 12.01 hereof shall permit or be
construed as permitting, without the consent of the holders of 100% of the Bonds
then Outstanding, (a) an extension of the time of the payment of any amounts
payable under Section 4.2(a) or Section 4.2(b) of the Agreement, or (b) a
reduction in the amount of any payment or in the total amount due under Section
4.2(a) or Section 4.2(b) of the Agreement. If at any time the Issuer and the
Borrower shall request the consent of the Trustee to any such proposed
amendment, change or modification of the Agreement, the Trustee shall, at the
request of the Issuer and upon being satisfactorily indemnified with respect to
expenses and upon receiving from the Borrower forms of notices and any other
related solicitation materials, cause notice of such proposed amendment, change
or modification to be mailed to the Owners of Bonds in the same manner as
provided by Section 3.02 hereof with respect to redemption of Bonds. Such notice
shall briefly set forth the nature of such proposed amendment, change or
modification and shall state that copies of the instrument embodying the same
are on file with the Trustee for inspection by all Bondholders. If, within sixty
(60) days, or such longer period as shall be prescribed by the Issuer, following
the mailing of such notice, the Owners of a majority or 100%, as the case may
be, in aggregate principal amount of the Bonds Outstanding at the time of the
execution of any such amendment, change or modification, as the case may be,
shall have consented to and approved the execution thereof as herein provided,
no Owner of any Bond shall have any right to object to any of the terms and
provisions contained therein, or the operation thereof, or in any manner to
question the propriety of the execution thereof, or to enjoin or restrain the
Borrower or the Issuer from executing the same or from taking any action
pursuant to the provisions thereof, or the Trustee from consenting thereto. The
Issuer shall have the right to extend from time to time the period within which
such consent and approval may be obtained from Bondholders. Upon the execution
of any such amendment, change or modification as in this Section permitted and
provided, the Agreement shall be and be deemed to be modified, changed and
amended in accordance therewith.
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SECTION 12.03. CONSENT OF TRUSTEE. The Trustee may, but shall not be
obligated to, consent to any amendment, change or modification of the Agreement
which adversely affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 12.04. RELIANCE ON OPINIONS OF COUNSEL. The Issuer and the
Trustee may receive and rely upon an opinion of Counsel to the effect that any
such proposed amendment, change or modification will comply with the provisions
of this Article XII and an opinion of Bond Counsel that any such amendment,
change or modification does not adversely affect the Tax-Exempt status of the
Bonds of a Tax-Exempt Series.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. SUCCESSORS OF THE ISSUER. All the covenants,
stipulations, promises and agreements in this Indenture contained, by or on
behalf of the Issuer, shall bind and inure to the benefit of its successors and
assigns, whether so expressed or not. If any of the powers or duties of the
Issuer shall hereafter be transferred by any law of the State, and if such
transfer shall relate to any matter or thing permitted or required to be done
under this Indenture by the Issuer, then the body or official of the Issuer who
shall succeed to such powers or duties shall act and be obligated in the place
and stead of the Issuer as in this Indenture provided.
SECTION 13.02. CONSENTS OF BONDHOLDERS. Any consent, approval,
direction or other instrument required by this Indenture to be signed and
executed by the Bondholders may be in any number of concurrent writings of
similar tenor and may be signed or executed by such Bondholders in person or by
agent appointed in writing. Proof of the execution of any such consent,
approval, direction or other instrument or of the writing appointing any such
agent, if made in the following manner, shall be sufficient for any of the
purposes of this Indenture, and shall be conclusive in favor of the Trustee with
regard to any action taken under such request or other instrument, namely:
(a) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any officer in any
jurisdiction who by law has power to take acknowledgments within such
jurisdiction that the Person signing such instrument or writing acknowledged
before him the execution thereof, or by affidavit of any witness to such
execution or in any other manner satisfactory to the Trustee; or
(b) The fact of ownership of Bonds and the amount or amounts, numbers
and other identification of such Bonds, and the date of acquiring the same shall
be proved by the registration books of the Issuer maintained by the Trustee
pursuant to Section 2.04 hereof.
Any request, demand, authorization, direction, notice, consent, waiver
or other action by any Bondholder shall bind every future holder of the same
Bond in respect of anything done or suffered to be done by the Trustee or the
Issuer in reliance thereon, whether or not notation of such action is made upon
such Bond.
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SECTION 13.03. LIMITATION OF RIGHTS. With the exception of rights
herein expressly conferred, nothing expressed or mentioned in or to be implied
from this Indenture or the Bonds is intended or shall be construed to give to
any person other than the parties hereto, the Borrower, the Liquidity Provider,
if any, the Bond Insurer, the Remarketing Agent, if any, and the Owners of the
Bonds any legal or equitable right, remedy or claim under or in respect to this
Indenture. This Indenture and all of the covenants, conditions and provisions
hereof are intended to be and being for the sole and exclusive benefit of the
parties hereto, the Owners of the Bonds, the Remarketing Agent, if any, and the
Borrower as herein provided. To the extent that this Indenture confers upon or
gives or grants to the Bond Insurer any right, remedy or claim under or by
reason of this Indenture, the Bond Insurer is hereby explicitly recognized as
being a third-party beneficiary hereunder and may enforce any such right, remedy
or claim conferred, given or granted hereunder.
SECTION 13.04. WAIVER OF NOTICE. Whenever in this Indenture the giving
of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such
case the giving or receipt of such notice shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
SECTION 13.05. SEVERABILITY. If any provision of this Indenture shall
be invalid, inoperative or unenforceable as applied in any particular case in
any jurisdiction or jurisdictions or in all jurisdictions, or in all cases
because it conflicts with any other provision or provisions hereof or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or
Sections in this Indenture contained, shall not affect the remaining portions of
this Indenture, or any part thereof.
SECTION 13.06. NOTICES. Except as otherwise provided herein, all
notices, certificates or other communications hereunder shall be sufficiently
given if in writing and shall be deemed given when mailed by registered,
certified or first class mail, postage prepaid, or by qualified overnight
courier service mutually acceptable to the delivering and recipient parties,
courier charges prepaid, addressed as follows:
If to the Issuer: Clark County Government Center
County Manager's Office
500 South Grand Central Parkway, 6th Floor
Las Vegas, NV 89155-1111
Phone: (702) 455-3234
Telecopy: (702) 455-6298
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If to the Borrower: Southwest Gas Corporation
5241 Spring Mountain Road
Las Vegas, NV 89192-8510
Phone: (702) 876-7252
Telecopy: (702) 876-7037
If to the Trustee, Harris Trust and Savings Bank
the Paying Agent or the Indenture Trust Administration
Tender Agent: 311 West Monroe, 12th Floor
Chicago, IL 60606
Phone: (312) 461-2908
Telecopy: (312) 461-3525
If to the Bond Insurer: Ambac Assurance Corporation
Utilities Group
One State Street Plaza
New York, NY 10004
Telecopy: (212) 797-5725
If to the Lehman Brothers
Remarketing Agent: 3 World Financial Center, 9th Floor
New York, NY 10285
Attention: Short-Term Municipal Desk
Telecopy: (212) 526-1386
If to any The address provided by such Liquidity Provider to
Liquidity Provider: the Issuer, the Borrower, the Trustee, the Bond
Insurer and the Remarketing Agent
Unless specifically otherwise required by the terms of this Indenture, any
notice required to be given pursuant to any provision of this Indenture may be
given by any form of electronic transmission that is capable of producing a
written record, including, without limitation, telecopy transmissions, provided
that the deliverer of any such notice given by electronic transmission shall
verify receipt of such notice promptly upon the transmission thereof and such
notice shall not be deemed duly given unless full and legible receipt thereof
has been verified by the recipient of such notice. The Issuer, the Borrower, the
Trustee, the Bond Insurer, the Liquidity Provider, if any, and the Remarketing
Agent, if any, by notice pursuant to this Section 13.06, designate any different
addresses to which subsequent notices, certificates or other communications
shall be sent. A duplicate copy of each notice, approval, consent, request,
complaint, demand or other communication given hereunder by the Issuer, the
Borrower or the Trustee to any one of the others shall also be given to each one
of the others.
SECTION 13.07. WAIVER OF PERSONAL LIABILITY OF ISSUER MEMBERS, ETC. No
member, officer, agent or employee of the Issuer, and no officer, official,
agent or employee of the State of Nevada or any department, board or agency of
the Issuer or the State of Nevada shall be individually or personally liable for
the payment of the principal of or
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premium or interest on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof; but nothing herein contained
shall relieve any such member, officer, agent or employee from the performance
of any official duty provided by law or by this Indenture.
SECTION 13.08. HOLIDAYS. If the date for making any payment or the last
date for performance of any act or the exercising of any right, as provided in
this Indenture, is not a Business Day, such payment may be made or act performed
or right exercised on the next succeeding Business Day with the same force and
effect as if done on the nominal date provided in this Indenture and no interest
shall accrue on the payment so deferred during the intervening period.
SECTION 13.09. OPINIONS OF BOND COUNSEL. For so long as Orrick,
Herrington & Sutcliffe LLP is nationally recognized bond counsel, whenever in
this Indenture it is required that prior to the taking of any action an opinion
of Bond Counsel is required to be delivered to the effect that such action will
not adversely affect the Tax-Exempt status of the Bonds of any Tax-Exempt
Series, and such opinion is not given by Orrick, Herrington & Sutcliffe LLP, the
opinion of Bond Counsel shall instead affirmatively state, in a manner
acceptable to the Issuer and the Trustee, that interest on the Bonds of any
Tax-Exempt Series is Tax-Exempt and will remain so after the action in question.
This Section shall apply in the same fashion with respect to the affirmative
opinion of any such successor Bond Counsel.
SECTION 13.10. COUNTERPARTS. This Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 13.11. APPLICABLE LAW. This Indenture shall be governed
exclusively by and construed in accordance with the applicable laws of the State
of Nevada.
SECTION 13.12. CAPTIONS. The captions or headings in this Indenture are
for convenience only and in no way define, limit, or describe the scope or
intent of any provisions or sections of this Indenture.
SECTION 13.13. DEALING IN BONDS. The Trustee, or the Remarketing Agent,
in its individual capacity, may in good faith buy, sell, own, hold and deal in
any of the Bonds, and may join in any action which any Bondholder may be
entitled to take with like effect as if it did not act in any capacity
hereunder. The Trustee or the Remarketing Agent, in its individual capacity,
either as principal or agent, may also engage in or be interested in any
financial or other transaction with the Issuer or the Borrower, and may act as
depositary, trustee or agent for any committee or body of Bondholders secured
hereby or other obligations of the Issuer as freely as if it did not act in any
capacity hereunder.
SECTION 13.14. IMMUNITY OF INCORPORATORS. No recourse under or upon any
obligations, covenants or agreements contained in the Agreement, this Indenture
or the Bonds, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, stockholder, director, officer or
employee, as such, whether past, present, or future, of the Borrower or the
Issuer or of any successor Person, either directly or through the
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Borrower or the Issuer, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that any such liability and any and all such claims
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of the Agreement.
SECTION 13.15. BORROWER MAY ACT THROUGH AGENTS. In connection with any
and all actions permitted or required to be taken by the Borrower in connection
with the provisions hereof, including without limitation those set forth in
Section 2.03 hereof, the Borrower may by written instrument filed with the
Trustee appoint one or more agents (which may be the Remarketing Agent) to take
such actions on its behalf, which appointment may be revoked at any time by the
Borrower by written instrument filed with the Trustee.
SECTION 13.16. RECORD DATE FOR DETERMINATION OF OWNERS ENTITLED TO
VOTE. The Borrower may set a record date for the purpose of determining the
Owners entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Owners. If not set by the Borrower prior to
their first solicitation of an Owner made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the thirtieth (30th) day prior to such
first solicitation or vote, as the case may be. With regard to any record date,
only the Owners on such date (or their duly appointed proxies) shall be entitled
to give or take, or vote on the relevant action.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture of Trust to be signed by authorized officers, all as of the date first
above written.
CLARK COUNTY, NEVADA
By /s/ Bruce L. Woodbury
------------------------------------
Chair, Board of County Commissioners
(SEAL)
Attest:
/s/ Shirley B Parraguirre
- ------------------------------------------
County Clerk
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By /s/ J. Bartolini
------------------------------------
Authorized Officer
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EXHIBIT A1
[FORM OF SERIES 1999A BOND]
No. A-1 CUSIP: ________
AS PROVIDED IN THE INDENTURE REFERRED TO HEREIN, UNTIL THE TERMINATION OF THE
SYSTEM OF BOOK-ENTRY-ONLY TRANSFERS THROUGH THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION (TOGETHER WITH ANY SUCCESSOR SECURITIES DEPOSITORY APPOINTED
PURSUANT TO THE INDENTURE, "DTC"), AND NOTWITHSTANDING ANY OTHER PROVISION OF
THE INDENTURE TO THE CONTRARY, (A) THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT
NOT IN PART, ONLY TO A NOMINEE OF DTC, OR BY DTC OR A NOMINEE OF DTC TO ANY
SUCCESSOR SECURITIES DEPOSITORY OR ANY NOMINEE THEREOF AND (B) A PORTION OF THE
PRINCIPAL AMOUNT OF THIS BOND MAY BE PAID OR REDEEMED WITHOUT SURRENDER HEREOF
TO THE PAYING AGENT. DTC OR A NOMINEE, TRANSFEREE OR ASSIGNEE OF DTC AS OWNER OF
THIS BOND MAY NOT RELY UPON THE PRINCIPAL AMOUNT INDICATED HEREON AS THE
PRINCIPAL AMOUNT HEREOF OUTSTANDING AND UNPAID. THE PRINCIPAL AMOUNT HEREOF
OUTSTANDING AND UNPAID SHALL FOR ALL PURPOSES BE THE AMOUNT DETERMINED IN THE
MANNER PROVIDED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNITED STATES OF AMERICA
STATE OF NEVADA
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BOND
(SOUTHWEST GAS CORPORATION PROJECT) SERIES 1999A
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEVADA OR
CLARK COUNTY, NEVADA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE
PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR ANY INTEREST ON THIS BOND.
Maturity Date: ____________, ________
Registered Owner: Cede & Co.
Initial Principal Amount: _____________ DOLLARS
Dated Date: ____________, _______
Interest Rate: [TERM RATE OF _________ %]
CLARK COUNTY, NEVADA (the "Issuer"), a public instrumentality and
political subdivision of the State of Nevada, for value received, hereby
promises to pay (but only out of the source hereinafter provided) to the
Registered Owner identified above, or registered assigns as hereinafter
provided, on the Maturity Date identified above, the Principal Amount identified
above, and to pay (but only out of the source hereinafter provided) interest on
the balance of said Principal Amount from time to time remaining unpaid until
payment of said
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Principal Amount has been made or duly provided for, at the rates and on the
dates determined as described herein and in the Indenture as hereinafter
defined, and to pay (but only out of the source hereinafter provided) interest
on overdue principal at the rate borne by this Bond on the date on which such
principal became due and payable, except as the provisions set forth in the
Indenture with respect to redemption or acceleration prior to maturity may
become applicable hereto, the principal of and premium, if any, and interest on
this Bond being payable in lawful money of the United States of America at the
Principal Office of Harris Trust and Savings Bank, an Illinois banking
corporation, as Paying Agent (the "Paying Agent"); provided, however, payment of
interest on any Interest Payment Date shall be made to the registered owner
hereof as of the close of business on the Record Date with respect to such
Interest Payment Date and shall be (i) paid by check or draft of the Paying
Agent mailed to such registered owner hereof at his address as it appears on the
registration books of the Issuer maintained by Harris Trust and Savings Bank, an
Illinois banking corporation, as Trustee (the "Trustee") or at such other
address as is furnished in writing by such registered owner to the Trustee not
later than the close of business on the Record Date or (ii) transmitted by wire
transfer to the account with a member of the Federal Reserve System located
within the continental United States of America of any owner which owns at least
$1,000,000 in aggregate principal amount of the Bonds and which shall have
provided wire transfer instructions to the Trustee prior to the close of
business on such Record Date. Notwithstanding the foregoing provisions, for so
long as this Bond is restricted to being registered on the registration books of
the Issuer kept by the Trustee in the name of a Securities Depository, the
provisions of the Indenture governing Book-Entry Bonds shall govern the manner
of the payment of the principal and purchase price (if applicable) of and
premium, if any, and interest on this Bond.
This Bond is one of an authorized issue of bonds limited in the initial
aggregate principal amount of $35,000,000 (the "Bonds") issued pursuant to a
resolution duly adopted by the governing body of the Issuer on March 2, 1999,
and the applicable provisions of the County Economic Development Revenue Bond
Law, Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes,
as amended and supplemented to the date hereof (the "Act"), and issued under an
Indenture of Trust, dated as of October 1, 1999 (the "Indenture"), between the
Issuer and the Trustee, for the purpose of financing or refinancing a portion of
the cost of the acquisition, construction and installation of a "project" within
the meaning of the Act consisting of the upgrade, improvement, addition and
replacement of facilities in Clark County, Nevada for the local furnishing of
natural gas (the "Project"). Proceeds from the sale of the Bonds are to be
loaned by the Issuer to Southwest Gas Corporation, a California corporation (the
"Borrower"), under the terms of a Financing Agreement, dated as of October 1,
1999 (the "Agreement"). The Bonds are all issued under and secured by and
entitled to the benefits of the Indenture, including the security of a pledge
and assignment of certain revenues and receipts derived by the Issuer pursuant
to the Agreement, and all receipts of the Trustee credited under the provisions
of the Indenture against such payments, including amounts realized by the
Trustee from repayments by the Borrower under the Agreement and from any other
moneys held by the Trustee under the Indenture for such purpose, and there shall
be no other recourse against the Issuer or any property now or hereafter owned
by it. Payments of principal of, and interest on the Bonds are guaranteed by
Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company.
This Bond may be transferred or exchanged by the registered owner
hereof in person or by his attorney duly authorized in writing at the Principal
Office of the Trustee but
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only in the manner, subject to the limitations and upon payment of the charges
provided in the Indenture, and upon surrender and cancellation of this Bond.
Upon such transfer or exchange a new registered Bond or Bonds, of authorized
denomination or denominations, for the same aggregate principal amount will be
issued to the transferee in exchange herefor.
IN NO EVENT SHALL THE INTEREST RATE ON ANY BOND EXCEED THE LESSER OF
15% PER ANNUM OR THE MAXIMUM RATE PER ANNUM THEN PERMITTED BY APPLICABLE LAW.
Interest on this Bond shall be payable on each Interest Payment Date
for the period commencing on the next preceding Interest Payment Date (or if no
interest has been paid hereon, commencing on the Dated Date) and ending on the
day next preceding such Interest Payment Date; provided, however, that if, as
shown by the records of the Trustee, interest on the Bonds shall be in default,
Bonds shall bear interest from the last date to which interest has been paid in
full or duly provided for on the Bonds, or if no interest has been paid or duly
provided for on the Bonds, from the Dated Date. Interest shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
The term "Interest Payment Date" means April 1 and October 1 of each
year, commencing April 1, 2000. The term "Record Date" means the fifteenth day
of the calendar month next preceding such Interest Payment Date.
The Bonds shall be deliverable in the form of registered Bonds without
coupons in the denominations of $5,000 and any integral multiple thereof.
THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY REDEMPTION AS PROVIDED
IN THE INDENTURE.
This Bond is issued pursuant to and in full compliance with the
Constitution and laws of the State of Nevada, particularly the Act, and pursuant
to further proceedings adopted by the governing authority of the Issuer, which
proceedings authorize the execution and delivery of the Indenture. This Bond and
the series of which it forms a part are limited obligations of the Issuer
payable solely from the amounts derived under the Agreement and pledged under
the Indenture, including all amounts payable from time to time by the Borrower
in respect of the indebtedness under the Agreement and all receipts of the
Trustee credited under the provisions of the Indenture against said amounts
payable. No owner of any Bond issued under the Act has the right to compel any
exercise of the taxing power of the Issuer to pay the Bonds, or the interest or
premium, if any, thereon. The Project is not security for the Bonds.
No recourse shall be had for the payment of the principal of and
premium, if any, or interest on any of the Bonds or for any claim based thereon
or upon any obligation, covenant or agreement in the Indenture contained,
against any past, present or future member, director, officer, employee or agent
of the Issuer or the Borrower, or through the Issuer or the Borrower, or any
successor to the Issuer or the Borrower, under any rule of law or equity,
statute or constitution or by the enforcement of any assessment or penalty or
otherwise, and all such liability of any such member, director, officer,
employee or agent as such is hereby expressly
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waived and released as a condition of and in consideration for the execution of
the Indenture, the Agreement and the issuance of any of the Bonds.
The owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any event of default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. If an Event of Default occurs and
is continuing, the principal of all Bonds then outstanding issued under the
Indenture and accrued interest thereon to the date of declaration may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture.
The Issuer, the Trustee, the Paying Agent, the Tender Agent, the
Registrar and any other agent of the Issuer or the Trustee may treat the person
in whose name this Bond is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Bond be overdue, and neither the Issuer, the Trustee, the Paying Agent, the
Tender Agent, the Registrar, nor any such agent shall be affected by notice to
the contrary.
The Indenture prescribes the manner in which it may be discharged and
after which the Bonds shall no longer be secured by or entitled to the benefits
of the Indenture, except for the purposes of payment, registration, transfer or
exchange of Bonds, including a provision that under certain circumstances the
Bonds shall be deemed to be paid if there shall have been deposited with the
Trustee certain government obligations, as provided in the Indenture, maturing
as to principal and interest in such amounts and at such times as to insure the
availability of sufficient moneys to pay the principal of and premium, if any,
and interest on the Bonds and all necessary and proper fees, compensation and
expenses of the Trustee.
Modifications or alterations of the Indenture, or any supplements
thereto, and the Agreement may be made only to the extent and in the
circumstances permitted by the Indenture.
Terms which are used herein as defined terms and which are not
otherwise defined shall have the meanings assigned to them in the Indenture.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all of the
conditions, things and acts required to exist, to have happened and to have been
performed precedent to and in the issuance of this Bond do exist, have happened
and have been performed in due time, form and manner as required by the Law (as
hereinafter defined) and by the Constitution and statutes of the State of Nevada
and that the amount of this Bond, together with all other indebtedness of the
Issuer, does not exceed any limit prescribed by the Constitution or statutes of
the State of Nevada.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture unless and until the
certificate of authentication hereon shall have been duly executed by the
Trustee.
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IN WITNESS WHEREOF, CLARK COUNTY, NEVADA has caused this Bond to be
executed in its name by the manual or duly authorized facsimile signatures of
its Chair of the Board of County Commissioners and its Treasurer and attested by
the manual or duly authorized facsimile signature of its County Clerk.
CLARK COUNTY, NEVADA
By
------------------------------------
Chair, Board of County Commissioners
By
------------------------------------
Treasurer
Attest:
- ------------------------------------
County Clerk
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<PAGE> 102
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds referred to in the within-mentioned
Indenture of Trust.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity,
but solely as Trustee
By:
----------------------------------------
Authorized Signatory
Date of Authentication:
----------------------------
[BOND INSURANCE LEGEND TO BE ADDED]
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[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on the face
of this Bond, shall be construed as though they were written out in full
according to applicable laws or regulations:
UNIF GIFT MIN ACT--
TEN COM -- as tenants in common __________________ Custodian __________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as ______________________________________
tenants in common (State)
Additional abbreviations may also be used though
not in the above list.
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
================================================================================
(Name and Address of Assignee)
- --------------------------------------------------------------------------------
Social Security or Other Taxpayer Identification Number of Assignee
the within Bond of Clark County, Nevada and does hereby irrevocably constitute
and appoint ______________________________ to transfer the said Bond on the
books kept for registration thereof with full power of substitution in the
premises.
Dated:____________________
___________________________________
Signature Guaranteed:
_________________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
[END OF FORM OF BOND]
A1-7
<PAGE> 104
[At such time as the Bonds are no longer held in Book-Entry form, the references
herein to the book-entry system may be deleted.]
EXHIBIT A2
[FORM OF TAXABLE SERIES 1999B BOND]
No. TB-______ CUSIP: __________
By its acceptance of this Bond, each purchaser of this Bond will be
deemed to have represented and agreed as follows: (1) the purchaser understands
that the Bonds are being issued only in transactions not involving any public
offering within the meaning of the Securities Act; (2) the purchaser is (A) a
sophisticated institutional investor who (i) is an "Accredited Investor" as that
term is defined in Rule 501(a) of Regulation D under the Securities Act (or is a
fiduciary or agent (other than a U.S. bank or savings and loan association) that
is purchasing the Bonds for the account of an Accredited Investor), (ii) has
such knowledge and experience (or is a fiduciary or agent with sole investment
discretion having such knowledge and experience) in financial and business
matters that it (or such fiduciary or agent) is capable of evaluating the merits
and risks of investing in such Bond, (iii) has had access to such information as
the purchaser deems necessary in order to make an informed investment decision,
and (iv) is purchasing the Bond for investment and not with a view to
distribution; or (B) in the case of sale of Bonds pursuant to Rule 144A under
the Securities Act, a "Qualified Institutional Buyer" as defined in Rule 144A
(or is a Qualified Institutional Buyer purchasing the Bonds on behalf of one or
more other Qualified Institutional Buyers); (3) if in the future the purchaser
(or any such other investor or any other fiduciary or agent representing such
investor) decides to sell such Bond prior to the maturity date, any redemption
date, or the date fixed for mandatory purchase, it will be sold only in a
transaction exempt from registration under, or not subject to, the Securities
Act and only to (i) the Remarketing Agent (as defined in the hereinafter
referred to Indenture) or through the Remarketing Agent to an institutional
investor approved by the Remarketing Agent as an institutional Accredited
Investor or a Qualified Institutional Buyer, or (ii) a Qualified Institutional
Buyer in a transaction made pursuant to Rule 144A under the Securities Act; (4)
the purchaser understands that, although the Remarketing Agent may repurchase
Bonds, the Remarketing Agent is not obligated to do so, and accordingly the
purchaser (or any such other investor) should be prepared to hold such Bond
until the maturity date or any earlier redemption date or date of mandatory
purchase thereof; (5) the purchaser acknowledges that the Bond sold to the
purchaser by the Remarketing Agent may be sold to it pursuant to Rule 144A; and
(6) the purchaser acknowledges that the Trustee or the Borrower may request
reasonable documentation from the purchaser (including opinions and
certificates) to ensure compliance with the terms of this legend in connection
with a transfer.
AS PROVIDED IN THE INDENTURE REFERRED TO HEREIN, UNTIL THE TERMINATION OF THE
SYSTEM OF BOOK-ENTRY-ONLY TRANSFERS THROUGH THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION (TOGETHER WITH ANY SUCCESSOR SECURITIES DEPOSITORY APPOINTED
PURSUANT TO THE INDENTURE, "DTC"), AND NOTWITHSTANDING ANY OTHER PROVISION OF
THE INDENTURE TO THE CONTRARY, (A) THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT
NOT IN PART, ONLY TO A NOMINEE OF DTC, OR BY DTC OR A NOMINEE OF DTC TO ANY
SUCCESSOR SECURITIES DEPOSITORY OR ANY NOMINEE THEREOF AND (B) A PORTION OF THE
PRINCIPAL AMOUNT OF THIS BOND MAY BE PAID OR REDEEMED WITHOUT SURRENDER HEREOF
TO THE PAYING AGENT. DTC OR A NOMINEE, TRANSFEREE OR ASSIGNEE OF DTC AS OWNER OF
THIS BOND MAY NOT RELY UPON THE PRINCIPAL AMOUNT INDICATED HEREON AS THE
PRINCIPAL AMOUNT HEREOF OUTSTANDING AND UNPAID. THE PRINCIPAL AMOUNT HEREOF
OUTSTANDING AND UNPAID SHALL FOR ALL PURPOSES BE THE AMOUNT DETERMINED IN THE
MANNER PROVIDED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A2-1
<PAGE> 105
UNITED STATES OF AMERICA
STATE OF NEVADA
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BOND
(SOUTHWEST GAS CORPORATION PROJECT) TAXABLE SERIES 1999B
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEVADA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM, IF ANY, OR ANY INTEREST ON THIS BOND.
Maturity Date: ____________, _______
Registered Owner: Cede & Co.
Initial Principal Amount: [____________] DOLLARS
Dated Date: ____________, _______
Initial Interest Rate: [TAXABLE WEEKLY RATE]
CLARK COUNTY, NEVADA (the "Issuer"), a political subdivision of the
State of Nevada, for value received, hereby promises to pay (but only out of the
source hereinafter provided) to the Registered Owner identified above, or
registered assigns as hereinafter provided, on the Maturity Date identified
above, the Principal Amount identified above, and to pay (but only out of the
source hereinafter provided) interest on the balance of said Principal Amount
from time to time remaining unpaid until payment of said Principal Amount has
been made or duly provided for, at the rates and on the dates determined as
described herein and in the Indenture as hereinafter defined, and to pay (but
only out of the source hereinafter provided) interest on overdue principal at
the rate borne by this Bond on the date on which such principal became due and
payable, except as the provisions set forth in the Indenture with respect to
redemption or acceleration prior to maturity may become applicable hereto, the
principal of and premium, if any, and interest on this Bond being payable in
lawful money of the United States of America at the Principal Office of Harris
Trust and Savings Bank an Illinois banking corporation, as Paying Agent (the
"Paying Agent"); provided, however, payment of interest on any Interest Payment
Date shall be made to the registered owner hereof as of the close of business on
the Record Date with respect to such Interest Payment Date and shall be (i) paid
by check or draft of the Paying Agent mailed to such registered owner hereof at
his address as it appears on the registration books of the Issuer maintained by
Harris Trust and Savings Bank an Illinois banking corporation, as Trustee (the
"Trustee") or at such other address as is furnished in writing by such
registered owner to the Trustee not later than the close of business on the
Record Date or (ii) transmitted by wire transfer to the account with a member of
the Federal Reserve System located within the continental United States of
America of any owner which owns at least $1,000,000 in aggregate principal
amount of the Bonds and which shall have provided wire transfer instructions to
the Trustee prior to the close of business on such Record Date, but, in the case
of interest payable on the first Interest Payment Date with respect to a Taxable
Flexible Rate
A2-2
<PAGE> 106
Segment, only upon presentation of such Bond (if such Bond is not a Book-Entry
Bond) at the Principal Office of the Trustee for exchange or transfer as
provided in the Indenture. Notwithstanding the foregoing provisions, for so long
as this Bond is restricted to being registered on the registration books of the
Issuer kept by the Trustee in the name of a Securities Depository, the
provisions of the Indenture governing Book-Entry Bonds shall govern the manner
of the payment of the principal and purchase price (if applicable) of and
premium, if any, and interest on this Bond.
This Bond is one of an authorized issue and series of bonds limited in
aggregate principal amount to $35,000,000 (the "Bonds") issued pursuant to a
resolution duly adopted by the governing body of the Issuer on March 2, 1999,
and the applicable provisions of the County Economic Development Revenue Bond
Law, Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes
(the "Act"), and issued under an Indenture of Trust, dated as of October 1, 1999
(the "Indenture"), between the Issuer and the Trustee, for the purpose of
financing or refinancing a portion of the cost of the acquisition, construction
and installation of a "project" within the meaning of the Act consisting of the
upgrade, improvement, addition and replacement of facilities in Clark County,
Nevada, for the purpose of local furnishing of natural gas (the "Project").
Proceeds from the sale of the Bonds are to be loaned by the Issuer to Southwest
Gas Corporation, a California corporation (the "Borrower"), under the terms of a
Financing Agreement, dated as of October 1, 1999 (the "Agreement"). The Bonds
are all issued under and secured by and entitled to the benefits of the
Indenture, including the security of a pledge and assignment of certain revenues
and receipts derived by the Issuer pursuant to the Agreement, and all receipts
of the Trustee credited under the provisions of the Indenture against such
payments, including amounts realized by the Trustee from repayments by the
Borrower under the Agreement and from any other moneys held by the Trustee under
the Indenture for such purpose, and there shall be no other recourse against the
Issuer or any property now or hereafter owned by it. Payments of principal of
and interest on the Bonds are guaranteed by Ambac Assurance Corporation. While
the Bonds are subject to tender for purchase, payments of the purchase price of
Bonds tendered for purchase and not remarketed are initially supported by a
Standby Bond Purchase Agreement (together with any replacement facility, the
"Liquidity Facility") between the Borrower and Bank One, NA (together with any
successor or the provider of any replacement Liquidity Facility, the "Liquidity
Provider"), pursuant to the terms of which the Trustee or Tender Agent, as
applicable, may draw for such payments hereunder. Notwithstanding any other
provision hereof or of the Indenture, if this Bond is acquired by the Liquidity
Provider pursuant to the provisions of the Liquidity Facility, such Bond will
bear interest and be subject to redemption as provided in the Liquidity
Facility.
The Bonds initially have been issued as taxable weekly variable rate
bonds (defined in the Indenture as Taxable Weekly Bonds), the interest on which
is includable in gross income for federal income tax purposes, but all or any
portion of the Bonds may be converted to bonds, the interest on which is
excludable from gross income for federal income tax purposes as provided in the
Indenture.
This Bond may be transferred or exchanged by the registered owner
hereof in person or by his attorney duly authorized in writing at the Principal
Office of the Trustee but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer or exchange a
A2-3
<PAGE> 107
new registered Bond or Bonds, of authorized denomination or denominations, for
the same aggregate principal amount and in the same series will be issued to the
transferee in exchange herefor.
IN THE MANNER PROVIDED AND SUBJECT TO THE PROVISIONS OF THE INDENTURE,
THE TERM OF THE BONDS WILL BE DIVIDED INTO CONSECUTIVE RATE PERIODS DURING EACH
OF WHICH THE BONDS SHALL BEAR INTEREST AT TAXABLE WEEKLY RATES OR AT TAXABLE
FLEXIBLE RATES OR AT TAXABLE TERM RATES, EACH OF WHICH SHALL BE DETERMINED IN
THE MANNER PROVIDED IN THE INDENTURE, UNTIL CONVERSION OF ALL OR ANY PORTION OF
THE BONDS AS AFORESAID. IN NO EVENT SHALL THE INTEREST RATE ON ANY BOND EXCEED
THE LESSER OF 15% PER ANNUM OR THE MAXIMUM INTEREST RATE PERMITTED BY LAW. THE
DETERMINATION OF THE TAXABLE WEEKLY RATE, THE TAXABLE FLEXIBLE RATE FOR ANY
TAXABLE RATE SEGMENT AND THE TAXABLE TERM RATE SHALL BE BINDING ON THE
REMARKETING AGENT, THE TRUSTEE, THE ISSUER, THE BORROWER AND THE OWNER OF THIS
BOND, Absent manifest error.
Interest on this Bond shall be payable on each Interest Payment Date
for the period commencing on the next preceding Interest Payment Date and ending
on the day next preceding such Interest Payment Date; provided, however, that
if, as shown by the records of the Trustee, interest on the Bonds shall be in
default, Bonds shall bear interest from the last date to which interest has been
paid in full or duly provided for on the Bonds, or if no interest has been paid
or duly provided for on the Bonds, from the Dated Date. Interest in the case of
any Taxable Weekly Rate Period or any Taxable Flexible Rate Period shall be
computed on the basis of a 365 or 366-day year, as applicable, for the number of
days actually elapsed, and in the case of a Taxable Term Rate shall be computed
on the basis of a year consisting of twelve 30-day months.
The terms used herein but not otherwise defined, including "Interest
Payment Date," "Record Date," "Tax-Exempt Conversion Date," "Taxable Flexible
Rate Segment," and "Taxable Term Rate Period," have the meanings assigned to
such terms in the Indenture.
The Bonds shall be deliverable in the form of registered Bonds without
coupons in the denominations authorized by the Indenture.
THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY TENDER AND PURCHASE AS
PROVIDED IN THE INDENTURE.
THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY REDEMPTION, IN SOME
INSTANCES AT PAR, AS PROVIDED IN THE INDENTURE.
This Bond and all other Bonds of the series of which it forms a part
are issued pursuant to and in full compliance with the Constitution and laws of
the State of Nevada, particularly the Act, and pursuant to further proceedings
adopted by the governing authority of the Issuer, which proceedings authorize
the execution and delivery of the Indenture. This Bond and the series of which
it forms a part are limited obligations of the Issuer payable solely from the
amounts derived under the Agreement and pledged under the Indenture, including
all
A2-4
<PAGE> 108
amounts payable from time to time by the Borrower in respect of the indebtedness
under the Agreement and all receipts of the Trustee credited under the
provisions of the Indenture against said amounts payable. No owner of any Bond
issued under the Act has the right to compel any exercise of the taxing power of
the Issuer to pay the Bonds, or the interest or premium, if any, thereon. The
Project is not security for the Bonds.
No recourse shall be had for the payment of the principal of and
premium, if any, or interest on any of the Bonds or for any claim based thereon
or upon any obligation, covenant or agreement in the Indenture contained,
against any past, present or future member, director, officer, employee or agent
of the Issuer or the Borrower, or through the Issuer or the Borrower, or any
successor to the Issuer or the Borrower, under any rule of law or equity,
statute or constitution or by the enforcement of any assessment or penalty or
otherwise, and all such liability of any such member, director, officer,
employee or agent as such is hereby expressly waived and released as a condition
of and in consideration for the execution of the Indenture, the Agreement and
the issuance of any of the Bonds.
The Owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any event of default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. If an Event of Default occurs and
is continuing, the principal of all Bonds then outstanding issued under the
Indenture and accrued interest thereon to the date of declaration may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture.
The Issuer, the Trustee, the Remarketing Agent, the Tender Agent, the
Paying Agent and any other agent of the Issuer or the Trustee may treat the
person in whose name this Bond is registered as the Owner hereof for the purpose
of receiving payment as herein provided and for all other purposes, whether or
not this Bond be overdue, and neither the Issuer, the Trustee, the Remarketing
Agent, the Paying Agent nor any such agent shall be affected by notice to the
contrary.
This Bond is subject to, and is executed in accordance with, all of the
terms, conditions and provisions of the Indenture.
The Indenture prescribes the manner in which it may be discharged and
after which the Bonds shall no longer be secured by or entitled to the benefits
of the Indenture, except for the purposes of payment, registration, transfer or
exchange of Bonds, including a provision that under certain circumstances the
Bonds shall be deemed to be paid if there shall have been deposited with the
Trustee certain government obligations, as provided in the Indenture, maturing
as to principal and interest in such amounts and at such times as to insure the
availability of sufficient moneys to pay the principal of and premium, if any,
and interest on the Bonds and all necessary and proper fees, compensation and
expenses of the Trustee.
Modifications or alterations of the Indenture, or of any supplements
thereto, may be made only to the extent and in the circumstances permitted by
the Indenture.
A2-5
<PAGE> 109
Terms which are used herein as defined terms and which are not
otherwise defined shall have the meanings assigned to them in the Indenture.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all of the
conditions, things and acts required to exist, to have happened and to have been
performed precedent to and in the issuance of this Bond do exist, have happened
and have been performed in due time, form and manner as required by the Law (as
hereinafter defined) and by the Constitution and statutes of the State of Nevada
and that the amount of this Bond, together with all other indebtedness of the
Issuer, does not exceed any limit prescribed by the Constitution or statutes of
the State of Nevada.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture unless and until the
certificate of authentication hereon shall have been duly executed by the
Trustee.
