As filed with the Securities and Exchange Commission on ________, 2001
Registration No.____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PSEG Power LLC
(Exact name of registrant as specified in its charter)
Delaware 4911 22-3663480
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation Classification
or organization) Code Number)
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PSEG Fossil LLC
(Exact name of registrant as specified in its charter)
Delaware 4911 22-3663481
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation Classification
or organization) Code Number)
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PSEG Nuclear LLC
(Exact name of registrant as specified in its charter)
Delaware 4911 22-3663482
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation Classification
or organization) Code Number)
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PSEG Energy Resources & Trade LLC
(Exact name of registrant as specified in its charter)
Delaware 6221 22-3663483
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation Classification
or organization) Code Number)
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80 Park Plaza-T16
Newark, New Jersey 07102
(973) 430-7000
http://www.pseg.com
(Address, including zip code and telephone number, including
area code, of Registrants' principal executive offices)
Morton A. Plawner
Vice President and Treasurer
PSEG Power LLC
80 Park Plaza-T6
Newark, New Jersey 07102
(973) 430-7000
(Name, address, including zip code and telephone number, including
area code, of agent for service)
Copies to:
James T. Foran, Esquire
Associate General Counsel
Public Service Enterprise Group Incorporated
80 Park Plaza-T5B
P.O. Box 1171
Newark, New Jersey 07101-1171
(973) 430-7000
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ]
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities to be Price Per Offering Registration
to be Registered Registered Unit Price Fee (1)
-------------------------------------------------------------------------------------------------------
67/8% Senior Notes due 2006 $500,000,000 100% $500,000,000 $125,000
-------------------------------------------------------------------------------------------------------
Guarantees of 67/8% Senior Notes
due 2006 (2) (2) (2) (2)
-------------------------------------------------------------------------------------------------------
73/4% Senior Notes due 2011 $800,000,000 100% $800,000,000 $200,000
-------------------------------------------------------------------------------------------------------
Guarantees of 73/4% Senior Notes
due 2011 (2) (2) (2) (2)
-------------------------------------------------------------------------------------------------------
85/8% Senior Notes due 2031 $500,000,000 100% $500,000,000 $125,000
-------------------------------------------------------------------------------------------------------
Guarantees of 85/8% Senior Notes
due 2031 (2) (2) (2) (2)
=======================================================================================================
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(1) The registration fee has been calculated pursuant to Rule 457(f)(2) under the Securities Act. The proposed maximum aggregate offering price represents the total value of the bonds being exchanged under this registration statement.
(2) No additional consideration will be paid for the Guarantees. Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable in respect of the Guarantees.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion dated September 10, 2001
PRELIMINARY PROSPECTUS
[LOGO]
$1,800,000,000
PSEG Power LLC
Offer to Exchange
$500,000,000 67/8% Senior Notes Due 2006
$800,000,000 73/4% Senior Notes Due 2011
$500,000,000 85/8% Senior Notes Due 2031
Which have been registered under the Securities Act
For Any and All Outstanding $500,000,000 67/8% Senior Notes Due 2006 $800,000,000 73/4% Senior Notes Due 2011 $500,000,000 85/8% Senior Notes Due 2031 Which have not been so registered
TERMS OF THE EXCHANGE OFFER
o The exchange offer expires at 5:00 p.m., Eastern Time, on , 2001, unless extended by us in our sole discretion, subject to applicable law.
o The terms of the exchange notes are substantially identical to the original notes, except that the exchange notes are registered under the Securities Act and the transfer restrictions and registration rights applicable to the original notes do not apply to the exchange notes.
o The exchange notes, like the original notes, will be fully and unconditionally guaranteed by PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC on a joint and several basis. The guarantees will rank equally in right of payment to all existing and future senior unsecured indebtedness of the guarantors.
o All original notes that are validly tendered and not validly withdrawn will be exchanged.
o Tenders of original notes may be withdrawn at any time prior to expiration of the exchange offer.
o The original notes are listed on the Luxembourg Stock Exchange. Application will be made to list the exchange notes on the Luxembourg Stock Exchange. We do not intend to apply for listing of the exchange notes on any other securities exchange or to arrange for them to be quoted on any quotation system.
o The exchange offer is subject to customary conditions, including the condition that the exchange offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission.
o We will not receive any proceeds from the exchange offer.
o You will not incur any material federal income tax consequences from your participation in the exchange offer.
Please see "Risk Factors" beginning on page 13 for a discussion of factors you should consider in connection with the exchange offer.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ______, 2001.
TABLE OF CONTENTS
Page
----
Where to Find More Information ............................................ 3
Prospectus Summary ........................................................ 4
Risk Factors .............................................................. 13
Forward-Looking Statements ................................................ 21
Use of Proceeds ........................................................... 22
Capitalization ............................................................ 22
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................................ 23
Business .................................................................. 35
Management ................................................................ 63
Certain Relationships and Related Transactions ............................ 65
The Exchange Offer ........................................................ 67
Description of the Exchange Notes ......................................... 75
Federal Income Tax Considerations ......................................... 94
Plan of Distribution ...................................................... 97
Legal Opinions ............................................................ 97
Experts ................................................................... 98
Index to Financial Statements ............................................. F-1
Independent Auditors' Report .............................................. F-2
Consolidated Financial Statements ......................................... F-3
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When we refer to the term "note" or "notes", we are referring to both the original notes and the exchange notes to be issued in the exchange offer. When we refer to "holders" of the notes, we are referring to those persons who are the registered holders of notes on the books of the registrar appointed under the indenture. Unless the context otherwise indicates, all references to "Power," "we," "us" or "our" herein mean PSEG Power LLC, a Delaware limited liability company, and its consolidated subsidiaries. (For periods prior to August 21, 2000, " Power," "we," "us" or "our" also includes the generation business of Public Service Electric and Gas Company.)
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to exchange only the notes offered by this prospectus, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
WHERE TO FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities and Exchange Commission (the "SEC") a registration statement under the Securities Act of 1933 (the "Securities Act"), relating to the exchange notes to be issued in the exchange offer. As permitted by SEC rules, this prospectus omits information included in the registration statement. For a more complete understanding of this exchange offer, you should refer to the registration statement, including its exhibits.
The public may read and copy any reports or other information that we file with the SEC at the SEC's public reference room, Room 1024 at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's regional offices located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. These documents are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. You may also obtain a copy of the exchange offer registration statement at no cost by writing or telephoning us at the following address:
Director, Investor Relations PSEG Services Corporation 80 Park Plaza-T6 Newark, New Jersey 07102 (973) 430-7000
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this prospectus.
Summary of the Exchange Offer
The Exchange Offer .............. We are offering to exchange an aggregate of
$1,800,000,000 principal amount of exchange
notes in three series, the $500,000,000 67/8%
Senior Notes due 2006, the $800,000,000 73/4%
Senior Notes due 2011 and the $500,000,000
85/8% Senior Notes due 2031, for
$1,800,000,000 of original notes of like
series. The original notes may be exchanged
only in minimum denominations of $100,000 and
integral multiples of $1,000 in excess
thereof.
Issuance of the Original Notes .. The original notes were issued and sold on
April 16, 2001 in a transaction not requiring
registration under the Securities Act.
Registration .................... Rights At the time we issued the original
notes, we entered into a registration rights
agreement which obligates us to make this
exchange offer.
Required Representations ........ In order to participate in the exchange
offer, you will be required to make some
representations in a letter of transmittal,
including that:
o you are not affiliated with us,
o you are not a broker-dealer who bought your
original notes directly from us,
o you will acquire the exchange notes in the
ordinary course of business, and
o you have not agreed with anyone to
distribute the exchange notes.
If you are a broker-dealer that purchased
original notes for your own account as part
of market-making or trading activities, you
may represent to us that you have not agreed
with us or our affiliates to distribute the
exchange notes. If you make this
representation, you need not make the last
representation provided for above.
Resale of the Exchange Notes .... We are making the exchange offer in reliance
on the position of the staff of the Division
of Corporation Finance of the SEC as defined
in certain interpretive letters issued to
third parties in other transactions. We
believe that the exchange notes acquired in
this exchange offer may be freely traded
without compliance with the provisions of the
Securities Act that call for registration and
delivery of a prospectus, except as described
in the following paragraph.
The exchange notes will be freely tradable
only if the holders meet the conditions
described under "Required Representations"
above. If you are a broker-dealer that
purchased original notes for your own account
as part of market-making or trading
activities, you must deliver a prospectus
when you sell exchange notes. We have agreed
in the registration rights agreement relating
to the original notes to allow you to use
this prospectus for this purpose during the
90-day period following completion of the
exchange offer, subject to our right under
some circumstances to restrict your use of
this prospectus. See "The Exchange Offer--
Resales of Exchange Notes".
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Broker dealers who acquired original notes
directly from us may not rely on the staff's
interpretations and must comply with the
registration and prospectus delivery
requirements of the Securities Act, including
being named as a selling security holder, in
order to resell the original notes or the
exchange notes.
Accrued Interest on the
Original Notes ................ The exchange notes due 2006 will bear
interest at an annual rate of 67/8%, the
exchange notes due 2011 will bear interest at
an annual rate of 73/4% and the exchange
notes due 2031 will bear interest at an
annual rate of 85/8%. Any interest that has
accrued on any series of the original notes
before their exchange in this exchange offer
will be payable on the exchange notes on the
first interest payment date after the
conclusion of this exchange offer.
Procedures for Exchanging
Notes ......................... The procedures for exchanging original notes
involve notifying the exchange agent before
the expiration date of the exchange offer of
your intention to do so. The procedures for
properly making notification are described in
this prospectus under the heading "The
Exchange Offer -- Procedures for Tendering
Original Notes".
Expiration Date ................. 5:00 p.m., Eastern Time, on , 2001, unless
the exchange offer is extended.
Exchange Date ................... We will notify the exchange agent of the date
of acceptance of the original notes for
exchange.
Withdrawal Rights ............... If you tender your original notes for
exchange in this exchange offer and later
wish to withdraw them, you may do so at any
time before 5:00 p.m., Eastern Time, on the
day this exchange offer expires.
Acceptance of Original
Notes and Delivery of
Exchange ...................... Notes We will accept any original notes that
are properly tendered for exchange before
5:00 p.m., Eastern Time, on the day this
exchange offer expires. The exchange notes
will be delivered promptly after expiration
of this exchange offer.
Tax Consequences ................ You will not incur any material federal
income tax consequences from your
participation in this exchange offer.
Use of Proceeds ................. We will not receive any cash proceeds from
this exchange offer.
Exchange Agent .................. The Bank of New York is serving as the
exchange agent. Its address and telephone
number are provided in this prospectus under
the heading "The Exchange Offer -- Exchange
Agent".
Effect on Holders of
Original Notes ................ Any original notes that remain outstanding
after this exchange offer will continue to be
subject to restrictions on their transfer.
After this exchange offer, holders of
original notes will not (with limited
exceptions) have any further rights under the
registration rights agreement. Any market for
original notes that are not exchanged could
be adversely affected by the consummation of
this exchange offer.
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This exchange offer applies to $1,800,000,000 aggregate principal amount of the original notes. The terms of the exchange notes will be essentially the same as the original notes, except that the exchange notes will not contain language restricting their transfer and holders of the exchange notes generally will not be entitled to further registration rights under the registration rights agreement. The exchange notes issued in the exchange offer will evidence the same debt as the outstanding original notes, which they will replace, and both the original notes and the exchange notes are governed by the same indenture. The exchange notes, like the original notes, will be fully and unconditionally guaranteed by our three principal operating subsidiaries, PSEG Fossil LLC ("Fossil"), PSEG Nuclear LLC ("Nuclear") and PSEG Energy Resources & Trade LLC ("ER&T"), on a joint and several basis. The guarantees will rank equally in right of payment to all existing and future senior unsecured indebtedness of the guarantors.
Issuer PSEG Power LLC
Securities Offered .............. $500,000,000 of 67/8% Senior Notes due 2006,
$800,000,000 of 73/4% Senior Notes due 2011
and $500,000,000 of 85/8% Senior Notes due
2031 which have been registered under the
Securities Act.
Interest Payment Dates .......... April 15 and October 15 of each year,
beginning October 15, 2001.
Maturities ...................... 67/8% Senior Notes due April 15, 2006, 73/4%
Senior Notes due April 15, 2011 and 85/8%
Senior Notes due April 15, 2031.
Optional Redemption ............. We may redeem any or all of each series of
the exchange notes at any time at a price
equal to the sum of (i) 100% of the principal
amount of the exchange notes being redeemed,
(ii) a make whole premium and (iii) unpaid
interest accrued up to and including the
applicable redemption date. See "Description
of Exchange Notes -- Optional Redemption".
Ranking ......................... The exchange notes will be senior unsecured
obligations, will rank equally with all of
our senior unsecured indebtedness and will
rank senior to our subordinated unsecured
indebtedness. As of , 2001, we had
outstanding $ million of debt that ranks
equal with the exchange notes and, as of that
date, we had no secured debt outstanding.
Guarantees ...................... Each series of the exchange notes will be
fully and unconditionally guaranteed by
Fossil, Nuclear and ER&T on a joint and
several basis. The guarantees will rank
equally in right of payment to all existing
and future senior unsecured indebtedness of
the guarantors. We have issued a guarantee of
the obligations of ER&T, which guarantee is
subordinate to the exchange notes.
Ratings ......................... The exchange notes have been assigned ratings
of "Baa1" by Moody's Investors Service, Inc.,
"BBB+" by Fitch, Inc. and "BBB" by Standard &
Poor's Ratings Services.
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any time
by the assigning rating agency. Each rating
should be evaluated independently of any
other rating.
Sinking Fund .................... None.
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Certain Covenants ............... The indenture under which the original notes
were, and the exchange notes will be, issued
contains covenants restricting us and the
above-referenced restricted subsidiaries.
Each of these covenants is subject to a
number of important qualifications and
exceptions. See "Description of the Exchange
Notes-- Selected Indenture Covenants." These
covenants limit our ability, and the ability
of our restricted subsidiaries to, among
other things:
o in the case of our restricted
subsidiaries, incur certain
indebtedness;
o create liens;
o in the case of our restricted
subsidiaries, create or permit to exist
dividend or payment restrictions with
respect to us;
o sell assets; and
o engage in mergers and consolidations.
ER&T ............................ Dividends In addition, the indenture contains
a covenant requiring one of our restricted
subsidiaries, ER&T, to pay periodic dividends
or distributions to us of the excess cash not
required for its business operations. See
"Description of the Exchange Notes --
Selected Indenture Covenants."
Form ............................ Each series of the exchange notes will be
represented by one or more permanent global
exchange notes in fully registered form
without interest coupons, deposited with the
Trustee as custodian for, and registered in
the name of, a nominee of DTC, except in
certain limited circumstances described in
this prospectus.
Risk ............................ Factors An investment in the exchange notes
involves certain risks relating to our
business, prospects, financial condition and
results of operations and the terms of the
exchange notes. These risks are described in
"Risk Factors."
PSEG Power
We are one of the largest independent electric generating and wholesale
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energy marketing and trading companies in the United States. Through our three principal operating subsidiaries, we generate and market electricity, capacity, ancillary services and natural gas products on a wholesale basis. As of June 30, 2001, our generation portfolio consisted of 11,490 megawatts ("MW") of installed capacity owned or under contract. Our target market, which we refer to as the Super Region, extends from Maine to the Carolinas and the Atlantic Coast to Indiana, encompassing 37% of the nation's power consumption. With 20% of installed capacity, we are the single largest power supplier in our primary market, the Pennsylvania-New Jersey-Maryland Power Pool ("PJM"), which is one of the nation's largest and most well-developed energy markets.
We expect to continue to increase our generation capacity within our target market, and we believe that we are favorably positioned to do so through site expansions, strategic acquisitions and new generation development. We seek to continually maximize the value of our generation portfolio through the centralized control of its operations and its integration with our trading, fuel procurement, marketing and risk management expertise. Our electric generation portfolio is diversified by fuel source and market segment and we have demonstrated expertise in natural gas procurement.
o acquired 544 MW of nuclear capacity in Pennsylvania and New Jersey;
o acquired 380 MW of steam capacity in New York;
o completed construction and began operation of 332 MW of combustion turbines in New Jersey;
o began construction of 1,854 MW of combined cycle and combustion turbine units in New Jersey;
o began construction of 2,000 MW of combined cycle units in Indiana and Ohio;
o are in advanced development of 750 MW of combined cycle units in New York.
We expect that the new generating assets under construction at June 30, 2001, which will add 4,604 MW to our generation portfolio, will be completed by the end of the second quarter of 2003. This new capacity will expand our generation portfolio to three contiguous reliability regions.
As a result of New Jersey's deregulation and restructuring of the electric power industry, PSE&G was required by the New Jersey Board of Public Utilities ("BPU") to transfer its generation facilities and related assets to an unregulated affiliate. We and our three principal operating subsidiaries, Fossil, which operates our fossil generating facilities; Nuclear, which operates our nuclear generating facilities; and ER&T, which conducts our wholesale energy marketing and trading activities, were therefore formed to own and operate what were formerly PSE&G's electric generation assets and business. As an Exempt Wholesale Generator ("EWG"), we do not directly serve any retail customers and we use our generation facilities exclusively for the production of electricity for sale at the wholesale level. We have contracted with PSE&G to provide its energy, capacity and ancillary services required to fulfill its BPU-mandated basic generation service ("BGS") obligation through July 2002. As part of our 380 MW asset purchase from Niagara Mohawk Power Corporation ("NIMO"), we have contracted to provide NIMO with energy and capacity at prices consistent with its regulatory agreement through September 2003.
We are a wholly-owned subsidiary of Public Service Enterprise Group Incorporated ("PSEG"). PSEG is an exempt public utility holding company and one of the leading providers of energy and energy related services in the nation. PSEG has three other direct, wholly-owned subsidiaries: PSE&G, PSEG Energy Holdings Inc. ("Energy Holdings") and PSEG Services Corporation ("Services"). PSE&G is New Jersey's largest public utility and is engaged principally in the transmission, distribution and sale of electric energy and gas service in New Jersey. Energy Holdings participates nationally and internationally in energy-related lines of business through its subsidiaries. Services provides corporate support and managerial and administrative services to PSEG and its affiliates.
Deregulation
Since the target markets in which we operate are deregulated at the wholesale level, continued deregulation of the retail markets within these regions is likely to bring new purchasers of electricity into the wholesale markets, thus increasing the volume of transactions. This should continue to strengthen the efficient operation and liquidity of those markets. Liquidity is essential for efficiency as it provides a ready market for our generation output and marketing and trading activities.
We believe that we are well positioned to build upon our successful history and existing asset base to remain one of the largest independent electric generating and wholesale energy marketing and trading companies in the United States. Our significant competitive strengths include the following:
o We have one of the largest and most diversified unregulated generating portfolios in PJM and the eastern United States:
o our assets represent a diversified mix in terms of fuel type, technology and energy market segments, which reduces our risk associated with market demand cycles and allows us to participate in each segment of the dispatch curve;
o our assets are strategically located near concentrations of customers; and
o our base load coal and nuclear assets continue to achieve high capacity factors, while our load-following and peaking units have high equivalent availability factors.
o We have a wholesale marketing and trading function with integrated control of our generating assets, fuel procurement and trading activities:
o we seek to create the optimal mix of financial and physical assets, mitigating the effects of adverse movement in the fuel and electricity markets;
o we enter into both short-term and longer term bilateral contracts with over 100 credit-approved counterparties; and
o we provide effective management of the spark spread - the difference between the cost of fuel and the price of power.
o We utilize a conservative risk management strategy to minimize our exposure to long-term and short-term market risks, which has been instrumental in our ability to consistently grow the profitability of our trading operations:
o our corporate risk management committee provides oversight of the entire process and reports directly to the PSEG Board of Directors;
o we have a corporate risk management group independent of our trading operations that reports to the chief financial officer of PSEG and provides independent risk oversight of trading activity and monitors, measures and aggregates the financial risk activities of all trading operations; and
o we monitor the value-at-risk associated with our forward positions, including our generation and sales obligations on a weekly basis, and we mark our positions to market and stress test our portfolio on a daily basis.
o We possess extensive experience within PJM and surrounding regions, which provides us with in-depth knowledge and insight about the market's assets, market rules and transmission constraints.
o We have a management team that is comprised of seasoned individuals who have long-standing experience with our generating assets, market conditions, labor relations, business development, commodity trading and risk management. Our management and operating teams have, for the most part, managed and controlled our generating assets since their construction.
o We are committed as an environmental leader:
o we led the industry as an advocate for integrated power plant emissions strategy that would coordinate reductions of nitrogen oxides, sulfur dioxide, mercury, and carbon dioxide;
o we were recognized by the U.S. Environmental Protection Agency ("EPA") for our efforts to reduce solid and hazardous wastes.
Business Strategy
Our objective is to continue to profitably build our multi-regional generating and wholesale energy marketing and trading company based upon our successful formula of integrating generating asset operations with our wholesale energy, fuel supply, trading and risk management expertise. To implement our strategy we plan to:
o Maximize the value of our existing assets based upon their location, low cost and fuel diversity. More specifically, we plan to:
o continue to provide for long term power supply contracts associated with about 75% of portfolio;
o benefit from the advantageous location of assets near the load centers - therefore allowing us to benefit from the impacts of transmission constraints; and
o take advantage of the value of possessing assets across the entire market spectrum - base load, load following and peaking.
o Continue the strong integration between the operation of our generating assets, fuel procurement, trading and risk management. More specifically, we plan to:
o continue to optimize the value of our generating assets by coordinating their dispatch with our fuel management and electricity and natural gas trading operations; and
o continue to maintain a strong control environment through the use of best practices in risk management oversight for both market and credit risk.
o Profitably expand our asset base across the eastern United States - focusing both within the PJM region and in adjoining regions. More specifically, we plan to:
o continue to expand our existing brownfield sites, based upon their favorable location with respect to load centers, priority position in the transmission queue and existing fuel supplies; and
o pursue a disciplined approach to asset growth in neighboring regions where we can bring our expertise to bear with regard to operations, market rules, trading and risk management; and
o Maintain our commitment to the environment - both by improving the environmental performance of our assets and by taking a leadership position for a uniform set of stringent, but achievable, air pollution standards for all U.S. power plants. More specifically, we plan to:
o continue to advocate an integrated power plant emissions strategy that coordinates reductions of nitrogen oxides, sulfur dioxide, mercury, and carbon dioxide;
o continue our implementation of the largest privately-funded wetlands restoration program in the U.S.; and
Recent Developments
Development Activities
In June 2001, our Kearny Unit #12 (175 MW) in Kearny, New Jersey, began commercial operation for one half of the capacity. The unit was fully operational in August 2001.
We are in the process of obtaining permits and approvals to authorize the development of the Bethlehem Energy Center, a 750 MW combined-cycle power plant that will use natural gas as its primary fuel and low-sulfur distillate oil as a secondary fuel. The Bethlehem Energy Center will be located on the site of the 400 MW Albany Steam Station (which was acquired from Niagara Mohawk Power Corporation in May 2000) and will replace that facility. In September, the New York Department of Environmental Conservation issued draft air and water permits for the project. In addition, the New York State Board on Electric Generation Siting and Environment determined that the plant's application Certificate of Environmental Compatibility and Public Need was in compliance with state regulations. Public hearings on the application are scheduled to commence in October.
On August 22, 2001, construction and term loans with a group of banks were closed for the Waterford, Ohio ($355 million) and Lawrenceburg, Indiana ($445 million) projects. The interest rate on these loans is set at LIBOR plus 1.375% during the construction phase and 1.5% thereafter. Construction on each of these projects has commenced.
In June 2001, we sold 350 MW of turbine equipment.
License Renewals
Exelon, co-owner and operator of Peach Bottom Atomic Power Station ("Peach Bottom"), has informed us that on July 3, 2001 an application was submitted to the Nuclear Regulatory Commission to renew the operating licenses for Peach Bottom Units 2 and 3. If approved, the current licenses would be extended by 20 years, to 2033 and 2034 for Units 2 and 3 respectively. Nuclear Regulatory Commission review of the application is expected to take approximately two years.
The New Jersey Department of Environmental Protection ("NJDEP") issued a
final New Jersey Pollutant Discharge Eliminating System permit (Permit) for our
Salem Generating Station (Salem), effective August 1, 2001, allowing for the
continued operation of Salem with its existing cooling water system. This Permit
renews Salem's variance from applicable thermal water quality standards under
Section 316(a) of the federal Clean Water Act ("CWA"), determines that the
existing intake structure represents best technology available under Section
316(b) of the CWA, requires that we continue to implement the wetlands
restoration and fish ladder programs established under the 1994 permit and
imposes requirements for additional analyses of data and studies to determine if
other intake technologies are available for application at Salem that are
biologically effective. The Permit also requires us to install up to two
additional fish ladders in New Jersey and fund an escrow account in the amount
of $500,000 for the construction of artificial reefs by NJDEP. The Permit's
expiration date is July 31, 2006.
Summary Selected Historical Consolidated Financial Data
The following table sets forth our summary selected historical consolidated financial data. The historical consolidated financial data as of June 30, 2001, and for the six months ended June 30, 2001 and 2000 have been derived from our unaudited financial statements included elsewhere in this prospectus. The historical consolidated financial data as of December 31, 2000 and 1999, and for the three years ended December 31, 2000 have been derived from our audited financial statements included elsewhere in this prospectus. The historical consolidated financial data as of December 31, 1998 and 1997, and for the year ended December 31, 1997 have been derived from audited financial statements not included herein. The historical consolidated financial data as of and for the year ended December 31, 1996 has been derived from unaudited financial statements not included herein and, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position and results of operations for this period. The information set forth below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included elsewhere in this prospectus. Data related to periods prior to August 2000 have been derived from PSE&G's financial statements and are not necessarily indicative of the financial condition, results of operations or net cash flows that would have existed had PSE&G's generation-related business been an independent company during those periods.
For the Six
Months Ended
(in millions) June 30, For the Years Ended December 31,
------------ ---------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Income Statement Data
Operating Revenue ......... $ 2,320 $ 2,373 $ 4,927 $ 4,494 $ 4,428 $ 2,822 $ 2,510
Operating Expenses ........ 1,883 2,003 4,215 3,563 3,794 2,195 1,957
Operating Income .......... 437 370 712 931 634 627 553
Interest Expense .......... 89 43 198 112 216 223 221
Income Taxes .............. 140 136 208 291 156 101 129
Income Before Extraordinary
Item .................... 206 198 313 516 237 195 187
Extraordinary Item (1) .... -- -- -- (3,204) -- -- --
Net Income (Loss) ......... 206 198 313 (2,688) 237 195 187
Earnings (Loss) Available
to PSEG ................. $ 206 $ 198 $ 313 $(2,691) $ 232 $ 186 $ 184
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As of June 30, As of December 31,
-------------- -----------------------------------------
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
Balance Sheet Data
Assets ................. $4,830 $4,530 $3,301 $8,045 $8,183 $8,405
Current Liabilities .... 1,388 1,470 1,038 762 984 838
Noncurrent Liabilities . 1,000 1,006 991 2,096 2,075 2,086
Capitalization (2) ..... 2,442 2,054 1,272 5,187 5,124 5,481
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For the Six
Months Ended
June 30, For the Years Ended December 31,
-------- ----------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Other Data
EBITDA (3) ......... $ 490 $ 445 $ 855 $1,155 $1,015 $ 905 $ 911
Capital Expenditures 741 177 479 92 265 166 75
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RISK FACTORS
In addition to the information contained elsewhere in this prospectus, prospective investors should carefully consider the risks described below. Each of the following factors could have a material adverse effect on our business, prospects, financial condition, results of operations or net cash flows.
Power generation operating performance may fall below projected levels
The risks associated with operating power generation facilities (each of which could result in performance below expected capacity levels) include:
o performance below expected levels of output or efficiency;
o breakdown or failure of equipment or processes;
o disruptions in the transmission of electricity;
o labor disputes;
o fuel supply interruptions;
o limitations which may be imposed by environmental or other regulatory requirements;
o violations of permit limitations; and
o operator error or other catastrophic events such as fires, earthquakes, explosions, floods or other similar occurrences.
Operation below expected capacity levels may result in lost revenues, increased expenses, higher maintenance costs and penalties. Individual facilities may be unable to meet operating and financial obligations resulting in reduced cash flow.
Although we employ experienced personnel to maintain and operate our facilities and carry insurance (including business interruption insurance for our nuclear units) to mitigate the effects of certain operating risks described above, we cannot give any assurance that, should one or more of the events described above occur, it would not significantly decrease or eliminate revenues from operations or significantly increase the costs of operations.
A decrease in revenues or an increase in operating costs could decrease or eliminate funds available to us to make payments on our debt, including the exchange notes.
We have a limited operating history as a stand-alone power generator
Although our generation stations had a significant operating history at the time they were acquired by us from PSE&G, we have a very limited history of owning and operating them on a stand-alone basis. In addition, the generation stations were previously operated as integrated parts of a regulated utility prior to their acquisition by us and their output of electricity was sold by PSE&G at prices that were based upon rates set by regulatory authorities. We cannot make any assurance that the generation stations will perform as expected or produce revenues sufficient to meet their cost of operation, necessary capital expenditures or debt service on our indebtedness.
Our historical consolidated financial statements do not allow us to predict with any certainty our future income because:
o of our generation business' limited experience operating as a separate, competitive, non-regulated enterprise;
o we have been operating the generation stations for a short period of time on a stand-alone basis;
o PJM's and New York ISO's pricing and operating rules have changed significantly in recent years; and
o since August 1, 1999, commodity/fuel risk is no longer being offset by regulatory fuel/energy adjustment clause mechanisms.
Unavailability of power transmission facilities may impact our ability to deliver our output to customers
We depend on transmission and distribution facilities owned and operated by others to deliver the electricity we generate and sell. If transmission is disrupted, or if transmission capacity is inadequate, our ability to sell and deliver our electric energy products may be adversely impacted. If a region's power transmission infrastructure is inadequate, our ability to generate power and earn revenues may be limited.
We may not be able to obtain adequate fuel supplies and purchased power at attractive prices
Prior to August 1, 1999, our revenues and expenses were impacted by the Electric Levelized Energy Adjustment Clause ("LEAC"). LEAC was a utility regulatory rate setting mechanism for compensating the utility and electric consumers for unpredicted fuel and purchased power price fluctuations. LEAC allowed for adjustments to electric rates on a periodic basis. In effect, the utility credited electric customers for lower than predicted fuel and purchased power prices and collected additional revenues when fuel and purchased power prices were higher than predicted. On August 1, 1999, LEAC was eliminated, introducing an increased potential for earnings and cash flow volatility associated with exposure to price fluctuations in the fuel and purchased power markets. We are now subject to the full effects of price fluctuations in the energy markets.
Among the factors that will influence such energy prices (all of which are beyond our control) are:
o prevailing availability and market prices for coal, natural gas, fuel oil, enriched uranium and uranium fuel;
o the extent of additional supplies of electric energy from our current competitors or new market entrants, including the development of new generation facilities that may be able to produce electricity less expensively;
o the extent of additional supplies of electricity from an increase in physical transmission capacity into the energy markets in which we participate;
o weather conditions from time to time; and
o the possibility of a reduction in the projected rate of growth in electricity usage as a result of such factors as regional economic conditions and the implementation of energy conservation programs.
We cannot guarantee that we will be consistently able to obtain adequate supplies of fuel and purchased power at attractive prices.
We may have to purchase electricity at substantially higher prices than we can sell it under our BGS contract with PSE&G
In the event that demand associated with the BGS contract exceeds our generation capacity, we will have to purchase wholesale power to meet this sales commitment. The cost of obtaining the electricity needed to service the full amount of the contract may exceed the price that we receive from PSE&G for providing that energy under the BGS contract. The price that we receive under the BGS contract is fixed (at the retail tariff rate on file with the BPU), while electricity prices in the wholesale market can be extremely volatile. In the event that we have to purchase electricity to cover our BGS commitments, high market prices for that purchased electricity, whether hedged or not, are likely to increase our energy costs and adversely affect our earnings.
The seasonality of our business may impact cash flow
Through July 31, 2002, our cash flow will be primarily influenced by the BGS contract that we have with PSE&G. Our BGS revenues will be a function of the terms of this contract, while our associated costs will be a function of the variable cost of our generation asset portfolio and power purchase
opportunities relative to the capacity and energy needs of PSE&G's BGS customer base. When the capacity and energy output of our owned generation units is insufficient to cover the needs of PSE&G's BGS load, which is more likely during summer months, we will purchase additional energy and capacity from the wholesale markets. In such instances, we could be exposed to the price volatility of the wholesale markets and our cash flows may vary throughout the course of a year.
After July 31, 2002, our cash flow will largely be determined by the size of our generation asset portfolio relative to our contractual obligations to provide retail aggregators and other wholesale market participants capacity and energy. Similar to the short-term situation, we will purchase or sell additional energy and capacity to/from the wholesale markets when necessary and such exposure may result in varying cash flows from month to month.
Upon expiration of the BGS contract, we cannot guarantee we will be able to replace those revenues
PSE&G is required by the BPU to competitively seek bids for the supply of its BGS obligations for periods after July 31, 2002. We will have the opportunity to submit a bid to continue to supply PSE&G or another load serving entity ("LSE") in New Jersey under a new contract, or we can sell our energy and capacity into the spot market, enter into other bilateral agreements or a combination thereof. Our goal is to realize a majority of our generation revenues from bilateral agreements. In addition, we will continue to sell additional energy and capacity into the spot market and will continue to be subject to the risks and rewards associated with the competitive wholesale electricity market to the extent that the price at which we sell our energy and capacity differs from our production or purchased power costs.
Credit, commodity and financial market risks may have an adverse impact
The revenues generated by the operation of our generation stations are subject to market risks that are beyond our control. Our generation output will either be used to satisfy our wholesale contracts or be sold into the competitive power markets or under other bilateral contracts. Participants in the competitive power markets are not guaranteed any specified rate of return on their capital investments through recovery of mandated rates payable by purchasers of electricity. Therefore, with the exception of revenue generated by the BGS contract (which expires on July 31, 2002) and from bilateral contracts for the sale of electricity with third-party LSEs and power marketers, our revenues and results of operations will be dependent upon prevailing market prices for energy, capacity and ancillary services in the markets we serve.
Among the factors that will influence the market prices for energy, capacity and ancillary services are:
o the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities that may be able to produce electricity less expensively;
o changes in the rules set by regulatory authorities with respect to the manner in which electricity sales will be priced;
o transmission congestion in PJM and/or other competitive markets;
o the operation of nuclear generation plants in PJM and other competitive markets beyond their presently expected dates of decommissioning;
o prevailing market prices for enriched uranium, fuel oil, coal and natural gas and associated transportation costs;
o weather conditions prevailing in PJM and other competitive market regions from time to time;
o the possibility of a reduction in the projected rate of growth in electricity usage as a result of factors such as national and regional economic conditions and the implementation of conservation programs; and
o changes in regulations applicable to PJM and other ISOs.
Trading risks may have an adverse impact
Our trading and marketing business frequently involves the establishment of trading positions in the wholesale energy markets on long-term and short-term bases. To the extent that we have long positions in the energy markets, a downturn in the markets is likely to result in losses from a decline in the value of such long positions. Conversely, to the extent that we enter into forward sales contracts to deliver energy we do not own, or take short positions in the energy markets, an upturn in the energy markets is likely to expose us to losses as we attempt to cover our short positions by acquiring energy in a rising market.
In addition, from time to time we may have a trading strategy consisting of simultaneously holding a long position and a short position, from which we expect to earn a profit based on changes in the relative value of the two positions. If, however, the relative value of the two positions changes in a direction or manner we did not anticipate, we could realize losses from such a paired position.
If the strategy we utilize to hedge our exposures to these various risks is not effective, we could incur significant losses. Our substantial trading positions can also be adversely affected by the level of volatility in the energy markets that, in turn, depends on various factors, including weather in various geographical areas and short-term supply and demand imbalances, which cannot be predicted with any certainty.
In addition, we are exposed to the risk that counterparties that owe us money or energy will not perform their obligations. Although we have devoted significant resources to develop our risk management policies and procedures and counterparty credit requirements and expect to continue to do so in the future, we can give no assurance that losses from our trading activities will not have a material adverse effect on our business, prospects, results of operations, financial condition, or net cash flows.
We may not have access to sufficient capital in the amounts and at the times needed for our business
Our capital and, in turn, that of our subsidiaries, is provided by equity contributions from PSEG, internally-generated cash flow, borrowings by us and borrowings by our subsidiaries. In order to ensure continued growth, we will increasingly require access to debt capital from outside sources on acceptable terms.
We can give no assurances that our current and future capital structure, operating performance or financial condition will permit us to access the capital markets or to obtain other financing at the times, in the amounts and on the terms necessary or advisable for us to successfully carry out our business strategy or to service our indebtedness, including the exchange notes.
Acquisition, construction and development activities may not be successful
We may seek to acquire, develop and construct new energy projects, the completion of any of which (including the pending acquisition of 298 MW of nuclear assets from Atlantic City Electric Company ("ACE")) is subject to substantial risk. Such activity can require us to expend significant sums for preliminary engineering, permitting, fuel supply, resource exploration, legal and other expenses in preparation for competitive bids which we may not win or before it can be established whether a project is feasible, economically attractive or capable of being financed. Successful development and construction is contingent upon, among other things, negotiation of terms satisfactory to us of engineering, construction, fuel supply and power sales contracts with other project participants, receipt of required governmental approvals and consents and timely implementation of construction. Further, we can give no assurance that we will obtain access to the substantial debt and equity capital required to develop and construct new generation projects or to refinance existing projects.
Our future growth is dependent, in large part, upon the demand for significant amounts of additional energy and our ability to supply portions of this demand. Even if such contracts are obtained, we can give no assurance that acquisition, construction or development efforts on any particular project, or our efforts generally, will be successful in supplying such demand.
Government regulation affects many of our operations
The electric power generation business is subject to substantial regulation and permitting requirements from federal, state and local authorities. See "Business -- Regulation." We are required to comply with numerous laws and regulations and to obtain numerous governmental permits in order to operate our generation stations.
We believe that we have obtained all material energy-related federal, state and local approvals currently required to operate our generation stations. Although not currently required, additional regulatory approvals may be required in the future due to a change in laws and regulations or for other reasons. No assurance can be given that we will be able to obtain any required regulatory approval that we may require in the future, or that we will be able to obtain any necessary extension in obtaining any required regulatory approvals. If we fail to obtain or comply with any required regulatory approvals, there could be a material adverse effect on our ability to operate our generation stations or to sell electricity to third parties.
PSEG has claimed an exemption from regulation by the SEC as a registered holding company under the Public Utility Holding Company Act of 1935 ("PUHCA"), except for Section 9(a)(2) thereof, which relates to the acquisition of 5% or more of the voting securities of an electric or gas utility company. PUHCA regulates public utility holding companies and their subsidiaries. The subsidiaries which operate our generation stations are EWGs under PUHCA. Failure to maintain EWG status could subject us to regulation by the SEC under PUHCA. In addition, actions taken by PSE&G could cause PSEG, and therefore its subsidiaries, including us, to no longer be exempt from regulation under PUHCA. If we, PSEG or any of our subsidiaries were to no longer be exempt from PUHCA, we or they would be subject to additional regulation by the SEC with respect to financing and investing activities.
We are subject to regulation by the Federal Energy Regulatory Commission ("FERC") with respect to certain matters, including interstate sales and exchanges of electric capacity and energy.
We are subject to pervasive regulation by the Nuclear Regulatory Commission ("NRC") with respect to the operation of our nuclear generation stations. Such regulation involves testing, evaluation and modification of all aspects of plant operation in light of NRC safety and environmental requirements. Continuous demonstrations to the NRC that plant operations meet applicable requirements are also required. The NRC has the ultimate authority to determine whether any nuclear generation unit may operate.
We can give no assurance that existing regulations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to us or any of our generation stations or that future changes in laws and regulations will not have a detrimental effect on our business.
Environmental regulation significantly impacts our operations
We are required to comply with numerous statutes, regulations and ordinances relating to the safety and health of employees and the public, the protection of the environment and land use. These statutes, regulations and ordinances are constantly changing. While we believe that we have obtained all material environmental-related approvals required as of the date hereof to own and operate our facilities or that such approvals have been applied for and will be issued in a timely manner, we may incur significant additional costs because of compliance with these requirements. Failure to comply with environmental statutes, regulations and ordinances could have a material effect on us, including potential civil or criminal liability and the imposition of clean-up liens or fines and expenditures of funds to bring our facilities into compliance.
Regulatory approval for the construction of new facilities is a costly and time-consuming process. Intricate and rapidly changing environmental regulations may require major expenditures for permitting, thereby creating the risk of expensive delays or material impairment of project value if these projects cannot function as planned due to changing regulatory requirements or local opposition.
We can give no assurance that we will be able to:
o obtain all required environmental approvals that we do not yet have or that may be required in the future;
o obtain any necessary modifications to existing environmental approvals; or
o maintain compliance with all applicable environmental laws, regulations and approvals.
Delay in obtaining or failure to obtain and maintain in full force and effect any such environmental approvals, or delay or failure to satisfy any applicable environmental regulatory requirements, could prevent construction of new facilities, operation of our existing facilities or sale of energy therefrom or could result in significant additional cost to us.
We are subject to more stringent environmental regulation than many of our competitors
Most of our facilities are located in the State of New Jersey and are subject to both federal and state pollution control requirements. New Jersey's environmental programs are generally considered to be particularly stringent in comparison to similar programs in other states. As such, there may be instances where the facilities located in New Jersey are subject to more stringent and therefore more costly pollution control requirements than competitive facilities in other states.
We are responsible for pre-existing environmental liabilities of the assets we acquired
In acquiring the generation stations from PSE&G, we assumed all environmental liabilities associated with the generation stations, regardless of when such liabilities arose and whether known or unknown, and agreed to indemnify PSE&G for these liabilities. Our contract to purchase the Albany Steam Station required our assumption of on-site environmental liabilities.
The indenture restricts our ability to enter into certain transactions
The indenture restricts our ability and the ability of our Restricted Subsidiaries (as defined below under "Description of the Exchange Notes") to, among other things:
o in the case of our Restricted Subsidiaries, incur certain indebtedness;
o create liens;
o in the case of our Restricted Subsidiaries, create or permit to exist dividend or payment restrictions with respect to us;
o sell assets; and
o engage in mergers and consolidations.
These restrictions may limit our ability to finance future operations, respond to changing business and economic conditions, secure any needed additional financing and engage in opportunistic transactions. See "Description of the Exchange Notes -- Selected Indenture Covenants."
Insurance coverage may not be sufficient
We have insurance for our generation stations, including all-risk property damage insurance, commercial general public liability insurance, boiler and machinery coverage, nuclear liability and, for our nuclear units, replacement power and business interruption insurance in amounts and with deductibles that we consider appropriate. We can give no assurance that such insurance coverage will be available in the future on commercially reasonable terms nor that the insurance proceeds received for any loss of or any damage to any of the generation stations will be sufficient to permit us to continue to make payments on our debt, including the exchange notes.
We are subject to substantial competition
The United States electric utility industry is currently experiencing increasing competitive pressures as a result of state and federal deregulation legislation and related regulatory initiatives, consumer
demands, distributed generation, technological advances, greater availability of natural gas and other factors. Pursuant to the National Energy Policy Act of 1992, FERC has effected certain regulatory changes to increase access to the nationwide transmission grid by utility and non-utility purchasers and sellers of electricity in order to create more competition in wholesale power markets. Many states are implementing or considering methods to introduce and promote retail competition. Thirteen of the nineteen states and the District of Columbia in our target markets have enacted restructuring legislation and twelve have opened their retail energy markets to competition. Furthermore, six of the remaining states have issued a regulatory order or are otherwise investigating restructuring. In addition, proposals have been introduced in Congress to repeal the Public Utility Regulatory Policy Act ("PURPA") and PUHCA which would further impact the markets in which we operate.
We are subject to substantial competition. Deregulation may not only continue to accelerate the current trend toward consolidation among domestic utilities, but may also continue to result in the splitting of vertically-integrated utilities into separate generation, transmission and distribution businesses. We face competition from independent power producers, numerous well-capitalized investment and finance company affiliates of banks, large energy marketing companies, utilities and industrial companies. As a result, additional significant competitors have become active in the independent power industry and the potential for excess capacity exists in portions of our target market.
The electric utility industry is undergoing substantial change
The electric utility industry in the State of New Jersey, across the country and around the world is undergoing major transformations. We, PSEG and PSE&G are affected by many issues that are common to the electric industry such as:
o deregulation, the unbundling of energy supplies and services and the establishment of a competitive energy marketplace for products and services;
o energy sales retention and growth;
o the need to reduce operating and capital costs and operate efficiently in a competitive environment;
o revenue stability and growth;
o nuclear operations and decommissioning;
o increased capital investments attributable to environmental regulations;
o managing wholesale energy trading operations;
o ability to complete development or acquisition of current and future investments;
o managing electric generation and distribution operations in locations outside of the traditional utility service territory;
o exposure to market price fluctuations and volatility;
o fair competition and affiliate transactions;
o accounting changes resulting from deregulation; and
o debt and equity market concerns associated with these issues.
Changes in technology may make our power generation assets less competitive
A key element of our business plan is that generating power at central power plants produces electricity at relatively low cost. There are other technologies that produce electricity, most notably fuel cells, microturbines, windmills and photovoltaic (solar) cells. It is possible that advances in technology will reduce the cost of alternative methods of producing electricity to a level that is competitive with that of most central station electric production. If this were to happen, our market share could be eroded and the value of our power plants could be significantly impaired. Changes in technology could also alter the channels through which retail electric customers buy electricity, thereby affecting our financial results.
We are subject to control by PSEG
Our sole limited liability company member, PSEG, controls the election of our directors and all other matters submitted for member approval and has control over our management and affairs. In circumstances involving a conflict of interest between PSEG, as the sole member, on the one hand, and our creditors, on the other, we can give no assurance that PSEG would not exercise its power to control us in a manner that would benefit PSEG to the detriment of our creditors, including the holders of the exchange notes.
The Indenture imposes no limitations on our ability to pay dividends or to make other payments to PSEG or on our ability to enter into transactions with PSEG or our other affiliates.
There is no public market for the exchange notes
Although the application for listing on the Luxembourg Stock Exchange of the exchange notes has been made, we do not intend to list any series of the exchange notes on any U.S. securities exchange. We can give no assurance concerning the liquidity of any market that may develop for the exchange notes, the ability of any investor to sell the exchange notes or the price at which investors would be able to sell their exchange notes.
Fraudulent transfer statutes and similar limitations may limit your rights as a noteholder
Each of our Restricted Subsidiaries will guarantee our obligations on the exchange notes (each a "Subsidiary Guaranty"). See "Description of the Exchange Notes -- Guaranty of Senior Notes."
Under federal and state fraudulent transfer laws, a court could find that the Subsidiary Guaranty provided by a Restricted Subsidiary constituted a fraudulent conveyance by that Restricted Subsidiary. To do so, a court would typically have to find that, at the time the Subsidiary Guaranty was issued, the relevant Restricted Subsidiary:
o issued the Subsidiary Guaranty with the intent of hindering, delaying or defrauding our current or future creditors; or
o (a) received less than fair consideration or reasonably equivalent value for incurring the indebtedness represented by its Subsidiary Guaranty; and (b) either (x) was insolvent or was rendered insolvent by reason of the issuance of the Subsidiary Guaranty, (y) was engaged, or about to engage, in a business or transaction for which its assets were unreasonably small or (z) intended to incur, or believed or should have believed it would incur, debts beyond its ability to pay as such debts mature.
Many of the foregoing terms are defined in or interpreted under those fraudulent transfer statutes.
Different jurisdictions define "insolvency" differently. However, an entity generally would be considered insolvent at the time it incurred any particular obligation if (1) its liabilities exceeded its assets, at a fair valuation, or (2) the present saleable value of its assets is less than the amount required to pay its total existing debts and liabilities (including any probable liability related to contingent liabilities) as they become absolute or matured. We cannot assure you of the standard a court would apply in order to determine whether any Restricted Subsidiary was "insolvent" as of the date the applicable Subsidiary Guaranty was issued, or that regardless of the method of valuation, a court would not determine, regardless of whether such Restricted Subsidiary was insolvent on the date the Subsidiary Guaranty was issued, that the payments constituted fraudulent transfers on another ground.
If a court were to make any such finding, it could:
o avoid all or a portion of the relevant Restricted Subsidiary's obligations on the Subsidiary Guarantees;
o subordinate the relevant Restricted Subsidiary's obligations on the Subsidiary Guarantees to obligations owed to its other existing and future creditors, entitling those creditors to be paid in full before any payment is made on the relevant Subsidiary Guaranty; and/or
o take other actions detrimental to you, including invalidating the relevant Subsidiary Guaranty.
In that event, we cannot assure you that you would receive any payment under the Subsidiary Guaranty of the relevant Restricted Subsidiary.
If you fail to exchange original notes, they will remain subject to transfer restrictions
Any original notes that remain outstanding after this exchange offer will continue to be subject to restrictions on their transfer. After this exchange offer, holders of original notes will not (with limited exceptions) have any further rights under the exchange and registration rights agreement. Any market for original notes that are not exchanged could be adversely affected by the conclusion of this exchange offer.
Late deliveries of notes and other required documents could prevent a holder from exchanging its notes
Holders are responsible for complying with all exchange offer procedures. Issuance of exchange notes in exchange for original notes will only occur upon completion of the procedures described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering Original Notes". Therefore, holders of original notes who wish to exchange them for exchange notes should allow sufficient time for timely completion of the exchange procedure. We are not obligated to notify you of any failure to follow the proper procedure.
If you are a broker-dealer, your ability to transfer the notes may be restricted
A broker-dealer that purchased original notes for its own account as part of market-making or trading activities must deliver a prospectus when it sells the exchange notes. Our obligation to make this prospectus available to broker-dealers is limited. Consequently, we cannot guarantee that a proper prospectus will be available to broker-dealers wishing to resell their exchange notes.
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this prospectus that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth of our businesses and operations, are forward-looking statements. These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include:
o the significant considerations and risks discussed in this prospectus;
o general and local economic, market or business conditions;
o demand (or lack thereof) for electricity, capacity and ancillary services in the markets served by our generation units;
o increasing competition from other companies;
o the acquisition and development opportunities (or lack thereof) that may be presented to and pursued by us;
o changes in laws or regulations that are applicable to us;
o environmental constraints on construction and operation;
o the rapidly changing market for energy products; and
o access to capital.
Consequently, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by us will be realized or, even if realized, will have the expected consequences to or effects on us or our business prospects, financial condition or results of operations. You should not place undue reliance on these forward-looking statements in making your investment decision. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to these forward-looking statements to reflect events or circumstances that occur or arise or are anticipated to occur or arise after the date hereof. In making an investment decision regarding the exchange notes, we are not making, and you should not infer, any representation about the likely existence of any particular future set of facts or circumstances.
USE OF PROCEEDS
The exchange offer is intended to satisfy some of our obligations under the registration rights agreement. We will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. In exchange for issuing the exchange notes as described in this prospectus, we will receive an equal principal amount of original notes, which will be canceled.
The net proceeds from the sale of the original notes were used to repay the $1.620 billion demand notes payable to PSEG which enabled us to repay the note we issued to PSE&G for the purchase of the generation units and other assets we acquired from PSE&G and for other general company purposes. $1.084 billion of these demand notes carried a per annum interest rate of 14.23%. The balance carried a commercial paper rate.
CAPITALIZATION
The following table sets forth our historical consolidated capitalization as of June 30, 2001 and as of December 31, 2000 which reflects equity and loans from PSEG used to repay our promissory note to PSE&G.
As of 6/30/01 As of 12/31/00
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(in millions)
Notes Payable-due to Affiliates .............. $ -- $ 2,786
Long-term Debt:
67/8% Senior Notes due 2006 ................. 498 --
73/4% Senior Notes due 2011 ................. 798 --
85/8% Senior Notes due 2031 ................. 495 --
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Total Debt .................................. $ 1,791 $ 2,786
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Total Common Equity(1) ....................... 1,637 254
Basis Adjustment ............................. (986) (986)
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Total Capitalization ......................... $ 2,442 $ 2,054
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(1) We are a limited liability company of which PSEG is the sole owner and member.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Corporate Structure
We are a wholly-owned subsidiary of PSEG formed in June 1999 to acquire, own and operate the electric generation-related assets of PSE&G pursuant to the Final Order issued by the BPU under the New Jersey Energy Master Plan Proceedings. We, in turn, have three principal direct wholly-owned operating subsidiaries: Fossil, which operates our fossil generation facilities; Nuclear, which operates our nuclear generation facilities; and ER&T, which conducts our wholesale marketing and trading activities. We acquired PSE&G's generation-related assets on August 21, 2000. Through our subsidiaries, we provide energy and capacity to PSE&G under the BGS contract and market and trade electricity, capacity and ancillary services throughout the eastern United States. In addition, we provide corporate support and managerial and administrative services to our subsidiaries and are responsible for financing their operations. We also have a finance company subsidiary, PSEG Power Capital Investment Co. ("Power Capital"), which provides certain financing for our other subsidiaries.
Overview and Future Outlook
We currently operate as an independent power generation and wholesale marketing and trading company in the eastern United States. As of June 30, 2001, we owned 11,490 MW of generation capacity. (This total includes the generation capacity (298 MW) related to our pending acquisition of ACE's share of co-owned nuclear generation facilities.) We derive our revenue and cash flows principally from the sale of electricity, capacity and ancillary services.
The regulatory structure that has historically governed the electric power industry in the United States and in many of the states is in transition. Recent federal and state legislative and regulatory initiatives have been designed to promote competition in the electric power industry. Deregulation is underway throughout the United States and is at a relatively advanced stage in the Northeast, where certain of the markets in which we compete are located. The resulting restructuring of energy markets provides us with new opportunities and exposes us to new risks.
In August 1999, as part of New Jersey's deregulation and restructuring of its electric power industry, the BPU issued its Final Order in PSE&G's rate unbundling, stranded costs and restructuring proceedings which directed, among other things, the sale by PSE&G of its generation related property, plant and equipment and all associated rights and liabilities to a separate, unregulated affiliate. In October and November 1999, appeals were filed challenging the validity of this order and the BPU's related financing order. In April 2000, the Appellate Division of the New Jersey Superior Court unanimously affirmed the BPU orders. In May 2000, the appellants requested the New Jersey Supreme Court to review certain aspects of the Appellate Division decision and, in July 2000, the New Jersey Supreme Court granted the requests of the New Jersey Business User's Coalition and of the New Jersey Ratepayer Advocate (the "RPA"), while denying the request of Co-Steel Raritan ("Co-Steel"), an individual PSE&G industrial customer. On December 6, 2000, the New Jersey Supreme Court issued a final order affirming the judgment of the Appellate Division. The New Jersey Supreme Court's written opinion in this matter was issued on May 18, 2001.
On March 6, 2001, Co-Steel filed a Petition for Writ of Certiorari (the "Petition") with the United States Supreme Court seeking limited review of the New Jersey Supreme Court decision, the granting of which is entirely discretionary with the Court. Briefs in opposition to the Petition have been filed. The outcome of this petition cannot be predicted.
Prior to the execution of PSE&G's transfer of its generation business to us, we and PSE&G obtained all necessary regulatory approvals. On August 21, 2000, PSE&G transferred its electric generation facilities and wholesale power contracts to us and our subsidiaries in exchange for a promissory note from us to PSE&G in an amount equal to the total purchase price of $2.786 billion. We settled the promissory note on January 31, 2001 with funds provided by PSEG in the form of loans and equity at which time the transferred assets were released from the lien of PSE&G's first and refunding mortgage.
Prior to the issuance of the Final Order, substantially all of the output of PSE&G's electric generation assets was sold to PSE&G's retail customers. To ensure that PSE&G's retail customers who choose not to select or who are not otherwise served by a different supplier continue to receive energy services, the Final Order also requires PSE&G to provide BGS through July 31, 2002. PSE&G has entered into a contract with us to supply the energy, capacity and ancillary services required to meet this obligation. As a result, since August 1, 1999, we have been selling substantially all of our output to PSE&G and will continue to do so until July 31, 2002.