[Remainder of page intentionally blank.]
A2-6
<PAGE> 110
IN WITNESS WHEREOF, CLARK COUNTY, NEVADA has caused this Bond to be
executed in its name by the manual or duly authorized facsimile signatures of
its Chair of the Board of County Commissioners and its Treasurer and attested by
the manual or duly authorized facsimile signature of its County Clerk.
CLARK COUNTY, NEVADA
By
------------------------------------
Chair, Board of County Commissioners
By
------------------------------------
Treasurer
Attest:
- -------------------------------
County Clerk
A2-7
<PAGE> 111
FOR CONVERSIONS ONLY
<TABLE>
<CAPTION>
Principal Amount of Authorized
Conversion Principal Amount Tax-Exempt Bonds Signatory of
Date of Converted Bonds After Conversion Trustee
---------- ------------------ ---------------- ------------
<S> <C> <C> <C>
__________________ __________________ __________________ _________________
__________________ __________________ __________________ _________________
__________________ __________________ __________________ _________________
__________________ __________________ __________________ _________________
</TABLE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds referred to in the within-mentioned
Indenture of Trust.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity,
but solely as Trustee
By:____________________________
Authorized Signatory
Date of Authentication:______________________________
[BOND INSURANCE LEGEND TO BE ADDED]
A2-8
<PAGE> 112
[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on the face
of this Bond, shall be construed as though they were written out in full
according to applicable laws or regulations:
UNIF GIFT MIN ACT--
TEN COM -- as tenants in common ___________________ Custodian _________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as _______________________________________
tenants in common (State)
Additional abbreviations may also be used though
not in the above list.
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
================================================================================
(Name and Address of Assignee)
- --------------------------------------------------------------------------------
Social Security or Other Taxpayer Identification Number of Assignee
the within Bond of Clark County, Nevada and does hereby irrevocably constitute
and appoint ___________________________ to transfer the said Bond on the books
kept for registration thereof with full power of substitution in the premises.
Dated:__________________________
___________________________________
Signature Guaranteed:
___________________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
[END OF FORM OF BOND]
A2-9
<PAGE> 113
EXHIBIT B
[FORM OF TAX-EXEMPT SERIES BOND]
AS PROVIDED IN THE INDENTURE REFERRED TO HEREIN, UNTIL THE TERMINATION OF THE
SYSTEM OF BOOK-ENTRY-ONLY TRANSFERS THROUGH THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION (TOGETHER WITH ANY SUCCESSOR SECURITIES DEPOSITORY APPOINTED
PURSUANT TO THE INDENTURE, "DTC"), AND NOTWITHSTANDING ANY OTHER PROVISION OF
THE INDENTURE TO THE CONTRARY, (A) THIS BOND MAY BE TRANSFERRED, IN WHOLE BUT
NOT IN PART, ONLY TO A NOMINEE OF DTC, OR BY DTC OR A NOMINEE OF DTC TO ANY
SUCCESSOR SECURITIES DEPOSITORY OR ANY NOMINEE THEREOF AND (B) A PORTION OF THE
PRINCIPAL AMOUNT OF THIS BOND MAY BE PAID OR REDEEMED WITHOUT SURRENDER HEREOF
TO THE PAYING AGENT. DTC OR A NOMINEE, TRANSFEREE OR ASSIGNEE OF DTC AS OWNER OF
THIS BOND MAY NOT RELY UPON THE PRINCIPAL AMOUNT INDICATED HEREON AS THE
PRINCIPAL AMOUNT HEREOF OUTSTANDING AND UNPAID. THE PRINCIPAL AMOUNT HEREOF
OUTSTANDING AND UNPAID SHALL FOR ALL PURPOSES BE THE AMOUNT DETERMINED IN THE
MANNER PROVIDED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNITED STATES OF AMERICA
STATE OF NEVADA
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BOND
(SOUTHWEST GAS CORPORATION PROJECT) TAX-EXEMPT SERIES 1999 ___
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEVADA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM, IF ANY, OR ANY INTEREST ON THIS BOND.
Registered Registered
No. __-__ $
For Flexible Rate Periods Only
<TABLE>
<CAPTION>
Mandatory
Purchase and Amount of
Number of Interest Interest Due for
Interest Days in Flexible Payment Flexible
Rate Segment Date Segment
-------- ---------------- ------------- ----------------
<S> <C> <C> <C>
__________________ __________________ __________________ _________________
_________________% __________________ __________________ ________________%
</TABLE>
B-1
<PAGE> 114
Maturity Date: _______________ CUSIP: _________
Dated Date: _______________, ___________
Registered Owner: Cede & Co.
Initial Principal Amount: _______________ DOLLARS
[Initial Interest Rate: ________________________]
CLARK COUNTY, NEVADA (the "Issuer"), a public instrumentality and
political subdivision of the State of Nevada, for value received, hereby
promises to pay (but only out of the source hereinafter provided) to the
Registered Owner identified above, or registered assigns as hereinafter
provided, on the Maturity Date identified above, the Principal Amount identified
above, and to pay (but only out of the source hereinafter provided) interest on
the balance of said Principal Amount from time to time remaining unpaid until
payment of said Principal Amount has been made or duly provided for, at the
rates and on the dates determined as described herein and in the Indenture as
hereinafter defined, and to pay (but only out of the source hereinafter
provided) interest on overdue principal at the rate borne by this Bond on the
date on which such principal became due and payable, except as the provisions
set forth in the Indenture with respect to redemption or acceleration prior to
maturity may become applicable hereto, the principal of and premium, if any, and
interest on this Bond being payable in lawful money of the United States of
America at the Principal Office of Harris Trust and Savings Bank, an Illinois
banking corporation, as Paying Agent (the "Paying Agent"); provided, however,
payment of interest on any Interest Payment Date shall be made to the registered
owner hereof as of the close of business on the Record Date with respect to such
Interest Payment Date and shall be (i) paid by check or draft of the Paying
Agent mailed to such registered owner hereof at his address as it appears on the
registration books of the Issuer maintained by Harris Trust and Savings Bank, an
Illinois banking corporation, as Trustee (the "Trustee") or at such other
address as is furnished in writing by such registered owner to the Trustee not
later than the close of business on the Record Date or (ii) transmitted by wire
transfer to the account with a member of the Federal Reserve System located
within the continental United States of America of any owner which owns at least
$1,000,000 in aggregate principal amount of the Bonds and which shall have
provided wire transfer instructions to the Trustee prior to the close of
business on such Record Date, but, in the case of interest payable in respect of
a Flexible Segment, only upon presentation of such Bond (if such Bond is not a
Book-Entry Bond) at the Principal Office of the Trustee for exchange or transfer
as provided in the Indenture. Notwithstanding the foregoing provisions, for so
long as this Bond is restricted to being registered on the registration books of
the Issuer kept by the Trustee in the name of a Securities Depository, the
provisions of the Indenture governing Book-Entry Bonds shall govern the manner
of the payment of the principal and purchase price (if applicable) of and
premium, if any, and interest on this Bond.
This Bond is one of an authorized issue of bonds limited in the initial
aggregate principal amount of $35,000,000 (the "Bonds") issued pursuant to a
resolution duly adopted by the governing body of the Issuer on March 2, 1999,
and the applicable provisions of the County
B-2
<PAGE> 115
Economic Development Revenue Bond Law, Sections 244A.669 to 244A.763, inclusive,
of the Nevada Revised Statutes, as amended and supplemented to the date hereof
(the "Act"), and issued under an Indenture of Trust, dated as of October 1, 1999
(the "Indenture"), between the Issuer and the Trustee, for the purpose of
financing or refinancing a portion of the cost of the acquisition, construction
and installation of a "project" within the meaning of the Act consisting of the
upgrade, improvement, addition and replacement of facilities in Clark County,
Nevada for the local furnishing of natural gas (the "Project"). Proceeds from
the sale of the Bonds are to be loaned by the Issuer to Southwest Gas
Corporation, a California corporation (the "Borrower"), under the terms of a
Financing Agreement, dated as of October 1, 1999 (the "Agreement"). The Bonds
are all issued under and secured by and entitled to the benefits of the
Indenture, including the security of a pledge and assignment of certain revenues
and receipts derived by the Issuer pursuant to the Agreement, and all receipts
of the Trustee credited under the provisions of the Indenture against such
payments, including amounts realized by the Trustee from repayments by the
Borrower under the Agreement and from any other moneys held by the Trustee under
the Indenture for such purpose, and there shall be no other recourse against the
Issuer or any property now or hereafter owned by it. Payments of principal of
and interest on the Bonds are guaranteed by Ambac Assurance Corporation. [While
the Bonds are subject to tender for purchase, payments of the purchase price of
Bonds tendered for purchase and not remarketed are initially supported by a
Standby Bond Purchaser Agreement (together with any replacement facility, the
"Liquidity Facility") between the Borrower and ___________________ (together
with any successor or the provider of any replacement Liquidity Facility, the
"Liquidity Provider"), pursuant to the terms of which the Trustee or Tender
Agent, as applicable, may draw for such payments hereunder. Notwithstanding any
other provision hereof or of the Indenture, if this Bond is acquired by the
Liquidity Provider pursuant to the provisions of the Liquidity Facility, such
Bond will bear interest and be subject to redemption as provided in the
Liquidity Facility.]
This Bond may be transferred or exchanged by the registered owner
hereof in person or by his attorney duly authorized in writing at the Principal
Office of the Trustee but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer or exchange a new registered Bond
or Bonds, of authorized denomination or denominations, for the same aggregate
principal amount will be issued to the transferee in exchange herefor.
IN THE MANNER PROVIDED AND SUBJECT TO THE PROVISIONS OF THE INDENTURE,
THE TERM OF THE BONDS WILL BE DIVIDED INTO CONSECUTIVE RATE PERIODS DURING EACH
OF WHICH THE BONDS SHALL BEAR INTEREST AT EITHER A DAILY RATE, A WEEKLY RATE, A
TERM RATE OR FLEXIBLE RATES FOR ANY FLEXIBLE RATE SEGMENT, EACH OF WHICH SHALL
BE DETERMINED IN THE MANNER PROVIDED IN THE INDENTURE. IN NO EVENT SHALL THE
INTEREST RATE ON ANY BOND EXCEED THE LESSER OF 15% PER ANNUM OR THE MAXIMUM RATE
PER ANNUM THEN PERMITTED BY APPLICABLE LAW. THE FIRST RATE PERIOD SHALL BE
SELECTED BY THE BORROWER IN ACCORDANCE WITH THE INDENTURE AND THE AGREEMENT ON
OR BEFORE THE DATE OF ISSUANCE OF THE BONDS.
B-3
<PAGE> 116
Interest on this Bond shall be payable on each Interest Payment Date
for the period commencing on the next preceding Interest Payment Date (or if no
interest has been paid hereon, commencing on the Dated Date) and ending on the
day next preceding such Interest Payment Date; provided, however, that if, as
shown by the records of the Trustee, interest on the Bonds shall be in default,
Bonds shall bear interest from the last date to which interest has been paid in
full or duly provided for on the Bonds, or if no interest has been paid or duly
provided for on the Bonds, from the Dated Date. Interest shall be computed (1)
in the case of a Term Rate Period, on the basis of a 360-day year consisting of
twelve 30-day months, and (2) in the case of any other Rate Period, on the basis
of a 365 or 366-day year, as appropriate, and the actual number of days elapsed.
The terms used herein and not otherwise defined, including "Interest
Payment Date" and "Record Date," have the meanings assigned to such terms in the
Indenture.
The Bonds shall be deliverable in the form of registered Bonds without
coupons in the denominations authorized by the Indenture.
THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY TENDER AND PURCHASE AS
PROVIDED IN THE INDENTURE.
THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY REDEMPTION AS PROVIDED
IN THE INDENTURE.
This Bond and all other Bonds of the series of which it forms a part
are issued pursuant to and in full compliance with the Constitution and laws of
the State of Nevada, particularly the Act, and pursuant to further proceedings
adopted by the governing authority of the Issuer, which proceedings authorize
the execution and delivery of the Indenture. This Bond and the series of which
it forms a part are limited obligations of the Issuer payable solely from the
amounts derived under the Agreement and pledged under the Indenture, including
all amounts payable from time to time by the Borrower in respect of the
indebtedness under the Agreement and all receipts of the Trustee credited under
the provisions of the Indenture against said amounts payable. No owner of any
Bond issued under the Act has the right to compel any exercise of the taxing
power of the Issuer to pay the Bonds, or the interest or premium, if any,
thereon. The Project is not security for the Bonds.
No recourse shall be had for the payment of the principal of and
premium, if any, or interest on any of the Bonds or for any claim based thereon
or upon any obligation, covenant or agreement in the Indenture contained,
against any past, present or future member, director, officer, employee or agent
of the Issuer or the Borrower, or through the Issuer or the Borrower, or any
successor to the Issuer or the Borrower, under any rule of law or equity,
statute or constitution or by the enforcement of any assessment or penalty or
otherwise, and all such liability of any such member, director, officer,
employee or agent as such is hereby expressly waived and released as a condition
of and in consideration for the execution of the Indenture, the Agreement and
the issuance of any of the Bonds.
The owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect
B-4
<PAGE> 117
to any event of default under the Indenture, or to institute, appear in or
defend any suit or other proceedings with respect thereto, except as provided in
the Indenture. If an Event of Default occurs and is continuing, the principal of
all Bonds then outstanding issued under the Indenture and accrued interest
thereon to the date of declaration may be declared due and payable upon the
conditions and in the manner and with the effect provided in the Indenture.
The Issuer, the Trustee, the Paying Agent, the Tender Agent, the
Registrar, the Remarketing Agent and any other agent of the Issuer or the
Trustee may treat the person in whose name this Bond is registered as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Bond be overdue, and neither the Issuer, the
Trustee, the Paying Agent, the Tender Agent, the Registrar, the Remarketing
Agent nor any such agent shall be affected by notice to the contrary.
The Indenture prescribes the manner in which it may be discharged and
after which the Bonds shall no longer be secured by or entitled to the benefits
of the Indenture, except for the purposes of payment, registration, transfer or
exchange of Bonds, including a provision that under certain circumstances the
Bonds shall be deemed to be paid if there shall have been deposited with the
Trustee certain government obligations, as provided in the Indenture, maturing
as to principal and interest in such amounts and at such times as to insure the
availability of sufficient moneys to pay the principal of and premium, if any,
and interest on the Bonds and all necessary and proper fees, compensation and
expenses of the Trustee.
Modifications or alterations of the Indenture, or any supplements
thereto, and the Agreement may be made only to the extent and in the
circumstances permitted by the Indenture.
Terms which are used herein as defined terms and which are not
otherwise defined shall have the meanings assigned to them in the Indenture.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all of the
conditions, things and acts required to exist, to have happened and to have been
performed precedent to and in the issuance of this Bond do exist, have happened
and have been performed in due time, form and manner as required by the Law (as
hereinafter defined) and by the Constitution and statutes of the State of Nevada
and that the amount of this Bond, together with all other indebtedness of the
Issuer, does not exceed any limit prescribed by the Constitution or statutes of
the State of Nevada.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture unless and until the
certificate of authentication hereon shall have been duly executed by the
Trustee.
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<PAGE> 118
IN WITNESS WHEREOF, CLARK COUNTY, NEVADA has caused this Bond to be
executed in its name by the manual or duly authorized facsimile signatures of
its Chair of the Board of County Commissioners and its Treasurer and attested by
the manual or duly authorized facsimile signature of its County Clerk.
CLARK COUNTY, NEVADA
By_______________________________________
Chair, Board of County Commissioners
By_______________________________________
Treasurer
Attest:
___________________________________
County Clerk
B-6
<PAGE> 119
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds referred to in the within-mentioned
Indenture of Trust.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity,
but solely, as Trustee
By_________________________________________
Authorized Officer
Date of Authentication: ____________________
[BOND INSURANCE LEGEND TO BE ADDED]
B-7
<PAGE> 120
[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on
the face of this Bond, shall be construed as though they were written out in
full according to applicable laws or regulations:
UNIF GIFT MIN ACT--
TEN COM -- as tenants in common ___________________ Custodian __________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as ______________________________________
tenants in common (State)
Additional abbreviations may also be used though
not in the above list.
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
================================================================================
(Name and Address of Assignee)
- --------------------------------------------------------------------------------
Social Security or Other Taxpayer Identification Number of Assignee
the within Bond of Clark County, Nevada and does hereby irrevocably constitute
and appoint ________________________ to transfer the said Bond on the books kept
for registration thereof with full power of substitution in the premises.
Dated: ________________________
_____________________________________
Signature Guaranteed:
________________________
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
[END OF FORM OF BOND]
B-8
<PAGE> 121
EXHIBIT C
TRUSTEE CERTIFICATE
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Principal Bonds outstanding
1. Name of Bond Issue Amount Issued 6/30/__ or 12/31/__
------------------ ------------- --------------------
Clark County, Nevada
Industrial Development
Revenue Bonds (Southwest
Gas Corporation Project)
Series 1999A and Taxable
Series 1999B
2. During the past six months, did the Borrower make all required payments to
the Trustee at the proper time and in the manner required by the Indenture?
Yes ____ No ____
If no, please explain on a separate page.
3. If the Borrower failed to make required payments, please attach copies of any
correspondence between the Trustee and the Borrower discussing the failure
and any steps to correct such failure.
4. Has the Trustee received a copy of the latest annual financial statements of
the Borrower as required by the Financing Agreement?
Yes ____ No ____
If no, please explain what steps have been taken to secure them.
5. Has the Trustee received a certificate of an officer of the Borrower, signed
within 120 days of the close of the fiscal year, stating whether there exists
any default under the terms of the Indenture, and if a default exists, what
steps will be taken to correct the default?
Yes ____ No ____
If no, please explain what steps have been taken to secure it.
6. If a credit enhancement supports this bond issue, will such credit
enhancement continue in full force during the next 12 months?
Yes ____ No ____ Not Applicable
If no, please explain on a separate page.
7. Has the Trustee received a copy of any rebate calculations prepared by or on
behalf of the borrower company? Yes ____ No ____
C-1
<PAGE> 122
If no, and the Trustee has any actual knowledge of why it did not receive
such calculations, please explain on a separate page.
By: _____________________________ Date __________________________
Authorized Signature
Title: __________________________ Phone No._____________________
C-2
<PAGE> 123
EXHIBIT D
[FORM OF COST OF ISSUANCE FUND REQUISITION]
REQUISITION FOR MONEY FROM THE COSTS OF ISSUANCE FUND
[Series A Account][Series B Account]
To: Harris Trust and Savings Bank
Re: Clark County, Nevada
Industrial Development Revenue Bonds
Southwest Gas Corporation Project
[Series 1999A][Taxable Series 1999B]
(the "1999 Bonds")
Requisition No. ________
The undersigned, on behalf of Southwest Gas Corporation (the
"Borrower"), hereby requests payment, from the Account of the Costs of Issuance
Fund identified above (the "Account"), the total amount shown below to the order
of the payee or payees named below, as payment or reimbursement for costs
incurred or expenditures made in connection with the issuance of the 1999 Bonds.
The payee(s), the purpose and the amount of the disbursement requested are as
follows:
Payee Purpose Amount
----- ------- ------
[name and address]
Total $
D-1
<PAGE> 124
The undersigned hereby certifies as follows:
Each obligation mentioned herein is described in Section 3.3 of the
Financing Agreement relating to the Project, has been properly incurred and is a
proper charge against the Account, and each item for which payment is requested
is or was necessary in connection with the issuance of the 1999 Bonds. None of
the items for which payment is requested has been reimbursed previously from the
Account, and none of the payments herein requested will result in a breach of
the representations and agreements in Section 2.2 of the Financing Agreement
relating to the Project.
Dated: _________________.
SOUTHWEST GAS CORPORATION
By:___________________________________
Authorized Borrower Representative
D-2
<PAGE> 1
EXHIBIT 10.12
SOUTHWEST GAS CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Effective October 7, 1980
Amended March 1, 1986
Amended December 7, 1987
Amended and Restated Effective January 1, 1989
Amended January 1, 1990
Amended and Restated Effective March 5, 1991
Amended and Restated Effective March 2, 1993
Amended and Restated Effective May 10, 1994
Amended and Restated Effective March 1, 1999
<PAGE> 2
SOUTHWEST GAS CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
PURPOSE
The principal objective of this Supplemental Retirement Plan (Plan) is to ensure
that a competitive level of retirement income is paid in order to attract,
retain, and motivate officers of the Company. The Plan is designed to provide a
benefit which, when added to an officer's other retirement income, will meet
that objective. All elected officers of the Company are Participants in the
Plan, subject to meeting the eligibility requirements for retirement under the
Plan.
The Plan is also designed to eliminate reductions in benefits under the Basic
Plan for those employees who have participated in the Company's Executive
Deferral Plan and do not qualify for the full scope of benefits under the Plan.
The original Plan was effective on October 7, 1980, and as restated or amended,
is effective with respect to each Participant starting on the effective date of
election to officer status or selection for Executive Deferral Plan
participation by the Board of Directors of Southwest Gas Corporation.
I. DEFINITIONS AND CONSTRUCTION OF TERMS
1.1 For purposes of the Plan, the following words and phrases will have the
meanings stated below unless a different meaning is clearly required by
the context. In the event there is a conflict in the meaning of any
defined terms used in this Plan because of the reference to the Basic
Plan, the definition contained in the Basic Plan shall prevail.
"AFFILIATE" means any corporation, partnership, or other organization
which, during any period of a Participant's employment, was at least 50
percent controlled by the Company or an affiliate of the Company.
"AVERAGE EARNINGS" means the 12-month average of the highest
consecutive 36-months of Earnings with the Company and its successors
and assigns.
"BASIC PLAN" means the defined benefit plans of the Company and/or
PriMerit Bank, its former Affiliate, in effect prior to a Change in
Control, whether maintained by the Company, PriMerit Bank or their
successor or assigns.
"BASIC PLAN BENEFITS" means the amount of benefit payable from the
Basic Plan to a Participant, including benefits payable from any
employer funded defined benefit plans of any of the Company's
successors or assigns, as if the form of a straight life annuity was
selected by the Participant.
1
<PAGE> 3
"BOARD OF DIRECTORS" means the Board of Directors of the Company and
its successors and assigns.
"CHANGE IN CONTROL" means the first to occur of any of the following
events:
(a) Any "person" (as the term is used in Sections 13 and 14(d)(2)
of the Securities Exchange Act of 1934 ("Exchange Act")) who
becomes a beneficial owner (as that term is used in Section
13(d) of the Exchange Act), directly or indirectly, of 50% or
more of the Company's capital stock entitled to vote in the
election of directors; or
(b) During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan,
individuals who, at the beginning of such period constitute
the board of directors of the Company, and any new director
(other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction
described in clause (a) of this definition) whose election by
the board of directors or nomination for election by the
Company's shareholders was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office,
who either were directors at the beginning of the period or
whose election or nomination for election was previously
approved, cease for any reason to constitute at least a
majority thereof.
"COMMITTEE" means the Compensation Committee of the Board of Directors,
to which the Board of Directors has given the authority to administer
this Plan. After a Change in Control, the Committee shall cease to have
any powers under the Plan and all powers previously vested in the
Committee under the Plan will then be vested in the Third Party
Fiduciary.
"COMPANY" means Southwest Gas Corporation and such of its Affiliates as
the Board of Directors may select to become parties to the Plan.
"CONTINUOUS SERVICE" means a Participant's Benefit Service with the
Company and its successors or assigns, as defined in the Basic Plan.
"EARNINGS" means the yearly compensation paid to a Participant,
including salary deferrals, but excluding bonuses, commissions,
overtime, special income (as defined in the Company's Executive
Deferral Plan) and nonmonetary awards for employment services to the
Company and its successors and assigns.
"ELIGIBLE SPOUSE" means the surviving spouse of a Participant as
defined in the Basic Plan.
2
<PAGE> 4
"PARTICIPANT" means an employee of the Company who is or was an
officer, including a Senior Officer, of the Company and any participant
in the Company's Executive Deferral Plan prior to a Change in Control.
"PLAN" means the Company's Supplemental Retirement Plan.
"RETIREMENT" means the termination of a Participant's employment with
the Company under the provisions of Sections II and VI. Continued
employment with a successor or assign of the Company will not qualify
as Retirement, unless otherwise agreed by the Participant and such
successors or assigns.
"SENIOR OFFICER" means an officer of the Company with the title "Senior
Vice President" or above.
"THIRD PARTY FIDUCIARY" means an independent third party (a corporate
entity with no other relationship with the Company) selected by the
Company, or its successors or assigns, to take over the administration
of the Plan upon and after a Change in Control and to determine appeals
of claims denied under the Plan before and after a Change in Control
pursuant to a Third Party Fiduciary Services Agreement.
"THIRD PARTY FIDUCIARY SERVICES AGREEMENT" means the agreement with the
Third Party Fiduciary to perform services with respect to the Plan.
"TRUST AGREEMENT" means an agreement establishing a "grantor trust" of
which the Company, or its successors or assigns, is the grantor, within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A
of the Internal Revenue Code of 1986, as amended (the "Code").
"TRUST FUND OR FUNDS" means the assets of every kind and description
held under any Trust Agreement forming a part of the Plan.
"TRUSTEE" means any person or entity selected by the Company, or its
successors or assigns, to act as trustee under any Trust Agreement at
any time of reference.
II. ELIGIBILITY FOR PARTICIPATION AND BENEFITS
2.1 An individual shall become a Participant in the Plan as of the
effective date of his election by the Board of Directors as an officer
of the Company (unless the Board of Directors determines, at that time,
that such officer will not become eligible to participate in the Plan)
or the effective date of his selection to participate in the Company's
Executive Deferral Plan.
2.2 A Participant with 20 or more years of Continuous Service is eligible
to retire and receive benefits under the Plan after attaining age 55.
3
<PAGE> 5
2.3 A Senior Officer with 10 or more years of Continuous Service is
eligible to retire and receive a benefit under this Plan after
attaining age 65.
2.4 A Participant who is vested under the Basic Plan, but who fails to
satisfy the requirements of Sections 2.2 or 2.3 of this Section, is
eligible to receive benefits only under the provisions of Section 3.3
of the Plan.
2.5 Anything herein to the contrary notwithstanding, if a Participant who
is receiving, or may be entitled to receive, a benefit hereunder
engages in competition with the Company (without the Committee's prior
authorization in writing), or is discharged for cause, or performs acts
of willful malfeasance or gross negligence in a matter of material
importance to the Company, payments thereafter payable hereunder to
such Participant or such Participant's Eligible Spouse will, at the
Board of Directors' discretion, be forfeited and the Company will have
no further obligation to such Participant or Eligible Spouse. This
Section 2.5 shall not apply after a Change in Control.
III. AMOUNT AND FORM OF RETIREMENT BENEFIT
3.1 The annual retirement benefit payable will be 50 percent (60 percent
for Senior Officers) of the Participant's Average Earnings, less any
Basic Plan Benefits.
3.2 If a Participant qualifies for benefits under Section 2.2 of the Plan
and retires before age 60, the benefits he receives under the
provisions of Section 3.1 of this Section will be reduced in the same
manner as the benefits under the Basic Plan are adjusted for early
retirement.
3.3 The annual retirement benefit payable to a Participant who only
satisfies the provisions of Section 2.4 of the Plan will be the benefit
payable under the Basic Plan as if Compensation, as defined in the
Basic Plan, includes compensation deferred under the Company's
Executive Deferral Plan or other non-qualified deferral plan offered by
any successors or assigns (but not any incentive or bonus award or
special income (as defined in the Company's Executive Deferral Plan))
and without regard to any statutory limitation on the compensation that
can be considered under the Basic Plan, less any Basic Plan Benefits.
3.4 The benefits determined under this Plan will be payable in the form of
a straight life annuity except as Section V otherwise provides.
IV. PAYMENT OF RETIREMENT BENEFITS
4.1 One-twelfth of the annual benefit determined in accordance with Section
III will be payable beginning on the first day of the month following
the date the Participant is eligible to retire and has retired.
Benefits will continue to be paid on
4
<PAGE> 6
the first day of each succeeding month. The last benefit payment will
be paid on the first day of the month in which the retired Participant
dies unless otherwise provided in accordance with Section V of the
Plan.
V. DEATH BENEFITS PAYABLE
5.1 If a Participant should die before retirement and after becoming
eligible for retirement as provided for in Sections 2.2 and 2.3 of the
Plan, the Eligible Spouse will receive a benefit equal to 50 percent of
the amount of the Participant's benefit under the Plan, determined in
accordance with Section III as if the Participant had retired and begun
receiving a benefit in accordance with Section IV of the Plan on the
first of the month before the date of his death.
5.2 If a Participant should die after retirement benefits under Section 3.1
of the Plan have begun, the Participant's Eligible Spouse will receive
a benefit equal to 50 percent of the benefit the Participant was
receiving under the Plan.
5.3 If a Participant should die before becoming eligible for retirement as
provided for in Sections 2.2 and 2.3 of the Plan, any benefits
available to the Eligible Spouse under the Basic Plan will be
determined using Compensation as defined in Section 3.3 of the Plan.
5.4 If a disabled Participant should die while receiving benefits in
accordance with Section VI of the Plan, such Participant's Eligible
Spouse will receive a benefit equal to 50 percent of the benefit the
Participant was receiving under the Plan.
5.5 If an Eligible Spouse is under age 50 and is more than 5 years younger
than the Participant, the Eligible Spouse's benefit described in this
Section, except as provided for in Section 5.3 of this Section, will be
reduced by 2 percent for each year over 5 by which such Eligible Spouse
is younger than the Participant.
5.6 Eligible Spouse's benefits described herein will commence on the first
day of the month following the Participant's death and continue on the
first of each succeeding month, ending on the first day of the month in
which the Eligible Spouse dies. No benefits under this Plan will be
payable thereafter.
5.7 If, on the date of his death, a Participant has no Eligible Spouse, no
further benefits are payable under this Plan.
VI. DISABILITY BENEFITS PAYABLE
6.1 Notwithstanding the provisions of Sections 2.2 or 2.3 of the Plan, if
the Committee determines that a Participant has become totally disabled
before
5
<PAGE> 7
attaining age 65, the Participant shall be entitled to retire and
receive a benefit under this Plan.
6.2 The annual disability benefit will be 50 percent (60 percent for Senior
Officers) of the Participant's Average Earnings, less any benefits
payable under the Company's salary continuation and long-term
disability plans or like plans offered by any of its successors and
assigns, and any Basic Plan Benefits.
6.3 Disability benefits will be payable on the same basis as retirement
benefits under Section IV of the Plan. The last payment will occur on
the first of the month during which the disabled Participant either
recovers, as determined solely by the Committee, or dies.
6.4 If a disabled Participant dies, a benefit will be paid to the Eligible
Spouse as provided in Section 5.4 of the Plan.
6.5 The Committee may require, no more frequently than once in any calendar
year, that a disabled Participant submit medical evidence of disability
satisfactory to the Committee. The Committee may discontinue a
disability benefit after considering such evidence or lack thereof.
6.6 If a Participant is determined to no longer be disabled, the period of
time he was disabled will be added to his Continuous Service for the
purposes of determining further eligibility for benefits under the
Plan.
VII. GENERAL
7.1 Amounts payable to a Participant or his Eligible Spouse shall be paid
from the general assets of the Company, the general assets of its
successors or assigns, or from the assets of a grantor trust within the
meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of
the Code, established for use in funding executive compensation
arrangements and commonly known as a "Rabbi Trust."
7.2 The Company, or its successors or assigns, shall have no obligation
under the Plan to a Participant or his Eligible Spouse, except as
provided in this Plan.
7.3 The Participant or his Eligible Spouse shall cooperate with the
Committee in furnishing all information requested by the Company, or
its successors or assigns, to facilitate the payment of his benefit.
7.4 Participants and their Eligible Spouses, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company, or its successors or
assigns. No assets of the Company, or that of its successors or
assigns, shall be held under any trust, or held in any way as
collateral security for the fulfilling its obligations under the Plan.
Any and all assets of the Company, or that of its successors or
assigns, shall be, and
6
<PAGE> 8
remain, the general unpledged, unrestricted assets of such entities.
The obligations of the Company, or its successors or assigns, under the
Plan shall be merely that of an unfunded and unsecured promise of the
Company, or its successors or assigns, to pay money in the future, and
the rights of the Participants shall be no greater than those of
unsecured general creditors. It is the intention of the Company, or its
successors or assigns, that this Plan (and the Trust Funds described in
Section VII) be unfunded for purposes of the Code and for the purposes
of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
7.5 There shall be deducted from each payment made under the Plan or other
compensation payable to the Participant or his Eligible Spouse all
taxes which are required to be withheld by the Company, or its
successors or assigns, in respect to such payment or this Plan. The
Company, or its successors or assigns, shall have the right to reduce
any payment (or other compensation) by the amount of cash sufficient to
provide the payment amount of said taxes.
7.6 Nothing contained herein will confer on any Participant the right to be
retained in the service of the Company, or its successors or assigns,
nor will it interfere with the rights of such entities to discharge or
otherwise deal with Participants without regard to the Plan's
existence.
VIII. TRUSTS
8.1 The Company, or its successors or assigns, may maintain one or more
Trust Funds to finance all or a portion of the benefits under the Plan
by entering into one or more Trust Agreement(s). Any Trust Agreement is
designated as, and shall constitute, a part of the Plan, and all rights
which may accrue to any person under the Plan shall be subject to all
the terms and provisions of such Trust Agreement. A Trustee shall be
appointed by the Committee or the Board of Directors and shall have
such powers as provided in the Trust Agreement. The Committee or the
Board of Directors may modify any Trust Agreement, in accordance with
its terms, to accomplish the purposes of the Plan and appoint a
successor Trustee under the provisions of such Trust Agreement. By
entering into such Trust Agreement, the Committee or the Board of
Directors may vest in the Trustee, or in one or more investment
managers (as defined in ERISA), the power to manage and control the
Trust Fund. The Committee's authority under the provisions of this
Section 8.1 will cease with a Change in Control.
IX. TERMINATION, SUSPENSION OR AMENDMENT
9.1 The Board of Directors may, at its sole discretion, amend or modify the
Plan or by resolution reduce the eligibility requirements or increase
the benefits for an individual Participant at any time or from time to
time, in whole or in part.
7
<PAGE> 9
However: (i) no amendment or modification of the Plan will affect or
reduce (a) the rights and benefits available to Participants under
terms of the Plan as in effect at the time of their selection and
during their participation in the Plan, (b) their Eligible Spouses'
rights to receive death benefits in accordance with this Plan, (c) the
continued accrual of benefits under the Plan on terms at least as
favorable as the terms of the Plan applicable to each Participant in
effect immediately prior to a Change in Control, taking into account
service and compensation earned after such an event, or (d) a retired
Participant's right or the right of an Eligible Spouse to continue to
receive a benefit in accordance with this Plan (as in effect on the
date such Participant began to receive a benefit under this Plan); and
(ii) effective March 1, 1999, no amendment or modification of this
Section IX, Section XI, or Section XII of the Plan shall be effective.
9.2 The Board shall not terminate the Plan until all benefits have been
paid in full under the provisions of the Plan.
X. RESTRICTIONS ON ALIENATION OF BENEFITS
10.1 To the maximum extent permitted by law, no interest or benefit under
the Plan shall be assignable or subject in any manner to alienation,
sale, transfer, claims of creditors, pledge, attachment, or
encumbrances of any kind.
XI. ADMINISTRATION OF THE PLAN
11.1 Except as otherwise provided in this Section XI, and subject to Section
XII, the general administration of the Plan, as well as construction
and interpretation thereof, shall be vested in the Committee.
Specifically, the Committee shall have the discretion and authority to:
(a) make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of the Plan; and (b) decide or
resolve any and all questions including interpretations of the Plan.
Any individual serving on the Committee who is a Participant shall not
vote or act on any matter relating solely to himself or herself. The
number of members of the Committee shall be established by, and the
members shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors. Members of the Committee may be
Participants under the Plan.
11.2 Upon and after a Change in Control, the administration of the Plan
shall be vested in a Third Party Fiduciary, as provided for herein and
pursuant to the terms of a Third Party Fiduciary Services Agreement.
Any Third Party Fiduciary Services Agreement is designated as, and
shall constitute, a part of the Plan. The Third Party Fiduciary shall
also have the discretion and authority to: (a) make, amend, interpret,
and enforce all appropriate rules and regulations for the
administration of the Plan; and (b) decide or resolve any and all
questions including interpretation of the Plan and the Trust Agreement.
Except as
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otherwise provided for in any Trust Agreement, the Third Party
Fiduciary shall have no power to direct the investment of Plan or Trust
Funds or select any investment manager or custodial firm for the Plan
or Trust Agreement. The Company, or its successors or assigns, shall
pay all reasonable administrative expenses and fees of the Third Party
Fiduciary when it acts as the administrator of the Plan or pursuant to
Section XII. The Third Party Fiduciary may not be terminated by the
Company, or its successors or assigns, without the consent of 50% of
the Participants in the Plan.
11.3 In the administration of the Plan, the Committee or the Third Party
Fiduciary, as the case may be, may from time to time employ such
agents, consultants, advisors, and managers as it deems necessary or
useful in carrying out its duties as it sees fit (including acting
through a duly authorized representative) and may from to time to time
consult with counsel to the Company, or counsel of any of its
successors or assigns.
11.4 The decision or action of the Committee or the Third Party Fiduciary,
as the case may be, with respect to any question arising out of or in
connection with the administration, interpretation, and application of
the Plan (and the Trust Agreement to the extent provided for in Section
11.2) and the rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons having any interest
in the Plan.
11.5 The Company, or its successors or assigns, shall indemnify and save
harmless each member of the Committee, the Third Party Fiduciary, and
any employee of the Company, or its successors or assigns, to whom the
duties of the Committee may be delegated against any and all claims,
losses, damages, expenses, and liabilities arising from any action or
failure to act with respect to the Plan, except in the case of fraud,
gross negligence, or willful misconduct by the Committee, any of its
members, the Third Party Fiduciary, or any such employee.
11.6 To enable the Committee and the Third Party Fiduciary to perform their
functions, the Company, or its successors or assigns, shall supply full
and timely information to the Committee and the Third Party Fiduciary,
as the case may be, on all matters relating to the compensation of all
Participants, their Retirement, death or other cause for termination of
service, and such other pertinent facts as the Committee or the Third
Party Fiduciary may require.
XII. BENEFIT CLAIMS PROCEDURE
12.1 Any Participant or Eligible Spouse (such being referred to below as a
"Claimant") may deliver to the Committee a written claim for
determination with respect to benefits available to such Claimant from
the Plan. The claim must state with particularity the determination
desired by the Claimant.
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12.2 The Committee shall consider a claim and notify the Claimant within 90
calendar days after receipt of a claim in writing:
(a) That the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) That the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant: (i) the specific reason(s) for the
denial of the claim, or any part thereof; (ii) the specific
reference(s) to pertinent provisions of the Plan upon which
the denial was based; (iii) a description of any additional
material or information necessary for the Claimant to perfect
the claim, and an explanation of why such material or
information is necessary; and (iv) an explanation of the claim
review procedure set forth in Section 12.3.
12.3 Within 60 days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimant's
duly authorized representative) may file with the Third Party Fiduciary
a written request for a review of the denial of the claim. Thereafter,
the Claimant (or the Claimant's duly authorized representative) may
review pertinent documents, submit written comments or other documents,
and request a hearing, which the Third Party Fiduciary, in its sole
discretion, may grant.
12.4 The Third Party Fiduciary shall render its decision on review promptly,
and not later than 60 days after the filing of a written request for
review of a denial, unless a hearing is held or other special
circumstances require additional time, in which case the Third Party
Fiduciary's decision must be rendered within 120 calendar days after
such date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain: (i) the specific
reason(s) for the decision; (ii) the specific reference(s) to the
pertinent Plan provisions upon which the decision was based; and (iii)
such other matters as the Third Party Fiduciary deems relevant.
12.5 A Claimant's compliance with the foregoing provisions of this Section
XII is a mandatory prerequisite to a Claimant's right to commence any
legal action with respect to any claim for benefits under the Plan.
XIII. MISCELLANEOUS
13.1 No Participant will participate in an action of the Committee or the
Board of Directors on a matter that solely applies to that Participant.
Such matters will be determined by a majority of the rest of the
Committee or the Board of Directors.
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13.2 Each Participant will receive a copy of this Plan and the Committee
will make available for any Participant's inspection a copy of the
rules and regulations the Committee uses in administering the Plan.
13.3 Except to the extent that federal law applies, the Plan shall be
governed by and construed under the laws of the State of Nevada.
13.4 The Plan shall be binding upon the Company and its successors and
assigns, and upon a Participant, his Eligible Spouse, and their
assigns, heirs, executors, and administrators.
13.5 Masculine pronouns wherever used shall include feminine pronouns and
when the context dictates, the singular shall include the plural.
13.6 In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but the Plan shall be construed and enforced as
if such illegal and invalid provisions had never been inserted herein.
13.7 Any notice given under the Plan shall be in writing and shall be mailed
or delivered to:
SOUTHWEST GAS CORPORATION
Supplemental Retirement Plan
Compensation Committee
5241 Spring Mountain Road
Las Vegas, NV 89102
and
CRG Fiduciary Services, Inc.
633 West Fifth Street, 53rd floor
Los Angeles, CA 90071-2086
Attn: Managing Director
IN WITNESS WHEREOF, Southwest Gas Corporation has caused this Amended and
Restated Plan to be executed this 30th day of July 1999.
SOUTHWEST GAS CORPORATION
By
-----------------------------------------
Michael O. Maffie
President & Chief Executive Officer
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EXHIBIT 10.13
SOUTHWEST GAS CORPORATION
EXECUTIVE DEFERRAL PLAN
Effective March 1, 1986
Amended and Restated March 1, 1988
Amended and Restated March 1, 1989
Amended and Restated March 1, 1990
Amended and Restated October 29, 1992
Amended and Restated May 10, 1994
Amended and Restated Effective March 1, 1999
<PAGE> 2
MASTER PLAN DOCUMENT
SOUTHWEST GAS CORPORATION EXECUTIVE DEFERRAL PLAN
PURPOSE
The purpose of this Plan is to provide specified benefits to a select group of
key employees who contribute materially to the continued growth, development and
future business success of SOUTHWEST GAS CORPORATION.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the context, the
words and phrases listed below shall be defined as follows:
1.1 "Account Balance" means a Participant's individual fund comprised of
Deferrals, Company Contributions and interest earnings credited thereon
up to the time of Benefit Distribution.
1.2 "Base Annual Salary" means the yearly compensation paid to an
Executive, excluding bonuses, commissions, overtime, and nonmonetary
awards for employment services to the Company.
1.3 "Beneficiary" means the person or persons, or the estate of a
Participant, named to receive any benefits under the Plan upon the
death of a Participant.
1.4 "Benefit Account Balance" shall have the meaning set forth in Article
5.3.
1.5 "Benefit Distribution" means the date benefits under the Plan commence
or are paid in full to a Participant, or because of his death, to his
Beneficiary, which will occur within 90 days of notification to the
Company of the event that gives rise to such distribution.
1.6 "Board of Directors" means the Board of Directors of Southwest Gas
Corporation and any Successor Corporation.
1.7 "Bonus" means the portion of actual awards, if any, paid in cash under
the terms of Southwest Gas Corporation's 1993 Management Incentive
Plan, as amended ("Management Incentive Plan").
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1.8 "Change in Control" means the first to occur of any of the following
events:
(a) Any "person" (as the term is used in Section 13 and 14(d)(2)
of the Securities Exchange Act of 1934 ("Exchange Act"))
becomes a beneficial owner (as that term is used in Section
13(d) of the Exchange Act), directly or indirectly, of 50% or
more of the Company's capital stock entitled to vote in the
election of directors; or
(b) During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan,
individuals who, at the beginning of such period constitute
the board of directors of the Company, and any new director
(other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction
described in clause (a) of this Article 1.8) whose election by
the board of directors or nomination for election by the
Company's shareholders was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office,
who either were directors at the beginning of the period or
whose election or nomination for election was previously
approved, cease for any reason to constitute at least a
majority thereof.
1.9 "Committee" means the administrative committee appointed by the Board
of Directors to manage and administer the Plan in accordance with the
provisions of the Plan. After a Change in Control, the Committee shall
cease to have any powers under the Plan and all powers previously
vested in the Committee under the Plan will then be vested in the Third
Party Fiduciary.
1.10 "Company" means Southwest Gas Corporation and such of its Subsidiaries
as the Board of Directors may select to become parties to the Plan. The
term "Company" shall also include any Successor Corporation.
1.11 "Company Contributions" means the amount added, if any, to a
Participant's Account Balance in accordance with Article 3.2.
1.12 "Deferral(s)" means the amount of Base Annual Salary, Bonus and special
income, as referred to in Article 3.9, transferred to the Plan
accounts.
1.13 "Employee" means any full-time employee of Southwest Gas Corporation as
determined under the personnel policies and practices of Southwest Gas
Corporation prior to a Change in Control.
1.14 "Executive" means any officer of Southwest Gas Corporation prior to a
Change in Control.
1.15 "Master Plan Document" means this legal instrument containing the
provisions of the Plan.
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1.16 "Moody's Rate" means Moody's Seasoned Corporate Bond Rate which is an
economic indicator consisting of an arithmetic average of yields of
representative bonds (industrial and AAA, AA and A rated public
utilities) as of January 1 prior to each Plan Year as published by
Moody's Investors Service, Inc. (or any successor thereto), or, if such
index is no longer published, a substantially similar index selected by
the Board of Directors.
1.17 "Moody's Composite Rate" means the average of the Moody's Rate on
January 1 for the five (5) years prior to Benefit Distribution.
1.18 "Participant" means any Executive who executes a Plan Agreement or an
Employee who has been selected to participate in the Plan and who
executes a Plan Agreement.
1.19 "Plan" means the Executive Deferral Plan of the Company evidenced by
this Master Plan Document.
1.20 "Plan Agreement" means the form of written agreement which is entered
into from time to time, by and between the Company and a Participant.
1.21 "Plan Year" means the year beginning on March 1 of each year.
1.22 "Retire" or "Retirement" means the severance from employment with the
Company on or after attaining age 55, other than by death, disability
or Termination of Employment.
1.23 "Subsidiary" means any corporation, partnership, or other organization
which is at least 50% owned by the Company or a Subsidiary of the
Company.
1.24 "Successor Corporation" means any corporation or other legal entity
which is the successor to Southwest Gas Corporation, whether resulting
from merger, reorganization or transfer of substantially all of the
assets of Southwest Gas Corporation, regardless of whether such entity
shall expressly agree to continue the Plan.
1.25 "Terminates Employment" or "Termination of Employment" means the
ceasing of employment with the Company, either voluntarily or
involuntarily, excluding Retirement, disability or death.
1.26 "Third Party Fiduciary" means an independent third party (a corporate
entity with no other relationship with the Company) selected by the
Company to take over the administration of the Plan upon and after a
Change in Control and to determine appeals of claims denied under the
Plan before and after a Change in Control pursuant to a Third Party
Fiduciary Services Agreement.
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1.27 "Third Party Fiduciary Services Agreement" means the agreement with the
Third Party Fiduciary to perform services with respect to the Plan.
1.28 "Trust Agreement" means an agreement establishing a "grantor trust" of
which the Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended (the "Code").
1.29 "Trust Fund or Funds" means the assets of every kind and description
held under any Trust Agreement forming a part of the Plan.
1.30 "Trustee" means any person or entity selected by the Company to act as
trustee under any Trust Agreement at any time of reference.
1.31 "Years of Service" means a Participant's Benefit Service as defined in
the Retirement Plan for Employees of Southwest Gas Corporation, plus
service with a Successor Corporation which is not taken into account
for such plan.
ARTICLE 2
ELIGIBILITY
2.1 SELECTION OF PARTICIPANTS. An Executive shall become eligible to
participate in the Plan as of the effective date of his election by the
Board of Directors as an officer of the Company (unless the Board of
Directors determines, at that time, that such Executive will not become
eligible to participate in the Plan). The Committee in its sole
discretion may select any other Employee to become eligible to
participate in the Plan.
2.2 CONTINUED ELIGIBILITY. If a Participant ceases to be an Executive and
he continues as an Employee, the Committee in its sole discretion will
determine whether such Employee will continue to be eligible to
participate in the Plan. Notwithstanding the foregoing and upon the
occurrence of a Change in Control, a Participant will continue to
participate in the Plan.
2.3 PARTICIPANT ACCEPTANCE. Once eligible to participate in the Plan, an
Executive or an Employee has to complete, execute and return to the
Committee a Plan Agreement to become a Participant in the Plan.
Continued participation in the Plan is subject to compliance with any
further conditions as may be established by the Committee.
Notwithstanding the foregoing and upon the occurrence of a Change in
Control, no additional conditions regarding continued participation in
the Plan may be established by the Committee or any Successor
Corporation.
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ARTICLE 3
DEFERRAL COMMITMENT AND COMPANY CONTRIBUTION
3.1 DEFERRALS. A Participant may defer up to 100% of his Base Annual Salary
and Bonus received during a Plan Year; provided, that such Deferral
exceeds $2,000 per Plan Year. Notwithstanding the foregoing, no
election shall be effective to reduce the Base Annual Salary and Bonus
paid to a Participant for a calendar year to an amount which is less
than the amount that the Company is required to withhold from such
Participant's Base Annual Salary and Bonus for the calendar year for
(a) applicable income and employment taxes (including Federal Insurance
Contributions Act tax), (b) contributions to any employee benefit plan
(other than this Plan), and (c) payroll transfers, in place, prior to
such elections.
3.2 COMPANY MATCHING CONTRIBUTIONS. If a Participant makes a Deferral
commitment with respect to Base Annual Salary and/or Bonus, the Company
will contribute an amount equal to 50% of such Deferral, up to a
maximum of 3% of the Participant's Base Annual Salary, to the
Participant's Account Balance.
3.3 TIMING OF DEFERRAL ELECTION. Prior to the commencement of each Plan
Year, a Participant will (a) advise the Committee, in writing, of his
Base Annual Salary Deferral commitment for the upcoming Plan Year and
(b) make his Deferral commitment for any Bonus earned during the
calendar year ending in such Plan Year. If a Participant fails to so
advise the Committee, through no fault of the Company, he will not be
permitted to defer any of his Base Annual Salary or Bonus during the
upcoming Plan Year.
3.4 EXERCISE OF DEFERRAL COMMITMENT. A Participant's Deferral commitment
will be exercised on a per pay period basis for the portion of his Base
Annual Salary that is deferred. The exercise of a Participant's
Deferral commitment with respect to his Bonus will occur at the time
the Bonus is paid.
3.5 ADJUSTMENT TO DEFERRAL COMMITMENT. The Committee reserves the right to
adjust any Participant's Deferral commitment during a Plan Year to
ensure that a Participant's actual Deferral does not exceed the maximum
allowable amount.
3.6 DEFERRAL ELECTIONS BY NEW PARTICIPANTS. In the event an Executive or an
Employee becomes a Participant in the Plan during a Plan Year, such
Participant may defer up to 100% of the remaining portion of his Base
Annual Salary for the current Plan Year. Such Participant must make his
Deferral commitment by advising the Committee, in writing, at the time
he elects to become a Participant in the Plan.
3.7 DEFERRAL COMMITMENT DEFAULT. In the event a Participant defaults on his
Base Annual Salary Deferral commitment, the Participant will not be
allowed to make any further Deferrals during the current Plan Year and
may not make any Deferrals for
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<PAGE> 7
the subsequent Plan Year. In the event a Participant defaults on his
Bonus Deferral commitment for a particular Plan Year, the Participant
will not be able to defer any of his Bonus for that Plan Year or the
subsequent Plan Year.
3.8 WAIVER OF DEFERRAL COMMITMENT DEFAULT. The Committee may waive for good
cause the default penalty specified in Article 3.7 upon the request of
the Participant.
3.9 DEFERRAL OF SPECIAL INCOME. A Participant who is entitled to receive
cash (a) from the cancellation of stock options granted under the 1996
Stock Incentive Plan as a result of a Change in Control, (b) from the
cancellation of outstanding performance shares issued pursuant to the
Management Incentive Plan as a result of a Change in Control, or (c)
under an employment, severance or special pay arrangement payable on
account of termination of employment resulting from a Change in
Control, may elect to defer receipt of all or a portion of such income;
provided that such election is filed with the Committee at least six
(6) months prior to the date such income would otherwise have become
payable to the Participant. If the Participant makes such an election,
such income shall not be paid to the Participant but rather shall be
treated as a Deferral and added to the Participant's Account Balance as
of the date such income would otherwise have been paid to the
Participant. In addition, for such election to be effective with
respect to the deferral of income resulting from the cancellation of an
option, the Participant must agree in writing that such option shall
not be exercised at all after the date of the election. Notwithstanding
the foregoing, a Participant's election to defer income resulting from
cancellation of an option shall terminate and the option may be
exercised in accordance with its terms without regard to the election
if the option would otherwise expire prior to cancellation (for
example, because of the Participant's termination of employment) or if
the cancellation does not occur.
ARTICLE 4
INTEREST, CREDITING AND VESTING
4.1 INTEREST RATE. A Participant's Account Balance at the start of a Plan
Year and any Deferrals and Company contributions made during a Plan
Year will earn, except as provided for in Article 4.2, interest
annually at 150% of the Moody's Rate. Interest will be credited to a
Participant's account for Deferrals and Company contributions made
during the Plan Year, as if all Deferrals and contributions were made
on the first day of the Plan Year.
4.2 ADJUSTMENT TO INTEREST RATE. If a Participant Terminates Employment
prior to completing five (5) Years of Service with the Company,
interest credited for all Deferrals and vested Company contributions to
a Participant's Account Balance will be adjusted based on the Moody's
Rate during the period he participated in the Plan.
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4.3 VESTING OF COMPANY CONTRIBUTIONS. Company contributions and interest
earned on such contributions will vest to a Participant at the rate of
20% per Year of Service and will vest completely once a Participant has
five (5) Years of Service with the Company.
4.4 INTEREST DURING POSTPONEMENT OF BENEFIT DISTRIBUTION. In the event a
Participant is allowed to postpone Benefit Distribution under the Plan,
his Account Balance will earn interest annually under the provisions of
Article 4.1, until Benefit Distribution.
ARTICLE 5
PLAN BENEFIT PAYMENTS
5.1 LUMP-SUM PAYMENT. A Participant's Account Balance will be paid to the
Participant in a lump-sum payment at the time of Benefit Distribution,
unless the Participant qualifies to receive benefit payments over a
specific benefit payment period.
5.2 INTEREST PRIOR TO BENEFIT DISTRIBUTION. A Participant's Account Balance
will earn interest under the provisions of Article 4.1 or, if
applicable, Article 4.2 until the time of Benefit Distribution.
5.3 BENEFIT PAYMENT PERIODS. If a Participant is entitled to receive Plan
benefit payments over a specific benefit payment period, his Account
Balance at the commencement of Benefit Distribution will be credited
with an amount equal to the interest such balance would have earned
assuming distribution in equal monthly installments over the specific
benefit payment period, at a specified interest rate, thereby creating
a Benefit Account Balance. The Benefit Account Balance will then be
paid to the Participant in equal monthly installments over the specific
benefit payment period.
5.4 PAYMENT PRIOR TO BENEFIT DISTRIBUTION. If there shall be a final
determination by the Internal Revenue Service or a court of competent
jurisdiction that the election by a Participant to defer the payment of
any amount in accordance with the terms of this Plan was not effective
to defer the taxation of such amount, then the Participant shall be
entitled to receive a distribution of the amount determined to be
taxable and the Participant's Account Balance shall be reduced
accordingly.
ARTICLE 6
RETIREMENT AND TERMINATION BENEFIT PAYMENTS
6.1 BENEFIT PAYMENT PERIODS; ELECTIONS. A Participant who Retires or
Terminates Employment with more than five (5) Years of Service
qualifies to receive his Account Balance over a period of 120, 180 or
240 months. The Participant shall
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<PAGE> 9
elect the payment period; provided that written notice of such election
is filed with the Committee at least one (1) year prior to his
Retirement or Termination of Employment. If a Participant fails to make
such election prior to the time specified, the payment period will be
240 months.
6.2 BENEFIT PAYMENT DEFERRAL; ELECTIONS. A Participant who Retires or
Terminates Employment with more than five (5) Years of Service, may
elect to defer his Benefit Distribution for up to five (5) years from
the date on which he Retires or Terminates Employment; provided that
written notice of such election is filed with the Committee at least
one (1) year prior to his Retirement or Termination of Employment. If a
Participant makes an election under this Article 6.2, the Participant's
Account Balance shall be paid in one of the optional forms of
distribution set forth in Article 6.1 as elected by the Participant.
6.3 CHANGING ELECTIONS. A Participant who has made an election under this
Article may subsequently revoke such election and make another election
under this Article by providing written notice to the Committee;
provided, however, that only the last such election or revocation in
effect on the date which is one (1) year prior to the date on which the
Participant Retires or Terminates Employment shall be effective.
Notwithstanding the foregoing, if a Participant Terminates Employment
or Retires as a result of a Change in Control or within one year after
March 1, 1999, the date of amendment and restatement of this Plan, the
foregoing provisions of this Article 6 shall be applied by substituting
"six (6) months" for "one (1) year."
6.4 INTEREST ON BENEFIT PAYMENTS. The interest rate used to calculate the
amount that will be credited to a Participant's Account Balance, to
determine his Benefit Account Balance under the provisions of Article
5.3, will be 150% of the Moody's Composite Rate.
ARTICLE 7
PRE-RETIREMENT SURVIVOR BENEFIT PAYMENTS
7.1 BENEFIT PAYMENTS. Notwithstanding any elections made pursuant to
Article 6, if a Participant dies while he is an employee of the
Company, his Account Balance will be paid to his Beneficiary in equal
monthly installments over the 180 month survivor benefit payment
period.
7.2 INTEREST ON BENEFIT PAYMENTS. The interest rate used to determine the
amount that will be credited to a Participant's Account Balance, to
determine his Benefit Account Balance under the provisions of Article
5.3 following the Participant's death, will be 150% of the Moody's
Composite Rate.
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ARTICLE 8
POST-RETIREMENT SURVIVOR BENEFIT PAYMENTS
8.1 BENEFIT PAYMENTS. If a Participant dies after the commencement of
Retirement, Termination of Employment or disability benefit payments
under Articles 6 or 9 but prior to such benefits having been paid in
full, the Participant's benefit payments will continue to be paid to
the Participant's Beneficiary through the end of the originally awarded
benefit payment period, except as provided for in Article 10.7.
8.2 DELAYED BENEFIT PAYMENTS. If a Participant who has elected to postpone
Benefit Distribution under the provisions of Article 6, dies after he
Retires or Terminates Employment but prior to the commencement of
benefit payments, payment of benefits to his Beneficiary will be made
consistent with such elections.
ARTICLE 9
DISABILITY BENEFIT PAYMENTS
9.1 DISABILITY DETERMINATION. A Participant shall be considered disabled if
he qualifies for a disability benefit under the Company's group
long-term disability plan. In the event a Participant does not qualify
for benefits under the group long-term disability plan, the Committee
may determine that a Participant is disabled under the provisions of
the Plan.
9.2 VESTING OF COMPANY CONTRIBUTIONS. Notwithstanding the provisions of
Article 4.3, Company contributions and interest earned on such
contributions will be fully vested to the Participant at the time he is
determined to be disabled under this Article.
9.3 BENEFIT PAYMENTS DURING FIRST FIVE (5) YEARS OF SERVICE. If a
Participant is disabled within the first five (5) Years of Service with
the Company, he will receive his Account Balance in a lump sum payment
at Benefit Distribution.
9.4 BENEFIT PAYMENTS AFTER FIVE (5) YEARS OF SERVICE. Notwithstanding any
elections made pursuant to Article 6, if a Participant is disabled
after five (5) Years of Service with the Company, his Account Balance
will be paid to him in equal monthly installments over the 180 month
disability payment period.
9.5 INTEREST ON BENEFIT PAYMENTS. If a Participant qualifies to receive his
Account Balance over the disability benefit payment period, the
interest rate used to calculate the amount that will be credited to a
Participant's Account Balance, to determine his Benefit Account Balance
under the provisions of Article 5.3, will be 150% of the Moody's
Composite Rate.
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ARTICLE 10
BENEFICIARIES
10.1 DESIGNATION OF BENEFICIARIES. A Participant shall have the right to
designate any person as his Beneficiary to whom benefits under this
Plan shall be paid in the event of the Participant's death prior to the
total distribution of his Benefit Account Balance under the Plan. If
greater than 50% of the Benefit Account Balance is designated to a
Beneficiary other than the Participant's spouse, such Beneficiary
designation must be consented to by the Participant's spouse. Each
Beneficiary designation must be in written form prescribed by the
Committee and will be effective only when filed with the Committee
during the Participant's lifetime.
10.2 CHANGING BENEFICIARY DESIGNATION. A Participant shall have the right to
change the Beneficiary designation, subject to spousal consent under
the provisions of Article 10.1, without the consent of any designated
Beneficiary by filing a new Beneficiary designation with the Committee.
The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed.
10.3 ACKNOWLEDGMENT. The Committee shall acknowledge, in writing, receipt of
each Beneficiary designation form.
10.4 DISCHARGE OF COMPANY OBLIGATION. The Committee shall be entitled to
rely on the Beneficiary designation last filed by the Participant prior
to his death. Any payment made in accordance with such designation
shall fully discharge the Company from all further obligations with
respect to the amount of such payments.
10.5 MINOR OR INCOMPETENT BENEFICIARIES. If a Beneficiary entitled to
receive benefits under the Plan is a minor or a person declared
incompetent, the Committee may direct payment of such benefits to the
guardian or legal representative of such minor or incompetent person.
The Committee may require proof of incompetency, minority or
guardianship as it may deem appropriate prior to distribution of any
Plan benefits. Such distribution shall completely discharge the
Committee and the Company from all liability with respect to such
payments.
10.6 EFFECT OF NO BENEFICIARY DESIGNATION. If no Beneficiary designation is
in effect at the time of the Participant's death, or if the named
Beneficiary predeceased the Participant, then the Beneficiary shall be:
(a) the surviving spouse; (b) if there is no surviving spouse, then his
issue per stirpes; or (c) if no surviving spouse or issue, then his
estate.
10.7 PAYMENT TO CONTINGENT BENEFICIARY. If a Beneficiary receiving benefit
payments under the provisions of the Plan dies prior to the completion
of the benefit payment period, the present value of the remaining
benefit payments will be paid, in a lump sum amount, to the contingent
Beneficiary designated by the Participant under the provisions of
Article 10.1. If the Participant has failed to designate a contingent
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Beneficiary, the present value of the remaining benefit payments will
be paid, in a lump sum amount, to the Beneficiary's estate. The present
value of the remaining benefit payments will be calculated using the
same methodology, including the same interest rate, as was used to
calculate the Participant's annuity payment calculation, under Article
5.3.
ARTICLE 11
LEAVE OF ABSENCE
11.1 CONTINUATION OF DEFERRAL COMMITMENT. If a Participant is authorized by
the Company for any reason to take a paid leave of absence, the
Participant's Deferral commitment shall remain in full force and
effect.
11.2 SUSPENSION OF DEFERRAL COMMITMENT. If a Participant is authorized by
the Company for any reason to take an unpaid leave of absence, the
Participant's Deferral commitment shall be suspended until the leave of
absence ends and the Participant's employment resumes.
ARTICLE 12
GENERAL
12.1 PAYMENT OBLIGATION. Amounts payable to a Participant shall be paid from
the general assets of the Company or from the assets of a grantor trust
within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Code, established for use in funding executive
compensation arrangements and commonly known as a "rabbi trust."
12.2 LIMITATION ON PAYMENT OBLIGATION. The Company shall have no obligation
under the Plan to a Participant or a Participant's Beneficiary, except
as provided in this Master Plan Document.
12.3 FURNISHING INFORMATION. The Participant must cooperate with the
Committee in furnishing all information requested by the Company to
facilitate the payment of his Benefit Account Balance. Such information
may include the results of a physical examination if any is required
for participation in the Plan.
12.4 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors, and assigns shall have no legal or equitable rights,
claims, or interest in any specific property or assets of the Company.
No assets of the Company shall be held under any trust, or held in any
way as collateral security for the fulfilling of the obligations of the
Company under the Plan. Any and all of the Company's assets shall be,
and remain, the general unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be merely that of an
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unfunded and unsecured promise of the Company to pay money in the
future, and the rights of the Participants and Beneficiaries shall be
no greater than those of unsecured general creditors. It is the
intention of the Company that this Plan (and the Trust Funds described
in Article 14.1) be unfunded for purposes of the Code and for the
purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
12.5 WITHHOLDING. There shall be deducted from each payment made under the
Plan or other compensation payable to the Participant (or Beneficiary)
all taxes which are required to be withheld by the Company in respect
to such payment or this Plan. The Company shall have the right to
reduce any payment (or other compensation) by the amount of cash
sufficient to provide the amount of said taxes.
ARTICLE 13
NO GUARANTEE OF CONTINUING EMPLOYMENT
13.1 FUTURE EMPLOYMENT. The terms and conditions of this Plan shall not be
deemed to constitute a contract of employment between the Company and a
Participant. Moreover, nothing in the Plan shall be deemed to give a
Participant the right to be retained in the service of the Company or
to interfere with the right of the Company to discipline or discharge
the Participant at any time.
ARTICLE 14
TRUSTS
14.1 TRUSTS. The Company may maintain one or more Trust Funds to finance all
or a portion of the benefits under the Plan by entering into one or
more Trust Agreements. Any Trust Agreement is designated as, and shall
constitute, a part of the Plan, and all rights which may accrue to any
person under the Plan shall be subject to all the terms and provisions
of such Trust Agreement. A Trustee shall be appointed by the Committee
or the Board of Directors and shall have such powers as provided in the
Trust Agreement. The Committee or the Board of Directors may modify any
Trust Agreement, in accordance with its terms, to accomplish the
purposes of the Plan and appoint a successor Trustee under the
provisions of such Trust Agreement. By entering into such Trust
Agreement, the Committee or the Board of Directors may vest in the
Trustee, or in one or more investment managers (as defined in ERISA)
the power to manage and control the Trust Fund. The Committee's
authority under the provisions of this Article 14.1 will cease with a
Change in Control.
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ARTICLE 15
TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN
15.1 PLAN AMENDMENT AND TERMINATION. The Board of Directors may, at any
time, without notice, amend or modify the Plan in whole or in part;
provided, however, that (a) no amendment or modification shall be
effective to decrease or restrict (i) the amount of interest to be
credited to a Participant's Account Balance under the provisions of the
Plan, (ii) the benefits the Participant qualifies for or may elect to
receive under the provisions of the Plan, or (iii) benefit payments to
Participants or Beneficiaries once such payments have commenced, and
(b) effective March 1, 1999, no amendment or modification of this
Article 15, Article 17, or Article 18 of the Plan shall be effective.
15.2 PLAN TERMINATION. The Board of Directors shall not terminate the Plan
until all accrued benefits have been paid in full under the provisions
of the Plan to the Participants and Beneficiaries.
15.3 PARTIAL PLAN TERMINATION. Except for the Participants' ability to defer
special income under the provisions of Article 3.9, the Board of
Directors may partially terminate the Plan by instructing the Committee
not to accept any additional Deferral commitments. In the event of a
partial termination, the remaining provisions of the Plan shall
continue to operate and be effective for all Participants in the Plan,
as of the date of such partial termination.
15.4 CHANGE OF CONTROL. In the event of a hostile or non-negotiated Change
of Control of the Company, the benefits of this Plan will become 100%
vested for all Participants and the interest credited to a
Participant's Account Balance under any provision of this Plan will be
adjusted, retroactively to the date an individual became a Participant
and prospectively thereafter, to 200% of the Moody's Rate.
ARTICLE 16
RESTRICTIONS ON ALIENATION OF BENEFITS
16.1 ALIENATION OF BENEFITS. To the maximum extent permitted by law, no
interest or benefit under the Plan shall be assignable or subject in
any manner to alienation, sale, transfer, claims of creditors, pledge,
attachment or encumbrances of any kind.
ARTICLE 17
ADMINISTRATION OF THE PLAN
17.1 COMMITTEE DUTIES. Except as otherwise provided in this Article 17, and
subject to Article 18, the general administration of the Plan, as well
as construction and interpretation thereof, shall be vested in the
Committee. Members of the Committee
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may be Participants under the Plan. Specifically, the Committee shall
have the discretion and authority to: (a) make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of
the Plan; and (b) decide or resolve any and all questions including
interpretations of the Plan. Any individual serving on the Committee
who is a Participant shall not vote or act on any matter relating
solely to himself or herself. The number of members of the Committee
shall be established by, and the members shall be appointed from time
to time by, and shall serve at the pleasure of, the Board of Directors.
17.2 ADMINISTRATION AFTER A CHANGE IN CONTROL. Upon and after a Change in
Control, the administration of the Plan shall be vested in a Third
Party Fiduciary, as provided for herein and pursuant to the terms of a
Third Party Fiduciary Services Agreement. Any Third Party Fiduciary
Services Agreement is designated as, and shall constitute, a part of
the Plan. The Third Party Fiduciary shall also have the discretion and
authority to: (a) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of the Plan; and (b)
decide or resolve any and all questions including interpretation of the
Plan and the Trust Agreement. Except as otherwise provided for in any
Trust Agreement, the Third Party Fiduciary shall have no power to
direct the investment of Plan or Trust Funds or select any investment
manager or custodial firm for the Plan or Trust Agreement. The Company
shall pay all reasonable administrative expenses and fees of the Third
Party Fiduciary when it acts as the administrator of the Plan or
pursuant to Article 18. The Third Party Fiduciary may not be terminated
by the Company without the consent of 50% of the Participants in the
Plan.
17.3 AGENTS. In the administration of the Plan, the Committee or the Third
Party Fiduciary, as the case may be, may from time to time employ such
agents, consultants, advisors, and managers as it deems necessary or
useful in carrying out its duties as it sees fit (including acting
through a duly authorized representative) and may from to time to time
consult with counsel to the Company.
17.4 BINDING EFFECT OF DECISIONS. The decision or action of the Committee or
the Third Party Fiduciary, as the case may be, with respect to any
question arising out of or in connection with the administration,
interpretation, and application of the Plan (and the Trust Agreement to
the extent provided for in Article 17.2) and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.
17.5 INDEMNITY BY COMPANY. The Company shall indemnify and save harmless
each member of the Committee, the Third Party Fiduciary, and any
employee of the Company to whom the duties of the Committee may be
delegated against any and all claims, losses, damages, expenses, and
liabilities arising from any action or failure to act with respect to
the Plan, except in the case of fraud, gross negligence, or willful
misconduct by the Committee, any of its members, the Third Party
Fiduciary, or any such employee.
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17.6 EMPLOYER INFORMATION. To enable the Committee and the Third Party
Fiduciary to perform their functions, the Company shall supply full and
timely information to the Committee and the Third Party Fiduciary, as
the case may be, on all matters relating to the compensation of all
Participants, their Retirement, death or other cause for Termination of
Employment, and such other pertinent facts as the Committee or the
Third Party Fiduciary may require.
17.7 MANNER AND TIMING OF BENEFIT PAYMENTS. The Committee or the Third Party
Fiduciary, as the case may be, may alter, at or after Benefit
Distribution, the manner and time of payments to be made to a
Participant or Beneficiary from that set forth herein, if requested to
do so by such Participant or Beneficiary to meet existing financial
hardships, which the Committee or the Third Party Fiduciary, as the
case may be, determine are the same as or similar in nature to those
identified in Section 1.401(k)-1(d)(2)(iv) of the federal treasury
regulations.
ARTICLE 18
CLAIMS PROCEDURE
18.1 PRESENTATION OF CLAIMS. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as
a "Claimant") may deliver to the Committee a written claim for
determination with respect to benefits available to such Claimant from
the Plan. The claim must state with particularity the determination
desired by the Claimant.
18.2 NOTIFICATION OF DECISION. The Committee shall consider a claim and
notify the Claimant within 90 calendar days after receipt of a claim in
writing:
(a) That the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) That the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant: (i) the specific reason(s) for the
denial of the claim, or any part thereof; (ii) the specific
reference(s) to pertinent provisions of the Plan upon which
the denial was based; (iii) a description of any additional
material or information necessary for the Claimant to perfect
the claim, and an explanation of why such material or
information is necessary; and (iv) an explanation of the claim
review procedure set forth in Article 18.3.
18.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or
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the Claimant's duly authorized representative) may file with the Third
Party Fiduciary a written request for a review of the denial of the
claim. Thereafter, the Claimant (or the Claimant's duly authorized
representative) may review pertinent documents, submit written comments
or other documents, and request a hearing, which the Third Party
Fiduciary, in its sole discretion, may grant.
18.4 DECISION ON REVIEW. The Third Party Fiduciary shall render its decision
on review promptly, and not later than 60 days after the filing of a
written request for review of a denial, unless a hearing is held or
other special circumstances require additional time, in which case the
Third Party Fiduciary's decision must be rendered within 120 calendar
days after such date. Such decision must be written in a manner
calculated to be understood by the Claimant, and it must contain: (i)
the specific reason(s) for the decision; (ii) the specific reference(s)
to the pertinent Plan provisions upon which the decision was based; and
(iii) such other matters as the Third Party Fiduciary deems relevant.
18.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 18 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
the Plan.
ARTICLE 19
MISCELLANEOUS
19.1 NOTICE. Any notice given under the Plan shall be in writing and shall
be mailed or delivered to:
SOUTHWEST GAS CORPORATION
Executive Deferral Plan
Administrative Committee
5241 Spring Mountain Road
Las Vegas, NV 89102
and
CRG Fiduciary Services, Inc.
633 West Fifth Street, 53rd floor
Los Angeles, CA 90071-2086
Attn: Managing Director
19.2 ASSIGNMENT. The Plan shall be binding upon the Company and any of its
successors and assigns, and upon a Participant, Participant's
Beneficiary, assigns, heirs, executors and administrators.
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19.3 GOVERNING LAWS. Except to the extent that federal law applies, the Plan
shall be governed by and construed under the laws of the State of
Nevada.
19.4 HEADINGS. Headings in this Master Plan Document are inserted for
convenience of reference only. Any conflict between such headings and
the text shall be resolved in favor of the text.
19.5 GENDER AND NUMBER. Masculine pronouns wherever used shall include
feminine pronouns and when the context dictates, the singular shall
include the plural.
19.6 EFFECT OF ILLEGALITY OR INVALIDITY. In case any provision of the Plan
shall be held illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but the Plan
shall be construed and enforced as if such illegal and invalid
provisions had never been inserted herein.
IN WITNESS WHEREOF, the Company has executed this Amended and Restated Master
Plan Document this 30th day of July 1999.
SOUTHWEST GAS CORPORATION
By
-----------------------------------
Michael O. Maffie
President & Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.14
MASTER PLAN DOCUMENT
SOUTHWEST GAS CORPORATION
DIRECTORS DEFERRAL PLAN
Effective October 29, 1992
Amended Effective March 5, 1996
Amended and Restated Effective March 1, 1999
<PAGE> 2
MASTER PLAN DOCUMENT
SOUTHWEST GAS CORPORATION DIRECTORS DEFERRAL PLAN
PURPOSE
The purpose of this Plan is to provide specified benefits to Directors of
SOUTHWEST GAS CORPORATION.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the context, the
words and phrases listed below shall be defined as follows:
1.1 "Account Balance" means a Participant's individual fund comprised of
Deferrals, rollovers contributions from the PriMerit Bank, Federal
Savings Bank directors deferral plan and interest earnings credited
thereon up to the time of Benefit Distribution.
1.2 "Beneficiary" means the person or persons, or the estate of a
Participant, named to receive any benefits under the Plan upon the
death of a Participant.
1.3 "Benefit Account Balance" shall have the meaning set forth in Article
5.3.
1.4 "Benefit Distribution" means the date benefits under the Plan commence
or are paid in full to a Participant, or because of his death, to his
Beneficiary, which will occur within 90 days of notification to the
Company of the event that gives rise to such distribution.
1.5 "Board Fees" means the compensation received by a Director for serving
on the Board of Directors of Southwest Gas Corporation and the
committees of the board.
1.6 "Board of Directors" means the Board of Directors of the Company.
1.7 "Change in Control" means the first to occur of any of the following
events:
(a) Any "person" (as the term is used in Section 13 and 14(d)(2)
of the Securities Exchange Act of 1934 ("Exchange Act"))
becomes a beneficial owner (as that term is used in Section
13(d) of the Exchange Act), directly or indirectly, of 50% or
more of the Company's capital stock entitled to vote in the
election of directors; or
(b) During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan,
individuals who, at the beginning of such period constitute
the board of directors of the Company, and any new
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director (other than a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described in clause (a) of this Article 1.8) whose
election by the board of directors or nomination for election
by the Company's shareholders was approved by a vote of at
least three-fourths (3/4ths) of the directors then still in
office, who either were directors at the beginning of the
period or whose election or nomination for election was
previously approved, cease for any reason to constitute at
least a majority thereof.
1.8 "Committee" means the administrative committee appointed by the Board
of Directors to manage and administer the Plan in accordance with the
provisions of the Plan. After a Change in Control, the Committee shall
cease to have any powers under the Plan and all powers previously
vested in the Committee under the Plan will then be vested in the Third
Party Fiduciary.
1.9 "Company" means Southwest Gas Corporation and any Successor
Corporation.
1.10 "Deferral(s)" means the amount of Board Fees and special income, as
referred to in Article 3.8, transferred to the Plan accounts.