Under the BGS contract, we charge the BGS retail tariff rate on file with the BPU. In addition, PSE&G pays us a price stability charge to compensate us for ensuring the reliability of BGS service and assuming the risk of price volatility. The price stability charge is equal to the full amount collected by PSE&G for its unsecuritized generation-related stranded costs per billing period. The Final Order also provides that rate reductions of up to 13.9% be phased in by PSE&G to its retail customers through August 1, 2002. These reductions are reflected in the Market Transition Charge ("MTC") revenue of up to $540 million, net of tax, that we are entitled to receive from PSE&G through July 31, 2003.
To the extent that we are unable to generate the energy or supply the capacity to meet our BGS contract obligations, we will be required to purchase necessary energy and capacity in the competitive wholesale electricity market. During the term of the BGS contract, to the extent that we are required to purchase energy and/or capacity in the competitive wholesale electricity markets or generate energy to meet our obligations to supply power to PSE&G under the BGS contract, earnings or cash flow may be negatively impacted if market prices or costs approach or exceed the BGS contract rate. We attempt to mitigate the risks associated with our long-term contracts through the use of derivative financial instruments that conform to our comprehensive risk management policy.
PSE&G is required to issue a request for proposals ("RFP") for supply of its BGS obligation for the period beginning August 1, 2002. We can submit a bid to renew the BGS contract in response to PSE&G's RFP, or we can sell our energy and capacity into the spot market, enter into other bilateral agreements or a combination thereof. Our goal is to realize a majority of our generation revenues from bilateral agreements. In addition, we will continue to sell additional energy and capacity into the spot market and will continue to be subject to the risks and rewards associated with the competitive wholesale electricity market to the extent that the price at which we sell our energy and capacity differs from our production or purchased power costs.
Our financial position, results of operations and net cash flows will be significantly impacted by: our ability to successfully manage production and purchased power costs; sell energy and capacity at favorable prices; and effectively control our centralized generation, fuel procurement, power purchases and wholesale energy marketing and trading operations.
We currently sell approximately 5% of the output from our generation facilities to customers in the competitive wholesale (spot) market and the remaining 95% under longer-term contracts. Within the spot market, we sell into the energy, capacity and ancillary services markets. Ancillary services include operating reserves and area regulation. Through ER&T, we are active in the spot, forward and futures markets throughout the surrounding region. However, our trading revenue is currently earned primarily within PJM, which in 2000 comprised nearly 85% of our trading activity.
By centrally managing our portfolio of generation assets, we are able to take advantage of synergies and market knowledge to maximize our profitability. Fossil and Nuclear sell all of their generation output to ER&T which centrally controls all of our wholly-owned generation assets, fossil fuel procurement and power purchases and provides a competitive wholesale energy marketing and trading function that actively participates in all aspects of the markets in the Super Region. This central management provides us the opportunity to optimize the mix of financial and physical assets and mitigate the effects of adverse movements in the fuel and electricity markets.
We participate primarily in the PJM market, where the pricing of energy was recently modified. Prior to April 1999, the price of energy was based upon the variable cost of production. As of April 1, 1999, FERC lifted the requirement that limited the bid prices for electric energy offered for sale in the
PJM market to the variable cost of producing such energy. However, transmission constraints have and will continue to affect energy pricing in PJM. All power providers are now paid the locational marginal price ("LMP") set through power providers' bids. The LMP will be higher in congested areas reflecting the bid prices of the higher cost units that are dispatched to supply demand and alleviate the transmission constraint. Under most circumstances, these bids are capped at $1,000 per megawatt hour. In the event that available generation within PJM is insufficient to satisfy demand, PJM may institute emergency purchases from adjoining regions for which there is no price cap.
With a majority of our generation assets located in the most densely populated and demand intensive areas of PJM, and positioned in close proximity to areas of the transmission grid that typically experience congestion, we receive premium prices when transmission congestion occurs. Our fully integrated generation and wholesale marketing and trading organization employs proprietary simulation tools and state-of-the art trading floor technology in an ongoing effort to anticipate grid congestion and ensure timely response to emerging demand requirements and their resulting pricing opportunities.
As an unregulated company, we are now exposed to the risk associated with fuel and purchased power price changes. Prior to August 1, 1999, all of our fuel, fuel related costs, purchased power costs and other expenses flowed through the LEAC. The LEAC mechanism compensated either the utility or its electric consumers for unpredicted fuel and purchased power price fluctuations by allowing for adjustments to future electric rates on a periodic basis. Any underrecoveries or overrecoveries of fuel costs were deferred and included in expense in the period in which they were reflected in rates. As of August 1, 1999, the LEAC was eliminated.
To the extent that the following discussion reports on business conducted under full monopoly regulation of the generation business, it must be understood that such business has evolved due to the deregulation of that business. Past results are not an indication of future business prospects or financial results.
Results of Operations
The discussion of Results of Operations herein has been developed using a number of assumptions to separate our operations from those of our affiliate, PSE&G, which previously operated together as a vertically integrated utility company. See Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a discussion of these assumptions and the methodologies used to prepare our financial statements.
As a line of business within PSE&G, we were subject to regulation by the BPU and FERC. As a result, we prepared our financial statements in accordance with the requirements of Statement of Financial Accounting Standards ("SFAS") 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"), which differed in certain respects from generally accepted accounting principles ("GAAP") for non-regulated businesses. See Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a further discussion.
As a result of the BPU's orders issued under the Energy Master Plan Proceedings, we concluded that we no longer met the requirements of SFAS 71 for the electric generation business. As a result, in 1999, an extraordinary charge to earnings of $3.204 billion, net of tax, was recorded which reflects the impairment of electric generation-related assets calculated in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). In addition to the impairment of electric generation stations, the extraordinary charge consisted of various accounting adjustments to reflect the absence of cost of service regulation in the electric generation portion of the business in the future. The adjustments related primarily to materials and supplies, general plant items and liabilities for certain contractual and environmental obligations.
Prior to August 1, 1999, revenue was calculated by unbundling the generation component of revenue from PSE&G's historical bundled rate for the generation, transmission and distribution of energy and adding any generation-related revenues, such as wholesale activities that include ancillary services, trading and capacity sales. Subsequent to August 1, 1999, revenues are being earned from
the BGS contract with PSE&G, wholesale energy sales, sales of capacity and ancillary services and energy trading revenues. During the three years ending July 31, 2002, we will provide energy to supply PSE&G's BGS obligations as determined by the BPU's Final Order. With the opening of retail choice in New Jersey, customer electricity demands upon PSE&G are changing. This affects the amount of generation capacity required to meet PSE&G's BGS obligations and, based upon this demand, the sources of our revenue stream and net cash flow could change from generation capacity to meet the BGS contracts to sales to the wholesale market.
Energy costs consist primarily of the costs associated with burning nuclear fuel, gas, oil and coal to generate energy, as well as energy purchases from the wholesale marketplace. Deregulation of the energy market could impact our energy costs in several ways. In the event that demand from the BGS contract exceeds our capacity, we will have to purchase wholesale power to meet this sales commitment. High purchase prices in the wholesale market, whether hedged or not, could increase energy costs and affect earnings and net cash flow.
Prior to August 1, 1999, fuel revenue and expense flowed through the LEAC mechanism. Variances in base fuel revenues and expenses offset and thus had no direct effect on earnings. On August 1, 1999, the LEAC was eliminated as a result of the Energy Master Plan Proceedings. This has increased the risk of earnings volatility since we now bear the full risks and rewards of changes in generation fuel costs and replacement power costs. See Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements.
Modification of energy pricing in PJM from variable cost of production to LMP, the capping of power providers' bids at $1,000 per megawatt hour ("mWh") (see "Business -- Products and Services -- Energy") and the absence of caps in situations involving emergency purchases, may also have a material impact on our financial condition, results of operations or net cash flows. For a discussion of market risks, see "-- Qualitative and Quantitative Disclosures About Market Risk", below.
With an increasingly competitive energy market, the composition and level of Operation and Maintenance expense is likely to change. Historically, to separate the Operation and Maintenance expense of the generation-related portion of the PSE&G's business, expenses were either specifically identified by function and reported accordingly or various allocations were used to disaggregate common expenses. It should be noted that some allocations and assumptions might not hold true in the future in a deregulated market. Additionally, under a revised capitalization policy, we will only capitalize costs that increase the capacity or extend the life of an existing asset, represent a newly acquired or constructed asset or replacement of a retired asset.
Prior to April 1, 1999, we had certain regulatory assets resulting from the use of a level of depreciation expense in the ratemaking process that differs from the amount that is recorded under GAAP for non-regulated companies. Effective April 1, 1999, we changed our depreciation policy to calculate depreciation consistent with new asset lives determined by our policy rather than using depreciation rates prescribed by the BPU in rate proceedings (see Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements).
Results of Operations -- For the Six Months Ended June 30, 2001 compared to the Six Months Ended June 30, 2000
Operating Revenues
Generation
Generation Revenues increased $89 million or 8% for the six months ended June 30, 2001 from the comparable period in 2000, primarily due to increased load served under the BGS contract with PSE&G. This increased load results from customers returning to PSE&G from TPS as wholesale market prices have typically exceeded fixed BGS rates. As of June 30, 2001, TPS were serving approximately 1.5% of the customer load traditionally served by PSE&G as compared to the June 30, 2000 level of 8%. Also contributing to the increase for the six months ended June 30, 2001, was a $17 million gain on a sale of a fixed asset at the Kearny Generation Station and output from new operating generation
projects placed in service subsequent to the first quarter of 2000. These increases were partially offset by reduced MTC revenues of $28 million from PSE&G as a result of an additional 2% rate reduction PSE&G gave to customers as part of its deregulation plan, effective on February 7, 2001.
Trading
Trading revenues decreased $142 million or 11% for the six months ended June 30, 2001 from the comparable period in 2000, due to lower trading volumes resulting from increased market volatility. However, as these decreased revenues were more than offset by decreased trading costs (discussed below in Trading Costs), trading margins increased from $43 million to $78 million for the six month period ended June 30, 2001.
Operating Expenses
Energy Costs
Energy Costs increased $44 million or 13% for the six months ended June 30, 2001 from the comparable period in 2000, primarily due to increased load served under the BGS contract and higher fuel costs for fossil generation resulting from higher natural gas prices, partially offset by increased low-cost nuclear generation compared to last year.
Trading Costs
Trading Costs decreased $177 million or 14% for the six months ended June 30, 2001 from the comparable period in 2000, primarily due to lower trading volumes resulting from increased market volatility.
Operation and Maintenance
Operation and Maintenance expense increased $24 million or 7% for six months ended June 30, 2001, primarily due to planned outage work in the second quarter of 2001 and higher expenses relating to projects going into operation subsequent to the first quarter of 2000.
Depreciation and Amortization
Depreciation and Amortization expense decreased $13 million or 19% for the six months ended June 30, 2001 from the comparable period in 2000. The decrease was primarily due to a reduction in the accrual for the estimated cost of removal of certain generating stations.
Interest Expense
Interest Expense increased $46 million or 107% for the six months ended June 30, 2001 from the comparable period in 2000. Prior to the generation business transfer in August 2000, our Interest Expense was calculated based upon an allocation methodology that charged us with financing costs from PSE&G in proportion to the generation business' share of total net property, plant and equipment, materials and supplies and deferred income taxes. The increase in Interest Expense resulted from our $2.786 billion 14.23% promissory note to PSE&G to finance the acquisition of the generation business. This loan was repaid on January 31, 2001 and was replaced on an interim basis by a $1.084 billion 14.23% loan and a $536 million 7.11% loan from January 2001 to April 2001. These loans were repaid with the proceeds from the issuance of our Senior Notes. For the six months ended June 30, 2001, Interest Expense relating to the interim financing discussed above was $40 million.
Results of Operations -- For the Year Ended December 31, 2000 compared to the Year Ended December 31, 1999
Excluding the extraordinary charge, our earnings for the year ended December 31, 2000 decreased $200 million from the comparable 1999 period. This decrease primarily resulted from the effects of the 5% rate reduction which commenced on August 1, 1999 and a $115 million reduction in MTC revenues which resulted primarily from an $88 million charge to net income in the third quarter of
2000 for the cumulative effect of estimated collections in excess of the allowed unsecuritized stranded costs from August 1, 1999 through September 30, 2000. Also contributing to this decrease was higher interest expense associated with the $2.786 billion promissory note to PSE&G.
Operating Revenues
Generation
Generation revenues decreased $449 million or 17% for the year ended December 31, 2000 from the comparable period in 1999 primarily due to the 5% rate reduction, which decreased revenues by approximately $120 million, a $115 million deferral of MTC revenues and reduced retail demand as PSE&G lost retail customers to third party suppliers ("TPS") which amounted to approximately $182 million.
Trading
Trading revenues increased $882 million or 48% for the year ended December 31, 2000 from the comparable period in 1999 primarily due to increased trading volumes. These increased revenues were largely offset by the related increase in trading costs discussed below.
Operating Expenses
Energy Costs
Energy Costs decreased $112 million or 13% for the year ended December 31, 2000 from the comparable 1999 period due to lower prices for power purchases beginning in August 1999 and lower generation costs that were a result of high capacity factors of our nuclear units. Prior to August 1999, Energy Costs included amounts paid under various non-utility generation ("NUG") contracts which are above market prices. Beginning in August 1999, PSE&G purchases the energy and capacity under these NUG contracts and sells the energy and capacity to us at market prices.
Trading Costs
Trading Costs increased $847 million or 47% for the year ended December 31, 2000 from the comparable 1999 period primarily due to higher trading costs associated with increased trading volumes.
Depreciation and Amortization
Depreciation and Amortization expense decreased $88 million or 39% for the year ended December 31, 2000 from the comparable 1999 period. The decrease was primarily due to lower net book value balances of PSE&G's generation-related assets that were reduced as of April 1, 1999 as a result of the impairment recorded pursuant to SFAS 121.
Interest Expense
Interest Expense increased $86 million or 77% for the year ended December 31, 2000 from the comparable 1999 period. As discussed previously, prior to the generation business transfer in August 2000, our Interest Expense was calculated based upon an allocation methodology that charged us with financing from PSE&G in proportion to our share of total net property, plant and equipment. Following the transfer of the generation business in August 2000, we paid interest on our $2.786 billion promissory note to PSE&G at an annual rate of 14.23%.
Results of Operations -- For the Year Ended December 31, 1999 compared to the Year Ended December 31, 1998
Excluding the extraordinary charge of $3.204 billion, our earnings for the year ended December 31, 1999 increased $281 million from the comparable 1998 period. This growth primarily resulted from a rise in sales of electricity due to increased demand from PSE&G's retail customers resulting from favorable weather conditions in 1999 and economic factors in New Jersey and profits realized from wholesale energy activities. In addition, although generation-related depreciation expense was lower for
a portion of 1999 as a result of the SFAS 121 impairment write-down, this reduction was partially offset by changes in depreciation and capitalization policies stemming from the discontinuation of SFAS 71. The increase in earnings was also partially offset by the 5% rate reduction, coupled with higher operating and maintenance expenses, including higher wholesale energy costs, than those incurred in 1998. See "-- Qualitative and Quantitative Disclosures About Market Risk", below.
Operating Revenues
Generation
Generation revenues increased $101 million or 4% for the year ended December 31, 1999 from the comparable 1998 period. The increase was primarily due to increased sales of electricity under the BGS contract due to favorable weather conditions in 1999 and economic factors in New Jersey. These increases were partially offset by the 5% rate reduction beginning August 1, 1999 that decreased revenues by approximately $80 million.
Trading
Trading revenues decreased $35 million or 2% for the year ended December 31, 1999 from the comparable 1998 period resulting from decreased trading volumes.
Operating Expenses
Energy Costs
Energy Costs decreased $114 million or 12% for the year ended December 31, 1999, from the comparable 1998 period due to lower prices for power purchases beginning in August 1999 relating to the NUG contracts discussed above.
Trading Costs
Trading Costs decreased $54 million or 3% for the year ended December 31, 1999 from the comparable 1998 period primarily due to lower costs associated with decreased trading volumes.
Operation and Maintenance
Operation and Maintenance expense increased $105 million or 18% for the year ended December 31, 1999 from the comparable 1998 period. The increase was primarily due to a change in the capitalization policy for the generation business that resulted in a $57 million increase in 1999 to Operation and Maintenance expense. Also contributing to the increase were higher costs related to wholesale power activities and higher material and outside services and information technology costs, including costs related to Year 2000 readiness in 1999 and increased PJM restructuring expenses.
Depreciation and Amortization
Depreciation and Amortization expense decreased $157 million or 41% for the year ended December 31, 1999 from the comparable 1998 period. The decreases were due to lower net book value balances of our assets. This decrease was partially offset by higher depreciation rates being used in 1999 due to the change in depreciation policy. Despite the higher depreciation rates, the decrease in expense will be ongoing due to the reduced asset balances.
Interest Expense
Interest Expense decreased $104 million or 48% for the year ended December 31, 1999 from the comparable 1998 period primarily due to a reduced allocation percentage. Our Interest Expense for these periods was calculated based upon an allocation methodology that charged us with financing from PSE&G in proportion to our share of total net property, plant and equipment. The decreased allocation percentage resulted from the lower net book value due to the impairment writedown in the second quarter of 1999.
Liquidity and Capital Resources
As directed by the BPU's Final Order, on August 21, 2000, we purchased PSE&G's generation property, plant and equipment for $2.443 billion and we also purchased the other generation-related assets and liabilities for $343 million, their net book value at the date of purchase.
Operating Activities
Cash generated from operations is expected to provide the major source of funds for our operating needs. Our primary customer until July 31, 2002 will be PSE&G under the BGS contract. Prior to the Final Order and the BGS contract, cash generated from operations was based on rate regulated cost recovery pursuant to BPU ratemaking.
Investing Activities
Our purchase of the generation-related assets of PSE&G are being financed on a permanent basis through the senior notes (including the exchange notes covered by this prospectus) and equity contributions from PSEG. Future development or purchases of generation assets will be subject to periodic review and may vary significantly depending upon the opportunities presented. Factors affecting actual expenditures and investments include availability of capital and suitable investment opportunities, market volatility and economic trends. The anticipated sources of funds for such growth opportunities are additional equity contributions from PSEG, cash flow from operations and external financings.
Financing Activities
As previously discussed, we purchased the generation-related assets of PSE&G on August 21, 2000. The purchase was financed through a promissory note of $2.786 billion to PSE&G. The promissory note was settled on January 31, 2001 with funds received from PSEG as equity and intercompany loans. In April 2001, we issued $1.8 billion of our senior notes, the proceeds of which were used primarily to replace our interim financing from PSEG. It is expected that our future capital needs will be funded with cash generated from operations and may be supplemented with external financings, equity infusions from PSEG and other project financing alternatives as dictated by our growth strategy. Any inability to obtain required additional external capital at reasonable interest rates may affect our financial condition, results of operations and net cash flows.
Capital resources and investment requirements may be affected by the requirements of the 1992 Focused Audit of PSEG's non-utility businesses ("Focused Audit"), and by the final outcome of the BPU's Energy Master Plan Proceedings, including the Affiliate Relationships Standards. As a result of the Focused Audit, the BPU approved a plan that, among other things, provides that PSEG will not permit its non-utility investments to exceed 20% of its consolidated assets without prior notice to the BPU.
As a result of the final outcome of the proceedings and the accounting impacts resulting from the deregulation of the generation of electricity and the unbundling of the utility business in New Jersey, we do not believe that the Focused Audit provision requiring notification of the BPU if PSEG's non-utility assets exceed 20% of its consolidated assets remains appropriate and believe that modifications will be required. The Final Order addressed the Focused Audit, noting that PSEG's non-regulated assets would likely exceed 20% of total PSEG assets once the generation assets were sold to us and directed PSE&G to file a petition with the BPU to maintain the existing regulatory parameters or to propose modifications to the Focused Audit order. The Final Order also recognized that, due to significant changes in the industry and, in particular, PSEG's corporate structure as a result of the Final Order, modifications to or relief from the Focused Audit might be warranted. In March 2000, PSE&G submitted a letter to the BPU as its initial compliance with this filing requirement in which it notified the BPU of its intention to make a filing to modify the terms of the Focused Audit within 120 days after the Final Order becomes final and non-appealable.
The BPU is expected to continue to provide regulatory oversight to ensure that there is no harm to utility ratepayers from PSEG's non-utility investments. PSEG believes that these issues will be satisfactorily resolved, although no assurance can be given. In addition, if we or PSEG were no longer to be exempt under the Public Utility Holding Company Act ("PUHCA"), we would be subject to additional regulation by the SEC with respect to financing and investing activities, including the amount
and type of non-utility investments. Inability to achieve satisfactory resolution of these matters could impact our and our subsidiaries' future relative size and financing activities and, accordingly, our future prospects. Consequently, this could have a material adverse impact on our financial condition, results of operations or net cash flows. We do not believe that our ability to service our debt, including the exchange notes, would be impaired in such circumstances, although no assurance can be given.
On March 15, 2000, the BPU issued a written order, Affiliate Relations, Fair Competition and Accounting Standards and Related Reporting Requirements ("Affiliate Standards"), that applies only to PSE&G and its affiliates that offer competitive retail services in New Jersey. PSE&G filed a compliance plan with the BPU on June 15, 2000 describing its internal policy and procedures to ensure compliance with such Affiliate Standards. Since we do not offer competitive retail services in New Jersey, the standards do not apply and are, therefore, not expected to have any material impact on our operations. However, the Energy Competition Act requires that the BPU conduct an audit of PSEG and its affiliates. The audit commenced July 2000 and a final report from the auditors was submitted to the BPU in October 2000. We do not expect the recommendations of the audit to materially impact our operations, financial condition, results of operations or net cash flows, although no assurances can be given.
Capital Requirements
We expect that the majority of our construction and capital requirements over the next five years will come from internally generated funds, with the balance to be provided by the issuance of debt and equity contributions from PSEG. Our capital needs will be dictated by our strategy to become a profitable, growth-oriented supplier in the wholesale power market. We will size our fleet of generation assets to take advantage of market opportunities, while seeking to increase its value and manage commodity price risk through our wholesale trading activity. Growth will be driven by expanding both the portfolio of generation assets and trading volume, including expanding into regional trading markets. To accomplish this, we will require cash generated from operations, external financings and equity contributions from PSEG.
We have substantial commitments as part of our ongoing construction programs. These programs are continuously reviewed and periodically revised as a result of changes in economic conditions, revised load forecasts, business strategies, site changes, cost escalations under construction contracts, requirements of regulatory authorities and laws and our ability to raise necessary capital.
For the six months ended June 30, 2001, we had net plant additions of $741 million, excluding capitalized interest. For the years ended December 31, 2000 and 1999, we had net plant additions of $479 million and $92 million, respectively, excluding Allowance for Funds Used During Construction (AFDC) and capitalized interest.
Construction expenditures were related to our acquisitions and improvements in our existing power plants. Our projected construction and investment expenditures are approximately $1.4 billion in 2001, $1.1 billion in 2002, $830 million in 2003 and range from $250 million to $300 million per year for 2004 and 2005 (which includes an aggregate of $1.2 billion associated with the Waterford, Ohio and Lawrenceburg, Indiana projects through 2003).
In September 2000, we announced that we had assumed responsibility of two Midwest generation projects then being developed by PSEG Global Inc. ("Global"), an affiliate and a subsidiary of Energy Holdings, and will be the sole PSEG subsidiary responsible for future generation projects and development in the United States. The two projects (the Waterford and Lawrenceburg projects discussed under "Business -- The Company") will have a combined generation capacity of 2,000 MW.
Also in 2000, we installed four new combustion turbines at Burlington Generation Station and two new combustion turbines at Linden Generation Station, adding 168 MW and 164 MW, respectively, of electric generating capacity, at a cost of approximately $155 million. The new combustion turbines were all operational as of July 2000. We also announced that we will construct a 500 MW natural gas-fired, combined cycle electric generation plant at Bergen Generation Station at a cost of approximately $290 million with completion expected in June 2002. We are also constructing an 1,186 MW combined cycle generation plant at Linden for approximately $590 million expected to be completed in May 2003 and are installing 168 MW of peaking units at Kearny for an approximate cost of $100 million.
On May 16, 2000, we purchased, through an indirect wholly-owned subsidiary, PSEG Power New York, Inc., a 380 MW oil and gas-fired electric generation station in Albany, New York (the "Albany Steam Station") from Niagara Mohawk Power Corporation ("NIMO") for $49.9 million. Under a transition power contract in place through September 2003, we will sell electricity to NIMO at prices consistent with those established in NIMO's regulatory agreement with the New York Public Service Commission. The acquisition of Albany Steam Station provides us with entry into the New York ISO. Under the terms of the acquisition agreement, NIMO could also receive up to an additional $9 million if we choose to pursue redevelopment of the Albany Steam Station.
In September 1999, we announced that we had signed an agreement to acquire all of Conectiv's interests in the Salem Nuclear Generation Station ("Salem") and the Hope Creek Nuclear Generation Station ("Hope Creek") and half of Conectiv's interest in the Peach Bottom Atomic Power Station ("Peach Bottom"), totaling 544 MW for an aggregate purchase price of $15.4 million plus the net book value of nuclear fuel at closing. In December 2000, our acquisition of Delmarva's portion of Conectiv's interests in Salem (7.41%) and Peach Bottom (7.51%, split equally between us and Exelon Generation LLC ("Exelon"), the other co-owner of the plants) was completed. For further information and a discussion of the wholesale transaction confirmation letter agreements between us and Conectiv, see Note 7. Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
External Financings
The changes in the utility industry are attracting increased attention from bond rating agencies which regularly assess business and financial matters, including how utility companies are addressing the increasingly competitive environment. Given the changes in the industry, attention and scrutiny of our competitive strategies by rating agencies will likely continue. These changes in the competitive environment could affect the bond ratings, cost of capital and the market prices of securities issued by utilities and generation companies.
On April 16, 2001, in a private placement, we issued $500 million of 6.875% Senior Notes due 2006, $800 million of 7.75% Senior Notes due 2011 and $500 million 8.625% Senior Notes due 2031. The net proceeds from the sale of the senior notes were used primarily for the repayment of loans from PSEG. This prospectus relates to an exchange offer for these senior notes. Each series of senior notes received investment grade ratings from Moody's Investors Service, Fitch, Inc. and Standard & Poor's Rating Services.
We also have various lines of credit extended by banks to support the issuance of letters of credit. As of June 30, 2001, letters of credit were issued in the amount of approximately $90 million.
Our short term financing needs will be met using PSEG's commercial paper program or lines of credit. PSEG has an $850 million commercial paper program to provide funds for general corporate purposes. On June 30, 2001, PSEG had commercial paper of $521 million outstanding. To provide liquidity for its commercial paper program, PSEG has a $570 million revolving credit facility expiring in March 2002 and a $280 million revolving credit facility expiring in March 2005. These agreements are with a group of banks and provide for borrowings with maturities of up to one year. As of June 30, 2001, there were no borrowings outstanding under these facilities.
PSE&G Fuel Corporation ("Fuelco"), which was a subsidiary of PSE&G, had a $125 million commercial paper program to finance a 42.49% share of Peach Bottom nuclear fuel. This commercial paper program was supported by a $125 million revolving credit facility with a group of banks. As a result of the transfer of generation assets from PSE&G to us, the Fuelco commercial paper program has been discontinued. All commercial paper outstanding under this program was paid down on August 21, 2000. The credit facility supporting this program was terminated on September 11, 2000.
The availability and cost of external capital could be affected by our performance as well as by the performance of our subsidiaries and affiliates. This could include the degree of structural or regulatory separation between PSE&G and its non-utility affiliates and the potential impact of affiliate ratings on our consolidated credit quality. Additionally, compliance with applicable financial covenants will depend upon our future financial position and levels of earnings and net cash flows, as to which no assurances can be given.
Over the next several years, we will be required to refinance our maturing debt and to raise additional debt and equity financing for growth. Any inability to obtain required additional external capital or to extend or replace maturing debt and/or existing agreements at current levels and at reasonable interest rates may affect our financial condition, results of operations or net cash flows.
Qualitative and Quantitative Disclosures About Market Risk
The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices, pollution credits, equity security prices and interest rates as discussed below. Our policy is to use derivatives to manage risk consistent with our business plans and prudent practices. PSEG has a Risk Management Committee comprised of executive officers and reporting to the Audit Committee of PSEG's Board of Directors that utilizes an independent risk oversight function to ensure compliance with corporate policies and prudent risk management practices.
We are exposed to credit losses in the event of non-performance or non-payment by counterparties. We also have a credit management process which is used to assess, monitor and mitigate counterparty exposure. In the event of non-performance or non-payment by a major counterparty, there may be a material adverse impact on our financial condition, results of operations or net cash flows.
Commodity-Related Instruments
The availability and price of energy commodities are subject to fluctuations from factors such as weather, environmental policies, changes in supply and demand, state and federal regulatory policies and other events. To reduce price risk caused by market fluctuations, we enter into derivative contracts, including forwards, futures, swaps and options with approved counterparties, to hedge our anticipated demand. These contracts, in conjunction with owned electric generation capacity, are designed to cover estimated electric customer commitments.
We use a value-at-risk ("VAR") model to assess the market risk of our commodity business. This model includes fixed price sales commitments, owned generation, native load requirements, physical contracts and financial derivative instruments. VAR represents the potential gains or losses for instruments or portfolios due to changes in market factors, for a specified time period and confidence level. PSEG estimates VAR across its commodity business using a model with historical volatilities and correlations.
The measured VAR using a variance/co-variance model with a 95% confidence level and assuming a one-week time horizon as of June 30, 2001 was approximately $7 million and as of December 31, 2000 was approximately $19 million, compared to the December 31, 1999 level of $3 million. Our calculated VAR represents an estimate of the potential change in the value of our portfolio of physical and financial derivate instruments. These estimates, however, are not necessarily indicative of actual results, which may differ due to the fact that actual market rate fluctuations may differ from forecasted fluctuations and due to the fact that the portfolio of hedging instruments may change over the holding period.
In the first quarter of 2000, the measured VAR fluctuated between $3 million and $10 million. The first quarter, compared to the rest of the year, was characterized by low price volatility. Starting in the second quarter of 2000 several different factors caused the VAR to fluctuate above $10 million, reaching a peak of $21.2 million in December 2000, which exceeded our alert limit of $16.5 million. The first was the inclusion into the VAR calculation of some additional non-trading exposures, such as fuel for generation and emission allowances held in inventory. The second and most important factor was the capacity, power and natural gas price volatilities, which continued to rise throughout the balance of the year. Finally, since we are in the commodity business, we face seasonal increases in our power, capacity and natural gas exposures, which cause the VAR to peak in the summer and in the winter. In February 2001, prices and volatilities decreased and the VAR moved below the alert limit.
As discussed in Results of Operations, our wholesale power activities positively impacted our results of operations each year, since its inception in 1997. Certain other generators and power marketers have experienced significant losses in their wholesale power operations during that period. These losses were primarily attributable to extreme market volatility, counterparty defaults and unavailability of generation.
Given the absence of a PJM price cap in situations involving emergency purchases and the potential for plant outages, extreme price movements, which have occurred, could have a material adverse impact on our financial condition, results of operations and net cash flows.
Nuclear Decommissioning Trust Funds
Contributions made into the Nuclear Decommissioning Trust Funds are invested in debt and equity securities. These marketable debt and equity securities had a market value of $723 million at June 30, 2001. The potential change in fair value resulting from a hypothetical 10% change in quoted market prices of these securities amounts to approximately $72 million. Gains and losses on the Nuclear Decommissioning Trust Funds do not affect earnings. As a result of the Energy Master Plan Proceedings, the recovery of these investments will be continued as part of the societal benefits charge ("SBC") levied by PSE&G on its customers. PSE&G will continue to collect this $29.6 million charge and remit it to us.
With the purchase of Delmarva's interests in Salem and Peach Bottom, we received a transfer of $49.7 million representing its Nuclear Decommissioning Trust Funds related to those stations.
Accounting Matters
For a discussion of Emerging Issues Task Force ("EITF") 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19"), SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, ("SFAS 133") and related Derivative Implementation Group ("DIG") issues, SFAS No. 141, "Business Combinations" ("SFAS 141"), SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") and SFAS No. 143, "Accounting for Asset Retirement Obligations ("SFAS 143"), see Note 3. Accounting Matters, and Note 5. Financial Instruments and Risk Management, of Notes to Consolidated Financial Statements.
Site Restorations and Other Environmental Costs
For discussion of potential environmental and other remediation costs, see Note 7. Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
Business
The Company
We are one of the largest independent electric generating and wholesale energy marketing and trading companies in the United States. Through our three principal operating subsidiaries, we generate and market electricity, capacity, ancillary services and natural gas products on a wholesale basis. Our generation portfolio consists of 11,490 MW of installed capacity owned or under contract. Our target market, which we refer to as the Super Region, extends from Maine to the Carolinas and the Atlantic Coast to Indiana, encompassing 37% of the nation's power consumption. With 20% of installed capacity, we are the single largest power supplier in our primary market, PJM, which is one of the nation's largest and well-developed energy markets. We are and each of the Subsidiary Guarantors is a limited liability company established in Delaware on June 16, 1999 and have our principal place of business at 80 Park Plaza, Newark, New Jersey 07102.
We expect to continue to increase our generation capacity in our target market, and we believe that we are favorably positioned to do so through site expansions, strategic acquisitions and new generation development. We seek to continually maximize the value of our generation portfolio through the centralized control of its operations and its integration with our trading, fuel procurement, marketing and risk management expertise. Our electric generation portfolio is diversified by fuel source and market segment and we have demonstrated expertise in natural gas procurement.
We began operating as a deregulated energy supplier in 1999. On August 21, 2000, we acquired ownership of the electric generation portfolio of our utility affiliate, PSE&G, New Jersey's largest public utility. This portfolio included more than 10,200 megawatts of nuclear and fossil capacity which we acquired at a cost of $239/kW. Through June 30, 2001, we:
o acquired 544 MW of nuclear capacity in Pennsylvania and New Jersey;
o acquired 380 MW of steam capacity in New York;
o completed construction and began operation of 332 MW of combustion turbines in New Jersey;
o began construction of:
o 1,854 MW of combined cycle and combustion turbine units in New Jersey;
o 1,150 MW of combined cycle units in Indiana; and
o 850 MW combined cycle units in Ohio; and
o are in advanced development of 750 MW of combined cycle units in New York.
We expect that the new generating assets currently under construction, which will add 4,604 MW to our generation portfolio, will be completed by the end of the second quarter of 2003. This new capacity will expand our generation portfolio to three contiguous reliability regions.
As a result of New Jersey's deregulation and restructuring of the electric power industry, PSE&G was required by the BPU to transfer its generation facilities and related assets to an unregulated affiliate. We and our three principal operating subsidiaries, Fossil, which operates our fossil generating facilities; Nuclear, which operates our nuclear generating facilities; and ER&T, which conducts our wholesale energy marketing and trading activities, were therefore formed to own and operate what were formerly PSE&G's electric generation assets and business. As an EWG, we do not directly serve any retail customers and we use our generation facilities exclusively for the production of electricity for sale at the wholesale level. We have contracted with PSE&G to provide its energy, capacity and ancillary services required to fulfill its BPU-mandated BGS obligation through July 2002. As part of our 380 MW asset purchase from NIMO, we have contracted to provide NIMO with energy and capacity at prices consistent with its regulatory agreement through September 2003.
We are a wholly-owned subsidiary of PSEG which is an exempt public utility
holding company and one of the leading providers of energy and energy related
services in the nation. PSEG has three other direct, wholly-owned subsidiaries:
PSE&G, Energy Holdings and Services. PSE&G is New Jersey's largest public
utility and is engaged principally in the transmission, distribution and sale of
electric energy and gas service in New Jersey. Energy Holdings participates
nationally and internationally in energy-related lines of business through its
subsidiaries. Services provides corporate support and managerial and
administrative services to PSEG and its affiliates.
THE SUPER REGION
[Chart omitted]
Industry Overview
The regulatory structure that has historically governed the electric power industry in the United States is in transition. Recent federal and state legislative and regulatory initiatives have been designed to promote competition in the electric power industry (see "Competition" and "Energy Markets"). These initiatives have led to statutorily mandated unbundling of the services traditionally provided by vertically integrated utilities, such as PSE&G, and the rapid growth of independent generation, energy trading and marketing. In addition, new technology and interest in self-generation and cogeneration have provided end-users with alternative sources and supplies of energy. Companies that have been engaged in providing generation, transmission, distribution and ancillary services are responding to the challenges and opportunities embodied in these changes. The challenges of open market competition, together with legislative and regulatory initiatives, are driving many utilities across the country to divest all or part of their generation assets. Other utilities and independent companies are acquiring generation assets and/or transferring their generation assets to independent affiliates to seize the opportunities in the wholesale power market. The independent companies are also launching or enhancing their wholesale energy trading operations to add value to their own generation asset portfolios.
Deregulation
Since the target markets in which we operate are deregulated at the wholesale level, continued deregulation of the retail markets within these regions is likely to bring new purchasers of electricity into the wholesale markets, thus increasing the volume of transactions. This should continue to strengthen the efficient operation and liquidity of those markets. Liquidity is essential for efficiency as it provides a ready market for our generation output and marketing and trading activities.
We believe that deregulation will continue in the regions in which we compete. In our target market, 13 of the 19 states and the District of Columbia have enacted restructuring legislation, while six of the remaining states have either issued a regulatory order relating to restructuring or are in the process of investigating restructuring. Retail competition has already begun in 12 of the states and the District of Columbia with two additional states scheduled to begin competition in 2001 and 2002. Three of the five wholesale marketplaces in our Super Region are operated by ISOs, and the other two markets are expected to develop similar governance structures in the near future.
Competitive Strengths
We believe that we are well positioned to build upon our successful history and existing asset base to remain one of the largest independent electric generating and wholesale energy marketing and trading companies in the Unites States. Our significant competitive strengths include the following:
Scale and Diversity of Assets. With 11,490 MW of installed capacity (including the pending acquisition from ACE) and 58 generation units, we have one of the largest and most diversified unregulated generation portfolios in PJM and the Eastern United States. Our portfolio of generation assets is well diversified by fuel type (42% Gas, 29% Nuclear, 18% Coal, 9% Oil and 2% Pumped Storage) and technology (35% Steam, 29% Nuclear, 26% Combustion Turbine, 8% Combined Cycle and 2% Pumped Storage). Our portfolio is also well distributed among the three energy market segments: base load (36% of our total capacity), load following (36% of our total capacity) and peaking (28% of our total capacity). Generation units are typically characterized as serving one or more of these market segments based upon their size, operating capability and performance. The scale and diversity of our portfolio provides us with the flexibility to offer a wide variety of products and services to the market and to mitigate the risks associated with fuel price volatility and market demand cycles.
Favorable Location of Assets. Many of our assets are strategically located within densely populated and demand intensive regions in PJM. In addition, the majority of our fossil generation stations are concentrated in the heavily industrialized and populated northeast quadrant of New Jersey where we can capitalize on a well-developed fuel supply infrastructure.
Quality of Assets. Our portfolio consists of 52 fossil-fueled units, one pumped storage hydroelectric unit and five nuclear power generation units. According to station operating statistics, our base load fossil units, which are coal units, achieved an average capacity factor of 82.4% in 2000 versus the latest available (1998) industry average for coal units of 69% (source: Energy Information Administration ("EIA")). From 1996 to 2000, the performance of our load following units has improved significantly. The average equivalent availability factor (the percentage of time that a unit is available to operate) ("EAF") for these units was 89% in 2000, up from 81% in 1996. By comparison, our peer group has performed at an average EAF of approximately 83% between 1996 and 1999 (the latest year for which peer group data is available). In addition, our peaking units had an average EAF ranging from 81% to 87% between 1996 and 2000 which compares favorably to the average EAF for our peer group which ranged from 79% to 84% between 1996 and 1999.
Our portfolio also includes nuclear assets that are performing at or above industry standards. According to station operating statistics for 2000, the average capacity factor for our nuclear units was 87.6%, as compared to the latest available (1999) US industry average of 86.8% (source: NEI). Our nuclear units have also benefited from substantial investments. From 1994 to 1999, we spent approximately $2.3 billion to maintain or enhance the operating efficiency and performance of our nuclear units.
Integrated Generation and Wholesale Marketing and Trading Functions. In addition to our fleet of generation assets, we have an established wholesale energy marketing and trading operation with significant technical capabilities, market expertise and a state-of-the-art trading floor. This group, which has been in operation since 1997 and has been continuously profitable and growing, centrally controls all of our wholly-owned generation assets and fossil fuel procurement and provides a competitive wholesale marketing, trading and risk management function that actively participates in all aspects of the energy markets. While we trade with over 100 credit-approved counterparties in the spot, forward and futures markets throughout the surrounding regions, nearly 85% of our trading activity during 2000 was within PJM, currently our primary marketplace and the location of most of our generation assets. The integration of our generation operations, fossil fuel procurement and wholesale marketing, trading and risk management capabilities enables us to obtain the optimal mix of financial and physical assets and mitigate the effects of adverse movements in the fuel and electricity markets. We also provide effective management of the spark spread which is the difference between the cost of fuel and the price of electricity.
Conservative Risk Management Framework. We have developed our risk management framework from the Group of Thirty recommendations, which are considered best practices for the use of derivative instruments. We established a Risk Management Committee ("RMC") that reports to the PSEG Board of Directors. On a monthly basis, we report our risk exposure using VAR related to our electricity and natural gas exposures. PSEG's Board of Directors approved our corporate financial risk management policy that empowers the RMC to manage risk, and set an overall corporate limit for VAR. The RMC sets risk VAR limits, alert limits and portfolio loss limits for us. These limits are contained in the procedures and guidelines that detail the actions for implementation of our corporate policy. The Chief Financial Officer ("CFO") of PSEG chairs the RMC. The RMC formally meets quarterly to discuss risk matters, but is also convened on demand when more immediate risk issues arise. We also established an independent corporate risk management group that reports to the CFO of PSEG and to the RMC. The corporate risk management group is charged with measuring, monitoring and reporting both market and credit risk. Our VAR is computed and reported weekly using a 95% confidence level and one-week holding period. We also mark all positions to market daily. Our portfolio is stress tested daily by ER&T and monthly by our corporate risk group. These stress tests identify potential risks to our portfolio of non-normal events.
We also have a credit policy, which defines our control environment for credit. Prior to engaging in any transactions with a new counterparty, we perform a thorough analysis of the creditworthiness of that counterparty. The corporate risk management group also participates in approving credit limits for counterparties with whom we trade. If necessary, we will request additional security from the counterparty, which could take the form of a parent guaranty or letter of credit. Once approved, we monitor the exposure to the counterparty using current net receivables and mark-to-market gains. Counterparties exceeding their credit limit and unapproved counterparties are placed on a restricted list, which precludes our traders from transacting with them. Violations of credit policies are reported to the RMC.
In-Depth Knowledge of the Region. Our extensive experience within PJM and surrounding regions provides us with in-depth knowledge and insight about the market rules, assets and transmission constraints within the region. In addition, our continuous involvement in the formation and operation of PJM as the first centrally dispatched energy market in the United States provides us with a significant competitive advantage in this market and in surrounding regions as these regions move towards similar market structures.
Continuity of Experienced Management. Our management team is comprised of seasoned individuals with substantial industry experience within our targeted regions. In addition to their understanding of our existing portfolio of generation assets, local market conditions and labor relations, our management includes individuals with: proven success in the generation development business; risk management expertise; substantial influence in the development of centralized electricity markets; and diverse experience in related business areas of transmission, distribution and retail customer service. This experience provides us with an in-depth knowledge and insight about the market's assets, market rules and transmission constraints. We believe our management team has an exceptionally
strong skill set in these areas because, unlike many of our competitors, we have operated all of our generation assets (other than the Albany Steam Station which was acquired in May 2000) since their original construction.
Environmental Leadership. We have led the industry as an advocate for a comprehensive system of uniform national standards that would substantially reduce power plant emissions of nitrogen oxide, sulfur dioxide and mercury. We also advocate for the start of prudent action toward addressing carbon dioxide emissions related to global warming. We are a founding member of the Clean Energy Group, a coalition of progressive energy companies that is working with the U.S. Congress, the environmental community and state and federal regulators to establish a common sense program to improve the environment without compromising fuel diversity or the reliability and affordability of the nation's electric energy supply. To set the standard, we have reduced emissions of nitrogen oxides by 80% and are currently pursuing additional reductions through the installation of additional emissions controls at our coal-fired power plants and are investing in new, state-of-the-art facilities. Further, we were the first to commit to -- and achieve -- stabilization of carbon dioxide emissions at 1990 levels by the year 2000.
Business Strategy
Our objective is to continue to profitably build our multi-regional generating and wholesale energy marketing and trading company based upon our successful formula of integrating generating asset operations with our wholesale energy, fuel supply, trading and risk management expertise. To implement our strategy we plan to:
Maintain a Stable Stream of Revenues and Cash Flow. Our principal source of revenue is the sale of energy through long-term contracts and, to a lesser extent, into the spot market. Through July 31, 2002, we have an exclusive full-requirements contract to supply PSE&G with the energy, capacity and ancillary services needed to fulfill its BGS obligations. In addition, we have several other contracts to supply LSEs. We anticipate that approximately 75% of our generation output will continue to be dedicated to supplying similar long-term (typically 2-3 years) contracts with LSEs. The relatively stable energy revenues from such contracts are supported primarily by the output of our base load generation units. Base load units are characterized by large size, high efficiency and low fuel and other operating costs and, therefore, have the opportunity to supply power economically in most energy market conditions throughout the year. We will continue to maximize the energy output of our base load units through ongoing improvement programs designed to upgrade capacity, shorten unit outages and enhance reliability.
Realize the Value of Possessing Assets Across the Entire Market Spectrum. In addition to energy sales, we have historically produced revenues and cash flows through the sale of products and services other than energy. Energy-related products and services consist primarily of capacity sales and ancillary services.
(i) Capacity Sales. In order to ensure that there is sufficient generation capacity available to meet peak demand, in PJM, LSEs are required to secure enough capacity to meet the projected demand of their retail customers, plus an additional amount as a reserve margin. As an owner of generation plants, we are able to sell "capacity" to LSEs or other wholesale market participants to meet this need. Subject to certain exceptions, a contract for capacity commits us to make a generation unit available so that it can be dispatched if its output is needed to satisfy total system demand. If the unit is actually dispatched, compensation for the resulting energy output is settled in the energy market in a separate transaction. Capacity sales are supported by all of our generation units and contribute additional cash flows. Since the operating expenses associated with providing capacity from our load following and peaking units are very low relative to the price of energy in the market, this market is an attractive source of profits for us. Hence, we will continue to serve this market by ensuring maximum availability through continual reliability improvements.
(ii) Ancillary Services. In order to assure safe and reliable transmission system performance, the PJM ISO established a market for ancillary services, many of which are provided by generation units. These ancillary services, which include area regulation service and operating reserves, permit the ISO to place certain units under its direct control and ensure that other units are able to provide electricity
within a certain time frame when their output is needed. Area regulation service allows the ISO to control the output of a unit to match fluctuating system demand. Operating reserves allow the ISO to compensate for sudden changes in supply or unforeseen increases in demand that can occur due to generation or transmission line problems or imbalances between forecasted demand and actual load. Generally, this results in those units running at reduced or, in some cases, minimum levels of output. We will continue to participate in this attractive market, particularly when prices for these services adequately compensate us for the opportunity cost of forgone energy sales and for associated wear on equipment. Ancillary services are supported by our load following and peaking units. We will also continue to optimize the balance of ancillary services and energy sales to maximize profit opportunities.
Continue to Reduce Costs. In order to increase margins, we continue to concentrate on effective cost management. Over the last several years, we have streamlined our operations by instituting flexible job specifications and creating mobile work teams. This has allowed us to seasonally reposition operating personnel in order to optimize unit profits as energy demand fluctuations occur. These improvements also allow us to add additional generation capacity at our existing sites without large increases in the size of associated workforces. The implementation of an enterprise resource planning system throughout our organization has also helped us to identify cost reduction opportunities and manage individual cost centers which should result in continued savings over the next several years. Since January 1, 2000, we have utilized Services to provide us with corporate support and managerial and administrative services, which we believe has lowered our corporate expenses. In addition, we expect that effective inventory management, strategic alliances and economies of scale resulting from the growth of our generation asset portfolio will help to further reduce costs.
Capitalize on Favorable Location of Assets. Many of our assets are strategically located within densely populated and demand intensive regions in PJM. In addition, the majority of our fossil generating stations are concentrated in the heavily industrialized and populated northeast quadrant of New Jersey where we will capitalize on a well-developed fuel supply infrastructure.
Capitalize on Additional Energy Revenue Opportunities through Integrated Generation, Marketing and Trading Functions. Our load following and peaking units allow us to capture additional energy revenue opportunities. In contrast to the larger and more efficient base load units, peaking units have lower fixed costs and relatively higher operating costs (mainly fuel expenses). The cost profile of load following units bridges the gap between base load and peaking units. As a result of these characteristics, some load following and all peaking units operate less frequently under most market conditions. However, the smaller size and operating flexibility of peaking units in particular allows us to respond quickly when energy prices are high. To sustain our ability to capitalize on these additional energy revenue opportunities, we will continue to improve the reliability and operational flexibility of these units and, through coordination with our wholesale energy marketing and trading operation, ensure that the units will be available during likely periods of high energy prices. Our wholesale energy marketing and trading operation actively manages the dispatch of our generation units to optimize the overall portfolio of generation and trading based on market opportunities. By centralizing the dispatch of our assets with fuel management and electricity trading, we have the ability to create additional revenue opportunities in the marketplace and extract full value from our existing contracts.
Maintain Prudent Risk Management Policies. We seek to limit the financial exposure associated with market risk, credit risk and operational risk of our portfolio of generation assets and contracts through a comprehensive risk management organization. Our team of marketing and trading professionals utilizes its in-depth knowledge of the markets, assets and complex rules in the regions in which we operate to maintain the optimal mix of physical and financial assets and to maximize the value of our portfolio. Sophisticated systems employed by our wholesale energy marketing and trading operation monitor market exposure, credit exposure and VAR of the entire portfolio. This information provides our marketing and trading, risk management and back office personnel with the up-to-date information necessary to manage both our physical and financial assets. In addition, we are subject to oversight by the RMC, an oversight committee that is independent of the trading operation and that reports directly to PSEG's Board of Directors, whose goal is to actively manage the financial risk exposure associated with the operations of PSEG's subsidiaries. We will continue to maintain a strong control environment and continue to watch for evolution of best practices.
Pursue Site Expansion Opportunities in PJM. We are favorably positioned to pursue growth opportunities through expansion of our installed capacity within PJM. We expect to utilize our significant development experience to expand capacity at our existing locations that are connected to transmission systems through existing interconnections and are located adjacent to existing gas transmission pipelines. Given these advantages, we believe site expansion will result in significantly lower associated costs and more timely receipt of required licenses and regulatory approvals than greenfield development. In addition, at many of our existing sites, we have been awarded favorable queue positions that provide us with priority rights to use existing transmission capability for delivering the power output of our planned generation capacity expansion projects.
Pursue Attractive Growth Opportunities in the Super Region. We also expect to grow by acquiring, in whole or in part, existing fossil plants and forming partnerships with independent power producers within the Super Region. We plan to concentrate on attractive opportunities and employ a disciplined approach to growth. For example, in May 2000, we acquired the Albany Steam Station, a 380 MW generation station which is well located within the New York market and offers significant expansion potential. In addition, in December 2000, we acquired 246 MW of jointly owned nuclear assets from Delmarva at Peach Bottom and Salem nuclear stations and we are under contract to acquire ACE's 298 MW share of Peach Bottom, Salem and Hope Creek.
We are expanding our PJM asset base with the addition of combined cycle units at Bergen (500 MW) and Linden (1,186 MW) and peaking units equaling 168 MW in the period 2001-2003. We are currently developing two planned combined cycle plants in the East Central Area Reliability Council ("ECAR"), an 850 MW plant in Waterford, Ohio and a 1,150 MW plant in Lawrenceburg, Indiana. As we continue to acquire generation capacity in the region, we intend to utilize our wholesale marketing, trading and risk management capabilities, together with our growing asset base, to expand our wholesale marketing and trading volume in PJM and other markets.
Maintain Our Commitment to the Environment. We will continue to seek ways for improving our performance and continue to advocate a uniform set of stringent but achievable air pollution standards for all U.S. power plants. This includes our goal of achieving a 90% reduction of nitrogen oxide emissions in our New Jersey facilities.
Products and Services
Wholesale energy markets increasingly consist of centralized power pools run by ISOs. The ISO is responsible for maintaining system reliability, ensuring the competitiveness and efficiency of the market, establishing various products to be offered for sale in the market and managing the spot market for those products. Three primary products traded in these markets include energy, capacity and ancillary services. While the following descriptions relate specifically to products and services offered in PJM, our principal market, similar products and services exist in most of the other markets in which we actively participate.
Energy
Electrical energy is produced by generation plants and is ultimately delivered to customers for use in lighting, heating and air conditioning and operation of other electrical equipment. Energy is our principal product and is priced on a usage basis, typically in cents per thousand Watt-hours ("kWh") or dollars per million Watt-hours ("mWh").
In a bid-based energy market such as PJM, owners of power plants specify prices at which they are prepared to generate and sell energy for the next day. Plant operators generally establish hourly bid prices at a level that approximates the marginal cost of generating energy from each individual unit at that plant. Marginal costs consist of fuel costs, variable operations and maintenance costs and other variable costs including air emission allowances. Within PJM, bid prices are typically capped at $1,000 per mWh, unless all available generation within the PJM control area is insufficient to satisfy demand. Under this condition, PJM may institute emergency purchases from adjoining regions that are not subject to a price cap.
The bid price for each plant is submitted to the ISO. Based upon bids received, the ISO instructs the units as to when they are to generate power, generally calling on the lowest cost units first. Typically, progressively higher bid units are called on (also referred to as "dispatched"), up until the point that the entire system demand for power (known as the system "load") is satisfied. The bid price of the last unit dispatched by the ISO establishes the energy market-clearing price, known as the locational marginal price ("LMP") within PJM. All units that are dispatched are paid the LMP for each mWh of energy produced, regardless of their specific bid prices. Since bids generally approximate the marginal cost of production, units with lower marginal costs generally run more hours over the course of a year and generate higher operating profits than units with relatively higher marginal costs.
At times, however, the transmission system becomes constrained when one or more parts of the transmission grid are at their full capability. During periods of transmission congestion, it is not possible to dispatch units in merit order without violating transmission reliability standards. Under such circumstances, the ISO will dispatch higher cost generation out of merit order within the congested area and power suppliers will be paid a LMP that is higher in the congested areas reflecting the price bids of those higher-cost generation units.
In addition to bidding into the market, owners of power plants sell energy on a wholesale basis under contract to power marketers and to LSEs, such as investor-owned and municipal utilities, and aggregators who resell energy to retail consumers. Our BGS contract with PSE&G is an example of such a contract.
Capacity
Capacity, as a product that is distinct from energy, is a commitment to the ISO that a given unit will be available for dispatch if it is needed to meet system demand. Capacity is typically priced in dollars per MW for a given sale period (e.g., mW-day or mW-year). Capacity generally refers to the power output rating of a generation plant, measured on an instantaneous basis. Thus, a generation plant that can produce 20 mWh of energy in one hour is said to have a capacity of 20 million Watts ("MW").
The PJM and New York ISOs maintain a separate capacity market as a means of ensuring power reliability and managing the energy market. Each LSE is required to secure enough capacity to meet the peak demand of its retail customers, plus an additional amount as a reserve margin. This reserve margin attempts to ensure that unpredicted peak demand increases or equipment unavailability does not cause a major system or market disruption. Owners of generation plants can sell their capacity to LSEs or to other wholesale market participants for resale. Subject to certain characteristics, a contract for capacity only commits the provider to make a generation unit available for dispatch by the ISO if it is needed. Should the unit actually be dispatched by the ISO, compensation for the resulting energy produced is settled in the energy market.
Buyers and sellers may either negotiate bilateral contracts or rely upon a bid-based system. The primary function of the bid-based capacity market is to facilitate capacity transactions where the capacity bid price of buyers and the offer price of sellers are matched through an ISO-sponsored auction process.