1.11 "Director" means any person on the board of directors of Southwest Gas
Corporation prior to a Change in Control.
1.12 "Master Plan Document" means this legal instrument containing the
provisions of the Plan.
1.13 "Moody's Rate" means Moody's Seasoned Corporate Bond Rate which is an
economic indicator consisting of an arithmetic average of yields of
representative bonds (industrial and AAA, AA and A rated public
utilities) as of January 1 prior to each Plan Year as published by
Moody's Investors Service, Inc. (or any successor thereto), or, if such
index is no longer published, a substantially similar index selected by
the Board of Directors.
1.14 "Moody's Composite Rate" means the average of the Moody's Rate on
January 1 for the five years prior to Benefit Distribution.
1.15 "Participant" means any Director who executes a Plan Agreement.
1.16 "Plan" means the Director Deferral Plan of the Company evidenced by
this Master Plan Document.
1.17 "Plan Agreement" means the form of written agreement which is entered
into from time to time, by and between the Company and a Participant.
1.18 "Plan Year" means the year beginning on March 15 of each year.
1.19 "Retire" or "Retirement" means the cessation of service on the Board of
Directors
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of the Company after attaining five Years of Service, other than by
death, disability or Termination of Service.
1.20 "Successor Corporation" means any corporation or other legal entity
which is the successor to Southwest Gas Corporation, whether resulting
from merger, reorganization or transfer of substantially all of the
assets of Southwest Gas Corporation, regardless of whether such entity
shall expressly agree to continue the Plan.
1.21 "Subsidiaries" means any corporation, partnership, or other
organization which is at least 50 percent owned by the Company or a
Subsidiary of the Company.
1.22 "Terminates Service" or "Termination of Service" means the cessation of
service on the Board of Directors of the Company, either voluntarily or
involuntarily, excluding Retirement, disability or death.
1.23 "Third Party Fiduciary" means an independent third party (a corporate
entity with no other relationship with the Company) selected by the
Company to take over the administration of the Plan upon and after a
Change in Control and to determine appeals of claims denied under the
Plan before and after a Change in Control pursuant to a Third Party
Fiduciary Services Agreement.
1.24 "Third Party Fiduciary Services Agreement" means the agreement with the
Third Party Fiduciary to perform services with respect to the Plan.
1.25 "Trust Agreement" means an agreement establishing a "grantor trust" of
which the Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended (the "Code").
1.26 "Trust Fund or Funds" means the assets of every kind and description
held under any Trust Agreement forming a part of the Plan.
1.27 "Trustee" means any person or entity selected by the Company to act as
trustee under any Trust Agreement at any time of reference.
1.28 "Years of Service" means the length of time, in discrete 12-month
periods, a Participant has served on the board of directors of
Southwest Gas Corporation.
ARTICLE 2
ELIGIBILITY
2.1 A Director shall become eligible to participate in the Plan as of the
effective date of his election as a Director.
2.2 Once eligible to participate in the Plan, a Director has to complete,
execute and
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return to the Committee a Plan Agreement to become a Participant in the
Plan. Continued participation in the Plan is subject to compliance with
any further conditions as may be established by the Committee.
ARTICLE 3
DEFERRAL COMMITMENT
3.1 A Participant may defer up to 100 percent of his Board Fees received
during a Plan Year; provided, that such Deferral exceeds $2,000 per
Plan Year.
3.2 Prior to the commencement of each Plan Year, a Participant will advise
the Committee, in writing, of his deferral commitment for the upcoming
Plan Year. If a Participant fails to so advise the Committee, through
no fault of the Company, he will not be permitted to defer any of his
Board Fees during the upcoming Plan Year.
3.3 A Participant's Deferral commitment will be exercised on a per pay
period basis.
3.4 In the event a Director becomes a Participant in the Plan during a Plan
Year, such Participant may defer up to 100 percent of the remaining
portion of his Board Fees for the Plan Year. Such Participant must make
his Deferral commitment by advising the Committee, in writing, at the
time he elects to become a Participant in the Plan.
3.5 In the event a Participant defaults on his Deferral commitment, the
Participant will not be allowed to make any further Deferrals during
the current Plan Year and may not make any Deferrals for the subsequent
Plan Year.
3.6 The Committee may waive for good cause the default penalty specified in
Article 3.5 upon the request of the Participant.
3.7 The Plan will accept rollover contributions for Participants from the
PriMerit Bank, Federal Savings Bank directors deferral plan.
3.8 A Participant who is entitled to receive cash from the cancellation of
stock options granted under the 1996 Stock Incentive Plan as a result
of a Change in Control may elect to defer receipt of all or a portion
of such income; provided that such election is filed with the Committee
at least six (6) months prior to the date such income would otherwise
have become payable to the Participant. If the Participant makes such
an election, such income shall not be paid to the Participant but
rather shall be treated as a Deferral and added to the Participant's
Account Balance as of the date such income would otherwise have been
paid to the Participant. In addition, for such election to be
effective, the Participant must agree in writing that such option shall
not be exercised at all after the date of the election. Notwithstanding
the foregoing, a Participant's election to defer income resulting from
cancellation of an option shall terminate and the option may be
exercised in accordance with its terms without regard to the election
if the option would otherwise expire prior to cancellation (for
example, because of the Participant's Termination of Service) or
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if the agreement setting forth the terms of the Change in Control is
terminated prior to the closing date set forth in such agreement.
ARTICLE 4
INTEREST, CREDITING AND VESTING
4.1 A Participant's Account Balance at the start of a Plan Year and any
Deferrals made during a Plan Year and rollover contributions from the
PriMerit Bank, Federal Savings Bank directors deferral plan will earn
interest annually at 150 percent of the Moody's Rate. Interest will be
credited to a Participant's account for Deferrals made during the Plan
Year, as if all Deferrals were made on the first day of the Plan Year.
Interest will be credited to a Participant's account for rollover
contributions, from the date such contributions are accepted by the
Plan.
ARTICLE 5
PLAN BENEFIT PAYMENTS
5.1 A Participant's Account Balance will be paid to the Participant as
provided for under the provisions of the Plan.
5.2 A Participant's Account Balance will earn interest under the provisions
of Article 4.1 until the time of Benefit Distribution.
5.3 If a Participant is entitled to receive Plan benefit payments over a
specific benefit payment period, his Account Balance at the
commencement of Benefit Distribution will be credited with an amount
equal to the interest such balance would have earned assuming
distribution in equal monthly installments over the specific benefit
payment period, at a specified interest rate, thereby creating a
Benefit Account Balance. The Benefit Account Balance will then be paid
to the Participant in equal monthly installments over the specific
benefit payment period.
5.4 If there shall be a final determination by the Internal Revenue Service
or a court of competent jurisdiction that the election by a Participant
to defer the payment of any amount in accordance with the terms of this
Plan was not effective to defer the taxation of such amount, then the
Participant shall be entitled to receive a distribution of the amount
determined to be taxable and the Participant's Account Balance shall be
reduced accordingly.
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ARTICLE 6
RETIREMENT AND TERMINATION BENEFIT PAYMENTS
6.1 A Participant who Retires or Terminates Service qualifies to receive
his Account Balance over a period of 60, 120, 180 or 240 months. The
Participant shall elect the payment period; provided that written
notice of such election is filed with the Committee at least one (1)
year prior to his Retirement or Termination of Employment. If a
Participant fails to make such election prior to the time specified,
the payment period will be 240 months.
6.2 A Participant who Retires or Terminates Service may elect to defer his
Benefit Distribution for up to five (5) years from the date on which he
Retires or Terminates Service; provided that written notice of such
election is filed with the Committee at least one (1) year prior to his
Retirement or Termination of Service. If a Participant makes an
election under this Article 6.2, the Participant's Account Balance
shall be paid in one of the optional forms of distribution set forth in
Article 6.1, as elected by the Participant.
6.3 A Participant who has made an election under this Article may
subsequently revoke such election and make another election under this
Article by providing written notice to the Committee; provided,
however, that only the last such election or revocation in effect on
the date which is one (1) year prior to the date on which the
Participant Retires or Terminates Service shall be effective.
Notwithstanding the foregoing, if a Participant Retires or Terminates
Service as a result of a Change in Control or within one (1) year after
March 1, 1999, the date of amendment and restatement of this Plan, the
foregoing provisions of this Article 6 shall be applied by substituting
"six (6) months" for "one (1) year."
6.4 The interest rate used to calculate the amount that will be credited to
a Participant's Account Balance, to determine his Benefit Account
Balance under the provisions of Article 5.3, will be 150 percent of the
Moody's Composite Rate.
ARTICLE 7
PRE-RETIREMENT SURVIVOR BENEFIT PAYMENTS
7.1 Notwithstanding any elections made pursuant to Article 6, if a
Participant dies while he is on the Board of Directors, his Account
Balance will be paid to his Beneficiary in equal monthly installments
over the 180 month survivor benefit payment period.
7.2 The interest rate used to determine the amount that will be credited to
a Participant's Account Balance, to determine his Benefit Account
Balance under the provisions of Article 5.3 following the Participant's
death, will be 150% of the Moody's Composite Rate.
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<PAGE> 8
ARTICLE 8
POST-RETIREMENT SURVIVOR BENEFIT PAYMENTS
8.1 If a Participant dies after the commencement of benefit payments under
Articles 6 or 9 but prior to such benefits having been paid in full,
the Participant's benefit payments will continue to be paid to the
Participant's Beneficiary through the end of the originally awarded
benefit payment period, except as provided for in Article 10.7.
8.2 If a Participant who has elected to postpone Benefit Distribution under
the provisions of Article 6, dies after he Retires or Terminates
Service but prior to the commencement of benefit payments, payment of
benefits to his Beneficiary will be made consistent with such
elections.
ARTICLE 9
DISABILITY BENEFIT PAYMENTS
9.1 The Committee will, in its sole discretion, determine whether a
Participant is disabled under the provisions of the Plan.
9.2 If a Participant is disabled within the first five Years of Service
with the Company, he will receive his Account Balance in a lump sum
payment at Benefit Distribution.
9.3 Notwithstanding any elections made pursuant to Article 6, if a
Participant is disabled after five Years of Service with the Company,
his Account Balance will be paid to him in equal monthly installments
over the 180-month disability benefit payment period.
9.4 If a Participant qualifies to receive his Account Balance over the
disability benefit payment period, the interest rate used to calculate
the amount that will be credited to a Participant's Account Balance, to
determine his Benefit Account Balance under the provisions of Article
5.3, will be 150 percent of the Moody's Composite Rate.
ARTICLE 10
BENEFICIARIES
10.1 A Participant shall have the right to designate any person as his
Beneficiary to whom benefits under this Plan shall be paid in the event
of the Participant's death prior to the total distribution of his
Benefit Account Balance under the Plan. If greater than 50 percent of
the Benefit Account Balance is designated to a Beneficiary other than
the Participant's spouse, such Beneficiary designation must be
consented to by the Participant's spouse. Each Beneficiary designation
must be in written form prescribed by the Committee and will be
effective only when filed with the Committee during the Participant's
lifetime.
10.2 A Participant shall have the right to change the Beneficiary
designation, subject to
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<PAGE> 9
spousal consent under the provisions of Article 10.1, without the
consent of any designated Beneficiary by filing a new Beneficiary
designation with the Committee. The filing of a new Beneficiary
designation form will cancel all Beneficiary designations previously
filed.
10.3 The Committee shall acknowledge, in writing, receipt of each
Beneficiary designation form.
10.4 The Committee shall be entitled to rely on the Beneficiary designation
last filed by the Participant prior to his death. Any payment made in
accordance with such designation shall fully discharge the Company from
all further obligations with respect to the amount of such payments.
10.5 If a Beneficiary entitled to receive benefits under the Plan is a minor
or a person declared incompetent, the Committee may direct payment of
such benefits to the guardian or legal representative of such minor or
incompetent person. The Committee may require proof of incompetency,
minority or guardianship as it may deem appropriate prior to
distribution of any Plan benefits. Such distribution shall completely
discharge the Committee and the Company from all liability with respect
to such payments.
10.6 If no Beneficiary designation is in effect at the time of the
Participant's death, or if the named Beneficiary predeceased the
Participant, then the Beneficiary shall be: (1) the surviving spouse;
(2) if there is no surviving spouse, then his issue per stirpes; or (3)
if no surviving spouse or issue, then his estate.
10.7 If a Beneficiary receiving benefit payments under the provisions of the
Plan dies prior to the completion of the benefit payment period, the
present value of the remaining benefit payments will be paid, in a lump
sum amount, to the contingent Beneficiary designated by the Participant
under the provisions of Article 10.1. If the Participant has failed to
designate a contingent Beneficiary, the present value of the remaining
benefit payments will be paid, in a lump sum amount, to the
Beneficiary's estate. The present value of the remaining benefit
payments will be calculated using the same methodology, including the
same interest rate, as was used to calculate the Participant's annuity
payment calculation, under Article 5.3.
ARTICLE 11
GENERAL
11.1 Amounts payable to a Participant shall be paid exclusively from the
general assets of the Company or from the assets of a grantor trust
within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Code, established for use in funding executive
compensation arrangements and commonly known as a "rabbi trust."
8
<PAGE> 10
11.2 The Company shall have no obligation under the Plan to a Participant or
a Participant's Beneficiary, except as provided in this Master Plan
Document.
11.3 The Participant shall cooperate with the Committee in furnishing all
information requested by the Company to facilitate the payment of his
Benefit Account Balance. Such information may include the results of a
physical examination if any is required for participation in the Plan.
11.4 Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company. No assets of the Company
shall be held under any trust, or held in any way as collateral
security for the fulfilling of the obligations of the Company under the
Plan. Any and all of the Company's assets shall be, and remain, the
general unpledged, unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the
rights of the Participants and Beneficiaries shall be no greater than
those of unsecured general creditors. It is the intention of the
Company that this Plan (and the Trust Funds described in Article 13.1)
be unfunded for purposes of the Code.
11.5 There shall be deducted from each payment made under the Plan or other
compensation payable to the Participant (or Beneficiary) all taxes
which are required to be withheld by the Company in respect to such
payment or this Plan. The Company shall have the right to reduce any
payment (or other compensation) by the amount of cash sufficient to
provide the amount of said taxes.
ARTICLE 12
NO GUARANTEE OF CONTINUING DIRECTORSHIP
12.1 The Company is without power to lawfully assure a Participant continued
tenure as a Director, and nothing herein constitutes a contract of
continuing directorship between the Company and the Participant.
ARTICLE 13
TRUSTS
13.1 The Company may maintain one or more Trust Funds to finance all or a
portion of the benefits under the Plan by entering into one or more
Trust Agreements. Any Trust Agreement is designated as, and shall
constitute, a part of the Plan, and all rights which may accrue to any
person under the Plan shall be subject to all the terms and provisions
of such Trust Agreement. A Trustee shall be appointed by the Committee
or the Board of Directors and shall have such powers as provided in the
Trust Agreement. The Committee or the Board of Directors may modify any
Trust Agreement, in accordance with its terms, to accomplish the
purposes of the Plan and appoint a successor Trustee under the
provisions of such Trust Agreement. By entering into such Trust
Agreement, the Committee or the Board of Directors may
9
<PAGE> 11
vest in the Trustee, or in one or more investment managers (as defined
in ERISA) the power to manage and control the Trust Fund. The
Committee's authority under the provisions of this Article 13.1 will
cease with a Change in Control.
ARTICLE 14
TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN
14.1 The Board of Directors may at any time, without notice, amend or modify
the Plan in whole or in part; provided, however, that (i) no amendment
shall be effective to decrease or restrict (a) the amount of interest
to be credited under the provisions of the Plan, (b) the benefits the
Participant qualifies for or may elect to receive under the provisions
of the Plan, or (c) benefit payments to Participants or Beneficiaries
once such payments have commenced, and (ii) effective March 1,1999, no
amendment or modification of this Article 14, Article 16, or Article 17
of the Plan shall be effective.
14.2 The Board of Directors shall not terminate the Plan until all accrued
benefits have been paid in full under the provisions of the Plan to the
Participants and Beneficiaries.
14.3 The Board of Directors may partially terminate the Plan by instructing
the Committee not to accept any additional Deferral commitments. In the
event of a partial termination, the remaining provisions of the Plan
shall continue to operate and be effective for all Participants in the
Plan, as of the date of such partial termination.
ARTICLE 15
RESTRICTIONS ON ALIENATION OF BENEFITS
15.1 To the maximum extent permitted by law, no interest or benefit under
the Plan shall be assignable or subject in any manner to alienation,
sale, transfer, claims of creditors, pledge, attachment or encumbrances
of any kind.
ARTICLE 16
ADMINISTRATION OF THE PLAN
16.1 Except as otherwise provided in this Article 16, and subject to Article
17, the general administration of the Plan, as well as construction and
interpretation thereof, shall be vested in the Committee. Members of
the Committee may be Participants under the Plan. Specifically, the
Committee shall have the discretion and authority to: (a) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of the Plan; and (b) decide or resolve any and all
questions including interpretations of the Plan. Any individual serving
on the Committee who is a Participant shall not vote or act on any
matter relating solely to himself or herself.
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<PAGE> 12
The number of members of the Committee shall be established by, and the
members shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors.
16.2 Upon and after a Change in Control, the administration of the Plan
shall be vested in a Third Party Fiduciary, as provided for herein and
pursuant to the terms of a Third Party Fiduciary Services Agreement.
Any Third Party Fiduciary Services Agreement is designated as, and
shall constitute, a part of the Plan. The Third Party Fiduciary shall
also have the discretion and authority to: (a) make, amend, interpret,
and enforce all appropriate rules and regulations for the
administration of the Plan; and (b) decide or resolve any and all
questions including interpretation of the Plan and the Trust Agreement.
Except as otherwise provided for in any Trust Agreement, the Third
Party Fiduciary shall have no power to direct the investment of Plan or
Trust Funds or select any investment manager or custodial firm for the
Plan or Trust Agreement. The Company shall pay all reasonable
administrative expenses and fees of the Third Party Fiduciary when it
acts as the administrator of the Plan or pursuant to Article 17. The
Third Party Fiduciary may not be terminated by the Company without the
consent of 50% of the Participants in the Plan.
16.3 In the administration of the Plan, the Committee or the Third Party
Fiduciary, as the case may be, may from time to time employ such
agents, consultants, advisors, and managers as it deems necessary or
useful in carrying out its duties as it sees fit (including acting
through a duly authorized representative) and may from to time to time
consult with counsel to the Company.
16.4 The decision or action of the Committee or the Third Party Fiduciary,
as the case may be, with respect to any question arising out of or in
connection with the administration, interpretation, and application of
the Plan (and the Trust Agreement to the extent provided for in Article
16.2) and the rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons having any interest
in the Plan.
16.5 The Company shall indemnify and save harmless each member of the
Committee, the Third Party Fiduciary, and any employee of the Company
to whom the duties of the Committee may be delegated against any and
all claims, losses, damages, expenses, and liabilities arising from any
action or failure to act with respect to the Plan, except in the case
of fraud, gross negligence, or willful misconduct by the Committee, any
of its members, the Third Party Fiduciary, or any such employee.
16.6 To enable the Committee and the Third Party Fiduciary to perform their
functions, the Company shall supply full and timely information to the
Committee and the Third Party Fiduciary, as the case may be, on all
matters relating to the compensation of all Participants, their
Retirement, death or other cause for Termination of Employment, and
such other pertinent facts as the Committee or the Third Party
Fiduciary may require.
16.7 The Committee or the Third Party Fiduciary, as the case may be, may
alter, at or after Benefit Distribution, the manner and time of
payments to be made to a
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<PAGE> 13
Participant or Beneficiary from that set forth herein, if requested to
do so by such Participant or Beneficiary to meet existing financial
hardships, which the Committee or the Third Party Fiduciary, as the
case may be, determine are the same as or similar in nature to those
identified in Section 1.401(k)-1(d)(2)(iv) of the federal treasury
regulations.
ARTICLE 17
CLAIMS PROCEDURE
17.1 Any Participant or Beneficiary of a deceased Participant (such
Participant or Beneficiary being referred to below as a "Claimant") may
deliver to the Committee a written claim for determination with respect
to benefits available to such Claimant from the Plan. The claim must
state with particularity the determination desired by the Claimant.
17.2 The Committee shall consider a claim and notify the Claimant within 90
calendar days after receipt of a claim in writing:
(a) That the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) That the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant: (i) the specific reason(s) for the
denial of the claim, or any part thereof; (ii) the specific
reference(s) to pertinent provisions of the Plan upon which
the denial was based; (iii) a description of any additional
material or information necessary for the Claimant to perfect
the claim, and an explanation of why such material or
information is necessary; and (iv) an explanation of the claim
review procedure set forth in Article 17.3.
17.3 Within 60 days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimant's
duly authorized representative) may file with the Third Party Fiduciary
a written request for a review of the denial of the claim. Thereafter,
the Claimant (or the Claimant's duly authorized representative) may
review pertinent documents, submit written comments or other documents,
and request a hearing, which the Third Party Fiduciary, in its sole
discretion, may grant.
17.4 The Third Party Fiduciary shall render its decision on review promptly,
and not later than 60 days after the filing of a written request for
review of a denial, unless a hearing is held or other special
circumstances require additional time, in which case the Third Party
Fiduciary's decision must be rendered within 120 calendar days after
such date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain: (i) the specific
reason(s) for the decision; (ii) the specific reference(s) to the
pertinent Plan provisions upon which the decision
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<PAGE> 14
was based; and (iii) such other matters as the Third Party Fiduciary
deems relevant.
17.5 A Claimant's compliance with the foregoing provisions of this Article
17 is a mandatory prerequisite to a Claimant's right to commence any
legal action with respect to any claim for benefits under the Plan.
ARTICLE 18
MISCELLANEOUS
18.1 Any notice given under the Plan shall be in writing and shall be mailed
or delivered to:
SOUTHWEST GAS CORPORATION
Directors Deferral Plan
Administrative Committee
5241 Spring Mountain Road
Las Vegas, NV 89102
and
CRG Fiduciary Services, Inc.
633 West Fifth Street, 53rd floor
Los Angeles, CA 90071-2086
Attn: Managing Director
18.2 The Plan shall be binding upon the Company and any of its successors
and assigns, and upon a Participant, Participant's Beneficiary,
assigns, heirs, executors and administrators.
18.3 The Plan shall be governed by and construed under the laws of the State
of Nevada.
18.4 Headings in this Master Plan Document are inserted for convenience of
reference only. Any conflict between such headings and the text shall
be resolved in favor of the text.
18.5 Masculine pronouns wherever used shall include feminine pronouns and
when the context dictates, the singular shall include the plural.
18.6 In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but the Plan shall be construed and enforced as
if such illegal and invalid provisions had never been inserted herein.
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<PAGE> 15
IN WITNESS WHEREOF, the Company has executed this Amended and Restated Master
Plan Document this 30th day of July 1999.
SOUTHWEST GAS CORPORATION
By
-----------------------------------
Michael O. Maffie
President & Chief Executive Officer
14
<PAGE> 1
EXHIBIT 10.15
SOUTHWEST GAS CORPORATION
BOARD OF DIRECTORS
RETIREMENT PLAN
Effective January 1, 1988
Amended Effective May 9, 1990
Amended and Restated Effective October 1, 1993
Amended and Restated Effective March 1, 1999
<PAGE> 2
SOUTHWEST GAS CORPORATION
BOARD OF DIRECTORS RETIREMENT PLAN
PURPOSE
The principal objective of this Board of Directors Retirement Plan is to ensure
that a competitive level of retirement income is paid in order to attract and
retain Directors of Southwest Gas Corporation. The Plan is designed to provide a
benefit that will meet this objective. Eligibility for participation in the Plan
shall be limited to outside, non-employee Directors retiring after January 1,
1988. The original Plan was effective on January 1, 1988, and amended May 9,
1990, October 1, 1993 and March 1, 1999.
I. DEFINITIONS
1.1 "Board" means the Board of Directors of the Company.
1.2 "Change in Control" means the first to occur of any of the following
events:
(a) Any "person" (as the term is used in Sections 13 and 14(d)(2)
of the Securities Exchange Act of 1934 ("Exchange Act")) who
becomes a beneficial owner (as that term is used in Section
13(d) of the Exchange Act), directly or indirectly, of 50% or
more of the Company's capital stock entitled to vote in the
election of directors; or
(b) During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan,
individuals who, at the beginning of such period constitute
the board of directors of the Company, and any new director
(other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction
described in clause (a) of this Section 1.2) whose election by
the board of directors or nomination for election by the
Company's shareholders was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office,
who either were directors at the beginning of the period or
whose election or nomination for election was previously
approved, cease for any reason to constitute at least a
majority thereof.
1.3 "Committee" means the Compensation Committee of the Board to which the
Board has given authority to administer the Plan. After a Change in
Control, the Committee shall cease to have any powers under the Plan
and all powers previously vested in the Committee under the Plan will
then be vested in the Third Party Fiduciary.
1.4 "Company" means Southwest Gas Corporation and any Successor
Corporation.
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<PAGE> 3
1.5 "Director" means an outside, non-employee member of the board of
directors of Southwest Gas Corporation prior to a Change in Control.
1.6 "Effective Date" previously was October 1, 1993. This amended and
restated Plan is effective March 1, 1999.
1.7 "Participant" means an outside, non-employee Director. Inside Directors
and retired employees of the Company are excluded from participation in
the Plan.
1.8 "Plan" is the Southwest Gas Board of Directors Retirement Plan as
described in this document.
1.9 "Retiree" means a former Director eligible for receiving benefits from
the Plan.
1.10 "Retire" or "Retirement" means the termination of a Director's service
on the Board on one of the dates specified in Section II.
1.11 "Successor Corporation" means any corporation or other legal entity
which is the successor to Southwest Gas Corporation, whether resulting
from merger, reorganization or transfer of substantially all of the
assets of Southwest Gas Corporation, regardless of whether such entity
shall expressly agree to continue the Plan.
1.12 "Third Party Fiduciary" means an independent third party (a corporate
entity with no other relationship with the Company) selected by the
Company to take over the administration of the Plan upon and after a
Change in Control and to determine appeals of claims denied under the
Plan before and after a Change in Control pursuant to a Third Party
Fiduciary Services Agreement.
1.13 "Third Party Fiduciary Services Agreement" means the agreement with the
Third Party Fiduciary to perform services with respect to the Plan.
1.14 "Trust Agreement" means an agreement establishing a "grantor trust" of
which the Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended (the "Code").
1.15 "Trust Fund or Funds" means the assets of every kind and description
held under any Trust Agreement forming a part of the Plan.
1.16 "Trustee" means any person or entity selected by the Company to act as
trustee under any Trust Agreement at any time of reference.
1.17 "Years of Service" means the length of time, in discrete 12-month
periods, a Participant has served on the board of directors of
Southwest Gas Corporation.
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<PAGE> 4
II. ELIGIBILITY FOR BENEFITS
2.1 Each Participant is eligible to Retire and receive a benefit under this
Plan beginning on one of the following dates, provided he qualifies:
(a) "Normal Retirement Date," which is the first day of the month
following the month in which the Participant reaches age 65,
provided he has at least ten Years of Service.
(b) "Mandatory Retirement Date," which is the first day of the
month following the month in which the Participant reaches age
72.
(c) "Postponed Retirement Date," which is the first day of the
month following the Participant's Normal Retirement Date, but
no later than the Mandatory Retirement Date, in which the
Participant terminates service on the Board, provided he has
at least ten Years of Service.
(d) "Disability Retirement Date," which is the first day of the
month following the month in which the Participant's total and
permanent disability began, as determined by the Committee,
but no later than the Participant's Normal Retirement Date,
provided he has at least ten Years of Service at the time of
the disability.
2.2 A Participant is eligible to take "Early Retirement" from the Board
prior to age 65 provided he has at least ten Years of Service. The
Participant taking "Early Retirement" will be eligible to receive
benefits pursuant to Section 3.3 when he reaches age 65.
2.3 Notwithstanding the foregoing and upon the occurrence of a Change in
Control, a Participant will Retire immediately prior to such an event
and receive the Normal Retirement Benefit beginning the first day of
the month following such an event, provided he has at least eight Years
of Service at such time.
III. AMOUNT AND FORM OF RETIREMENT BENEFIT
3.1 Normal Retirement Benefit. The annual benefit payable under the Plan
will be the amount of the Participant's annual retainer fee on his
Normal Retirement Date and will be paid for life.
3.2 Mandatory Retirement Benefit. The annual benefit payable under the Plan
will be the amount of the Participant's annual retainer fee on his
Mandatory Retirement Date and will be paid for life.
3.3 Early Retirement Benefit. The annual benefit payable for Early
Retirement under the Plan will be the amount of the Participant's
annual retainer fee on his Early
3
<PAGE> 5
Retirement date and will be paid for life commencing when the
Participant reaches age 65.
3.4 Postponed Retirement Benefit. The annual benefit payable at a Postponed
Retirement Date under the Plan will be the amount of the Participant's
annual retainer fee on the date of his postponed retirement and will be
paid for life.
3.5 Disability Retirement Benefit. The annual benefit under the Plan for a
totally and permanently disabled Participant, payable at a Disability
Retirement Date, will be the amount of the Participant's annual
retainer fee on the date of the disability and will be paid for life.
3.6 Discretionary Benefits. The Board may, at its sole discretion, grant to
an eligible Participant an increased benefit of $1,000 per year for
life for each ten-year period of service beyond the minimum qualifying
service period of ten years.
IV. PAYMENT OF RETIREMENT BENEFITS
4.1 One-quarter of the benefit determined in accordance with Section III
will be payable on the first day of each calendar quarter. The initial
benefit payment will be paid at the time of Retirement or within 30
days thereof, and will be prorated for a partial quarter if the
Retirement date is not on the first day of a quarter.
4.2 Benefit payments will cease on the first day of the calendar quarter
following the Retiree's death.
V. NO DEATH BENEFITS
5.1 No benefits are payable under this Plan in the event of death.
VI. GENERAL
6.1 Amounts payable to a Participant shall be paid from the general assets
of the Company or from the assets of a grantor trust within the meaning
of subpart E, part I, subchapter J, chapter 1, subtitle A of the Code,
established for use in funding executive compensation arrangements and
commonly known as a "Rabbi Trust."
6.2 The Company shall have no obligation under the Plan to a Participant,
except as provided in this Plan.
6.3 The Participant must cooperate with the Committee in furnishing all
information requested by the Company to facilitate the payment of his
benefit.
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<PAGE> 6
6.4 Participants and their heirs, successors, and assigns shall have no
legal or equitable rights, claims, or interest in any specific property
or assets of the Company. No assets of the Company shall be held under
any trust, or held in any way as collateral security for the fulfilling
of the obligations of the Company under the Plan. Any and all of the
Company's assets shall be, and remain, the general unpledged,
unrestricted assets of the Company. The Company's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of the
Company to pay money in the future, and the rights of the Participants
shall be no greater than those of unsecured general creditors. It is
the intention of the Company that this Plan (and the Trust Funds
described in Section VII) be unfunded for purposes of the Code.
6.5 There shall be deducted from each payment made under the Plan or other
compensation payable to the Participant all taxes which are required to
be withheld by the Company in respect to such payment or this Plan. The
Company shall have the right to reduce any payment (or other
compensation) by the amount of cash sufficient to provide the payment
amount of said taxes.
6.6 The Company is without power to lawfully assure a Participant continued
tenure as a Director, and nothing herein constitutes a contract for
continuing service between the Company and the Participant.
VII. TRUSTS
7.1 The Company may maintain one or more Trust Funds to finance all or a
portion of the benefits under the Plan by entering into one or more
Trust Agreement(s). Any Trust Agreement is designated as, and shall
constitute, a part of the Plan, and all rights which may accrue to any
person under the Plan shall be subject to all the terms and provisions
of such Trust Agreement. A Trustee shall be appointed by the Committee
or the Board and shall have such powers as provided in the Trust
Agreement. The Committee or the Board may modify any Trust Agreement,
in accordance with its terms, to accomplish the purposes of the Plan
and appoint a successor Trustee under the provisions of such Trust
Agreement. By entering into such Trust Agreement, the Committee or the
Board may vest in the Trustee, or in one or more investment managers
(as defined in ERISA), the power to manage and control the Trust Fund.
The Committee's authority under the provisions of this Section 7.1 will
cease with a Change in Control.
VIII. TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN
8.1 The Board may, at any time, without notice, amend or modify the Plan in
whole or in part; provided, however, that: (i) no amendment or
modification shall be effective to decrease or restrict (a) the benefit
the Participant qualifies for under the provisions of the Plan, or (b)
benefit payments to Participants once such payments
5
<PAGE> 7
have commenced; and (ii) effective March 1, 1999, no amendment or
modification of this Section VIII, Section X, or Section XI of the Plan
shall be effective.
8.2 The Board shall not terminate the Plan until all benefits have been
paid in full under the provisions of the Plan.
IX. RESTRICTIONS ON ALIENATION OF BENEFITS
9.1 To the maximum extent permitted by law, no interest or benefit under
the Plan shall be assignable or subject in any manner to alienation,
sale, transfer, claims of creditors, pledge, attachment, or
encumbrances of any kind.
X. ADMINISTRATION OF THE PLAN
10.1 Except as otherwise provided in this Section X, and subject to Section
XI, the general administration of the Plan, as well as construction and
interpretation thereof, shall be vested in the Committee. Specifically,
the Committee shall have the discretion and authority to: (a) make,
amend, interpret, and enforce all appropriate rules and regulations for
the administration of the Plan; and (b) decide or resolve any and all
questions including interpretations of the Plan. Any individual serving
on the Committee who is a Participant shall not vote or act on any
matter relating solely to himself or herself. The number of members of
the Committee shall be established by, and the members shall be
appointed from time to time by, and shall serve at the pleasure of, the
Board of Directors. Members of the Committee may be Participants under
the Plan.
10.2 Upon and after a Change in Control, the administration of the Plan
shall be vested in a Third Party Fiduciary, as provided for herein and
pursuant to the terms of a Third Party Fiduciary Services Agreement.
Any Third Party Fiduciary Services Agreement is designated as, and
shall constitute, a part of the Plan. The Third Party Fiduciary shall
also have the discretion and authority to: (a) make, amend, interpret,
and enforce all appropriate rules and regulations for the
administration of the Plan; and (b) decide or resolve any and all
questions including interpretation of the Plan and the Trust Agreement.
Except as otherwise provided for in any Trust Agreement, the Third
Party Fiduciary shall have no power to direct the investment of Plan or
Trust Funds or select any investment manager or custodial firm for the
Plan or Trust Agreement. The Company shall pay all reasonable
administrative expenses and fees of the Third Party Fiduciary when it
acts as the administrator of the Plan or pursuant to Section XI. The
Third Party Fiduciary may not be terminated by the Company without the
consent of 50% of the Participants in the Plan.
10.3 In the administration of the Plan, the Committee or the Third Party
Fiduciary, as the case may be, may from time to time employ such
agents, consultants, advisors, and managers as it deems necessary or
useful in carrying out its duties as it sees fit (including acting
through a duly authorized representative) and may from to time to time
consult with counsel to the Company.
6
<PAGE> 8
10.4 The decision or action of the Committee or the Third Party Fiduciary,
as the case may be, with respect to any question arising out of or in
connection with the administration, interpretation, and application of
the Plan (and the Trust Agreement to the extent provided for in Section
10.2) and the rules and regulations promulgated hereunder shall be
final and conclusive and binding upon all persons having any interest
in the Plan.
10.5 The Company shall indemnify and save harmless each member of the
Committee, the Third Party Fiduciary, and any employee of the Company
to whom the duties of the Committee may be delegated against any and
all claims, losses, damages, expenses, and liabilities arising from any
action or failure to act with respect to the Plan, except in the case
of fraud, gross negligence, or willful misconduct by the Committee, any
of its members, the Third Party Fiduciary, or any such employee.
10.6 To enable the Committee and the Third Party Fiduciary to perform their
functions, the Company shall supply full and timely information to the
Committee and the Third Party Fiduciary, as the case may be, on all
matters relating to the compensation of all Participants, their
Retirement, death or other cause for termination of service, and such
other pertinent facts as the Committee or the Third Party Fiduciary may
require.
XI. CLAIMS PROCEDURE
11.1 Any Participant (such Participant being referred to below as a
"Claimant") may deliver to the Committee a written claim for
determination with respect to benefits available to such Claimant from
the Plan. The claim must state with particularity the determination
desired by the Claimant.
11.2 The Committee shall consider a claim and notify the Claimant within 90
calendar days after receipt of a claim in writing:
(a) That the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) That the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant: (i) the specific reason(s) for the
denial of the claim, or any part thereof; (ii) the specific
reference(s) to pertinent provisions of the Plan upon which
the denial was based; (iii) a description of any additional
material or information necessary for the Claimant to perfect
the claim, and an explanation of why such material or
information is necessary; and (iv) an explanation of the claim
review procedure set forth in Section 11.3.
7
<PAGE> 9
11.3 Within 60 days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimant's
duly authorized representative) may file with the Third Party Fiduciary
a written request for a review of the denial of the claim. Thereafter,
the Claimant (or the Claimant's duly authorized representative) may
review pertinent documents, submit written comments or other documents,
and request a hearing, which the Third Party Fiduciary, in its sole
discretion, may grant.
11.4 The Third Party Fiduciary shall render its decision on review promptly,
and not later than 60 days after the filing of a written request for
review of a denial, unless a hearing is held or other special
circumstances require additional time, in which case the Third Party
Fiduciary's decision must be rendered within 120 calendar days after
such date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain: (i) the specific
reason(s) for the decision; (ii) the specific reference(s) to the
pertinent Plan provisions upon which the decision was based; and (iii)
such other matters as the Third Party Fiduciary deems relevant.
11.5 A Claimant's compliance with the foregoing provisions of this Section
XI is a mandatory prerequisite to a Claimant's right to commence any
legal action with respect to any claim for benefits under the Plan.
XII. MISCELLANEOUS
12.1 No Director will participate in an action of the Committee or the Board
on a matter that solely applies to that Director. Such matters will be
determined by a majority of the rest of the Committee or the Board.
12.2 Each Participant will receive a copy of this Plan, and the Committee
will make available for any Participant's inspection a copy of the
rules and regulations the Committee uses in administering the Plan.
12.3 This Plan is established under, and will be construed according to, the
laws of the state of Nevada.
12.4 The Plan shall be binding upon the Company and any of its successors
and assigns, and upon a Participant, Participant's beneficiary,
assigns, heirs, executors, and administrators.
12.5 Masculine pronouns wherever used shall include feminine pronouns and
when the context dictates, the singular shall include the plural.
12.6 In case any provision of the Plan shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but the Plan shall be construed and enforced as
if such illegal and invalid provisions had never been inserted herein.
8
<PAGE> 10
12.7 Any notice given under the Plan shall be in writing and shall be mailed
or delivered to:
SOUTHWEST GAS CORPORATION
Board of Directors Retirement Plan
Compensation Committee
5241 Spring Mountain Road
Las Vegas, NV 89102
and
CRG Fiduciary Services, Inc.