Ancillary Services
Ancillary services constitute another category of energy-related activities supplied by generation unit owners to the ISO. The ISO requires such services to ensure the safe and reliable operation of the bulk power system. The market for ancillary services exists solely on a wholesale level. Owners of generation units may bid units into the ancillary services market and, in turn, receive compensatory payment from the ISO. The ISO recovers the cost of paying generators for ancillary services through charges imposed on market participants. The two principal ancillary services in which we participate are area regulation and operating reserves. We will continue to participate in this attractive market, particularly when prices for these services adequately compensate us for the opportunity cost of forgone energy sales and for associated wear on equipment. We will also continue to optimize the balance of ancillary services and energy sales to maximize profit opportunities.
Area regulation service entails allowing the ISO to control the output of a unit to match the constantly fluctuating system demand. Generally, this results in the unit operating at less than full output. The ISO pays the provider of area regulation services a rate which compensates it for the opportunity cost of operating at less than full output (i.e., the market price of energy which could have been produced and sold during this period) plus an incentive amount to compensate for any additional equipment wear.
Operating reserves allow the ISO to compensate for sudden changes in supply or unforeseen increases in demand that occur when there is a sudden loss of a large generation unit, a problem with a transmission line or a mismatch between forecast and actual load. By operating steam units that otherwise would not be dispatched, and synchronizing combustion turbines to the bulk power system, generators are able to provide these ancillary services to the ISO. Synchronizing a combustion turbine to the system involves starting a unit and adjusting it so that the ISO can quickly bring the unit up to full power if it is needed. Once the unit is synchronized, it is spinning at normal rotational speed but does not generate electric output until directed to do so by the ISO. The ISO pays generators operating reserve payments that reflect their bid price for providing these services.
Energy Markets
In the Eastern United States, there are three centralized electricity markets now being operated by ISO organizations: PJM (operated by the PJM ISO), New York (operated by the New York ISO) and New England (operated by ISO New England). In addition to our involvement in the formation and ongoing operation of all three organizations, we actively trade in their wholesale markets. We are also active in other major electricity markets in the midwestern and southern United States, principally in the Virginia Carolina Reliability Group ("VACAR") area and the ECAR area. Although these markets are not yet centrally dispatched or operated by an ISO, they do have wholesale markets in which we are able to actively participate.
Together, these markets define a Super Region which spans part or all of 19 states plus the District of Columbia. With approximately 300,000 MWs of installed capacity, the Super Region constitutes over 37% of the total load in the United States (Resource Data International PowerDAT Database) and serves approximately 40% of the total U.S. population (U.S. Census Bureau, 1999 estimates).
Our centralized asset base within PJM and our extensive knowledge of the surrounding markets provide us with an advantage in the markets throughout the Super Region. The majority of our generation assets are located within PJM, which is the geographic center of the Super Region. While nearly 85% of our trading activity during 2000 was within PJM, the central concentration of assets allows us to effectively trade in the broader Super Region. As other markets continue to evolve, we will use our centralized asset base within PJM and our regional knowledge and experience to pursue expansion opportunities and increase trading volume throughout the Super Region.
In addition, the markets of the Super Region are relatively advanced in terms of restructuring which has created an area with relatively liquid and active wholesale trading markets. Three of the five markets are operated by ISO organizations and the other two markets (ECAR and VACAR) are expected to develop similar governance structures within the near future. Thirteen of the nineteen states within the Super Region and the District of Columbia have enacted restructuring legislation, while six of the remaining states have either issued a regulatory order on restructuring or are in the process of investigating restructuring (source: EIA). Furthermore, retail competition has already begun in twelve of the states and the District of Columbia with an additional one state scheduled to begin competition by 2002.
The following table sets forth certain characteristics of each of these markets. Installed capacity and peak demand data were obtained from the NERC's 2000 Electric Supply and Demand Database.
Approximate 2000 Summer
Super Region Relevant 2000 Installed Peak Demand
Markets Market Operator States/Districts Capacity (MW) (MW)
----------- -------------- ------------- --------------- -----------
PJM PJM ISO PA, NJ, MD, 57,828 51,206
DE, VA and
Wash D.C.
New York New York ISO NY 34,699 30,200
New England ISO New England CT, MA, ME, 25,619 23,250
NH, RI, and VT
ECAR N/A IN, KY, MD, 107,287 97,557
MI, OH,
PA, VA and WV
VACAR N/A NC, SC,VA 55,653 53,441
and WV
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PJM
The PJM ISO conducts the largest centrally dispatched energy market in North America with over 200 market participants and 540 generation sources. It serves nearly 9% of the total U.S. population. As part of the restructuring of the energy markets within PJM, some investor-owned utilities have divested their generation assets. As of December 31, 2000, approximately 14,000 MW, or 24% of the total installed capacity within PJM, had been sold or was awaiting final regulatory approval for sale.
Peak demand in PJM is forecasted to grow at a rate of 1.5% per year through 2010, while energy supply is also expected to increase at an annual rate of 1.5% (NERC 2000 Electric Supply and Demand Database). There has been significant merchant plant activity in the region. Over 5,700 MW of new capacity is expected to come online in PJM between January 1, 2001 and December 31, 2003. Plans for development of approximately 17,000 MW of additional new capacity have been reported.
There are a number of factors that distinguish PJM from the state of California, where electric industry deregulation has received significant attention in recent months. We believe these factors significantly reduce the likelihood of us experiencing the types of problems encountered by various utilities and power generators in California. The most prominent difference is the extent to which there is adequate generation capacity to meet demand in the region. In 1999, PJM's reserve margin (installed capacity less peak demand) was 15%, which is considerably higher than that of California's where reserve margins have slipped below 6%. In PJM, reserve margins are required of all LSEs, whereas in California, no such requirements exist. The two markets have also operated differently. Initially, California utilities were required to buy their energy in the day-ahead, or spot, market. While longer-term forward contracts have been permitted more recently, the initial rules resulted in utilities with considerable price risk. In contrast, in PJM utilities have been permitted to lock in prices through long-term contracts and to mitigate risk with use of other hedging instruments. Finally, California is considerably more dependent on gas-fired generation and hydro (51% and 26%, respectively). In contrast, PJM has a more diverse fuel mix, including a substantial base of coal and nuclear generators, whose cost structures have remained more stable.
New York
The New York ISO officially began operations as the market coordinator for New York in November 1999. The New York ISO is now responsible for managing the power pool and for administering the energy marketplace. Through 2010, peak demand within the New York market is expected to grow at approximately 0.9% per year (NERC 2000 Electric Supply and Demand Database). As part of the restructuring of New York's utility industry, the New York State Public Service Commission has ordered investor-owned utilities to divest their generation assets. As of December 31, 2000, generation units with capacity totaling approximately 18,000 MW, representing approximately 53% of the State's total
capacity, had been sold or were awaiting final regulatory approval for sale to new market participants. These sales are helping to create a more active wholesale energy market, similar to the market in PJM. It is anticipated that reserve capacity margins in New York will be insufficient to meet the NPCC criterion of a one-day in ten years loss-of-load expectation. Excluding New York City and Long Island, approximately 2,700 MW of new capacity is expected to come online in New York between January 1, 2001 and December 31, 2003. Plans for development of approximately 16,000 MW of additional new capacity have been announced.
New England
ISO New England was established on July 1, 1997 and immediately assumed responsibility for managing the New England Power Pool which covers the six New England states and has over 130 members operating 330 generation units. In June 1999, ISO New England also began administering the restructured wholesale energy market. As in PJM and New York, the restructuring of the utility industry in New England has also resulted in divestiture of generation assets. As of December 31, 2000, generation units of investor-owned utilities with approximately 17,500 MW of capacity, representing approximately 69% of the total generation capability in New England, either had been sold to new owners or were awaiting final regulatory approval for sale. As in New York, these sales are increasing trading activity in the wholesale markets. Approximately 8,700 MW of new capacity is expected to come online in New England between January 1, 2001 and December 31, 2003. Plans for development of approximately 16,000 MWs of additional new capacity have been announced.
ECAR
The ECAR region is made up of Ohio, Indiana, most of Michigan and West Virginia and parts of Virginia, Kentucky, Maryland and Pennsylvania. Unlike the ISO-operated markets, ECAR does not have a centrally managed energy market or a regional open access transmission tariff. Instead, within ECAR, each utility operates its own control area that, collectively, forms an interconnected electrical system covering eight states and 29 major utilities. However, it appears likely that federal initiatives (see "Federal Laws and Regulations") will result in the creation of an ISO organization within or including the ECAR region within several years that will likely increase trading activity within the region. At present, the demand in the ECAR region is growing at approximately 1.7% annually. Projections indicate potential capacity deficiencies by 2005 (NERC Reliability Assessment 2000-2009). To serve these loads, the region will likely have to rely on supplemental resources to meet peak summer demand. Approximately 6,500 MW of new capacity is expected to come online in ECAR between January 1, 2001 and December 31, 2003. Plans for development of approximately 44,000 MWs of additional new capacity have been announced.
VACAR
VACAR encompasses a portion of West Virginia, most of Virginia and all of North and South Carolina. Like ECAR, VACAR does not have a centrally managed competitive electricity market but, instead, is an interconnected grid of individual utility control areas. Although it has not yet committed to the establishment of an ISO or other open access, non-discriminatory organization, VACAR is expected to move in that direction in the next several years which will likely increase trading activity within the region. Due to their proximity to our generation assets, we are primarily focused on West Virginia and Virginia in Northern VACAR. Approximately 3,200 MW of new capacity is expected to come online in VACAR between January 1, 2001 and December 31, 2003. Plans for development of approximately 7,000 MW of additional new capacity have been announced.
FERC Regional Transmission Organization Orders
In a series of orders issued in July, FERC called for the creation of four large regional transmission organizations ("RTOs") to facilitate competitive regional markets in the U.S. FERC rejected several smaller RTO proposals and directed transmission owners and ISOs to combine into much larger RTOs, dramatically altering their proposed geographic size and configuration.
In the Northeast region, FERC conditionally approved a PJM RTO proposal (subject to several modifications and compliance filings) and rejected alternate proposals advanced by the New York ISO and ISO New England. FERC directed that the three existing ISOs for PJM, New York and New England, as well as the systems involved in PJM West, form a single Northeast RTO, based on the "PJM platform". FERC directed that the parties in the region engage in mediation (with FERC oversight) to prepare a proposal and timetable for the merger of the ISOs into a single RTO. At the end of a 45-day mediation period, the Administrative Law Judge assigned to the matter will submit a report to FERC.
In the Southeast region, FERC rejected a separate RTO proposal made by the Southern Companies and another submitted jointly by Entergy and the Southwest Power Pool. FERC directed that a single Southeast RTO be created, using the Grid South platform. As in the Northeast, FERC directed the Southeast parties to engage in mediation under supervision of an Administrative Law Judge.
Lower-cost generation should benefit from having better access to a larger regional market. While specific impacts on us are uncertain because specific rules will not be known for some time, we generally expect that the elimination of seams issues and the creation of a single wholesale market in the Northeast will have a positive impact on our competitive position.
Generation Assets
As of June 30, 2001, our portfolio of generation assets consisted of 11,490 MW of installed capacity. Of this total, approximately 11,110 MW are located within PJM, which equates to approximately 20% of PJM's installed capacity as of that date. These assets are well diversified in terms of fuel type, technology and energy market segment. The portfolio's diversity represents a balance that helps to mitigate risks associated with fuel price volatility and market demand cycles. The following charts provide a breakdown of our installed generation assets by market segments, fuel type and technology.
[Chart omitted]
Distribution Among Market Segments
There are generally three energy market segments: base load, load following (also referred to as mid-merit) and peaking. Generation units are typically characterized as serving one or more of these markets based on their operating capability and performance. On a capacity basis, our portfolio of generation assets consists of 36% base load, 36% load following and 28% peaking. This balanced distribution among market segments reduces our risk associated with market demand cycles and allows us to participate in the market at each segment of the dispatch curve.
Base Load Units: Base load units are the largest and most efficient units that we operate. These units are typically greater than 500 MW in capacity and are characterized by high construction (capital) costs, high fixed costs (primarily labor) and low operating costs (primarily fuel). Operating costs are low due to the combination of high efficiency and the use of coal and nuclear fuels, which are generally lower in cost per unit of output relative to oil or natural gas. Base load units are the primary source of our energy revenues and the capacity of these units supports revenues from capacity sales.
Because of their size and operating characteristics, base load plants are most suited to run for long periods at maximum output. Performance of these units is generally measured by "capacity factor," or the ratio of the actual output of the unit to the theoretical maximum output of the unit if it ran continuously over a given period. Base load units tend to be profitable to operate in most energy market conditions throughout the year and, therefore, typically have capacity factors above 60%. During 2000, our base load fossil and nuclear units achieved average capacity factors of 82.4% and 87.6%, respectively.
Load Following Units: Load following units are smaller and more flexible, but somewhat less efficient than base load units. They generally range in size from 100 MW to 500 MW. The construction costs of these units are typically lower than that of base load plants, but the operating costs are higher per unit of output due to lower efficiency and/or the use of higher cost fuels such as oil and natural gas. Load following units are designed to operate less frequently than base load units (i.e., during those periods when system demand exceeds the base load capacity of the system) and, therefore, typically have capacity factors that range from 20% to 60%. These units generally support revenues from capacity sales and area regulation, as well as energy revenues during periods of higher energy prices.
Due to the less frequent operation of load following units relative to base load units, a more relevant measure of performance for these units is EAF, the percentage of time a unit is available to operate during the year, whether or not it actually operates. In 2000, the weighted average EAF of our load following units was 89%.
Peaking Units: Peaking units, which normally have capacities of 10 MW to 100 MW, represent the smallest and most flexible units in our fleet. The capital costs and fixed costs of these units are low relative to base load plants. Peaking units are the least efficient plants in our portfolio and utilize higher cost fuels such as oil and natural gas. As a result, operating costs per unit of output tend to be much higher than that of base load units. For this reason, peaking units are operated during times of peak demand and derive the majority of their revenues from capacity and ancillary services sales. However, the operating flexibility and rapid startup characteristics of these units enable them to capture energy revenues during periods of high energy prices, which may occur during times of peak demand or as a result of transmission congestion. As with load following units, the relevant measure of performance is EAF. In 2000, the weighted average EAF of our peaking units was 87%.
One special class of peaking unit technology is pumped storage hydroelectric. These units utilize electric power during low cost periods (e.g., early morning hours when demand is generally low) to pump water to an elevated reservoir. When energy prices are high, the water is allowed to flow through the turbine to operate the generators and the resulting energy output is sold to the market. We are the co-owner of one pumped storage facility.
Diversity of Fuel Types and Technologies
Our portfolio consists of generation assets that are powered by a variety of fuel types. Coal, natural gas and oil power our 14 fossil generation stations and our ownership interest in these stations represent a total of 7,873 MW, or 69% of our current installed capacity. We also have an ownership interest in a pumped storage hydroelectric station, which adds additional diversity and 200 MW to our generation fleet. We have ownership interests in five nuclear units that are currently licensed to operate for 40 years, with the first unit's license expiring in August 2013. Our share of the nuclear units in which we have an ownership interest represents a current net capacity of 3,417 MW that accounts for 29% of our current installed capacity. This includes a recent transaction wherein we contracted to purchase Conectiv's ownership interests in the Salem, Hope Creek and Peach Bottom units, increasing our respective ownership share of those units to 57.4%, 100.0% and 50.0% (a total of 544 MW). The Delmarva portion of that transaction (246 MW) was closed in December 2000. The ACE portion (298 MW) awaits regulatory approval.
Our portfolio is also diverse in terms of generation technologies employed. The range of fossil-fueled technologies includes conventional steam units, combined cycle units and combustion turbine units. In addition, our nuclear and pumped storage hydroelectric generation units represent entirely different generation technologies that serve as a strategic complement to those of the fossil fleet.
Power Production Breakdown
The following figure shows our output by energy source in the twelve months ended June 30, 2001 relative to installed capacity. Our coal and nuclear fueled units, represent 18% and 29%, respectively, of our installed capacity, yet accounted for 28% and 63%, respectively, of our total energy output for the period. In contrast, our gas, oil and pumped storage load following and peaking units, which represent 53% of our installed capacity, accounted for 9% of our total energy output for the period.
Energy and Capacity by Fuel Type
[Chart omitted]
The following table provides summary profiles of our fossil and nuclear generation stations and the units that comprise them:
Generation Unit Primary Total Capacity Owned
Station Unit # Type(1) Fuel Type Plant Mission(2) (MW) Capacity (MW) Plant Operator
----------- ------ ----- --------- ------------- ------------ ------------- -------------
Conemaugh 1&2 ST Coal Base Load 1,700 382 Reliant
3 IC Oil Peaking 11 2
Keystone 1&2 ST Coal Base Load 1,700 388 Reliant
3 IC Oil Peaking 11 3
Albany 1-4 ST Gas/Oil Load Following 380 380 Power
Hudson 1&2 ST Coal/Gas Load Following 991 991 Power
3 CT Oil Peaking 129 129
Kearny 7&8 ST Oil Load Following 300 300 Power
9 CT Gas Peaking 21 21
10-12 CT Gas/Oil Peaking 443 443
Linden 1&2 ST Oil Load Following 430 430 Power
3 CT Gas Peaking 21 21
5-8 CT Gas/Oil Peaking 316 316
Mercer 1&2 ST Coal/Gas Load Following 648 648 Power
3 CT Oil Peaking 129 129
Sewaren 1-4 ST Gas/Oil Load Following 453 453 Power
6 CT Oil Peaking 129 129
Bergen 1 CC Gas Load Following 675 675 Power
3 CT Gas Peaking 21 21
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Generation Unit Primary Total Capacity Owned
Station Unit # Type(1) Fuel Type Plant Mission(2) (MW) Capacity (MW) Plant Operator
----------- ------ ----- --------- ------------- ------------ ------------- -------------
Burlington 10 CC Gas Load Following 245 245 Power
1,2 8, CT Oil Peaking 561 561
9&11 CT
Bayonne 1&2 CT Oil Peaking 42 42 Power
Edison 1-3 CT Gas/Oil Peaking 504 504 Power
Essex 9-12 CT Gas/Oil Peaking 617 617 Power
National Park 1 CT Oil Peaking 21 21 Power
Yards Creek 1 PS Pumped Storage Peaking 400 200 GPU
Salem 1&2 NU Nuclear Base Load 2,223 1,2813 Power
3 CT Oil Peaking 38 22
Hope Creek 1 NU Nuclear Base Load 1,042 1,0423 Power
Peach Bottom 2&3 NU Nuclear Base Load 2,186 1,0943 Exelon
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As of June 30, 2001, we had 4,604 MW of generation capacity in construction or advanced development as shown in the following table:
Total Principal
Name and Location and Capacity Fuel
Expected Completion Date (MW) Used Missions
------------------------ -------- --------- --------
Single Cycle:
Kearny, NJ Unit 121 168 Gas/Oil Peaking
Waterford (Phase I), Ohio (June 2002) 500 Gas Load Following
Combined Cycle:
Bergen, Ridgefield, NJ (June 2002) 500 Gas Load Following
Lawrenceburg, Indiana (May 2003) 1,150 Gas Load Following
Waterford (Phase II), Ohio (May 2003) 350 Gas Load Following
Linden, NJ (June 2003) 1,186 Gas Load Following
Bethlehem, NY (June 2004) 750 Gas/Oil Load Following
-----
Total Construction or Advanced
Development 4,604
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1 This unit commenced full commercial operation on August 1, 2001.
Development/Growth Plans
We believe that we are well positioned to grow by acquiring new plants, developing greenfield and brownfield sites and forming partnerships with independent power producers. We plan to concentrate on attractive opportunities and employ a disciplined approach to growth. We are expanding our PJM asset base with the addition of combined cycle units at Bergen (500 MW) and Linden (1,186 MW) and peaking units equaling 168 MW in the period 2001-2003. In addition, we are currently developing two combined cycle plants in ECAR, an 850 MW plant in Waterford, Ohio and a 1,150 MW plant in
Lawrenceburg, Indiana. As we continue to acquire generation capacity in the Super Region, we will utilize our wholesale marketing, trading and risk management capabilities, together with our growing asset base, to expand our wholesale marketing and trading volume in PJM and other markets.
Energy Marketing and Trading
We have been engaged in energy trading and marketing operations for a number of years. We utilize our significant industry expertise and capability to provide comprehensive energy portfolio and risk management services to achieve the greatest overall return on our portfolio of assets. During each of the last three years, we completed wholesale transactions relating to more than 100 million mWh of electricity annually with trading partners in the Super Region. In the future, we expect to continue to successfully participate in the Super Region to further enhance the value of our assets.
We engage in physical and financial transactions in the electricity wholesale markets and execute an overall risk management strategy to mitigate the effects of adverse movements in the fuel and electricity markets. In addition to bidding the output of our generation assets into the day-ahead PJM energy market, we actively trade energy, capacity, fixed transmission rights, fuel and emission allowances in the spot, forward and futures markets primarily within PJM, but also throughout the Super Region. We are also involved in financial transactions that include swaps, options and futures in the electricity markets.
In addition to participating in each of the major electricity supply and capacity markets in the Super Region, we also market and trade a broad spectrum of other energy and energy-related products. These products include coal, oil, natural gas, sulfur dioxide and nitrous oxide emissions allowances and financial instruments including fixed transmission rights. Our marketing and trading activity for these products extends throughout the United States and involves physical and financially settled transactions, futures, options, swaps and basis contracts.
We perform stress tests to identify risks in the portfolio that may not be apparent in normal market conditions. ER&T's risk management group performs stress tests on a daily basis to test market positions against adverse price movements and to identify potential risks in its entire portfolio. The corporate risk group also performs independent stress tests on a weekly basis using standardized scenarios and on a monthly basis using data that will attempt to identify weaknesses in the portfolio. The corporate risk group reports the results of these stress tests to the RMC.
We have developed a hedging and overall risk management strategy to limit our risk exposure and to track our positions in the wholesale markets. Hedging is used as the primary method for protecting against adverse price fluctuations and involves taking a position in a related financial instrument that is designed to offset the risk associated with the original position. We only use hedging instruments that correspond to the generation, purchase or sale of electricity and the purchase or sale of fuel.
Our corporate financial risk management policy, developed in 1997, uses the Group of Thirty recommendations, which are considered best practices for the prudent use of derivatives. The policy was approved by the PSEG Board of Directors and empowers an executive-level RMC chaired by the CFO of PSEG to monitor, measure and mitigate risk taking activities of the company. The RMC created an independent corporate risk group to manage the daily activities related to risk measurement and monitoring. Our corporate risk group, which functionally reports directly to the CFO of PSEG, monitors, measures and aggregates the financial risk of all trading operations. The RMC sets overall commodity portfolio risk limits, and specific trading limits for each trading area, to ensure that risk parameters are not exceeded. Specifically, we use a VAR model that measures the potential gains or losses that could be sustained due to changes in market factors. Based on this model, VAR limits for certain time periods are established to limit our exposure. Currently, the VAR limit for ER&T is set at $25 million with a $16.5 million alert level. In the event that the alert level is reached, the portfolio is examined and the root causes of the change in the value of the portfolio are assessed.
As previously discussed, on December 20, 2000, our portfolio exceeded the alert limit of $16.5 million in VAR. The RMC convened to discuss the reasons for the increase in the VAR, which were increasing natural gas and electricity prices and the corresponding volatility in the commodity prices. The RMC determined that no immediate action should be taken by ER&T but that the corporate risk management group would report VAR levels twice in a week and more frequently, if necessary to monitor the portfolio. In February 2001, prices and volatilities decreased and the VAR moved below the alert limit.
To further enhance trading activity, we have a comprehensive portfolio management system. Traders trade from one consolidated portfolio and we maintain a trading "book" that is continuously marked to market. All trades are immediately entered into the portfolio management system, where trading managers, the risk manager and the corporate risk group review and monitor the status of the portfolio and evaluate the VAR of the forward positions.
Each trading counterparty must pass a thorough credit analysis before being approved as a trading partner. The credit analysis results in an internal credit rating with a credit line that is closely monitored. Credit enhancements, including guarantees, performance bonds, prepayment and letters of credit, may also be required and are actively managed. New trading counterparties are approved on a regular basis and performance of existing trading partners is monitored. Counterparties can be removed from the approved list due to deteriorating business conditions or as our evaluation of our risk changes.
One example of how we intend to maximize the value of our generation portfolio is effective management of the "spark spread", or the difference between the cost of fuel and the price of power. This "spark spread" represents the margin we are able to realize on the sale of each unit of electricity we generate. By using our trading expertise, we can enhance our revenues by taking advantage of the volatility inherent in the "spark spread". For example, through ER&T we may enter into a "forward sale" in which we (a) contract to deliver our electricity to a purchaser at a future date at a fixed price and (b) contract for the delivery of the amount of fuel we will require to fulfill our contracted electricity delivery requirements at a fixed price. By entering into a forward sale, we reduce our level of risk by locking in the margin we receive for the electricity we generate. In addition, if the market price of fuel rises relative to the market price of electricity, we are able to sell the fuel that we previously contracted to buy and purchase electricity from the market to cover our obligation to deliver electricity. Through these transactions, we realize a profit on the sale of the fuel we had contracted to purchase in the future while also ensuring that we do not leave an unhedged trading position by covering our obligation to supply power in the future through the purchase of replacement power. On a daily basis, we are currently arbitraging the spark spread for about 1,200 MW of gas-fired generation assets. As the overall scale and diversity of our portfolio continues to grow, to the extent that we experience reduced BGS requirements as a result of PSE&G's customer attrition, the level of transactions that we can engage in will increase, creating the potential for additional value creation.
Our team of marketing and trading professionals utilizes its in-depth knowledge of the markets, assets and complex rules in the region in which we operate to maintain the optimal mix of physical and financial assets and to maximize the value of our portfolio. All marketing and trading activities are performed by a staff of experts with experience in commodity trading, financial institutions and the electric industry. A fully integrated "back-office" operation performs contract management, scheduling, billing, cash management, credit analysis and monitoring, and regulatory and legal support functions.
Fuel Management
Our diverse generation portfolio of nuclear, fossil and hydroelectric facilities utilizes several different types of fuels in the production of electricity. Coal and uranium are the primary fuels for the base load units, while natural gas is the primary fuel for the majority of the load following and peaking units. The remainder of the load following and peaking units run on fuel oil. Natural gas and fuel oil are also used as alternate fuels for some coal and gas fired units, respectively. Approximately 5,269 MW, or 46% of our generation portfolio has dual fuel capability.
Our wholesale marketing and trading operation manages the procurement of all fossil fuels (coal, oil and natural gas) for the operation of our fossil generation stations. By integrating fuel procurement, control of our generation units and responsibility for wholesale energy supply and trade, we are able to more effectively hedge our positions in the market and take advantage of arbitrage opportunities that are present across the full spectrum of the energy and emissions markets. This represents another facet of our wholesale marketing and trading operation's integration with our generation operations that substantially benefits our profitability.
We are actively managing our fuel supply to lower transportation and commodity costs and improve fuel quality. Our efforts involve leveraging our size as a buyer, improving our transfer and handling capabilities and purchasing from a more diverse range of suppliers from around the world. We have also expanded off-site storage to leverage purchasing power and to support arbitrage transaction opportunities.
Coal
Coal is the primary fuel for seven of our base load and load following steam turbine units: Hudson 2, Mercer 1 and 2, Keystone 1 and 2 and Conemaugh 1 and 2. Coal is purchased through spot market transactions, as well as annual and medium-term contracts from numerous suppliers, primarily in Northern, Central and Southern Appalachia. Coal is delivered to our New Jersey units through a combination of rail and barge movements and to our Pennsylvania units by rail and truck.
Natural Gas
Natural gas is the primary fuel for the bulk of our load following and peaking fleet, including the combined cycle units at Bergen and Burlington, the load following steam turbine units at Albany, Hudson and Sewaren and the combustion turbine peaking units at Bergen, Burlington, Edison, Essex, Kearny and Linden. Natural gas is also the alternate fuel for the primarily coal-fired units at Hudson and Mercer. Natural gas is delivered to stations via pipeline to all sites with gas-fired units and is purchased via supplier contracts and in the spot market.
Fuel Oil
No. 2 (Kerosene) and No. 6 Oil are used as primary fuels by two load following steam units and nine combustion turbine peaking units. No. 2 and No. 6 Oil are also used as alternate fuels by several load following and peaking units that have dual-fuel capability and burn natural gas as their primary fuel. Fuel deliveries to sites with oil-fired units are made by truck, barge, or pipeline. Fuel oil for all oil-fired units is purchased on the spot market.
Uranium
Uranium is the fuel for our five nuclear units. The supply of fuel for these base load units involves the mining of uranium ore that is processed and fabricated into fuel assemblies. We have several long-term contracts with uranium ore processors to meet the currently projected requirements for Salem and Hope Creek stations. Exelon, the operator of the Peach Bottom units, has similar contracts to satisfy the fuel requirements of Peach Bottom. Currently, there is an adequate supply of nuclear fuel for Salem, Hope Creek and Peach Bottom.
Our nuclear fuel supply strategy has also emphasized the reduction of fuel costs. Through global sourcing, renegotiated contracts and improved fuel design, we have reduced our nuclear fuel costs (for Salem and Hope Creek) by approximately $0.06 per kWh since 1997 when fuel costs were $0.58 per kWh. We are continuing to focus on reducing these costs below $0.48 per kWh by 2002, which would place our fuel costs within the top quartile of fuel cost efficient U.S. nuclear plants.
Customers
Current Customers
PSE&G, pursuant to the BGS contract, will be the primary customer for our generation business through July 31, 2002. PSE&G, under the terms of the BPU Final Order, will provide basic generation service to all retail customers in its service area that either do not choose to buy their power from alternative suppliers or are not being served by their alternative energy supplier for any reason. As of December 31, 2000, PSE&G provided service to approximately 1.9 million electric customers. For the year ended December 31, 2000, electric operating revenues associated with this customer base aggregated approximately $1.8 billion. PSE&G's peak load during the summer of 2000 was 9,369 MW.
PSE&G will pay us the full amount charged to BGS customers, or the retail tariff rate on file at the BPU, less any sales and use taxes. In addition, PSE&G will pay us a price stability charge to compensate us for ensuring the reliability of BGS service and removing from PSE&G price volatility risk. The charge will be equal to the full amount collected by PSE&G for its unsecuritized generation stranded costs per billing period.
In addition to the BGS contract, we will continue to supply four municipal and electric cooperative customers and one public utility a total of 489 MW of capacity, including some other obligations, such as energy, under the terms of existing contracts for the remaining one to five years of those contracts.
Wholesale energy and related product trading have been growing business opportunities throughout the Super Region over the last ten years and we and our predecessors and affiliates have been in the forefront as an active participant. Trading relationships have been developed with most of the larger and more successful power marketers and existing trading relationships have been strengthened with the region's utilities. More recently, new relationships have developed with companies that are focused on aggregating retail customers in states that have restructured. We currently have over 100 active trading counterparties, which have passed a rigorous credit analysis and contracting process. These include investor owned utilities, retail aggregators and marketers.
Potential New Customers
Customer growth will come from the many opportunities that are a result of regulatory changes providing open access to new markets and the opportunity to offer many wholesale energy and related products in new innovative delivery methods. Many of these new customers are subsidiaries of existing energy-based companies that meet our contract and credit requirements and which have established trading relationships with us. Other new customers are newly formed companies that are looking for opportunities in the new energy markets and are able to meet our contract and credit requirements. During the remainder of the BGS contract period ending July 31, 2002, we will market excess generation capacity as PSE&G's retail market is expected to moderately erode during the outset of retail competition. We currently have several contracts to supply retail aggregators and, following the completion of the BGS contract period, we anticipate that the majority of our generation output will continue to be dedicated to supplying similar long-term contracts.
Insurance
We carry insurance coverage consistent with companies engaged in similar commercial operation with similar properties. Our insurance coverage includes risk insurance as well as commercial general public liability insurance, covering liabilities to third parties for bodily injury and property damage resulting from our operations; automobile liability insurance, for all owned, non-owned and hired vehicles, covering liabilities to third parties for bodily injury and property damage, and all risk property insurance, covering the replacement value of all real and personal property, including coverage for boiler and machinery breakdowns and earthquake and flood damage, subject to certain sublimits. We also maintain substantial excess liability insurance coverage above the established primary limits for commercial general liability and automobile liability insurance. Limits and deductibles are comparable to those carried by other electric generation companies of similar size. For a discussion of liability and other insurance related to our nuclear generation facilities, see Note 7. Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements.
Competition
The National Energy Policy Act of 1992 ("Energy Policy Act") (see "-- Regulation -- Federal Laws and Regulations") laid the groundwork for competition in the wholesale electricity markets in the United States. This legislation expanded the FERC's authority to order electric utilities to open their transmission systems to allow third-party suppliers to transmit, or "wheel," electricity over their lines. In 1996, FERC issued an order that resulted in expanded open access to transmission lines, providing eligible third-party wholesale marketers comparable transmission access. These actions have enabled power marketers, independent power producers, EWGs and utilities to compete actively in wholesale markets, consumers to have the right to choose their energy suppliers and competition to set the price of the generation component of electricity bills in deregulated areas.
During the last several years, additional legislation has been introduced to further encourage competition at the retail level (often referred to as customer choice or retail access). While no legislative proposal has yet coalesced at the federal level, it is expected that efforts to restructure the nation's electricity industry, encourage competition and greater industry flexibility and allow retail customer choice will continue. At present, the timing and effect of federal restructuring legislation cannot be predicted with any degree of certainty. Nevertheless, an increasing number of states have enacted legislation to open their markets to customer choice and retail competition. As a result, the highly regulated market structure of the past is giving way to one where electricity consumers have the right to choose their electricity supplier and competition is setting the price of the generation component of electricity bills.
In the regions where we are the most active, most states have already begun the process of restructuring their electricity markets. Retail power markets opened to competition in New York, Massachusetts and Rhode Island in 1998. Pennsylvania began opening its markets in January 1999. New Jersey's electricity market opened to full competition late in 1999, while Delaware and Michigan markets began phasing in competition at virtually the same time. In 2000, Connecticut (January), Maine (March) and Maryland (July) began competition. Ohio and the District of Columbia began opening to competition in January 2001. New Hampshire and Virginia are scheduled to begin phasing in competition in 2001 and 2002.
As markets continue to evolve, several types of competitors have or will emerge in the markets in which we participate. These competitors include independent power producers with or without trading capabilities, other utility affiliates that have formed generation and/or trading affiliates, aggregators, wholesale power marketers or some combination thereof. These participants will compete with one another buying and selling in wholesale power pools, entering into bilateral contracts and/or selling to aggregated retail customers.
We expect to compete as a large, diverse supplier of wholesale electricity and related products and services. In this market segment, defined to include large companies with fully integrated trading and generation functions, we anticipate that our primary competitors will include companies like Enron Corp., Duke Energy Corporation, Mirant Corp. and Exelon Corp. While these companies are formidable competitors, we believe that our asset size and location, regional market knowledge and integrated functions will provide us with a competitive edge in our selected markets.
Properties
In addition to our generation assets, we own or lease several other properties associated with our business activities. We sublease approximately 70,000 square feet of office space in an office tower and other office facilities in Newark, New Jersey. We also lease approximately 19,600 square feet of space in the Hadley Road Training Center in South Plainfield, New Jersey from PSE&G. This space is used for fossil system maintenance, procurement and materials management staffs.
Through a subsidiary, we own a 50.0% interest in about 20,000 acres of restored wetlands and conservation facilities in the Delaware Estuary. This subsidiary was formed to acquire and own lands and other conservation facilities required to satisfy the condition of the New Jersey Pollutant Discharge Elimination System ("NJPDES") permit issued for the Salem Generating Station. These lands and
conservation facilities are the only assets of The Francis Corporation, our wholly-owned subsidiary. We also own several other facilities including the on-site Nuclear Administration and Processing Center buildings.
We have an ownership interest in the 650-acre Merrill Creek Reservoir in Warren County, New Jersey. The reservoir was constructed to store water for release to the Delaware River during periods of low flow. Merrill Creek is jointly owned by seven entities that have generation facilities along the Delaware River and use the river water in their operations. We also own the Maplewood Test Center in Maplewood, New Jersey and the Central Maintenance Shop at Sewaren, New Jersey.
Employees and Labor Relations
As of December 31, 2000, we had a total of 3,124 employees, of whom 1,154 were dedicated to Fossil, 1,835 to Nuclear, 60 to ER&T and 75 in corporate functions. Collective bargaining agreements, which expire on April 30, 2002, are in place with three union groups, representing 1,662 employees (802 employees, or approximately 69% of the workforce in Fossil and 860 employees, or approximately 47% of the workforce in Nuclear). In the last 15 years, we have not experienced any labor problems resulting in significant work stoppage and we believe that we maintain satisfactory relationships with our employees.
Legal Proceedings
We are involved in the following environmental related matters involving governmental authorities. Based on current information, we do not expect expenditures for any such site, individually or all such current sites in the aggregate, to have a material effect on their financial condition, results of operations and net cash flows.
(1) Claim made in 1985 by U.S. Department of the Interior under CERCLA with respect to the Pennsylvania Avenue and Fountain Avenue municipal landfills in Brooklyn, New York, for damages to natural resources. The U.S. Government alleges damages of approximately $200 million. To our knowledge there has been no action on this matter since 1988.
(2) Duane Marine Salvage Corporation Superfund Site is in Perth Amboy, Middlesex County, New Jersey. We were named as one of several potentially responsible parties ("PRPs") with regard to contamination of this site.
(3) Various Spill Act directives were issued by NJDEP to PRPs, including us with respect to the PJP Landfill in Jersey City, Hudson County, New Jersey, ordering payment of costs associated with operating and maintenance expenses, interim remedial measures and a Remedial Investigation and Feasibility Study ("RI/FS") in excess of $25 million. The directives also sought reimbursement of NJDEP's past and future oversight costs and the costs of any future remedial action.
(4) In 1991, the NJDEP issued Directive and Notice to Insurers Number Two ("Directive Two") to 24 Insurers and 52 Respondents, including PSE&G, in connection with an investigation and remediation of the Global Landfill Site in Old Bridge Township, Middlesex County, New Jersey seeking recovery of past and anticipated future NJDEP response costs ($37 million). We and other participating PRPs have agreed with NJDEP to a partial settlement of such costs and to perform the remedial design and remedial action. In 1996, 13 of the Directive Two Respondents, including PSE&G, filed a contribution action pursuant to CERCLA and the Spill Act against approximately 190 parties seeking contribution for an equitable share of all liability for response costs incurred and to be incurred in connection with the site. In September 1997, the NJDEP issued a Superfund record of decision with estimated cost of $3.7 million.
(5) The NJDEP assumed control of a former petroleum products blending and mixing operation and waste oil recycling facility in Elizabeth, Union County, New Jersey (Borne Chemical Co. site) and issued various directives to a number of entities including us requiring performance of
various remedial actions including: establishment of security at the site; removal and off-site disposal of containerized wastes at the site; and conduct of a remedial investigation of the site. Our nexus to the site is based upon the shipment of certain waste oils to the site for recycling. We and certain of the other entities named in NJDEP directives are members of a PRP group that have been working together to satisfy NJDEP requirements including: funding of the site security program; containerized waste removal; and a site remedial investigation program.
Regulation
Energy Regulatory Matters
We generate, sell and transmit electric power under the jurisdiction of several federal agencies. We are subject to regulation by FERC with respect to the interstate sale and exchange of electric capacity and energy. The construction and operation of nuclear generation facilities are subject to comprehensive regulation by the NRC. Such regulation may include our providing parental guarantees to Nuclear for the broad financial assurances required by the NRC. In addition, the Federal Emergency Management Agency is responsible for the review, in conjunction with the NRC, of certain aspects of emergency planning relating to the operation of nuclear plants.
We are also subject to the regulation by the EPA, the U.S. Department of Transportation ("USDOT") and the U.S. Department of Energy ("DOE") with respect to the construction and operation of our generation stations.
Federal Laws and Regulations
FERC Order 888 ("Order No. 888"). The Energy Policy Act eased restrictions on independent power producers ("IPPs") in an effort to increase competition in the wholesale electric generation market. Order No. 888, issued in April 1996, required all public utilities that own, control or operate electric transmission lines to offer nondiscriminatory open access to their transmission systems. Intra-pool transactions for power pools were also required to be conducted under a nondiscriminatory, pool-wide open access tariff. FERC Orders No. 888-A and 888-B clarified and largely reaffirmed the legal and policy bases on which Order No. 888 was grounded and also provided a process for recovery of stranded costs from wholesale customers. While Order 888 has been significant in opening up competition in the electric power industry, it is not directly applicable to us because we do not operate an electric transmission system.
Federal Power Act ("FPA"). The FPA gives FERC exclusive ratemaking jurisdiction over the wholesale marketing and transmission of electricity in interstate commerce. All public utilities under FERC jurisdiction are required to file rate schedules with FERC prior to commencing with wholesale marketing or transmission. Because we will be selling power into the wholesale market, we are considered a public utility under the FPA. We have filed, and FERC has accepted, a rate schedule that grants us authority to sell electricity, capacity and ancillary services at market-based rates.
Public Utility Holding Company Act ("PUHCA"). PUHCA provides that any corporation, partnership or other entity or organized group that owns, controls or holds power to vote 10% or more of the outstanding voting securities of a "public utility company" or a company that is a "holding company" of a public utility company is subject to pervasive regulation under PUHCA as a registered holding company, unless an exemption is established or an order is issued by the SEC declaring it not to be a holding company. Registered holding companies under PUHCA are required to limit their utility operations to a single integrated utility system and to divest any other operations not functionally related to the operation of the utility system. In addition, a public utility company that is a subsidiary of a registered holding company under PUHCA is subject to financial and organizational regulation, including the requirement for SEC approval of certain of its financing transactions. However, under the Energy Policy Act, a company engaged exclusively in the business of owning and/or operating facilities used for the generation of electric energy exclusively for sale at wholesale may be exempted from
PUHCA regulation as an EWG. With the exception of a section relating to the acquisition of 5% or more of the voting securities of an electric or gas utility company, PSEG and we have each claimed exemptions from regulation by the SEC as a registered holding company under PUHCA. Fossil and Nuclear have also been designated as EWGs under PUHCA.
State Regulatory Bodies
Neither PSEG nor we are subject to direct regulation by the BPU. However, because of PSEG's ownership of PSE&G, the BPU may potentially assert regulation with respect to certain transfers of control and reporting requirements. The BPU may also impose certain requirements with respect to affiliate transactions between PSE&G and PSEG and/or PSEG's non-regulated subsidiaries, including us. The BPU Order authorizing the transfer of PSE&G's generation assets to us requires that, should any of those assets be sold to a third party within five years from August 24, 1999, any gains on such sale would have to be shared on a 50/50 basis with PSE&G's retail customers.
As a participant in the ownership of generation facilities in Pennsylvania, we are subject to regulation by the PPUC in limited respects in regard to such facilities.
We are also subject to the rules and regulations of the New Jersey Department of Environmental Protection ("NJDEP") and Department of Transportation ("NJDOT") with respect to the construction and operation of our generation stations.
State Laws and Regulations
New Jersey Energy Master Plan Proceedings and Related Orders. Following the enactment of the New Jersey Electric Discount and Energy Competition Act ("Energy Competition Act"), the BPU rendered its Final Order relating to PSE&G's rate unbundling, stranded costs and restructuring proceedings providing, among other things, for the transfer to an affiliate of all of PSE&G's electric generation facilities, plant and equipment for $2.443 billion and all other related property, including materials, supplies and fuel at the net book value thereof, together with associated rights and liabilities. Pursuant to the Final Order, we acquired all of PSE&G's electric generation facilities and wholesale power contracts on August 21, 2000 in exchange for a promissory note in an amount equal to the purchase price. Such note was repaid, and the acquired assets were released from the lien of PSE&G's First and Refunding Mortgage, on January 31, 2001.
The Energy Competition Act, the BPU's Final Order and the related BPU proceedings, referred to as the Energy Master Plan Proceedings, opened the New Jersey energy markets to competition by allowing all New Jersey retail electric and gas customers to select their suppliers.
Securitization Filing and Finance Order. Also in the Final Order, the BPU concluded that PSE&G should recover up to $2.94 billion (net of tax) of its generation-related stranded costs, through securitization of $2.4 billion and an opportunity to recover up to $540 million (net of tax) of its unsecuritized generation-related stranded costs on a net present value basis. The $540 million is subject to recovery by various means, including an explicit market transition charge, the MTC. Following the issuance of the Final Order, the BPU issued its order approving PSE&G's petition relating to the proposed securitization transaction ("Finance Order") which authorized, among other things, the imposition of a non-bypassable transition bond charge on PSE&G's customers; the sale of PSE&G's property right in such charge to a bankruptcy-remote financing entity; the issuance and sale of $2.525 billion of transition bonds by such entity as consideration for such property right, including an estimated $125 million of transaction costs; and the application by PSE&G of the transition bond proceeds to retire outstanding debt and/or equity.
PSE&G Transition Funding LLC, a wholly-owned subsidiary of PSE&G, issued such transition bonds on January 31, 2001.
Basic Generation Service. Under the BPU Final Order, PSE&G is obligated to provide basic generation service to customers who do not choose another electric supplier or who, for any reason, are not being supplied by another electric supplier. PSE&G has contracted with us to provide the energy and capacity necessary to meet its BGS and Off-Tariff Rate Agreements ("OTRA") obligations through July 31, 2002. The Final Order prohibits PSE&G and us from promoting such service as a competitive alternative to other electricity suppliers and marketers. BGS will be competitively bid for the year beginning August 1, 2002 and annually thereafter. Any payments to PSE&G resulting from BGS being bid out will be credited to the deferred societal benefit costs balance for purposes of establishing its societal benefit clause rate for the year beginning August 1, 2003, and may not be retained by PSE&G or otherwise utilized to recover unsecuritized generation-related stranded costs.
Affiliate Standards. In February 2000, the BPU approved affiliate standards and fair competition standards which apply to transactions between a public utility and its affiliates which provide, or offer, competitive services to retail customers in New Jersey. These regulations are set to expire in March 2002 and, at that time, will be subject to BPU review and public comment. As currently formulated, these standards have limited applicability to transactions between us and PSE&G since we do not serve retail customers in New Jersey.
Environmental Regulatory Matters
Federal, regional, state and local authorities regulate the environmental impacts of our operations. Areas of regulation include air quality, water quality, site remediation, land use, waste disposal, aesthetics and other matters. Generators of hazardous substances potentially face joint and several liability, without regard to fault, when they fail to manage these materials properly and when they are required to clean up property affected by the production and discharge of such substances.
Compliance with environmental requirements has caused us to modify the day-to-day operations of our facilities, to participate in the cleanup of various properties that have been contaminated and to modify, supplement and replace existing equipment and facilities. During 2000, we expended approximately $9.0 million for capital related expenditures to improve the environment and comply with environmental-related laws and regulations. Our estimates are that we will expend approximately $15.0, $24.0 and $12.0 million in the years 2001 through 2003, respectively, for such purposes. Such amounts are included in estimates of construction expenditures (see "MD&A -- Liquidity and Capital Resources").
Air Pollution Control. Federal, state and local air pollution laws (such as the Federal Clean Air Act ("CAA") and the New Jersey Air Pollution Control Act), and the regulations implementing those laws, require controls of emissions from sources of air pollution, as well as record keeping, reporting and permit requirements. Our approximate 23% ownership interest in Conemaugh and Keystone subjects us to state regulation in Pennsylvania governing compliance with, and maintenance of, air quality standards in Pennsylvania. Our ownership of Albany Steam Station subjects us to similar regulation in New York.
To reduce emissions of sulfur dioxide ("SO2"), the CAA sets a cap on total SO2 emissions from affected units and allocates SO2 "allowances" (each allowance authorizes the emission of one ton of SO2) to those units. Generation units needing to cover emissions above their allocations can buy allowances from sources that have excess allowances. Similarly, to reduce emissions of nitrogen oxides ("NOx"), which contribute to the formation of smog, Northeastern states and the District of Columbia have set a cap on total emissions of NOx from affected units, and allocated NOx allowances (with each allowance authorizing the emission of one ton of NOx) to those units. The NOx allowances can be bought and sold through a regional trading program similar to the trading of SO2 allowances. In 2003, the cap will be reduced to limit NOx emissions further.
To comply with the SO2 and NOx requirements, affected units may choose one or more strategies, including installing air pollution control technologies, changing or limiting operations, changing fuels or obtaining additional allowances. At this time, we do not expect that we will incur material expenditures
to continue complying with the SO2 program. Our current analysis leads us to believe that the potential costs for purchasing additional NOx allowances will also not be material through December 31, 2002. In 2003, when the NOx cap is reduced, the cost of complying with the cap may increase significantly. Whether the cost will increase or decrease will depend upon whether we will be a net purchaser or seller of NOx allowances. The extent of any increase or decrease will depend upon a number of factors that may increase or decrease total NOx emissions from affected units, thus increasing or decreasing demand for a fixed supply of allowances. We have been implementing measures to reduce NOx emissions at several of our units, which will reduce the cost of purchasing allowances.
In 1998, EPA issued regulations (commonly known as the "SIP Call") requiring the 22 states in the eastern half of the United States to make significant NOx emission reductions by 2003 and to subsequently cap these emissions. The NOx reduction requirements are consistent with requirements already in place in New Jersey, New York and Pennsylvania and thus are not likely to have an additional impact on nor change the capacity available from our facilities. On March 3, 2000, a federal court upheld nearly all of the provisions of the SIP Call, regulations.
In December 1999, the EPA proposed to approve plans by several states (including New Jersey and certain other Northern states) to attain the ozone National Ambient Air Quality Standards. That approval is contingent on these states implementing new programs to further reduce emissions of smog-forming chemicals (including NOx). The affected Northeastern states have committed to make these reductions, and by October 1, 2001, must select measures that could affect the operation of our electric generation units and other generation-related equipment. Measures currently under consideration may increase demand for NOx allowances and, thus, increase their prices.
EPA adopted a new air quality standard in 1997 for fine particulate matter. To attain the fine particulate matter standard, states may require further reductions in NOx and SO2. However, under the time schedule announced by EPA when the new standard was adopted, non-attainment areas will not be designated until 2002 and control measures to meet this standard will not be identified until 2005. The timing of these actions is uncertain due to a federal court decision that overturned the new standard. That decision was appealed to the United States Supreme Court, which, in a recent decision, upheld the EPA's new standards for fine particulate matter. Additionally, similar NOx and SO2 reductions may be required to satisfy requirements of an EPA rule protecting visibility in 156 of the nation's scenic areas, including some areas near our facilities.
Under the CAA, states must require each major facility to obtain a facility-wide operating permit. Operating permits for certain of our facilities may require changes to facility operations or technology, installation of additional air pollution controls and performance of supplemental emissions monitoring. Capital costs of complying with these and other air pollution control requirements through 2004 are included in our estimate of construction expenditures (see Capital Requirements of MD&A).
In November 1999, the federal government announced the filing of lawsuits by several states against seven companies operating power plants in the Midwest and Southeast, charging that 32 coal-fired plants in ten states violated the Prevention of Significant Deterioration ("PSD")/New Source Review requirements of the CAA. Generally, these regulations require major sources of certain air pollutants to obtain permits, install pollution control technology and obtain offsets in some circumstances when those sources undergo a "major modification," as defined in the regulations. Various environmental and public interest organizations have given notice of their intent to file similar lawsuits. The Federal government is seeking to order these companies to install the best available air pollution control technology at the affected plants and to pay monetary penalties of up to $27,500 for each day of continued violation.
The EPA and NJDEP issued a demand in March 2000 under section 114 of the CAA requiring information to assess whether projects completed since 1978 at the Hudson and Mercer coal burning units were implemented in accordance with applicable PSD/New Source Review regulations. We completed our response to the section 114 information request in November 2000. Based upon the information provided to the EPA it is likely that the EPA will seek to enforce the requirements of the New Source Review program at Hudson 2 and Mercer 1 and 2. We are currently in discussions with the EPA and NJDEP to resolve the matter. However, it is uncertain whether these discussions will be successful and capital costs of compliance could approximate $300 million.
Subsequent to December 31, 2000, EPA indicated that it is considering enforcement action under its PSD rules relating to the construction that is currently in progress for Bergen 2, scheduled for operation in 2002. EPA maintained that PSD requirements are applicable to Bergen 2, thereby requiring us to obtain a permit prior to the commencement of construction. To obtain such a permit, an applicant must demonstrate that the addition of the additional emission source will not cause significant deterioration of the air shed in the vicinity of the plant. The time required to obtain such a permit is estimated at 6-12 months. We vigorously dispute that PSD requirements are applicable to Bergen 2, and we are continuing construction. NJDEP has informally indicated it agrees with our position, but has also advised that the ultimate authority to decide PSD applicability resides with EPA. Discussions to resolve this matter are underway with EPA and NJDEP. At June 30, 2001, we had expended approximately $179 million in the construction of Bergen 2.
Water Pollution Control. The Federal Water Pollution Control Act ("FWPCA") authorizes the imposition of technology and water-quality based effluent limitations to regulate the discharge of pollutants into surface waters through the issuance of National Pollutant Discharge Elimination System ("NPDES") permits. The New Jersey Water Pollution Control Act ("NJWPCA") and implementing regulations were adopted to regulate discharges to New Jersey's surface waters and ground waters through the New Jersey Pollutant Discharge Elimination System ("NJPDES") permits. EPA has delegated to New Jersey authority to administer the NPDES program through the NJWPCA and to implement regulations with EPA oversight. The NJDEP administers the NPDES/NJPDES permit program. Certain of our facilities are directly regulated by NJPDES permits issued by NJDEP pursuant to FWPCA and the NJWPCA. In addition, Pennsylvania also has a state PDES program that impacts the operation of our jointly owned Keystone and Conemaugh plants.
The NJPDES permit renewal application for our Hudson Station, is in the process of being reviewed by the NJDEP. As part of that renewal, the NJDEP has requested updated information in part, to address issues identified by a consultant hired by NJDEP. The consultant recommended that Hudson Station be retrofitted to operate with closed cycle cooling to address alleged adverse impacts associated with the thermal discharge and intake structure. We proposed certain modifications to the intake structure and submitted these demonstrations to NJDEP in the fourth quarter of 1998. While we believe that these demonstrations address the issues identified by the NJDEP's consultant and provide an adequate basis for favorable determinations under the FWPCA without the imposition of closed cycle cooling, it is impossible to predict the outcome of the agency's review at the present time. We presently estimate that the cost of retrofitting Hudson Station to operate with closed cycle cooling, if required, would be approximately $100 million. Such amount is not included in our estimate of construction expenditures (see Liquidity and Capital Resources of MD&A).
NJDEP has advised us that it is reviewing a renewal application for Mercer Station, and in connection with that renewal, will be reexamining the effects of Mercer Station's cooling water system pursuant to FWPCA. We are preparing updated demonstrations to the NJDEP. It is not possible to predict the outcome of such review.
On June 29, 2001, the NJDEP issued a renewal permit (the "2001 Permit")
for Salem, with an effective date of August 1, 2001, allowing for the continued
operation of Salem with its existing cooling water system. This 2001 Permit
renews Salem's variance from applicable thermal water quality standards under
Section 316(a) of the federal Clean Water Act ("CWA"), determines that the
existing intake structure represents best technology available under Section
316(b) of the CWA, requires that we continue to implement the wetlands
restoration and fish ladder programs established under the prior Permit and
imposes requirements for additional analyses of data and studies to determine if
other intake technologies are available for application at Salem that are
biologically effective. The 2001 Permit also requires us to install up to two
additional fish ladders in New Jersey and fund a $500,000 escrow account for the
construction of artificial reefs by NJDEP. The 2001 Permit expires on July 31,
2006.
We have also reached a settlement with the Delaware Department of Natural Resources and Environmental Control (the "DNREC") providing that we will fund additional habitat restoration and enhancement activities as well as fisheries monitoring and that we and DNREC will work cooperatively
on the finalization of other regulatory approvals required for implementation of the 2001 Permit. As part of this agreement, we deposited approximately $5.8 million into an escrow account to be used for future costs related to this settlement.
If the NJDEP or the EPA were to impose a requirement at Salem, Hudson, Mercer or any other of our generation stations that closed cycle cooling be implemented, or that material operating restrictions be imposed, the continued operation of the station would need to be reassessed. We believe that the current operations of our stations are in compliance with FWPCA and will vigorously pursue our applications to continue operations of our generation stations with present cooling water intake structures. The EPA, as a result of litigation by environmental groups, is conducting a rulemaking under the CWA that may result in the establishment of regulatory guidance on material issues with respect to permitting decisions, such as guidance on determinations of adverse environmental impacts and best technology available. The rulemaking may impact NJDEP determinations with respect to our pending permit renewal applications.
The Delaware River Basin Commission (the "DRBC") issued a Revised Docket for Salem in 1995 ("Revised Docket") approving a modification to the 1970 Salem Docket that approved the construction and operation of the station's cooling water system and the continued operation of the station's cooling water system for an additional five years. The Revised Docket provided that the authorization would expire September 27, 2000 absent review of the Docket on or before August 31, 1999 and renewal by the DRBC. We filed a preliminary information submission with DRBC during April 1999 and the DRBC commenced its review of the matter in the second quarter of 1999. The DRBC modified the Revised Docket to provide that it shall remain in effect until December 29, 2001 (six months after the NJDEP acts on our application for renewal of Salem's NJPDES Permit), or at a later date established by the DRBC. The matter is currently scheduled for consideration by DRBC on September 13, 2001. We cannot predict the timing or outcome of this matter.
While it is impossible to predict the timing and/or outcome of the review of these applications in respect of the Hudson, Mercer and Salem Generation Stations, an unfavorable determination could have a material adverse effect on PSEG's and our financial position, results of operations and net cash flows.
Control of Hazardous Substances. Certain Federal and state laws authorize the EPA and the NJDEP, among other agencies, to issue orders and bring enforcement actions to compel responsible parties to investigate and take remedial actions at any site that is determined to present an actual or potential threat to human health or the environment because of an actual or threatened release of one or more hazardous substances. Because of the nature of our business, various by-products and substances are or were produced or handled which contain constituents classified as hazardous. For a discussion of these hazardous waste issues, see Note 7. Commitments and Contingent Liabilities, of Notes to Consolidated Financial Statements.
Other liabilities associated with environmental remediation include natural resource damages. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") and the New Jersey Spill Compensation and Control Act ("Spill Act") authorize Federal and state trustees for natural resources to assess "damages" against persons who have discharged a hazardous substance, which discharge resulted in an "injury" to natural resources. Until recently, the state trustee in New Jersey, NJDEP, has not aggressively pursued natural resource damages. In 1997, the NJDEP adopted changes to the technical requirements for site remediation pursuant to the Spill Act. Among these changes was a new provision requiring all persons conducting remediation to characterize "injuries" to natural resources. Further, these changes required persons to address those injuries through restoration or damages. The New Jersey program is still developing and we cannot assess the magnitude of the potential impact of this regulatory change. Although currently not estimable, costs associated with these requirements could be material.
A preliminary review of possible mercury contamination at the Kearny Station, concluded that an additional study and investigations are required. In 1996, we entered into an agreement with NJDEP for the Kearny Station that required a Remedial Investigation ("RI") of the site to be conducted. An RI
Report was submitted to the NJDEP in September 1997 and is currently under its technical review. As currently issued, the RI Report found that the mercury at the site is stable and immobile and should be addressed at the time the Kearny Station is retired.
The EPA has determined that a six mile stretch of the Passaic River in Newark, New Jersey is a "facility" within the meaning of that term under the CERCLA and that, to date, at least thirteen corporations, including PSE&G and us, may be potentially liable for performing required remedial actions to address potential environmental pollution at the Passaic River "facility." Our Essex Station is within the Passaic River "facility". We cannot predict what action, if any, the EPA or any third party may take against us with respect to these matters, or in such event, what costs we may incur to address any such claims. However, such costs may be material.
The EPA conducted an inspection of Spill Prevention Control and Countermeasure ("SPCC") Plan compliance at three of our electric generation facilities in 1997. The EPA identified certain procedural and substantive deficiencies in the SPCC Plans for these sites. We have submitted revised SPCC Plans to the EPA for these sites and are currently working with the EPA to finalize these SPCC Plans. In 1998, we evaluated SPCC Plan compliance at all of our electric generation facilities and identified deficiencies. The necessary upgrades are now in progress of being made. It is anticipated that these upgrades will take several years to complete.
Nuclear Fuel Disposal. After spent fuel is removed from a nuclear reactor, it is placed in temporary storage for cooling in a spent fuel pool at the nuclear station site. Under the Nuclear Waste Policy Act of 1982 ("NWPA"), as amended, the Federal government has entered into contracts with the operators of nuclear power plants for transportation and ultimate disposal of the spent fuel and the nuclear plant operators were required to contribute to a Nuclear Waste Fund at a rate of one mil per kWh of nuclear generation, subject to such escalation as may be required to assure full cost recovery by the Federal government. These costs are being recovered through the BGS contract. In addition, a one-time payment was made to the DOE for permanently discharged spent fuels irradiated prior to 1983. Payments made to the DOE for disposal costs are based on nuclear generation and are included in Energy Costs in the Consolidated Statements of Income.
Under the NWPA, DOE was required to begin taking possession of all spent nuclear fuel generated by Power's nuclear units for disposal by no later than 1998. DOE construction of a permanent disposal facility has not begun and DOE has announced that it does not expect a facility to be available earlier than 2010. Exelon has advised us that it had signed an agreement with the DOE applicable to Peach Bottom under which Exelon would be reimbursed for costs resulting from the DOE's delay in accepting spent nuclear fuel. The agreement allows Exelon to reduce the charges paid to the Nuclear Waste Fund to reflect costs reasonably incurred due to the DOE's delay. Past and future expenditures associated with Peach Bottom's recently completed on-site dry storage facility would be eligible for this reduction in future DOE fees. On November 22, 2000 a group of eight nuclear plant operators filed a petition against DOE in the Eleventh Circuit U.S. Court of Appeals seeking to set aside the receipt of credits out of the Nuclear Waste Fund, as stipulated in the Peach Bottom agreement. No assurances can be given as to any damage recovery or the ultimate availability of a disposal facility.
Pursuant to NRC rules, spent nuclear fuel generated in any reactor can be stored in reactor facility storage pools or in independent spent fuel storage installations located at reactor or away-from-reactor sites for at least 30 years beyond the licensed life for reactor operation (which may include the term of a revised or renewed license). The availability of adequate spent fuel storage capacity is estimated through 2011 for Salem 1, 2015 for Salem 2 and 2007 for Hope Creek. We presently expect to construct an on-site storage facility that would satisfy the spent fuel storage needs of both Salem and Hope Creek. This construction will require certain regulatory approvals, the timely receipt of which cannot be assured. Exelon has advised us that it has constructed an on-site dry storage facility at Peach Bottom that is now licensed and operational and can provide storage capacity through the end of the current licenses for the two Peach Bottom units.
Low Level Radioactive Waste ("LLRW"). As a by-product of their operations, nuclear generation units produce LLRW. Such wastes include paper, plastics, protective clothing, water purification materials and other materials. LLRW materials are accumulated on site and disposed of at licensed
permanent disposal facilities. On July 1, 2000, New Jersey, Connecticut and South Carolina formed the Atlantic Compact. This arrangement gives New Jersey nuclear generators, including us, continued access to the Barnwell LLRW disposal facility which is owned by South Carolina. We believe that the formation of the Atlantic Compact will provide for adequate LLRW disposal for Salem and Hope Creek through the end of their current licenses, although no assurances can be given. Both we and Exelon have on-site LLRW storage facilities for Peach Bottom, Salem and Hope Creek which have the capacity for at least five years of temporary storage for each facility.
MANAGEMENT
PSEG is the sole member of our limited liability company and, as such, has the power to control the election of our board of directors and all other matters submitted for member approval and has control over our management and affairs. Currently, all of our directors are officers and employees of or consultants to PSEG or one of its subsidiaries.
Our executive officers and members of our board of directors and their ages as of June 30, 2001 are as follows:
Name Age Position
----- --- -------
Executive Officers
E. James Ferland 59 Chairman of the Board and Chief Executive
Officer
Frank Cassidy 54 President, Chief Operating Officer and Director
Thomas R. Smith 41 Executive Vice President-- Operations and
Development
Harold W. Keiser 58 President and Chief Nuclear Officer of Nuclear
Steven R. Teitelman 53 President of ER&T
Elbert C. Simpson 52 Senior Vice President-- Chief Administrative
Officer of Nuclear
Harold W. Borden, Jr. 57 Vice President and General Counsel
Patricia A. Rado 59 Vice President and Controller
Morton A. Plawner 54 Vice President and Treasurer
Directors
Robert E. Busch 54 President, PSEG Services Corporation
Robert J. Dougherty, Jr. 49 President, PSEG Energy Holdings Inc.
Robert C. Murray 55 Consultant-- PSEG
Thomas M. O'Flynn 41 Executive Vice President and Chief Financial
Officer-- PSEG
R. Edwin Selover 55 Vice President and General Counsel-- PSEG
Michael J. Thomson 42 President, PSEG Global Inc.
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Mr. Ferland has been Chairman of the Board and Chief Executive Officer of Power since its formation. He has been Chairman of the Board, President and Chief Executive Officer of Public Service Enterprise Group Incorporated since July 1986, Chairman of the Board and Chief Executive Officer of PSEG Energy Holdings Inc. since June 1989 and Chairman of the Board and Chief Executive Officer of Public Service Electric and Gas Company since September 1991.
Mr. Cassidy has been President, Chief Operating Officer and a director of Power since its formation. He is also a member of the board of directors of Fossil, Nuclear and ER&T. He served as President and Chief Operating Officer of PSEG Energy Technologies Inc. from November 1996 to July 1999. Mr. Cassidy was Senior Vice President -- Fossil Generation of Public Service Electric and Gas Company from February 1995 to November 1996 and Vice President -- Transmission Systems of Public Service Electric and Gas Company from November 1989 to February 1995.
Mr. Smith has been Executive Vice President -- Operations and Development of Power since October 2000. He also serves as President of Fossil and is a member of the board of directors of Fossil, Nuclear and ER&T. He had been Executive Vice President and Chief Operating Officer of PSEG Global Inc. from January 2000. Prior to that, he was President of PSEG Americas, a subsidiary of Global, from November 1996. Before that, he was Senior Vice President and Regional Executive for Latin America for the International Generating Company.
Mr. Keiser has been President and Chief Nuclear Officer and a director of PSEG Nuclear LLC since its formation. He is also a member of the board of directors of Fossil and ER&T. He was Chief Nuclear Officer and President -- Nuclear Business Unit of Public Service Electric and Gas Company from May 1998 to July 1999. Prior to that time, he was Executive Vice President of the Nuclear Business Unit of Public Service Electric and Gas Company. From October 1997 to January 1998, he was a private consultant to the electric industry. From March 1996 to October 1997, Mr. Keiser was Vice President and Chief Nuclear Operating Officer of Commonwealth Edison Company. From December 1995 to March 1996, he was Vice President, Pressurized Water Reactor of Commonwealth Edison Company. From April 1993 to December 1995, Mr. Keiser was Executive Vice President and Chief Operating Officer of Entergy Operations Incorporated.
Mr. Teitelman has been President and a director of ER&T since its formation. He is also a member of the board of directors of Fossil and Nuclear. He had been Vice President -- Energy Resources and Trade of Public Service Electric and Gas Company from September 1997 to July 1999. From 1993 to 1997, Mr. Teitelman was the President of Penn Resources Inc., an energy consulting and project development company. From 1987 to 1993, he was the President of Penn International Trading Co., a subsidiary of Marubeni Corporation. Penn Trading was an international petroleum products trading company and a clearing member of the New York Mercantile Exchange.
Mr. Simpson has been Senior Vice President -- Chief Administrative Officer of PSEG Nuclear LLC since its formation. Mr. Simpson was Senior Vice President -- Nuclear Engineering of Public Service Electric and Gas Company from June 1995 to July 1999. From 1993 to 1995, Mr. Simpson was Vice President of Nuclear Support for Arizona Public Service Company, which operates the three unit Palo Verde Nuclear Generating Station. From 1990 to 1993, he was Vice President of Nuclear Engineering for all three Palo Verde Units.
Mr. Borden has been Vice President and General Counsel of Power since its formation and is also General Counsel of Fossil, Nuclear and ER&T. Mr. Borden had been Vice President -- Law of Public Service Electric and Gas Company from April 1995 to July 1999.
Ms. Rado has been Vice President and Controller of Power since its formation. She is also Controller of Fossil, Nuclear and ER&T. Ms. Rado has been Vice President and Controller of Public Service Enterprise Group and Public Service Electric and Gas Company since April 1993.
Mr. Plawner has been Vice President and Treasurer of Power since its formation. He is also Treasurer of Fossil, Nuclear and ER&T. Mr. Plawner has been Treasurer of Public Service Enterprise Group and Vice President and Treasurer of Public Service Electric and Gas Company since January 1, 1998. Prior to that, Mr. Plawner had been General Manager -- Property and Risk Management of Public Service Electric and Gas Company since 1994 and Risk Manager since 1989.
Mr. Busch has been a director of Power since December 2000. He has been President of PSEG Services Corporation since April 2001 and Senior Vice President and Chief Financial Officer of Public Service Electric and Gas Company since March 1998. From 1997, he was the National Director of the Hay Group Utility Consulting Practice. From 1996 to 1997, he was a Senior Consultant for Cambridge Energy Research Associates. Prior to that time, he was President of the Energy Resources Group of Northeast Utilities.
Mr. Dougherty has been a director of Power since its formation. He has been President and Chief Operating Officer of PSEG Energy Holdings Inc. since January 1997. Prior to that, Mr. Dougherty was president of Enterprise Ventures and Services Corporation.
Mr. Murray has been a director of Power since its formation. He is a consultant to Public Service Enterprise Group Incorporated and had been Vice President and Chief Financial Officer of Public Service Enterprise Group Incorporated from January 1992 through June 2001. Mr. Murray was Executive Vice President -- Finance of Public Service Electric and Gas Company from June 1997 to June 2000. Mr. Murray was Senior Vice President and Chief Financial Officer of Public Service Electric and Gas Company from January 1992 to June 1997.
Mr. O'Flynn has been a director of Power since July 2001. He has been Executive Vice President Finance and Chief Financial Officer of Public Service Enterprise Group Incorporated since July 1, 2001. From December 1997 to May 2001, Mr. O'Flynn was a Managing Director of Morgan Stanley's Global Power and Utility Investment Banking Division Group. From January 1994 through December 1997, he was a Principal of Morgan Stanley's Global Power and Utility Investment Banking Division Group.
Mr. Selover has been a director of Power since its formation. He has been Vice President and General Counsel of Public Service Enterprise Group since April 1988. Mr. Selover has also been Senior Vice President and General Counsel of Public Service Electric and Gas Company since January 1988.
Mr. Thomson has been a director of Power since January 2000. He has been President and Chief Executive Officer of PSEG Global Inc. since January 1997. Prior to that time he was Senior Vice President, from July 1993, and Chief Operating Officer, from February 1994, of PSEG Global Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transfer of Assets
Pursuant to the BPU Final Order in the Energy Master Plan Proceedings (see "Business -- Regulation -- Energy Regulatory Matters -- State Laws and Regulations -- New Jersey Energy Master Plan Proceedings and Related Orders"), we acquired all of PSE&G's existing generation related assets. We acquired all land (except that Nuclear acquired the land associated with nuclear generation stations), as well as PSE&G's interests in the Merrill Creek reservoir facility. Such transfer was at full-value, consistent with the BPU's determination of PSE&G's recoverable stranded costs. Other generation-related assets, including materials, supplies, fuel and land, were transferred at book value.
PSE&G transferred to Fossil all of the fossil generation assets, equipment and associated assets (excluding land), including PSE&G's interests in those assets in which it has a partial ownership. In addition, PSE&G's interest in the Yards Creek pumped-storage facility was also transferred to Fossil.
All of PSE&G's nuclear generation assets, equipment and associated assets, including those assets in which PSE&G only has partial ownership, were transferred from PSE&G to Nuclear. In addition, all land associated with nuclear generation was transferred to Nuclear.
In December 2000, we purchased from Global two Midwest generation projects with a combined projected generation capacity of 2,000 MW.
Power Purchase Agreements
Fossil, Nuclear, ER&T and PSE&G are parties to several wholesale contracts that govern the transactions between and among them. Power Purchase Agreements ("PPAs") between ER&T and each of Fossil and Nuclear stipulate that ER&T will purchase all capacity and energy from their respective facilities. ER&T is our sole marketer of energy and energy services. ER&T purchases all of the capacity and energy from Fossil and Nuclear facilities and is responsible for marketing that power on a portfolio basis together with power that it may acquire in the open market. Fossil and Nuclear are responsible for supplying energy and ancillary services as arranged by ER&T. The pricing under these contracts is designed to provide for the recovery of Fossil's and Nuclear's respective operating costs. ER&T reimburses Fossil and Nuclear for all costs incurred in operating and maintaining the generation units. ER&T also arranges for acquisition of the fuel supply for Fossil's plants. In addition, ER&T is obligated through the BGS Contract with PSE&G (see "Business -- Customers") to fully supply the requirements of PSE&G's aggregate retail load for a period of three years that began on July 31, 1999.
Services Agreement
Traditionally, the fossil, trading and nuclear business units of PSE&G relied on its corporate offices and other business units, such as transmission and distribution, to provide various services. Generally, transmission and distribution business units provided more technical services, while the corporate offices of PSE&G performed administrative and general functions, such as accounting and human resources. We continue to need many of these services and rely on our affiliates (PSE&G and Services) to provide them in accordance with Affiliate Standards and FERC requirements (See "-- Statement of Policy & Code of Conduct" below).
We have signed a service agreement with our affiliate, Services, for administrative services. This contract generally articulates the terms upon which services are provided.
The interconnection agreements between PSE&G and Fossil and Nuclear serve as the foundation for services to be provided with respect to transmission and distribution.
Tax Sharing Agreement
We are a single member limited liability company, wholly-owned by PSEG. PSEG files a consolidated Federal income tax return with its affiliated companies. A tax allocation agreement exists between PSEG and us and between PSEG and each of our subsidiaries. The general operation of these agreements is that the subsidiary company will compute its taxable income on a stand-alone basis. If the result is a net tax liability, such amount shall be paid to PSEG. If there are net operating losses and/or tax credits, the subsidiary shall receive payment for the tax savings from PSEG to the extent that PSEG is able to utilize those benefits.
Statement of Policy & Code of Conduct
We abide by the standards imposed by FERC Order 889 governing the relationship and transactions between wholesale power marketers and their affiliate transmission organizations. These standards of conduct were developed to ensure that trading and transmission organizations function as entirely separate business units. Prior to our formation, the standards applied to PSE&G's trading and transmission departments. Our relationship with PSE&G's transmission organization is subject to the same standards.
In addition, we and PSE&G have agreed to a standard of conduct as part of FERC's approval under the FPA Sections 203 and 205. Such standards provide that employees will operate separately and that all market information shared between employees will be simultaneously disclosed to the public. In addition, the standards provide that the price of all sales of non-power goods and services by PSE&G to us will be at the higher of cost or market price and that such sales by us to PSE&G will be at market price or below.
The BPU has adopted standards governing the relationship between all regulated New Jersey electric and gas utilities, including PSE&G, and all of their respective affiliates providing competitive services to retail customers in New Jersey (see "Business -- Regulation -- Energy Regulatory Matters -- State Laws and Regulations -- New Jersey Energy Master Plan and Related Orders.")
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the original notes, we and the subsidiary guarantors entered into a registration rights agreement with the initial purchasers. Under the registration rights agreement, we agreed to use our reasonable best efforts to complete the exchange offer and to file and cause to become effective with the SEC a registration statement for the exchange of the original notes for exchange notes.
The terms of the exchange notes of each series are the same as the terms of the corresponding series of original notes except that the exchange notes have been registered under the Securities Act and will not be subject to some restrictions on transfer that apply to the original notes. In that regard, the original notes provide, among other things, that if the exchange offer has not been consummated within the period specified in the original notes, the interest rate on the original notes will increase by 0.50% per annum, until the exchange offer is consummated.
Upon completion of the exchange offer, holders of original notes will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. See "Risk Factors -- Consequences of failure to exchange original notes" and "Description of the Exchange Notes". The exchange offer is not being made to holders of original notes in any jurisdiction in which the exchange offer or the acceptance of the notes would not comply with securities or blue sky laws. Unless the context requires otherwise, the term "holder" with respect to the exchange offer means any person who has obtained a properly completed bond power from the registered holder, or any person whose original notes are held of record by The Depository Trust Company (DTC) who desires to deliver such original notes by book-entry transfer at DTC. We will exchange as soon as practicable after the expiration date of the exchange offer the original notes for a like aggregate principal amount of the exchange notes of each series.
Completion of the exchange offer is subject to the conditions that the exchange offer not violate any applicable law or interpretation of the staff of the Division of Corporate Finance of the SEC and that no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer. The exchange offer is also subject to various procedural requirements discussed below with which holders must comply. We reserve the right, in our absolute discretion, to waive compliance with these requirements subject to applicable law.
Terms of the Exchange Offer
We are offering, upon the terms and subject to the conditions described in this prospectus and in the accompanying letter of transmittal, to exchange up to $1,800,000,000 aggregate principal amount of exchange notes in three series for a like aggregate principal amount of original notes of the same series properly tendered on or before the expiration date of the exchange offer and not properly withdrawn in accordance with the procedures described below. We will issue, promptly after the expiration date of the exchange offer, an aggregate principal amount of up to $1,800,000,000 of exchange notes in exchange for a like principal amount of outstanding original notes of the same series tendered and accepted in connection with the exchange offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. See "-- Fees and Expenses".
Holders may tender their original notes in whole or in part in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof. The exchange offer is not conditioned upon any minimum principal amount of original notes being tendered. As of the date of this prospectus, $1,800,000,000 aggregate principal amount of the original notes ($500,000,000 aggregate principal amount of the 67/8% Senior Notes due 2006, $800,000,000 aggregate principal amount of the 73/4% Senior Notes due 2011 and $500,000,000 aggregate principal amount of the 85/8% Senior Notes due 2031) is outstanding. (Holders of original notes do not have any appraisal or dissenters' rights in connection with the exchange offer. Original notes which are not tendered for or are tendered but not accepted in connection with the exchange offer will remain outstanding and be entitled to the benefits
of the indenture, but will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. See "Risk Factors -- Consequences of failure to exchange original notes" and "Description of the Exchange Notes". If any tendered original notes are not accepted for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, appropriate book-entry transfer will be made, without expense, to the tendering holder of the notes promptly after the expiration date of the exchange offer. Holders who tender original notes in connection with the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of original notes in connection with the exchange offer.
Neither we nor our Board of Directors make any recommendation to holders of original notes as to whether to tender or refrain from tendering all or any portion of their original notes in the exchange offer. In addition, no one has been authorized to make any recommendation as to whether holders should tender notes in the exchange offer. Holders of original notes must make their own decisions whether to tender original notes in the exchange offer and, if so, the aggregate amount of original notes to tender based on the holders' own financial positions and requirements.
Expiration Date; Extensions; Amendments
The term "expiration date" means 5:00 p.m., Eastern Time, on , 2001. However, if the exchange offer is extended by us, the term "expiration date" will mean the latest date and time to which we extend the exchange offer.
We expressly reserve the right in our sole and absolute discretion, subject to applicable law, at any time and from time to time:
o to delay the acceptance of the original notes for exchange,
o to extend the expiration date of the exchange offer and retain all original notes tendered in the exchange offer, subject, however, to the right of holders of original notes to withdraw their tendered original notes as described under "-- Withdrawal Rights", and
o to waive any condition or otherwise amend the terms of the exchange offer in any respect.
If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly
o disclose the amendment in a prospectus supplement that will be distributed to the registered holders of the original notes,
o we will file a post-effective amendment to the registration statement filed with the SEC with regard to the exchange notes and the exchange offer, and
o we will extend the exchange offer to the extent required by Rule 14e-1 under the Exchange Act.
We will promptly notify the exchange agent by making an oral or written public announcement of any delay in acceptance, extension, termination or amendment. This announcement in the case of an extension will be made no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled expiration date. Without limiting the manner in which we may choose to make any public announcement and, subject to applicable law, we will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, we will exchange and issue to the exchange agent, exchange notes for original notes of each series validly tendered and not withdrawn promptly after the expiration date. In all cases, delivery of exchange notes in exchange for original notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of:
- original notes or a book-entry confirmation of a book-entry transfer of original notes into the exchange agent's account at DTC, including an agent's message (as defined below) if the tendering holder has not delivered a letter of transmittal,
- the letter of transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees or (in the case of a book-entry transfer) an agent's message instead of the letter of transmittal, and
- any other documents required by the letter of transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of original notes into the exchange agent's account at DTC. The term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering DTC participant. This acknowledgment states that the participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against the participant.
Subject to the terms and conditions of the exchange offer, we will be deemed to have accepted for exchange, and therefore exchanged, original notes validly tendered and not withdrawn as, if and when we give oral or written notice to the exchange agent of our acceptance of such original notes for exchange pursuant to the exchange offer. The exchange agent will act as agent for us for the purpose of receiving tenders of original notes, letters of transmittal and related documents, and as agent for tendering holders for the purpose of receiving original notes, letters of transmittal and related documents and transmitting exchange notes to validly tendering holders. This exchange will be made promptly after the expiration date.
If, for any reason whatsoever, acceptance for exchange or the exchange of any tendered original notes is delayed, whether before or after our acceptance for exchange of original notes, or we extend the exchange offer or are unable to accept for exchange or exchange tendered original notes, then, without prejudice to the rights we have in the exchange offer, the exchange agent may, nevertheless, on our behalf and subject to Rule 14e-1(c) under the Exchange Act, retain tendered original notes. These original notes may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under "-- Withdrawal Rights".
Under the letter of transmittal or agent's message, a holder of original notes will warrant and agree that it has full power and authority to tender, exchange, sell, assign and transfer original notes, that we will acquire good, marketable and unencumbered title to the tendered original notes, free and clear of all liens, restrictions, charges and encumbrances, and the original notes tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by us or the exchange agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the original notes tendered in the exchange offer.
Procedures for Tendering Original Notes
Valid Tender. Except as indicated below, in order for original notes to be validly tendered in the exchange offer, an original copy or facsimile of a properly completed and duly executed letter of transmittal, with any required signature guarantees, or, in the case of a book-entry tender, an agent's message instead of the letter of transmittal, and any other required documents, must be received by the exchange agent at one of its addresses listed under "-- Exchange Agent". In addition, either:
- tendered original notes must be received by the exchange agent,
- the tender of original notes must follow the procedures for book-entry transfer described below and a book-entry confirmation, including an agent's message if the tendering holder has not delivered a letter of transmittal, must be received by the exchange agent, in each case on or before the expiration date, or
- the guaranteed delivery procedures described below must be complied with.
If less than all of the original notes of each series are tendered, a tendering holder should fill in the amount of original notes of such series being tendered in the appropriate box on the letter of transmittal. The entire amount of original notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated.
The method of delivery of certificates, the letter of transmittal and all other required documents is at the option and sole risk of the tendering holder. Delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, we recommend properly insured registered mail, return receipt requested, or an overnight delivery service. In all cases, you should allow sufficient time to ensure timely delivery.
Book-Entry Transfer. The exchange agent will establish an account with respect to the original notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of the original notes by causing DTC to transfer such Original Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of original notes may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an agent's message instead of the letter of transmittal, and any other required documents, must in any case be delivered to and received by the exchange agent at its address listed under "-- Exchange Agent" on or before the expiration date. Alternatively, the guaranteed delivery procedure described below must be complied with.
Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the exchange agent.
Signature Guarantees. Certificates for the original notes need not be endorsed and signature guarantees on the letter of transmittal are unnecessary unless
(1) a certificate for the original notes is registered in a name other than that of the person surrendering the certificate or (2) such holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the letter of transmittal. In the case of (1) or (2) above, the certificates for original notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the letter of transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein):
- a bank;
- a broker, dealer, municipal securities broker or dealer or government securities broker or dealer;
- a credit union;
- a national securities exchange, registered securities association or clearing agency; or
- a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of that Eligible Institution. See Instruction 1 to the letter of transmittal.
Guaranteed Delivery. If a holder desires to tender original notes in the exchange offer and the certificates for the original notes are not immediately available or time will not permit all required documents to reach the exchange agent on or before the expiration date, or the procedures for book-entry transfer cannot be completed on a timely basis, the original notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with:
(1) the tenders are made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the letter of transmittal, is received by the exchange agent, as provided below, on or before the expiration date; and
(3) the certificates (or a book-entry confirmation) representing all tendered original notes, in proper form for transfer, together with a properly completed and duly executed letter of transmittal (or facsimile thereof), with any required signature guarantees, or an agent's message instead of the letter of transmittal, and any other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail to the exchange agent and must include a guarantee by an Eligible Institution in the form shown in the notice. Regardless of any other provision in this prospectus, the delivery of exchange notes in exchange for original notes tendered and accepted for exchange in the exchange offer will in all cases be made only after timely receipt by the exchange agent of original notes of the corresponding series, or of a book-entry confirmation with respect to those original notes, and an original copy or facsimile of a properly completed and duly executed letter of transmittal, together with any required signature guarantees, or an agent's message instead of the letter of transmittal, and any other documents required by the letter of transmittal. Accordingly, the delivery of exchange notes might not be made to all tendering holders at the same time, and will depend upon when original notes, book-entry confirmations with respect to original notes and other required documents are received by the exchange agent. Our acceptance for exchange of original notes tendered under any of the procedures described above will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions of the exchange offer.
Determination of Validity. All questions as to the form of documents, validity, eligibility, including time of receipt, and acceptance for exchange of any tendered original notes will be determined by us, in our sole discretion. The interpretation by us of the terms and conditions of the exchange offer, including the letter of transmittal and the accompanying instructions, will be final and binding.
We reserve the absolute right, in our sole and absolute discretion, to reject any and all tenders determined by us not to be in proper form or the acceptance of which, or exchange for, may, in the opinion of our counsel, be unlawful. We also reserve the absolute right, subject to applicable law, to waive any condition or irregularity in any tender of original notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. No tender of original notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither we, any of our affiliates or assigns, the exchange agent nor any other person will be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any notification.
If any letter of transmittal, endorsement, bond power, power of attorney, or any other document required by the letter of transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should so indicate when signing, and unless waived by us, proper evidence satisfactory to us, in our sole discretion, of that person's authority must be submitted. A beneficial owner of original notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact that entity promptly if that beneficial holder wishes to participate in the exchange offer.
Resales of Exchange Notes
We are making the exchange offer for the exchange notes in reliance on the position of the staff of the Division of Corporation Finance of the SEC as defined in certain interpretive letters addressed to third parties in other transactions. However, we did not seek our own interpretive letter and we cannot assure that the staff of the Division of Corporation Finance of the SEC would make a similar determination with respect to the exchange offer as it has in other interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance of the SEC, and subject to the two immediately following sentences, we believe that exchange notes issued pursuant to this exchange offer in exchange for original notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such
exchange notes are acquired in the ordinary course of the holder's business and that the holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of the exchange notes.
However, any holder of original notes who is an "affiliate" of ours or who intends to participate in the exchange offer for the purpose of distributing exchange notes, or any broker-dealer who purchased original notes from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act,
(a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the SEC defined in the above-mentioned interpretive letters,
(b) will not be permitted or entitled to tender such original notes in the exchange offer and
(c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such original notes unless such sale is made pursuant to an exemption from such requirements.
In addition, as described below, if any broker-dealer holds original notes acquired for its own account as a result of market-making or other trading activities and exchanges those original notes for exchange notes, then that broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of those exchange notes. Each holder of original notes who wishes to exchange original notes for exchange notes in the exchange offer will be required to represent that:
- it is not an "affiliate" of ours,
- any exchange notes to be received by it are being acquired in the ordinary course of its business,
- it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such exchange notes, and
- if the tendering holder is not a broker-dealer, that holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of its exchange notes.
In addition, we may require the holder, as a condition to that holder's eligibility to participate in the exchange offer, to furnish to us (or an agent of ours) in writing, information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom that holder holds the original notes to be exchanged in the exchange offer.
Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it acquired the original notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of those exchange notes. The letter of transmittal states that by making that acknowledgement and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the SEC in the interpretive letters referred to above, we believe that participating broker-dealers who acquired original notes for their own accounts as a result of market-making activities or other trading activities may fulfill their prospectus delivery requirements with respect to the exchange notes received upon exchange of original notes (other than original notes which represent an unsold allotment from the initial sale of the original notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for this exchange offer so long as it contains a description of the plan of distribution regarding the resale of the exchange notes.
Accordingly, this prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes received in exchange for original notes where the original notes were acquired by the participating broker-dealer for its own account as a result of market-making or other trading activities. See "Plan of Distribution". Subject to certain provisions contained in the registration rights agreement, we have agreed that this prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes for a period not exceeding 90 days after the expiration date. However, a participating
broker-dealer who intends to use this prospectus in connection with the resale of exchange notes received in exchange for original notes pursuant to the exchange offer must notify us on or before the expiration date that it is a participating broker-dealer. This notice may be given in the space provided for that purpose in the letter of transmittal or may be delivered to the exchange agent at one of the addresses set forth herein under "-- Exchange Agent".
Any participating broker-dealer who is an "affiliate" of ours may not rely on these interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each participating broker-dealer who surrenders original notes in the exchange offer will be deemed to have agreed, by execution of the letter of transmittal or an agent's message, that upon receipt of notice from us of the occurrence of any event or the discovery of:
(1) any fact which makes any statement contained or incorporated by reference in this prospectus untrue in any material respect or
(2) any fact which causes this prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference in this prospectus, in light of the circumstances under which they were made, not misleading, or
(3) the occurrence of other events specified in the registration rights agreement,
that participating broker-dealer will suspend the sale of exchange notes under this prospectus until we have amended or supplemented this prospectus to correct the misstatement or omission and have furnished copies of the amended or supplemented prospectus to the participating broker-dealer, or we have given notice that the sale of the exchange notes may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided in this prospectus, tenders of original notes may be withdrawn at any time on or before the expiration date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of the notice of withdrawal must be timely received by the exchange agent at its address listed under "-- Exchange Agent" on or before the expiration date. Any notice of withdrawal must specify the name of the person who tendered the original notes to be withdrawn, the aggregate principal amount and series of original notes to be withdrawn, and, if certificates for the original notes have been tendered, the name of the registered holder of the original notes, if different from that of the person who tendered the original notes.
If original notes have been delivered or otherwise identified to the exchange agent, then before the physical release of the original notes, the tendering holder must submit the serial numbers shown on the particular original notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of original notes tendered for the account of an Eligible Institution. For original notes tendered under the procedures for book-entry transfer described in "-- Procedures for Tendering Original Notes", the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of original notes, in which case a notice of withdrawal will be effective if delivered to the exchange agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of original notes may not be rescinded. Original notes properly withdrawn will not be deemed validly tendered for purposes of the exchange offer, but may be retendered at any subsequent time on or before the expiration date by following any of the procedures described above under "-- Procedures for Tendering Original Notes". All questions as to the validity, form and eligibility, including time of receipt, of withdrawal notices will be determined by us, in our sole discretion, whose determination shall be final and binding on all parties. Neither we, the subsidiary guarantors, the exchange agent nor any other person is under any duty to give any notification of any irregularities in any notice of withdrawal nor will those parties incur any liability for failure to give that notice. Any original notes which have been tendered but which are withdrawn will be returned to the holder promptly after withdrawal.
Interest on Exchange Notes
Interest on the 67/8% Senior Notes due 2006 will accrue at the rate of 67/8% per annum and will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001. Interest on the 73/4% Senior Notes due 2011 will accrue at the rate of 73/4% per annum and will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001. Interest on the 85/8% Senior Notes due 2031 will accrue at the rate of 85/8% per annum and will be payable semi-annually in arrears on April 15 and October 15 of each year (each an "Interest Payment Date" for each series) commencing October 15, 2001. We will make each interest payment to the persons in whose names the exchange notes are registered at the close of business on the 15th day immediately preceding the applicable Interest Payment Date. The exchange notes will bear interest from and including the last interest payment date on the original notes, or if one has not yet occurred, the date of issuance of the original notes. Accordingly, holders of original notes that are accepted for exchange will not receive accrued but unpaid interest on original notes at the time of tender. Rather, that interest will be payable on the exchange notes delivered in exchange for the original notes on the first interest payment date after the expiration date.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the original notes for which they are exchanged, which is the aggregate principal amount of the original notes, as reflected in our accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the exchange offer. The cost of the exchange offer will be amortized over the term of the exchange notes.
Exchange Agent
The Bank of New York has been appointed as exchange agent for the exchange offer. Delivery of the letters of transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this prospectus or of the letters of transmittal should be directed to the exchange agent as follows:
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street, 7 East
New York, NY 10286
Attention: William Buckley
Reorganization Section
By Hand or Overnight Delivery Service:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, NY 10286
Attention: William Buckley
Reorganization Section
By Facsimile Transmission (for Eligible Institutions only):
(212) 815-6339
Confirm by Telephone:
or (212) 815-5788
Delivery to other than the above addresses or facsimile number will not constitute a valid delivery.
Fees and Expenses
We have agreed to pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses. We will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus and related documents to the beneficial owners of original notes, and in handling or tendering for their customers. Holders who tender their original notes for exchange will not be obligated to pay any transfer taxes in connection with the transfer. If, however, exchange notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the original notes tendered, or if a transfer tax is imposed for any reason other than the exchange of original notes in connection with the exchange offer, then the amount of any such transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. We will not make any payment to brokers, dealers or other nominees soliciting acceptances of the exchange offer.
DESCRIPTION OF THE EXCHANGE NOTES
General
We issued the original notes and will issue each series of the exchange notes under the indenture dated as of April 16, 2001 (the "indenture") between and among us, the Subsidiary Guarantors and The Bank of New York, as trustee (the "trustee"). The terms of the exchange notes are stated in the indenture and include terms made part of the indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). You should refer to the indenture and the Trust Indenture Act for a statement of these terms. The indenture is governed by New York law. As used herein, "Senior Notes" means original notes and/or exchange notes as the context requires.
The following summary of selected provisions of the indenture and the registration rights agreement referred to below under "Registration Rights; Additional Interest" is not complete. We recommend that you read the indenture and the registration rights agreement, copies of which may be obtained from the trustee. You can find the definitions of certain capitalized terms used in the following summary under the subheading "-- Definitions."
Each series of the exchange notes will be our senior unsecured obligations. They will rank equally in right of payment to all of our existing and future senior unsecured indebtedness. Upon completion of the exchange, we will have approximately $1,800,000,000 of senior indebtedness outstanding. The exchange notes will rank junior to secured indebtedness to the extent of related collateral. We currently do not have any outstanding secured indebtedness.
Each series of the exchange notes will be guaranteed, jointly and severally, by the Subsidiary Guarantors as described below. The Subsidiary Guaranties will rank equally in right of payment to all existing and future senior unsecured indebtedness of the Subsidiary Guarantors. Other than intercompany debt, the Subsidiary Guarantors currently have no indebtedness outstanding.
Principal, Maturity and Interest
The indenture does not limit the aggregate principal amount of debt securities that we may issue under it and provides that debt securities may be issued under it up to the principal amount as we may authorize from time to time. The debt securities may be issued from time to time in one or more series. We may "reopen" any series of debt securities, including the 67/8% Senior Notes due 2006, the 73/4% Senior Notes due 2011 and the 85/8% Senior Notes due 2031, and issue additional debt securities of that series.
The 67/8% Senior Notes due 2006 were initially limited to $500,000,000, the 73/4% Senior Notes due 2011 were initially limited to $800,000,000 and the 85/8% Senior Notes due 2031 were initially limited to $500,000,000. Each of these series of Senior Notes were issued in registered form only, without coupons, in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof. The 67/8% Senior Notes due 2006 will mature at par on April 15, 2006 (the "67/8% Senior Note Stated
Maturity Date"), the 73/4% Senior Notes due 2011 will mature at par on April 15, 2011 (the "73/4% Senior Note Stated Maturity Date") and the 85/8% Senior Notes due 2031 will mature at par on April 15, 2031 (the "85/8% Senior Note Stated Maturity Date") unless we redeem them in accordance with their terms prior to such date.
Interest on the 67/8% Senior Notes due 2006 accrues at the rate of 67/8% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001. Interest on the 73/4% Senior Notes due 2011 accrues at the rate of 73/4% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001. Interest on the 85/8% Senior Notes due 2031 accrues at the rate of 85/8% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year (each, an "Interest Payment Date" for each series) commencing October 15, 2001. We will make each interest payment to the persons in whose names the Senior Notes are registered at the close of business on the 15th day immediately preceding the applicable Interest Payment Date.
Interest on the exchange notes will accrue from the date of original issuance or, if interest has already been paid, from the most recent Interest Payment Date to which interest was paid or duly provided for. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
If any Interest Payment Date or the Stated Maturity Date or date of earlier redemption is not a Business Day, the required payment shall be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of the payment subject to delay, with the same force and effect as if made on the Interest Payment Date or Stated Maturity Date or date of earlier redemption.
Payment and Paying Agents
Interest on the exchange notes will be payable at any office or agency that we maintain for such purpose in West Paterson, New Jersey, The City of New York and, for so long as any of the exchange notes are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, in Luxembourg. At our option, however, interest may be paid (i) by check mailed to the address of the person entitled to the interest payment at the address that appears in the "security register" that we maintain for such purpose or (ii) by wire transfer to an account maintained by the person entitled to the interest payment as specified in the security register subject to the provisions described under "-- Book Entry; Delivery and Form". (Sections 301, 1001 and 1002 of the indenture.)
Transfer and Exchange
Under the indenture, debt securities of any series, including each series
of the exchange notes, may be presented for registration of transfer and may be
presented for exchange (i) at each office or agency that we are required to
maintain for payment of such series as described in "-- Payment and Paying
Agents," above and (ii) at each other office or agency that we may designate
from time to time for such purposes. No service charge will be made for any
transfer or exchange of debt securities, including each series of the exchange
notes, but we may require payment of any tax or other governmental charge
payable in connection with the transfer or exchange.
(Section 305 of the indenture.)
The indenture does not require us to (i) issue, register the transfer of or exchange debt securities during a period beginning at the opening of business 15 days before any selection of debt securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any debt security in registered form, or portion thereof, called for redemption, except the unredeemed portion of any debt security in registered form being redeemed in part; or (iii) issue, register the transfer of or exchange any debt security which has been surrendered for repayment at the option of the holder, except the portion, if any, of such debt security not to be so repaid. (Section 305 of the indenture.)
The registered holder of an exchange note of any series will be treated as its owner for all purposes.
Mandatory Redemption
We will not be required to make mandatory redemption or sinking fund payments with respect to any series of the exchange notes.
Optional Redemption
We may redeem each series of the exchange notes at any time, in whole or in part, upon not less than 30 nor more than 60 days' prior written notice, as more fully described under "-- Selection and Notice" below, at a price equal to the greater of:
(a) 100 percent of the principal amount of the exchange notes being redeemed, or
(b) as determined by the calculation agent, the sum of the present values of the remaining scheduled payments of principal and interest on the exchange notes being redeemed not including any portion of such payment of interest accrued on the date of redemption, from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 30 basis points for the 67/8% Senior Notes due 2006, at the treasury rate plus 35 basis points for the 73/4% Senior Notes due 2011 and at the treasury rate plus 40 basis points for the 85/8% Senior Notes due 2031.
plus any accrued and unpaid interest to the date of redemption and liquidated damages, if any, and additional amounts, if any.
"Treasury rate" means, with respect to any redemption date for any of the notes being redeemed:
(a) the yield for the maturity corresponding to the comparable treasury issue (as defined below), under the heading that represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," provided, that if no maturity is within three months before or after the maturity date for any series of notes being redeemed the yields for the two published maturities most closely corresponding to the comparable treasury issue will be determined and the treasury rate shall be interpolated or extrapolated from those yields on a straight line basis, rounding to the nearest month; or
(b) if the release referred to in (a) (or any successor release) is not published during the week preceding the calculation date or does not contain the yields referred to above, the rate per annum equal to the semiannual equivalent yield to maturity of the comparable treasury issue, calculated using a price for the comparable treasury issue (expressed as a percentage of its principal amount) equal to the comparable treasury price for that redemption date.
The treasury rate will be calculated on the third business day preceding the redemption date.
"Comparable treasury issue" means, with respect to any redemption date for any of the exchange notes being redeemed, the United States Treasury security selected by an "independent investment banker" as having the maturity comparable to the remaining term of the series of exchange notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the series of exchange notes. "Independent investment banker" means one of the reference treasury dealers appointed by the trustee after consultation with us.
"Comparable treasury price" means with respect to any redemption date for any of the exchange notes being redeemed:
(a) the average of four reference treasury dealer quotations (as defined below) for the redemption date, after excluding the highest and lowest of those reference treasury dealer quotations, or
(b) if the calculation agent obtains fewer than four reference treasury dealer quotations, the average of all reference treasury dealer quotations obtained.
"Reference treasury dealer" means each of four primary U.S. Government securities dealers in New York City selected by the trustee in consultation with us and initially will include Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc. If any reference treasury dealer ceases to be a primary U.S. government securities dealer, the trustee will substitute another primary U.S. government securities dealer for that dealer.
"Reference treasury dealer quotations" means, with respect to any redemption date, the average, as determined by the calculation agent, of the bid and asked prices for the comparable treasury issue (expressed in each case as a percentage of its principal amount) quoted to the calculation agent by that reference treasury dealer at 5:00 p.m. New York time on the third business day preceding the redemption date.
Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the notes called for redemption.
Selection and Notice
The trustee will select the exchange notes of any series for redemption on a pro rata basis or in accordance with any other method the trustee considers fair and appropriate. Exchange notes in denominations of $1,000 or less may not be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days prior to the redemption date to each holder of exchange notes to be redeemed at its registered address. The notice of redemption will state the portion of the principal amount to be redeemed if the exchange note is to be redeemed in part. An exchange note in principal amount equal to the unredeemed portion will be issued in the name of the holder upon cancellation of the original exchange note. On and after the redemption date, interest will no longer accrue on those exchange notes or portions of exchange notes called for redemption (unless we default in the payment of any amount payable by us upon such redemption).
Notices to the holders of the exchange notes shall be given by first class mail, postage prepaid, to the registered holders of such exchange notes at their addresses appearing in the note register. In addition, for so long as any exchange notes are listed on the Luxembourg Stock Exchange and so long as the rules of such exchange so require, notices to the holders of such exchange notes shall also be given by publication in an Authorized Newspaper in Luxembourg and the Luxembourg Stock Exchange will be notified of the outstanding amount of exchange notes following any redemption. Such Authorized Newspaper is expected to be the Luxemburger Wort.
Selected Indenture Covenants
Limitations on Obligations
Restricted Subsidiaries. We will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including, without limitation, Acquired Obligations), except for (i) the Subsidiary Guaranties; (ii) Obligations existing on the date of the indenture; (iii) Obligations of ER&T related to the purchase and sale of fuel, capacity, energy (including, but not limited to, electric power, natural gas and coal), environmental credits or entitlements, utility services, fuel, water, related transportation services and other similar or related products and services in the ordinary course; (iv) Obligations of Nuclear related to the purchase and sale of fuel and related transportation services in the ordinary course; (v) Permitted Hedging Obligations; (vi) Obligations incurred in exchange for, or the net proceeds of which are used to refund, refinance, or replace Obligations described under "Limitations on Obligations", provided that the average life of the refinancing Obligations shall not be shorter than the average life of the Obligations being refinanced and the principal amount of the refinancing obligations shall not exceed the principal amount of the Obligations being so refinanced; and (vii) Obligations to us or any other Restricted Subsidiary which are subordinated to the Subsidiary Guaranty with respect to the Senior Notes of the Restricted Subsidiary incurring the Obligations.
The foregoing notwithstanding, Restricted Subsidiaries may Incur Obligations not otherwise permitted by the preceding paragraph in an aggregate amount outstanding after giving effect to such Incurrence not to exceed at any one time the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the last day of the preceding month.
Subsidiaries Other Than Restricted Subsidiaries. Except for parental guaranties of debt service reserves, surety bonds, equity guarantees, performance bonds and bid bonds entered into in the ordinary course of business aggregating at any one time not more than $100 million, we shall not permit any Subsidiary that is not a Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including, without limitation, Acquired Obligations) that are recourse to us or any Restricted Subsidiary. (Section 1008 of the indenture.)
Limitation on Liens
We may not, and may not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit to exist any Lien of any kind on or with respect to any Property or interest in our Property or that of any of our Restricted Subsidiaries or any income or profits therefrom (in each case, whether the Property is owned at the date of the indenture or thereafter acquired), unless the Senior Notes are secured equally and ratably with (or prior to) any and all other Obligations secured by the Lien, provided, however, that these restrictions shall not apply to or prevent the creation, incurrence, assumption or existence of Permitted Liens.
Permitted Liens shall include:
o Liens existing on the date of the indenture;
o Liens to secure or provide for the payment of all or part of the purchase price of any Property or the cost of construction or improvement thereof; provided that no such Lien shall extend to or cover any other of our or our Restricted Subsidiaries' Property;
o Liens existing on Property at the time such Property is acquired by us or
any Restricted Subsidiary; provided that such Liens (x) are not created,
Incurred or assumed in contemplation of such Property being acquired and
(y) do not extend to or cover any other of our or our Restricted
Subsidiaries' Property;
o Liens existing on Property of any entity at the time such entity is merged with or into or consolidated with us or a Restricted Subsidiary; provided that such Liens (x) are not created, Incurred or assumed in contemplation of such merger or consolidation and (y) do not extend to any other of our or our Restricted Subsidiaries' Property;
o Liens securing Permitted Hedging Obligations;
o Liens for taxes, assessments or governmental charges that are not yet delinquent or that are being contested in good faith by any appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate reserve provision, if any, as is required in conformity with GAAP shall have been made;
o Liens arising by reason of any judgment, decree or order of any court, so long as any such Lien is being contested in good faith and is bonded or such judgment, decree or order does not exceed $50 million, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order have not been finally terminated or the period within which such proceedings may be initiated has not expired;
o Liens to secure pledges or deposits made in the ordinary course of business in connection with bids, tenders or contracts (other than for payment of indebtedness) or to secure guarantees, statutory or regulatory obligations or surety or performance bonds each made in the ordinary course of business;
o Liens imposed by law such as carriers', warehousemen's and mechanics' Liens, in each case arising in the ordinary course of business and with respect to amounts not yet due or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as is required in conformity with GAAP shall have been made;
o Survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties incidental to the conduct of the business or to the ownership of Properties which were not incurred in connection with indebtedness or other extensions of credit and which do not in the aggregate materially and adversely affect the value of the Properties or materially impair their use in the operation of the business;
o Liens securing letters of credit entered into in the ordinary course of business;
o Liens to secure pollution control revenue bonds or industrial revenue bonds;
o Liens securing Non-Recourse Obligations of Unrestricted Subsidiaries;
o Liens granted on the capital stock of Unrestricted Subsidiaries for the purpose of securing the Obligations of such Unrestricted Subsidiaries;
o Liens pursuant to Capitalized Leases or Synthetic Leases permitted to be entered into under the "Limitation on Obligations" covenant;
o Liens arising by reason of leases and subleases of Property pursuant to a Sale/Leaseback Transaction allowed pursuant to the Sale of Assets covenant that do not materially interfere with the ordinary conduct of our or any of our Restricted Subsidiaries' business;
o Liens created in connection with worker's compensation, unemployment insurance and other social security statutes or regulations;
o Liens by a Wholly-Owned Subsidiary to us or any Restricted Subsidiary;
o Liens on Property, other than Capital Stock of Restricted Subsidiaries, to secure Obligations so long as the sum of the amount of outstanding Obligations secured by Liens Incurred pursuant to this provision does not exceed the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the end of the most recent fiscal quarter for which financial statements are available; and
o The replacement, extension or renewal (or successive replacements, extensions or renewals), as a whole or in part, of any Lien or of any agreement referred to above or the replacement, extension or renewal (not exceeding the outstanding principal amount of Indebtedness secured thereby together with any premium, interest, fee or expense payable in connection with any such replacement, extension or renewal) of Indebtedness secured thereby; provided that such replacement, extension or renewal is limited to all or part of the same Property that secured the Lien replaced, extended or renewed (plus improvements thereon or additions or accessions thereto).
Guaranty of Senior Notes
Each initial Subsidiary Guarantor (Fossil, Nuclear and ER&T) has executed and any subsequent Subsidiary Guarantor at or before the time the definition of Subsidiary Guarantor shall be applicable to it, shall execute, a Subsidiary Guaranty of each series of the Senior Notes in substantially the form provided for by the indenture. (Section 1601 of the indenture.)
Guaranty of ER&T Obligations
We have executed a guaranty of the Obligations of ER&T substantially in the form provided for by the indenture.
Payment of Dividends by ER&T to Us
For so long as we continue to guarantee the Obligations of ER&T, we shall cause ER&T, to the extent permitted by applicable law, to pay, at least quarterly, dividends or distributions to us of the excess cash not then required for its business operations. (Section 1010 of the indenture.)
Limitation on Dividend and Other Payment Restrictions
Other than pursuant to the indenture or as otherwise may be required by law, we will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or cause to become, or as a result of the acquisition of any Person or Property, or upon any Person becoming a Restricted Subsidiary, remain subject to, any consensual encumbrance or consensual restriction of any kind on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock;
(ii) make payments on any Obligations owed to us or any of our Restricted Subsidiaries;
(iii) make loans or advances to us or to any of our Restricted Subsidiaries;
(iv) transfer any of its Property to us or to any of our Restricted Subsidiaries; or
(v) make payments under a Subsidiary Guaranty with respect to the Senior Notes.
The foregoing shall not prohibit:
(a) encumbrances and restrictions resulting from customary provisions relating to (i) transfers of Property that restrict the subletting or assignment of any lease or (ii) transfers of Property that are contained in licenses and that relate to the Property covered thereby, in each case entered into in the ordinary course of business;
(b) encumbrances and restrictions on transfers of Property existing on any assets at the time such assets are acquired (or the entity owning such assets is acquired) by any Restricted Subsidiary, whether by merger, consolidation, purchase of such assets or otherwise; provided that such restrictions and encumbrances (i) are not created, Incurred or assumed in contemplation of such assets or entity being acquired by the Restricted Subsidiary and (ii) do not extend to any other assets of the Restricted Subsidiary; and
(c) restrictions on transfers of Property created in connection with
sales or purchases of electricity, energy, capacity, natural gas,
coal, ancillary services, environmental credits and/or entitlements,
utility services, fuel, water, related transportation services and
other similar products and services, in each case, in the ordinary
course of business; provided that restrictions arising from any
transaction or series of related transactions pursuant to this clause
(c) shall not be materially more restrictive, taken as a whole, than
encumbrances and restrictions customarily accepted as industry
standard for similar transactions. (Section 1008 of the indenture.)
Limitation on Sale of Assets
Except for a sale of all or substantially all of our assets, as provided in the "Merger, Consolidation or Sale of Assets" covenant, and other than (1) assets required to be sold to conform with government regulations, laws or impositions, (2) sales or dispositions of surplus, obsolete or worn out equipment, (3) sales or dispositions of ownership interests in Unrestricted Subsidiaries, or (4) any other sale or disposition so long as after giving effect to such events, the Rating Agencies shall have confirmed their ratings on our debt securities in effect immediately prior to such sale or disposition, we may not, and may not permit any Restricted Subsidiary to, make any Asset Sale (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other Asset Sales) if, on a pro forma basis, the aggregate net book value of all such Asset Sales during the most recent 12-month period would exceed 15% of Consolidated Net Tangible Assets computed as of the most recent quarter preceding such sale; provided, however, that any such Asset Sale shall be disregarded for purposes of this 15% limitation if the Net Cash Proceeds are within 270 days thereafter (i) invested in a Permitted Business, (ii) used to purchase and retire Obligations ranking equal in right of payment to the Senior Notes or (iii) used to redeem the Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest thereon up to and including the applicable redemption date, plus a make-whole premium equal to, with respect to any Senior Note, the excess of (a) the aggregate present value as of the date of prepayment of the expected future cash flows of the Senior Note (for the avoidance of doubt, these
amounts shall include all principal and interest payable with respect to the Senior Note) (exclusive of interest accrued to the date of prepayment) that, but for the prepayment, would have been payable if the prepayment had not been made, determined by discounting such amounts at a rate that is equal to the applicable treasury rate (as defined under "-- Optional Redemption" above) plus 0.30% for the 67/8% Senior Notes due 2006, 0.35% for the 73/4% Senior Notes due 2011 and 0.40% for the 85/8 Senior Notes due 2031 over (b) the aggregate principal amount of the Senior Note then to be prepaid.