633 West Fifth Street, 53rd floor
Los Angeles, CA 90071-2086
Attn: Managing Director
IN WITNESS WHEREOF, the Company has executed this Amended and Restated Board of
Directors Retirement Plan this 30th day of July 1999.
SOUTHWEST GAS CORPORATION
By
-----------------------------------
Thomas Y. Hartley
Chairman of Board of Directors
By
-----------------------------------
Michael O. Maffie
President & Chief Executive Officer
9
<PAGE> 1
EXHIBIT 10.16
================================================================================
FINANCING AGREEMENT
Dated as of October 1, 1999
By and Between
CLARK COUNTY, NEVADA
and
SOUTHWEST GAS CORPORATION
relating to
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SOUTHWEST GAS CORPORATION PROJECT)
SERIES 1999A
and
CLARK COUNTY, NEVADA
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SOUTHWEST GAS CORPORATION PROJECT)
TAXABLE SERIES 1999B
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS...............................................................................1
SECTION 1.1 Definitions of Terms........................................................1
SECTION 1.2 Number and Gender...........................................................1
SECTION 1.3 Articles, Sections..........................................................1
ARTICLE II REPRESENTATIONS...........................................................................2
SECTION 2.1 Representations by the Issuer................................................2
SECTION 2.2 Representations by the Borrower..............................................2
ARTICLE III THE PROJECT; ISSUANCE OF THE BONDS........................................................4
SECTION 3.1 The Project..................................................................4
SECTION 3.2 Agreement to Issue Bonds; Application of Bond Proceeds.......................4
SECTION 3.3 Disbursements from the Construction Fund and Costs of Issuance Fund..........4
SECTION 3.4 Investment of Moneys.........................................................5
SECTION 3.5 Costs of Issuance............................................................6
ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT.........................................................6
SECTION 4.1 Loan of Bond Proceeds........................................................6
SECTION 4.2 Loan Repayments and Other Amounts Payable....................................6
SECTION 4.3 Unconditional Obligation.....................................................8
SECTION 4.4 Payments Pledged and Assigned................................................9
SECTION 4.5 Payment of the Bonds and Other Amounts.......................................9
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS..........................................................9
SECTION 5.1 Right of Access to the Project and Records...................................9
SECTION 5.2 Borrower's Maintenance of Its Existence; Assignments........................10
SECTION 5.3 Establishment of Completion Date; Obligation of Borrower to Complete........11
SECTION 5.4 Maintenance and Repair; Taxes; Utility and Other Charges....................12
SECTION 5.5 Qualification in Nevada.....................................................12
SECTION 5.6 No Warranty by the Issuer...................................................12
SECTION 5.7 Agreement as to Use of the Project..........................................12
</TABLE>
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TABLE OF CONTENTS (Continued)
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SECTION 5.8 Notices and Certificates Required to be Delivered to the Trustee............12
SECTION 5.9 Borrower to Furnish Notice of Adjustments of Interest Rate Periods..........13
SECTION 5.10 Information Reporting.......................................................13
SECTION 5.11 Tax Covenants; Rebate.......................................................13
SECTION 5.12 [Reserved]..................................................................14
SECTION 5.13 Continuing Disclosure.......................................................14
SECTION 5.14 Alternate Liquidity Facility................................................14
SECTION 5.15 Bond Insurance, Liquidity Facility..........................................15
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES............................................................16
SECTION 6.1 Events of Default Defined...................................................16
SECTION 6.2 Remedies on Default.........................................................17
SECTION 6.3 No Remedy Exclusive.........................................................19
SECTION 6.4 Agreement to Pay Fees and Expenses of Counsel...............................19
SECTION 6.5 No Additional Waiver Implied by One Waiver; Consents to Waivers.............20
ARTICLE VII OPTION AND OBLIGATION OF BORROWER TO PREPAY...............................................20
SECTION 7.1 Option to Prepay............................................................20
SECTION 7.2 Obligation to Prepay........................................................20
SECTION 7.3 Notice of Prepayment; Amount to be Prepaid..................................20
SECTION 7.4 Cancellation at Expiration of Term..........................................21
ARTICLE VIII NON-LIABILITY OF ISSUER...................................................................21
SECTION 8.1 Non-Liability of the Issuer.................................................21
ARTICLE IX MISCELLANEOUS ............................................................................22
SECTION 9.1 Notices.....................................................................22
SECTION 9.2 Assignments.................................................................22
SECTION 9.3 Severability................................................................22
SECTION 9.4 Execution of Counterparts...................................................22
SECTION 9.5 Amounts Remaining in Bond Fund..............................................22
</TABLE>
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TABLE OF CONTENTS (Continued)
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SECTION 9.6 Amendments, Changes and Modifications.......................................22
SECTION 9.7 Governing Law...............................................................23
SECTION 9.8 Authorized Issuer and Borrower Representatives..............................23
SECTION 9.9 Term of the Agreement.......................................................23
SECTION 9.10 Binding Effect..............................................................23
SECTION 9.11 Trustee as a Party in Interest and Third Party Beneficiary..................23
EXHIBIT A Description of the Project...............................................................A-1
</TABLE>
-iii-
<PAGE> 5
THIS FINANCING AGREEMENT made and entered into as of October 1, 1999
(this "Agreement"), by and between CLARK COUNTY, NEVADA, a political subdivision
of the State of Nevada, party of the first part (hereinafter sometimes referred
to as the "Issuer"), and SOUTHWEST GAS CORPORATION, a California corporation,
party of the second part (hereinafter sometimes referred to as the "Borrower"),
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Issuer is entering into an Indenture of Trust, dated as of
October 1, 1999 (the "Indenture"), with Harris Trust and Savings Bank, as
trustee (the "Trustee") thereunder, pursuant to which the Clark County, Nevada
Industrial Development Revenue Bonds (Southwest Gas Corporation Project) Series
1999A, and its Clark County, Nevada Industrial Development Revenue Bonds
(Southwest Gas Corporation Project) Taxable Series 1999B, will be issued and
secured, and providing for the further security and liquidity for such Bonds by
Bond Insurance and, if applicable, a Liquidity Facility, as such terms are
defined in the Indenture; and
WHEREAS, the Issuer hereby confirms and the Borrower hereby
acknowledges and adopts the recitals to the Indenture as though fully set forth
here;
NOW, THEREFORE, in consideration of the respective representations and
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions of Terms. Except as defined below, for all
purposes of this Agreement, unless the context clearly requires otherwise, all
terms defined in Article I of the Indenture have the same meanings in this
Agreement.
"Event of Default" under this Agreement is defined in Section
6.1.
SECTION 1.2 Number and Gender. The singular form of any word used
herein, including the terms defined in Section 1.02 of the Indenture, shall
include the plural, and vice versa. The use herein of a word of any gender shall
include all genders.
SECTION 1.3 Articles, Sections. Unless otherwise specified, references
to Articles, Sections and other subdivisions of this Agreement are to the
designated Articles, Sections and other subdivisions of this Agreement as
originally executed. The words "hereof," "herein," "hereunder" and words of
similar import refer to this Agreement as a whole. The headings or titles of the
several articles and sections, and the table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not affect the
meaning, construction or effect of the provisions hereof.
1
<PAGE> 6
ARTICLE II
REPRESENTATIONS
SECTION 2.1 Representations by the Issuer. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Issuer is a political subdivision of the State of Nevada.
Under the provisions of the Act, the Issuer has the power to enter into the
transactions contemplated by this Agreement and to carry out its obligations
hereunder. By proper action, the Issuer has been duly authorized to execute,
deliver and duly perform this Agreement and the Indenture. To the extent the
foregoing representation involves a legal conclusion, such representation is
made in reliance on the opinion of Bond Counsel.
(b) To finance or refinance part of the Cost of the Project,
including the refunding of the Refunded Bonds, the Issuer will issue the Bonds,
which will mature, bear interest and be subject to redemption as provided in the
Indenture.
(c) The Issuer's interest in this Agreement (except certain
rights of the Issuer to payment of fees and expenses and indemnification, to
rights of inspection and to consents and rights to receive any notices,
certificates, requests, requisitions and other communications) will be pledged
to the Trustee as security for payment of the principal of, and premium, if any,
and interest on the Bonds.
(d) The Issuer has not pledged and will not pledge its interest
in this Agreement for any purpose other than to secure the Bonds under the
Indenture.
(e) The Issuer is not in default under any of the provisions of
the laws of the State of Nevada which default would affect its existence or its
powers referred to in subsection (a) of this Section 2.1.
(f) The Issuer has found and determined and hereby finds and
determines that all requirements of the Act with respect to the issuance of the
Bonds and the execution of this Agreement and the Indenture have been complied
with and that financing or refinancing the Project, including the refunding of
the Refunded Bonds, by issuing the Bonds and entering into this Agreement and
the Indenture is in the public interest, serves the public purposes and meets
the requirements of the Act.
(g) On September 15, 1998, the Issuer adopted an initial
resolution authorizing the issuance of bonds in an amount not to exceed
$50,000,000 to finance a portion of the Cost of the Project. On March 2, 1999,
the Issuer adopted its resolution approving the issuance of the Bonds.
(h) No member, officer or other official of the Issuer has any
interest whatsoever in the Borrower or in the transactions contemplated by this
Agreement.
2
<PAGE> 7
SECTION 2.2 Representations by the Borrower. The Borrower makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Borrower is a corporation duly incorporated and in good
standing in the State of California, is duly qualified to transact business and
in good standing in the State, has power to enter into and by proper corporate
action has been duly authorized to execute and deliver this Agreement and all
other documents contemplated hereby to be executed by the Borrower in connection
with the issuance and sale of the Bonds.
(b) Neither the execution and delivery of this Agreement or any
other documents contemplated hereby to be executed by the Borrower in connection
with the issuance and sale of the Bonds, the consummation of the transactions
contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement, conflicts with or results in a breach of any of
the terms, conditions or provisions of the Borrower's articles of incorporation
or by-laws or of any corporate actions or of any agreement or instrument to
which the Borrower is now a party or by which it is bound, or constitutes a
default (with due notice or the passage of time or both) under any of the
foregoing, or result in the creation or imposition of any prohibited lien,
charge or encumbrance whatsoever upon any of the property or assets of the
Borrower under the terms of any instrument or agreement to which the Borrower is
now a party or by which it is bound.
(c) The Cost of the Project is as set forth in the Tax
Certificate and has been determined in accordance with sound
engineering/construction and accounting principles. All the information provided
by, and all the representations made by, the Borrower in the Tax Certificate are
true and correct as of the date thereof.
(d) The Project consists of those facilities described in Exhibit
A to this Agreement and in the Southwest Gas Corporation Engineering Certificate
dated the date of issuance of the Series 1999A Bonds (the "Engineering
Certificate") which is incorporated by reference herein, and the Borrower shall
not make any changes to the Project except as otherwise permitted hereunder or
to the operation thereof which would affect the qualification of the Project
under the Act or, after the conversion of any Bonds to a Tax-Exempt Series,
impair the Tax-Exempt status of the Bonds of a Tax-Exempt Series. In particular,
the Borrower shall comply with all requirements set forth in the Tax
Certificate. The Borrower intends to cause the Project to be used for the local
furnishing of natural gas until the principal of, the premium, if any, and the
interest on the Bonds shall have been paid.
(e) The Borrower has and will have title to and all necessary
easements to install the Project, sufficient to carry out the purposes of this
Agreement.
(f) At the time of submission of an application to the Issuer for
financial assistance in connection with the Project and on the dates on which
the Issuer took action on such application, permanent financing for the Project
had not otherwise been obtained or arranged.
(g) All certificates, approvals, permits and authorizations with
respect to the construction of the Project of agencies of applicable local
governments, the State of Nevada and the federal government have been obtained
or will be obtained in the normal course of business.
3
<PAGE> 8
(h) No event has occurred and no condition exists which would
constitute an Event of Default or which with the passing of time or with the
giving of notice or both would become such an Event of Default.
(i) To the best of the knowledge of the Borrower, no member,
officer, or other official of the Issuer has any interest whatsoever in the
Borrower or in the transactions contemplated by this Agreement.
(j) The Borrower has reviewed the Indenture and hereby accepts
the terms thereof.
ARTICLE II
THE PROJECT; ISSUANCE OF THE BONDS
SECTON 3.1 The Project. The Borrower agrees that it will acquire,
construct, equip, and install, or complete the acquisition, construction,
equipping, and installation of the Project and all other facilities and real and
personal property necessary for the operation of the Project and at all times
shall operate the Project as a "project" within the meaning of the Act and so
that the Project constitutes Exempt Facilities and substantially in accordance
with the Plans and Specifications. The Borrower agrees to proceed with due
diligence to complete the Project within three years from the date hereof.
SECTION 3.2 Agreement to Issue Bonds; Application of Bond Proceeds. In
order to provide funds to lend to the Borrower to finance or refinance part of
the Cost of the Project as provided in Section 4.1 hereof, the Issuer agrees
that it will issue under the Indenture and sell and cause to be delivered to the
Purchasers thereof its Series 1999A Bonds and its Series 1999B Bonds in an
aggregate principal amount not to exceed $35,000,000, each bearing interest and
maturing as set forth in the Indenture. The Issuer will thereupon deposit the
proceeds received from the sale of the Bonds as provided in Section 2.02(e) of
the Indenture.
SECTION 3.3 Disbursements from the Construction Fund and Costs of
Issuance Fund. The Company will request pursuant to the terms of the Indenture,
authorize and direct the Trustee to disburse the moneys in the Construction Fund
to or on behalf of the Borrower, upon compliance with Section 6.06 of the
Indenture, for the following purposes (but, subject to the provisions of Section
3.4 hereof, for no other purpose):
(a) Payment to the Borrower of such amounts, if any, as shall be
necessary to reimburse the Borrower, in full for all advances and payments made
by it at any time prior to or after the delivery of the Bonds for expenditures
incurred in connection with the preparation of plans and specifications for the
Project (including any preliminary study or planning of the Project or any
aspect thereof) and the acquisition, construction and installing of the Project.
(b) Payment for labor, services, materials and supplies used or
furnished in site improvement and in the acquisition, construction and
installing of the Project and miscellaneous expenditures incidental to any of
the foregoing items.
4
<PAGE> 9
(c) Payment of the fees, if any, for architectural, engineering,
legal, underwriting and supervisory services with respect to the Project and the
Bonds.
(d) Payment of the premiums on all insurance that was required to
be acquired and maintained in connection with the Project during the
construction period with respect to the Project.
(e) Payment of the taxes, assessments and other charges, if any,
that may have become payable during the construction period with respect to the
Project.
(f) Payment of expenses incurred in seeking to enforce any remedy
against any contractor or subcontractor or any other third party in respect of
any default under a contract relating to the Project.
(g) Payment of any other costs which constitute a part of the
Cost of the Project in accordance with generally accepted accounting principles,
which are permitted by the Act and which will not adversely affect the
Tax-Exempt status of the Bonds of a Tax-Exempt Series.
Each of the payments referred to in Sections 3.3(a)-(g) shall be made
upon receipt by the Trustee of a written requisition in the form prescribed by
Section 6.06 of the Indenture, signed by the Authorized Borrower Representative.
The Borrower will authorize and direct the Trustee, upon compliance
with Section 6.07 of the Indenture, to disburse the moneys in the Costs of
Issuance Fund to or on behalf of the Borrower only for Costs of Issuance. Each
of the payments referred to in this paragraph shall be made upon receipt by the
Trustee of a written requisition in the form prescribed by Section 6.07 of the
Indenture.
The Borrower covenants and agrees that at all times at least 97% of the
moneys so disbursed out of the Construction Fund will be used to pay or
reimburse the Borrower for the payment of qualifying costs of Exempt Facilities
as described in the Tax Certificate. The Borrower further covenants and agrees
that it will not take any action or authorize or permit, any action to be taken
which would adversely affect the Tax-Exempt status of the Bonds of a Tax-Exempt
Series.
The Borrower understands that the Tax Certificate may impose additional
restrictions on withdrawals from the Construction Fund, and the Borrower agrees
to be bound by such restrictions, if any.
SECTION 3.4 Investment of Moneys . Any moneys held as a part of the
Bond Fund or the Construction Fund or the Costs of Issuance Fund shall be
invested or reinvested by the Trustee at the written direction of an Authorized
Borrower Representative as to specific investments, to the extent permitted by
law, in accordance with Section 7.01 of the Indenture. The Borrower shall not
direct the Trustee to make any investments or reinvestments other than those
permitted by the Indenture and as permitted by law. In making any such
investments, the Trustee may rely on directions delivered to it pursuant to this
Section, and the Trustee and the Issuer shall be relieved of all liability with
respect to making such investments in accordance
5
<PAGE> 10
with such directions. The Borrower agrees that to the extent any moneys in the
Bond Fund represent moneys held for the payment of the principal of Bonds which
have become due at maturity or on a redemption date and the premium, if any, on
such Bonds or interest due on Bonds in all cases where Bonds have not been
presented for payment and paid or such interest is unclaimed, or to the extent
any moneys are held by the Trustee for the payment of the purchase price of
Bonds which have not been presented for payment, such moneys shall not be
invested.
SECTION 3.5 Costs of Issuance. The Borrower covenants and agrees to pay
all costs incurred in connection with the issuance of the Bonds, which may be
reimbursed or paid out of the proceeds of the Bonds to the extent permitted by
the Act, the Code and the Tax Certificate, and the Issuer shall have no
obligation with respect to such costs.
ARTICLE IV
LOAN AND PROVISIONS FOR REPAYMENT
SECTION 4.1 Loan of Bond Proceeds. (a) The Issuer agrees, upon the
terms and conditions in this Agreement, to lend to the Borrower the proceeds
received by the Issuer from the sale of the Bonds in order to finance or
refinance a portion of the Cost of the Project. The Issuer's obligation herein
shall be solely to deposit the proceeds of the Bonds with the Trustee as
provided in Section 3.2 hereof. Upon such deposit, the Issuer will be deemed to
have made two loans to the Borrower, one in an amount equal to the principal
amount of the Series 1999A Bonds and one in an amount equal to the principal
amount of the Series 1999B Bonds.
(b) The Issuer and the Borrower expressly reserve the right to
enter into, to the extent permitted by law, an agreement or agreements other
than this Agreement, with respect to the issuance by the Issuer, under an
indenture or indentures other than the Indenture, of obligations to provide
additional funds to pay the Cost of the Project or to refund all or any
principal amount of the Bonds (or any portions thereof), or any combination
thereof.
SECTION 4.2 Loan Repayments and Other Amounts Payable. (a) On each date
provided in or pursuant to the Indenture for the payment of principal (whether
at maturity or upon redemption or acceleration) of and/or premium, if any,
and/or interest on the Bonds, until the principal of and premium, if any, and
interest on the Bonds shall have been fully paid or provision for the payment
thereof shall have been made in accordance with the Indenture, the Borrower
shall pay to the Trustee in immediately available funds, for deposit in the Bond
Fund, as a repayment installment of the loan of the proceeds of the Bonds
pursuant to Section 4.1 hereof, a sum equal to the amount payable on such
interest payment or redemption or acceleration or maturity date as principal
(whether at maturity or upon redemption or acceleration) of and premium, if any,
and interest on the Bonds as provided in the Indenture. In the event the
Borrower shall fail to make any of the payments required in this subsection, the
payment so in default shall continue as an obligation of the Borrower until the
amount in default shall have been fully paid.
(b) The Borrower shall pay to the Trustee amounts equal to the
amounts to be paid by the Trustee for the purchase of Bonds which have not been
remarketed pursuant to Article IV of the Indenture. Such amounts shall be paid
by the Borrower to the Trustee, acting as
6
<PAGE> 11
Tender Agent (or, for so long as the Bonds are Book-Entry Bonds, to the
Securities Depository), in immediately available funds on the dates and no later
than the times such payments pursuant to Section 4.05 of the Indenture are to be
made. In the event the Borrower shall fail to make any of the payments required
in this subsection, the payment so in default shall continue as an obligation of
the Borrower until the amount in default shall have been fully paid. The
obligation of the Borrower to make any payment under this subsection shall be
deemed to have been satisfied to the extent of any corresponding payment made by
the Liquidity Provider to the Trustee under a Liquidity Facility.
(c) The Borrower agrees to pay to the Trustee, (i) the reasonable
fees, charges and expenses of the Trustee, as Registrar, and as Paying Agent and
Tender Agent, as and when the same become due, and (ii) the reasonable fees,
charges and expenses of the Trustee, as and when the same become due under the
Indenture, including payments under Section 6.4 hereof, and including the annual
fee of the Trustee for the services rendered by it and the expenses incurred by
it under the Indenture. In the event the Borrower should fail to make any of the
payments required in this subsection, the item or installment so in default
shall continue as an obligation of the Borrower until the amount in default
shall have been fully paid; provided, however, that such failure of payment
shall not be deemed an event of default during the period in which the Borrower
is in good faith contesting, by appropriate proceedings promptly initiated and
diligently conducted, such payment required by this subsection. The provision of
this subsection shall survive the retirement of the Bonds and the termination of
this Agreement.
(d) The Borrower shall pay to the Issuer upon demand all
Administrative Expenses, including payments under Section 6.4 hereof. In the
event the Borrower should fail to make any of the payments required in this
subsection, the item or installment so in default shall continue as an
obligation of the Borrower until the amount in default shall have been fully
paid.
(e) The Borrower releases the Issuer and the Trustee from, and
covenants and agrees that neither the Issuer nor the Trustee shall be liable
for, and covenants and agrees, to the extent permitted by law, to indemnify and
hold harmless the Issuer and the Trustee and their directors, officers,
employees and agents from and against, any and all losses, claims, damages,
liabilities or expenses, of every conceivable kind, character and nature
whatsoever arising out of, resulting from or in any way connected with (1) the
Project, or the conditions, occupancy, use, possession, conduct or management
of, or work done in or about, or from the planning, design, acquisition,
installation or construction of the Project or any part thereof (including
without limitation any of the foregoing relating to any federal, state or local
environmental law, rule or regulation); (2) the issuance of any Bonds or any
certifications, covenants or representations made in connection therewith and
the carrying out of any of the transactions contemplated by the Bonds and this
Agreement; (3) the Trustee's acceptance or administration of the trusts under
the Indenture, or the exercise or performance of any of its powers or duties
under the Indenture; or (4) any untrue statement or alleged untrue statement of
any material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading, in any official
statement or other offering circular utilized by the Issuer or any underwriter
or placement agent in connection with the sale or remarketing of any Bonds;
provided that such indemnity shall not be required for damages that result from
willful misconduct (or, as to the Trustee, negligence) on the part of the party
seeking such indemnity or result from statements or information provided by the
party seeking such indemnity. The Borrower further covenants and
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agrees, to the extent permitted by law, to pay or to reimburse the Issuer and
the Trustee and their respective officers, employees and agents for any and all
costs, reasonable attorneys fees, liabilities or expenses incurred in connection
with investigating, defending against or otherwise in connection with any such
losses, claims, damages, liabilities, expenses or actions, except to the extent
that the same arise out of the willful misconduct (or, as to the Trustee,
negligence) of the party claiming such payment or reimbursement. The provisions
of this Section shall survive the retirement of the Bonds and the expiration of
this Agreement.
The indemnified party shall promptly notify the Borrower in writing of
any claim or action covered by this indemnity and brought against the
indemnified party, or in respect of which indemnity may be sought against the
Borrower, setting forth the particulars of such claim or action, and the
Borrower will assume the defense thereof, including the employment of counsel
satisfactory to the indemnified party and the payment of all expenses. The
indemnified party may employ separate counsel in any such action and participate
in the defense thereof, and the fees and expenses of such counsel shall be
payable by the Borrower.
(f) The Borrower agrees to pay to the Remarketing Agent the
reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer
shall have no obligation or liability with respect to the payment of any such
fees, charges or expenses.
(g) The Borrower agrees to pay any Rebate Requirement (as defined
in the Tax Certificate) to the Trustee for deposit in the Rebate Fund.
(h) The Borrower also agrees to pay, (i) as soon as practicable
after receipt of request for payment thereof, all expenses required to be paid
by the Borrower under the terms of any Bond Purchase Agreement relating to the
sale of the Bonds; (ii) at the time of issuance of any Bonds, the Issuer's
administrative fee in the amount of $35,000; and (iii) at the time of issuance
of any Bonds, all reasonable expenses of the Issuer related to such Bonds which
are not otherwise required to be paid by the Borrower under the terms of this
Agreement.
SECTION 4.3 Unconditional Obligation. The obligation of the Borrower to
make the payments pursuant to this Agreement and to perform and observe the
other agreements on its part contained herein shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Issuer, and during the term
of this Agreement, the Borrower shall pay absolutely the payments to be made on
account of the loan as prescribed in Section 4.2 and all other payments as
prescribed herein, free of any deductions and without abatement, diminution or
set-off. Until such time as the principal of and premium, if any, and interest
on the Bonds shall have been fully paid, or provisions for the payment thereof
shall have been made as required by the Indenture, the Borrower (i) will not
suspend or discontinue any payments required hereunder, including payments
provided for in Section 4.2 hereof; (ii) will perform and observe all of its
other covenants contained in this Agreement; and (iii) except as provided in
Article VII hereof, will not terminate this Agreement for any cause, including,
without limitation, the occurrence of any act or circumstance that may
constitute failure of consideration, destruction of or damage to the Project,
commercial frustration of purpose, any change in the tax or other laws of the
United States of America or of the State of Nevada or any political subdivision
of either of them, or any failure of the Issuer or the Trustee to perform and
observe any covenant, whether express or
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implied, or any duty, liability or obligation arising out of or connected with
this Agreement or the Indenture, except to the extent permitted by this
Agreement.
SECTION 4.4 Payments Pledged and Assigned. It is understood and agreed
that all rights to the payment of moneys hereunder (except payments made to the
Trustee pursuant to Sections 4.2(c), 4.2(e) 4.2(g), 4.2(h), and 6.4 hereof and
payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof
and payments to be made to the Issuer pursuant to Sections 4.2(d), 4.2(e),
4.2(h) and 6.4 hereof and its rights of indemnification and inspection and
rights to receive notices, certificates, requests, requisitions or other
communications and to give consents hereunder) are pledged and assigned to the
Trustee by the Indenture. The Borrower consents to such pledge and assignment.
The Issuer hereby directs the Borrower and the Borrower hereby agrees to pay or
cause to be paid to the Trustee all said amounts required to be paid by or for
the account of the Borrower pursuant to Section 4.2 hereof (except payments to
be made directly to the Remarketing Agent pursuant to Section 4.2(f) hereof and
payments to be made directly to the Issuer pursuant to Sections 4.2(d), 4.2(e),
4.2(h) and 6.4 hereof). The Project will not constitute any part of the security
for the Bonds.
SECTION 4.5 Payment of the Bonds and Other Amounts. The Bonds shall be
payable from payments made by the Borrower to the Trustee under Section 4.2(a)
hereof. Payments of principal of or premium, if any, or interest on the Bonds
with moneys in the Bond Fund or earnings on investments made under the
provisions of the Indenture shall be credited against the obligation to pay
required by Section 4.2(a) hereof. Whenever any Bonds are redeemable in whole or
in part at the option of the Borrower, the Trustee, on behalf of the Issuer,
shall redeem the same upon the request of the Borrower and such redemption shall
constitute payment of amounts required by Section 4.2(a) hereof equal to the
redemption price of such Bonds.
Whenever payment or provision therefor has been made in respect of the
principal of or premium, if any, or interest on all or any portion of the Bonds
in accordance with the Indenture (whether at maturity or upon redemption or
acceleration or upon provision for payment in accordance with Article VIII of
the Indenture), payments shall be deemed paid to the extent such payment or
provision therefor has been made and is considered to be a payment of principal
of or premium, if any, or interest on such Bonds. If such Bonds are thereby
deemed paid in full, the Trustee shall notify the Borrower and the Issuer that
such payment requirement has been satisfied. Subject to the foregoing, or unless
the Borrower is entitled to a credit under this Agreement or the Indenture, all
payments shall be in the full amount required by Sections 4.2(a) and (b) hereof.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1 Right of Access to the Project and Records. The Borrower
agrees that during the term of this Agreement the Issuer, the Trustee and the
duly authorized agents of either of them shall have the right at all reasonable
times during normal business hours to examine the books and records of the
Borrower with respect to the Project and to enter upon the site of the Project
to examine and inspect the Project; provided, however, that this right is
subject to federal and State laws and regulations applicable to the site of the
Project. The rights of access hereby
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reserved to the Issuer and the Trustee may be exercised only after such agent
shall have executed release of liability and secrecy agreements if requested by
the Borrower in the form then currently used by the Borrower, and nothing
contained in this Section or in any other provision of this Agreement shall be
construed to entitle the Issuer or the Trustee to any information or inspection
involving the confidential know-how of the Borrower.
SECTION 5.2 Borrower's Maintenance of Its Existence; Assignments.
(a) To the extent permitted by law and its articles of
incorporation, the Borrower agrees that during the term of this Agreement it
will maintain its corporate existence in good standing and its authorization to
do business in the State and will not dissolve or otherwise dispose of all or
substantially all of its assets and will not consolidate with or merge into
another Person or permit one or more other Persons to consolidate with or merge
into it; provided, however, that the Borrower may, without violating the
covenants in this Section, merge into or consolidate with or transfer all or
substantially all of its assets to a wholly-owned subsidiary of the Borrower;
and provided further that the Borrower may, without violating the covenants in
this Section, combine, consolidate with or merge into another Person qualified
to do business in one of the states of the United States, or permit one or more
other Persons to combine, consolidate with or merge into it, or sell to another
Person all or substantially all of its assets, if:
(i) the surviving, resulting or transferee Person, as the
case may be (A) assumes and agrees in writing to pay and perform all of the
obligations of the Borrower hereunder, and (B) is qualified to do business in
the State;
(ii) the existing Liquidity Facility, if any, will remain in
full force and effect or will be replaced as provided in Section 5.14 or the
Series 1999B Bonds shall have been redeemed; and
(iii) the rating on the outstanding Bonds shall be no lower
than the rating on the outstanding Bonds immediately prior to the transaction.
The Borrower agrees to provide the Issuer such information as the
Issuer may reasonably request in order to assure compliance with this Section
5.2(a).
Within ten (10) Business Days after the consummation of the
merger or other transaction described above, the Borrower shall (except as
provided in the next sentence) provide the Issuer, the Bond Insurer and the
Trustee with counterpart copies of the merger instruments or other documents
constituting the transaction but only to the extent that such documents or
instruments are available to the public and not subject to any confidentiality
agreement or restriction, and an officer's certificate satisfactory to the
Issuer executed by an Authorized Borrower Representative that all of the
provisions of this Section 5.2(a) have been complied with. In the case of a (i)
merger or consolidation of the Borrower and any wholly-owned subsidiary of the
Borrower or (ii) the transfer to any wholly-owned subsidiary of the Borrower of
all or substantially all of the assets of the Borrower, the Borrower shall send
the Issuer, the Bond Insurer and the Trustee a notice of such merger within ten
(10) Business Days after its completion, together with the officer's certificate
described in the preceding sentence.
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Notwithstanding any other provision of this Section 5.2, the
Borrower need not comply with any of the provisions of Section 5.2(a) if, at the
time of such merger, combination, sale of assets, dissolution or reorganization,
the Bonds will be defeased as provided in Article VIII of the Indenture.
(b) The rights and obligations of the Borrower under this
Agreement may be assigned and delegated, respectively, by the Borrower to any
person in whole or in part, subject, however, to each of the following
conditions:
(i) No assignment other than pursuant to subsection (a) of
this Section shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any assignment not pursuant to said
subsection (a) the Borrower shall continue to remain primarily liable for the
payments specified in Section 4.2 hereof and for performance and observance of
the other agreements on its part herein provided to be performed and observed by
it.
(ii) Any assignment from the Borrower shall retain for the
Borrower such rights and interests as will permit it to perform its obligations
under this Agreement, and any assignee from the Borrower shall assume in writing
the obligations of the Borrower hereunder to the extent of the interest
assigned.
(iii) The Borrower shall, within thirty (30) days of each
such assignment, furnish or cause to be furnished to the Issuer and the Trustee
a true and complete copy of each such assignment together with an instrument of
assumption and an opinion of Counsel satisfactory to the Issuer that the
Borrower has complied with the provision of this Section 5.2(b).
(c) In the case of any consolidation, merger or transfer pursuant
to subsection (a) hereof or any assignment pursuant to subsection (b) hereof,
the Borrower shall cause to be delivered to the Issuer and the Trustee, not
later than the effective date of such consolidation, merger, transfer or
assignment, an opinion of Bond Counsel to the effect that such consolidation,
merger, transfer or assignment will not, in and of itself, adversely affect the
Tax-Exempt status of any Tax-Exempt Bonds.
SECTION 5.3 Establishment of Completion Date; Obligation of Borrower to
Complete. As soon as the Project is completed, the Authorized Borrower
Representative, on behalf of the Borrower, shall evidence the Completion Date by
providing a certificate to the Trustee and the Issuer stating the Cost of the
Project and further stating that (i) the acquisition, equipping and construction
of the Project has been completed substantially in accordance with the plans,
specifications and work orders therefor, and all labor, services, materials and
supplies used in the acquisition, equipping, rehabilitation and construction
have been paid or provided for, and (ii) all other facilities necessary in
connection with the Project have been acquired, constructed and installed in
accordance with the plans and specifications and work orders therefor and all
costs and expenses incurred in connection therewith have been paid or provided
for. Notwithstanding the foregoing, such certificate may state that it is given
without prejudice to any rights of the Borrower against third parties for any
claims or for the payment of any amount not then due and payable which exists at
the date of such certificate or which may subsequently exist. At the time
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such certificate is delivered to the Trustee, moneys remaining in the
Construction Fund, including any earnings resulting from the investment of such
moneys, shall be used as provided in Section 6.06 of the Indenture.
SECTION 5.4 Maintenance and Repair; Taxes; Utility and Other Charges.
The Borrower agrees to maintain, to the extent permitted by applicable law and
regulation, the Project, or cause the Project to be so maintained, during the
term of this Agreement (i) in as reasonably safe condition as its operations
shall permit and (ii) in good repair and in good operating condition, ordinary
wear and tear excepted, making from time to time all necessary repairs thereto
and renewals and replacements thereof.
The Borrower agrees to pay or cause to be paid during the term of
this Agreement all taxes, governmental charges of any kind lawfully assessed or
levied upon the Project or any part thereof, all utility and other charges
incurred in the operation, maintenance, use, occupancy and upkeep of the Project
and all assessments and charges lawfully made by any governmental body for
public improvements that may be secured by a lien on the Project, provided that
with respect to special assessments or other governmental charges that may
lawfully be paid in installments over a period of years, the Borrower shall be
obligated to pay only such installments as are required to be paid during the
term of this Agreement. The Borrower may, at the Borrower's expense and in the
Borrower's name, in good faith, contest any such taxes, assessments and other
charges and, in the event of any such contest, may permit the taxes, assessments
or other charges so contested to remain unpaid during that period of such
contest and any appeal therefrom unless by such nonpayment the Project or any
part thereof will be subject to loss or forfeiture.
The Borrower agrees that it will keep, or cause to be kept, (i)
the Project insured against such risks and in such amounts as are consistent
with its insurance practices for similar types of facilities (which may include
self-insurance), and (ii) insurance against all direct or contingent loss or
liability for personal injury, death or property damage occasioned by the
operation of the Project, which insurance may include self-insurance and may be
a part of the policy or policies of insurance customarily maintained by the
Borrower in connection with its general property and liability insurance upon
all of the plants and properties operated by it (including such deductibles as
may be provided in said policies).
SECTION 5.5 Qualification in Nevada. The Borrower agrees that
throughout the term of this Agreement it, or any successor or assignee as
permitted by Section 5.2 hereof, will be qualified to do business in the State
of Nevada.
SECTION 5.6 No Warranty by the Issuer. The Issuer makes no warranty,
either express or implied, as to the Project or that it will be suitable for the
purposes of the Borrower or needs of the Borrower.
SECTION 5.7 Agreement as to Use of the Project. The Issuer and the
Borrower agree that the Issuer shall have no interest in the Project.
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SECTION 5.8 Notices and Certificates Required to be Delivered to the
Trustee. The Borrower hereby agrees to provide the Trustee with the following:
(a) Within one hundred twenty (120) days of the end of the fiscal
year of the Borrower, a certificate of an Authorized Borrower Representative to
the effect that (i) all payments have been made under this Agreement and that,
to the best of such Authorized Borrower Representative's knowledge, no Event of
Default or event or condition which with the passage of time or giving of notice
or both would constitute an Event of Default has occurred and is continuing and
(ii) audited financial statements of the Borrower for such Fiscal Year;
(b) Upon knowledge of an Event of Default under this Agreement or
the Indenture, notice of such Event of Default, such notice to include a
description of the nature of such event and what steps are being taken to remedy
such Event of Default; and
(c) Prompt written disclosure of any significant change known to
the Borrower that occurs which would adversely impact the Trustee's ability to
perform its duties under the Indenture, or of any conflicts which may result
because of other business dealings between the Trustee and the Borrower
(including, without limitation, removal or replacement of the Remarketing Agent,
if any).
SECTION 5.9 Borrower to Furnish Notice of Adjustments of Interest Rate
Periods. The Borrower is hereby granted the option to designate from time to
time changes in Rate Periods (and to rescind such changes) in the manner and to
the extent set forth in Section 2.03 of the Indenture. In the event the Borrower
elects to exercise any such option, the Borrower agrees that it shall cause
notices of adjustments of Rate Periods (or rescissions thereof) to be given to
the Issuer, the Trustee and the Remarketing Agent in accordance with Section
2.03 of the Indenture. The exercise of any such option, and all actions in
connection therewith, may be taken by the Borrower through agents acting on its
behalf, as provided in the Indenture, including without limitation, the
Remarketing Agent. In connection with any change in Rate Periods, if the
Indenture requires an opinion of Bond Counsel as a condition thereto, the
Borrower shall, at its sole expense, cause such opinion to be delivered to the
Issuer and the Trustee in accordance with the Indenture.
SECTION 5.10 Information Reporting. The Issuer covenants and agrees
that, upon the direction of the Borrower or Bond Counsel, it will mail or cause
to be mailed to the Secretary of the Treasury (or his designee as prescribed by
regulation, currently the Internal Revenue Service Center, Philadelphia, PA
19255) a statement setting forth the information required by Section 149(e) of
the Code, which statement shall be in the form of the Information Reporting
Statement (Form 8038) of the Internal Revenue Service (or any successor form as
may be necessary from time to time with respect to any Tax-Exempt Series of
Bonds).
SECTION 5.11 Tax Covenants; Rebate. The provisions of this Section 5.11
shall apply only to the Series 1999A Bonds, or all or any portion of the Series
1999B Bonds, after they have been converted to Tax-Exempt status.
(a) The Borrower covenants that it will not take any action which
would adversely affect the Tax-Exempt status of any of the Bonds of a Tax-Exempt
Series, and will take, or require to be taken, such acts as may be reasonably
within its ability and as may from time to time be required under applicable law
or regulation to continue such Tax-Exempt status
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of such Bonds of a Tax-Exempt Series; and, in furtherance of such covenants, the
Borrower agrees to comply with the Tax Certificate and the Engineering
Certificate.