In addition, on a cumulative basis we may not sell or otherwise dispose of more than 25% of the assets or Capital Stock in Fossil, unless Net Cash Proceeds from such sale are invested in other non-nuclear generation assets or the capital stock of entities engaged in fossil generation and related businesses.
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly, consolidate or merge with or into (whether or not we are the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets, in one or more related transactions, to another Person unless:
(i) the Person formed by the consolidation or surviving the merger or the Person that acquires by sale, assignment, transfer, conveyance or other disposition, or that leases, the assets (if other than us) (in each such case, the "Successor Entity"), is a corporation or limited liability company organized and existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes our obligations under the indenture and the Senior Notes;
(ii) if any of our or a Restricted Subsidiary's Property or assets would become subject to a Lien other than a Permitted Lien under the "Limitations on Liens" covenant, the Senior Notes shall be equally and ratably secured in accordance with such covenant;
(iii) immediately after such transaction no event exists that is or with the passage of time or the giving of notice or both would be an Event of Default under the indenture; and
(iv) each Subsidiary Guarantor shall have by amendment to its Subsidiary
Guaranty with respect to the Senior Notes confirmed that its
Subsidiary Guaranty shall apply to the obligations of the Successor
Entity under the indenture and each series of the Senior Notes.
(Section 801 of the indenture.)
Events of Default and Remedies
Each of the following is an Event of Default under the indenture with respect to any series of the Senior Notes:
(i) default for five days in the payment when due of interest on any of the exchange notes of such series;
(ii) default in the payment when due of the principal of, or premium, if any, or make-whole amount, on, the exchange notes of such series;
(iii) failure by us or any Restricted Subsidiary to comply with the provisions described under "Limitation on Sale of Assets" or "Merger, Consolidation or Sale of Assets";
(iv) failure by us or any Restricted Subsidiary for 60 days after notice by the trustee or to us and to the trustee by the holders of 25% or more in aggregate principal amount of the Senior Notes of such series to comply with any of our agreements in the indenture or the Senior Notes of such series that are not otherwise covered in clauses (i), (ii), (iii), (v), (vi) or (vii);
(v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any of our or any of our Subsidiaries; indebtedness (including indebtedness represented by any other series of debt securities under the indenture or the payment of which is guaranteed by us or by any of our Subsidiaries) (but other than
Non-Recourse Obligations) whether such indebtedness or guaranty now
exists or is created after the date of the indenture, which default
(a) is caused by a failure to pay the principal of such indebtedness
at the stated maturity of such indebtedness after the expiration of
grace periods provided in the indebtedness (a "Payment Default") or
(b) has resulted in the acceleration of the indebtedness prior to
its stated maturity; and, in each case the principal amount of the
indebtedness, together with the principal amount of any other
indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $50.0 million
or more;
(vi) failure by us or any of our Restricted Subsidiaries to pay one or more final judgments not otherwise covered by insurance aggregating in excess of $50.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; and
(vii) certain events of bankruptcy or insolvency with respect to us or any of our Restricted Subsidiaries. (Section 501 of the indenture.)
Additional series of debt securities issued under the indenture may specify other events of default for such series of debt securities.
We are required to file with the trustee, annually, an officer's certificate as to our compliance with all conditions and covenants under the indenture. (Section 1011 of the indenture.) The indenture provides that the trustee may withhold notice to the holders of debt securities of a series, including each series of the Senior Notes, of any default (except payment defaults on the debt securities of that series) if it considers it in the interest of the holders of debt securities of the series to do so. (Section 601 of the indenture.)
If an Event of Default (other than an Event of Default occasioned by our
or any of our Restricted Subsidiaries' bankruptcy or insolvency) with respect to
debt securities of a series, including any series of the Senior Notes, has
occurred and is continuing, the trustee or the holders of not less than 25% in
principal amount of outstanding debt securities of that series may declare the
principal (or, if the debt securities of that series are issued with original
issue discount or are "indexed debt securities" (i.e., debt securities, the
interest and principal payments on which are determined by reference to a
particular index, such as a foreign currency or commodity), such portion of the
principal as may be specified in the terms of those debt securities) of all of
the debt securities of that series to be due and payable immediately, by a
notice in writing to us.
(Section 502 of the indenture.)
If an Event of Default occasioned by our or any of our Restricted Subsidiaries' bankruptcy or insolvency occurs, the principal of and interest on all debt securities, including each series of the Senior Notes, shall, ipso facto become and be immediately due and payable without any declaration or other act on the part of the trustee or any holders of debt securities.
Subject to the provisions of the indenture relating to the duties of the trustee, in case an event of default with respect to debt securities of any series, including any series of the Senior Notes, has occurred and is continuing, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request, order or direction of the holders of debt securities of that series, unless those holders have offered the trustee indemnity satisfactory to the trustee against the expenses and liabilities which might be incurred by it in compliance with such request. (Section 507 of the indenture.)
Subject to such provisions for the indemnification of the trustee, the
holders of a majority in principal amount of the outstanding debt securities of
any series of debt securities, including each series of the Senior Notes, will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or power
conferred on the trustee with respect to the debt securities of that series.
(Section 512 of the indenture.)
The holders of a majority in principal amount of the outstanding debt securities of a series, including each series of the Senior Notes, may, on behalf of the holders of all debt securities of such series and any related coupons, waive any past default under the indenture with respect to such series and its consequences, except a default (i) in the payment of the principal of (or premium, if any) or
interest, if any, on or additional amounts payable in respect of any debt
security of such series or any related coupons or (ii) in respect of a covenant
or provision that cannot be modified or amended without the consent of the
holder of each outstanding debt security of such series affected thereby.
(Section 513 of the indenture.)
Definitions
"Acquired Obligations" means, with respect to any Person, (i) Obligations of any other Person existing at the time the other Person is merged with or into or became a Subsidiary of the Person, including, without limitation, Obligations Incurred in connection with, or in contemplation of, the other Person merging with or into or becoming a Subsidiary of the Person; and (ii) Obligations secured by a Lien encumbering any asset acquired by the Person at the time the asset is acquired by the Person.
"Asset Sale" means any sale, transfer, conveyance, lease or other disposition (including by way of merger, consolidation or sale-leaseback) by us or any of our Restricted Subsidiaries to any Person (other than to us or a Restricted Subsidiary of ours and other than in the ordinary course of business) of any Capital Stock or other Property of ours or of any of our Restricted Subsidiaries (including Capital Stock of Subsidiaries). The term "Asset Sale" will not include (i) any sale, transfer, conveyance, lease or other disposition of Property governed by the "Merger, Consolidation or Sale of Assets" covenant and (ii) any transaction or series of related transactions consisting of the sale, transfer, conveyance, lease or other disposition of Capital Stock or other Property with a Fair Market Value aggregating less than $50 million in any fiscal year. The term "Asset Sale" also will not include (a) the grant of or realization upon a Lien permitted under the "Limitation on Liens" covenant or the exercise of remedies thereunder and (b) sales of fuel, capacity, energy (including, but not limited to, electric power, natural gas and coal), environmental credits or entitlements, related transportation services and other related services by ER&T and its Permitted Hedging Obligations as permitted by the "Limitation on Obligations" covenant.
"Attributable Debt" means with respect to any Sale/Leaseback Transaction, at the time of determination, the present value (discounted at the interest rate borne by the Senior Notes, compounded annually) of the total Obligations of the lessee for rental payments during the remaining term of the lease included in the Sale/Leaseback Transaction (including any period for which the lease has been extended).
"Board of Directors" means either the Board of Directors of PSEG Power or any duly authorized committee of such Board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Capitalized Lease" means as applied to any Person, any lease of any Property of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person, and "Capitalized Lease Obligation" means the rental obligations, as aforesaid, under such lease.
"Commodity Trading Obligations," with respect to any Person, means the Obligations of such Person under (i) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity cap agreement, commodity floor agreement, commodity collar agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof, designed to protect such Person against fluctuations in commodity prices or (ii) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof (including an
agreement or arrangement to hedge foreign exchange risks) in respect of commodities entered into by us pursuant to asset optimization and risk management policies and procedures adopted in good faith by the Board of Directors.
"Consolidated Current Liabilities," as of the date of determination, means the aggregate amount of our and our Restricted Subsidiaries' liabilities on a consolidated basis which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating (i) all inter-company items between us and any consolidated Restricted Subsidiary, (ii) all current maturities of long-term indebtedness, all as determined in accordance with GAAP and (iii) all liabilities attributable to Subsidiaries that are not Restricted Subsidiaries.
"Consolidated Net Tangible Assets" means, as of any date of determination, the total amount of assets (less accumulated depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of us and our Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, consistently applied, and after giving effect to purchase accounting and after deducting therefrom, to the extent otherwise included, the amounts of:
o Consolidated Current Liabilities;
o excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors;
o unamortized debt discount and expense and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;
o treasury stock;
o any cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and
o all assets attributable to Subsidiaries that are not Restricted Subsidiaries (including Capital Stock thereof), except to the extent of dividends or distributions received from such Subsidiaries.
"Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default.
"Event of Default" has the meaning specified in Section 501 of the indenture.
"Fair Market Value" means the price that would be paid by a purchaser to a seller in an arm's-length transaction.
"GAAP" means generally accepted accounting principles in the United States applied on a basis consistent with the principles, methods, procedures and practices employed in the preparation of our audited financial statements, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession.
"Hedging Obligations" means, with respect to any Person, the obligations of such Person under any interest rate or currency swap agreement, interest rate or currency future agreement, interest rate cap or collar agreement, interest rate or currency hedge agreement, and any put, call or other agreement or arrangement designed to protect such Person against fluctuations in interest rates or currency exchange rates.
"Incur" means, with respect to any Obligation, to directly or indirectly create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for payment of, contingently or otherwise, such Obligation. The term "Incurrence" has a corresponding meaning.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority, or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any agreement to give or grant a Lien or any lease, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).
"Net Cash Proceeds" from an Asset Sale is defined to mean cash payments received (including any cash payments received by way of a payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received (including any cash received upon sale or disposition of any such note or receivable), excluding any other consideration received in the form of assumption by the acquiring Person of Obligations relating to the Property disposed of in such Asset Sale or received in any form other than cash) therefrom, in each case, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses of any kind (including consent and waiver fees and any applicable premiums, earn-out or working interest payments or payments in lieu or in termination thereof) Incurred, (ii) all federal, state, provincial, foreign and local taxes and other governmental charges required to be accrued as a liability under GAAP as a consequence of such Asset Sale, (iii) a reasonable reserve for the after-tax cost of any indemnification payments (fixed and contingent) attributable to seller's indemnities to the purchaser undertaken by us or any of our Subsidiaries in connection with such Asset Sale, (iv) all payments made on any Obligation that is secured by such Property, in accordance with the terms of any Lien upon or with respect to such Property, or that must by its terms or by applicable law or in order to obtain a required consent or waiver be repaid out of the proceeds from or in connection with such Asset Sale and (v) all distributions and other payments made to holders of Capital Stock of Subsidiaries (other than us or our Restricted Subsidiaries) as a result of such Asset Sale.
"Non-Recourse Obligation" means, with respect to any Person, any financing that is or was Incurred with respect to the development, acquisition, design, engineering, procurement, construction, operation, ownership, servicing or management of one or more facilities used or useful in a Permitted Business in respect of which such Person has a direct or indirect interest, provided that such financing is without recourse to any Person or Property other than to (i) the Property that constitutes such facilities together with contracts, permits, licenses, reserves and other items related to such facilities, (ii) the income from and proceeds of such facilities, (iii) the Capital Stock of, and other investments in, the Person that owns the Property that constitutes any such facilities and (iv) the Capital Stock of, and other investments in, any Person obligated with respect to such financing and of any Subsidiary of such Person that owns a direct or indirect interest in any such facilities.
"Obligations" of any Person shall mean at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person arising under any conditional sale or other
title retention arrangement or otherwise to pay the deferred purchase price of
Property or services, (iv) all obligations of such Person Incurred in respect of
Attributable Debt associated with any Sale/Leaseback Transaction, Capitalized
Lease or Synthetic Lease, (v) all obligations of such Person under letters of
credit, (vi) all obligations of such Person under trade or bankers' acceptances,
(vii) all obligations of such Person under Hedging Obligations and Commodity
Trading Obligations, (viii) trade payables in respect of fuel, labor, supplies
or other materials or services or the obligation to provide power, (ix)
Preferred Stock and Redeemable Stock issued to any Person other than us or a
Restricted Subsidiary, (x) all obligations of others secured by a Lien on any
asset of such Person, whether or not such obligations are assumed by such Person
and (xi) all obligations of others to the extent guaranteed by such Person. The
amount of any obligation shall be deemed to be the amount equal to the stated or
determinable amount thereof or, if not stated or determinable, the maximum
probable liability thereunder as determined by us in good faith.
"Permitted Business" means any business in which we or any of our Subsidiaries are engaged on the date of the indenture or any other power or energy-related business, including the business of acquiring, developing, owning or operating electric power or thermal energy generation or cogeneration facilities, electric power transmission, fuel supply and fuel transportation facilities, together with their related power supply, thermal energy and fuel contracts and other facilities, services or goods that are
ancillary, incidental, complementary or reasonably related to the marketing, trading, development, construction or management servicing, ownership or operation of the foregoing.
"Permitted Hedging Obligations" of any Person shall mean (i) Hedging Obligations entered into in the ordinary course of business and in accordance with such Person's established risk management policies that are designed to protect such Person against, among other things, fluctuations in interest rates or currency exchange rates and which in the case of agreements relating to interest rates shall have a notional amount no greater than the payments due with respect to the Obligations being hedged thereby and (ii) Commodity Trading Obligations.
"Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) or preferred or preference stock of such Person that is outstanding or issued on or after the date of original issuance of the original notes.
"Property" of any Person is defined to mean all types of real, personal, tangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person under GAAP.
"Rating Agencies" means Moody's Investors Service Inc., Standard & Poor's Ratings Services, Fitch Inc. and any successor thereof.
"Redeemable Stock" is defined to mean any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Senior Notes, (ii) redeemable at the option of the holder of such Capital Stock at any time prior to the Stated Maturity of the Senior Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Obligations having a scheduled maturity prior to the Stated Maturity of the Senior Notes.
"Restricted Subsidiary" means only PSEG Fossil LLC, PSEG Nuclear LLC, PSEG Energy Resources & Trade LLC and each other of our Subsidiaries that executes a Subsidiary Guaranty with respect to the Senior Notes and is subsequently designated by the Board of Directors by written notice to the trustee as a Restricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to Property now owned or hereafter acquired whereby we or one of our Subsidiaries transfers the Property to a Person and leases it back from that Person, other than leases for a term of not more than 12 months or between us and one of our Wholly-Owned Subsidiaries that is a Restricted Subsidiary or between Wholly-Owned Subsidiaries that are Restricted Subsidiaries.
"Stated Maturity" means with respect to any Senior Note or any installment of interest thereon, the date specified in such Senior Note as the fixed date on which any principal of such Senior Note or any such installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of Voting Stock is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantor" means all current and subsequently designated Restricted Subsidiaries.
"Subsidiary Guaranty" means a guaranty of a Subsidiary Guarantor in favor of the trustee for the benefit of the holders of the Senior Notes in substantially the form provided for by the indenture or a guaranty of a Subsidiary Guarantor of any other of our Obligations.
"Synthetic Lease" means (i) a lease pursuant to which the lessee is treated as the owner of the Property subject to the lease for tax purposes, whether or not such lease is treated as an operating lease for accounting purposes or (ii) a lease treated as an operating lease for accounting purposes but having at least three of the following characteristics, (a) the term of the lease, inclusive of all renewal periods at the lessee's option, is greater than 75% of the useful life of the Property subject to the lease as estimated at the inception of the Lease, (b) the lessee has the right to purchase such Property at a fixed price, (c) the lessee's payments under the lease are calculated to amortize and service the debt of the lessor incurred in order to acquire the asset and (d) the lessor obtains 80% or more of the cost of the asset from borrowed funds.
"Unrestricted Subsidiary" means a Subsidiary that is not a Restricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Obligations at any date, the number of years obtained by dividing (i) the then outstanding principal amount of such Obligations into (ii) the total of the product obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the numbers of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by us and/or one or more of our Wholly-Owned Subsidiaries.
Reports and Rule 144A Information Requirement
We must file with the trustee, within 30 days of filing them with the SEC, copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If we are not subject to the requirements of Section 13 or 15(d) of the Exchange Act, we must nevertheless file with the SEC (if permitted) and the trustee, on the date upon which we would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which we would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that we will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so.
We have agreed to furnish to the holders of the Senior Notes and prospective purchasers of the Senior Notes designated by holders of the Senior Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Senior Notes are no longer "restricted securities" within the meaning of Rule 144 under the Securities Act (assuming such Senior Notes have not been owned by an affiliate of ours).
No Personal Liability of Directors, Officers, Employees and Members
No past, present or future director, officer, employee, or member, as such, shall have any liability for any of our obligations under the Senior Notes and the indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder by accepting an exchange note waives and releases all such liability as part of the consideration for issuance of the exchange notes. This waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such waiver is against public policy. (Section 113 of the indenture.)
Satisfaction and Discharge
According to the terms of the indenture, we may discharge certain
obligations to holders of any series of debt securities, including any series of
the exchange notes, that have not already been delivered to the trustee for
cancellation and that either have become due and payable or are by their terms
due and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the trustee, in trust, funds in an amount sufficient
to pay the entire indebtedness on such debt securities for principal (and
premium, if any) and interest, if any, and any additional amounts with respect
thereto, to the date of such deposit (if the debt securities have become due and
payable) or to the maturity date or redemption date, as the case may be.
(Section 401 of the indenture.)
Legal Defeasance and Covenant Defeasance
The indenture provides that, if the provisions of Article Fourteen of the
indenture are made applicable to the debt securities of or within any series,
including any series of the exchange notes, and any related coupons pursuant to
Section 301 thereunder, we may elect either (a) to defease and be discharged
from any and all obligations with respect to such debt securities and any
related coupons (except for the obligation to pay additional amounts, if any,
upon the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such debt securities and the obligations to register
the transfer or exchange of such debt securities and any related coupons, to
replace temporary or mutilated, destroyed, lost or stolen debt securities and
any related coupons, to maintain an office or agency in respect of such debt
securities and any related coupons, and to hold moneys for payment in trust)
(defeasance) (Section 1402 of the indenture) or (b) to be released from our
obligations under any covenant specified pursuant to Section 301 with respect to
such debt securities and any related coupons, and any omission to comply with
such obligations shall not constitute a default or an event of default with
respect to such debt securities and any related coupons (covenant defeasance)
(Section 1403 of the indenture), in either case upon the irrevocable deposit by
us with the trustee (or other qualifying trustee), in trust, of (i) an amount in
United States Dollars, (ii) Government Obligations (as defined below) applicable
to such debt securities and coupons that through the payment of principal and
interest in accordance with their terms will provide money in an amount, or
(iii) a combination thereof in an amount, sufficient to pay the principal of
(and premium, if any) and interest, if any, on such debt securities and any
related coupons, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust may only be established if, among other things, we have delivered to the trustee an opinion of counsel to the effect that the holders of such debt securities and any related coupons will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred. The opinion of counsel in the case of defeasance under clause (a) above must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. (Section 1404 of the indenture.)
"Government Obligations" means securities which are (i) direct obligations
of the United States or (ii) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of the United States, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States, which are not callable or redeemable at the option of the issuer
of that obligation. Government Obligations also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the holder
of a depository receipt; provided that, except as required by law, such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from the amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
(Section 101 of the indenture.)
In the event we effect covenant defeasance with respect to any debt
securities and any related coupons and such debt securities and coupons are
declared due and payable because of the occurrence of any event of default
(other than the events of default described in clause (iii) under "Events of
Default and Remedies" which provisions would no longer be applicable to such
debt securities and coupons), the amount of Government Obligations and funds on
deposit with the trustee will be sufficient to pay amounts due on such debt
securities and coupons at the time of their stated maturity but may not be
sufficient to pay amounts due on such debt securities and coupons at the time of
the acceleration resulting from such event of default. In such case, we would
remain liable to make payment of such amount due at the time of acceleration.
(Section 501 of the indenture.)
If the trustee or any paying agent is unable to apply any money in accordance with the indenture by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then our obligations under the indenture and such debt securities and any related coupons shall be revived and reinstated as though no deposit had occurred pursuant to the indenture, until such time as such trustee or paying agent is permitted to apply all such money in accordance with the Indenture; provided, however, that if we make any payment of principal of (or premium, if any) or interest, if any, on any such debt security or any related coupon following the reinstatement of its obligations, we shall be subrogated to the rights of the holders of such debt securities and any related coupons to receive such payment from the money held by such trustee or paying agent.
Amendment, Supplement and Waiver
We and the trustee may modify and amend the indenture with the consent of the holders of a majority in principal amount of all outstanding debt securities that are affected by the modification or amendment; provided that no modification or amendment may, without the consent of the holder of each outstanding debt security affected thereby, among other things:
o change the stated maturity date of the principal of (or premium, if any, on) or any installment of principal of or interest on any debt security;
o reduce the principal amount of, or the rate or amount of interest in respect of, or any premium payable upon the redemption of, any debt security;
o change the rate, or manner of calculating the rate, of interest;
o change any of our obligations to pay additional amounts in respect of any debt security;
o reduce the portion of the principal of a debt security issued with the original issue discount or an indexed debt security that would be due and payable upon a declaration of acceleration of the maturity of the debt security or provable in bankruptcy;
o adversely affect any right of repayment at the option of the holder of any such debt security;
o change the Place of Payment of principal of, or any premium or interest on, the debt security;
o impair the right to institute suit for the enforcement of any payment on or after the stated maturity date of the debt security or on or after any redemption date or repayment date for the debt security;
o adversely affect any right to convert or exchange any debt security;
o reduce the percentage in principal amount of such outstanding debt securities, the consent of whose holders is required to amend or waive compliance with certain provisions of the indenture or to waive certain defaults under the indenture;
o reduce the requirements for voting or quorum described below; or
o modify any of the foregoing requirements or any of the provisions relating to waiving past defaults or compliance with certain restrictive provisions, except to increase the percentage of holders required to effect waiver or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each debt security affected by the modification or waiver. (Section 902 of the indenture.)
The trustee and we may modify and amend the indenture without the consent of any holder, for any of the following purposes:
o to evidence the succession of another person to us and the assumption by any successor of our covenants under the indenture and the debt securities;
o to add to our covenants for the benefit of the holders of all or any series of debt securities issued under the indenture, including any series of the exchange notes, and any related coupons or to surrender any right or power conferred upon us by the indenture;
o to add events of default for the benefit of the holders of all or any series of debt securities, including any series of the exchange notes, issued under the indenture;
o to add to or change any provisions of the indenture to facilitate the issuance of, or to liberalize the terms of, debt securities issued in bearer form or to permit or facilitate the issuance of debt securities in uncertificated form, provided that any such actions do not adversely affect the interests of the holders of the debt securities issued under the indenture or any related coupons in any material respect;
o to change or eliminate any provisions of the indenture, provided that any change or elimination of this nature will become effective only when there are no debt securities outstanding of any series created prior to the change or elimination of the provisions which are entitled to the benefit of the provisions;
o to secure the debt securities, including any series of the exchange notes, under the indenture pursuant to the "Limitations on Liens" covenant of the indenture, or otherwise;
o to establish the form or terms of debt securities of any series and any related coupons;
o to evidence and provide for the acceptance of appointment by a successor trustee or facilitate the administration of the trusts under the indenture by more than one trustee;
o to cure an ambiguity, defect or inconsistency in the indenture, provided such action does not adversely affect the interests of holders of debt securities of a series, including any series of the exchange notes, issued under the indenture or any related coupons in any material way; or
o to supplement any of the provisions of the indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of debt securities issued under the indenture, including any series of the exchange notes, provided that the action does not adversely affect the interests of the holders of the debt securities of that series, including the applicable series of the exchange notes, and any related coupons in any material way. (Section 901 of the indenture.)
In determining whether the holders of the requisite principal amount of outstanding debt securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or whether a quorum is present at a meeting of holders of debt securities thereunder:
o the principal amount of a debt security issued with original issue discount that will be deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the maturity of the debt security;
o the principal amount of an indexed debt security that may be counted in
making the determination of calculation and that will be deemed
outstanding will be equal to the principal face amount of the indexed debt
security at original issuance, unless otherwise provided pursuant to
Section 301 of the indenture; and
o Debt securities owned by us or any other obligor upon the debt securities
or any affiliate of ours or of such other obligor shall be disregarded.
(Section 101 of the indenture.)
The indenture contains provisions for convening meetings of the holders of debt securities of a series if debt securities of that series are issuable in bearer form. (Section 1501 of the indenture.) A meeting may be called at any time by the trustee, and also, upon request, by us or the holders of at
least 10% in principal amount of the outstanding debt securities of that series,
in any such case upon notice given as provided in the indenture. (Section 1502
of the indenture.) Except for any consent that must be given by the holder of
each debt security, as described above, any resolution presented at a meeting
(or an adjourned meeting duly reconvened) at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of outstanding debt securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage which is less than a majority in principal
amount of outstanding debt securities of a series may be adopted at a meeting
(or an adjourned meeting duly reconvened) at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding debt securities of that series. Any resolution passed or
decision taken at any meeting of the holders of debt securities of a series duly
held in accordance with the Indenture will be binding on all holders of debt
securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution will be persons holding or representing a majority
in principal amount of the outstanding debt securities of a series; provided,
however, that, if any action is to be taken at a meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding debt securities of a series,
the persons holding or representing the specified percentage in principal amount
of the outstanding debt securities of that series will constitute a quorum.
(Section 1504 of the indenture.)
Notwithstanding the foregoing provisions, if any action is to be taken at a meeting of holders of debt securities of a series, including any series of the exchange notes, with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the holders of a specified percentage in principal amount of all outstanding debt securities affected by the action or of the holders of that series and one or more additional series:
o there shall be no minimum quorum requirement for that meeting and
o the principal amount of the outstanding debt securities of the series that
vote in favor of request, demand, authorization, direction, notice,
consent, waiver or other action will be taken into account in determining
whether such request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under the indenture.
(Section 1504 of the indenture.)
Concerning the Trustee
The Bank of New York is the trustee under the indenture.
The indenture provides that, except during the continuance of an Event of Default, the trustee will perform only such duties as are specifically set forth in the indenture. During the existence of an Event of Default, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any Holder of Senior Notes, unless such Holder will have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. The trustee may resign at any time with respect to a series of securities by written notice in accordance with the indenture. In addition, the trustee may be removed upon the happening of certain events specified in the indenture. Following any resignation or removal of the trustee, our Board of Directors will promptly appoint a successor trustee with respect to the securities affected in accordance with the indenture.
Book-Entry, Delivery and Form
The certificates representing the exchange notes will be in fully registered, global form without interest coupons.
Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants).
So long as DTC or its nominee is the registered owner or holder of the Global Notes, DTC or such nominee, as the case may be, will be considered the sole record owner or holder of the exchange notes represented by such Global Notes for all purposes under the indenture. No beneficial owner of an interest in the Global Notes will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the indenture and, if applicable, Euroclear or Clearstream.
Payments of the principal of and interest on the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of us, the trustee, or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global Notes will credit participants,
accounts with payments in amounts proportionate to their respective beneficial
ownership interests in the principal amount of such Global Notes, as shown on
the records of DTC or its nominee. We also expect that payments by participants
to owners of beneficial interests in such Global Notes held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of Senior Notes. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Neither the trustee nor we will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed within 90 days, we will issue definitive, certificated Senior Notes in exchange for the Global Notes.
Euroclear has advised us as follows: Euroclear was created in 1968 to hold securities for its participants and to clear and settle transactions between its participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear provides various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract with Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to others that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.
The Euroclear Operator was granted a banking license by the Belgian Banking and Finance Commission in 2000, authorizing it to carry out banking activities on a global basis. It took over operation of Euroclear from the Brussels, Belgium office of Morgan Guaranty Trust Company of New York on December 31, 2000.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants.
Distributions with respect to exchange notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Terms and Conditions, to the extent received by Euroclear.
Clearstream has advised us as follows: Clearstream is incorporated under the laws of The Grand Duchy of Luxembourg as a professional depositary. Clearstream holds securities for its participants and facilitates the clearance and settlement of securities transactions between its participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Monetary Institute. Clearstream participants are financial institutions around the world, including securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Clearstream is also available to others that clear through or maintain a custodial relationship with a Clearstream participant either directly or indirectly.
Distributions with respect to exchange notes held beneficially through Clearstream will be credited to cash accounts of Clearstream participants in accordance with its rules and procedures, to the extent received by Clearstream.
FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of the material United States federal income tax consequences resulting from the exchange offer and from the ownership of the exchange notes. It deals only with exchange notes held as capital assets and not with special classes of noteholders, such as dealers in securities or currencies, life insurance companies, tax exempt entities, and persons that hold an exchange note in connection with an arrangement that completely or partially hedges the exchange note. The discussion is based upon the Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial decisions thereunder as of the date hereof. Such authorities may be repealed, revoked or modified so as to produce federal income tax consequences different from those discussed below. The information contained in this section has been passed upon for us by James T. Foran, Esquire, Associate General Counsel of PSEG. We have received an opinion from Mr. Foran regarding the material federal income tax consequences of the exchange offer.
Noteholders tendering their original notes or prospective purchasers of exchange notes should consult their own tax advisors concerning the United States federal income tax and any state or local income or franchise tax consequences in their particular situations and any consequences under the laws of any other taxing jurisdiction.
Consequences of Tendering Original Notes
The exchange of original notes for the exchange notes pursuant to the exchange offer will not be treated as an "exchange" for United States federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the original notes. Rather, the exchange notes received by a noteholder will be treated as a continuation of the original notes in the hands of such noteholder. As a result, there will be no United States federal income tax consequences to noteholders exchanging the original notes for the exchange notes pursuant to the exchange offer. The noteholder must continue to include stated interest in income as if the exchange had not occurred. The adjusted basis and holding period of the exchange notes for any noteholder will be the same as the adjusted basis and holding period of the original notes. Similarly, there would be no United States federal income tax consequences to a holder of original notes that does not participate in the exchange offer.
United States Holders
For purposes of this discussion, a "United States Holder" means:
(1) a citizen or resident of the United States;
(2) a partnership, corporation or other entity treated as a corporation or partnership for United States federal income tax purposes, created or organized in or under the law of the United States or of any State of the United States including the District of Columbia;
(3) an estate the income of which is subject to United States federal income tax regardless of its source;
(4) a trust, if either:
(a) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust; or
(b) the trust was in existence on August 20, 1996 and elected to be treated as a United States person at all times thereafter;
(5) any other person that is subject to United States federal income tax on interest income derived from a note as a result of such income being effectively connected with the conduct by such person of a trade or business within the United States; or
(6) certain former citizens of the United States whose income and gain on the exchange notes will be subject to U.S. income tax.
Payments of Interest
Interest on an exchange note will be taxable to a United States Holder as ordinary interest income at the time it is received or accrued, depending on the noteholder's method of accounting for tax purposes.
Disposition of an Exchange Note
Upon the sale, exchange or retirement of an exchange note, a United States Holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or retirement (other than amounts representing accrued and unpaid interest, which will be treated as ordinary income) and such holder's adjusted basis in the exchange note. Such gain or loss generally will be long-term capital gain or loss if the holder's holding period in the exchange note was more than one year at the time of disposition.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply with respect to non-corporate United States Holders to payments of principal and interest on an exchange note and the proceeds of the sale of an exchange note before maturity. A 31% "backup withholding" tax will apply to such payments if the
United States Holder fails to provide an accurate taxpayer identification number or to report all interest and dividends required to be shown on its federal income tax returns.
Payments to United States Aliens
As used herein, a "United States Alien" is a person or entity that, for United States federal income tax purposes, is not a United States Holder (as defined above).
Under current United States federal income and estate tax law:
(1) payments of principal and interest on an exchange note by us or any paying agent to a noteholder that is a United States Alien will not be subject to withholding of United States federal income tax, provided that the noteholder:
(a) does not actually or constructively own 10% or more of the combined voting power of our stock;
(b) is not a controlled foreign corporation related to us through stock ownership;
(c) is not a bank receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code; and
(d) provides a statement, under penalties of perjury (such as Form W-8BEN), to us that the holder is a United States Alien and provides its name and address;
(2) a noteholder that is a United States Alien will not be subject to United States federal income tax on gain realized on the sale, exchange or redemption of such note, unless:
(a) the gain is effectively connected with the conduct of a trade or business within the United States by the United States Alien; or
(b) in the case of a United States Alien who is a nonresident alien individual and holds the exchange note as a capital asset, such holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met; and
(3) an exchange note will not be subject to United States federal estate tax as a result of the death of a noteholder who is not a citizen or resident of the United States at the time of death, provided that: (a) such noteholder did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of our stock; and,
(b) at the time of such noteholder's death, payments of interest on such exchange note would not have been effectively connected with the conduct by such noteholder of a trade or business in the United States.
United States information reporting requirements and backup withholding tax will not apply to payments on an exchange note made outside the United States by us or any paying agent (acting in its capacity as such) to a noteholder that is a United States Alien provided that a statement described in(1)(c) above has been received and neither we nor our paying agent has actual knowledge that the payee is not a United States Alien.
Information reporting requirements and backup withholding tax will not apply to any payment of the proceeds of the sale of an exchange note effected outside the United States by a foreign office of a "broker" (as defined in applicable Treasury regulations), provided that such broker:
(1) is a United States Alien;
(2) derives less than 50% of its gross income for certain periods from the conduct of a trade or business in the United States; and
(3) is not a controlled foreign corporation as to the United States (a person described in (1), (2) and (3) above being hereinafter referred to as a "foreign controlled person"). Payment of the proceeds of the sale of an exchange note effected outside the United States by a foreign office of any broker that is not a foreign controlled person will not be subject to backup withholding tax, but will be subject to
information reporting requirements unless such broker has documentary evidence in its records that the beneficial owner is a United States Alien and certain other conditions are met, or the beneficial owner otherwise establishes an exemption.
PLAN OF DISTRIBUTION
We are making the exchange offer in reliance on the position of the staff of the Division of Corporation Finance of the SEC as defined in certain interpretive letters issued to third parties in other transactions.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for original notes where such original notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period not to exceed 90 days after the exchange offer has been completed, we will make this prospectus, as amended or supplemented, available to any broker-dealer that reasonably requests such document for use in connection with any such resale. Broker dealers who acquired original notes directly from us may not rely on the staff's interpretations and must comply with the registration and prospectus delivery requirements of the Securities Act, including being named as a selling security holder, in order to resell the original notes or the exchange notes.
We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the exchange offer has been completed, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such document in the letter of transmittal. We have agreed to pay certain expenses incident to the exchange offer, other than commission or concessions of any brokers or dealers, and will indemnify the holders of the exchange notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
By acceptance of this exchange offer, each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the prospectus untrue in any material respect or requires the making of any changes in the prospectus in order to make the statements therein not misleading (which notice we agree to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the prospectus until we have amended or supplemented the prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemental prospectus to such broker-dealer.
LEGAL OPINIONS
The validity of the exchange notes will be passed upon for us by James T. Foran, Esquire, Associate General Counsel of PSEG. The information contained in "Federal Income Tax Considerations" has been passed upon for us by Mr. Foran.
EXPERTS
The financial statements of PSEG Power LLC as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
Index to Financial Statements
Page
----
Independent Auditors' Report ........................................... F-2
Consolidated Statements of Income ...................................... F-3
Consolidated Balance Sheets ............................................ F-4
Consolidated Statements of Cash Flows .................................. F-6
Consolidated Statements of Capitalization and Member's Equity .......... F-7
Notes to Consolidated Financial Statements ............................. F-8
|
INDEPENDENT AUDITORS' REPORT
To the Member and Board of Directors of
PSEG Power LLC:
We have audited the accompanying consolidated balance sheets of PSEG Power LLC (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, capitalization and member's equity and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Parsippany, New Jersey
March 21, 2001
PSEG POWER LLC
CONSOLIDATED STATEMENTS OF INCOME
(Millions of Dollars)
For the Six Months For the Years Ended
Ended June 30, December 31,
------------------------ --------------------------------
2001 2000 2000 1999 1998
------ ------ ------ ------- ------
(unaudited)
OPERATING REVENUES
Generation .................................. $1,159 $1,070 $2,203 $ 2,652 $2,551
Trading ..................................... 1,161 1,303 2,724 1,842 1,877
------ ------ ------ ------- ------
Total Operating Revenues ................. 2,320 2,373 4,927 4,494 4,428
OPERATING EXPENSES
Energy Costs ................................ 385 341 719 831 945
Trading Costs ............................... 1,083 1,260 2,647 1,800 1,854
Operation and Maintenance ................... 349 325 686 689 584
Depreciation and Amortization ............... 55 68 136 224 381
Taxes Other Than Income Taxes ............... 11 9 27 19 30
------ ------ ------ ------- ------
Total Operating Expenses ................. 1,883 2,003 4,215 3,563 3,794
------ ------ ------ ------- ------
OPERATING INCOME .............................. 437 370 712 931 634
Other Income and Deductions ................... (2) 7 7 -- --
Interest Expense .............................. 89 43 198 112 216
Preferred Securities Dividend
Requirements of Subsidiaries -- -- -- 12 25
------ ------ ------ ------- ------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM ...................... 346 334 521 807 393
INCOME TAXES .................................. 140 136 208 291 156
------ ------ ------ ------- ------
INCOME BEFORE EXTRAORDINARY
ITEM ........................................ 206 198 313 516 237
Extraordinary Item (Net of Tax
of $2,002) ................................. -- -- -- (3,204) --
------ ------ ------ ------- ------
NET INCOME (LOSS) ............................. 206 198 313 (2,688) 237
Preferred Stock Dividend
Requirements ............................... -- -- -- 3 5
------ ------ ------ ------- ------
EARNINGS (LOSS) AVAILABLE TO
PUBLIC SERVICE ENTERPRISE
GROUP INCORPORATED .......................... $ 206 $ 198 $ 313 $(2,691) $ 232
====== ====== ====== ======= ======
|
See Notes to Consolidated Financial Statements.
PSEG POWER LLC
CONSOLIDATED BALANCE SHEETS
ASSETS
(Millions of Dollars)
December 31,
June 30, ------------------------
2001 2000 1999
------- ------- -------
(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents ............................... $ 9 $ 20 $ 77
Accounts Receivable ..................................... 255 272 254
Accounts Receivable-Affiliated Companies ................ 186 159 179
Materials and Supplies, net of valuation
reserves (2001, $9, 2000 and 1999, $11) ................ 108 107 88
Fuel .................................................... 57 58 47
Prepayments ............................................. 15 10 18
Energy Trading Contracts ................................ 336 799 --
Other ................................................... 10 2 3
------ ------ ------
Total Current Assets ................................. 976 1,427 666
Property, Plant and Equipment ............................. 3,500 2,705 2,289
Less: Accumulated depreciation and amortization ......... (1,193) (1,070) (1,015)
------ ------ ------
Net Property, Plant & Equipment ...................... 2,307 1,635 1,274
------ ------ ------
Noncurrent Assets:
Nuclear Decommissioning Fund ............................ 723 716 631
Deferred Income Taxes ................................... 664 676 608
Other ................................................... 160 76 122
------ ------ ------
Total Noncurrent Assets ............................. 1,547 1,468 1,361
------ ------ ------
TOTAL ASSETS ............................................. $4,830 $4,530 $3,301
------ ------ ------
|
See Notes to Consolidated Financial Statements.
PSEG POWER LLC
CONSOLIDATED BALANCE SHEETS
LIABILITIES, CAPITALIZATION AND MEMBER'S EQUITY
(Millions of Dollars)
December 31,
June 30, -----------------------
2001 2000 1999
------ ------ ------
(unaudited)
LIABILITIES, CAPITALIZATION AND
MEMBER'S EQUITY
Current Liabilities:
Commercial Paper and Loans ................................. $ -- $ -- $ 685
Accounts Payable ........................................... 347 336 295
Accounts Payable - Affiliated Companies .................... 595 317 --
Energy Trading Contracts ................................... 307 730 --
Other ...................................................... 139 87 58
------ ------ ------
Total Current Liabilities ............................... 1,388 1,470 1,038
------ ------ ------
Noncurrent Liabilities:
Nuclear Decommissioning .................................... 723 716 631
Cost of Removal Liability .................................. 156 157 131
Environmental .............................................. 53 53 53
Other ...................................................... 68 80 176
------ ------ ------
Total Noncurrent Liabilities ............................ 1,000 1,006 991
------ ------ ------
Commitments and Contingent Liabilities ....................... -- -- --
Note Payable - Affiliated Company ............................ -- 2,786 --
Notes Payable ................................................ 1,791 -- --
Capitalization ............................................... -- -- 1,272
Member's Equity:
Contributed Capital ........................................ 1,350 150 --
Basis Adjustment ........................................... (986) (986) --
Retained Earnings .......................................... 310 104 --
Accumulated Other Comprehensive Loss ....................... (23) -- --
------ ------ ------
Total Member's Equity ................................... 651 (732) --
------ ------ ------
Total Capitalization and Member's Equity ................ 2,442 (732) 1,272
------ ------ ------
TOTAL LIABILITIES, CAPITALIZATION AND
MEMBER'S EQUITY ............................................ $4,830 $4,530 $3,301
====== ====== ======
|
See Notes to Consolidated Financial Statements.
PSEG POWER LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
For the Six Months For the Years Ended
Ended June 30, December 31,
-------------------- ---------------------------------
2001 2000 2000 1999 1998
-------- ------- -------- -------- --------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss) ............................ $ 206 $ 198 $ 313 $(2,688) $ 237
------- ------- ------- ------- -------
Adjustments to reconcile net income/(loss)
to net cash flows from operating activities:
Extraordinary Item - net of tax .............. -- -- -- 3,204 --
Depreciation and Amortization ................ 55 68 136 224 381
Amortization of Nuclear Fuel ................. 27 45 130 92 94
Recovery of Electric Energy Costs ............ -- -- -- 20 130
Provision for Deferred Income Taxes
and ITC - net .............................. 12 (18) (69) (70) (35)
Demand Side Management ....................... -- -- -- (64) (29)
Net changes in certain current assets
and liabilities:
Materials and Supplies and Fuel .......... -- (25) (30) 51 (19)
Accounts Receivable ...................... (10) (144) 161 10 (41)
Accounts Payable ......................... 289 220 195 44 (29)
Other Current Assets and Liabilities ..... 79 (98) (89) (22) (28)
Other ........................................ (87) (26) (46) (31) 30
------- ------- ------- ------- -------
Net Cash Provided By Operating Activities ...... 571 220 701 770 691
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment ... (741) (177) (405) (92) (265)
Acquisition of Generation Businesses ......... -- -- (74) -- --
Contribution to Decommissioning Funds
and Other Special Funds ..................... (15) (15) (29) (115) (63)
Other ........................................ (31) (5) (34) (24) (5)
------- ------- ------- ------- -------
Net Cash Used In Investing Activities .......... (787) (197) (542) (231) (333)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Change in Short-Term Debt ................ -- (685) -- -- --
Net Change in Commercial Paper and Loans ..... -- -- (685) 262 (175)
Repayment of Note Payable due to
Affiliated Company ......................... (2,786) -- -- -- --
Issuance of Long-Term Debt ................... 1,791 -- -- -- --
Net Change in Capitalization Activity ........ -- 480 319 (746) (177)
Proceeds from Contributed Capital ............ 1,200 120 150 -- --
------- ------- ------- ------- -------
Net Cash Provided By (Used In)
Financing Activities .................... 205 (85) (216) (484) (352)
------- ------- ------- ------- -------
Net Change In Cash And Cash Equivalents ........ (11) (62) (57) 55 6
Cash And Cash Equivalents At Beginning
Of Period ..................................... 20 77 77 22 16
------- ------- ------- ------- -------
Cash And Cash Equivalents At End Of Period ..... $ 9 $ 15 $ 20 $ 77 $ 22
======= ======= ======= ======= =======
Income Taxes Paid .............................. $ 89 $ 190 $ 242 $ 306 $ 211
Interest Paid .................................. $ 113 $ 42 $ 159 $ 104 $ 212
|
See Notes to Consolidated Financial Statements.
PSEG POWER LLC
CONSOLIDATED STATEMENTS OF CAPITALIZATION AND MEMBER'S EQUITY
(Millions of Dollars)
Total
Accumulated Capitalization
Other Total and
Contributed Retained Comprehensive Basis Member's Member's
Capital Earnings Loss Adjustment Equity Capitalization Equity
------- -------- ---- ---------- ------ -------------- ------
Balance as of January 1, 1998 ... $ -- $ -- $ -- $ -- $ -- $ 5,124 $ 5,124
Net Income (1) ................ -- -- -- -- -- 237 237
Net Transfers to PSEG ......... -- -- -- -- -- (169) (169)
Cash Dividends Paid ........... -- -- -- -- -- (5) (5)
------ ---- ---- ----- ------- ------- -------
Balance as of December 31, 1998 . -- -- -- -- -- 5,187 5,187
------ ---- ---- ----- ------- ------- -------
Net Loss (1) .................. -- -- -- -- -- (2,688) (2,688)
Net Transfers to PSEG ......... -- -- -- -- -- (1,224) (1,224)
Cash Dividends Paid ........... -- -- -- -- -- (3) (3)
------ ---- ---- ----- ------- ------- -------
Balance as of December 31, 1999 . -- -- -- -- -- 1,272 1,272
------ ---- ---- ----- ------- ------- -------
Net Income (1) ................ -- 104 -- -- 104 209 313
Contributed Capital ........... 150 -- -- -- 150 -- 150
Net Transfers to PSEG ......... -- -- -- -- (1,481) (1,481)
Transfer of Generation Business -- -- -- (986) (986) -- (986)
------ ---- ---- ----- ------- ------- -------
Balance as of December 31, 2000 . $ 150 $104 -- $(986) $ (732) -- $ (732)
------ ---- ---- ----- ------- ------- -------
Net Income (1) ................ -- 206 -- -- 206 -- 206
Other Comprehensive Income
(Loss) ...................... -- -- (23) -- (23) -- (23)
Contributed Capital ........... 1,200 -- -- -- 1,200 -- 1,200
------ ---- ---- ----- ------- ------- -------
Balance as of June 30, 2001
(unaudited) .................... $1,350 $310 $(23) $(986) $ 651 $ -- $ 651
====== ==== ==== ===== ======= ======= =======
|
See Notes to Consolidated Financial Statements.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
PSEG Power LLC (Power) is a wholly-owned subsidiary of Public Service Enterprise Group Incorporated (PSEG). Power has three principal direct wholly-owned subsidiaries: PSEG Nuclear LLC (Nuclear), PSEG Fossil LLC (Fossil) and PSEG Energy Resources & Trade LLC (ER&T). Power and its subsidiaries were established to acquire, own and operate the electric generation-related business of their affiliate, Public Service Electric and Gas Company (PSE&G), pursuant to the Final Decision and Order (Final Order) issued by the New Jersey Board of Public Utilities (BPU) under the New Jersey Electric Discount and Energy Competition Act (Energy Competition Act) discussed below. Power is engaged in generation, wholesale energy marketing and trading of energy. Power provides energy and capacity to PSE&G under certain contracts and markets electricity, natural gas, capacity and ancillary services throughout the Eastern United States. Power also has a finance company subsidiary, PSEG Power Capital Investment Co. (Power Capital), which provides certain financing for Power's other subsidiaries.
Purchase of Generation-Related Business from PSE&G
In August 2000, pursuant to the Final Order, Power purchased PSE&G's generation-related property, plant and equipment for $2.443 billion, as specified in the Final Order, plus $343 million for other generation-related assets and liabilities (the Transaction) in exchange for a $2.786 billion promissory note with an interest rate of 14.23%, representing PSE&G's weighted average cost of capital. Power repaid the promissory note on January 31, 2001, with funds provided from PSEG in the form of equity and loans.
Because the assets were purchased from an affiliate, Power recorded the assets at PSE&G's carrying value. The difference between the total purchase price and the net book value of the generation-related assets and liabilities was recorded as a Basis Adjustment reducing Power's equity.
Basis of Presentation
The consolidated financial statements of Power present the historical financial position, results of operations and net cash flows of the generation-related business of PSE&G prior to the Transaction in August 2000, and are not necessarily indicative of the financial position, results of operations or net cash flows that would have existed had the generation-related business been an independent company during the periods presented. For periods prior to the Transaction, any references to Power contained herein refer to Power's business and the generation-related business of PSE&G prior to the purchase of the generation-related business from PSE&G.
Certain information in these consolidated financial statements relating to the results of operations and financial condition prior to the Transaction was derived from the historical financial statements of PSE&G which have been prepared in accordance with generally accepted accounting principles (GAAP). Various allocation methodologies were employed to separate the results of operations and financial condition of the generation-related portion of PSE&G's business from PSE&G's historical financial statements prior to the Transaction. Prior to the Transaction, revenues included the generation component of revenue from PSE&G's operations and any generation-related revenues, such as ancillary services and wholesale energy activity. Expenses, such as energy costs, operations and maintenance and depreciation and amortization, and assets, such as property, plant and equipment, materials and supplies and fuel, were specifically identified by function and reported accordingly for Power's operations. Various allocations were used to disaggregate other common expenses, assets and liabilities between Power and PSE&G's regulated transmission and distribution operations. Interest and preferred stock dividends were calculated based upon an allocation methodology that charged Power with financing and equity costs from PSE&G in proportion to its share of total net property, plant
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and equipment prior to the effects of deregulation discussed below. These methodologies use the assumption that Power had operated as a separate, regulated company prior to April 1, 1999. On the date of the Transaction, certain of the assets and liabilities which were allocated in the historical consolidated financial statements, such as other postretirement benefits (OPEB) and working capital, remained with PSE&G.
Management believes that these allocation methodologies are reasonable. Had Power actually existed as a separate company, its results could have significantly differed from those presented herein. In addition, future results of operations, financial position and net cash flows could materially differ from the historical results presented.
The unaudited financial information included herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented.
Summary of Significant Accounting Policies
Accounting for the Effects of Regulation
Prior to April 1999, Power's financial statements were prepared in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71 recognizes that accounting for rate-regulated enterprises should reflect the relationship of costs and revenues as determined by regulators. Under SFAS 71, a regulated entity must defer recognition of costs (a regulatory asset) or recognize obligations (a regulatory liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future revenues.
Effective April 1, 1999, Power discontinued the application of SFAS 71 and recorded an extraordinary charge consistent with the requirements of Emerging Issues Task Force (EITF) Issue No. 97-4, "Deregulation of the Pricing of Electricity - Issues Related to the Application of FASB Statements No. 71 and No. 101" (EITF 97-4) and SFAS 101, "Regulated Enterprises--Accounting for the Discontinuation of Application of FASB Statement No. 71" (SFAS 101). The extraordinary charge consisted primarily of the write-down of Power's nuclear and fossil generating stations in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). A discounted cash flow analysis was performed on a unit-by-unit basis to determine the amount of the impairment. As a result of this impairment analysis, the net book value of the generating stations was reduced by approximately $5.0 billion (pre-tax) or approximately $3.1 billion (after-tax).
In addition to the impairment of Power's generating stations, the extraordinary charge consisted of various accounting adjustments to reflect the absence of cost of service regulation for electric generation in the future. The adjustments related primarily to materials and supplies, general plant items and liabilities for certain contractual and environmental obligations.
Other accounting impacts of the discontinuation of SFAS 71 included reclassifying the Accrued Nuclear Decommissioning Reserve and the Accrued Cost of Removal for generation-related assets from Accumulated Depreciation to Long-Term Liabilities.
Consolidation Policy
The consolidated statements include the accounts for Power and its subsidiaries. Power and its subsidiaries consolidate those entities in which they have a controlling interest.
Reclassifications
Certain reclassifications of prior period data have been made to conform with the current presentation.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant and Equipment
Prior to April 1999, additions to plant and replacement of units of property were capitalized at original cost. The cost of maintenance, repair and replacement of minor items of property was charged to the appropriate expense accounts. Also prior to April 1999, the original cost less net salvage value of units of depreciable property retired or otherwise disposed of was charged to accumulated depreciation.
Beginning in April 1999, and in concert with the discontinuation of SFAS 71, Power changed its capitalization policy. Under its new capitalization policy, Power only capitalizes costs to acquire new assets or costs which increase either the capacity or the life of an asset or represent the replacement of a retired asset. All other costs are expensed as incurred. Also, under its revised policy, upon retirement of an asset, the portion of Power's future retirements which have not been fully depreciated will impact earnings.
Depreciation and Amortization
Depreciation is computed under the straight-line method for each class of depreciable property. Prior to April 1999, depreciation rates were reviewed periodically and adjustments were made as approved by the BPU. Depreciation rates stated in percentages of original cost of depreciable property in 1999 (prior to April 1, 1999) and 1998 were 3.52%. Prior to April 1999, Power had certain regulatory assets embedded in property, plant and equipment as a result of the use of a level of depreciation expense in the rate-making process that differed from the amount that would have been recorded under GAAP for non-regulated companies.
Beginning in April 1999, and in concert with the discontinuation of SFAS 71, Power calculates depreciation on generation-related assets based on the assets' estimated useful lives determined by Power, rather than using depreciation rates prescribed by the BPU in rate proceedings. The estimated useful lives are from 3 to 20 years for general plant. The estimated useful lives for buildings and generating stations are as follows:
Class of Property Estimated Useful Life (Years) ----------------- ----------------------------- Fossil Production 25-40 years Nuclear Generation 30 years Pumped Storage 40 years |
Nuclear fuel burnup costs are charged to fuel expense on a units-of-production basis over the estimated life of the fuel. Rates for the recovery of fuel used at all nuclear units include a provision of one mill per kilowatt-hour (kWh) of nuclear generation for spent fuel disposal costs.
Allowance for Funds Used During Construction (AFDC) and Interest Capitalized During Construction (IDC)
AFDC represented the cost of debt and equity funds used to finance the construction of new facilities. The amount of AFDC capitalized was reported in the Consolidated Statements of Income as a reduction of interest charges. The rates used for calculating AFDC in 1999 (prior to April 1, 1999) and 1998 were 5.29% and 6.06%, respectively. Effective April 1, 1999, Power no longer calculates AFDC. Interest related to capital projects is now capitalized in accordance with SFAS No. 34, "Capitalization of Interest Cost."
IDC represents the cost of debt used to finance the construction of non-utility facilities. The amount of IDC capitalized is reported in the Consolidated Statements of Income as a reduction of interest charges. The weighted average rate used for calculating IDC in 2000 was 9.98%.
Revenues and Energy Costs
Revenues are recorded based on energy and capacity sold and services rendered to customers during each accounting period. Prior to August 1, 1999, revenue was calculated by unbundling the
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
generation component of revenue from PSE&G's bundled rate for the generation, transmission and distribution of energy and adding any other generation-related revenues, such as ancillary services and wholesale energy trading activity. Also, prior to August 1, 1999, Power recorded unbilled revenues representing the estimated amount customers would be billed for services rendered from the time meters were last read to the end of the respective accounting period. Beginning on August 1, 1999, electric rates charged to customers were unbundled and the generation, transmission, distribution and other components of the total rate became separate charges. Effective with that date, revenue represents the amount recorded for the energy and capacity provided to meet the basic generation service (BGS) requirements to PSE&G combined with other generation-related revenues, such as ancillary services, wholesale energy trading activity and amounts recorded for the market transition charge (MTC) (see Note 4. Regulatory Issues and Accounting Impacts of Deregulation). Following the Transaction, Power bills, and periodically settles with, PSE&G for BGS requirements and MTC.
Prior to August 1, 1999, fuel revenues and expenses and purchased power costs flowed through the Electric Levelized Energy Adjustment Clause (LEAC) mechanism and variances in fuel revenues and expenses and purchased power costs were subject to deferral accounting and thus had no direct effect on earnings. Any LEAC underrecoveries or overrecoveries, together with interest (in the case of net overrecoveries), were deferred and included in the results of operations in the period in which they were reflected in rates. Effective January 1, 1998, the amount included for LEAC under/overrecovery represented the difference between fuel-related revenues and fuel-related expenses which included electricity purchases at the PJM Interconnection, LLC (PJM) market clearing price. Effective April 1, 1998, PJM, as an independent system operator (ISO), replaced the PJM uniform market clearing price with locational marginal pricing (LMP) for determining the market clearing price to energy providers. Due to the effects of congestion and constraints in the PJM market, LMP may be different for the various delivery points in PJM. Due to the discontinuation of the LEAC mechanism on August 1, 1999, earnings volatility increased since the unregulated electric generation business ceased to follow deferral accounting. Power now bears the full risks and rewards of managing the fixed price BGS contract and the changes in nuclear and fossil generating fuel costs and purchased power costs.
Materials and Supplies
The carrying value of the materials and supplies for Power and its subsidiaries is valued at lower of cost or market.
Commodity-Related Contracts
Power engages in electricity and natural gas commodity forwards, futures, swaps and option purchases and sales with counterparties to manage exposure to electricity and natural gas price risk. Certain contracts, in conjunction with owned electric generating capacity, are designed to manage price risk exposure for electric customer commitments. Unrealized gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets and liabilities and are ultimately recognized in income when the related asset or liability is realized or settled. Unrealized gains and losses related to qualifying hedges of firm commitments or anticipated transactions are also deferred and recognized in income when the hedged transaction occurs.
Power also enters into forwards, futures, swaps and options that are not used to manage price risk exposure for commitments to customers. Effective January 1, 1999, Power adopted EITF 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities" (EITF 98-10). EITF 98-10 requires that energy trading contracts be marked to market with gains and losses included in current earnings.
Income Taxes
Power and its subsidiaries join in the filing of a consolidated federal income tax return by PSEG. Power and its subsidiaries will record their tax liabilities as though they were filing separate returns and will record tax benefits to the extent that PSEG is able to receive those benefits. Deferred income taxes
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
are provided for the temporary differences between book and taxable income, resulting primarily from the use of accelerated depreciation for tax purposes and the recognition of unrealized gains for book purposes. Power defers and amortizes investment and energy tax credits over the lives of the related properties.
Impairment of Long-Lived Assets
Power reviews for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon deregulation, Power evaluated the recoverability of its assets and recorded an extraordinary, non-cash charge to earnings. For the impact of the application of SFAS 121, see Note 4. Regulatory Issues and Accounting Impacts of Deregulation.
Use of Estimates
The process of preparing financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Also, such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. In addition to these estimates, see Basis of Presentation for a discussion of the estimates used and methodologies employed to derive Power's historical financial statements.
NOTE 2. CAPITALIZATION
Prior to the Transaction, PSE&G provided the necessary capital to finance its generation-related business. PSE&G's capital structure consisted of 41.1% Long-Term Debt, 49.8% Common Equity and 9.1% Preferred Securities as of December 31, 1999. Power had net capitalization of $1.272 billion as of December 31, 1999. This amount represents the amount of capital investments made by PSE&G for its generation-related business and Power's allocated capitalization prior to the formation of the separate entity. Interest and preferred stock dividends were calculated based upon an allocation methodology that charged Power with financing and equity costs from PSE&G in proportion to its share of total net property, plant and equipment prior to the effects of deregulation. The $2.786 billion promissory note to PSE&G is classified as long term, due to the ability and intent of Power to settle this note through equity infusions and the anticipated issuance of long-term debt. On January 31, 2001, through equity infusions of $1.2 billion from PSEG and demand loans of $1.586 billion from PSEG, Power repaid the promissory note to PSE&G. Power's issuance of long-term debt in 2001 was fully and unconditionally and jointly and severally guaranteed by Fossil, Nuclear and ER&T. All other direct and indirect subsidiaries of Power are minor and Power has no independent assets or operations.
PSE&G Fuel Corporation (Fuelco), a wholly-owned subsidiary of PSE&G, had a $125 million commercial paper program to finance a 42.49% ownership share of the Peach Bottom Atomic Power Station Units 2 and 3 (Peach Bottom) nuclear fuel, supported by a $125 million revolving credit facility with a group of banks. PSE&G guaranteed repayment of Fuelco's respective obligations under this program. Fuelco had commercial paper of $73 million outstanding as of December 31, 1999. As of December 31, 1999, there was no debt outstanding under the revolving credit facility. As a result of the Transaction, Fuelco's commercial paper program was discontinued and financing of Peach Bottom nuclear fuel is being funded through Power. The revolving credit facility supporting this program was terminated on September 11, 2000.
NOTE 3. ACCOUNTING MATTERS
In July 2000, EITF 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" (EITF 99-19), provided guidance on the issue of whether a company should report revenue based on the gross amount billed to the customer or the net amount retained. The guidance states that whether a company should recognize revenue based on the gross amount billed or the net retained requires significant judgement, which depends on the relevant facts and circumstances. In the first quarter of
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2001, based on the analysis and interpretation of EITF 99-19, Power reported all the revenues and cost of goods sold on a gross basis for the physical bilateral energy sales and purchases and capacity sales and purchases. Power continues to report swaps, futures, option premiums, firm transmission rights, transmission congestion credits, and purchases and sales of emission allowances on a net basis. The prior year financial statements have been reclassified accordingly.
On January 1, 2001, Power adopted Statement of Financial Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", (SFAS 133) as amended. Power did not have a transition adjustment. Subsequent to December 31, 2000, Power entered into certain derivative instruments, which have been designated as cash flow hedges. As of June 30, 2001, the fair value of Power's derivative liabilities was $34.2 million and has been recorded on the consolidated balance sheet in Other Current Liabilities (unaudited). See Note 5. Financial Instruments and Risk Management.
The Financial Accounting Standards Board's (FASB) Derivative Implementation Group (DIG) has issued guidance, effective July 1, 2001, regarding certain derivative contracts and the eligibility of those contracts for the normal purchases and sales exceptions. Power is currently evaluating this guidance and cannot predict the impact on its financial position or results of operations, however, such impact could be material (unaudited).
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" (SFAS 141). SFAS 141, was effective July 1, 2001 and requires that all business combinations subsequent to that date be accounted for under the purchase method. Power is currently evaluating this guidance and does not believe it will have a substantial effect on its growth strategy. Power does not anticipate that there will be a material impact on its financial position or results of operations (unaudited).
Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Under SFAS 142, goodwill is considered a nonamortizable asset and will be subject to an annual review for impairment and an interim review when required by events or circumstances. SFAS 142 also defines intangible assets, other than goodwill, that may arise in a purchase combination. SFAS 142 is effective for all fiscal years beginning after December 15, 2001. Power is currently evaluating this guidance and does not believe it will have a material impact on its financial position or results of operations (unaudited).
Also in July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143). Under SFAS 143, the fair value of a liability for an asset retirement obligation should be recorded in the period in which it is incurred. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years beginning after June 15, 2002. Power is currently evaluating this guidance and cannot predict the impact on its financial position or results of operations, however, such impact could be material (unaudited).
NOTE 4. REGULATORY ISSUES AND ACCOUNTING IMPACTS OF DEREGULATION
New Jersey Energy Master Plan Proceedings and Related Orders
In August 1999, following the enactment of the Energy Competition Act, the BPU rendered a Final Order relating to PSE&G's rate unbundling, stranded costs and restructuring proceedings providing, among other things, for the transfer to Power of all of PSE&G's electric generation facilities, plant and equipment for $2.443 billion and all other related property, including materials, supplies and fuel at the net book value thereof, together with associated rights and liabilities.
Also in the Final Order, the BPU concluded that PSE&G should recover up to $2.94 billion (net of tax) of its generation-related stranded costs, through securitization of $2.4 billion and an opportunity to recover up to $540 million (net of tax) of its unsecuritized generation-related stranded costs on a net present value basis. The $540 million is subject to recovery through a Market Transition Charge (MTC)
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
which is to be collected over a four year period ending on July 31, 2003 and is remitted to Power along with Basic Generation Service (BGS) revenues as part of PSE&G's BGS contract with Power.
In October and November 1999, appeals were filed challenging the validity
of the Final Order. In April 2000, the Appellate Division of the New Jersey
Superior Court (Appellate Division) unanimously rejected the arguments made by
the New Jersey Business Users' Coalition, the New Jersey Ratepayer Advocate
(RPA) and Co-Steel Raritan (Co-Steel), an individual PSE&G customer (appellants)
and affirmed the Final Order. Thereafter, the appellants requested the New
Jersey Supreme Court to review certain aspects of the Appellate Division
decision. On December 6, 2000, the New Jersey Supreme Court affirmed the
Appellate Division's decision by a vote of 4 to 1. The New Jersey Supreme
Court's written opinion in the matter was issued on May 18, 2000.
On March 6, 2001, Co-Steel filed a Petition of Writ of Certiorari (Petition) with the United States Supreme Court seeking limited review of the New Jersey Supreme Court decision, the granting of which is entirely discretionary with the Court. Briefs in opposition to the Petition have been filed. The outcome of this action cannot be predicted.
As a result of this appellate review, PSE&G's securitization transaction was delayed until the first quarter of 2001, causing a delay in the implementation of the Securitization Transition Charge (STC) which would have reduced the MTC. In order to properly recognize the recovery of the allowed unsecuritized stranded costs over the transition period, Power recorded a charge to net income of $88 million, pre-tax, or $52 million, after tax, in the third quarter of 2000 for the cumulative amount of estimated collections in excess of the allowed unsecuritized stranded costs from August 1, 1999 through September 30, 2000. As of June 30, 2001 (unaudited), the amount of estimated collections in excess of the allowed unsecuritized stranded costs was $146 million.
NOTE 5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Power's operations give rise to exposure to market risks from changes in commodity prices, interest rates and securities prices. Power's policy is to use derivative financial instruments for the purpose of managing market risk consistent with its business plans and prudent business practices.
Commodity-Related Instruments
At December 31, 2000 and 1999, Power held or issued commodity and financial instruments that reduce exposure to market fluctuations from factors such as weather, environmental policies, changes in demand, changes in supply and other events. These instruments, in conjunction with owned electric generating capacity, are designed to cover estimated electric customer commitments under BGS and other contracts. Power uses futures, forwards, swaps and options to manage and hedge price risk related to these market exposures.
As of June 30, 2001 (unaudited), Power had entered into 18 million mWh of electric physical forward contracts and 30 million MMBTU of gas futures and swaps to hedge its forecasted BGS requirements and gas purchases requirements for generation with a maximum term of approximately one year, which qualified for hedge accounting treatment under SFAS 133. These commodity and financial instruments are marked to market based on management's best estimates using over-the-counter quotations, exchange prices, volatility factors and other valuation methodology. For the quarter ended June 30, 2001 (unaudited), the total negative mark to market valuation of $34 million was recorded as a derivative liability offset by negative Other Comprehensive Income (OCI) and deferred taxes of $21 million and $13 million, respectively.
As discussed in Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, Power implemented EITF 98-10 effective January 1, 1999. As a result, Power's energy trading contracts have been marked to market and gains and losses from such contracts were included in earnings. Power recorded $6 million of unrealized gains in the six months ended June 30,
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2001 and $55 million and $7 million of unrealized gains in the years ended December 31, 2000 and 1999, respectively, related to these contracts.
The fair value of the financial instruments that are marked to market are based on management's best estimates using over-the-counter quotations, exchange prices, volatility factors and valuation methodology. The estimates presented herein are not necessarily indicative of the amounts that Power could realize in a current market exchange. The fair values as of June 30, 2001 and December 31, 2000 and 1999 and the average fair values for the periods then ended of Power's significant financial instruments related to energy commodities are summarized in the following table:
June 30, 2001 December 31, 2000
-------------------- ------------------
Average Average
Fair Fair Fair Fair
Value Value Value Value
----- --------- ----- --------
(Millions of Dollars) (Millions of Dollars)
(Unaudited)
Futures and Options -- NYMEX ........................... $(3) $ (1) $ 6 $(1)
Physical forwards ...................................... 25 15 13 14
Options -- OTC ......................................... (7) 66 184 68
Swaps .................................................. 31 (39) (138) 23
Emissions Allowances ................................... 28 23 6 9
|
Power routinely enters into exchange traded futures and options transactions for electricity and natural gas as part of its wholesale trading operations. Generally, exchange-traded futures contracts require deposit of margin cash, the amount of which is subject to change based on market movement and in accordance with exchange rules. The amount of the margin deposits at June 30, 2001 (unaudited) and December 31, 2000 and 1999 were approximately $4 million and $1 million, respectively.
Credit Risk
Credit risk relates to the risk of loss that Power would incur as a result of non-performance by counterparties, pursuant to the terms of their contractual obligations. Power has established credit policies that it believes significantly minimize its exposure to credit risk. These policies include an evaluation of potential counterparties' financial condition (including credit rating), collateral requirements under certain circumstances and the use of standardized agreements, which may allow for the netting of positive and negative exposures associated with a single counterparty.
Two major California utilities, including Pacific Gas & Electric Company (PG&E), have significantly underrecovered from customers costs paid for power. As a consequence, these utilities have defaulted under a variety of contractual obligations. On April 6, 2001, PG&E filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Affiliates of these California utilities have entered into physical forward and swap contracts with ER&T for delivery in the PJM area. Although these counterparties have met their obligations to date and are still investment grade entities, ER&T has not entered into any additional contracts with either counterparty since December 2000. ER&T's exposure to these entities under these contracts is not material and management does not believe that any reserve is presently necessary.
Interest Rate Swaps
In February 2001, Power entered into various forward-interest rate swaps, with an aggregate notional amount of $400 million, to hedge the interest rate risk related to the anticipated issuance of debt. On April 11, 2001, Power issued $1.8 billion in fixed-rate Senior Notes and closed out the forward starting interest rate swaps. The aggregate loss, net of tax, of $3.2 million (unaudited) was classified as Accumulated Other Comprehensive Loss and is being amortized and charged to interest expense over the life of the debt.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Current Assets and Current Liabilities
The fair value of current assets and current liabilities approximate their carrying amounts.
NOTE 6. CASH AND CASH EQUIVALENTS
The December 31, 2000 and 1999 balances consist primarily of working funds and highly liquid marketable securities (commercial paper and money market funds) with an original maturity of three months or less.
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
Nuclear Insurance Coverages and Assessments
At December 31, 2000, Power's insurance coverages and maximum retrospective assessments for its nuclear operations are as follows:
Power Maximum
Type and Source of Coverages Total Site Coverage Assessments
-------------------------- ----------------- --------------
(Millions of Dollars)
Public and Nuclear Worker Liability (Primary Layer):
American Nuclear Insurers .......................................... $ 200.0(A) $ 9.1
Nuclear Liability (Excess Layer):
Price-Anderson Act ................................................. 9,338.1(B) 253.3
-------- ------
Nuclear Liability Total .......................................... $9,538.1(C) $262.4
======== ======
Property Damage (Primary Layer):
Nuclear Electric Insurance Limited (NEIL) Primary
(Salem/Hope Creek/Peach Bottom) .................................... $ 500.0 $ 7.4
Property Damage (Excess Layers):
NEIL II (Salem/Hope Creek/Peach Bottom) ............................ 1,250.0 5.5
NEIL Blanket Excess (Salem/Hope Creek/Peach Bottom) ................ 1,000.0(D) 0.9
-------- ------
Property Damage Total (Per Site) ................................... $2,750.0 $ 13.8
======== ======
Accidental Outage:
NEIL I (Salem and Peach Bottom) .................................... $ 210.0(E) $ 4.3
NEIL I (Hope Creek) ................................................ 465.5 $ 2.3
-------- ------
Replacement Power Total ......................................... $ 675.5 $ 6.6
======== ======
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(B) Retrospective premium program under the Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended. Nuclear is subject to retrospective assessment with respect to loss from an incident at any licensed nuclear reactor in the United States. This retrospective assessment can be adjusted for inflation every five years. The last adjustment was effective as of August 20, 1998. This retrospective program is in excess of the Public and Nuclear Worker Liability primary layers.
(C) Limit of liability under the Price-Anderson Act for each nuclear incident.
(D) For property limits in excess of $1.75 billion, Power participates in a Blanket Limit policy where the $1 billion limit is shared by Amergen, Exelon, and Power among the Clinton, Oyster Creek, TMI-1, Limerick, Peach Bottom, Salem and Hope Creek sites. This limit is not subject to reinstatement in the event of a loss. Participation in this program significantly reduces Power's premium and the associated potential assessment.
(E) Salem and Peach Bottom have an aggregate indemnity limit based on a weekly indemnity of $1.5 million for 52 weeks followed by 80% of the weekly indemnity for 110 weeks. Hope Creek has an aggregate indemnity limit based on a weekly indemnity of $3.3 million for 52 weeks followed by 80% of the weekly indemnity for 110 weeks.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Price-Anderson Act sets the "limit of liability" for claims that could arise from an incident involving any licensed nuclear facility in the nation. The "limit of liability" is based on the number of licensed nuclear reactors and is adjusted at least every five years based on the Consumer Price Index. The current "limit of liability" is $9.5 billion. All utilities owning a nuclear reactor, including Nuclear, have provided for this exposure through a combination of private insurance and mandatory participation in a financial protection pool as established by the Price-Anderson Act. Under the Price-Anderson Act, each party with an ownership interest in a nuclear reactor can be assessed its share of $88.1 million per reactor per incident, payable at $10 million per reactor per incident per year. If the damages exceed the "limit of liability," the President is to submit to Congress a plan for providing additional compensation to the injured parties. Congress could impose further revenue raising measures on the nuclear industry to pay claims. Nuclear's maximum aggregate assessment per incident is $253.3 million (based on Nuclear's ownership interests in Hope Creek, Peach Bottom and Salem) and its maximum aggregate annual assessment per incident is $28.8 million. This does not include the $9.1 million that could be assessed under the nuclear worker policies.
Further, a decision by the U.S. Supreme Court, not involving Nuclear, has held that the Price-Anderson Act did not preclude awards based on state law claims for punitive damages.
Power is a member of an industry mutual insurance company, Nuclear Electric Insurance Limited (NEIL). NEIL provides the primary property and decontamination liability insurance at Salem/Hope Creek and Peach Bottom. NEIL also provides excess property insurance through its decontamination liability, decommissioning liability, and excess property policy and replacement power coverage through its accidental outage policy. NEIL policies may make retrospective premium assessments in case of adverse loss experience. Power's maximum potential liabilities under these assessments are included in the table and notes above. Certain provisions in the NEIL policies provide that the insurer may suspend coverage with respect to all nuclear units on a site without notice if the NRC suspends or revokes the operating license for any unit on a site, issues a shutdown order with respect to such unit or issues a confirmatory order keeping such unit down.
Pending Asset Purchases
Delmarva Power and Light Company (DP&L) and Atlantic City Electric Company (ACE), subsidiaries of Conectiv, are co-owners of the Salem Nuclear Generating Station (Salem) and the Peach Bottom Atomic Power Station (Peach Bottom) with Power and Exelon Generation LLC (Exelon). Additionally, Power and ACE are co-owners of the Hope Creek Generating Station (Hope Creek). In 1999, Power entered into agreements with Conectiv, DP&L, ACE and Exelon pursuant to which Power would acquire all of DP&L's and ACE's interests in Salem and Hope Creek and half of DP&L's and ACE's interest in Peach Bottom (a total of 544 MW) for a purchase price of $15.4 million plus the net book value of nuclear fuel at the respective closing dates. In December 2000, the DP&L portion of the transaction (246 MW) closed. In October 2000, Power entered into Wholesale Transaction Confirmation letter agreements with ACE under which Power obtains 298 MW of generation capacity and output representing the portion of ACE's interest in Salem, Hope Creek and Peach Bottom to be acquired. Under this agreement, Power receives all revenue and pays all expenses associated with this 298 MW of generating capacity and output through the date that the purchase transaction closes. Power has been advised by Conectiv that the Ratepayer Advocate, by letter to the BPU dated October 26, 2000, has objected to and challenged this financial transaction.
Hazardous Waste
The New Jersey Department of Environmental Protection (NJDEP) regulations concerning site investigation and remediation require an ecological evaluation of potential injuries to natural resources in connection with a remedial investigation of contaminated sites. The NJDEP is presently working with
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
industry to develop procedures for implementing these regulations. These regulations may substantially increase the costs of remedial investigations and remediations, where necessary, particularly at sites situated on surface water bodies. Power and predecessor companies owned and/or operated certain facilities situated on surface water bodies, certain of which are currently the subject of remedial activities. Power does not anticipate that the compliance with these regulations will have a material adverse effect on its financial position, results of operations or net cash flows.
Passaic River Site
The Environmental Protection Agency (EPA) has determined that a six mile stretch of the Passaic River in Newark, New Jersey is a "facility" within the meaning of that term under the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and that, to date, at least thirteen corporations, including Power, may be potentially liable for performing required remedial actions to address potential environmental pollution at the Passaic River "facility". In a separate matter, Power and certain of its predecessors operated industrial facilities at properties within the Passaic River "facility", including the Essex Generating Station. Power cannot predict what action, if any, the EPA or any third party may take against Power with respect to these matters, or in such event, what costs Power may incur to address any such claims. However, such costs may be material.
New Source Review
The EPA and NJDEP issued a demand to PSE&G in March 2000 under Section 114 of the Clean Air Act requiring information to assess whether projects completed since 1978 at the Hudson and Mercer coal burning units were implemented in accordance with applicable New Source Review regulations. As a result of the transfer of the generating assets by PSE&G to Power. The responsibility for these environmental requirements rests with Power. Power completed its response to the Section 114 information request in November 2000. Based upon the information provided to the EPA it is likely that the EPA will seek to enforce the requirements of the New Source Review regulations at Hudson 2 and Mercer 1 and 2. Power is currently in discussions with the EPA and NJDEP to resolve the matter. However, it is uncertain whether these discussions will be successful and capital costs of compliance could be material.
Subsequent to December 31, 2000, the EPA indicated that it is considering enforcement action against Power under its PSD rules relating to the construction that is currently in progress for Bergen 2, scheduled for operation in 2002. The EPA maintains that PSD requirements are applicable to Bergen 2, thereby requiring Power to obtain a permit prior to the commencement of construction. To obtain such a permit, an applicant must demonstrate that addition of the additional emission source will not cause significant deterioration of the air shed in the vicinity of the plant. The time required to obtain such a permit is estimated at 6 to 12 months. Power vigorously disputes that PSD requirements are applicable to Bergen 2 and is continuing construction. The NJDEP has informally indicated it agrees with Power's position but has also advised that the ultimate authority to decide PSD applicability rests solely with the EPA. Settlement discussions are underway with the EPA and NJDEP. At June 30, 2001 (unaudited), Power had expended approximately $179 million in the construction of Bergen 2.
NOTE 8. NUCLEAR DECOMMISSIONING TRUST
Power has an ownership interest in five nuclear units. In accordance with rate orders received from the BPU, PSE&G had established an external master nuclear decommissioning trust for all its nuclear units that were transferred to Power. This trust now resides with Nuclear and contains two separate funds: a qualified fund and a non-qualified fund. Section 468A of the Internal Revenue Code limits the amount of money that can be contributed into a "qualified" fund. Contributions made into a qualified fund
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
are tax deductible. PSE&G estimated the total cost of decommissioning its share of these five nuclear units at $986 million in year end 1995 dollars (the year that the most recent site specific estimates were prepared), excluding contingencies.
Contributions made into the Nuclear Decommissioning Trust Funds are invested in debt and equity securities. Gains and losses on the Nuclear Decommissioning Trust Funds do not affect earnings. As a result of the Energy Master Plan Proceedings, the recovery of these investments will be continued as part of the societal benefits charge levied by PSE&G on its customers. PSE&G will continue to collect this $29.6 million charge and remit it to Nuclear.
With the purchase of Conectiv's interests in Salem, Hope Creek and Peach Bottom, Power received a transfer of $49.7 million representing Conectiv's Nuclear Decommissioning Trust Funds and the related liabilities for those stations.
NOTE 9. INCOME TAXES
The following are the components of income tax expense:
2000 1999 1998
---- ---- ----
(Millions of Dollars)
Income Taxes:
Current provision--Federal and State $ 209 $ 311 $ 206
Provision for deferred income taxes (1) 5 (35)
Purchased State Tax Benefits ....... -- (21) --
Investment tax credits--net ........ -- (4) (15)
----- ----- -----
Total income tax provision ......... $ 208 $ 291 $ 156
===== ===== =====
|
Reconciliation between total income tax provision and tax computed at the statutory tax rate on pretax income follows:
2000 1999 1998
----- ----- -----
(Millions of Dollars)
Tax computed at Federal statutory rate of 35% .. $ 182 $ 282 $ 138
Increase (decrease) attributable to flow-through
of certain tax adjustments:
Depreciation--plant related .................. -- 16 21
Amortization of investment tax credits ....... -- (4) (15)
New Jersey Corporate Business Tax ............ 30 27 35
Other ........................................ (4) (30) (23)
----- ----- -----
Subtotal ................................... 26 9 18
----- ----- -----
Total income tax provision ................. $ 208 $ 291 $ 156
----- ----- -----
Effective income tax rate ...................... 39.92% 36.06% 39.69%
===== ===== =====
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Power provides deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for rate-making purposes.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred Income Taxes
2000 1999
---- ----
(Millions of Dollars)
Assets:
Nuclear Decommissioning ................................. $ 26 $ 26
Deferred Electric Energy Costs .......................... -- 25
New Jersey Corporate Business Tax ....................... 149 474
Plant Related Items ..................................... 407 125
Cost of Removal ......................................... 55 13
Contractual & Environmental Liabilities ................. 35 33
Other ................................................... 9 23
---- ----
Total Assets .......................................... $681 $719
==== ====
Liabilities:
Conservation Costs ...................................... $ -- $ 76
Unamortized Debt Expense ................................ -- 23
Other ................................................... 5 12
---- ----
Total Liabilities ..................................... 5 111
---- ----
Total Deferred Income Tax Asset/(Liability) ......... $676 $608
==== ====
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NOTE 10. PENSION, OTHER POSTRETIREMENT BENEFIT AND SAVINGS PLANS
Employees of Power participate in non-contributory pension plans sponsored by PSEG and administered by PSEG Services Corporation. In addition, PSEG sponsors two defined contribution plans. Represented employees of Power are eligible for participation in the PSEG Employee Savings Plan (Savings Plan), while non-represented employees of Power are eligible for participation in the PSEG Thrift and Tax-Deferred Savings Plan (Thrift Plan). These plans are 401(k) plans to which eligible employees may contribute up to 25% of their compensation. Employee contributions up to 7% for Savings Plan participants and up to 8% for Thrift Plan participants are matched with employer contributions of cash or PSEG common stock equal to 50% of such employee contributions related to employee contributions. Employer contributions, related to participant contributions in excess of 5% and up to 7%, are made in shares of PSEG common stock for Savings Plan participants. Employer contributions, related to participant contributions in excess of 6% and up to 8%, are made in shares of PSEG common stock for Thrift Plan participants. Pension costs amounted to $12 million, $24 million and $15 million for the years ended December 31, 2000, 1999 and 1998, respectively. Thrift and Savings Plan matching costs amounted to approximately $8 million, $8 million and $5 million for the years ended December 31, 2000, 1999 and 1998, respectively.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), which requires that the expected cost of employees' postretirement health care and life insurance benefits, also referred to as other postretirement benefits (OPEB), be charged to income during the years in which employees render service. Such costs were deferred through December 31, 1997, pursuant to an order from the BPU. In concert with the discontinuance of SFAS 71, the portion of the resulting regulatory asset allocated to Power prior to the Transaction remained with PSE&G as recovery of these previously incurred costs will be through PSE&G's regulated transmission and distribution operations. OPEB costs amounted to $4 million, $30 million and $28 million for the years ended December 31, 2000, 1999 and 1998, respectively.
NOTE 11. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
Generation
The generation segment of Power's business earns revenue by bidding the energy, capacity and ancillary services of Fossil and Nuclear into the market. In addition to bidding into the market, Power earns a substantial portion of its generation revenue by selling energy on a wholesale basis under contract to power marketers and to load serving entities ("LSEs") such as the BGS contract with PSE&G.
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trading
The trading segment of Power's business earns revenues by trading energy, capacity, fixed transmission rights, fuel and emission allowances in the spot, forward and futures markets. Power's trading segment also earns revenues through financial transactions, including swaps, options and futures in the electricity markets.
Information related to the segments of Power's business is detailed below:
Consolidated
Generation Trading Total
---------- ------- ------------
(Millions of Dollars)
For the Six Months Ended June 30, 2001 (Unaudited):
Total Revenues .................................. $ 1,159 $ 1,161 $ 2,320
Depreciation and Amortization ................... 55 -- 55
Interest Income ................................. -- -- --
Interest Expense ................................ 89 -- 89
Income Before Income Taxes ...................... 268 78 346
Income Taxes .................................... 108 32 140
Net Income ...................................... 160 46 206
------- ------- -------
Gross Additions to Property, Plant and Equipment $ 741 $ -- $ 741
======= ======= =======
As of June 30, 2001 (Unaudited):
Total Assets .................................... $ 4,118 $ 712 $ 4,830
======= ======= =======
For the Six Months Ended June 30, 2000 (Unaudited):
Total Revenues .................................. $ 1,070 $ 1,303 $ 2,373
Depreciation and Amortization ................... 68 -- 68
Interest Income ................................. -- -- --
Interest Expense ................................ 43 -- 43
Income Before Income Taxes ...................... 291 43 334
Income Taxes .................................... 118 18 136
Net Income ...................................... 173 25 198
======= ======= =======
Gross Additions to Property, Plant and Equipment $ 177 $ -- $ 177
======= ======= =======
For the Year Ended December 31, 2000:
Total Revenues .................................. $ 2,203 $ 2,724 $ 4,927
Depreciation and Amortization ................... 136 -- 136
Interest Income ................................. 1 -- 1
Interest Expense ................................ 198 -- 198
Income Before Income Taxes ...................... 444 77 521
Income Taxes .................................... 177 31 208
Net Income ...................................... 267 46 313
======= ======= =======
Gross Additions to Property, Plant and Equipment $ 479 $ -- $ 479
======= ======= =======
As of December 31, 2000:
Total Assets .................................... $ 3,439 $ 1,091 $ 4,530
======= ======= =======
For the Year Ended December 31, 1999:
Total Revenues .................................. $ 2,652 $ 1,842 $ 4,494
Depreciation and Amortization ................... 224 -- 224
Interest Expense ................................ 112 -- 112
Income Before Income Taxes ...................... 765 42 807
Income Taxes .................................... 274 17 291
Income before Extraordinary Item ................ 491 25 516
Extraordinary Item (net of tax) ................. (3,204) -- (3,204)
Net Income (Loss) ............................... (2,713) 25 (2,688)
------- ------- -------
Gross Additions to Property, Plant and Equipment $ 92 $ -- $ 92
======= ======= =======
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PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Consolidated
Generation Trading Total
---------- ------- ------------
As of December 31, 1999:
Total Assets ................................ $3,055 $ 246 $3,301
====== ====== ======
For the Year Ended December 31, 1998:
Total Revenues .............................. $2,551 $1,877 $4,428
Depreciation and Amortization ............... 381 -- 381
Interest Expense ............................ 216 -- 216
Income Before Income Taxes .................. 370 23 393
Income Taxes ................................ 147 9 156
Net Income .................................. 223 14 237
------ ------ ------
Gross Additions to Property,
Plant and Equipment ........... $ 265 $ -- $ 265
====== ====== ======
|
Power does not have any foreign investments or operations.
Information related to Property, Plant and Equipment is detailed below:
December 31,
------------------
2000 1999
---- ----
(Millions of Dollars)
Property, Plant and Equipment
Electric Plant in Service:
Fossil Production ................................. $1,840 $1,628
Nuclear Production ................................ 130 110
------ ------
Total Electric Plant in Service ................. 1,970 1,738
------ ------
Nuclear Fuel in Service ............................. 417 466
Construction Work in Progress
Including Nuclear Fuel ............................ 311 78
Plant Held For Future Use ........................... 1 1
Other ............................................... 6 6
------ ------
Total ........................................... $2,705 $2,289
====== ======
|
NOTE 12. JOINTLY OWNED FACILITIES -- PROPERTY, PLANT AND EQUIPMENT
Power has ownership interests in and is responsible for providing its share of the necessary financing for the following jointly owned facilities. All amounts reflect the share of Power's jointly owned projects and the corresponding direct expenses are included in Consolidated Statements of Income as operating expenses.
Plant--December 31, 2000
---------------------------------------
Ownership Accumulated
Interest Plant Depreciation
--------- ----- -----------
(Millions of Dollars)
Coal Generating
Conemaugh ....................... 22.50% $198 $ 63
Keystone ........................ 22.84% 122 47
Nuclear Generating
Peach Bottom .................... 46.25% 88 10
Hope Creek ...................... 95.00% 606 508
Salem ........................... 50.00% 645 544
Nuclear Support Facilities ...... Various 5 1
Pumped Storage Facilities
Yards Creek ..................... 50.00% 28 11
Merrill Creek Reservoir ......... 13.91% 2 --
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PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. SELECTED QUARTERLY DATA (UNAUDITED)
The information shown below, in the opinion of management, includes all adjustments, consisting only of normal recurring accruals, necessary to a fair presentation of such amounts. Due to the seasonal nature of the generation business, quarterly amounts vary significantly during the year.
Calendar Quarter Ended
-----------------------------------------------------------
December 31, September 30, June 30, March 31,
------------ ------------- ----------- ------------
2000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
(Millions of Dollars)
Revenues .................................. $603 $575 $564 $746 $555 $ 697 $ 558 $676
Operating Income .......................... 199 184 143 300 134 251 236 196
Income before
Extraordinary Item ....................... 64 99 51 176 71 149 127 92
Extraordinary Item ........................ -- -- -- (14) -- (3,190) -- --
Net Income/(Loss) ......................... 64 99 51 162 71 (3,041) 127 92
Earnings/(Loss) Available
to PSEG .................................. 64 98 51 162 71 (3,041) 127 90
|
NOTE 14. RELATED PARTY TRANSACTIONS
PSE&G
PSE&G's transfer of its electric generating assets was in exchange for a promissory note from Power in an amount equal to the total purchase price of $2.786 billion. Interest on the note was payable at an annual rate of 14.23%, which represented PSE&G's weighted average cost of capital. For the period from August 21, 2000 to December 31, 2000, Power recorded interest expense of approximately $143 million relating to the promissory note.
For the period from January 1, 2001 to January 31, 2001, Power recorded interest expense of approximately $34 million relating to the promissory note. Power settled the promissory note on January 31, 2001, with funds provided from PSEG in the form of equity and loans. In addition, on January 31, 2001, PSEG loaned $1.620 billion to Power at various rates for which Power recorded interest expense of approximately $40 million for the six months ended June 30, 2001 (unaudited).
In April 2001 (unaudited), Power, in a private placement, issued $500 million of 6.875% Senior Notes due 2006, $800 million of 7.75% Senior Notes due 2011 and $500 million 8.625% Senior Notes due 2031. The net proceeds from the sale of the Senior Notes were used primarily for the repayment of the loans from PSEG. Each series of the Senior Notes is fully and unconditionally and jointly and severally guaranteed by Fossil, Nuclear and ER&T. All other direct and indirect subsidiaries of Power that are not guarantors of the Notes are minor and Power has no independent assets or operations.
Effective with the asset transfer, Power charges PSE&G for MTC and the energy and capacity provided to meet PSE&G's BGS requirements. For the six months ended June 30, 2001 (unaudited), Power has charged PSE&G approximately $938 million for MTC and BGS. As of June 30, 2001 (unaudited), Power's receivable from PSE&G relating to these costs was approximately $186 million. For the six months ended June 30, 2001 (unaudited), PSE&G sold energy and capacity to Power at the market price of approximately $80 million, which PSE&G purchased under various non-utility generation (NUG) contracts. As of June 30, 2001 (unaudited), Power's payable to PSE&G relating to these purchases was approximately $14 million.
For the year ended December 31, 2000, Power has recorded approximately $1.827 billion for MTC and BGS requirements. As of December 31, 2000, Power's receivable from PSE&G relating to these costs was approximately $159 million. Also through December 31, 2000, Power purchased energy and
PSEG POWER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
capacity from PSE&G at the market price of approximately $152 million which PSE&G purchased under various NUG contracts. As of December 31, 2000, Power's payable to PSE&G relating to these purchases was approximately $17 million.
PSEG Global Inc. (Global)
In September 2000, Power announced that it will assume responsibility of four Midwest generation projects being developed by Global and will be responsible for all future generation projects and development in the United States. The four projects will have a combined generating capacity of 2,830 MW. As of December 31, 2000, Power owed Global $52 million related to these projects, which was paid in 2001. In 2001, Power decided to continue development on two of the four projects with a combined generation capacity of 2,000 MW.
PSEG Services Corporation (Services) (unaudited)
Services provides and bills administrative services to Power on a monthly basis. Power's costs related to such services amounted to approximately $37 million and $81 million for the quarter and six months ended June 30, 2001. As of June 30, 2001, Power's intercompany payable related to these costs was approximately $19 million.
$1,800,000,000
[LOGO] PSEG POWER LLC
Offer to Exchange
$500,000,000 67/8% Senior Notes due 2006
$800,000,000 73/4% Senior Notes due 2011
$500,000,000 85/8% Senior Notes due 2031
Which have been registered under the Securities Act
For Any and All Outstanding $500,000,000 67/8% Senior Notes due 2006 $800,000,000 73/4% Senior Notes due 2011 $500,000,000 85/8% Senior Notes due 2031
Which have not been so registered
Part II
Information not required in Prospectus
Item 20. Indemnification of Directors and Officers
Article 18 of each registrant's limited liability agreement provides, as follows:
o No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct.
Article 18 also provides as follows:
o To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.
The directors and officers of the registrants are insured under policies of insurance, within the limits and subject to the limitations of the policies, against claims made against them for acts in the discharge of their duties, and each registrant is insured to the extent that it is required or permitted by law to indemnify the directors and officers for such loss. The premiums for such insurance are paid by the respective registrant.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. Exhibit Number Description ------- ----------- |
3.1 -- Certificate of Formation of PSEG Power LLC.
3.2 -- PSEG Power LLC Limited Liability Company Agreement.
3.3 -- Certificate of Formation of PSEG Fossil LLC.
3.4 -- PSEG Fossil LLC Limited Liability Company Agreement.
3.5 -- Certificate of Formation of PSEG Nuclear LLC.
3.6 -- PSEG Nuclear LLC Limited Liability Company Agreement.
3.7 -- Certificate of Formation of PSEG Energy Resources & Trade LLC.
3.8 -- PSEG Energy Resources & Trade LLC Limited Liability Company
Agreement.
4.1 -- Indenture dated April 16, 2001 between Registrants and The Bank of
New York and form of Subsidiary Guaranty included therein.
4.2 -- Registration Rights Agreement dated April 9, 2001 between
Registrants and the purchasers named therein.
4.3 -- Form of 67/8% Exchange Note.
4.4 -- Form of 73/4% Exchange Note.
4.5 -- Form of 85/8% Exchange Note.
5 -- Opinion of James T. Foran, Esquire.
8 -- Opinion of James T. Foran, Esquire regarding tax matters.
II-1
Exhibit Number Description ------- ----------- 10 -- Basic Generation Service Contract with PSE&G. 12 -- Statement regarding computation of ratios of earnings. 21 -- Subsidiaries of the Registrants. |
23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).
23.2 -- Independent Auditors' Consent.
24 -- Power of Attorney.
25 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.
The undersigned registrants hereby undertake (a):
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change in such information in the
registration statement; provided, however, that the registrant
need not file a post-effective amendment to include the
information required to be included by subsection (a)(1)(i) or
(a)(l)(ii) if such information is contained in periodic
reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act that are
incorporated by reference in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Fossil LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 10th day of September, 2001.
PSEG Fossil LLC
By: /s/ THOMAS R. SMITH
---------------------------
Thomas R. Smith
President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ THOMAS R. SMITH Principal Executive September 10, 2001
----------------------- Officer, Principal Financial
Thomas R. Smith Officer and Director
/s/ PATRICIA A. RADO Principal Accounting Officer September 10, 2001
-----------------------
Patricia A. Rado
/s/ FRANK CASSIDY Director September 10, 2001
-----------------------
Frank Cassidy
/s/ HAROLD W. KEISER Director September 10, 2001
-----------------------
Harold W. Keiser
/s/ STEVEN R. Teitelman Director September 10, 2001
-----------------------
Steven R. Teitelman
|
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Nuclear LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 10th day of September, 2001.
PSEG Nuclear LLC
By: /s/ HAROLD W. KEISER
-----------------------------
Harold W. Keiser
President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ HAROLD W. KEISER Principal Executive September 10, 2001
------------------------ Officer, Principal Financial
Harold W. Keiser Officer and Director
/s/ PATRICIA A. RADO Principal Accounting Officer September 10, 2001
------------------------
Patricia A. Rado
/s/ FRANK CASSIDY Director September 10, 2001
------------------------
Frank Cassidy
/s/ THOMAS R. SMITH Director September 10, 2001
------------------------
Thomas R. Smith
/s/ STEVEN R. Teitelman Director September 10, 2001
------------------------
Steven R. Teitelman
|
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Energy Resources & Trade LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 10th day of September, 2001.
PSEG Energy Resources & Trade LLC
By: /s/ STEVEN R. Teitelman
--------------------------------
Steven R. Teitelman
President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ STEVEN R. Teitelman Principal Executive September 10, 2001
----------------------- Officer, Principal Financial
Steven R. Teitelman Officer and Director
/s/ PATRICIA A. RADO Principal Accounting Officer September 10, 2001
-----------------------
Patricia A. Rado
/s/ FRANK CASSIDY Director September 10, 2001
-----------------------
Frank Cassidy
/s/ HAROLD W. KEISER Director September 10, 2001
-----------------------
Harold W. Keiser
/s/ THOMAS R. SMITH Director September 10, 2001
-----------------------
Thomas R. Smith
|
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Power LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 10th day of September, 2001.
PSEG POWER LLC
By: /s/ FRANK CASSIDY
-------------------------
Frank Cassidy
President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ E. JAMES FERLAND Principal Executive September 10, 2001
--------------------------- Officer and Director
E. James Ferland
/s/ FRANK CASSIDY Principal Financial September 10, 2001
--------------------------- Officer and Director
Frank Cassidy
/s/ PATRICIA A. RADO Principal Accounting September 10, 2001
--------------------------- Officer
Patricia A. Rado
Director
---------------------------
Robert E. Busch
/s/ ROBERT J. DOUGHERTY, JR. Director September 10, 2001
---------------------------
Robert J. Dougherty, Jr.
/s/ ROBERT C. MURRAY Director September 10, 2001
---------------------------
Robert C. Murray
/s/ THOMAS M. O'FLYNN Director September 10, 2001
---------------------------
Thomas M. O'Flynn
/s/ R. EDWIN SELOVER Director September 10, 2001
---------------------------
R. Edwin Selover
/s/ MICHAEL J. THOMSON Director September 10, 2001
---------------------------
Michael J. Thomson
|
II-6
Exhibit Index
Exhibit
Number Description
------- -----------
|
3.1 -- Certificate of Formation of PSEG Power LLC.
3.2 -- PSEG Power LLC Limited Liability Company Agreement.
3.3 -- Certificate of Formation of PSEG Fossil LLC.
3.4 -- PSEG Fossil LLC Limited Liability Company Agreement.
3.5 -- Certificate of Formation of PSEG Nuclear LLC.
3.6 -- PSEG Nuclear LLC Limited Liability Company Agreement.
3.7 -- Certificate of Formation of PSEG Energy Resources & Trade LLC.
3.8 -- PSEG Energy Resources & Trade LLC Limited Liability Company
Agreement.
4.1 -- Indenture dated April 16, 2001 between Registrants and The Bank of
New York and form of Subsidiary Guaranty included therein.
4.2 -- Registration Rights Agreement dated April 9, 2001 between
Registrants and the purchasers named therein.
4.3 -- Form of 6 7/8% Exchange Note.
4.4 -- Form of 7 3/4% Exchange Note.
4.5 -- Form of 8 5/8% Exchange Note.
5 -- Opinion of James T. Foran, Esquire.
8 -- Opinion of James T. Foran, Esquire regarding tax matters.
10 -- Basic Generation Service Contract with PSE&G.
12 -- Statement regarding computation of ratios of earnings.
21 -- Subsidiaries of the Registrants.
23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).
23.2 -- Independent Auditors' Consent.
24 -- Power of Attorney.
25 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
Exhibit 3.1
CERTIFICATE OF FORMATION
OF
PSEG POWER LLC
This Certificate of Formation of PSEG Power LLC (the "LLC"), dated as of June 16, 1999, is being duly executed and filed by Bernard J. Kelley, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. subsection 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is PSEG Power LLC.
SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.
/s/ Bernard J. Kelley ----------------------- Name: Bernard J. Kelley Authorized Person |
Exhibit 3.2
LIMITED LIABILITY COMPANY AGREEMENT
OF
PSEG POWER LLC
This Limited Liability Company Agreement (together with the schedules attached hereto, this "Agreement") of PSEG Power LLC, a Delaware limited liability company (the "Company"), is entered into by Public Service Enterprise Group Incorporated, a New Jersey corporation, as the sole member (the "Initial Member"). Capitalized terms used herein and not otherwise defined have the meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby forms and continues the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. ss.18-101, et seq.), as amended from time to time (the "Act"), and (ii) hereby agrees as follows:
1. Name.
The name of the limited liability company heretofore formed and continued hereby is PSEG Power LLC.
2. Principal Business Office.
The principal business office of the Company shall be located at such location as may hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
5. Members.
The name and the mailing address of the Initial Member are set forth on Schedule B attached hereto.
6. Certificates.
Bernard J. Kelley, as an "authorized person" within the meaning of the Act, shall execute, deliver and file the Certificate of Formation with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" shall cease, and the Member thereupon became the designated "authorized person" and shall continue as the designated "authorized person" within the meaning of the Act. The Member or an Officer shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in New Jersey and in any other jurisdiction in which the Company may wish to conduct business.
7. Purposes.
The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act.
8. Powers.
The Company shall have the power and right to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes and business described herein or as permitted by the Act and shall have, without limitation, the power and right to:
a. acquire by purchase, lease, transfer, contribution of property or otherwise, own, hold, sell, convey, transfer or dispose of any real or personal property and all associated rights and liabilities which may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
b. act as a nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all of the powers, duties, rights and responsibilities associated therewith;
c. take any and all actions necessary, convenient or appropriate as nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amendments of rights or powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;
d. operate, purchase, maintain, finance, improve, own, sell, convey, assign, mortgage, lease or demolish or otherwise dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purposes of the Company;
e. borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Company, and secure the same by mortgage, pledge or other lien on the assets of the Company;
f. invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;
g. prepay in whole or in part, refinance, recast, increase, modify or extend any indebtedness of the Company and, in connection therewith, execute any extensions, renewals or modifications of any mortgage or security agreement securing such indebtedness;
h. enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any person or entity affiliated with the Member, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;
i. employ or otherwise engage employees, managers, contractors, advisors, attorneys and consultants and pay reasonable compensation for such services;
j. form, own, acquire and dispose of wholly-owned limited liability companies, trusts, associations, partnerships (general and limited), corporations or other ventures in furtherance of the purposes of the Company;
k. enter into partnerships (general and limited), limited liability companies, trusts, associations, corporations or other ventures with other persons or entities, including affiliated entities, in furtherance of the purposes of the Company; and
l. do such other things and engage in such other activities related to the foregoing as may be necessary, appropriate, proper, advisable, incidental or convenient to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.
The listing of powers and rights in this Section 8 shall not in any manner be deemed a restriction on the power or right of the Company to engage in any other activities permitted or not prohibited by the Act. Notwithstanding anything in this Agreement to the contrary, without the need for any additional action on the part of any Person, the Company, and any officer on behalf of the Company, are hereby authorized to execute, deliver and perform the Limited Liability Company Agreements of PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC, each dated June 16, 1999.
9. Management.
a. Board of Directors. The business and affairs of the Company shall be managed by or under the direction of a Board comprised of one or more Directors to be elected, designated or appointed by the Member. The Member may determine at any time in its sole and absolute discretion the number of Directors to constitute the entire Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion. The initial number of Directors shall be five. The names and mailing addresses of the persons designated as initial Directors are set forth in Schedule C attached hereto. Each Director elected, designated or appointed by the Member shall hold office until his or her successor is elected and qualified or until such Director's earlier death, resignation or removal. As a condition and qualification to serving as a Director, each Director shall execute and deliver to the Company the Management Agreement set forth in Schedule D attached hereto. Directors need not be Members.
b. Powers. The Board shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise.
c. Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the Chairman of the Board or President on not less than 24 hours' notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President, the Chairman of the Board or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. A special meeting of the Board may be held without prior notice if all Directors waive in writing the requirement for such notice.
d. Quorum; Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
e. Electronic Communications. Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar
communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.
f. Committees of Directors.
(i) The Board may designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
(iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. If not otherwise specified by the Board, unless there is only one member of a committee (in which case one member shall constitute a quorum for the transaction of business), one-third of the entire committee, or two members, whichever is greater, shall constitute a quorum for the transaction of business.
g. Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board and/or a stated retainer for each Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
h. Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed, with or without cause, by the Member, and, any vacancy caused by any such removal may be filled by action of the Member.
i. Directors as Agents. To the extent of their powers set forth in this Agreement, the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. However, except as provided in this Agreement, no Director shall have the authority to bind the Company in his or her individual capacity. Any and all actions of the Board must be taken at a duly authorized meeting of the Board or upon unanimous written consent of the Board.
10. Duties of Directors.
Except as provided in this Agreement, in exercising their rights and performing their duties under this Agreement, the Directors shall have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware.
11. Officers.
a. Officers. The initial Officers of the Company are listed on Schedule E attached hereto. Except for the initial Officers, the Officers of the Company shall be chosen by the Board and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any number of offices may be held by the same person. Each Officer shall hold office until his or her successor is elected and qualified or until such officer's earlier resignation or removal. Any Officer may resign at any time upon written notice to the Company. In addition, the Board may appoint such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The salaries of all Officers and employees of the Company shall be fixed by or in the manner prescribed by the Board. Any initial Officer or any Officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by the Board. The Chairman of the Board, the President, each Senior Vice President and each Vice President, severally, shall have the power to sign deeds, contracts and other instruments; to attend, act and vote at any meeting of stockholders, partners, members, beneficial owners or the substantial equivalent of any corporation, partnership (limited and general), limited liability company, trust or any other entity in which the Company may hold stock, partnership interests, limited liability company interests, beneficial interests or other interests and to appoint, if permitted by the relevant entity, one or more other persons as proxy or proxies to attend, act, and vote at any such meeting and such officer or such proxy or proxies shall possess and may exercise on behalf of the Company any and all rights and powers incident to its ownership of such stock, partnership interests, limited liability company interests, beneficial interests or other interests; and shall have such powers and perform such duties as may be assigned by the Board of Directors, and any Committee of the Board, or the Chief Executive Officer, in addition to any powers and duties that are assigned specifically by this Agreement.
b. Chairman of the Board. If there be a Chairman of the Board, he shall preside at all meetings of the Board of Directors, and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors or the Executive Committee. If there be a Chairman of the Board, the Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer of the Company with plenary powers of supervision and direction of the business and affairs of the Company, unless such offices are occupied by the same person.
c. President. If there be no Chairman of the Board, the President shall be the chief executive officer. If there be a Chairman of the Board and if he be designated as the chief executive officer of the Company, the President shall have charge of the coordination and supervision of all matters of operation of the Company. In the absence of the Chairman of the Board, the President shall have the powers and perform the duties of the Chairman of the Board.
d. Senior Vice President. The Senior Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board and the President, have the powers and perform the duties of the Chairman of the Board.
e. Vice President. The Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President and the Senior Vice Presidents, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board, the President and the Senior Vice Presidents, have the powers and perform the duties of the Chairman of the Board.
f. Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Board and all meetings of the Members, if any, and record all the proceedings of the meetings of the Company and of the Board and shall perform like duties for special and standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
g. Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board or, if authorized by the Board, the Treasurer. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
h. Officers as Agents. The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business, and, the actions of the Officers taken in accordance with such powers shall bind the Company.
i. Duties of Officers. Except to the extent otherwise provided herein, each Officer shall have a fiduciary duty of loyalty and care similar to that of officers of business corporations organized under the General Corporation Law of the State of Delaware.
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither any Member nor any Director nor any Officer shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, a Director or an Officer of the Company.
13. Capital Contributions.
The Member shall be deemed admitted as the Member of the Company effective as of the date of this Agreement. The Initial Member shall contribute the amount of cash to the Company listed on Schedule B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, Schedule B of this Agreement does not need to be revised; rather, the Secretary or Treasurer shall modify the books and records of the Company to reflect such additional capital contribution. The provisions of this Agreement, including this Section 14, are intended solely to benefit the Member and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and no Member shall have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the Member.
16. Distributions.
Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act or any other applicable law.
17. Books and Records.
The Board shall keep or cause to be kept complete and accurate books of account and records with respect to the Company's business. Each Member and its duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours. The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) of the Act. The Company's books of account shall be kept using the method of accounting determined by the Board. The Company's independent auditor shall be an independent public accounting firm selected by the Member.
18. Exculpation and Indemnification.
a. No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct.
b. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.
c. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 18.
d. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person.
f. The Company may purchase and maintain insurance, to the extent and in such amounts as the Treasurer, in his sole discretion, shall deem reasonable, on behalf of Covered Persons and such other persons or entities as the Treasurer shall determine, against any liability that may be asserted against or expenses that may be incurred by any such person or entity in connection with the activities of the Company or such indemnities, regardless of whether the Company would have the power to indemnify such person or entity against such liability under the provisions of this Agreement. The Company may enter into indemnity contracts with Covered Persons and such other persons or entities as the Board shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under Section 18(c) and containing such other procedures regarding indemnification as are appropriate.
g. The foregoing provisions of this Section 18 shall survive any termination of this Agreement.
19. Assignments.
The Member may assign in whole or in part its limited liability company interest in the Company. If the Member transfers any or all of its limited liability company interest in the Company pursuant to this Section 19, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer, and, if the transfer is a transfer of the transferor Member's entire limited liability company
interest in the Company, the transferor Member shall cease to be a member of the Company immediately following such admission.
20. Resignation.
A Member may resign from the Company with the written consent of the
Initial Member. If a Member is permitted to resign pursuant to this Section 20,
an additional member of the Company may be admitted to the Company, subject to
Section 21, upon its execution of an instrument signifying its agreement to be
bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed
effective immediately prior to the resignation, and, immediately following such
admission, the resigning Member shall cease to be a member of the Company.
21. Admission of Additional Members.
One or more additional members of the Company may be admitted to the Company with the written consent of the Member.
22. Dissolution.
a. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the retirement, resignation or dissolution of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the business of the Company is continued in a manner permitted by the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act.
b. The bankruptcy (as defined in Sections 18-101(1) and 18-304 of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.
c. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act.
23. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each Member hereby irrevocably waives any right or power that such Member might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. No Member shall have any interest in any specific assets of the Company, and no Member shall have the status of a creditor with respect to any distribution pursuant to Section 16 hereof. The interest of the Members in the Company is personal property.
24. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of any Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
25. Other Business.
The Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
26. Severability of Provisions.
Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.
27. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.
28. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.
29. Amendments.
This Agreement may not be modified, altered, supplemented or amended except pursuant to a written instrument executed and delivered by the Member.
30. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument
31. Notices.
Any notices required to be delivered hereunder shall be in writing
and personally delivered, mailed or sent by telecopy, electronic mail, or other
similar form of rapid transmission, and shall be deemed to have been duly given
upon receipt (a) in the case of the Company, to the Company at its address in
Section 2, (b) in the case of a Member, to such Member at its address as listed
on Schedule B attached hereto and (c) in the case of either of the foregoing, at
such other address as may be designated by written notice to the other party.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Agreement as of the 16th day of June, 1999. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of June 16, 1999.
MEMBER:
Public Service Enterprise Group Incorporated
By: /s/ E. James Ferland
--------------------------------
Name: E. James Ferland
Title: Chairman of the Board and
Chief Executive Officer
|
SCHEDULE A
A. Definitions
When used in this Agreement, the following terms not otherwise defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person.