(b) The Borrower covenants that it will not take any action or
fail to take any action with respect to the Bonds of a Tax-Exempt Series which
would cause any of the Bonds of a Tax-Exempt Series to be "arbitrage bonds"
within the meaning of Section 148 of the Code.
(c) The Borrower covenants that it will not use or permit the use
of any property financed with the proceeds of any of the Bonds of a Tax-Exempt
Series by any person (other than a state or local governmental unit) in such
manner or to such extent as would result in loss of the Tax-Exempt status of any
of the Bonds of a Tax-Exempt Series.
(d) The Borrower shall calculate, or cause to be calculated, its
rebate liability at such times as are required by Section 148(f) of the Code and
any temporary, proposed or final Regulations as may be applicable to such Bonds
of a Tax-Exempt Series from time to time. The Borrower shall provide to the
Trustee a copy of each calculation of rebate liability prepared by or on behalf
of the Borrower, which documentation shall be made available to the Issuer upon
request. The Borrower shall make any and all payments to the Trustee for deposit
in the Rebate Fund, or as otherwise required to be made to the United States
Department of the Treasury in connection with any of the Bonds of a Tax-Exempt
Series pursuant to Section 148(f) of the Code.
(e) Notwithstanding any other provisions of this Agreement to the
contrary, so long as necessary in order to maintain the Tax-Exempt status of any
of the Bonds of a Tax-Exempt Series, the covenants in this Section 5.11 shall
survive the payment for such Bonds of a Tax-Exempt Series and the interest
thereon, including any payment or defeasance thereof pursuant to Section 8.01 of
the Indenture.
SECTION 5.12 [Reserved].
SECTION 5.13 Continuing Disclosure. The Borrower shall undertake the
continuing disclosure requirements promulgated under S.E.C. Rule 15c2-12, as it
may from time to time hereafter be amended or supplemented, if applicable, and
the Issuer shall have no liability to the holders of the Bonds or any other
person with respect to such disclosure matters. Notwithstanding any other
provision of the Indenture, failure of the Borrower to comply with the
requirements of S.E.C. Rule 15c2-12, as it may from time to time hereafter be
amended or supplemented, shall not be considered an Event of Default; however,
the Trustee, subject to Article X of the Indenture, may (and, at the request of
the Remarketing Agent or the holders of at least 25% in aggregate principal
amount of Outstanding Bonds, shall) or any Bondholder or beneficial owner of any
Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the Borrower to
comply with its obligations under this Section 5.13.
SECTION 5.14 Alternate Liquidity Facility. The Borrower may deposit
with the Trustee an Alternate Liquidity Facility, in lieu of keeping the
Liquidity Facility in place as may be required by Section 5.15 hereof.
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Upon deposit with the Trustee, an Alternate Liquidity Facility
must meet the following conditions:
(a) the Alternate Liquidity Facility must be approved by the
Issuer or any successors and assigns;
(b) provisions of the Alternate Liquidity Facility must be
acceptable to the Bond Insurer and the Trustee;
(c) the term of the Alternate Liquidity Facility must extend at
least 364 days or to at least the first date on which the related Series of
Bonds is subject to redemption, pursuant to the Indenture, whichever is longer;
and
(d) the Alternate Liquidity Facility must be in an amount
sufficient to pay the purchase price of any Bonds purchased pursuant to Article
IV of the Indenture.
Not less than thirty (30) days prior to the delivery of an
Alternate Liquidity Facility, the Borrower shall (i) deliver to the Trustee and
the Remarketing Agent a written commitment for the delivery of such Alternate
Liquidity Facility, (ii) inform the Trustee and the Remarketing Agent of the
date on which the Alternate Liquidity Facility will become effective, which date
shall not be less than five (5) calendar days prior to the stated expiration
date of the existing Liquidity Facility and (iii) inform the Trustee of the
rating expected to apply to the applicable Series of Bonds after the related
Alternate Liquidity Facility is delivered. On or prior to the date of the
delivery of an Alternate Liquidity Facility to the Trustee, the Borrower shall
cause to be furnished to the Trustee (i) an opinion of Bond Counsel to the
effect that the delivery of such Alternate Liquidity Facility to the Trustee is
authorized under the Indenture and complies with the terms hereof and will not
adversely affect the Tax-Exempt status of any Tax-Exempt Bonds, (ii) an opinion
to the effect that the Alternate Liquidity Facility is exempt from registration
under the Securities Act of 1933, as amended, and is enforceable in accordance
with the terms of such Alternate Liquidity Facility, except to the extent that
enforceability thereof may be limited by bankruptcy, reorganization or similar
laws limiting the enforceability of creditors' rights generally and except that
no opinion need be expressed as to the availability of any discretionary
equitable rights, and (iii) written evidence from each Rating Agency then rating
the Bonds that following the delivery of such Alternate Liquidity Facility the
rating on the related Series of Bonds shall not be lower than A-1 or P-1, as
applicable, or the current rating from such Rating Agency will not be reduced or
withdrawn.
SECTION 5.15 Bond Insurance, Liquidity Facility. Subject to Section
5.14 hereof and except as may be permitted under the Indenture, the Borrower
agrees that throughout the term of this Agreement it, or any successor or
assignee as permitted by Section 5.2 hereof, will maintain or cause to be
maintained (i) the Bond Insurance for each Series of Bonds and (ii) a Liquidity
Facility with respect to Series 1999B Bonds and any Tax-Exempt Series of Bonds
created upon conversion of such Series 1999B Bonds. Notwithstanding the
foregoing, if any Tax-Exempt Series of Bonds or the Series 1999B Bonds are fixed
in a Term Rate Period or Taxable Term Rate Period ending on the maturity date
for such Bonds, no Liquidity Facility need be maintained with respect to such
Bonds. At any time the Borrower may, at its option, provide for the delivery to
the Trustee of an Alternate Liquidity Facility and the Borrower shall, in any
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event, cause to be delivered an Alternate Liquidity Facility at least five (5)
days before the expiration date of any existing Liquidity Facility, unless
otherwise permitted by the Indenture, or any existing Alternate Liquidity
Facility.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1 Events of Default Defined. The following events shall be
Events of Default under this Agreement, and the terms "Event of Default" or
"Events of Default" shall mean, whenever they are used in this Agreement, any
one or more of the following events:
(a) Failure by the Borrower to pay when due any amounts required
to be paid under Section 4.2(a) or 4.2(b) hereof; or
(b) Failure by the Borrower to observe and perform any covenant,
condition or agreement on its part to be observed or performed in this
Agreement, other than as referred to in (a) above, for a period of ninety (90)
days after written notice, specifying such failure and requesting that it be
remedied and stating that such notice is a "Notice of Default" hereunder, given
to the Borrower by the Trustee or to the Borrower and the Trustee by the Issuer,
unless the Issuer and the Trustee shall agree in writing to an extension of such
time prior to its expiration; provided, however, if the failure stated in the
notice cannot be corrected within the applicable period, the Issuer and the
Trustee will not unreasonably withhold their consent to an extension of such
time if corrective action is instituted within the applicable period and
diligently pursued until the failure is corrected and the fact of such
non-correction, corrective action or diligent pursuit is evidenced to the
Trustee by a certificate of an Authorized Borrower Representative; or
(c) A proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent jurisdiction
seeking (i) liquidation, reorganization, dissolution, winding-up or composition
or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower or of all or any substantial part of its
assets, or (iii) similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or cause shall continue undismissed, or an order, judgment,
or decree approving or ordering any of the foregoing shall be entered and shall
continue in effect for a period of ninety (90) days; or an order for relief
against the Borrower shall be entered against the Borrower in an involuntary
case under the United States Bankruptcy Code (as now or hereafter in effect) or
other applicable law; or
(d) The Borrower shall admit in writing its inability to pay its
debts generally as they become due or shall file a petition in voluntary
bankruptcy or shall make any general assignment for the benefit of its
creditors, or shall consent to the appointment of a receiver or trustee of all
or substantially all of its property, or shall commence a voluntary case under
the United States Bankruptcy Code (as now or hereafter in effect), or shall file
in any court of competent jurisdiction a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, or shall fail to controvert in a timely or
appropriate manner, or acquiesce in writing to, any petition
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filed against it in an involuntary case under such United States Bankruptcy Code
or other applicable law; or
(e) Dissolution or liquidation of the Borrower; provided that the
term "dissolution or liquidation of the Borrower" shall not be construed to
include the cessation of the corporate existence of the Borrower resulting
either from a merger or consolidation of the Borrower into or with another
corporation or a dissolution or liquidation of the Borrower following a transfer
of all or substantially all of its assets as an entirety, under the conditions
permitting such actions contained in Section 5.2 hereof; or
(f) The occurrence of an "Event of Default" under the Indenture
(other than an Event of Default described in Section 9.01(e) thereof); or
(g) Receipt by the Trustee from the Bond Insurer of notice of the
occurrence of an "Event of Default" under the Insurance Agreement dated as of
October 1, 1999, between the Borrower and the Bond Insurer, as the same may be
amended from time to time.
The foregoing provisions of Section 6.1(b) are subject to the
following limitations: If by reason of Force Majeure the Borrower is unable in
whole or in part to carry out its agreements on its part herein contained other
than the obligations on the part of the Borrower contained in Article IV and
Section 6.4 hereof the Borrower shall not be deemed in default during the
continuance of such inability. The Borrower agrees, however, to remedy with all
reasonable dispatch the cause or causes preventing the Borrower from carrying
out its agreements; provided that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Borrower
and the Borrower shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is in the sole judgment of the Borrower
unfavorable to the Borrower.
SECTION 6.2 Remedies on Default. Subject to the rights of the Bond
Insurer, whenever any Event of Default referred to in Section 6.1 hereof shall
have occurred and be continuing,
(a) The Trustee may, and upon the written request of the Owners
of not less than a majority in aggregate principal amount of Bonds then
Outstanding shall, by notice in writing to the Borrower declare the unpaid
indebtedness under Section 4.2(a) hereof to be due and payable immediately, if
concurrently with or prior to such notice the unpaid principal amount of the
Bonds shall have been declared to be due and payable, and upon any such
declaration the same (being an amount sufficient, together with other moneys
available therefor in the Bond Fund, to pay the unpaid principal of and premium,
if any, and interest accrued on the Bonds) shall become and shall be immediately
due and payable as liquidated damages.
(b) The Issuer or the Trustee may take whatever action at law or
in equity may appear necessary or desirable to collect the payments and other
amounts then due and thereafter to become due hereunder or to enforce
performance and observance of any obligation, agreement or covenant of the
Borrower hereunder; provided, however, that nothing in Section 4.4 hereof shall
be deemed to limit the rights of the Issuer under this Section 6.2(b); provided,
nevertheless,
17
<PAGE> 22
that the Issuer will not exercise any remedies, with respect to any of the
Issuer's rights assigned to the Trustee pursuant to Section 4.4 hereof unless,
in the Issuer's reasonable judgment and after written request to a Responsible
Officer of the Trustee, the Trustee has failed to enforce such rights. The
Issuer has no obligation to take any action under this Section.
(c) The Trustee shall immediately draw upon any Bond Insurance
and Liquidity Facility, if any, if permitted by the terms thereof and required
by the terms of the Indenture, and apply the amount so drawn in accordance with
the Indenture and may exercise any remedy available to it thereunder.
The provisions of clause (a) of the preceding paragraph are
subject to the condition that if, at any time after the unpaid indebtedness
under Section 4.2(a) hereof shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, there shall have been deposited
with the Trustee a sum sufficient to pay all the principal of the Bonds matured
prior to such declaration and all matured installments of interest (if any) upon
all the Bonds, with interest on such overdue installments of principal as
provided herein, and the reasonable expenses of the Trustee and the Issuer, and
any and all other defaults known to the Trustee (other than in the payment of
principal of and interest on the Bonds due and payable solely by reason of such
declaration) shall have been made good or cured to the satisfaction of the
Trustee or provision deemed by the Trustee to be adequate shall have been made
therefor, then, and in every such case the Trustee shall, on behalf of the
Owners of all the Bonds, rescind and annul such declaration and its consequences
and waive such default; provided that no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair or exhaust any
right or power consequent thereon.
In case the Trustee or the Issuer, as the case may be, shall have
proceeded to enforce its rights under this Agreement, and such proceedings shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee or the Issuer, then, and in every such case, the
Borrower, the Trustee and the Issuer shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Borrower, the Trustee and the Issuer shall continue as though no such action
had been taken.
Any amounts collected pursuant to action taken under this Section
6.2 shall be paid into the Bond Fund (unless otherwise provided in this
Agreement) and applied in accordance with the provisions of the Indenture. No
action taken pursuant to this Section 6.2 shall relieve the Borrower from the
Borrower's obligations pursuant to Section 4.2 hereof.
No recourse shall be had for any claim based on this Agreement
against any officer, director or stockholder, past, present or future, of the
Borrower as such, either directly or through the Borrower, under any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise.
Nothing herein contained shall be construed to prevent the Issuer
from enforcing directly any of its rights under Section 5.1 hereof and under
Sections 4.2(d), 4.2(e), 4.2(h) and 6.4 hereof.
18
<PAGE> 23
In case proceedings shall be pending for the bankruptcy or for
the reorganization of the Borrower under the federal bankruptcy laws or any
other applicable law, or in case a receiver or trustee shall have been appointed
for the property of the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or property of the
Borrower, then the Trustee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee allowed in
such judicial proceedings relative to the Borrower, its creditors or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute such amounts as provided in
the Indenture after the deduction of its reasonable charges and expenses. Any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized to make such payments to the Trustee, and to pay to the Trustee any
amount due if for reasonable compensation and expenses, including reasonable
expenses and fees of counsel incurred by it up to the date of such distribution.
Anything in this Agreement to the contrary notwithstanding, upon
the occurrence and continuance of an Event of Default other than an Insurer
Default, the Bond Insurer shall be entitled to control and direct the
enforcement of all rights and remedies granted to the Issuer, the Bondholders or
the Trustee for the benefit of the Bondholders hereunder, including, without
limitation: (i) the right to accelerate the payment of the indebtedness of the
Borrower hereunder as described herein, and (ii) the right to annul any
declaration of acceleration, and the Bond Insurer shall also be entitled to
approve all waivers of Events of Default hereunder.
SECTION 6.3 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Issuer or the Trustee to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice,
other than such notice as may be herein expressly required. Such rights and
remedies as are given the Issuer hereunder shall also extend to the Trustee and
the Owners of the Bonds, subject to the provisions of the Indenture, and the
Trustee and Owners of the Bonds shall be entitled to the benefit of all
covenants and agreements herein contained.
SECTION 6.4 Agreement to Pay Fees and Expenses of Counsel. In the event
the Borrower should default under any of the provisions of this Agreement and
the Issuer or the Trustee should employ Counsel or incur other expenses for the
collection of the indebtedness hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Borrower herein
contained, the Borrower agrees that it will on demand therefor pay to the
Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the
Issuer, the reasonable fees of such Counsel and such other reasonable expenses
so incurred by or on behalf of the Issuer or the Trustee. If the circumstances
set forth in this Section 6.4 shall occur with the result that the Borrower is
obligated to make payments to the Trustee under this Section 6.4, and so long as
such obligation shall be continuing, in order to secure such obligation of the
Borrower
19
<PAGE> 24
to the Trustee, the Trustee shall have a lien prior to the Bonds on all moneys
held by the Trustee under the Indenture except those moneys held in trust to pay
the principal of and premium, if any, and interest on, or the purchase price of,
particular Bonds and except for moneys, if any, in the Rebate Fund. If the
Trustee incurs fees and expenses in connection with a default specified in
Section 6.1(c), 6.1(d) or 6.1(e) of this Agreement, such fees and expenses are
understood to include expenses of administration under any bankruptcy law.
SECTION 6.5 No Additional Waiver Implied by One Waiver; Consents to
Waivers. In the event any agreement contained in this Agreement should be
breached by either party and thereafter waived by the other party, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder. No waiver shall be effective unless in writing
and signed by the party making the waiver. The Issuer shall have no power to
waive any default hereunder by the Borrower without the consent of the Trustee.
The Trustee shall have power to waive any default by the Borrower hereunder,
except a default under Sections 4.2(d), 4.2(e), 4.2(h) or 6.4, without the prior
written concurrence of the Issuer.
ARTICLE VII
OPTION AND OBLIGATION OF BORROWER TO PREPAY
SECTION 7.1 Option to Prepay. The Borrower shall have, and is hereby
granted, the option to prepay the payments due hereunder in whole or in part at
any time or from time to time (a) to provide for the redemption of the Bonds
pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide
for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In
the event the Borrower elects to provide for the redemption of Bonds as
permitted by this Section, the Borrower shall notify and instruct the Trustee in
accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in
advance of maturity.
SECTION 7.2 Obligation to Prepay. The Borrower shall be obligated to
prepay amounts due hereunder, in whole or in part, to provide for the redemption
of Bonds in whole or in part pursuant to the provisions of Section 3.01(B) of
the Indenture. In the case of any of the events stated in Section 3.01(B) of the
Indenture, the Borrower must satisfy its obligation by prepaying within 180 days
after such event.
SECTION 7.3 Notice of Prepayment; Amount to be Prepaid. (a) In order to
exercise the option granted to the Borrower in Section 7.1 hereof, or fulfill an
obligation described in Section 7.2 hereof, the Borrower shall give at least 30
days written notice of such prepayment to the Issuer, the Trustee and the
Remarketing Agent, if any. On the date fixed for redemption of the Bonds or
portions thereof, there shall be deposited with the Trustee from payments by the
Borrower as required by Section 7.l or 7.2, as appropriate, for payment into the
Bond Fund the amount required in subsection (b) of this Section. The notice
shall provide for the date of the application of the prepayment made by the
Borrower hereunder to the redemption of the Bonds or portions thereof in whole
or in part pursuant to call for redemption, shall specify the redemption date
and shall be given to the Trustee, the Issuer and the Remarketing Agent in
accordance with the provisions of the Indenture for the redemption of Bonds or
portions thereof.
20
<PAGE> 25
(b) The prepayment payable by the Borrower hereunder upon either
(i) the exercise of the option granted to the Borrower in Section 7.1 hereof, or
(ii) the fulfillment of an obligation specified in Section 7.2 shall be, to the
extent applicable and except as otherwise provided in Article VIII of the
Indenture, the sum of the following:
(1) the amount of money which, when added to the amount on
deposit in the Bond Fund prior to the prepayment being made and
available for such purpose, will be sufficient to provide all funds
necessary to redeem the Bonds or portions thereof designated in the
notice specified in subsection (a) of this Section to be redeemed on
the date set forth in the notice, including, without limitation,
principal, premium, if any, and all interest to accrue to said
redemption date and redemption expenses; plus
(2) in the event all of the Bonds are to be redeemed, an
amount of money equal to all Administrative Expenses and the Trustee's
and the Remarketing Agent's fees and expenses under the Indenture
accrued and to accrue until the final payment and redemption of the
Bonds.
(c) Any prepayment made pursuant to Section 7.1 or 7.2 hereof
shall be deposited into the Bond Fund. No prepayment or investment of the
proceeds thereof shall be made which shall cause any Tax-Exempt Series of Bonds
to be "arbitrage bonds" within the meaning of Section 148(a) of the Code.
SECTION 7.4 Cancellation at Expiration of Term. At the acceleration,
termination or expiration of the term of this Agreement and following full
payment of the Bonds or provision for payment thereof and of all other fees and
charges having been made in accordance with the provisions of this Agreement and
the Indenture, the Issuer shall deliver to the Borrower any documents and take
or cause the Trustee to take such actions as may be necessary to effectuate the
cancellation and evidence the termination of this Agreement.
ARTICLE VIII
NON-LIABILITY OF ISSUER
SECTION 8.1 Non-Liability of the Issuer. The Issuer shall not be
obligated to pay the principal of, or premium, if any, or interest on the Bonds,
except from Revenues or the proceeds of Bond Insurance, and shall not be
obligated to pay the purchase price of any Bonds, except from the proceeds of
the remarketing of the Bonds or from moneys paid by the Borrower pursuant to
Section 4.2(b) hereof. The Borrower hereby acknowledges that the Issuer's sole
source of moneys to repay the Bonds will be provided by the payments made by the
Borrower pursuant to this Agreement, together with other Revenues and the
proceeds of Bond Insurance, including investment income on certain funds and
accounts held by the Trustee under the Indenture, and hereby agrees that if the
payments to be made hereunder shall ever prove insufficient to pay all principal
of, and premium, if any, and interest on the Bonds as the same shall become due
(whether by maturity, redemption, acceleration or otherwise), then upon notice
from the Trustee, the Borrower shall pay such amounts as are required from time
to time to prevent any deficiency or default in the payment of such principal,
premium or interest.
21
<PAGE> 26
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices. All notices, certificates or other communications
shall be sufficiently given in writing and shall be deemed given on the day on
which the same have been mailed by certified mail, postage prepaid, addressed as
set forth in Section 13.06 of the Indenture. A duplicate copy of each notice,
certificate or other communication given hereunder by either the Issuer or the
Borrower to the other shall also be given to the Trustee. The Issuer, the
Borrower, the Trustee, the Bond Insurer, the Remarketing Agent, if any, and the
Liquidity Provider, if any, may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
SECTION 9.2 Assignments. This Agreement may not be assigned by either
party without consent of the other, except that (i) the Issuer shall assign to
the Trustee its rights under this Agreement (except under Sections 4.2(d),
4.2(e), 4.2(h) and 6.4 hereof and rights of the Issuer to make inspections or to
receive any notices, certificates, requests, requisitions or communications
hereunder and to give consent hereunder) as provided by Section 4.4 hereof, and
(ii) the Borrower may assign its rights under this Agreement as provided by
Section 5.2 hereof.
SECTION 9.3 Severability. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
SECTION 9.4 Execution of Counterparts. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument;
provided, however, that for purposes of perfecting a security interest in this
Agreement by the Trustee, only the counterpart delivered, pledged and assigned
to the Trustee shall be deemed the original.
SECTION 9.5 Amounts Remaining in Bond Fund. It is agreed by the parties
hereto that after payment in full of (i) the Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture),
(ii) the fees, charges and expenses of the Trustee in accordance with the
Indenture, (iii) the Administrative Expenses of the Issuer, (iv) the fees and
expenses of the Remarketing Agent, and (v) all other amounts required to be paid
under this Agreement and the Indenture, any amounts remaining in the Bond Fund
shall belong to and be paid to the Borrower by the Trustee. Notwithstanding any
other provision of this Agreement or the Indenture, under no circumstances shall
proceeds of Bond Insurance, the Liquidity Facility, or remarketing proceeds be
paid to the Issuer or the Borrower.
SECTION 9.6 Amendments, Changes and Modifications. This Agreement may
be amended, changed, modified, altered or terminated only by written instrument
executed by the Issuer and the Borrower, and only if the written consent thereto
of the Trustee or, if applicable, the Bond Insurer or the Owners of the
requisite percentage in aggregate principal amount of the Bonds, is obtained in
accordance with Article XII of the Indenture.
22
<PAGE> 27
SECTION 9.7 Governing Law. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State of Nevada.
SECTION 9.8 Authorized Issuer and Borrower Representatives. Whenever
under the provisions of this Agreement the approval of the Issuer or the
Borrower is required to take some action at the request of the other, such
approval or such request shall be given for the Issuer by the Authorized Issuer
Representative and for the Borrower by the Authorized Borrower Representative,
and the other party hereto and the Trustee shall be authorized to act on any
such approval or request and neither party hereto shall have any complaint
against the other or against the Trustee as a result of any such action taken.
SECTION 9.9 Term of the Agreement. This Agreement shall be in full
force and effect from its date to and including such date as all of the Bonds
issued under the Indenture shall have been fully paid or retired (or provision
for such payment shall have been made as provided in the Indenture) and all
other fees and expenses shall have been paid pursuant to this Agreement or the
Indenture, provided that all representations and certifications by the Borrower
as to all matters affecting the Tax-Exempt status of interest on any Tax-Exempt
Series of Bonds and the covenants of the Borrower in Sections 4.2(c), 4.2(d),
4.2(e), 4.2(h), 5.11 and 6.4 hereof shall survive the termination of this
Agreement.
SECTION 9.10 Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Borrower and their respective
successors and assigns; subject, however, to the limitations contained in
Section 5.2 hereof.
SECTION 9.11 Trustee as a Party in Interest and Third Party
Beneficiary. The parties hereto acknowledge and agree that as to any right to
indemnity or payment of fees and expenses provided in Section 4.2 hereof the
Trustee is a party in interest and third party beneficiary under this Agreement
entitled to enforce its rights as so stated herein as if it were a party hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
23
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CLARK COUNTY, NEVADA
By: /s/ Bruce L. Woodbury
------------------------------------
Chair, Board of County Commissioners
(SEAL)
Attest:
/s/ Shirley B Parraguirre
- ------------------------------------
County Clerk
SOUTHWEST GAS CORPORATION
By: /s/ Jeffrey W. Shaw
------------------------------------
Authorized Borrower Representative
24
<PAGE> 29
EXHIBIT A
DESCRIPTION OF THE PROJECT
--------------------------
The Project consists of the Company's construction program with respect
to the following capital additions, improvements and equipment located in Clark
County, Nevada:
The Distribution Facilities
- ---------------------------
The Project includes Distribution Facilities consisting of the meters,
customer service connections, mains, pressure regulators, and other additions,
improvements, replacements of obsolete, damaged or worn out components, and
relocations and enhancements of existing components to the lower-pressure (under
500 psig) gas distribution facilities by which the Company furnishes gas to
customers within its retail service area in Clark County, Nevada, together with
additions, relocations and improvements to the Company's other plant, property
and equipment to be acquired, installed, or constructed by the Company for use
in connection therewith, for the same purposes.
Transmission Facilities
- -----------------------
The Project also includes Transmission Facilities consisting of the
pressure regulators, mains, compressor facilities and other additions and
improvements to the Company's higher-pressure (500 psig and over) gas
transmission facilities by which it transports gas within its retail service
area in Clark County, Nevada, together with additions and improvements to the
Company's other plant, property and equipment to be acquired, installed, or
constructed by the Company for use in connection therewith, for the same
purposes.
Included in the foregoing Facilities are associated land and land
rights and such modifications' additions and supplements or changes to the
Facilities as may prove necessary or desirable for the same purposes.
A-1
<PAGE> 1
EXHIBIT 12.01
SOUTHWEST GAS CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Thousands of dollars)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
1. Fixed charges:
(A) Interest expense $ 63,110 $ 63,416 $63,247 $54,674 $52,844
(B) Amortization 1,366 1,243 1,164 1,494 1,569
(C) Interest portion of rentals 8,217 7,531 6,973 6,629 4,435
(D) Preferred securities distributions 5,475 5,475 5,475 5,475 913
-------- -------- ------- ------- -------
Total fixed charges $ 78,168 $ 77,665 $76,859 $68,272 $59,761
======== ======== ======= ======= =======
2. Earnings (as defined):
(E) Pretax income from
continuing operations $ 60,955 $ 83,951 $21,328 $10,448 $ 3,493
Fixed Charges (1. above) 78,168 77,665 76,859 68,272 59,761
-------- -------- ------- ------- -------
Total earnings as defined $139,123 $161,616 $98,187 $78,720 $63,254
======== ======== ======= ======= =======
3. Ratio of earnings to fixed charges 1.78 2.08 1.28 1.15 1.06
======== ======== ======= ======= =======
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ADJUSTED FOR INTEREST ALLOCATED TO
DISCONTINUED OPERATIONS
1. Fixed charges:
(A) Interest expense $ 63,110 $ 63,416 $63,247 $54,674 $52,844
(B) Amortization 1,366 1,243 1,164 1,494 1,569
(C) Interest portion of rentals 8,217 7,531 6,973 6,629 4,435
(D) Preferred securities distributions 5,475 5,475 5,475 5,475 913
(E) Allocated interest (1) -- -- -- -- 9,636
-------- -------- ------- ------- -------
Total fixed charges $ 78,168 $ 77,665 $76,859 $68,272 $69,397
======== ======== ======= ======= =======
2. Earnings (as defined):
(F) Pretax income from
continuing operations $ 60,955 $ 83,951 $21,328 $10,448 $ 3,493
Fixed Charges (1. above) 78,168 77,665 76,859 68,272 69,397
-------- -------- ------- ------- -------
Total earnings as defined $139,123 $161,616 $98,187 $78,720 $72,890
======== ======== ======= ======= =======
3. Ratio of earnings to fixed charges 1.78 2.08 1.28 1.15 1.05
======== ======== ======= ======= =======
</TABLE>
- ---------------
(1) Represents allocated interest through the period ended December 31, 1995.
Carrying costs for the period subsequent to year end through the disposition
of the discontinued operations were accrued and recorded as disposal costs.
<PAGE> 2
SOUTHWEST GAS CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
CONTINUING OPERATIONS 1999 1998 1997 1996 1995
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1. Combined fixed charges:
A) Total fixed charges $ 78,168 $ 77,665 $76,859 $68,272 $59,761
B) Preferred dividends [1] -- -- -- -- 404
-------- -------- ------- ------- -------
Total fixed charges and
preferred dividends $ 78,168 $ 77,665 $76,859 $68,272 $60,165
======== ======== ======= ======= =======
2. Earnings $139,123 $161,616 $98,187 $78,720 $63,254
======== ======== ======= ======= =======
3. Ratio of earnings to fixed charges
and preferred dividends 1.78 2.08 1.28 1.15 1.05
======== ======== ======= ======= =======
ADJUSTED FOR INTEREST ALLOCATED TO FOR THE YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS ---------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------ ------- --------
1. Combined fixed charges:
A) Total fixed charges $ 78,168 $ 77,665 $76,859 $68,272 $69,397
B) Preferred dividends [1] -- -- -- -- 404
-------- -------- ------- ------- -------
Total fixed charges and
preferred dividends $ 78,168 $ 77,665 $76,859 $68,272 $69,801
======== ======== ======= ======= =======
2. Earnings $139,123 $161,616 $98,187 $78,720 $72,890
======== ======== ======= ======= =======
3. Ratio of earnings to fixed charges
and preferred dividends 1.78 2.08 1.28 1.15 1.04
======== ======== ======= ======= =======
</TABLE>
[1] Preferred dividends have been adjusted to represent the pretax earnings
necessary to cover such dividend requirements.
<PAGE> 1
CONSOLIDATED SELECTED FINANCIAL STATISTICS
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars,
except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating revenues $ 936,866 $ 917,309 $ 732,010 $ 644,061 $ 563,502
Operating expenses 805,654 763,139 629,749 572,488 505,090
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income $ 131,212 $ 154,170 $ 102,261 $ 71,573 $ 58,412
====================================================================================================================================
Income from continuing operations $ 39,310 $ 47,537 $ 16,469 $ 6,574 $ 2,654
Loss from discontinued
operations, net of tax(1) -- -- -- -- (17,536)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 39,310 $ 47,537 $ 16,469 $ 6,574 $ (14,882)
====================================================================================================================================
Net income (loss) applicable to
common stock $ 39,310 $ 47,537 $ 16,469 $ 6,574 $ (15,189)
====================================================================================================================================
Total assets at year end $ 1,923,442 $ 1,830,694 $ 1,769,059 $ 1,560,269 $ 1,532,527
====================================================================================================================================
Capitalization at year end
Common equity $ 505,425 $ 476,400 $ 385,979 $ 379,616 $ 356,050
Trust originated preferred securities 60,000 60,000 60,000 60,000 60,000
Long-term debt 859,291 812,906 778,693 665,221 607,945
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,424,716 $ 1,349,306 $ 1,224,672 $ 1,104,837 $ 1,023,995
====================================================================================================================================
Common stock data
Return on average common equity 8.0% 11.0% 4.3% 1.8% (4.1)%
Earnings (loss) per share
Continuing operations $ 1.28 $ 1.66 $ 0.61 $ 0.25 $ 0.10
Discontinued operations -- -- -- -- (0.76)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ 1.28 $ 1.66 $ 0.61 $ 0.25 $ (0.66)
====================================================================================================================================
Diluted earnings (loss) per share $ 1.27 $ 1.65 $ 0.61 $ 0.25 $ (0.66)
====================================================================================================================================
Dividends paid per share $ 0.82 $ 0.82 $ 0.82 $ 0.82 $ 0.82
Payout ratio 64% 49% N/A N/A N/A
Book value per share at year end $ 16.31 $ 15.67 $ 14.09 $ 14.20 $ 14.55
Market value per share at year end $ 23.00 $ 26.63 $ 18.69 $ 19.25 $ 17.63
Market value per share to book
value per share 141% 170% 133% 136% 121%
Common shares outstanding at
year end (000) 30,985 30,410 27,387 26,733 24,467
Number of common shareholders
at year end 22,989 24,489 25,833 26,371 25,133
Ratio of earnings to fixed charges
Continuing operations 1.78 2.08 1.28 1.15 1.06
Adjusted for interest allocated
to discontinued operations 1.78 2.08 1.28 1.15 1.05
</TABLE>
1. Includes the 1995 loss on sale of the Bank.
SOUTHWEST GAS CORPORATION 19
<PAGE> 2
NATURAL GAS OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Sales $ 740,900 $ 753,338 $ 569,542 $ 506,200 $ 524,914
Transportation 50,255 46,259 45,123 40,161 38,588
- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenue 791,155 799,597 614,665 546,361 563,502
Net cost of gas sold 330,031 329,849 209,338 187,580 227,456
- ------------------------------------------------------------------------------------------------------------------------------------
Operating margin 461,124 469,748 405,327 358,781 336,046
Expenses
Operations and maintenance 221,258 209,172 201,159 198,364 187,969
Depreciation and amortization 88,254 80,231 74,528 67,443 62,492
Other 27,610 31,646 29,393 28,156 27,173
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income $ 124,002 $ 148,699 $ 100,247 $ 64,818 $ 58,412
====================================================================================================================================
Contribution to consolidated net
income (loss) $ 35,473 $ 44,830 $ 15,825 $ 3,919 $ 2,654
====================================================================================================================================
Total assets at year end $ 1,855,114 $ 1,772,418 $ 1,717,025 $ 1,498,099 $ 1,357,034
====================================================================================================================================
Net gas plant at year end $ 1,581,102 $ 1,459,362 $ 1,360,294 $ 1,278,457 $ 1,137,750
====================================================================================================================================
Construction expenditures and
property additions $ 207,773 $ 179,361 $ 164,528 $ 210,743 $ 166,183
====================================================================================================================================
Cash flow, net
From operating activities $ 165,220 $ 189,465 $ 45,923 $ 47,931 $ 97,754
From investing activities (207,024) (176,731) (170,455) (41,804) (163,718)
From financing activities 40,674 (12,632) 132,349 (11,456) 71,056
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash $ (1,130) $ 102 $ 7,817 $ (5,329) $ 5,092
====================================================================================================================================
Total throughput (thousands of therms)
Sales 1,037,409 1,103,264 914,732 818,329 805,884
Transportation 1,186,859 1,001,372 1,030,857 968,208 1,016,011
- ------------------------------------------------------------------------------------------------------------------------------------
Total throughput 2,224,268 2,104,636 1,945,589 1,786,537 1,821,895
====================================================================================================================================
Weighted average cost of gas
purchased ($/therm) $ 0.28 $ 0.27 $ 0.35 $ 0.27 $ 0.21
Customers at year end 1,274,000 1,209,000 1,151,000 1,092,000 1,029,000
Employees at year end 2,482 2,429 2,447 2,420 2,383
Degree days - actual 1,928 2,321 1,976 1,896 1,781
Degree days - ten-year average 2,031 2,043 2,022 2,033 2,021
</TABLE>
20 SOUTHWEST GAS CORPORATION
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
The following discussion of Southwest Gas Corporation and subsidiaries (the
Company) includes information related to its regulated natural gas transmission
and distribution activities and nonregulated activities. In 1996, the Company
completed the sale of PriMerit Bank, Federal Savings Bank (the Bank), which was
reported as discontinued operations. The loss on disposition was included in
the 1995 results of operations.
The Company is principally engaged in the business of purchasing,
transporting, and distributing natural gas (Southwest or natural gas operations
segment). Southwest is the largest distributor in Arizona, selling and
transporting natural gas in most of southern, central, and northwestern Arizona,
including the Phoenix and Tucson metropolitan areas. Southwest is also the
largest distributor and transporter of natural gas in Nevada, and serves the Las
Vegas metropolitan area and northern Nevada. In addition, Southwest distributes
and transports natural gas in portions of California, including the Lake Tahoe
area in northern California and high desert and mountain areas in San Bernardino
County.
As of December 31, 1999 Southwest had 1,274,000 residential,
commercial, industrial, and other customers, of which 722,000 customers were
located in Arizona, 431,000 in Nevada, and 121,000 in California. Residential
and commercial customers represented over 99 percent of the total customer base.
During 1999, Southwest added 65,000 customers, a five percent increase, of which
33,000 customers were added in Arizona, 28,000 in Nevada, and 4,000 in
California. Customer growth over the past three years averaged over five percent
annually. These additions are largely attributed to population growth in the
service areas. Based on current commitments from builders, customer growth is
expected to approximate five percent in 2000. During 1999, 56 percent of
operating margin was earned in Arizona, 34 percent in Nevada, and 10 percent in
California. During this same period, Southwest earned 83 percent of operating
margin from residential and small commercial customers, 4 percent from other
sales customers, and 13 percent from transportation customers. These patterns
are similar to prior years and are expected to continue.
In April 1996, the Company acquired all of the outstanding stock of
Northern Pipeline Construction Co. (Northern or construction services segment)
pursuant to a definitive agreement dated November 1995. The Company issued
approximately 1,439,000 shares of common stock valued at $24 million in
connection with the acquisition. The acquisition was accounted for as a
purchase. Goodwill in the amount of approximately $10 million was recorded by
Northern and is being amortized over 25 years. Northern provides utility
companies with trenching and installation, replacement, and maintenance services
for energy distribution systems.
In December 1998, the Company entered into a merger agreement with
ONEOK, Inc. (ONEOK). The merger agreement was amended in April 1999 following
receipt of unsolicited offers to acquire the Company from Southern Union Company
(Southern Union) that were rejected by the Company. On January 4, 2000, the
staff of the Arizona Corporation Commission (ACC) issued a
SOUTHWEST GAS CORPORATION 21
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
report that stated it was unable to recommend approval of the acquisition of the
Company by ONEOK due to concerns about ONEOK's actions and fitness to serve in
Arizona. On January 21, 2000, ONEOK informed the Company that it was terminating
the merger agreement. Additional information is provided in Note 14 of the Notes
to Consolidated Financial Statements. Litigation is pending in California,
Arizona, and Oklahoma relating to the now terminated acquisition of the Company
by ONEOK and the Company's rejection of the Southern Union offers. This
litigation is described in Item 3, "Legal Proceedings" in the 1999 Form 10-K
filed with the Securities and Exchange Commission.