"Agreement" means this Limited Liability Company Agreement of the Company, together with the schedules attached hereto, as amended, restated or supplemented form time to time.
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Certificate of Formation" means the Certificate of Formation of the Company to be filed with the Secretary of State of the State of Delaware on June 16, 1999, as amended or amended and restated from time to time.
"Control" means the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. "Controlling" and "Controlled" shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.
"Covered Persons" has the meaning set forth in Section 18a.
"Directors" means the directors elected to the Board of Directors from time to time by the Member. A Director is hereby designated as a "manager" of the Company within the meaning of Section 18-101(10) of the Act.
"Initial Member" means Public Service Enterprise Group Incorporated, a New Jersey corporation, as the sole member of the Company.
"Management Agreement" means the agreement of the Directors in the form attached hereto as Schedule D. The Management Agreement shall be deemed to be and constitute part of this Agreement.
"Member" means the Initial Member and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement.
"Officer" means an officer of the Company described in Section 11.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms. The words "include" and "including" shall be deemed to be followed by the phrase "without limitation." The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement.
SCHEDULE B
Members
-------
Agreed Value
of Capital Percentage
Name Mailing Address Contribution Interest
---- --------------- ------------ --------
Public Service Enterprise 80 Park Plaza $10,000 100%
Group Incorporated P. O. Box 1171
Newark, NJ 07102-1171
|
SCHEDULE C
Directors
---------
Name Address
---- -------
Frank Cassidy c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Robert J. Dougherty, Jr. c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
E. James Ferland c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Robert C. Murray c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
R. Edwin Selover c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
|
SCHEDULE D
__________ __, 1999
PSEG Power LLC
Re: Management Agreement
PSEG Power LLC
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned persons, who have been designated as directors of PSEG Power LLC, a Delaware limited liability company (the "Company"), in accordance with the Limited Liability Company Agreement of the Company, dated as of June 16, 1999, as it may be amended or restated from time to time (the "LLC Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such person's rights and authority as a Director (as defined in the LLC Agreement) under the LLC Agreement and agrees to perform and discharge such person's duties and obligations as a Director under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such person's successor as a Director is designated or until such person's resignation or removal as a Director in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a "manager" of the Company within the meaning of the Delaware Limited Liability Company Act.
2. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.
SCHEDULE E
Officers
--------
Name Title
---- -----
E. James Ferland Chairman of the Board and Chief Executive
Officer
Frank Cassidy President and Chief Operating Officer
Harold W. Borden Jr. Vice President and General Counsel
Morton A. Plawner Vice President and Treasurer
Patricia A. Rado Vice President and Controller
Robert W. Metcalfe Vice President-Development
Ardeshir Rostami Assistant Treasurer
Fred F. Saunders Assistant Treasurer
Edward J. Biggins Jr. Secretary
Patrick M. Burke Assistant Secretary
|
Exhibit 3.3
CERTIFICATE OF FORMATION
OF
PSEG FOSSIL LLC
This Certificate of Formation of PSEG Fossil LLC (the "LLC"), dated as of June 16, 1999, is being duly executed and filed by Bernard J. Kelley, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. subsection 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is PSEG Fossil LLC.
SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.
/s/ Bernard J. Kelley ----------------------- Name: Bernard J. Kelley Authorized Person |
Exhibit 3.4
LIMITED LIABILITY COMPANY AGREEMENT
OF
PSEG FOSSIL LLC
This Limited Liability Company Agreement (together with the schedules attached hereto, this "Agreement") of PSEG Fossil LLC, a Delaware limited liability company (the "Company"), is entered into by PSEG Power LLC, a Delaware limited liability company, as the sole member (the "Initial Member"). Capitalized terms used herein and not otherwise defined have the meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby forms and continues the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. ss.18-101, et seq.), as amended from time to time (the "Act"), and (ii) hereby agrees as follows:
1. Name.
The name of the limited liability company heretofore formed and continued hereby is PSEG Fossil LLC.
2. Principal Business Office.
The principal business office of the Company shall be located at such location as may hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
5. Members.
The name and the mailing address of the Initial Member are set forth on Schedule B attached hereto.
6. Certificates.
Bernard J. Kelley, as an "authorized person" within the meaning of the Act, shall execute, deliver and file the Certificate of Formation with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" shall cease, and the Member thereupon became the designated "authorized person" and shall continue as the designated "authorized person" within the meaning of the Act. The Member or an Officer shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in New Jersey and in any other jurisdiction in which the Company may wish to conduct business.
7. Purposes.
The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act.
8. Powers.
The Company shall have the power and right to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes and business described herein or as permitted by the Act and shall have, without limitation, the power and right to:
a. acquire by purchase, lease, transfer, contribution of property or otherwise, own, hold, sell, convey, transfer or dispose of any real or personal property and all associated rights and liabilities which may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
b. act as a nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all of the powers, duties, rights and responsibilities associated therewith;
c. take any and all actions necessary, convenient or appropriate as nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amendments of rights or powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;
d. operate, purchase, maintain, finance, improve, own, sell, convey, assign, mortgage, lease or demolish or otherwise dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purposes of the Company;
e. borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Company, and secure the same by mortgage, pledge or other lien on the assets of the Company;
f. invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;
g. prepay in whole or in part, refinance, recast, increase, modify or extend any indebtedness of the Company and, in connection therewith, execute any extensions, renewals or modifications of any mortgage or security agreement securing such indebtedness;
h. enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any person or entity affiliated with the Member, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;
i. employ or otherwise engage employees, managers, contractors, advisors, attorneys and consultants and pay reasonable compensation for such services;
j. form, own, acquire and dispose of wholly-owned limited liability companies, trusts, associations, partnerships (general and limited), corporations or other ventures in furtherance of the purposes of the Company;
k. enter into partnerships (general and limited), limited liability companies, trusts, associations, corporations or other ventures with other persons or entities, including affiliated entities, in furtherance of the purposes of the Company; and
l. do such other things and engage in such other activities related to the foregoing as may be necessary, appropriate, proper, advisable, incidental or convenient to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.
The listing of powers and rights in this Section 8 shall not in any manner be deemed a restriction on the power or right of the Company to engage in any other activities permitted or not prohibited by the Act.
9. Management.
a. Board of Directors. The business and affairs of the Company shall be managed by or under the direction of a Board comprised of one or more Directors to be elected, designated or appointed by the Member. The Member may determine at any time in its sole and
absolute discretion the number of Directors to constitute the entire Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion. The initial number of Directors shall be three. The names and mailing addresses of the persons designated as initial Directors are set forth in Schedule C attached hereto. Each Director elected, designated or appointed by the Member shall hold office until his or her successor is elected and qualified or until such Director's earlier death, resignation or removal. As a condition and qualification to serving as a Director, each Director shall execute and deliver to the Company the Management Agreement set forth in Schedule D attached hereto. Directors need not be Members.
b. Powers. The Board shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise.
c. Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the Chairman of the Board or President on not less than 24 hours' notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President, the Chairman of the Board or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. A special meeting of the Board may be held without prior notice if all Directors waive in writing the requirement for such notice.
d. Quorum; Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
e. Electronic Communications. Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.
f. Committees of Directors.
(i) The Board may designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
(iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. If not otherwise specified by the Board, unless there is only one member of a committee (in which case one member shall constitute a quorum for the transaction of business), one-third of the entire committee, or two members, whichever is greater, shall constitute a quorum for the transaction of business.
g. Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board and/or a stated retainer for each Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
h. Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed, with or without cause, by the Member, and, any vacancy caused by any such removal may be filled by action of the Member.
i. Directors as Agents. To the extent of their powers set forth in this Agreement, the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. However, except as provided in this Agreement, no Director shall have the authority to bind the Company in his or her individual capacity. Any and all actions of the Board must be taken at a duly authorized meeting of the Board or upon unanimous written consent of the Board.
10. Duties of Directors.
Except as provided in this Agreement, in exercising their rights and performing their duties under this Agreement, the Directors shall have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware.
11. Officers.
a. Officers. The initial Officers of the Company are listed on Schedule E attached hereto. Except for the initial Officers, the Officers of the Company shall be chosen by the Board and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any number of offices may be held by the same person. Each Officer shall hold office until his or her successor is elected and qualified or until such officer's earlier resignation or removal. Any Officer may resign at any time upon written notice to the Company. In addition, the Board may appoint such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The salaries of all Officers and employees of the Company shall be fixed by or in the manner prescribed by the Board. Any initial Officer or any Officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by the Board. The Chairman of the Board, the President, each Senior Vice President and each Vice President, severally, shall have the power to sign deeds, contracts and other instruments; to attend, act and vote at any meeting of stockholders, partners, members, beneficial owners or the substantial equivalent of any corporation, partnership (limited and general), limited liability company, trust or any other entity in which the Company may hold stock, partnership interests, limited liability company interests, beneficial interests or other interests and to appoint, if permitted by the relevant entity, one or more other persons as proxy or proxies to attend, act, and vote at any such meeting and such officer or such proxy or proxies shall possess and may exercise on behalf of the Company any and all rights and powers incident to its ownership of such stock, partnership interests, limited liability company interests, beneficial interests or other interests; and shall have such powers and perform such duties as may be assigned by the Board of Directors, and any Committee of the Board, or the Chief Executive Officer, in addition to any powers and duties that are assigned specifically by this Agreement.
b. Chairman of the Board. If there be a Chairman of the Board, he shall preside at all meetings of the Board of Directors, and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors or the Executive Committee. If there be a Chairman of the Board, the Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer of the Company with plenary powers of supervision and direction of the business and affairs of the Company, unless such offices are occupied by the same person.
c. President. If there be no Chairman of the Board, the President shall be the chief executive officer. If there be a Chairman of the Board and if he be designated as the chief executive officer of the Company, the President shall have charge of the coordination and supervision of all matters of operation of the Company. In the absence of the Chairman of the Board, the President shall have the powers and perform the duties of the Chairman of the Board.
d. Senior Vice President. The Senior Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board and the President, have the powers and perform the duties of the Chairman of the Board.
e. Vice President. The Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President and the Senior Vice Presidents, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board, the President and the Senior Vice Presidents, have the powers and perform the duties of the Chairman of the Board.
f. Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Board and all meetings of the Members, if any, and record all the proceedings of the meetings of the Company and of the Board and shall perform like duties for special and standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
g. Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board or, if authorized by the Board, the Treasurer. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
h. Officers as Agents. The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business, and, the actions of the Officers taken in accordance with such powers shall bind the Company.
i. Duties of Officers. Except to the extent otherwise provided herein, each Officer shall have a fiduciary duty of loyalty and care similar to that of officers of business corporations organized under the General Corporation Law of the State of Delaware.
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither any Member nor any Director nor any Officer shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, a Director or an Officer of the Company.
13. Capital Contributions.
The Member shall be deemed admitted as the Member of the Company effective as of the date of this Agreement. The Initial Member shall contribute the amount of cash to the Company listed on Schedule B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, Schedule B of this Agreement does not need to be revised; rather, the Secretary or Treasurer shall modify the books and records of the Company to reflect such additional capital contribution. The provisions of this Agreement, including this Section 14, are intended solely to benefit the Member and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and no Member shall have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the Member.
16. Distributions.
Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act or any other applicable law.
17. Books and Records.
The Board shall keep or cause to be kept complete and accurate books of account and records with respect to the Company's business. Each Member and its duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours. The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) of the Act. The Company's books of account shall be kept using the method of accounting determined by the Board. The Company's independent auditor shall be an independent public accounting firm selected by the Member.
18. Exculpation and Indemnification.
a. No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct.
b. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.
c. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 18.
d. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person.
f. The Company may purchase and maintain insurance, to the extent and in such amounts as the Treasurer, in his sole discretion, shall deem reasonable, on behalf of Covered Persons and such other persons or entities as the Treasurer shall determine, against any liability that may be asserted against or expenses that may be incurred by any such person or entity in connection with the activities of the Company or such indemnities, regardless of whether the Company would have the power to indemnify such person or entity against such liability under the provisions of this Agreement. The Company may enter into indemnity contracts with Covered Persons and such other persons or entities as the Board shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under Section 18(c) and containing such other procedures regarding indemnification as are appropriate.
g. The foregoing provisions of this Section 18 shall survive any termination of this Agreement.
19. Assignments.
The Member may assign in whole or in part its limited liability company interest in the Company. If the Member transfers any or all of its limited liability company interest in the Company pursuant to this Section 19, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer, and, if the transfer is a transfer of the transferor Member's entire limited liability company
interest in the Company, the transferor Member shall cease to be a member of the Company immediately following such admission.
20. Resignation.
A Member may resign from the Company with the written consent of the
Initial Member. If a Member is permitted to resign pursuant to this Section 20,
an additional member of the Company may be admitted to the Company, subject to
Section 21, upon its execution of an instrument signifying its agreement to be
bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed
effective immediately prior to the resignation, and, immediately following such
admission, the resigning Member shall cease to be a member of the Company.
21. Admission of Additional Members.
One or more additional members of the Company may be admitted to the Company with the written consent of the Member.
22. Dissolution.
a. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the retirement, resignation or dissolution of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the business of the Company is continued in a manner permitted by the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act.
b. The bankruptcy (as defined in Sections 18-101(1) and 18-304 of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.
c. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act.
23. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each Member hereby irrevocably waives any right or power that such Member might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. No Member shall have any interest in any specific assets of the Company, and no Member shall have the status of a creditor with respect to any distribution pursuant to Section 16 hereof. The interest of the Members in the Company is personal property.
24. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of any Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
25. Other Business.
The Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
26. Severability of Provisions.
Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.
27. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.
28. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.
29. Amendments.
This Agreement may not be modified, altered, supplemented or amended except pursuant to a written instrument executed and delivered by the Member.
30. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument
31. Notices.
Any notices required to be delivered hereunder shall be in writing
and personally delivered, mailed or sent by telecopy, electronic mail, or other
similar form of rapid transmission, and shall be deemed to have been duly given
upon receipt (a) in the case of the Company, to the Company at its address in
Section 2, (b) in the case of a Member, to such Member at its address as listed
on Schedule B attached hereto and (c) in the case of either of the foregoing, at
such other address as may be designated by written notice to the other party.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Agreement as of the 16th day of June, 1999. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of June 16, 1999.
MEMBER:
PSEG Power LLC
By: /s/ E. James Ferland
--------------------------------------
Name: E. James Ferland
Title: Chairman of the Board and Chief
Executive Officer
|
SCHEDULE A
A. Definitions
When used in this Agreement, the following terms not otherwise defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person.
"Agreement" means this Limited Liability Company Agreement of the Company, together with the schedules attached hereto, as amended, restated or supplemented form time to time.
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Certificate of Formation" means the Certificate of Formation of the Company to be filed with the Secretary of State of the State of Delaware on June 16, 1999, as amended or amended and restated from time to time.
"Control" means the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. "Controlling" and "Controlled" shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.
"Covered Persons" has the meaning set forth in Section 18a.
"Directors" means the directors elected to the Board of Directors from time to time by the Member. A Director is hereby designated as a "manager" of the Company within the meaning of Section 18-101(10) of the Act.
"Initial Member" means PSEG Power LLC, a Delaware limited liability company, as the sole member of the Company.
"Management Agreement" means the agreement of the Directors in the form attached hereto as Schedule D. The Management Agreement shall be deemed to be and constitute part of this Agreement.
"Member" means the Initial Member and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement.
"Officer" means an officer of the Company described in Section 11.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms. The words "include" and "including" shall be deemed to be followed by the phrase "without limitation." The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement.
SCHEDULE B
Members
-------
Agreed Value
of Capital Percentage
Name Mailing Address Contribution Interest
---- --------------- ------------ ----------
PSEG Power LLC c/o Public Service $2,000 100%
Enterprise Group
Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
|
SCHEDULE C
Directors
---------
Name Address
---- -------
Frank Cassidy c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Harold W. Keiser c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Steven R. Teitelman c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
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SCHEDULE D
______ __, 1999
PSEG Fossil LLC
Re: Management Agreement
PSEG Fossil LLC
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned persons, who have been designated as directors of PSEG Fossil LLC, a Delaware limited liability company (the "Company"), in accordance with the Limited Liability Company Agreement of the Company, dated as of June 16, 1999, as it may be amended or restated from time to time (the "LLC Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such person's rights and authority as a Director (as defined in the LLC Agreement) under the LLC Agreement and agrees to perform and discharge such person's duties and obligations as a Director under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such person's successor as a Director is designated or until such person's resignation or removal as a Director in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a "manager" of the Company within the meaning of the Delaware Limited Liability Company Act.
2. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.
SCHEDULE E
Officers
--------
Name Title
---- -----
Frank Cassidy President
Patrick D. Colgan Vice President
Morton A. Plawner Treasurer
Ardeshir Rostami Assistant Treasurer
Fred F. Saunders Assistant Treasurer
Edward J. Biggins Jr. Secretary
Patrick M. Burke Assistant Secretary
Harold W. Borden Jr. General Counsel
Patricia A. Rado Controller
|
Exhibit 3.5
CERTIFICATE OF FORMATION
OF
PSEG NUCLEAR LLC
This Certificate of Formation of PSEG Nuclear LLC (the "LLC"), dated as of June 16, 1999, is being duly executed and filed by Bernard J. Kelley, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. subsection 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is PSEG Nuclear LLC.
SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.
/s/ Bernard J. Kelley ----------------------- Name: Bernard J. Kelley Authorized Person |
Exhibit 3.6
LIMITED LIABILITY COMPANY AGREEMENT
OF
PSEG NUCLEAR LLC
This Limited Liability Company Agreement (together with the schedules attached hereto, this "Agreement") of PSEG Nuclear LLC, a Delaware limited liability company (the "Company"), is entered into by PSEG Power LLC, a Delaware limited liability company, as the sole member (the "Initial Member"). Capitalized terms used herein and not otherwise defined have the meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby forms and continues the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. ss.18-101, et seq.), as amended from time to time (the "Act"), and (ii) hereby agrees as follows:
1. Name.
The name of the limited liability company heretofore formed and continued hereby is PSEG Nuclear LLC.
2. Principal Business Office.
The principal business office of the Company shall be located at such location as may hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
5. Members.
The name and the mailing address of the Initial Member are set forth on Schedule B attached hereto.
6. Certificates.
Bernard J. Kelley, as an "authorized person" within the meaning of the Act, shall execute, deliver and file the Certificate of Formation with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" shall cease, and the Member thereupon became the designated "authorized person" and shall continue as the designated "authorized person" within the meaning of the Act. The Member or an Officer shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in New Jersey and in any other jurisdiction in which the Company may wish to conduct business.
7. Purposes.
The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act.
8. Powers.
The Company shall have the power and right to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes and business described herein or as permitted by the Act and shall have, without limitation, the power and right to:
a. acquire by purchase, lease, transfer, contribution of property or otherwise, own, hold, sell, convey, transfer or dispose of any real or personal property and all associated rights and liabilities which may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
b. act as a nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all of the powers, duties, rights and responsibilities associated therewith;
c. take any and all actions necessary, convenient or appropriate as nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amendments of rights or powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;
d. operate, purchase, maintain, finance, improve, own, sell, convey, assign, mortgage, lease or demolish or otherwise dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purposes of the Company;
e. borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Company, and secure the same by mortgage, pledge or other lien on the assets of the Company;
f. invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;
g. prepay in whole or in part, refinance, recast, increase, modify or extend any indebtedness of the Company and, in connection therewith, execute any extensions, renewals or modifications of any mortgage or security agreement securing such indebtedness;
h. enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any person or entity affiliated with the Member, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;
i. employ or otherwise engage employees, managers, contractors, advisors, attorneys and consultants and pay reasonable compensation for such services;
j. form, own, acquire and dispose of wholly-owned limited liability companies, trusts, associations, partnerships (general and limited), corporations or other ventures in furtherance of the purposes of the Company;
k. enter into partnerships (general and limited), limited liability companies, trusts, associations, corporations or other ventures with other persons or entities, including affiliated entities, in furtherance of the purposes of the Company; and
l. do such other things and engage in such other activities related to the foregoing as may be necessary, appropriate, proper, advisable, incidental or convenient to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.
The listing of powers and rights in this Section 8 shall not in any manner be deemed a restriction on the power or right of the Company to engage in any other activities permitted or not prohibited by the Act.
9. Management.
a. Board of Directors. The business and affairs of the Company shall be managed by or under the direction of a Board comprised of one or more Directors to be elected, designated or appointed by the Member. The Member may determine at any time in its sole and
absolute discretion the number of Directors to constitute the entire Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion. The initial number of Directors shall be three. The names and mailing addresses of the persons designated as initial Directors are set forth in Schedule C attached hereto. Each Director elected, designated or appointed by the Member shall hold office until his or her successor is elected and qualified or until such Director's earlier death, resignation or removal. As a condition and qualification to serving as a Director, each Director shall execute and deliver to the Company the Management Agreement set forth in Schedule D attached hereto. Directors need not be Members.
b. Powers. The Board shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise.
c. Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the Chairman of the Board or President on not less than 24 hours' notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President, the Chairman of the Board or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. A special meeting of the Board may be held without prior notice if all Directors waive in writing the requirement for such notice.
d. Quorum; Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
e. Electronic Communications. Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.
f. Committees of Directors.
(i) The Board may designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
(iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. If not otherwise specified by the Board, unless there is only one member of a committee (in which case one member shall constitute a quorum for the transaction of business), one-third of the entire committee, or two members, whichever is greater, shall constitute a quorum for the transaction of business.
g. Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board and/or a stated retainer for each Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
h. Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed, with or without cause, by the Member, and, any vacancy caused by any such removal may be filled by action of the Member.
i. Directors as Agents. To the extent of their powers set forth in this Agreement, the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. However, except as provided in this Agreement, no Director shall have the authority to bind the Company in his or her individual capacity. Any and all actions of the Board must be taken at a duly authorized meeting of the Board or upon unanimous written consent of the Board.
10. Duties of Directors.
Except as provided in this Agreement, in exercising their rights and performing their duties under this Agreement, the Directors shall have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware.
11. Officers.
a. Officers. The initial Officers of the Company are listed on Schedule E attached hereto. Except for the initial Officers, the Officers of the Company shall be chosen by the Board and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any number of offices may be held by the same person. Each Officer shall hold office until his or her successor is elected and qualified or until such officer's earlier resignation or removal. Any Officer may resign at any time upon written notice to the Company. In addition, the Board may appoint such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The salaries of all Officers and employees of the Company shall be fixed by or in the manner prescribed by the Board. Any initial Officer or any Officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by the Board. The Chairman of the Board, the President, each Senior Vice President and each Vice President, severally, shall have the power to sign deeds, contracts and other instruments; to attend, act and vote at any meeting of stockholders, partners, members, beneficial owners or the substantial equivalent of any corporation, partnership (limited and general), limited liability company, trust or any other entity in which the Company may hold stock, partnership interests, limited liability company interests, beneficial interests or other interests and to appoint, if permitted by the relevant entity, one or more other persons as proxy or proxies to attend, act, and vote at any such meeting and such officer or such proxy or proxies shall possess and may exercise on behalf of the Company any and all rights and powers incident to its ownership of such stock, partnership interests, limited liability company interests, beneficial interests or other interests; and shall have such powers and perform such duties as may be assigned by the Board of Directors, and any Committee of the Board, or the Chief Executive Officer, in addition to any powers and duties that are assigned specifically by this Agreement.
b. Chairman of the Board. If there be a Chairman of the Board, he shall preside at all meetings of the Board of Directors, and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors or the Executive Committee. If there be a Chairman of the Board, the Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer of the Company with plenary powers of supervision and direction of the business and affairs of the Company, unless such offices are occupied by the same person.
c. President. If there be no Chairman of the Board, the President shall be the chief executive officer. If there be a Chairman of the Board and if he be designated as the chief executive officer of the Company, the President shall have charge of the coordination and supervision of all matters of operation of the Company. In the absence of the Chairman of the Board, the President shall have the powers and perform the duties of the Chairman of the Board.
d. Senior Vice President. The Senior Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board and the President, have the powers and perform the duties of the Chairman of the Board.
e. Vice President. The Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President and the Senior Vice Presidents, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board, the President and the Senior Vice Presidents, have the powers and perform the duties of the Chairman of the Board.
f. Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Board and all meetings of the Members, if any, and record all the proceedings of the meetings of the Company and of the Board and shall perform like duties for special and standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
g. Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board or, if authorized by the Board, the Treasurer. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
h. Officers as Agents. The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business, and, the actions of the Officers taken in accordance with such powers shall bind the Company.
i. Duties of Officers. Except to the extent otherwise provided herein, each Officer shall have a fiduciary duty of loyalty and care similar to that of officers of business corporations organized under the General Corporation Law of the State of Delaware.
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither any Member nor any Director nor any Officer shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, a Director or an Officer of the Company.
13. Capital Contributions.
The Member shall be deemed admitted as the Member of the Company effective as of the date of this Agreement. The Initial Member shall contribute the amount of cash to the Company listed on Schedule B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, Schedule B of this Agreement does not need to be revised; rather, the Secretary or Treasurer shall modify the books and records of the Company to reflect such additional capital contribution. The provisions of this Agreement, including this Section 14, are intended solely to benefit the Member and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and no Member shall have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the Member.
16. Distributions.
Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act or any other applicable law.
17. Books and Records.
The Board shall keep or cause to be kept complete and accurate books of account and records with respect to the Company's business. Each Member and its duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours. The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) of the Act. The Company's books of account shall be kept using the method of accounting determined by the Board. The Company's independent auditor shall be an independent public accounting firm selected by the Member.
18. Exculpation and Indemnification.
a. No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct.
b. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.
c. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 18.
d. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person.
f. The Company may purchase and maintain insurance, to the extent and in such amounts as the Treasurer, in his sole discretion, shall deem reasonable, on behalf of Covered Persons and such other persons or entities as the Treasurer shall determine, against any liability that may be asserted against or expenses that may be incurred by any such person or entity in connection with the activities of the Company or such indemnities, regardless of whether the Company would have the power to indemnify such person or entity against such liability under the provisions of this Agreement. The Company may enter into indemnity contracts with Covered Persons and such other persons or entities as the Board shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under Section 18(c) and containing such other procedures regarding indemnification as are appropriate.
g. The foregoing provisions of this Section 18 shall survive any termination of this Agreement.
19. Assignments.
The Member may assign in whole or in part its limited liability company interest in the Company. If the Member transfers any or all of its limited liability company interest in the Company pursuant to this Section 19, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer, and, if the transfer is a transfer of the transferor Member's entire limited liability company
interest in the Company, the transferor Member shall cease to be a member of the Company immediately following such admission.
20. Resignation.
A Member may resign from the Company with the written consent of the
Initial Member. If a Member is permitted to resign pursuant to this Section 20,
an additional member of the Company may be admitted to the Company, subject to
Section 21, upon its execution of an instrument signifying its agreement to be
bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed
effective immediately prior to the resignation, and, immediately following such
admission, the resigning Member shall cease to be a member of the Company.
21. Admission of Additional Members.
One or more additional members of the Company may be admitted to the Company with the written consent of the Member.
22. Dissolution.
a. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the retirement, resignation or dissolution of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the business of the Company is continued in a manner permitted by the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act.
b. The bankruptcy (as defined in Sections 18-101(1) and 18-304 of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.
c. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act.
23. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each Member hereby irrevocably waives any right or power that such Member might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. No Member shall have any interest in any specific assets of the Company, and no Member shall have the status of a creditor with respect to any distribution pursuant to Section 16 hereof. The interest of the Members in the Company is personal property.
24. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of any Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
25. Other Business.
The Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
26. Severability of Provisions.
Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.
27. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.
28. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.
29. Amendments.
This Agreement may not be modified, altered, supplemented or amended except pursuant to a written instrument executed and delivered by the Member.
30. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument
31. Notices.
Any notices required to be delivered hereunder shall be in writing
and personally delivered, mailed or sent by telecopy, electronic mail, or other
similar form of rapid transmission, and shall be deemed to have been duly given
upon receipt (a) in the case of the Company, to the Company at its address in
Section 2, (b) in the case of a Member, to such Member at its address as listed
on Schedule B attached hereto and (c) in the case of either of the foregoing, at
such other address as may be designated by written notice to the other party.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Agreement as of the 16th day of June, 1999. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of June 16, 1999.
MEMBER:
PSEG Power LLC
By: /s/ E. James Ferland
--------------------------------------
Name: E. James Ferland
Title: Chairman of the Board and Chief
Executive Officer
|
SCHEDULE A
A. Definitions
When used in this Agreement, the following terms not otherwise defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person.
"Agreement" means this Limited Liability Company Agreement of the Company, together with the schedules attached hereto, as amended, restated or supplemented form time to time.
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Certificate of Formation" means the Certificate of Formation of the Company to be filed with the Secretary of State of the State of Delaware on June 16, 1999, as amended or amended and restated from time to time.
"Control" means the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. "Controlling" and "Controlled" shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.
"Covered Persons" has the meaning set forth in Section 18a.
"Directors" means the directors elected to the Board of Directors from time to time by the Member. A Director is hereby designated as a "manager" of the Company within the meaning of Section 18-101(10) of the Act.
"Initial Member" means PSEG Power LLC, a Delaware limited liability company, as the sole member of the Company.
"Management Agreement" means the agreement of the Directors in the form attached hereto as Schedule D. The Management Agreement shall be deemed to be and constitute part of this Agreement.
"Member" means the Initial Member and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement.
"Officer" means an officer of the Company described in Section 11.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms. The words "include" and "including" shall be deemed to be followed by the phrase "without limitation." The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement.
SCHEDULE B
Members
-------
Agreed Value
of Capital Percentage
Name Mailing Address Contribution Interest
---- --------------- ------------ ----------
PSEG Power LLC c/o Public Service $2,000 100%
Enterprise Group
Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
|
SCHEDULE C
Directors
---------
Name Address
---- -------
Frank Cassidy c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Harold W. Keiser c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Steven R. Teitelman c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
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SCHEDULE D
______ __, 1999
PSEG Nuclear LLC
Re: Management Agreement
PSEG Nuclear LLC
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned persons, who have been designated as directors of PSEG Nuclear LLC, a Delaware limited liability company (the "Company"), in accordance with the Limited Liability Company Agreement of the Company, dated as of June 16, 1999, as it may be amended or restated from time to time (the "LLC Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such person's rights and authority as a Director (as defined in the LLC Agreement) under the LLC Agreement and agrees to perform and discharge such person's duties and obligations as a Director under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such person's successor as a Director is designated or until such person's resignation or removal as a Director in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a "manager" of the Company within the meaning of the Delaware Limited Liability Company Act.
2. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.
SCHEDULE E
Officers
--------
Name Title
---- -----
Harold W. Keiser President
Elbert C. Simpson Senior Vice President
Louis F. Storz Senior Vice President
Morton A. Plawner Treasurer
Ardeshir Rostami Assistant Treasurer
Fred F. Saunders Assistant Treasurer
Edward J. Biggins Jr. Secretary
Patrick M. Burke Assistant Secretary
Harold W. Borden Jr. General Counsel
Patricia A. Rado Controller
|
Exhibit 3.7
CERTIFICATE OF FORMATION
OF
PSEG ENERGY RESOURCES & TRADE LLC
This Certificate of Formation of PSEG Energy Resources & Trade LLC (the "LLC"), dated as of June 16, 1999, is being duly executed and filed by Bernard J. Kelley, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. subsection 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is PSEG Energy Resources & Trade LLC.
SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.
/s/ Bernard J. Kelley ----------------------- Name: Bernard J. Kelley Authorized Person |
Exhibit 3.8
LIMITED LIABILITY COMPANY AGREEMENT
OF
PSEG ENERGY RESOURCES & TRADE LLC
This Limited Liability Company Agreement (together with the schedules attached hereto, this "Agreement") of PSEG Energy Resources & Trade LLC, a Delaware limited liability company (the "Company"), is entered into by PSEG Power LLC, a Delaware limited liability company, as the sole member (the "Initial Member"). Capitalized terms used herein and not otherwise defined have the meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby forms and continues the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. ss.18-101, et seq.), as amended from time to time (the "Act"), and (ii) hereby agrees as follows:
1. Name.
The name of the limited liability company heretofore formed and continued hereby is PSEG Energy Resources & Trade LLC.
2. Principal Business Office.
The principal business office of the Company shall be located at such location as may hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
5. Members.
The name and the mailing address of the Initial Member are set forth on Schedule B attached hereto.
6. Certificates.
Bernard J. Kelley, as an "authorized person" within the meaning of the Act, shall execute, deliver and file the Certificate of Formation with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an "authorized person" shall cease, and the Member thereupon became the designated "authorized person" and shall continue as the designated "authorized person" within the meaning of the Act. The Member or an Officer shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in New Jersey and in any other jurisdiction in which the Company may wish to conduct business.
7. Purposes.
The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act.
8. Powers.
The Company shall have the power and right to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes and business described herein or as permitted by the Act and shall have, without limitation, the power and right to:
a. acquire by purchase, lease, transfer, contribution of property or otherwise, own, hold, sell, convey, transfer or dispose of any real or personal property and all associated rights and liabilities which may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;
b. act as a nominee, bailee, director, officer, agent or in some other fiduciary capacity for any person or entity and to exercise all of the powers, duties, rights and responsibilities associated therewith;
c. take any and all actions necessary, convenient or appropriate as nominee, bailee, director, officer, agent or other fiduciary, including the granting or approval of waivers, consents or amendments of rights or powers relating thereto and the execution of appropriate documents to evidence such waivers, consents or amendments;
d. operate, purchase, maintain, finance, improve, own, sell, convey, assign, mortgage, lease or demolish or otherwise dispose of any real or personal property which may be necessary, convenient or incidental to the accomplishment of the purposes of the Company;
e. borrow money and issue evidences of indebtedness in furtherance of any or all of the purposes of the Company, and secure the same by mortgage, pledge or other lien on the assets of the Company;
f. invest any funds of the Company pending distribution or payment of the same pursuant to the provisions of this Agreement;
g. prepay in whole or in part, refinance, recast, increase, modify or extend any indebtedness of the Company and, in connection therewith, execute any extensions, renewals or modifications of any mortgage or security agreement securing such indebtedness;
h. enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any person or entity affiliated with the Member, necessary to, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company;
i. employ or otherwise engage employees, managers, contractors, advisors, attorneys and consultants and pay reasonable compensation for such services;
j. form, own, acquire and dispose of wholly-owned limited liability companies, trusts, associations, partnerships (general and limited), corporations or other ventures in furtherance of the purposes of the Company;
k. enter into partnerships (general and limited), limited liability companies, trusts, associations, corporations or other ventures with other persons or entities, including affiliated entities, in furtherance of the purposes of the Company; and
l. do such other things and engage in such other activities related to the foregoing as may be necessary, appropriate, proper, advisable, incidental or convenient to the conduct of the business of the Company, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.
The listing of powers and rights in this Section 8 shall not in any manner be deemed a restriction on the power or right of the Company to engage in any other activities permitted or not prohibited by the Act.
9. Management.
a. Board of Directors. The business and affairs of the Company shall be managed by or under the direction of a Board comprised of one or more Directors to be elected, designated or appointed by the Member. The Member may determine at any time in its sole and
absolute discretion the number of Directors to constitute the entire Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion. The initial number of Directors shall be three. The names and mailing addresses of the persons designated as initial Directors are set forth in Schedule C attached hereto. Each Director elected, designated or appointed by the Member shall hold office until his or her successor is elected and qualified or until such Director's earlier death, resignation or removal. As a condition and qualification to serving as a Director, each Director shall execute and deliver to the Company the Management Agreement set forth in Schedule D attached hereto. Directors need not be Members.
b. Powers. The Board shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise.
c. Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the Chairman of the Board or President on not less than 24 hours' notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President, the Chairman of the Board or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. A special meeting of the Board may be held without prior notice if all Directors waive in writing the requirement for such notice.
d. Quorum; Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
e. Electronic Communications. Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.
f. Committees of Directors.
(i) The Board may designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
(iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. If not otherwise specified by the Board, unless there is only one member of a committee (in which case one member shall constitute a quorum for the transaction of business), one-third of the entire committee, or two members, whichever is greater, shall constitute a quorum for the transaction of business.
g. Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board and/or a stated retainer for each Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
h. Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed, with or without cause, by the Member, and, any vacancy caused by any such removal may be filled by action of the Member.
i. Directors as Agents. To the extent of their powers set forth in this Agreement, the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. However, except as provided in this Agreement, no Director shall have the authority to bind the Company in his or her individual capacity. Any and all actions of the Board must be taken at a duly authorized meeting of the Board or upon unanimous written consent of the Board.
10. Duties of Directors.
Except as provided in this Agreement, in exercising their rights and performing their duties under this Agreement, the Directors shall have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware.
11. Officers.
a. Officers. The initial Officers of the Company are listed on Schedule E attached hereto. Except for the initial Officers, the Officers of the Company shall be chosen by the Board and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any number of offices may be held by the same person. Each Officer shall hold office until his or her successor is elected and qualified or until such officer's earlier resignation or removal. Any Officer may resign at any time upon written notice to the Company. In addition, the Board may appoint such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The salaries of all Officers and employees of the Company shall be fixed by or in the manner prescribed by the Board. Any initial Officer or any Officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by the Board. The Chairman of the Board, the President, each Senior Vice President and each Vice President, severally, shall have the power to sign deeds, contracts and other instruments; to attend, act and vote at any meeting of stockholders, partners, members, beneficial owners or the substantial equivalent of any corporation, partnership (limited and general), limited liability company, trust or any other entity in which the Company may hold stock, partnership interests, limited liability company interests, beneficial interests or other interests and to appoint, if permitted by the relevant entity, one or more other persons as proxy or proxies to attend, act, and vote at any such meeting and such officer or such proxy or proxies shall possess and may exercise on behalf of the Company any and all rights and powers incident to its ownership of such stock, partnership interests, limited liability company interests, beneficial interests or other interests; and shall have such powers and perform such duties as may be assigned by the Board of Directors, and any Committee of the Board, or the Chief Executive Officer, in addition to any powers and duties that are assigned specifically by this Agreement.
b. Chairman of the Board. If there be a Chairman of the Board, he shall preside at all meetings of the Board of Directors, and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors or the Executive Committee. If there be a Chairman of the Board, the Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer of the Company with plenary powers of supervision and direction of the business and affairs of the Company, unless such offices are occupied by the same person.
c. President. If there be no Chairman of the Board, the President shall be the chief executive officer. If there be a Chairman of the Board and if he be designated as the chief executive officer of the Company, the President shall have charge of the coordination and supervision of all matters of operation of the Company. In the absence of the Chairman of the Board, the President shall have the powers and perform the duties of the Chairman of the Board.
d. Senior Vice President. The Senior Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board and the President, have the powers and perform the duties of the Chairman of the Board.
e. Vice President. The Vice Presidents, severally, in the order designated by the chief executive officer, shall, in the absence of the President and the Senior Vice Presidents, have the powers and perform the duties of the President, and if there be a Chairman of the Board, they shall, in the absence of the Chairman of the Board, the President and the Senior Vice Presidents, have the powers and perform the duties of the Chairman of the Board.
f. Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Board and all meetings of the Members, if any, and record all the proceedings of the meetings of the Company and of the Board and shall perform like duties for special and standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
g. Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board or, if authorized by the Board, the Treasurer. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
h. Officers as Agents. The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business, and, the actions of the Officers taken in accordance with such powers shall bind the Company.
i. Duties of Officers. Except to the extent otherwise provided herein, each Officer shall have a fiduciary duty of loyalty and care similar to that of officers of business corporations organized under the General Corporation Law of the State of Delaware.
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither any Member nor any Director nor any Officer shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, a Director or an Officer of the Company.
13. Capital Contributions.
The Member shall be deemed admitted as the Member of the Company effective as of the date of this Agreement. The Initial Member shall contribute the amount of cash to the Company listed on Schedule B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, Schedule B of this Agreement does not need to be revised; rather, the Secretary or Treasurer shall modify the books and records of the Company to reflect such additional capital contribution. The provisions of this Agreement, including this Section 14, are intended solely to benefit the Member and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and no Member shall have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the Member.
16. Distributions.
Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act or any other applicable law.
17. Books and Records.
The Board shall keep or cause to be kept complete and accurate books of account and records with respect to the Company's business. Each Member and its duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours. The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) of the Act. The Company's books of account shall be kept using the method of accounting determined by the Board. The Company's independent auditor shall be an independent public accounting firm selected by the Member.
18. Exculpation and Indemnification.
a. No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct.
b. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.
c. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 18.
d. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person.
f. The Company may purchase and maintain insurance, to the extent and in such amounts as the Treasurer, in his sole discretion, shall deem reasonable, on behalf of Covered Persons and such other persons or entities as the Treasurer shall determine, against any liability that may be asserted against or expenses that may be incurred by any such person or entity in connection with the activities of the Company or such indemnities, regardless of whether the Company would have the power to indemnify such person or entity against such liability under the provisions of this Agreement. The Company may enter into indemnity contracts with Covered Persons and such other persons or entities as the Board shall determine and adopt written procedures pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under Section 18(c) and containing such other procedures regarding indemnification as are appropriate.
g. The foregoing provisions of this Section 18 shall survive any termination of this Agreement.
19. Assignments.
The Member may assign in whole or in part its limited liability company interest in the Company. If the Member transfers any or all of its limited liability company interest in the Company pursuant to this Section 19, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer, and, if the transfer is a transfer of the transferor Member's entire limited liability company
interest in the Company, the transferor Member shall cease to be a member of the Company immediately following such admission.
20. Resignation.
A Member may resign from the Company with the written consent of the
Initial Member. If a Member is permitted to resign pursuant to this Section 20,
an additional member of the Company may be admitted to the Company, subject to
Section 21, upon its execution of an instrument signifying its agreement to be
bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed
effective immediately prior to the resignation, and, immediately following such
admission, the resigning Member shall cease to be a member of the Company.
21. Admission of Additional Members.
One or more additional members of the Company may be admitted to the Company with the written consent of the Member.
22. Dissolution.
a. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the retirement, resignation or dissolution of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the business of the Company is continued in a manner permitted by the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act.
b. The bankruptcy (as defined in Sections 18-101(1) and 18-304 of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.
c. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act.
23. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each Member hereby irrevocably waives any right or power that such Member might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. No Member shall have any interest in any specific assets of the Company, and no Member shall have the status of a creditor with respect to any distribution pursuant to Section 16 hereof. The interest of the Members in the Company is personal property.
24. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of any Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.
25. Other Business.
The Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.
26. Severability of Provisions.
Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.
27. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof.
28. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.
29. Amendments.
This Agreement may not be modified, altered, supplemented or amended except pursuant to a written instrument executed and delivered by the Member.
30. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument
31. Notices.
Any notices required to be delivered hereunder shall be in writing
and personally delivered, mailed or sent by telecopy, electronic mail, or other
similar form of rapid transmission, and shall be deemed to have been duly given
upon receipt (a) in the case of the Company, to the Company at its address in
Section 2, (b) in the case of a Member, to such Member at its address as listed
on Schedule B attached hereto and (c) in the case of either of the foregoing, at
such other address as may be designated by written notice to the other party.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Agreement as of the 16th day of June, 1999. Pursuant to Section 18-201(d) of the Act, this Agreement shall be effective as of June 16, 1999.
MEMBER:
PSEG Power LLC
By: /s/ E. James Ferland
--------------------------------------
Name: E. James Ferland
Title: Chairman of the Board and Chief
Executive Officer
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SCHEDULE A
A. Definitions
When used in this Agreement, the following terms not otherwise defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person.
"Agreement" means this Limited Liability Company Agreement of the Company, together with the schedules attached hereto, as amended, restated or supplemented form time to time.
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Certificate of Formation" means the Certificate of Formation of the Company to be filed with the Secretary of State of the State of Delaware on June 16, 1999, as amended or amended and restated from time to time.
"Control" means the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or general partnership or managing member interests, by contract or otherwise. "Controlling" and "Controlled" shall have correlative meanings. Without limiting the generality of the foregoing, a Person shall be deemed to Control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.
"Covered Persons" has the meaning set forth in Section 18a.
"Directors" means the directors elected to the Board of Directors from time to time by the Member. A Director is hereby designated as a "manager" of the Company within the meaning of Section 18-101(10) of the Act.
"Initial Member" means PSEG Power LLC, a Delaware limited liability company, as the sole member of the Company.
"Management Agreement" means the agreement of the Directors in the form attached hereto as Schedule D. The Management Agreement shall be deemed to be and constitute part of this Agreement.
"Member" means the Initial Member and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement.
"Officer" means an officer of the Company described in Section 11.
"Person" means any individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, association, joint-stock company, trust, unincorporated organization, or other organization, whether or not a legal entity, and any governmental authority.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms. The words "include" and "including" shall be deemed to be followed by the phrase "without limitation." The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision. The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement.
SCHEDULE B
Members
-------
Agreed Value
of Capital Percentage
Name Mailing Address Contribution Interest
---- --------------- ------------ --------
PSEG Power LLC c/o Public Service $2,000 100%
Enterprise Group
Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
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SCHEDULE C
Directors
---------
Name Address
---- -------
Frank Cassidy c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Harold W. Keiser c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
Steven R. Teitelman c/o Public Service Enterprise
Group Incorporated
80 Park Plaza
P. O. Box 1171
Newark, NJ 07102-1171
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SCHEDULE D
______ __, 1999
PSEG Energy Resources & Trade LLC
Re: Management Agreement
PSEG Energy Resources & Trade LLC
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned persons, who have been designated as directors of PSEG Energy Resources & Trade LLC, a Delaware limited liability company (the "Company"), in accordance with the Limited Liability Company Agreement of the Company, dated as of June 16, 1999, as it may be amended or restated from time to time (the "LLC Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such person's rights and authority as a Director (as defined in the LLC Agreement) under the LLC Agreement and agrees to perform and discharge such person's duties and obligations as a Director under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such person's successor as a Director is designated or until such person's resignation or removal as a Director in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a "manager" of the Company within the meaning of the Delaware Limited Liability Company Act.
2. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.
SCHEDULE E
Officers
--------
Name Title
---- -----
Steven R. Teitelman President
Morton A. Plawner Treasurer
Ardeshir Rostami Assistant Treasurer
Fred F. Saunders Assistant Treasurer
Edward J. Biggins Jr. Secretary
Patrick M. Burke Assistant Secretary
Harold W. Borden Jr. General Counsel
Patricia A. Rado Controller
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Exhibit 4.1
PSEG Power LLC PSEG Nuclear LLC PSEG Fossil LLC PSEG Energy Resources and Trade LLC
To
The Bank of New York,
Trustee
Indenture
Dated as of April 16, 2001
Providing for the Issuance
of
Senior Debt Securities
PSEG POWER LLC, et al
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of April 16, 2001
Trust Indenture
Indenture Act Section Section
subsection 310(a)(1).................................................. 607
(a)(2)................................................................ 607
(b)................................................................... 608
subsection 312(c)..................................................... 701
subsection 314(a)..................................................... 703
(a)(4)................................................................ 1005
(c)(1)................................................................ 102
(c)(2)................................................................ 102
(e)................................................................... 102
subsection 315(b)..................................................... 601
subsection 316(a) (last sentence)..................................... 101
("Outstanding")....................................................... 101
(a)(1)(A)............................................................. 502, 512
(a)(1)(B)............................................................. 513
(b)................................................................... 508
subsection 317(a)(1).................................................. 503
(a)(2)................................................................ 504
subsection 318(a)..................................................... 111
(c)................................................................... 111
----------
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NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
Table of Contents
Page
----
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions....................................................2
SECTION 102. Compliance Certificates and Opinions..........................15
SECTION 103. Form of Documents Delivered to Trustee........................16
SECTION 104. Acts of Holders...............................................16
SECTION 105. Notices, etc., to Trustee, Company and
Subsidiary Guarantors.......................................18
SECTION 106. Notice to Holders; Waiver.....................................19
SECTION 107. Effect of Headings and Table of Contents......................20
SECTION 108. Successors and Assigns........................................20
SECTION 109. Severability Clause...........................................20
SECTION 110. Benefits of Indenture.........................................20
SECTION 111. Governing Law.................................................20
SECTION 112. Legal Holidays................................................21
SECTION 113. No Personal Liability.........................................21
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities...........................................21
SECTION 202. Form of Trustee's Certificate of Authentication...............22
SECTION 203. Securities Issuable in Global Form............................22
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series..........................23
SECTION 302. Denominations.................................................26
SECTION 303. Execution, Authentication, Delivery and Dating................27
SECTION 304. Temporary Securities..........................................29
SECTION 305. Registration, Registration of Transfer and Exchange...........31
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..............35
SECTION 307. Payment of Interest; Interest Rights Preserved;
Optional Interest Reset.....................................36
SECTION 308. Optional Extension of Maturity................................39
SECTION 309. Persons Deemed Owners.........................................40
SECTION 310. Cancellation..................................................40
SECTION 311. Computation of Interest.......................................41
SECTION 312. CUSIP Numbers.................................................41
(i)
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Page
----
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.......................41
SECTION 402. Application of Trust Funds....................................43
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.............................................43
SECTION 502. Acceleration of Maturity; Rescission and Annulment............45
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee......................................46
SECTION 504. Trustee May File Proofs of Claim..............................47
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons.......................................48
SECTION 506. Application of Money Collected................................48
SECTION 507. Limitation on Suits...........................................48
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium, and Interest.......................................49
SECTION 509. Restoration of Rights and Remedies............................49
SECTION 510. Rights and Remedies Cumulative................................49
SECTION 511. Delay or Omission Not Waiver..................................50
SECTION 512. Control by Holders of Securities..............................50
SECTION 513. Waiver of Past Defaults.......................................50
SECTION 514. Waiver of Stay or Extension Laws..............................50
SECTION 515. Notice of Defaults............................................51
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities...........................51
SECTION 602. Certain Rights of Trustee.....................................52
SECTION 603. Not Responsible for Recitals or Issuance of Securities........54
SECTION 604. May Hold Securities...........................................54
SECTION 605. Money Held in Trust...........................................54
SECTION 606. Compensation and Reimbursement................................54
SECTION 607. Corporate Trustee Required; Eligibility.......................55
SECTION 608. Resignation and Removal; Appointment of Successor.............55
SECTION 609. Acceptance of Appointment by Successor........................57
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business.....................................58
SECTION 611. Appointment of Authenticating Agent...........................58
(ii)
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Page
----
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders..................60
SECTION 702. Reports by Trustee............................................60
SECTION 703. Reports by Company............................................60
SECTION 704. Calculation of Original Issue Discount........................61
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, etc., Only on Certain Terms..........61
SECTION 802. Successor Person Substituted..................................62
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders............62
SECTION 902. Supplemental Indentures With Consent of Holders...............64
SECTION 903. Execution of Supplemental Indentures..........................65
SECTION 904. Effect of Supplemental Indentures.............................65
SECTION 905. Conformity With Trust Indenture Act...........................66
SECTION 906. Reference in Securities to Supplemental Indentures............66
SECTION 907. Notice of Supplemental Indentures.............................66
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest...........66
SECTION 1002. Maintenance of Office or Agency...............................66
SECTION 1003. Money for Securities Payments to be Held in Trust.............68
SECTION 1004. Additional Amounts............................................69
SECTION 1005. Limitation on Liens...........................................70
SECTION 1006. Limitation on Sale of Assets..................................72
SECTION 1007. Limitation on Dividends and Other Payment Restrictions........73
SECTION 1008. Limitations on Obligations....................................74
SECTION 1009. Guaranty of ER&T Obligations..................................75
SECTION 1010. Payment of Dividends by ER&T to the Company...................75
SECTION 1011. Statement as to Compliance....................................75
SECTION 1012. Waiver of Certain Covenants...................................75
(iii)
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article......................................76
SECTION 1102. Election to Redeem; Notice to Trustee.........................76
SECTION 1103. Selection by Trustee of Securities to be Redeemed.............76
SECTION 1104. Notice of Redemption..........................................76
SECTION 1105. Deposit of Redemption Price...................................78
SECTION 1106. Securities Payable on Redemption Date.........................78
SECTION 1107. Securities Redeemed in Part...................................79
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article......................................79
SECTION 1202. Satisfaction of Sinking Fund Payments With Securities.........79
SECTION 1203. Redemption of Securities for Sinking Fund.....................80
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article......................................80
SECTION 1302. Repayment of Securities.......................................80
SECTION 1303. Exercise of Option............................................81
SECTION 1304. When Securities Presented for Repayment
Become Due and Payable......................................81
SECTION 1305. Securities Repaid in Part.....................................82
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance....................82
SECTION 1402. Defeasance and Discharge......................................83
SECTION 1403. Covenant Defeasance...........................................83
SECTION 1404. Conditions to Defeasance or Covenant Defeasance...............84
SECTION 1405. Deposited Money and Government Obligations to be
Held in Trust; Other Miscellaneous Provisions...............85
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May be Called.....................86
SECTION 1502. Call, Notice and Place of Meetings............................86
SECTION 1503. Persons Entitled to Vote at Meetings..........................86
(iv)
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SECTION 1504. Quorum; Action................................................87
SECTION 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings.....................................88
SECTION 1506. Counting Votes and Recording Action of Meetings...............89
ARTICLE SIXTEEN
SUBSIDIARY GUARANTY
SECTION 1601. Subsidiary Guaranty...........................................89
ACKNOWLEDGEMENTS
EXHIBIT A - FORMS OF CERTIFICATION..........................................A-1
EXHIBIT B - FORM OF SUBSIDIARY GUARANTY.....................................B-1
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INDENTURE, dated as of April 16, 2001, among PSEG POWER LLC, a Delaware limited liability company (hereinafter called the "Company"), having its principal office at 80 Park Plaza, Newark, NJ 07102, PSEG NUCLEAR LLC, a Delaware limited liability company (hereinafter called "Nuclear"), having its principal office at 80 Park Plaza, Newark, NJ 07102, PSEG FOSSIL LLC, a Delaware limited liability company (hereinafter called "Fossil"), having its principal office at 80 Park Plaza, Newark, NJ 07102, PSEG ENERGY RESOURCES AND TRADE LLC, a Delaware limited liability company (hereinafter called "ER&T"), having its principal office at 80 Park Plaza, Newark, NJ 07102, and THE BANK OF NEW YORK, a New York banking corporation as Trustee (hereinafter called the "Trustee"), having a Corporate Trust Office at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for its lawful purposes senior debt securities (hereinafter called the "Securities") evidencing its unsecured and unsubordinated indebtedness, which may or may not be convertible into or exchangeable for any securities of any Person (including the Company), and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to principal amount, to bear such rates of interest, to mature at such times and to have such other provisions as shall be fixed as hereinafter provided.
For value received, the execution and delivery by Nuclear, Fossil and ER&T of this Indenture to provide for the Guarantees (as defined herein) in respect of Guaranteed Securities (as defined herein) has been duly authorized. All things necessary to make this Indenture a valid agreement of each of Nuclear, Fossil and ER&T, in accordance with its terms, have been done.
This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders (as defined herein) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities and any coupons (as defined herein), as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles (as defined herein); and
(4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms used principally in certain Articles hereof, are defined in those Articles.
"Acquired Obligations" means, with respect to any Person, (i) Obligations of any other Person existing at the time the other Person is merged with or into or became a Subsidiary of the Person, including, without limitation, Obligations Incurred in connection with, or in contemplation of, the other Person merging with or into or becoming a Subsidiary of the Person; and (ii) Obligations secured by a Lien encumbering any asset acquired by the Person at the time the asset is acquired by the Person.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Additional Amounts" means any additional amounts which are required by a Security or by or pursuant to a Board Resolution, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders specified therein and which are owing to such Holders.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, transfer, conveyance, lease or other
disposition (including by way of merger, consolidation or sale-leaseback) by the
Company or any Restricted Subsidiary to any Person (other than to the Company or
a Restricted Subsidiary and other than in the ordinary course of business) of
any Capital Stock or other Property of the Company or of any Restricted
Subsidiary (including Capital Stock of Subsidiaries). The term "Asset Sale" will
not include (i) any sale, transfer, conveyance, lease or other disposition of
Property governed by Section 801 hereunder and (ii) any transaction or series of
related transactions consisting of the sale, transfer, conveyance, lease or
other disposition of Capital Stock or other Property with a Fair Market Value
aggregating less than $50 million in any fiscal year. The term "Asset Sale" also
will not include (a) the grant of or realization upon a Lien permitted under
Section 1005 hereunder or the exercise of remedies thereunder and (b) sales of
fuel, capacity, energy (including, but not limited to, electric power, natural
gas and coal), environmental credits or entitlements, related transportation
services and other related services by ER&T and its Permitted Hedging
Obligations as permitted by Section 1008 hereunder.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at a rate per annum equal to the weighted average interest rate of all Outstanding Securities compounded semi-annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended).