CAPITAL RESOURCES AND LIQUIDITY
The capital requirements and resources of the Company generally are
determined independently for the natural gas operations and construction
services segments. Each business activity is generally responsible for securing
its own financing sources. The capital requirements and resources of the
construction services segment are not material to the overall capital
requirements and resources of the Company.
Southwest continues to experience significant population growth throughout
its service territories. This growth has required large amounts of capital to
finance the investment in infrastructure, in the form of new transmission and
distribution plant, to satisfy consumer demand. For example, during the
three-year period ended December 31, 1999, total gas plant increased from $1.7
billion to $2.2 billion, or at an annual rate of eight percent.
During 1999, capital expenditures for the gas operations segment were $208
million. Approximately 74 percent of these current-period expenditures
represented new construction and the balance represented costs associated with
routine replacement of existing transmission, distribution, and general plant.
Cash flows from operating activities of Southwest (net of dividends) provided
$140 million of the required capital resources pertaining to these construction
expenditures. The remainder was provided from net external financing activities.
Southwest estimates construction expenditures during the three-year period
ending December 31, 2002 will be approximately $630 million. During the
three-year period, cash flow from operating activities (net of dividends) is
estimated to fund approximately 60 percent of the gas operations total
construction expenditures. A portion of the construction expenditure funding
will be provided by $13 million of funds held in trust, at December 31, 1999,
from the issuance of industrial development revenue bonds (IDRB). The remaining
cash requirements are expected to be provided by external financing sources. The
timing, types, and amounts of these additional external financings will be
dependent on a number of factors, including conditions in the capital markets,
timing and amounts of rate relief, and growth levels in Southwest service areas.
These external
22 SOUTHWEST GAS CORPORATION
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
financings may include the issuance of both debt and equity securities, bank and
other short-term borrowings, and other forms of financing.
Liquidity refers to the ability of an enterprise to generate adequate
amounts of cash to meet its cash requirements. General factors that could
significantly affect capital resources and liquidity in future years include
inflation, growth in the economy, changes in income tax laws, changes in the
ratemaking policies of regulatory commissions, interest rates, and the level of
natural gas prices.
The rate schedules in all of the service territories of Southwest contain
purchased gas adjustment (PGA) clauses which permit adjustments to rates as the
cost of purchased gas changes. Southwest must first obtain regulatory approval
before changing the rates it charges for recovery of gas costs. The PGA
mechanism allows Southwest to change the gas cost component of the rates charged
to its customers to reflect increases or decreases in the price expected to be
paid to its suppliers and companies providing interstate pipeline transportation
service. In addition, Southwest uses this mechanism to either refund amounts
over-collected or recoup amounts under-collected as compared to the price paid
for natural gas during the period since the last PGA rate change went into
effect. Generally, tariffs in Nevada and California service territories of
Southwest provide for annual adjustment dates for changes in purchased gas
costs. In addition, Southwest may request to adjust rates more often than once
each year, if conditions warrant. In Arizona, beginning in June 1999, Southwest
adjusts its rates monthly for changes in purchased gas costs. PGA rate changes
impact cash flows but have no direct impact on profit margin. See RATES AND
REGULATORY PROCEEDINGS for details of these filings.
The Company has a common stock dividend policy which states that common
stock dividends will be paid at a prudent level that is within the normal
dividend payout range for its respective businesses, and that the dividend will
be established at a level considered sustainable in order to minimize business
risk and maintain a strong capital structure throughout all economic cycles. The
quarterly common stock dividend was 20.5 cents per share throughout 1999. A
dividend of 20.5 cents per share has been paid quarterly since September 1994.
Securities ratings issued by nationally recognized ratings agencies provide
a method for determining the credit worthiness of an issuer. Company debt
ratings are important because long-term debt constitutes a significant portion
of total capitalization. These debt ratings are a factor considered by lenders
when determining the cost of debt for the Company (i.e., the better the rating,
the lower the cost to borrow funds).
Since January 1997, Moody's Investor Service has rated Company unsecured
long-term debt at Baa2. Moody's debt ratings range from Aaa (best quality) to C
(lowest quality). Moody's applies a Baa2 rating to obligations which are
considered medium grade obligations (i.e., they are neither highly protected nor
poorly secured).
SOUTHWEST GAS CORPORATION 23
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
Since September 1997, Duff & Phelps Credit Rating Co. has rated Company
unsecured long-term debt at BBB. Duff & Phelps debt ratings range from AAA
(highest rating possible) to DD (defaulted debt obligation). The Duff & Phelps
rating of BBB indicates a credit quality that is considered prudent for
investment.
The Company's unsecured long-term debt rating from Standard and Poor's
(S&P) is BBB-. S&P debt ratings range from AAA (highest rating possible) to D
(obligation is in default). The S&P rating of BBB- indicates the debt is
regarded as having an adequate capacity to pay interest and repay principal.
The three rating agencies above recently affirmed the Company's credit
ratings following the termination of the proposed merger with ONEOK.
A securities rating is not a recommendation to buy, sell, or hold a
security and is subject to change or withdrawal at any time by the rating
agency.
The impact of inflation on results of operations has diminished in recent
years. Natural gas, labor, and construction costs are the categories most
significantly impacted by inflation. Changes to Company cost of gas are
generally recovered through PGA mechanisms and do not significantly impact net
earnings when approved as filed. Labor is a component of the cost of service,
and construction costs are the primary component of rate base. In order to
recover increased costs, and earn a fair return on rate base, general rate cases
are filed by Southwest, when deemed necessary, for review and approval by its
regulatory authorities. Regulatory lag, that is, the time between the date
increased costs are incurred and the time such increases are recovered through
the ratemaking process, can impact earnings. See RATES AND REGULATORY
PROCEEDINGS for discussion of recent rate case proceedings.
CONSOLIDATED RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
Contribution to Net Income
Year Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Natural gas operations $35,473 $44,830 $15,825
Construction services 3,837 2,707 644
- --------------------------------------------------------------------------------
Net income $39,310 $47,537 $16,469
================================================================================
</TABLE>
1999 VS. 1998
Earnings per share for the year ended December 31, 1999 were $1.28, a $0.38
decrease from per share earnings of $1.66 recorded for the year ended December
31, 1998. Current-year earnings were composed of $1.16 per share from natural
gas operations and $0.12 per share from construction services. Results for 1999
included merger-related costs of $2.5 million, net of tax, which reduced
24 SOUTHWEST GAS CORPORATION
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
earnings per share by $0.08. Average shares outstanding increased by 2.1 million
shares between years, primarily resulting from a 2.5 million share common stock
issuance in August 1998.
1998 VS. 1997
Earnings per share for the year ended December 31, 1998 were $1.66, a $1.05
increase from per share earnings of $0.61 recorded for the year ended December
31, 1997. Current-year earnings were composed of $1.57 per share from natural
gas operations and $0.09 per share from construction services. Prior-year
results included the impact of three nonrecurring events which reduced earnings
by $4.1 million, or $0.15 per share. Average shares outstanding increased by 1.5
million shares between years, primarily resulting from a 2.5 million share
common stock issuance in August 1998.
RESULTS OF NATURAL GAS OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- -------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Gas operating revenues $ 791,155 $ 799,597 $ 614,665
Net cost of gas sold 330,031 329,849 209,338
- -------------------------------------------------------------------------------------------
Operating margin 461,124 469,748 405,327
Operations and maintenance expense 221,258 209,172 201,159
Depreciation and amortization 88,254 80,231 74,528
Taxes other than income taxes 27,610 31,646 29,393
- -------------------------------------------------------------------------------------------
Operating income 124,002 148,699 100,247
Other income (expense) (2,925) (2,115) (12,979)
- -------------------------------------------------------------------------------------------
Income before interest and income taxes 121,077 146,584 87,268
Net interest deductions 61,597 62,284 61,751
Preferred securities distributions 5,475 5,475 5,475
Income tax expense 18,532 33,995 4,217
- -------------------------------------------------------------------------------------------
Contribution to consolidated net income $ 35,473 $ 44,830 $ 15,825
===========================================================================================
</TABLE>
1999 VS. 1998
The gas segment contribution to consolidated net income decreased $9.4 million
from 1998. The decrease in earnings was attributed to a return to more normal
weather conditions from last year's colder-than-normal temperatures.
Operating margin decreased $8.6 million, or two percent, in 1999.
Differences in heating demand between periods caused a $23 million reduction in
operating margin. Customer growth mitigated the impact of weather as Southwest
added 65,000 customers during the year, a five percent increase, contributing
$14 million in incremental margin. The 1999 customer additions were a record for
the Company, surpassing the 63,000 customers who signed up for service during
1996.
SOUTHWEST GAS CORPORATION 25
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
Operations and maintenance expense increased $12.1 million, or six percent,
reflecting increases in labor and other costs, including the incremental
expenses associated with meeting the needs of a growing customer base.
Depreciation expense increased $8 million, or ten percent, as a result of
construction activities. Average gas plant in service increased $163 million, or
eight percent, compared to the prior year. This was attributed to the upgrade of
existing operating facilities and the expansion of the system to accommodate
record customer growth.
General taxes decreased $4 million, or 13 percent, resulting from a
negotiated reduction in the taxable property base in Arizona and Nevada and a
reduced assessment rate. During 2000, general taxes are anticipated to increase
consistent with the estimated volume of construction activities.
Other income (expense) for 1999 includes approximately $4.8 million
(pretax) of costs associated with the now terminated merger agreement with
ONEOK. (See Note 14 of the Notes to Consolidated Financial Statements for
additional information on the status of merger-related issues). Southwest also
recorded a $2 million expense in connection with the CPUC approval of the
settlement agreement with the town of Truckee (see NORTHERN CALIFORNIA EXPANSION
PROJECT discussion below). Partially offsetting these expenses was a $1.6
million litigation settlement by a non-construction, non-utility subsidiary and
$1.4 million from the increase in value of other investments. In 1998, other
income (expense) included $1.1 million of pretax merger-related costs.
Net interest deductions decreased $687,000, or one percent. Strong cash
flows related to the recovery of deferred purchased gas costs, particularly
during the first half of the year, reduced the need for new borrowings to
finance construction. This trend is not expected to continue into 2000 as
additional financing will be needed to fund construction.
1998 VS. 1997
The gas segment contribution to consolidated net income increased $29 million
from 1997. The increase was the result of record first quarter earnings driven
by cooler temperatures, rate relief, and customer growth. The second and third
quarters were substantially better than the prior year, primarily as a result of
customer growth, second quarter weather, and rate design improvements. Fourth
quarter results were about the same as the prior year.
Operating margin increased $64 million, or 16 percent, in 1998. Arizona
rate relief, effective September 1997, contributed $23 million towards the
increase. Customer growth accounted for $16 million as Southwest added 58,000
customers during the year, a five percent increase. The remaining $25 million
was due to differences in heating demand caused by weather variations between
periods.
Operations and maintenance expense increased $8 million, or four percent,
reflecting increases in labor and other costs, including the incremental
expenses associated with meeting the needs of a growing customer base.
26 SOUTHWEST GAS CORPORATION
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
Depreciation expense and general taxes increased $8 million, or eight
percent, as a result of construction activities. Average gas plant in service
increased $136 million, or eight percent, compared to the prior year. This was
attributed to the upgrade of existing operating facilities and the expansion of
the system to accommodate customer growth.
Net interest deductions increased less than one percent between years.
Stronger-than-expected cash flows from operating activities, coupled with a 2.5
million share common stock offering, reduced the need to issue net new debt
during the year.
The effective income tax rate in 1997 was 21 percent. This resulted from
the recognition of a $3.4 million income tax benefit related to the successful
settlement in November 1997 of open tax issues dating back as far as 1988.
Other income (expense) improved $10.9 million. Results for 1997 included
two nonrecurring charges related to cost overruns on two separate construction
projects. An $8 million pretax charge resulted from cost overruns experienced
during expansion of the northern California service territory (see NORTHERN
CALIFORNIA EXPANSION PROJECT discussion below). A second pretax charge, for $5
million, related to cost overruns on a non-utility construction project, which
was completed in 1998. In connection with the then proposed merger into ONEOK,
the Company incurred approximately $1.1 million (pretax) of financial advisor
and legal costs, which were included in other income (expense), during the
fourth quarter of 1998.
RATES AND REGULATORY PROCEEDINGS
CALIFORNIA GENERAL RATE CASES. Southwest last filed general rate applications
for its California jurisdictions with the California Public Utilities Commission
(CPUC) in 1994. Increased rates went into effect in January 1995 and continued
through 1998 as part of a settlement agreement. In addition, annual operational
attrition increases have been received in northern California. However,
primarily as a result of the northern California expansion proposal described
below, Southwest filed a petition with the CPUC in March 1999 requesting an
extension of the rate case cycle. As part of the settlement agreement and mutual
release approved in February 2000, rates will remain at currently authorized
levels in both rate jurisdictions and Southwest agreed not to file a general
rate case applicable to its California service territories to be effective prior
to January 1, 2002.
NEVADA GENERAL RATE CASES. In December 1995, Southwest filed general rate cases
for its northern and southern Nevada jurisdictions. Increased rates went into
effect in July 1996 as part of a settlement agreement. The settlement agreement
also specified a moratorium on future general rate increase requests until April
1999. There are currently no plans to file a general rate case during 2000.
ARIZONA GENERAL RATE CASE. In November 1996, Southwest filed its most recent
general rate application with the Arizona Corporation Commission (ACC) to
increase revenues for both the central and southern Arizona rate jurisdictions.
In August 1997, the ACC approved a settlement of
SOUTHWEST GAS CORPORATION 27
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
the general rate case providing Southwest with a $32 million annualized general
rate increase effective September 1997. In addition, both Arizona rate
jurisdictions were consolidated for ratemaking purposes. There is no rate
moratorium in Arizona on future general rate filings. Southwest is considering
filing a general rate case during 2000.
FERC GENERAL RATE CASE. In July 1996, Paiute Pipeline Company, a wholly owned
subsidiary of the Company, filed its most recent general rate case with the
Federal Energy Regulatory Commission (FERC) to increase rates. Effective January
1997, the FERC authorized a $3.2 million annualized general rate increase. The
settlement prohibited Paiute from filing for a rate increase until December
1999. No general rate case filing is currently planned during 2000.
NORTHERN CALIFORNIA EXPANSION PROJECT. In 1995, Southwest initiated a
multi-year, three- phase construction project to expand its northern California
service territory and extend service into Truckee, California. The CPUC
established a $29.1 million cost cap for the project. In 1995, Southwest
completed Phase I of the project, which included transmission system
reinforcement and distribution system expansion to accommodate approximately 940
customers. Construction costs of $7.1 million were on target with the cost
estimate approved by the CPUC.
Phase II of the project, completed in 1997, extended the transmission
system to Truckee, California and expanded the distribution system to serve an
additional 4,200 customers. The cost cap apportioned to Phase II was
approximately $13.8 million. The incurred cost of Phase II was $28.8 million. An
estimated $9.2 million of the Phase II cost overrun was due to changes in
project scope, such as adjustments for design changes required by governmental
bodies, changes in facilities necessitated by requirements beyond Southwest's
control, and costs incurred to accommodate customer service requests. Due to the
Phase II cost overruns and difficult construction environment experienced,
construction of Phase III was postponed to reevaluate the economics of
completing the project.
In July 1997, Southwest filed an application requesting authorization from
the CPUC to modify the terms and conditions of the original certificate of
public convenience and necessity. In January 1998, a settlement agreement
involving all parties to the proceeding was executed and filed with the CPUC
which redefined the terms and conditions for completing the project and
recovering the additional project costs. Under the settlement agreement,
Southwest agreed to absorb $8 million in cost overruns experienced in Phase II.
There was no opposition to the settlement agreement by the Truckee Town Council.
Anticipating approval of the settlement agreement by the CPUC, Southwest
recognized an $8 million pretax charge in the fourth quarter of 1997.
In May 1998, the presiding Administrative Law Judge (ALJ) issued an
unexpected proposed decision rejecting the settlement agreement and directing
Southwest to complete the project under the terms and conditions of the original
certificate. Subsequent to the decision, the Truckee Town Council
28 SOUTHWEST GAS CORPORATION
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
took a formal position in opposition to the settlement agreement although they
were not a party to the proceeding.
In July 1998, the CPUC voted to adopt the proposed decision and reject
the settlement agreement, ordering Southwest to complete the project under the
terms of the original certificate. Southwest filed a motion for stay of order
and petitioned the CPUC for rehearing in August 1998. In September 1998, the
CPUC denied the motion for stay and in January 1999, the petition was denied.
In September 1998, Southwest filed a civil lawsuit in the United States
Federal District Court naming the town of Truckee as a defendant for an
indeterminate amount of damages. Southwest asserted that actions taken by the
town of Truckee resulted in unanticipated changes in project scope, which
materially contributed to the cost overruns experienced during construction of
Phase II of the project.
In February 1999, Southwest petitioned the Supreme Court of the state
of California for review of the July 1998 CPUC decision ordering Southwest to
complete the project under the terms and scope of the original certificate.
The petition for review was denied in June 1999.
In April 1999, following six months of mediation, Southwest and the
town of Truckee negotiated a settlement agreement and mutual release (Agreement)
that reconciled disputes and claims against each other. The Agreement provides
for natural gas service to be offered to all areas of Truckee, California,
consistent with the original scope of the project. The estimated remaining cost
to complete the project was reduced from $25 million to $18 million following
receipt of new construction bids. Service to potential customers in certain
areas would be provided pursuant to mains and services extension rules.
Southwest agreed to provide a $2 million subsidy to assist customers in covering
the mains and services extension costs. Southwest also agreed not to file a
general rate case applicable to its California service territories to be
effective before January 1, 2002. The Agreement also provides for the dismissal
by Southwest of the aforementioned lawsuit subsequent to the approval of the
terms of the Agreement by the CPUC.
In June 1999, Southwest and the town of Truckee filed the Agreement as
part of a joint petition with the CPUC to modify the certificate of public
convenience and necessity and the related cost recovery mechanism. Southwest
resumed construction on the project during the summer of 1999. Through December
1999, Southwest has spent $39.5 million of the estimated $54 million in
construction costs it expects to incur to complete the entire project.
In February 2000, the CPUC approved the joint petition, including the
terms and conditions of the Agreement, with the modifications that Southwest
file a project status report within two months following each construction
season through project completion, and that the project be completed with due
diligence, but in no event later than January 1, 2004, subject to delays in
construction for any cause beyond the control of Southwest. All parties have
consented to the Agreement and accepted the modifications ordered by the CPUC.
SOUTHWEST GAS CORPORATION 29
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
Based on the approval of the joint petition, Southwest's additional regulatory
disallowance exposure was reduced from $17 million to $2 million. A $2 million
pretax charge was recognized in the fourth quarter of 1999, representing the
customer subsidy for mains and services extension costs Southwest has committed
to provide. Southwest expects to complete the project by January 1, 2004, at or
below the total cost estimate of $54 million. Therefore, no additional
write-offs related to the expansion project are anticipated.
PGA FILINGS
ARIZONA PGA FILING. In October 1998, the ACC approved a proposal by the ACC
staff, to modify the methodology used by Arizona natural gas utilities in
calculating and revising customer rates to reflect changes in the cost of gas.
The modifications, which became effective in June 1999, use a twelve-month
rolling average of the commodity cost of gas and related transportation costs.
The updated rates are reflected in customer bills each month. The changes are
designed to reduce volatility on customer bills and in the PGA balance. The
mechanism also provides for a twelve-month recovery from customers of the
transitional balance ($17.9 million at December 31, 1999) in the deferred
purchased gas cost account and for interest charges on amounts accumulated under
the new monthly method.
NEVADA PGA FILING. In June 1999, Southwest submitted its annual PGA filing in
compliance with the Nevada Gas Tariff. Effective November 1999, new rates were
approved by the Public Utilities Commission of Nevada (PUCN). The new rates,
reflecting a lower average cost of purchased gas, resulted in annualized revenue
decreases of $20.9 million, or 12 percent, in the southern Nevada rate
jurisdiction, and $3.9 million, or 6 percent, in the northern Nevada rate
jurisdiction. These PGA changes impact cash flows but have no direct impact on
profit margin.
CALIFORNIA PGA FILINGS. In December 1997 and January 1998, the CPUC approved PGA
filings for the southern California and northern California rate jurisdictions,
respectively. These filings resulted in annualized revenue increases of $10
million, or 19 percent, in the southern California rate jurisdiction, and $2.6
million, or 19 percent, in the northern California rate jurisdiction. The
revenue increase was designed to recover the PGA balance over a twenty-four
month period. PGA changes impact cash flows but have no direct impact on profit
margin.
30 SOUTHWEST GAS CORPORATION
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
RESULTS OF CONSTRUCTION SERVICES
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Construction revenues $145,711 $117,712 $117,345
Cost of construction 134,790 108,911 112,194
- --------------------------------------------------------------------------------------
Gross profit 10,921 8,801 5,151
General and administrative expenses 3,312 2,931 2,777
- --------------------------------------------------------------------------------------
Income from operations 7,609 5,870 2,374
Other income (expense) 946 326 379
- --------------------------------------------------------------------------------------
Income before interest and income taxes 8,555 6,196 2,753
Interest expense 1,605 1,070 1,467
Income tax expense 3,113 2,419 642
- --------------------------------------------------------------------------------------
Contribution to consolidated net income $ 3,837 $ 2,707 $ 644
======================================================================================
</TABLE>
1999 VS. 1998
The 1999 construction segment contribution to consolidated net income increased
$1.1 million from the prior year. The improvement was due to additional revenues
that resulted from obtaining several new contracts and favorable winter weather
conditions. With revenues increasing approximately 24 percent, the gross margin
percentage remained relatively constant, thus increasing gross profit $2.1
million.
General and administrative expenses, as a percent of revenue, remained
relatively constant. Other income (expense) improved during 1999 due to
increased gains from the sale of equipment. The majority of the increase in
interest costs was due to an increase in the amount of financing for new
equipment purchases that were necessary to accommodate the new work obtained
during the year.
1998 VS. 1997
The construction services segment contribution to consolidated net income
increased $2.1 million from 1997. The increase was the result of a fundamental
improvement in gross profit margin coupled with favorable weather conditions.
With comparable revenues of approximately $117 million, gross profit
increased $3.6 million from 1997. The improvement was attributed to obtaining
more profitable new contracts, eliminating less profitable contracts,
implementing cost containment measures, and favorable winter weather conditions
in several of the cold-climate operating areas during the first and fourth
quarters of 1998.
SOUTHWEST GAS CORPORATION 31
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
General and administrative expenses remained relatively constant, while interest
expense decreased approximately $397,000. Timely billings to customers coupled
with collections of accounts receivable and the timing of equipment purchases
had a direct impact on reducing interest costs.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133." As it applies to the Company, SFAS
No. 137 postpones the effective date of SFAS No. 133 to January 2001.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 also requires
that changes in the fair value of derivative instruments be recognized currently
in earnings in the income statement unless specific hedge accounting criteria
are met. Special hedge accounting for qualified hedges allows changes in the
fair value of derivative instruments to be offset in the income statement in the
period in which the related changes in the fair value of the item being hedged
occurs. Hedge accounting requires an entity to formally document, designate, and
assess hedge effectiveness.
The Company does not currently utilize stand-alone derivatives for
speculative purposes or for hedging, and does not have foreign currency
exposure. However, the Company has fixed-price gas supply contracts, which may
be considered derivatives under the requirements of this complex statement, even
though they are part of the Company's normal gas purchase portfolio. In March
2000, the FASB issued an Exposure Draft that would exclude these contracts from
the scope of SFAS No. 133. The Company will continue to review the terms of
these contracts and monitor the progress of the Exposure Draft to determine if
SFAS No. 133 accounting requirements apply.
YEAR 2000 READINESS DISCLOSURE
In 1994, the Company initiated a comprehensive review of its computer systems to
identify processes that could be adversely affected by Year 2000 issues. By
early 1995, the Company identified computer application systems that required
modification or replacement. Since that time, the Company has focused on
converting all business-critical systems to be Year 2000 compliant.
In addition to the evaluation and remediation of computer application
systems and components, the Company developed a comprehensive Year 2000
compliance plan. As part of this plan, the Company formed a Year 2000 project
team with the mission of ensuring that all critical systems, facilities, and
processes were identified and analyzed for Year 2000 compliance. The project
32 SOUTHWEST GAS CORPORATION
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
team consisted of representatives from several strategic departments of the
Company. By the end of the third quarter of 1999, all business critical systems
were Year 2000 compliant, and contingency plans were developed.
The Company has experienced no significant events related to Year 2000
readiness issues. The Company estimates that the cost of remediation was
approximately $2 million. The remediation costs included internal labor costs,
as well as fees and expenses paid to outside contractors, specifically
associated with reprogramming or replacing noncompliant components. Such
expenditures did not have a material impact on results of operations or
financial condition.
FORWARD-LOOKING STATEMENTS
This annual report contains statements which constitute "forward-looking
statements" within the meaning of the Securities Litigation Reform Act of 1995
(Reform Act). All such forward-looking statements are intended to be subject to
the safe harbor protection provided by the Reform Act. A number of important
factors affecting the business and financial results of the Company could cause
actual results to differ materially from those stated in the forward-looking
statements. These factors include, but are not limited to, the impact of weather
variations on customer usage, natural gas prices, the effects of
regulation/deregulation, the timing and amount of rate relief, changes in
capital requirements and funding, acquisitions, and competition.
COMMON STOCK PRICE AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
1999 1998 Dividends Paid
- --------------------------------------------------------------------------------------------------
High Low High Low 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $29 $ 25 1/4 $21 1/2 $17 5/16 $ 0.205 $ 0.205
Second Quarter 29 1/2 26 7/8 25 20 3/8 0.205 0.205
Third Quarter 29 1/8 26 7/8 24 1/2 17 3/8 0.205 0.205
Fourth Quarter 27 5/16 20 3/8 26 7/8 20 3/16 0.205 0.205
- --------------------------------------------------------------------------------------------------
$ 0.820 $ 0.820
==================================================================================================
</TABLE>
The principal markets on which the common stock of the Company is traded
are the New York Stock Exchange and the Pacific Stock Exchange. At March 14,
2000, there were 22,759 holders of record of common stock and the market price
of the common stock was $19.
SOUTHWEST GAS CORPORATION 33
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS,
SOUTHWEST GAS CORPORATION:
We have audited the accompanying consolidated balance sheets of Southwest
Gas Corporation (a California corporation, hereinafter referred to as the
Company) and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 11, 2000
34 SOUTHWEST GAS CORPORATION
<PAGE> 17
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- ------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Operating revenues:
Gas operating revenues $ 791,155 $ 799,597 $ 614,665
Construction revenues 145,711 117,712 117,345
- ------------------------------------------------------------------------------------------------
Total operating revenues 936,866 917,309 732,010
- ------------------------------------------------------------------------------------------------
Operating expenses:
Net cost of gas sold 330,031 329,849 209,338
Operations and maintenance 221,258 209,172 201,159
Depreciation and amortization 98,525 88,804 84,661
Taxes other than income taxes 27,610 31,646 29,393
Construction expenses 128,230 103,668 105,198
- ------------------------------------------------------------------------------------------------
Total operating expenses 805,654 763,139 629,749
- ------------------------------------------------------------------------------------------------
Operating income 131,212 154,170 102,261
- ------------------------------------------------------------------------------------------------
Other income and (expenses):
Net interest deductions (63,202) (63,354) (63,218)
Preferred securities distributions (Note 5) (5,475) (5,475) (5,475)
Other income (deductions) (Note 11) (1,580) (1,390) (12,240)
- ------------------------------------------------------------------------------------------------
Total other income and (expenses) (70,257) (70,219) (80,933)
- ------------------------------------------------------------------------------------------------
Income before income taxes 60,955 83,951 21,328
Income tax expense (Note 10) 21,645 36,414 4,859
- ------------------------------------------------------------------------------------------------
Net income $ 39,310 $ 47,537 $ 16,469
================================================================================================
Basic earnings per share (Note 13) $ 1.28 $ 1.66 $ 0.61
================================================================================================
Diluted earnings per share (Note 13) $ 1.27 $ 1.65 $ 0.61
================================================================================================
Average number of common shares outstanding 30,690 28,611 27,069
Average shares outstanding (assuming dilution) 30,965 28,815 27,193
</TABLE>
The accompanying notes are an integral part of these statements.
SOUTHWEST GAS CORPORATION 35
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 1999 1998
- ---------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C>
ASSETS
Utility plant:
Gas plant $ 2,203,223 $ 2,020,139
Less: accumulated depreciation (662,510) (612,138)
Acquisition adjustments 3,503 3,881
Construction work in progress 36,886 47,480
- ---------------------------------------------------------------------------------------
Net utility plant (Note 2) 1,581,102 1,459,362
- ---------------------------------------------------------------------------------------
Other property and investments 84,850 73,926
- ---------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 17,126 18,535
Accounts receivable, net of allowances (Note 3) 88,476 88,037
Accrued utility revenue 56,373 56,873
Deferred income taxes (Note 10) 6,141 --
Deferred purchased gas costs (Note 4) 9,051 57,595
Prepaids and other current assets 31,971 26,346
- ---------------------------------------------------------------------------------------
Total current assets 209,138 247,386
- ---------------------------------------------------------------------------------------
Deferred charges and other assets (Note 4) 48,352 50,020
- ---------------------------------------------------------------------------------------
Total assets $ 1,923,442 $ 1,830,694
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
36 SOUTHWEST GAS CORPORATION
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 1999 1998
- ------------------------------------------------------------------------------------------------------
(Thousands of dollars, except par value)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $1 par (authorized -- 45,000,000 shares; issued
and outstanding -- 30,985,120 and 30,409,616 shares) $ 32,615 $ 32,040
Additional paid-in capital 439,262 424,840
Retained earnings 33,548 19,520
- ------------------------------------------------------------------------------------------------------
Total common equity 505,425 476,400
Company-obligated mandatorily redeemable preferred securities
of the Company's subsidiary, Southwest Gas Capital I,
holding solely $61.8 million principal amount of 9.125% subordinated
notes of the Company due 2025 (Note 5) 60,000 60,000
Long-term debt, less current maturities (Note 6) 859,291 812,906
- ------------------------------------------------------------------------------------------------------
Total capitalization 1,424,716 1,349,306
- ------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 8)
Current liabilities:
Current maturities of long-term debt (Note 6) 7,931 5,270
Short-term debt (Note 7) 61,000 52,000
Accounts payable 64,247 64,295
Customer deposits 27,408 24,333
Accrued taxes 40,611 33,480
Accrued interest 14,270 13,872
Deferred taxes (Note 10) -- 12,627
Other current liabilities 49,423 44,917
- ------------------------------------------------------------------------------------------------------
Total current liabilities 264,890 250,794
- ------------------------------------------------------------------------------------------------------
Deferred income taxes and other credits:
Deferred income taxes and investment tax credits (Note 10) 178,438 179,666
Other deferred credits (Note 4) 55,398 50,928
- ------------------------------------------------------------------------------------------------------
Total deferred income taxes and other credits 233,836 230,594
- ------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,923,442 $1,830,694
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
SOUTHWEST GAS CORPORATION 37
<PAGE> 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 39,310 $ 47,537 $ 16,469
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 98,525 88,804 84,661
Deferred income taxes (19,996) (152) 47,476
Changes in current assets and liabilities:
Accounts receivable, net of allowances (439) (10,021) (7,913)
Accrued utility revenue 500 (2,500) (7,873)
Deferred purchased gas costs 48,544 29,357 (96,384)
Accounts payable (48) 1,971 12,373
Accrued taxes 7,131 31,780 (8,277)
Other current assets and liabilities 2,737 15,763 2,004
Other 2,296 978 13,889
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 178,560 203,517 56,425
- --------------------------------------------------------------------------------------------------------
Cash flow from investment activities:
Construction expenditures and property additions (229,503) (194,621) (169,614)
Other 3,521 4,327 (1,308)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (225,982) (190,294) (170,922)
- --------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Issuance of common stock, net 14,997 67,180 12,205
Dividends paid (25,164) (23,676) (22,177)
Issuance of long-term debt, net 53,348 40,864 120,321
Retirement of long-term debt, net (6,168) (6,623) (7,565)
Issuance (repayment) of short-term debt 9,000 (90,000) 21,000
- --------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 46,013 (12,255) 123,784
- --------------------------------------------------------------------------------------------------------
Change in cash and temporary cash investments (1,409) 968 9,287
Cash at beginning of period 18,535 17,567 8,280
- --------------------------------------------------------------------------------------------------------
Cash at end of period $ 17,126 $ 18,535 $ 17,567
========================================================================================================
Supplemental information:
Interest paid, net of amounts capitalized $ 61,321 $ 61,164 $ 58,771
========================================================================================================
Income taxes paid (received), net $ 30,090 $ 4,968 $ (33,954)
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
38 SOUTHWEST GAS CORPORATION
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Retained
Shares Amount Capital Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
December 31, 1996 26,733 $ 28,363 $349,132 $ 2,121 $379,616
Common stock issuances 654 654 11,551 12,205
Net income 16,469 16,469
Dividends declared
Common: $0.82 per share (22,311) (22,311)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 27,387 29,017 360,683 (3,721) 385,979
Common stock issuances 3,023 3,023 64,157 67,180
Net income 47,537 47,537
Dividends declared
Common: $0.82 per share (24,296) (24,296)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 30,410 32,040 424,840 19,520 476,400
Common stock issuances 575 575 14,422 14,997
Net income 39,310 39,310
Dividends declared
Common: $0.82 per share (25,282) (25,282)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 30,985* $ 32,615 $439,262 $ 33,548 $505,425
====================================================================================================================================
</TABLE>
*At December 31, 1999, 2 million common shares were registered and available for
issuance under provisions of the Employee Investment Plan, the Stock Incentive
Plan, and the Dividend Reinvestment and Stock Purchase Plan.
The accompanying notes are an integral part of these statements.
SOUTHWEST GAS CORPORATION 39
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS. Southwest Gas Corporation (the Company) is comprised of
two segments: natural gas operations (Southwest or the natural gas operations
segment) and construction services. Southwest purchases, transports, and
distributes natural gas to customers in portions of Arizona, Nevada, and
California. Southwest's public utility rates, practices, facilities, and service
territories are subject to regulatory oversight. The timing and amount of rate
relief can materially impact results of operations. Natural gas sales are
seasonal, peaking during the winter months. Variability in weather from normal
temperatures can materially impact results of operations. Northern Pipeline
Construction Co. (Northern or the construction services segment), a wholly owned
subsidiary, is a full-service underground piping contractor which provides
utility companies with trenching and installation, replacement, and maintenance
services for energy distribution systems.
BASIS OF PRESENTATION. The Company follows generally accepted accounting
principles (GAAP) in accounting for all of its businesses. Accounting for the
natural gas utility operations conforms with GAAP as applied to regulated
companies and as prescribed by federal agencies and the commissions of the
various states in which the utility operates. The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CONSOLIDATION. The accompanying financial statements are presented on a
consolidated basis and include the accounts of Southwest Gas Corporation and all
wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated with the exception of transactions between
Southwest and Northern. Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation," provides that
intercompany profits on sales to regulated affiliates should not be eliminated
in consolidation if the sales price is reasonable and if future revenues
approximately equal to the sales price will result from the rate-making process.
Management believes these two criteria are being met.
NET UTILITY PLANT. Net utility plant includes gas plant at original cost, less
the accumulated provision for depreciation and amortization, plus the
unamortized balance of acquisition adjustments. Original cost includes
contracted services, material, payroll and related costs such as taxes and
benefits, general and administrative expenses, and an allowance for funds used
during construction less contributions in aid of construction.
DEFERRED PURCHASED GAS COSTS. The various regulatory commissions have
established procedures to enable Southwest to adjust its billing rates for
changes in the cost of gas purchased. The difference between the current cost of
gas purchased and the cost of gas recovered in billed rates is deferred.
40 SOUTHWEST GAS CORPORATION
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Generally, these deferred amounts are recovered or refunded within one year.
Southwest must first obtain regulatory approval before changing the rates it
charges for recovery of gas costs.
INCOME TAXES. The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period that includes the enactment
date.
For regulatory and financial reporting purposes, investment tax credits
(ITC) related to gas utility operations are deferred and amortized over the life
of related fixed assets.
GAS OPERATING REVENUES. Revenues are recorded when customers are billed.
Customer billings are based on monthly meter reads and are calculated in
accordance with applicable tariffs. Southwest also recognizes accrued utility
revenues for the estimated amount of services rendered between the meter-reading
dates in a particular month and the end of such month.
CONSTRUCTION REVENUES. The majority of the Northern contracts are performed
under unit price contracts. These contracts state prices per unit of
installation. Revenues are recorded as installations are completed. Fixed-price
contracts use the percentage of completion method of accounting and, therefore,
take into account the cost, estimated earnings, and revenue to date on contracts
not yet completed. The amount of revenue recognized is based on costs expended
to date relative to anticipated final contract costs. Revisions in estimates of
cost and earnings during the course of the work are reflected in the accounting
period in which the facts requiring revision become known. If a loss on a
contract becomes known or is anticipated, the entire amount of the estimated
ultimate loss is recognized at that time in the financial statements.
DEPRECIATION AND AMORTIZATION. Utility plant depreciation is computed on the
straight-line remaining life method at composite rates considered sufficient to
amortize costs over estimated service lives, including components which adjust
for salvage value and removal costs, as approved by the appropriate regulatory
agency. When plant is retired from service, the original cost of plant,
including costs of removal, less salvage, is charged to the accumulated
provision for depreciation. Acquisition adjustments are amortized, as ordered by
regulators, over periods which approximate the remaining estimated life of the
acquired properties. Costs related to refunding utility debt and debt issuance
expenses are deferred and amortized over the weighted-average lives of the new
issues. Other regulatory assets, when appropriate, are amortized over time
periods authorized by regulators. Nonutility property and equipment are
depreciated on a straight-line method based on the estimated useful lives of the
related assets.
SOUTHWEST GAS CORPORATION 41
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC). AFUDC represents the cost
of both debt and equity funds used to finance utility construction. AFUDC is
capitalized as part of the cost of utility plant. The Company capitalized $2.3
million in 1999, $2.4 million in 1998, and $1.6 million in 1997 of AFUDC related
to natural gas utility operations. The debt portion of AFUDC is reported in the
consolidated statements of income as an offset to net interest deductions and
the equity portion is reported as other income. Utility plant construction
costs, including AFUDC, are recovered in authorized rates through depreciation
when completed projects are placed into operation, and general rate relief is
requested and granted.
EARNINGS PER SHARE. Basic earnings per share (EPS) are calculated by dividing
net income by the weighted-average number of shares outstanding during the
period. Diluted EPS includes additional weighted-average common stock
equivalents (stock options and performance shares). Unless otherwise noted, the
term "Earnings Per Share" refers to Basic EPS. A reconciliation of the shares
used in the Basic and Diluted EPS calculations is shown in the following table.
Net income was the same for Basic and Diluted EPS calculations.
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Average basic shares 30,690 28,611 27,069
Effect of dilutive securities
Stock options 176 108 61
Performance shares 99 96 63
- --------------------------------------------------------------------------------
Average diluted shares 30,965 28,815 27,193
================================================================================
</TABLE>
CASH FLOWS. For purposes of reporting consolidated cash flows, cash and cash
equivalents include cash on hand and financial instruments with a maturity of
three months or less, but exclude funds held in trust from the issuance of
industrial development revenue bonds.
RECLASSIFICATIONS. Certain reclassifications have been made to amounts shown for
prior years to conform to the current-year presentation.
42 SOUTHWEST GAS CORPORATION
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - UTILITY PLANT
Net utility plant as of December 31, 1999 and 1998 was as follows (thousands of
dollars):
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Gas plant:
Storage $ 3,842 $ 3,316
Transmission 174,563 170,512
Distribution 1,762,341 1,598,703
General 185,344 186,468
Other 77,133 61,140
- --------------------------------------------------------------------------------
2,203,223 2,020,139
Less: accumulated depreciation (662,510) (612,138)
Acquisition adjustments, net 3,503 3,881
Construction work in progress 36,886 47,480
- --------------------------------------------------------------------------------
Net utility plant $ 1,581,102 $ 1,459,362
================================================================================
</TABLE>
Depreciation expense on gas plant was $85.6 million in 1999, $78.4
million in 1998, and $73.5 million in 1997.
LEASES AND RENTALS. Southwest leases the liquefied natural gas (LNG) facilities
on its northern Nevada system, a portion of its corporate headquarters office
complex in Las Vegas, and its administrative offices in Phoenix. The leases
provide for current terms which expire in 2003, 2017, and 2004, respectively,
with optional renewal terms available at the expiration dates. The rental
payments for the LNG facilities are $6.7 million annually and $23.3 million in
the aggregate. The rental payments for the corporate headquarters office complex
are $1.8 million for each of the years 2000 through 2002, $1.9 million in 2003,
$2 million in 2004, and $26.2 million cumulatively thereafter. The rental
payments for the Phoenix administrative offices are $1.2 million for 2000, $1.3
million for each of the years 2001 through 2003, and $1 million in the final
year of the lease. In addition to the above, the Company leases certain office
and construction equipment. The majority of these leases are short-term. These
leases are accounted for as operating leases, and for the gas segment are
treated as such for regulatory purposes. Rentals included in operating expenses
for all operating leases were $24.7 million in 1999, $22.6 million in 1998, and
$20.7 million in 1997. These amounts include Northern lease expenses of
approximately $8.4 million in 1999, $7.6 million in 1998, and $6.7 million in
1997 for various short-term leases of equipment and temporary office sites.
SOUTHWEST GAS CORPORATION 43
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a schedule of future minimum lease payments for
noncancellable operating leases (with initial or remaining terms in excess of
one year) as of December 31, 1999 (thousands of dollars):
<TABLE>
<CAPTION>
Year Ending December 31
- --------------------------------------------------------------------------------
<S> <C>
2000 $11,243
2001 11,078
2002 10,762
2003 6,719
2004 2,950
Thereafter 26,247
- --------------------------------------------------------------------------------
Total minimum lease payments $68,999
================================================================================
</TABLE>
NOTE 3 - RECEIVABLES AND RELATED ALLOWANCES
Business activity with respect to gas utility operations is conducted with
customers located within the three-state region of Arizona, Nevada, and
California. At December 31, 1999, gas utility customer accounts receivable were
$68.3 million. Approximately 57 percent of the gas utility customers were in
Arizona, 34 percent in Nevada, and 9 percent in California. Although the Company
seeks to minimize its credit risk related to utility operations by requiring
security deposits from new customers, imposing late fees, and actively pursuing
collection on overdue accounts, some accounts are ultimately not collected.
Provisions for uncollectible accounts are recorded monthly, as needed, and are
included in the ratemaking process as a cost of service. Activity in the
allowance for uncollectibles is summarized as follows (thousands of dollars):
<TABLE>
<CAPTION>
Allowance for
Uncollectibles
- --------------------------------------------------------------------------------
<S> <C>
Balance, December 31, 1996 $ 1,510
Additions charged to expense 1,495
Accounts written off, less recoveries (1,427)
- --------------------------------------------------------------------------------
Balance, December 31, 1997 1,578
Additions charged to expense 2,057
Accounts written off, less recoveries (2,290)
- --------------------------------------------------------------------------------
Balance, December 31, 1998 1,345
Additions charged to expense 1,897
Accounts written off, less recoveries (1,512)
- --------------------------------------------------------------------------------
Balance, December 31, 1999 $ 1,730
================================================================================
</TABLE>
NOTE 4 - REGULATORY ASSETS AND LIABILITIES
Natural gas operations are subject to the regulation of the Arizona Corporation
Commission (ACC), the Public Utilities Commission of Nevada (PUCN), the
California Public Utilities Commission
44 SOUTHWEST GAS CORPORATION
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CPUC), and the Federal Energy Regulatory Commission (FERC). Company accounting
policies conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process.
Such effects concern mainly the time at which various items enter into the
determination of net income in accordance with the principle of matching costs
with related revenues.
The following table represents existing regulatory assets and liabilities
(thousands of dollars):
<TABLE>
<CAPTION>
December 31 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Regulatory assets:
Deferred purchased gas costs $ 9,051 $ 57,595
SFAS No. 109 - Income taxes, net 6,251 7,870
Unamortized premium on reacquired debt 15,347 16,107
Other 20,277 21,478
- --------------------------------------------------------------------------------
50,926 103,050
Regulatory liabilities:
Supplier and other rate refunds due customers (29) (2,809)
Other (2,264) (241)
- --------------------------------------------------------------------------------
Net regulatory assets $ 48,633 $ 100,000
================================================================================
</TABLE>
NOTE 5 - PREFERRED SECURITIES
PREFERRED SECURITIES OF SOUTHWEST GAS CAPITAL I. In October 1995, Southwest Gas
Capital I (the Trust), a consolidated wholly owned subsidiary of the Company,
issued $60 million of 9.125% Trust Originated Preferred Securities (the
Preferred Securities). In connection with the Trust issuance of the Preferred
Securities and the related purchase by the Company of all of the Trust common
securities (the Common Securities), the Company issued to the Trust $61.8
million principal amount of its 9.125% Subordinated Deferrable Interest Notes,
due 2025 (the Subordinated Notes). The sole assets of the Trust are and will be
the Subordinated Notes. The interest and other payment dates on the Subordinated
Notes correspond to the distribution and other payment dates on the Preferred
Securities and Common Securities. Under certain circumstances, the Subordinated
Notes may be distributed to the holders of the Preferred Securities and holders
of the Common Securities in liquidation of the Trust. The Subordinated Notes are
redeemable at the option of the Company on or after December 31, 2000, at a
redemption price of $25 per Subordinated Note plus accrued and unpaid interest.
In the event that the Subordinated Notes are repaid, the Preferred Securities
and the Common Securities will be redeemed on a pro rata basis at $25 per
Preferred Security and Common Security plus accumulated and unpaid
distributions. Company obligations under the Subordinated Notes, the Declaration
of Trust (the agreement under which the Trust was formed), the
SOUTHWEST GAS CORPORATION 45
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
guarantee of payment of certain distributions, redemption payments and
liquidation payments with respect to the Preferred Securities to the extent the
Trust has funds available therefor and the indenture governing the Subordinated
Notes, including the Company agreement pursuant to such indenture to pay all
fees and expenses of the Trust, other than with respect to the Preferred
Securities and Common Securities, taken together, constitute a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities. As of December 31, 1999, 2.4 million Preferred
Securities were outstanding.
The Company has the right to defer payments of interest on the Subordinated
Notes by extending the interest payment period at any time for up to 20
consecutive quarters (each, an Extension Period). If interest payments are so
deferred, distributions will also be deferred. During such Extension Period,
distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at an annual rate of 9.125% per annum compounded
quarterly. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Notes. If the Company exercises the
right to extend an interest payment period, the Company shall not during such
Extension Period (i) declare or pay dividends on, or make a distribution with
respect to, or redeem, purchase or acquire or make a liquidation payment with
respect to, any of its capital stock, or (ii) make any payment of interest,
principal or premium, if any, on or repay, repurchase, or redeem any debt
securities issued by the Company that rank equal with or junior to the
Subordinated Notes; provided, however, that restriction (i) above does not apply
to any stock dividends paid by the Company where the dividend stock is the same
as that on which the dividend is being paid. The Company has no present
intention of exercising its right to extend the interest payment period.
46 SOUTHWEST GAS CORPORATION
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Carrying Market Carrying Market
(Thousands of dollars) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debentures:
9 3/4% Series F, due 2002 $ 100,000 $ 105,114 $ 100,000 $ 111,672
7 1/2% Series, due 2006 75,000 73,845 75,000 83,063
8% Series, due 2026 75,000 73,339 75,000 84,301
Medium-term notes, 7.59% series, due 2017 25,000 23,964 25,000 26,817
Medium-term notes, 7.78% series, due 2022 25,000 24,032 25,000 27,458
Medium-term notes, 7.92% series, due 2027 25,000 24,212 25,000 27,852
Medium-term notes, 6.89% series, due 2007 17,500 16,547 17,500 18,242
Medium-term notes, 6.76% series, due 2027 7,500 6,316 7,500 7,277
Medium-term notes, 6.27% series, due 2008 25,000 22,520 25,000 24,997
Unamortized discount (3,119) -- (3,452) --
- ------------------------------------------------------------------------------------------------------------------------------------
371,881 371,548
- ------------------------------------------------------------------------------------------------------------------------------------
Revolving credit facility 200,000 200,000 200,000 200,000
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial development revenue bonds:
Variable-rate bonds
Tax-exempt Series A, due 2028 50,000 50,000 50,000 50,000
Taxable Series B, due 2038 22,590 22,590 -- --
Less funds held in trust (12,768) -- (19,684) --
- ------------------------------------------------------------------------------------------------------------------------------------
59,822 30,316
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed-rate bonds
7.30% 1992 Series A, due 2027 30,000 31,203 30,000 28,484
7.50% 1992 Series B, due 2032 100,000 104,518 100,000 96,777
6.50% 1993 Series A, due 2033 75,000 71,082 75,000 63,591
6.10% 1999 Series A, due 2038 12,410 12,139 -- --
Unamortized discount (3,490) -- (3,448) --
- ------------------------------------------------------------------------------------------------------------------------------------
213,920 201,552
- ------------------------------------------------------------------------------------------------------------------------------------
Other 21,599 -- 14,760 --
- ------------------------------------------------------------------------------------------------------------------------------------
867,222 818,176
Less current maturities (7,931) (5,270)
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current maturities $ 859,291 $ 812,906
====================================================================================================================================
</TABLE>
The Company has a $350 million revolving credit agreement, which bears
interest at either the London Interbank Offering Rate (LIBOR) plus or minus a
competitive margin or prime rate plus one half of one percent of the Federal
Funds rate. Any amounts borrowed under the revolving credit agreement become
payable in June 2002. The Company has designated $200 million of the total
facility as long-term debt and uses the remaining $150 million for working
capital purposes and has designated the related outstanding amounts as
short-term debt.
SOUTHWEST GAS CORPORATION 47
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1999, the Company issued $35 million in Clark County, Nevada
industrial development revenue bonds (IDRB) due 2038. The issuance included
$12.4 million of tax-exempt bonds bearing interest at 6.10 percent and $22.6
million of taxable bonds with a variable interest rate. Net proceeds were used
to finance the cost of the acquisition, construction, completion, extension, and
improvement of Southwest pipeline systems in Clark County, Nevada. The Company
anticipates that it will convert the taxable bonds to tax-exempt bonds in
amounts corresponding to the private activity volume cap allocation designated
from time to time by Clark County, Nevada.
The interest rate on the taxable variable-rate IDRBs averaged 6.13 percent
in 1999. The interest rate on the tax-exempt variable-rate IDRBs averaged 3.74
percent in 1999, 3.74 percent in 1998, and 4.18 percent in 1997. The rates for
the variable-rate IDRBs are established on a weekly basis. The Company has the
option to convert from the current weekly rates to daily-term or variable-term
rates.
The fair value of the revolving credit facility approximates carrying
value. Market values for the debentures and fixed-rate IDRB were determined
based on dealer quotes using trading records for December 31, 1999 and 1998, as
applicable, and other secondary sources which are customarily consulted for data
of this kind. The carrying values of variable-rate IDRBs were used as estimates
of fair value based upon the variable interest rates of the bonds.
Estimated maturities of long-term debt for the next five years are expected
to be $7.9 million, $5.7 million, $305 million, $2.6 million, and $0,
respectively.
NOTE 7 - SHORT-TERM DEBT
As discussed in Note 6, a portion of the $350 million revolving credit facility
is designated as short-term debt. Short-term borrowings were $61 million and $52
million at December 31, 1999 and 1998, respectively. The weighted-average
interest rates on these borrowings were 8.10 percent at December 31, 1999 and
7.62 percent at December 31, 1998.
NOTE 8- COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS. In connection with activities surrounding the now terminated
merger (see Note 14), the Company is a party to various legal proceedings
including claims by certain shareholders and Southern Union. The Company has
also been named as defendant in various other legal proceedings. The ultimate
dispositions of these proceedings are not presently determinable; however, it is
the opinion of management that no litigation to which the Company is subject
will have a material adverse impact on its financial position or results of
operations.
NOTE 9 - EMPLOYEE BENEFITS
Southwest has a noncontributory qualified retirement plan with defined benefits
covering substantially all employees. Southwest also provides postretirement
benefits other than pensions (PBOP) to its qualified retirees for health care,
dental, and life insurance benefits.
48 SOUTHWEST GAS CORPORATION
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth the qualified retirement plan and PBOP
funded status and amounts recognized on the Consolidated Balance Sheets and
Statements of Income.
<TABLE>
<CAPTION>
Qualified
Retirement Plan PBOP
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligation for service rendered to
date at beginning of year (PBO/APBO) $ 222,832 $ 190,389 $ 23,977 $ 21,698
Service cost 9,976 9,130 572 504
Interest cost 15,406 14,092 1,643 1,591
Actuarial loss (gain) (6,096) 14,221 (300) 1,334
Benefits paid (5,500) (5,000) (1,010) (1,150)
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year (PBO/APBO) 236,618 222,832 24,882 23,977
- ------------------------------------------------------------------------------------------------------------------------------------
Change in plan assets
Market value of plan assets at beginning of year 255,685 232,413 6,679 3,581
Actual return on plan assets 21,695 28,272 543 487
Employer contributions -- -- 1,724 2,611
Benefits paid (5,500) (5,000) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Market value of plan assets at end of year 271,880 255,685 8,946 6,679
- ------------------------------------------------------------------------------------------------------------------------------------
Funded status 35,262 32,853 (15,936) (17,298)
Unrecognized net actuarial loss (gain) (51,992) (44,467) (210) (231)
Unrecognized transition obligation (2004/2012) 3,305 4,142 11,270 12,137
Unrecognized prior service cost 237 295 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ (13,188) $ (7,177) $ (4,876) $ (5,392)
====================================================================================================================================
Weighted-average assumptions as of
December 31,
Discount rate 7.25% 7.00% 7.25% 7.00%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.75% 4.50% 4.75% 4.50%
</TABLE>
For PBOP measurement purposes, a 6.5 percent annual rate of increase in the
per capita cost of covered health care benefits is assumed for 2000. The rate is
assumed to decrease one-half of one percent per year until 2003, at which time
the average annual increase is projected to be five percent. The Company makes
fixed contributions for health care benefits of employees who retire after 1988,
but pays up to 100 percent of covered health care costs for employees who
retired prior to 1989. The assumed annual rate of increase noted above applies
to the benefit obligations of pre-1989 retirees only.
SOUTHWEST GAS CORPORATION 49
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMPONENTS OF NET PERIODIC BENEFIT COST:
<TABLE>
<CAPTION>
Qualified Retirement Plan PBOP
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 9,976 $ 9,130 $ 9,630 $ 572 $ 504 $ 567
Interest cost 15,406 14,092 12,945 1,643 1,591 1,638
Expected return on
plan assets (20,266) (18,199) (16,270) (664) (349) (244)
Amortization of prior
service costs 58 57 57 -- -- --
Amortization of unrecognized
transition obligation 837 837 837 867 867 867
Amortization of net
(gain) loss -- (32) -- -- -- 12
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 6,011 $ 5,885 $ 7,199 $ 2,418 $ 2,613 $ 2,840
====================================================================================================================================
</TABLE>
In addition to the qualified retirement plan, Southwest has a separate unfunded
supplemental retirement plan which is limited to officers. The plan is
noncontributory with defined benefits. Plan costs were $2 million in 1999, 1998,
and 1997. The accumulated benefit obligation of the plan was $17.2 million at
December 31, 1999.
The Employees' Investment Plan provides for purchases of Company common
stock or certain other investments by eligible Southwest employees through
deductions of up to 16 percent of base compensation, subject to IRS limitations.
Southwest matches one-half of amounts deferred. The maximum Company contribution
is three percent of an employee's annual compensation. The cost of the plan was
$2.8 million in 1999, $2.6 million in 1998, and $2.5 million in 1997. Northern
has a separate plan, the cost and liability for which are not significant.
Southwest has a deferred compensation plan for all officers and members of
the Board. The plan provides the opportunity to defer up to 100 percent of
annual cash compensation. Southwest matches one-half of amounts deferred by
officers. The maximum Company contribution is three percent of an officer's
annual salary. Payments of compensation deferred, plus interest, are made in
equal monthly installments over 5, 10, 15, or 20 years, as elected by the
participant. Deferred compensation earns interest at a rate determined each
January. The interest rate represents 150 percent of Moody's Seasoned Corporate
Bond Index.
At December 31, 1999, the Company had two stock-based compensation plans.
These plans are accounted for in accordance with APB Opinion No. 25 "Accounting
for Stock Issued to
50 SOUTHWEST GAS CORPORATION
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employees." In connection with the stock-based compensation plans, the Company
recognized compensation expense of $2.2 million in 1999, $2.1 million in 1998,
and $1 million in 1997. Had compensation cost been determined based on the fair
value of the awards at the grant dates, net income and earnings per share would
have reflected the pro forma amounts indicated below (thousands of dollars,
except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net income
As reported $39,310 $47,537 $16,469
Pro forma 38,995 47,869 16,318
Basic earnings per share
As reported 1.28 1.66 0.61
Pro forma 1.27 1.67 0.60
</TABLE>
With respect to the first plan, the Company may grant options to purchase shares
of common stock to key employees and outside directors. Each option has an
exercise price equal to the market price of Company common stock on the date of
grant and a maximum term of 10 years. The options vest 40 percent at the end of
year one and 30 percent at the end of years two and three. The grant date fair
value of the options was estimated using the extended binomial option pricing
model. The following assumptions were used in the valuation calculation:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 4.62% 3.15% 4.09%
Risk-free interest rate range 4.91 to 5.76% 5.36 to 5.63% 5.28 to 5.38%
Expected volatility range 22 to 28% 22 to 25% 22 to 24%
Expected life 1 to 3 years 1 to 3 years 1 to 3 years
</TABLE>
The following tables summarize Company stock option plan activity and related
information (thousands of options):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Number average Number average Number average
of options exercise price of options exercise price of options exercise price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the
beginning of the year 587 $ 17.38 472 $ 15.96 380 $ 15.00
Granted during the year 118 28.91 118 23.04 121 18.78
Exercised during the year (1) 15.00 -- -- -- --
Forfeited during the year -- -- ( 3) 15.80 (29) 15.14
Expired during the year -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at year end 704 $ 19.32 587 $ 17.38 472 $ 15.96
====================================================================================================================================
Exercisable at year end 481 $ 17.77 295 $ 16.19 141 $ 15.00
====================================================================================================================================
</TABLE>
SOUTHWEST GAS CORPORATION 51
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average grant-date fair value of options granted was $4.34 for
1999, $2.68 for 1998, and $2.26 for 1997. The exercise prices for the options
outstanding range from $15.00 to $28.94. On December 31, 1999, the options
outstanding had a weighted-average remaining contractual life of approximately
7.5 years.
In addition to the option plan, the Company may issue restricted stock in
the form of performance shares to encourage key employees to remain in its
employment to achieve short-term and long-term performance goals. Plan
participants are eligible to receive a cash bonus (i.e., short-term incentive)
and performances shares (i.e., long-term incentive). The performance shares vest
after three years from issuance and are subject to a final adjustment as
determined by the Board of Directors. The following table summarizes the
activity of this plan (thousands of shares):
<TABLE>
<CAPTION>
Year Ending December 31 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonvested performance shares at beginning of year 172 126 93
Performance shares granted 83 67 59
Performance shares forfeited (1) -- --
Shares vested and issued (61) (21) (26)
- --------------------------------------------------------------------------------------
Nonvested performance shares at end of year 193 172 126
======================================================================================
Grant date fair value of award $26.63 $18.69 $19.25
======================================================================================
</TABLE>
NOTE 10 - INCOME TAXES
Income tax expense (benefit) consists of the following (thousands of dollars):
<TABLE>
<CAPTION>
Year Ending December 31 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 33,152 $ 32,267 $(42,921)
State 6,736 2,519 (2,227)
- --------------------------------------------------------------------------------
39,888 34,786 (45,148)
- --------------------------------------------------------------------------------
Deferred:
Federal (15,126) (268) 47,614
State (3,117) 1,896 2,393
- --------------------------------------------------------------------------------
(18,243) 1,628 50,007
- --------------------------------------------------------------------------------
Total income tax expense $ 21,645 $ 36,414 $ 4,859
================================================================================
</TABLE>
52 SOUTHWEST GAS CORPORATION
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax expense consists of the following significant components
(thousands of dollars):
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred federal and state:
Property-related items $ 11,405 $ 15,586 $ 19,006
Purchased gas cost adjustments (19,201) (10,344) 37,156
Employee benefits (5,816) (2,320) (1,265)
Merger costs (1,822) -- --
All other deferred (1,941) (426) (4,022)
- ----------------------------------------------------------------------------------
Total deferred federal and state (17,375) 2,496 50,875
Deferred investment tax credit, net (868) (868) (868)
- ----------------------------------------------------------------------------------
Total deferred income tax expense $(18,243) $ 1,628 $ 50,007
==================================================================================
</TABLE>
The consolidated effective income tax rate for the period ended December 31,
1999 and the two prior periods differs from the federal statutory income tax
rate. The sources of these differences and the effect of each are summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Net state tax liability 3.0 5.5 4.2
Property-related items 1.4 1.3 3.8
Effect of Internal Revenue Service examinations (1.8) -- (16.0)
Tax credits (1.4) (1.0) (4.0)
Tax exempt interest (0.3) (0.3) (1.7)
Corporate owned life insurance (1.0) 1.0 (1.0)
All other differences 0.6 1.9 2.5
- -----------------------------------------------------------------------------------------------
Consolidated effective income tax rate 35.5% 43.4% 22.8%
===============================================================================================
</TABLE>
SOUTHWEST GAS CORPORATION 53
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities consist of the following (thousands of
dollars):
<TABLE>
<CAPTION>
December 31 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Deferred income taxes for future amortization of ITC $ 10,372 $ 11,673
Employee benefits 15,595 9,779
Merger costs 1,822 --
Other 8,438 8,996
Valuation allowance -- --
- ---------------------------------------------------------------------------------------------
36,227 30,448
- ---------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property-related items, including accelerated depreciation 160,541 149,095
Regulatory balancing accounts 4,090 23,280
Property-related items previously flowed-through 16,622 19,543
Unamortized ITC 16,403 17,271
Debt-related costs 5,397 6,258
Other 5,471 7,294
- ---------------------------------------------------------------------------------------------
208,524 222,741
- ---------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 172,297 $ 192,293
=============================================================================================
Current $ (6,141) $ 12,627
Noncurrent 178,438 179,666
- ---------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 172,297 $ 192,293
=============================================================================================
</TABLE>
NOTE 11 - CALIFORNIA EXPANSION AND LNG CONSTRUCTION PROJECTS
NORTHERN CALIFORNIA EXPANSION PROJECT. In 1995, Southwest initiated a
multi-year, three-phase construction project to expand its northern California
service territory and extend service into Truckee, California. The California
Public Utilities Commission (CPUC) established a $29.1 million cost cap for the
project. In 1995, Southwest completed Phase I of the project, which included
transmission system reinforcement and distribution system expansion to
accommodate approximately 940 customers. Construction costs of $7.1 million were
on target with the cost estimate approved by the CPUC.
Phase II of the project, completed in 1997, extended the transmission
system to Truckee, California and expanded the distribution system to serve an
additional 4,200 customers. The cost cap apportioned to Phase II was
approximately $13.8 million. The incurred cost of Phase II was $28.8 million. An
estimated $9.2 million of the Phase II cost overrun was due to changes in
project scope, such as adjustments for design changes required by governmental
bodies, changes in facilities necessitated by requirements beyond Southwest's
control, and costs incurred to accommodate customer service requests. Due to the
Phase II cost overruns and difficult construction environment experienced,
construction of Phase III was postponed to reevaluate the economics of
completing the project.
In July 1997, Southwest filed an application requesting authorization from
the CPUC to modify the terms and conditions of the original certificate of
public convenience and necessity. In January 1998, a settlement agreement
involving all parties to the proceeding was executed and filed with the CPUC
54 SOUTHWEST GAS CORPORATION
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
which redefined the terms and conditions for completing the project and
recovering the additional project costs. Under the settlement agreement,
Southwest agreed to absorb $8 million in cost overruns experienced in Phase II.
There was no opposition to the settlement agreement by the Truckee Town Council.
Anticipating approval of the settlement agreement by the CPUC, Southwest
recognized an $8 million pretax charge in the fourth quarter of 1997.
In May 1998, the presiding Administrative Law Judge (ALJ) issued an
unexpected proposed decision rejecting the settlement agreement and directing
Southwest to complete the project under the terms and conditions of the original
certificate. Subsequent to the decision, the Truckee Town Council took a formal
position in opposition to the settlement agreement although they were not a
party to the proceeding.
In July 1998, the CPUC voted to adopt the proposed decision and reject the
settlement agreement, ordering Southwest to complete the project under the terms
of the original certificate. Southwest filed a motion for stay of order and
petitioned the CPUC for rehearing in August 1998. In September 1998, the CPUC
denied the motion for stay and in January 1999, the petition was denied.
In September 1998, Southwest filed a civil lawsuit in the United States
Federal District Court naming the town of Truckee as a defendant for an
indeterminate amount of damages. Southwest asserted that actions taken by the
town of Truckee resulted in unanticipated changes in project scope, which
materially contributed to the cost overruns experienced during construction of
Phase II of the project.
In February 1999, Southwest petitioned the Supreme Court of the state of
California for review of the July 1998 CPUC decision ordering Southwest to
complete the project under the terms and scope of the original certificate. The
petition for review was denied in June 1999.
In April 1999, following six months of mediation, Southwest and the town of
Truckee negotiated a settlement agreement and mutual release (Agreement) that
reconciled disputes and claims against each other. The Agreement provides for
natural gas service to be offered to all areas of Truckee, California,
consistent with the original scope of the project. The estimated remaining cost
to complete the project was reduced from $25 million to $18 million following
receipt of new construction bids. Service to potential customers in certain
areas would be provided pursuant to mains and services extension rules.
Southwest agreed to provide a $2 million subsidy to assist customers in covering
the mains and services extension costs. Southwest also agreed not to file a
general rate case applicable to its California service territories to be
effective before January 1, 2002. The Agreement also provides for the dismissal
by Southwest of the aforementioned lawsuit subsequent to the approval of the
terms of the Agreement by the CPUC.
In June 1999, Southwest and the town of Truckee filed the Agreement as part
of a joint petition with the CPUC to modify the certificate of public
convenience and necessity and the related
SOUTHWEST GAS CORPORATION 55
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cost recovery mechanism. Southwest resumed construction on the project during
the summer of 1999. Through December 1999, Southwest has spent $39.5 million of
the estimated $54 million in construction costs it expects to incur to complete
the entire project.
In February 2000, the CPUC approved the joint petition, including the terms
and conditions of the Agreement, with the modifications that Southwest file a
project status report within two months following each construction season
through project completion, and that the project be completed with due
diligence, but in no event later than January 1, 2004, subject to delays in
construction for any cause beyond the control of Southwest. All parties have
consented to the Agreement and accepted the modifications ordered by the CPUC.
Based on the approval of the joint petition, Southwest's additional
regulatory disallowance exposure was reduced from $17 million to $2 million. A
$2 million pretax charge was recognized in the fourth quarter of 1999,
representing the customer subsidy for mains and services extension costs
Southwest has committed to provide. Southwest expects to complete the project by
January 1, 2004, at or below the total cost estimate of $54 million. Therefore,
no additional write-offs related to the expansion project are anticipated.
LNG STORAGE AND DISTRIBUTION SYSTEM. A subsidiary of the Company entered into an
agreement to build Liquefied Natural Gas (LNG) storage and distribution systems
to serve several small towns. The subsidiary contracted to provide project
management services, materials, two gas distribution systems, and two LNG
storage and vaporization systems. The project was completed in 1998. The total
project cost exceeded the contract price by approximately $5 million. A pretax
charge of $5 million was recorded in 1997 and was included in Other income
(deductions) on the Consolidated Statements of Income.
NOTE 12 - SEGMENT INFORMATION
Company operating segments are determined based on the nature of their
activities. The natural gas operations segment is engaged in the business of
purchasing, transporting, and distributing natural gas. Revenues are generated
from the sale and transportation of natural gas. The construction services
segment is engaged in the business of providing utility companies with trenching
and installation, replacement, and maintenance services for energy distribution
systems.
The accounting policies of the reported segments are the same as those
described within Note 1 - Summary of Significant Accounting Policies. Northern
accounts for the services provided to Southwest at contractual (market) prices.
At December 31, 1999 and 1998, consolidated accounts receivable included $4.4
million and $5 million, respectively, which were not eliminated during
consolidation.
56 SOUTHWEST GAS CORPORATION
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial information pertaining to natural gas operations and construction
services segments for each of the three years in the period ended December 31,
1999, is as follows (thousands of dollars):
<TABLE>
<CAPTION>
1999
- ---------------------------------------------------------------------------------------------------
Gas Construction
Operations Services Adjustments Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers $ 791,155 $ 95,744 $ 886,899
Intersegment sales -- 49,967 49,967
===================================================================================================
Total $ 791,155 $ 145,711 $ 936,866
===================================================================================================
Interest expense $ 61,597 $ 1,605 $ 63,202
===================================================================================================
Depreciation and amortization $ 88,254 $ 10,271 $ 98,525
===================================================================================================
Income tax expense $ 18,532 $ 3,113 $ 21,645
===================================================================================================
Segment income $ 35,473 $ 3,837 $ 39,310
===================================================================================================
Segment assets $1,855,114 $ 68,630 $(302) $1,923,442
===================================================================================================
Capital expenditures $ 207,773 $ 21,730 $ 229,503
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1998
- -----------------------------------------------------------------------------------------------------
Gas Construction
Operations Services Adjustments Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers $ 799,597 $ 79,736 $ 879,333
Intersegment sales -- 37,976 37,976
=====================================================================================================
Total $ 799,597 $ 117,712 $ 917,309
=====================================================================================================
Interest expense $ 62,284 $ 1,070 $ 63,354
=====================================================================================================
Depreciation and amortization $ 80,231 $ 8,573 $ 88,804
=====================================================================================================
Income tax expense $ 33,995 $ 2,419 $ 36,414
=====================================================================================================
Segment income $ 44,830 $ 2,707 $ 47,537
=====================================================================================================
Segment assets $1,772,418 $ 59,285 $(1,009) $1,830,694
=====================================================================================================
Capital expenditures $ 179,361 $ 15,260 $ 194,621
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1997
- ---------------------------------------------------------------------------------------------------
Gas Construction
Operations Services Adjustments Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers $ 614,665 $ 81,421 $ 696,086
Intersegment sales -- 35,924 35,924
===================================================================================================
Total $ 614,665 $ 117,345 $ 732,010
===================================================================================================
Interest expense $ 61,751 $ 1,467 $ 63,218
===================================================================================================
Depreciation and amortization $ 74,528 $ 10,133 $ 84,661
===================================================================================================
Income tax expense $ 4,217 $ 642 $ 4,859
===================================================================================================
Segment income $ 15,825 $ 644 $ 16,469
===================================================================================================
Segment assets $1,717,025 $ 52,919 $(885) $1,769,059
===================================================================================================
Capital expenditures $ 164,528 $ 5,086 $ 169,614
===================================================================================================
</TABLE>
SOUTHWEST GAS CORPORATION 57
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Construction services segment assets include an income tax receivable of
$302,000 in 1999, which was netted against gas operations segment accrued taxes
during consolidation. Construction services segment assets include deferred tax
assets of $1 million in 1998 and $885,000 in 1997, which were netted against gas
operations segment deferred tax liabilities during consolidation.
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended March 31 June 30 September 30 December 31
- ------------------------------------------------------------------------------------------------------------------------------------
(Thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C>
1999
Operating revenues $ 308,025 $ 200,292 $ 166,289 $ 262,260
Operating income (loss) 62,725 11,530 (2,904) 59,861
Net income (loss) 28,266 (3,596) (14,188) 28,828
Basic earnings (loss) per common share* 0.93 (0.12) (0.46) 0.93
Diluted earnings (loss) per common share* 0.92 (0.12) (0.46) 0.93
1998
Operating revenues $ 292,601 $ 192,897 $ 162,508 $ 269,303
Operating income (loss) 75,502 12,951 (529) 66,246
Net income (loss) 35,953 (2,514) (10,945) 25,043
Basic earnings (loss) per common share* 1.31 (0.09) (0.38) 0.83
Diluted earnings (loss) per common share* 1.30 (0.09) (0.38) 0.82
1997
Operating revenues $ 235,231 $ 136,938 $ 128,698 $ 231,143
Operating income (loss) 51,515 (3,982) (7,248) 61,976
Net income (loss) 21,568 (12,748) (15,686) 23,335
Basic earnings (loss) per common share* 0.80 (0.47) (0.58) 0.85
Diluted earnings (loss) per common share* 0.80 (0.47) (0.58) 0.85
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The sum of quarterly earnings (loss) per average common share may not equal the
annual earnings (loss) per share due to the ongoing change in the weighted
average number of common shares outstanding.
The demand for natural gas is seasonal, and it is the opinion of management
that comparisons of earnings for the interim periods do not reliably reflect
overall trends and changes in the operations of the Company. Also, the timing of
general rate relief can have a significant impact on earnings for interim
periods. See Management's Discussion and Analysis for additional discussion of
operating results.
58 SOUTHWEST GAS CORPORATION
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - MERGER-RELATED ISSUES
In December 1998, the Boards of Directors of the Company and ONEOK, Inc.
(ONEOK), headquartered in Tulsa, Oklahoma, announced an agreement for the
Company to be acquired by ONEOK. The agreement called for ONEOK to pay $28.50 in
cash for each outstanding share of Company common stock.
In February 1999, the Company announced that it had received an
unsolicited proposal from Southern Union Company (Southern Union), headquartered
in Austin, Texas, offering to acquire the Company for $32 per share in cash.
Under the terms of the original agreement with ONEOK, and as a result of certain
preliminary determinations made by the Board of Directors of the Company, the
Board of Directors authorized management to commence substantive discussions
with Southern Union regarding its proposal.
In April 1999, the Board of Directors approved an amendment to the
agreement with ONEOK, which reflected among other things a revised cash purchase
price of $30 per share, and rejected the unsolicited bid by Southern Union. In
late April 1999, Southern Union revised its offer to $33.50 per share. In May
1999, the Board of Directors rejected the revised bid.
In June 1999, regulatory approval for the merger was obtained from the
Public Utilities Commission of Nevada. The shareholders of the Company approved
the principal terms of the merger at the annual shareholders meeting held in
August 1999. Merger filings were also made with the California and Arizona
regulatory bodies.
Hearings before the Arizona Corporation Commission (ACC), scheduled
during the third quarter of 1999, were delayed several times. The ACC staff
requested additional time to review the voluminous information filed in the
merger application (including merger-related litigation documents).
On January 4, 2000, the staff of the ACC issued a report that stated it
was unable to recommend approval of the merger of the Company and ONEOK due to
concerns about ONEOK's actions and fitness to serve in Arizona. On January 18,
2000, the Company sent ONEOK a letter demanding that ONEOK cure the deficiencies
identified in the ACC staff report. On January 21, 2000, ONEOK responded to the
Company's January 18th letter and stated that it was terminating the merger
agreement with the Company.
Operating results of the Company included merger-related costs of $2.5
million (net of tax) in 1999 and $666,000 (net of tax) in 1998.
SOUTHWEST GAS CORPORATION 59
<PAGE> 1
EXHIBIT 21.01
SOUTHWEST GAS CORPORATION
LIST OF SUBSIDIARIES OF THE REGISTRANT
AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
STATE OF INCORPORATION
SUBSIDIARY NAME OR ORGANIZATION TYPE
- --------------- ---------------------------
<S> <C>
LNG Energy, Inc. Nevada
Paiute Pipeline Company Nevada
Northern Pipeline Construction Co. Nevada
Southwest Gas Transmission Company Partnership between
Southwest Gas Corporation
and Utility Financial Corp.
Southwest Gas Capital I Delaware
Utility Financial Corp. Nevada
</TABLE>
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 11, 2000, incorporated by reference in this Form
10-K, into Southwest Gas Corporation's previously filed registration statements
on Form S-3 (File No. 333-14605), Form S-8 (File No. 333-31223), Form S-8 (File
No. 333-31267), and Form S-3 (File No. 333-81603).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Southwest
Gas Corporation's Form 10-K for the year ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,581,102
<OTHER-PROPERTY-AND-INVEST> 84,850
<TOTAL-CURRENT-ASSETS> 209,138
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 48,352
<TOTAL-ASSETS> 1,923,422
<COMMON> 32,615
<CAPITAL-SURPLUS-PAID-IN> 439,262
<RETAINED-EARNINGS> 33,548
<TOTAL-COMMON-STOCKHOLDERS-EQ> 505,425
0
0
<LONG-TERM-DEBT-NET> 859,291
<SHORT-TERM-NOTES> 61,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 7,931
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 489,795<F1>
<TOT-CAPITALIZATION-AND-LIAB> 1,923,442
<GROSS-OPERATING-REVENUE> 936,866
<INCOME-TAX-EXPENSE> 21,645
<OTHER-OPERATING-EXPENSES> 805,654
<TOTAL-OPERATING-EXPENSES> 805,654
<OPERATING-INCOME-LOSS> 131,212
<OTHER-INCOME-NET> (7,055)<F2>
<INCOME-BEFORE-INTEREST-EXPEN> 124,157
<TOTAL-INTEREST-EXPENSE> 63,202
<NET-INCOME> 39,310
0
<EARNINGS-AVAILABLE-FOR-COMM> 39,310
<COMMON-STOCK-DIVIDENDS> 25,164
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 178,560
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.27
<FN>
<F1>Includes: trust originated preferred securities of $60,000, current
liabilities, net of current long-term debt maturities and short-term debt,
of $195,959 and deferred income taxes and other credits of $233,836.
<F2>Includes distributions related to trust originated preferred securities of
$5,475.
</FN>
</TABLE>