"Authenticating Agent" means any authenticating agent appointed by the Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Where successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different newspapers in the same city meeting the foregoing requirements and in each case on any Business Day.
"Bearer Security" means any Security established pursuant to Section 201 which is payable to bearer.
"Board of Directors" means the board of directors of the Company, the executive committee or any committee of that board duly authorized to act on behalf of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distribution of assets of, the
issuing Person.
"Capitalized Lease" means as applied to any Person, any lease of any Property of which the discounted present value of the rental obligations of such Person as lessee, in conformity with Generally Accepted Accounting Principles is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means, as to any Person, all rental obligations as lessee which, under Generally Accepted Accounting Principles, are or will be required to be capitalized on the books of such Person or any of its Subsidiaries, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles.
"Clearstream" means Clearstream Banking, societe anonyme, or its successor.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.
"Commodity Trading Obligations," with respect to any Person, means the Obligations of such Person under (i) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity cap agreement, commodity floor agreement, commodity collar agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof, designed to protect such Person against fluctuations in commodity prices or (ii) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof (including an agreement or arrangement to hedge foreign exchange risks) in respect of commodities entered into by the Company pursuant to asset optimization and risk management policies and procedures adopted in good faith by the Board of Directors.
"Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Corporation.
"Company Request" and "Company Order" mean, respectively, a written request or order signed in the name of the Company by the Chairman, the President or a Vice President, the
Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.
"Consolidated Current Liabilities," as of the date of determination, means the aggregate amount of liabilities on a consolidated basis which may properly be classified as current liabilities (including taxes accrued as estimated) of the Company and its Restricted Subsidiaries, after eliminating (i) all inter-company items between the Company and any consolidated Restricted Subsidiary, (ii) all current maturities of long-term indebtedness, all as determined in accordance with Generally Accepted Accounting Principles and (iii) all liabilities attributable to Subsidiaries that are not Restricted Subsidiaries.
"Consolidated Net Tangible Assets" means, as of any date of determination, the total amount of assets (less accumulated depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items in accordance with Generally Accepted Accounting Principles) which would appear on a consolidated balance sheet of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles, consistently applied, and after giving effect to purchase accounting and after deducting therefrom, to the extent otherwise included, the amounts of: (i) Consolidated Current Liabilities; (ii) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors; (iii) unamortized debt discount and expense and other unamortized deferred charges, goodwill (including the amounts of investments in affiliates that consist of goodwill), patents, trademarks, service marks, trade names, copyrights, licenses, deferred project costs, organizational or other development expenses and other intangible items; (iv) treasury stock; (v) any cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and (vi) all assets attributable to Subsidiaries that are not Restricted Subsidiaries (including Capital Stock thereof), except to the extent of dividends or distributions received from such Subsidiaries.
"Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration, or such other address as the Trustee may designate form time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as successor Trustee may designate from time to time by notice to the Holders and the Company).
"Corporation" includes corporations, associations, companies, limited liability companies and business trusts.
"Coupon" means any interest coupon appertaining to a Bearer Security.
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar", "Dollars" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
"ER&T" means the Person named as "ER&T" in the first paragraph of this Indenture until a successor Corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "ER&T" shall mean such successor Corporation.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels Office, or its successor as operator of the Euroclear System.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the price that would be paid by a purchaser to a seller in an arms-length transaction.
"Fossil" means the Person named as "Fossil" in the first paragraph of this Indenture until a successor Corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Fossil" shall mean such successor Corporation.
"Generally Accepted Accounting Principles" means generally accepted accounting principles in the United States applied on a basis consistent with the principles, methods, procedures and practices employed in the preparation of the Company's audited financial statements, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession.
"Government Obligations" means securities which are (i) direct obligations of the United States of America or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt.
"Guaranteed Securities" means a series of Securities made subject to a Subsidiary Guaranty (as set forth in Article Sixteen) pursuant to Section 301.
"Hedging Obligations" means, with respect to any Person, the obligations of such Person under any interest rate or currency swap agreement, interest rate or currency future agreement, interest rate cap or collar agreement, interest rate or currency hedge agreement, and any put, call or other agreement or arrangement designed to protect such Person against fluctuations in interest rates or currency exchange rates.
"Holder" means, in the case of a Registered Security, the Person in whose name a Security is registered in the Security Register and, in the case of a Bearer Security, the bearer thereof and, when used with respect to any coupon, shall mean the bearer thereof.
"Incur" means, with respect to any Obligation, to directly or indirectly create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for payment of, contingently or otherwise, such Obligation. The term "Incurrence" has a corresponding meaning.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including the provisions of the TIA that are deemed to be a part hereof, and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, "Indenture" shall mean, with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the or those particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party.
"Indexed Security" means a Security as to which all or certain interest payments and/or the principal amount payable at Maturity are determined by reference to prices, changes in prices, or differences between prices, of other securities, currencies, intangibles, goods, articles or commodities or by such other objective price, economic or other measures as are specified in Section 301 hereof.
"Interest" means, when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, interest payable after Maturity, and, when used with respect to a Security which provides for the payment of Additional Amounts pursuant to Section 1004, includes such Additional Amounts.
"Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"Issue Date", when used with respect to any Security, means the date on which the Security is originally issued.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing).
"Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment, notice of exchange or conversion or otherwise.
"Net Cash Proceeds" from an Asset Sale is defined to mean cash payments received (including any cash payments received by way of a payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received (including any cash received upon sale or disposition of any such note or receivable), excluding any other consideration received in the form of assumption by the acquiring Person of Obligations relating to the Property disposed of in such Asset Sale or received in any form other than cash) therefrom, in each case, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses of any kind (including consent and waiver fees and any applicable premiums, earn-out or working interest payments or payments in lieu or in termination thereof) Incurred, (ii) all federal, state, provincial, foreign and local taxes and other governmental charges required to be accrued as a liability under Generally Accepted Accounting Principles as a consequence of such Asset Sale, (iii) a reasonable reserve for the after-tax cost of any indemnification payments (fixed and contingent) attributable to seller's indemnities to the purchaser undertaken by the Company or any of its Subsidiaries in connection with such Asset Sale, (iv) all payments made on any Obligation that is secured by such Property, in accordance with the terms of any Lien upon or with respect to such Property, or that must by its terms or by applicable law or in order to obtain a required consent or waiver be repaid out of the proceeds from or in connection with such Asset Sale and (v) all distributions and other payments made to holders of Capital Stock of Subsidiaries (other than the Company or its Restricted Subsidiaries) as a result of such Asset Sale.
"Non-Recourse Obligation" means, with respect to any Person, any financing that is or was Incurred with respect to the development, acquisition, design, engineering, procurement, construction, operation, ownership, servicing or management of one or more facilities used or useful in a Permitted Business in respect of which such Person has a direct or indirect interest, provided that such financing is without recourse to any Person or Property other than to (i) the Property that constitutes such facilities, (ii) the income from and proceeds of such facilities, (iii)
the Capital Stock of, and other investments in, the Person that owns the Property that constitutes any such facilities and (iv) the Capital Stock of, and other investments in, any Person obligated with respect to such financing and of any Subsidiary of such Person that owns a direct or indirect interest in any such facilities.
"Nuclear" means the Person named as "Nuclear" in the first paragraph of this Indenture until a successor Corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Nuclear" shall mean such successor Corporation.
"Obligations" of any Person shall mean at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person arising under any conditional sale or other
title retention arrangement or otherwise to pay the deferred purchase price of
Property or services, (iv) all obligations of such Person Incurred in respect of
Attributable Debt associated with any Sale/Leaseback Transaction, Capitalized
Lease or Synthetic Lease, (v) all obligations of such Person under letters of
credit, (vi) all obligations of such Person under trade or bankers' acceptances,
(vii) all obligations of such Persons under Hedging Obligations and Commodity
Trading Obligations, (viii) trade payables in respect of fuel, labor, supplies
or other materials or services or the obligation to provide power, (ix)
Preferred Stock and Redeemable Stock issued to any Person other than the Company
or a Restricted Subsidiary, (x) all obligations of others secured by a Lien on
any asset of such Person, whether or not such obligations are assumed by such
Person and (xi) all obligations of others to the extent guaranteed by such
Person. The amount of any obligation shall be deemed to be the amount equal to
the stated or determinable amount thereof or, if not stated or determinable, the
maximum probable liability thereunder as determined by the Company in good
faith.
"Officer" means the Chairman, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Controller, any Assistant Controller, the Secretary or any Assistant Secretary of the Company.
"Officer's Certificate" means a certificate signed on behalf of the Company by any one of its Officers and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company or who may be an employee of or other counsel for the Company.
"Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(2) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and any coupons appertaining thereto, provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
(3) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; and
(4) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by TIA Section 313, (i) the principal amount of an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Security pursuant to Section 301 and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the principal of (or premium, if any) or interest, if any, on any Securities or coupons on behalf of the Company.
"Permitted Business" means any business in which the Company or any of its Subsidiaries is engaged on the date of this Indenture or any other power or energy-related
business, including the business of acquiring, developing, owning or operating electric power or thermal energy generation or cogeneration facilities, electric power transmission, fuel supply and fuel transportation facilities, together with their related power supply, thermal energy and fuel contracts and other facilities, services or goods that are ancillary, incidental, complementary or reasonably related to the marketing, trading, development, construction or management servicing, ownership or operation of the foregoing.
"Permitted Hedging Obligations" of any Person shall mean (i) Hedging Obligations entered into in the ordinary course of business and in accordance with such Person's established risk management policies that are designed to protect such Person against, among other things, fluctuations in interest rates or currency exchange rates and which in the case of agreements relating to interest rates shall have a notional amount no greater than the payments due with respect to the Obligations being hedged thereby and (ii) Commodity Trading Obligations.
"Permitted Liens" has the meaning specified in Section 1005.
"Person" means any individual, Corporation, partnership, limited partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of or within any series, means the place or places where the principal of (and premium, if any) and interest, if any, on such Securities are payable as specified and as contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of preferred or preference stock of such Person that is outstanding or issued on or after the date of original issuance of the Securities.
"Property" of any Person is defined to mean all types of real, personal, tangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person under Generally Accepted Accounting Principles.
"PSEG" means Public Service Enterprise Group Incorporated, a corporation organized and existing under the laws of the State of New Jersey.
"Rating Agencies" means Moody's Investors Service, Inc., Fitch, Inc. and Standard & Poor's Ratings Services and any successors thereof.
"Record Date" means, when used with respect to any Security, the Regular Record Date, the Special Record Date or any date set to determine the Holders of such Security entitled to vote, make a request, consent, receive a payment or exercise any other right with respect to such Security.
"Redeemable Stock" is defined to mean any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Securities, (ii) redeemable at the option of the holder of such Capital Stock at any time prior to the Stated Maturity of the Securities or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Obligations having a scheduled maturity prior to the Stated Maturity of the Securities.
"Redemption Date" means, when used with respect to any Security to be redeemed, in whole or in part, the date specified for such redemption in accordance with the terms thereof or by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be redeemed, the price at which it is to be redeemed pursuant to the terms thereof and this Indenture.
"Registered Security" means any Security which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest Payment Date for the Registered Securities of or within any series means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day.
"Repayment Date" means, when used with respect to any Security to be repaid at the option of the Holder, the date fixed for such repayment by or pursuant to this Indenture.
"Repayment Price" means, when used with respect to any Security to be repaid at the option of the Holder, the price at which it is to be repaid by or pursuant to this Indenture.
"Responsible Officer" when used with respect to the Trustee, means any vice president, any assistant vice president, any senior trust officer or assistant trust officer, any trust officer, or any other officer associated with the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such person's knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means only Fossil, Nuclear, ER&T and each other of the Company's subsidiaries that subsequently executes and delivers a Subsidiary Guaranty with respect to any Guaranteed Securities and is designated by the Board of Directors by written notice to the Trustee as a Restricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to Property now owned or hereafter acquired whereby the Company or one of its Subsidiaries transfers the Property to a Person and leases it back from that Person, other than leases for a term of not more than 12 months or between the Company and one of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary or between Wholly-Owned Subsidiaries that are Restricted Subsidiaries.
"Security" or "Securities" has the meaning stated in the first recital of this Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that, if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on the Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security or a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable, as such date may be extended pursuant to the provisions of Section 308.
"Subsidiary" means, with respect to any Person, (i) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of Voting Stock is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantors" means all current and subsequently designated Restricted Subsidiaries.
"Subsidiary Guarantor's Board Resolution" means a copy of one or more resolutions, certified by the Secretary or an Assistant Secretary of a Subsidiary Guarantor to have been duly adopted by a Subsidiary Guarantor's Board of Directors and to be in full force and effect on the date of such certification, delivered to the Trustee.
"Subsidiary Guarantor's Officer's Certificate" means a certificate signed by the Chairman, the President or a Vice President (whether or not designated by a number or a word or
words added before or after the title "vice president"), by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of a Subsidiary Guarantor, and delivered to the Trustee.
"Subsidiary Guarantor's Request" and "Subsidiary Guarantor's Order" mean, respectively, a written request or order signed in the name of a Subsidiary Guarantor by the Chairman, the President or a Vice President (whether or not designated by a number or a word or words added before or after the title "vice president"), by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of a Subsidiary Guarantor, and delivered to the Trustee.
"Subsidiary Guaranty" means an unconditional guarantee by any Subsidiary Guarantor of the payment of the principal of or any premium or interest on any Guaranteed Securities, as more fully set forth in Article Sixteen, or a guaranty by any Subsidiary Guarantor of any other Obligations incurred by the Company. A form of Subsidiary Guaranty with respect to a Guaranteed Security is attached hereto as Exhibit B.
"Synthetic Lease" means (i) a lease pursuant to which the lessee is treated as the owner of the Property subject to the lease for tax purposes, whether or not such lease is treated as an operating lease for accounting purposes or (ii) a lease treated as an operating lease for accounting purposes but having at least three of the following characteristics, (a) the term of the lease, inclusive of all renewal periods at the lessee's option, is greater than 75% of the useful life of the Property subject to the lease as estimated at the inception of the Lease, (b) the lessee has the right to purchase such Property at a fixed price, (c) the lessee's payments under the lease are calculated to amortize and service the debt of the lessor incurred in order to acquire the asset and (d) the lessor obtains 80% or more of the cost of the asset from borrowed funds.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended, and any reference herein to the Trust Indenture Act or a particular provision thereof means such Act or provision, as the case may be, as amended or replaced from time to time or as supplemented from time to time by rules or regulations adopted by the Commission under or in furtherance of the purposes of such Act or provision, as the case may be.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean only the Trustee with respect to Securities of that series.
"UCC" means the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.
"United States" means, unless otherwise specified with respect to any Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with respect to any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a Corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source.
"Unrestricted Subsidiary" means a Subsidiary that is not a Restricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Obligations at any date, the number of years obtained by dividing (i) the then outstanding principal amount of such Obligations into (ii) the total of the product obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the numbers of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company and/or one or more of its Wholly-Owned Subsidiaries.
SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company or any Subsidiary Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or such Subsidiary Guarantor, as the case may be, shall furnish to the Trustee an Officers' Certificate or a Subsidiary Guarantor's Officer's Certificate, as the case may be, stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or any Subsidiary Guarantor may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a certificate or representations of or by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or a Subsidiary Guarantor, as the case may be, stating that the information as to such factual matters is in the possession of the Company or a Subsidiary Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of Securities of such series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company and each Subsidiary Guarantor. Such instrument or
instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and each Subsidiary Guarantor and any agent of the Trustee or the Company and each Subsidiary Guarantor, if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506.
(b) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may be proved in any manner that the Trustee deems reasonably sufficient.
(c) The ownership of Registered Securities shall be proved by the Security Register.
(d) The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depository, by any trust company, bank, banker or other depository, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depository, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee, the Company and each Subsidiary Guarantor may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, or (2) such Bearer Security is produced to the Trustee by some other Person, or (3) such Bearer Security is surrendered in exchange for a Registered Security, or (4) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner that the Trustee deems sufficient.
(e) If the Company or any Subsidiary Guarantor shall solicit from the Holders of any Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company or any Subsidiary Guarantor, as the case may be, may, at its option, in or pursuant to a Board Resolution or a Subsidiary Guarantor's Board Resolution, as the case may be, fix in advance a Record Date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company or any Subsidiary Guarantor, as the case may be, shall have no obligation to do so. Notwithstanding TIA Section 316(c), such Record Date shall be the Record Date specified in or pursuant to such Board Resolution or Subsidiary Guarantor Board Resolution, as the case may be, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a Record Date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such Record Date, but only the Holders of record at the close of business on such Record Date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed
or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such Record Date; provided that no such authorization, agreement or consent by the Holders on such Record Date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the Record Date.
(f) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent, the Company or any Subsidiary Guarantor in reliance thereon, whether or not notation of such action is made upon such Security.
SECTION 105. Notices, etc., to Trustee, Company and Subsidiary Guarantors. Any notice, request or other communication required or permitted to be given hereunder shall be in writing and delivered, telecopied or mailed by first-class mail, postage prepaid, addressed as follows:
if to the Company:
PSEG Power LLC
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101
Facsimile No.: (973) 596-6309
Attention: Vice President and Treasurer
if to ER&T:
PSEG Energy Resources and Trade LLC
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101
Facsimile No.: (973) 596-6309
Attention: Vice President and Treasurer
if to Fossil:
PSEG Fossil LLC
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101
Facsimile No.: (973) 596-6309
Attention: Vice President and Treasurer
if to Nuclear:
PSEG Nuclear LLC
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101
Facsimile No.: (973) 596-6309
Attention: Vice President and Treasurer
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Facsimile No.: (212) 815-5915 Attention: Corporate Trust Trustee Administration
The Company, any Subsidiary Guarantor or the Trustee, by giving notice to the other, may designate additional or different addresses for subsequent notices or communications. The Company and each Subsidiary Guarantor shall notify the Holders of any such additional or different addresses of which the Company or each such Subsidiary Guarantor, as applicable, receives notice from the Trustee.
SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders of Registered Securities by the Company, a Subsidiary Guarantor or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.
If by reason of the suspension of or irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, where this Indenture provides for notice to Holders of Bearer Securities of any event, such notice shall be sufficiently given if published in an Authorized Newspaper in The City of New York and in such other city or cities as may be specified in such
Securities on a Business Day, such publication to be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. If by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent, waiver or Act required or permitted under this Indenture shall be in the English language, except that if the Company or any Subsidiary Guarantor, as the case may be, so elects, any published notice may be in an official language of the country of publication.
If the Company or any Subsidiary Guarantor mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-Registrar.
Holders may communicate, pursuant to TIA Section 312(b), with other Holders with respect to their rights under this Indenture or the Securities. The Company, each Subsidiary Guarantor, the Trustee, the Registrar, the Paying Agent and anyone else shall have the protection of TIA Section 312(c).
SECTION 107. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 108. Successors and Assigns. All covenants and agreements in this Indenture by the Company or any Subsidiary Guarantor shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Severability Clause. In case any provision in this Indenture or in any Security or coupon shall be deemed invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture. Nothing in this Indenture or in the Securities or coupons, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law. This Indenture and the Securities and coupons shall be governed by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. This Indenture is subject to the provisions of the Trust Indenture Act that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 112. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section), payment of principal (or premium, if any) or interest, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity; provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be.
SECTION 113. No Personal Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, in any Security or coupon appertaining thereto, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such or, against any past, present or future member, officer or director as such, of the Company or any Subsidiary Guarantor or any successor thereto, either directly or through the Company or any Subsidiary Guarantor or any successor thereto under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities.
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities. The Registered Securities, if any, of each series and the Bearer Securities, if any, of each series and related coupons shall be in substantially the forms as shall be established in one or more indentures supplemental hereto or approved from time to time by or pursuant to a Board Resolution in accordance with Section 301, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage.
Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities or coupons, as evidenced by their execution of such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication. Subject to
Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Dated:__________________ THE BANK OF NEW YORK,
as Trustee
By _______________________________
Authorized Signatory
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SECTION 203. Securities Issuable in Global Form. If Securities of or
within a series are issuable in global form, as specified as contemplated by
Section 301, then, notwithstanding clause (8) of Section 301 and the provisions
of Section 302, any such Security shall represent such of the Outstanding
Securities of such series as shall be specified therein and may provide that it
or any number of such Securities shall represent the aggregate amount of
Outstanding Securities of such series from time to time endorsed thereon and may
also provide that the aggregate amount of Outstanding Securities of such series
represented thereby may from time to time be increased or decreased to reflect
exchanges. Any endorsement of a Security in global form to reflect the amount,
or any increase or decrease in the amount, of Outstanding Securities represented
thereby shall be made by the Trustee in such manner and upon instructions given
by such Person or Persons as shall be specified therein or in the Company Order
to be delivered to the Trustee pursuant to Section 303 or 304. Subject to the
provisions of Section 303 and, if applicable, Section 304, the Trustee shall
deliver and redeliver any Security in permanent global form in the manner and
upon instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 303 or 304 has
been, or simultaneously is, delivered, any instructions by the Company with
respect to endorsement, delivery or redelivery of a Security in global form
shall be in writing but need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of (and premium, if any) and interest, if any, on any Security in permanent global form shall be made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 309 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or Clearstream.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities shall rank equally and pari passu and may be issued in one or more series. There shall be established in one or more Board Resolutions and, if applicable, Subsidiary Guarantor's Board Resolutions or pursuant to authority granted by one or more Board Resolutions and, if applicable, Subsidiary Guarantor's Board Resolutions and, subject to Section 303, set forth, or determined in the manner provided, in an Officers' Certificate and, if applicable, Subsidiary Guarantor's Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (13) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which shall distinguish the Securities of such series from all other series of Securities);
(2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or 1305);
(3) the date or dates, or the method by which such date or dates will be determined or extended, on which the principal of the Securities of the series shall be payable;
(4) the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, and the basis upon which such interest shall be calculated if other than that of a 360-day year of twelve 30-day months;
(5) the place or places, if any, other than or in addition to the Borough of Manhattan, The City of New York, where the principal of (and premium, if any) and interest, if any, on Securities of the series shall be payable, any Registered Securities of the series may be surrendered for registration of transfer, Securities of the series may be surrendered for exchange, where Securities of any series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable, and where notices or demands to or upon the Company in respect of the Securities of the series and this Indenture may be served;
(6) the period or periods within which, or the date or dates on which, the price or prices at which and other terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have the option;
(7) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which and other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple thereof, the denomination or denominations in which any Registered Securities of the series shall be issuable and, if other than denominations of $5,000, the denomination or denominations in which any Bearer Securities of the series shall be issuable;
(9) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent;
(10) if other than the principal amount thereof, the portion of the principal amount of Securities of the series that shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or the method by which such portion shall be determined;
(11) whether the amount of payments of principal of (or premium, if any) or interest, if any, on the Securities of the series may be determined with reference to an
index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined;
(12) provisions, if any, granting special rights to the Holders of the Securities of the series upon the occurrence of such events as may be specified;
(13) any deletions from, modifications of or additions to the Events of Default or covenants (including any deletions from, modifications of or additions to any of the provisions of Section 1012) of the Company with respect to Securities of the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein;
(14) whether Securities of the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities of the series may be exchanged for Registered Securities of the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of the series are to be issuable initially in temporary global form and whether any Securities of the series are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series in certificated form and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of the series are to be issuable as a global Security, the identity of the depository for such series;
(15) the date as of which any Bearer Securities of the series and any temporary global Security representing Outstanding Securities of the series shall be dated if other than the date of original issuance of the first Security of the series to be issued;
(16) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304;
(17) the applicability, if any, of Sections 1402 and/or 1403 to the Securities of the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen;
(18) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions;
(19) whether, and under what circumstances, the Company will pay Additional Amounts as contemplated by Section 1004 on the Securities of the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option);
(20) if the Securities of the series are to be convertible into or exchangeable for any securities of any Person (including the Company), the terms and conditions upon which such Securities will be so convertible or exchangeable;
(21) if the Securities of the series are to be Guaranteed Securities; and
(22) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture or the requirements of the Trust Indenture Act).
All Securities of any one series and the coupons, if any, appertaining to any Bearer Securities of such series shall be substantially identical except, in the case of Registered Securities, as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution establishing such series (subject to Section 303) and set forth in such Officers' Certificate or in any indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions or Subsidiary Guarantor's Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company or Subsidiary Guarantor, as the case may be, and delivered to the Trustee at or prior to the delivery of the Officers' Certificate and the Subsidiary Guarantor's Officer's Certificate setting forth the terms of the Securities of such series.
SECTION 302. Denominations. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by Section
301. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions with respect to the Securities of any series, the
Registered Securities of such series, other than Registered Securities issued in
global form (which may be of any denomination) shall be issuable in
denominations of $1,000 and any integral multiple thereof, and the Bearer
Securities of such series, other than Bearer Securities issued in global form
(which may be of any denomination), shall be issuable in a denomination of
$5,000.
SECTION 303. Execution, Authentication, Delivery and Dating. The Securities and any coupons appertaining thereto shall be executed on behalf of the Company by its Chairman, its President or one of its Vice Presidents, under its corporate seal reproduced thereon, and attested by its Secretary or one of its Assistant Secretaries, and on behalf of a Subsidiary Guarantor by its Chairman, its President or one of its Vice Presidents, under its corporate seal reproduced thereon, and attested to by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities and coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company or a Subsidiary Guarantor, as the case may be, shall bind the Company or a Subsidiary Guarantor, as the case may be, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or coupons.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupon appertaining thereto, executed by the Company, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that, in connection with its original issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided further that, unless otherwise specified with respect to any series of Securities pursuant to Section 301, a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security shall have furnished a certificate in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture. If any Security shall be represented by a permanent global Bearer Security, then, for purposes of this Section and Section 304, the notation of a beneficial owner's interest therein upon original issuance of such Security or upon exchange of a portion of a temporary global Security shall be deemed to be delivery in connection with its original issuance of such beneficial owner's interest in such permanent global Security. Except as permitted by Section 306, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and canceled. If all the Securities of any series are not to be issued at one time and if the Board Resolution or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as interest rate, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to TIA Section 315(a) through 315(d)) shall be fully protected in relying upon,
(i) an Opinion of Counsel stating that,
(a) the form or forms of such Securities and any coupons have been established in conformity with the provisions of this Indenture;
(b) the terms of such Securities and any coupons have been established in conformity with the provisions of this Indenture; and
(c) such Securities, together with any coupons appertaining thereto, when completed by appropriate insertions and executed and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting the enforcement of creditors' rights, to general equitable principles and to such other qualifications as such counsel shall conclude do not materially affect the rights of Holders of such Securities and any coupons and will entitle the Holders thereof to the benefits of this Indenture, including a Subsidiary Guaranty if such Securities are Guaranteed Securities; and
(ii) an Officers' Certificate and a Subsidiary Guarantor's Officer's Certificate stating that all conditions precedent provided for in this Indenture relating to the issuance of the Securities have been complied with and that, to the best of the knowledge of the signers of such certificates, no Event of Default with respect to any of the Securities shall have occurred and be continuing.
Notwithstanding the provisions of Section 301 and of this Section 303, if
all the Securities of any series are not to be issued at one time, it shall not
be necessary to deliver an Officers' Certificate otherwise required pursuant to
Section 301 or the Company Order, Opinion of Counsel or Officers' Certificate
otherwise required pursuant to the preceding paragraph at the time of issuance
of each Security of such series, but such order, opinion and certificates, with
appropriate modifications to cover such future issuances, shall be delivered at
or before the time of issuance of the first Security of such series.
If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
Each Registered Security shall be dated the date of its authentication and
each Bearer Security shall be dated as of the date specified as contemplated by
Section 301.
No Security or coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or Security to which such
coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee or an Authenticating Agent by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 310 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities. (a) Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form with one or more coupons or without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form.
Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Board Resolution), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any non-matured coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided further that a definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.
(b) Unless otherwise provided in or pursuant to a Board Resolution, this
Section 304(b) shall govern the exchange of temporary Securities issued in
global form. If temporary Securities of any series are issued in global form,
any such temporary global Security shall, unless otherwise provided therein, be
delivered to the London office of a depository or common
depository (the "Common Depository"), for the benefit of Euroclear and Clearstream, for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct).
Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), the Company shall deliver to the Trustee definitive Securities, in aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depository to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such temporary global Security, upon such presentation by the Common Depository, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by Clearstream as to the portion of such temporary global Security held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided further that definitive Bearer Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303.
Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or Clearstream, as the case may be, to request such exchange on his behalf and delivers to Euroclear or Clearstream, as the case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and Clearstream, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or Clearstream. Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and Clearstream on such Interest Payment Date upon delivery by Euroclear and Clearstream to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this Indenture (or in such other form as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or Clearstream, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301). Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments of principal (or premium, if any) or interest, if any, owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security shall have been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and Clearstream and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company.
SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee, at its Corporate Trust Office, is hereby initially appointed "Security Registrar" for the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided. In the event that the Trustee shall cease to be Security Registrar, it shall have the right to examine the Security Register at all reasonable times.
Upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for that series, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, bearing a number not contemporaneously outstanding and containing identical terms and provisions.
At the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency. Whenever any Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified with respect to any series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution and (subject to Section 303) set forth in the applicable Officers' Certificate, or in any indenture supplemental hereto, delivered as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to any Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 1002, interest represented by coupons shall be payable only upon presentation and surrender of those coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.
Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be exchangeable
only as provided in this and the next succeeding paragraph. If any beneficial
owner of an interest in a permanent global Security is entitled to exchange such
interest for Securities of such series and of like tenor and principal amount of
another authorized form and denomination, as specified as contemplated by
Section 301 and provided that any applicable notice provided in the permanent
global Security shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Company shall deliver to the Trustee definitive Securities in
aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security, executed by the Company. On
or after the earliest date on which such interests may be so exchanged, such
permanent global Security shall be surrendered by the Common Depository or such
other depository as shall be specified in the Company Order with respect thereto
to the Trustee, as the Company's agent for such purpose, to be exchanged, in
whole or from time to time in part, for definitive Securities without charge and
the Trustee shall authenticate and deliver, in exchange for each portion of such
permanent global Security, an equal aggregate principal amount of definitive
Securities of the same series of authorized denominations and of like tenor as
the portion of such permanent global Security to be exchanged which, unless the
Securities of the series are not issuable both as Bearer Securities and as
Registered Securities, as specified as contemplated by Section 301, shall be in
the form of Bearer Securities or Registered Securities, or any combination
thereof, as shall be specified by the beneficial owner thereof; provided,
however, that no such exchanges may occur during a period beginning at the
opening of business 15 days before any selection of Securities to be redeemed
and ending on the relevant Redemption Date if the Security for which exchange is
requested may be among those selected for redemption; and provided further that
no Bearer Security delivered in exchange for a portion of a permanent global
Security shall be mailed or otherwise delivered to any location in the United
States. If a Registered Security is issued in exchange for any portion of a
permanent global Security after the close of business at the office or agency
where such exchange occurs on (i) any Regular Record Date and before the opening
of business at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest,
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of such Registered Security, but will be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such permanent global
Security is payable in accordance with the provisions of this Indenture.
If at any time the depository for the Securities of a series issued in global form notifies the Company that it is unwilling or unable to continue as depository for the Securities of such series or if at any time the depository for Securities of a series shall no longer be a clearing
agency registered and in good standing under the Exchange Act or other applicable statute or regulation, the Company shall appoint a successor depository with respect to the Securities of such series. If a successor depository for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Registered Securities of such series in definitive form in an aggregate principal amount equal to the principal amount of such global Security representing such series in exchange for such global Security. In addition, if the Registered Securities of any series shall have been issued in global form and if an Event of Default with respect to the Securities of such series shall have occurred and be continuing, the Company will promptly execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Registered Securities of such series in definitive form and in an aggregate principal amount equal to the principal amount of the global Security representing such series in exchange for such global Security.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company and any Subsidiary Guarantor (if such Securities are Guaranteed Securities), evidencing the same debt and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the Securities to be redeemed under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer
Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously surrendered for redemption, or (iv) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee or the Company, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them or any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security or coupon; provided, however, that payment of principal of (and premium, if any) and interest, if any, on Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company and any Subsidiary Guarantor (if such Security is a Guaranteed
Security), whether or not the destroyed, lost or stolen Security and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved; Optional Interest Reset. (a) Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest, if any, on any Registered Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest, if any, on any Registered Security may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 309, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee inside the United States.
Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest, if any, may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States.
Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to each of Euroclear and Clearstream with respect to that portion of such permanent global Security held for its account by the Common Depository, for the purpose of permitting each of Euroclear and Clearstream to credit the interest, if any, received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof.
In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.
Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company or any Subsidiary Guarantor (if the Registered Security is a Guaranteed Security), at its election in each case, as provided in clause (1) or (2) below:
(1) The Company or any Subsidiary Guarantor (if the Registered Security is a Guaranteed Security) may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company or any Subsidiary Guarantor (if the Registered Security is a Guaranteed Security) shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company or any Subsidiary Guarantor (if the Registered Security is a Guaranteed Security), as the case may be, shall deposit with the Trustee an amount of money in Dollars equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company or any Subsidiary Guarantor, as the case may be, of such Special Record Date and, in the name and at the expense of the Company or any Subsidiary Guarantor, as the case may be, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at his address as it appears in the Security Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.
(2) The Company or any Subsidiary Guarantor (if the Registered Security is a Guaranteed Security) may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company or any Subsidiary Guarantor, as the case may be, to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
(b) The provisions of this Section 307(b) may be made applicable to any series of Securities pursuant to Section 301 (with such modifications, additions or substitutions as may be specified pursuant to such Section 301). The interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) on any Security of such series may be reset by the Company on the date or dates specified on the face of such Security (each an "Optional Reset Date"). The Company may exercise such option with respect to such Security by notifying the Trustee of such exercise at least 45 but not more than 60 days prior to an Optional Reset Date for such Security. Not later than 35 days prior to each Optional Reset Date, the Trustee shall transmit, in the manner provided for in Section 106, to the Holder of any such Security a notice (the "Reset Notice") indicating whether the Company has elected to reset the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable), and if so (i) such new interest rate (or such new spread or spread multiplier, if applicable) and (ii) the provisions, if any, for redemption during the period from such Optional Reset Date to the next Optional Reset Date or if there is no such next Optional Reset Date, to the Stated Maturity of such Security (each such period a "Subsequent Interest Period"), including the date or dates on which or the period or periods during which and the price or prices at which such redemption may occur during the Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to the Optional Reset Date, the Company may, at its option, revoke the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) provided for in the Reset Notice and establish a higher interest rate (or a spread or spread multiplier providing for a higher interest rate, if applicable) for the Subsequent Interest Period by causing the Trustee to transmit, in the manner provided for in Section 106, notice of such higher interest rate (or such spread or spread multiplier providing for a higher interest rate, if applicable) to the Holder of such Security. Such notice shall be irrevocable. All Securities with respect to which the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) is reset on an Optional Reset Date, and with respect to which the Holders of such Securities have not tendered such Securities for repayment (or have validly revoked any such tender) pursuant to the next succeeding paragraph, will bear such higher interest rate (or such spread or spread multiplier providing for a higher interest rate, if applicable).
The Holder of any such Security may have the option to elect repayment by the Company of the principal of such Security on each Optional Reset Date at a price equal to the principal amount thereof plus interest accrued to such Optional Reset Date. In order to obtain repayment
on an Optional Reset Date, the Holder must follow the procedures set forth in Article Thirteen for repayment at the option of Holders except that the period for delivery or notification to the Trustee shall be at least 25 but not more than 30 days prior to such Optional Reset Date and except that, if the Holder has tendered any Security for repayment pursuant to the Reset Notice, the Holder may, by written notice to the Trustee, revoke such tender or repayment until the close of business on the tenth day before such Optional Reset Date.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Optional Extension of Maturity. The provisions of this
Section 308 may be made applicable to any series of Securities pursuant to
Section 301 (with such modifications, additions or substitutions as may be
specified pursuant to such Section 301). The Stated Maturity of any Security of
such series may be extended at the option of the Company for the period or
periods specified on the face of such Security (each an "Extension Period") up
to but not beyond the date (the "Final Maturity") set forth on the face of such
Security. The Company may exercise such option with respect to any Security by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the Stated Maturity of such Security in effect prior to the exercise of
such option (the "Original Stated Maturity"). If the Company exercises such
option, the Trustee shall transmit, in the manner provided for in Section 106,
to the Holder of such Security not later than 35 days prior to the Original
Stated Maturity a notice (the "Extension Notice") indicating (i) the election of
the Company to extend the Stated Maturity, (ii) the new Stated Maturity, (iii)
the interest rate (or spread, spread multiplier or other formula to calculate
such interest rate, if applicable), if any, applicable to the Extension Period
and (iv) the provisions, if any, for redemption during such Extension Period.
Upon the Trustee's transmittal of the Extension Notice, the Stated Maturity of
such Security shall be extended automatically and, except as modified by the
Extension Notice and as described in the next paragraph, such Security will have
the same terms as prior to the transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days before the Original Stated Maturity of such Security, the Company may, at its option, revoke the interest rate (or spread, spread multiplier or other formula used to calculate such interest rate, if applicable) provided for in the Extension Notice and establish a higher interest rate (or spread, spread multiplier or other formula used to calculate such higher interest rate, if applicable) for the Extension Period by causing the Trustee to transmit, in the manner provided for in Section 106, notice of such higher interest rate (or spread, spread multiplier or other formula used to calculate such interest rate, if applicable) to the Holder of such Security. Such notice shall be irrevocable. All Securities with respect to which the Stated Maturity is extended will bear such higher interest rate.
If the Company extends the Stated Maturity of any Security, the Holder will have the option to elect repayment of such Security by the Company on the Original Stated Maturity at a
price equal to the principal amount thereof, plus interest accrued to such date. In order to obtain repayment on the Original Stated Maturity once the Company has extended the Stated Maturity thereof, the Holder must follow the procedures set forth in Article Thirteen for repayment at the option of Holders, except that the period for delivery or notification to the Trustee shall be at least 25 but not more than 30 days prior to the Original Stated Maturity and except that, if the Holder has tendered any Security for repayment pursuant to an Extension Notice, the Holder may by written notice to the Trustee revoke such tender for repayment until the close of business on the tenth day before the Original Stated Maturity.
SECTION 309. Persons Deemed Owners. Prior to due presentment of a Registered Security for registration of transfer, the Company, any Subsidiary Guarantor or the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 305 and 307) interest, if any, on such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and none of the Company, any Subsidiary Guarantor or the Trustee nor any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto shall pass by delivery. The Company, any Subsidiary Guarantor or the Trustee and any agent of the Company, any Subsidiary Guarantor or the Trustee may treat the Holder of any Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and none of the Company any Subsidiary Guarantor or, the Trustee nor any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary.
None of the Company, any Subsidiary Guarantor or the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, any Subsidiary Guarantor or the Trustee, or any agent of the Company, any Subsidiary Guarantor or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depository, as a Holder, with respect to such global Security or impair, as between such depository and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depository (or its nominee) as Holder of such global Security.
SECTION 310. Cancellation. All Securities and coupons surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee, and any such Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company or any Subsidiary Guarantor (if the Security is a Guaranteed Security) may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or any Subsidiary Guarantor (if the Security is a Guaranteed Security) may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. The Trustee shall dispose of all cancelled Securities in accordance with its customary procedures.
SECTION 311. Computation of Interest. Except as otherwise specified as contemplated by Section 301 with respect to Securities of any series, interest, if any, on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
SECTION 312. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall indicate the "CUSIP" numbers of the Securities in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series expressly provided for herein or pursuant hereto and any right to receive Additional Amounts, as provided in Section 1004), and the Trustee, upon receipt of a Company Order, and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when
(1) either
(A) all Securities of such series theretofore authenticated and delivered and all coupons, if any, appertaining thereto (other than (i) coupons appertaining to
Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities and coupons of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been waived as provided in Section 1106, and (iv) Securities and coupons of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or
(B) all Securities of such series and, in the case of (i) or
(ii) below, any coupons appertaining thereto not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company or each Subsidiary Guarantor (if the applicable Securities are Guaranteed Securities),
and the Company or any Subsidiary Guarantor (if the applicable
Securities are Guaranteed Securities), in the case of (i), (ii) or
(iii) above, has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust for such purpose an amount
in Dollars sufficient to pay and discharge the entire indebtedness
on such Securities and such coupons not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest, if any, to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company or any Subsidiary Guarantor (if the applicable Securities are Guaranteed Securities) has paid or caused to be paid all other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, or any Subsidiary Guarantor has delivered to the Trustee a Subsidiary Guarantor's Officer's Certificate and an Opinion of Counsel (if the applicable Securities are Guaranteed Securities) each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company and each Subsidiary Guarantor under
any applicable registration rights agreement relating to the Securities, the
obligations of the Company to any Authenticating Agent under Section 611 and, if
money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Funds. Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest, if any, for whose payment such money has or Government Obligations have been deposited with or received by the Trustee, but such money and Government Obligations need not be segregated from other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to any particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series or of any coupon appertaining thereto, when such interest or coupon becomes due and payable, and continuance of such default for a period of 5 days; or
(2) default in the payment of the principal of (or premium, if any, on), or make-whole amount, if any, on, any Security of that series when it becomes due and payable; or
(3) default in the deposit of any sinking fund payment, when and as due by the terms of any Security of that series; or
(4) any failure by the Company or any Restricted Subsidiary to comply with the provisions of Section 801 or Section 1006 hereunder;
(5) default in the performance, or breach, of any covenant or agreement of the Company or any Restricted Subsidiary in this Indenture with respect to any Security of
that series (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company or any Subsidiaries (including indebtedness represented by any other series of Securities under this Indenture or the payment of which is guaranteed by the Company or any Restricted Subsidiary) (but other than Non-Recourse Obligations) whether such indebtedness or guaranty now exists or is created after the date hereof, which default (a) is caused by a failure to pay the principal of such indebtedness at the Stated Maturity of such indebtedness after the expiration of grace periods provided in the indebtedness (a "Payment Default") or (b) has resulted in the acceleration of the indebtedness prior to its stated maturity; and, in each case the principal amount of the indebtedness, together with the principal amount of any other indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50,000,000 or more;
(7) failure by the Company or any Restricted Subsidiary to pay one or more final judgements not otherwise covered by insurance aggregating in excess of $50,000,000, which judgments are not paid, discharged or stayed for a period of 60 days; and
(8) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an involuntary case,
(C) consents to the appointment of a Custodian of it or for all or substantially all of its property and such Custodian is not discharged within 60 days, or
(D) makes a general assignment for the benefit of its creditors; or
(9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Restricted Subsidiary or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Restricted Subsidiary,
and the order or decree remains unstayed and in effect for 90 days; or
(10) any other Event of Default provided with respect to Securities of that series.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law.
SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default with respect to the Company or any Restricted Subsidiary described in Section 501(8) or Section 501(9)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company and any Restricted Subsidiary (and to the Trustee if given by the Holders), and upon any such declaration such principal or specified portion thereof shall become immediately due and payable.
If an Event of Default with respect to the Company or any Restricted Subsidiary described in Section 501(8) or 501(9) occurs and is continuing, the principal of and interest, if any, on the Securities shall be due and payable immediately without any declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and any Restricted Subsidiary and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company or any Restricted Subsidiary has paid or deposited with the Trustee a sum sufficient to pay in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series):
(A) all overdue installments of interest, if any, on all Outstanding Securities of that series and any related coupons,
(B) the principal of (and premium, if any, on) all Outstanding Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates borne by or provided for in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the nonpayment of the principal of (or premium, if any) or
interest on Securities of that series which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company and each Restricted Subsidiary, jointly and severally, covenants that if:
(1) default is made in the payment of any installment of interest on any Security of any series and any related coupon when such interest becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at its Maturity,
then the Company or each Restricted Subsidiary, as the case may be, will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities of such series and coupons, the whole amount then due and payable on such Securities and coupons for principal (and premium, if any) and interest, if any, with interest upon any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company or any Restricted Subsidiary fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any
Restricted Subsidiary or any other obligor upon such Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any Restricted Subsidiary, as the case may be, or any other obligor upon such Securities of such series, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any related coupons by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any Restricted Subsidiary or any other obligor upon the Securities or the property of the Company or any Restricted Subsidiary or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company or any Restricted Subsidiary for the payment of any overdue principal, premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal (or in the case of Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be provided for in the terms thereof) (and premium, if any) and interest, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of the Securities of such series and coupons to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or Coupons. All rights of action and claims under this Indenture or any of the Securities or coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest if any, upon presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium, if any)
and interest, if any, in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to
the aggregate amounts due and payable on such Securities
and coupons for principal (and premium, if any), and
interest, if any, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or
any other Person or Persons entitled thereto.
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SECTION 507. Limitation on Suits. No Holder of any Security of any series or any related coupon shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security or coupon shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Sections 305 and 307) interest, if any, on such Security or payment of such coupon on the respective Stated Maturity or Maturity specified in such Security or coupon (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, each Restricted Subsidiary, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to any Holder may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by such Holder of Securities or coupons, as the case may be.
SECTION 512. Control by Holders of Securities. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders of Securities of such series not consenting.
SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any related coupons waive any past default hereunder with respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest, if any, any Security of such series or any related coupons, or
(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws. Each of the Company and each Restricted Subsidiary covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Company and each
Restricted Subsidiary (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
SECTION 515. Notice of Defaults. Within 90 days after the occurrence of any Default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of (or premium, if any) or interest, if any, on any Security of such series, or in the payment of any sinking or purchase fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided further that in the case of any Default or breach of the character specified in Section 501(5) with respect to the Securities and coupons of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; 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 (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(b) In case an Event of Default has occurred and is continuing, 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 or her own affairs.
(c) 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 wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgement made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) 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 Holders of a majority in principal amount of the Outstanding Securities of any series, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA
Section 315(a) through 315(d):
(1) The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(2) Any request or direction of the Company or any Subsidiary Guarantor, mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or Subsidiary Guarantor's Request or Subsidiary Guarantor's Order, as the case may be (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303 which shall be sufficiently evidenced as provided therein), and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(3) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a Board Resolution, an Opinion of Counsel or an Officers' Certificate or, if such matter pertains to a Subsidiary Guarantor, a Subsidiary Guarantor's Officer's Certificate.
(4) The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(5) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any related coupons pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.
(6) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and any Subsidiary Guarantor, personally or by agent or attorney.
(7) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or counsel and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or counsel appointed with due care by it hereunder.
(8) The Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.
(9) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture.
(10) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and
shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.
(11) The Trustee may request that the Company deliver an Officer's Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer's Certificate may be signed by any person authorized to sign an Officer's Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
SECTION 603. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificate of authentication, and in any coupons shall be taken as the statements of the Company or any Subsidiary Guarantor, as the case may be, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company and each Subsidiary Guarantor are true and accurate, subject to the qualifications set forth therein. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities. The Trustee, any Paying Agent, Security Registrar, Authenticating Agent or any other agent of the Company or any Subsidiary Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company or any Subsidiary Guarantor with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent.
SECTION 605. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company or any Subsidiary Guarantor.
SECTION 606. Compensation and Reimbursement. The Company and each Subsidiary Guarantor, jointly and severally, agree:
(1) To pay to the Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time upon in writing (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust).
(2) Except as otherwise expressly provided herein, to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith.
(3) To indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense including taxes (other than taxes based upon the income of the Trustee) incurred without negligence or bad faith on its own part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim (whether asserted by the Company, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company and each Subsidiary Guarantor under this Section, the Trustee shall have a claim prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium, if any) or interest, if any, on particular Securities or any coupons.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(8) or (9) occurs, the expenses and compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 607. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee hereunder which shall be eligible to act as Trustee under TIA
Section 310(a)(1) and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes reports of condition at least
annually, pursuant to law or the requirements of Federal, State, Territorial or
District of Columbia supervising or examining authority, then for the purposes
of this Section, 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. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company and each Subsidiary Guarantor.
(c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company and each Subsidiary Guarantor.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company, any
Subsidiary Guarantor or by any Holder of a Security who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company, any Subsidiary Guarantor or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company or any Subsidiary Guarantor by or pursuant to a Board Resolution may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
(e) If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of a notice of resignation or the delivery of an Act of removal, the Trustee resigning or being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(f) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company or any Subsidiary Guarantor, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company, any Subsidiary Guarantor and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company and each Subsidiary Guarantor. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company and each Subsidiary Guarantor or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to Securities of such series.
(g) The Company and each Subsidiary Guarantor shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company, any Subsidiary Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company, any Subsidiary Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606.
(b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, any Subsidiary Guarantor, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company, any Subsidiary Guarantor or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company and each Subsidiary Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business. Any Corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities or coupons shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons. In case any Securities or coupons shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee.
SECTION 611. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and each Subsidiary Guarantor and, except as may otherwise be provided pursuant to Section 301, shall at all times be a bank or trust company or Corporation organized and doing business and in good standing
under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such Corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series, to the Company and to each Subsidiary Guarantor. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent, to the Company and to each Subsidiary Guarantor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and each Subsidiary Guarantor and shall give notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Company and each Subsidiary Guarantor, jointly and severally, agree to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Dated:__________________________ THE BANK OF NEW YORK,
as Trustee
By ________________________________
as Authenticating Agent
By ________________________________
Authorized Signatory
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company, any Subsidiary Guarantor nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such May 15 if required by TIA Section 313(a).
A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee of the listing of the Securities on any stock exchange.
SECTION 703. Reports by Company. The Company will:
(1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the Company
is not required to file information, documents or reports pursuant to
either of such Sections, then it will file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time
to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
Section 13 of the Securities Exchange Act of 1934 in respect of a security
listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3) transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in TIA Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.
Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on Officer's Certificates).
SECTION 704. Calculation of Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year a written notice specifying the amount of original issue discount (including daily rates and accrual periods), if any, accrued on Outstanding Securities as of the end of such year and such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not, directly or indirectly, consolidate with or merge with or into (whether or not the Company is the surviving entity) any other Corporation or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's assets, in one or more related transactions, to another Person unless:
(i) the Person formed by the consolidation or surviving the merger or the Person that acquires by sale, assignment, transfer, conveyance or other disposition, or that leases, the assets (if other than the Company) (in each such case, the "Successor Entity"), is a Corporation organized and existing under the laws of the United States, any State thereof or the District of Columbia and expressly assumes the obligations of the Company under the Indenture and the Securities;
(ii) if any of the Company's or a Restricted Subsidiary's Property or assets would become subject to a Lien other than a Permitted Lien under Section 1005, the Securities shall be equally and ratably secured in accordance with such Section 1005;
(iii) immediately after such transaction, no event exists that is or with the passage of time or the giving of notice or both would be an Event of Default under this Indenture; and
(iv) each Subsidiary Guarantor shall have by amendment to its Subsidiary Guaranty confirmed that its Subsidiary Guaranty shall apply to the obligations of the Successor Entity under this Indenture and the Securities.
SECTION 802. Successor Person Substituted. Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the Successor Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Successor Entity had been named as the Company herein; and in the event of any such conveyance or transfer, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities and coupons and may be dissolved and liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, each Subsidiary Guarantor, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company or any Subsidiary Guarantor or the addition of another Person and the assumption by any such successor or additional Person of the covenants of the Company or any Subsidiary Guarantor, as the case may be, contained herein and in the Securities contained; or
(2) to add to the covenants of the Company or any Subsidiary Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company or any Subsidiary Guarantor; or
(3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that in respect of any such additional Events of Default such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of that or those series of Securities to which such additional Events of Default apply to waive such default, or
(4) to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any premium or interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form; provided that any such action shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or
(6) to secure the Securities pursuant to the requirements of Section 801, or otherwise; or
(7) to establish the form or terms of Securities of any series and any related coupons as permitted by Sections 201 and 301, including the provisions and procedures relating to Securities convertible into or exchangeable for any securities of any Person (including the Company); or
(8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or
(9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture; provided that such provisions shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or
(10) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided that any such action shall not adversely affect the interests of the Holders of Securities of such series and any related coupons or any other series of Securities in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Company, each Subsidiary Guarantor (if the Securities are Guaranteed Securities) and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, any Subsidiary Guarantor and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities and any related coupons under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate of interest (or change the manner of calculating the rate of interest, thereon, or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1004 (except as contemplated by Section 801(1) and permitted by Section 901(1))), or reduce the portion of the principal of an Original Issue Discount Security or Indexed Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504, or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be), or adversely affect any right to convert or exchange any Security as may be provided pursuant to Section 301 herein, or
(2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (of
compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1012, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) modify or affect the terms and conditions of the obligations of any Subsidiary Guarantor in respect of the due and punctual payment of principal of, or any premium or interest on, Guaranteed Securities.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
The Company may, but shall not be obligated to, fix a Record Date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a Record Date is fixed, the Holders on such Record Date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such Record Date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such Record Date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect.
SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall, if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company, any Subsidiary Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest, if any, on the Securities of that series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture. Any interest due on Bearer Securities on or before Maturity, other than Additional Amounts, if any, payable as provided in Section 1004 in respect of principal of (or premium, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest due on Bearer Securities on or before Maturity shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature.
SECTION 1002. Maintenance of Office or Agency. If Securities of a series are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange, where Securities of that series that are convertible or exchangeable may be
surrendered for conversion or exchange, as applicable, and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If Securities of a series are issuable as Bearer Securities, the Company will maintain (A) in the Borough of Manhattan, The City of New York, an office or agency where any Registered Securities of that series may be presented or surrendered for payment, where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange, where Securities of that series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable, and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where Bearer Securities of that series and related coupons may be presented or surrendered for payment in the circumstances described in the following paragraph (and not otherwise), (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series which is located outside the United States, an office or agency where Securities of that series and related coupons may be presented and surrendered for payment; provided, however, that if the Securities of that series are listed on the Luxembourg Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in Luxembourg or any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange, and (C) subject to any laws or regulations applicable thereto, in a Place of Payment for that series located outside the United States an office or agency where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange, where Securities of that series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related coupons may be presented and surrendered for payment at the offices specified in the Security, in London, England, and the Company hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee its agent to receive all such presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, no payment of principal, premium or interest on Bearer Securities
shall be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that, if
the Securities of a series are payable in Dollars, payment of principal of (and
premium, if any) and interest, if any, on any Bearer Security shall be made at
the office of the Company's Paying Agent in the Borough of Manhattan, The City
of New York, if (but only if) payment in Dollars of the full amount of such
principal, premium or interest, as the case may be, at all offices or agencies
outside the United States maintained for such purpose by the Company
in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions.
The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities pursuant to Section 301 with respect to a series of Securities, the Company hereby designates as Places of Payment for each series of Securities the office or agency of the Company in the Borough of Manhattan, The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands.
SECTION 1003. Money for Securities Payments to be Held in Trust. If the Company or any Guarantor shall at any time act as its own Paying Agent with respect to any series of any Securities and any related coupons, it will, on or before each due date of the principal of (or premium, if any) or interest, if any, on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium, if any) and interest, if any, on Securities of such series so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of Securities and any related coupons, it will, prior to 10:00 a.m. on each due date of the principal of (or premium, if any) or interest, if any, on any Securities of that series, deposit with a Paying Agent a sum (in Dollars, as described in the preceding paragraph) sufficient to pay the principal (or premium, if any) or interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.
The Company or any Subsidiary Guarantor (in respect of Guaranteed Securities) may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order or Subsidiary Guarantor Order, as the case may be, direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or Subsidiary Guarantor, as the case may be, or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.
Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest, if any, on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company upon Company Request (or if deposited by a Subsidiary Guarantor, paid to such Subsidiary Guarantor upon a Subsidiary Guarantor's Request), or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company and any Subsidiary Guarantor (if the Securities are Guaranteed Securities) for payment of such principal, premium or interest on any Security, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company or any Subsidiary Guarantor, as the case may be.
SECTION 1004. Additional Amounts. If the Securities of a series provide
for the payment of Additional Amounts, the Company or each Subsidiary Guarantor
(in respect of Guaranteed Securities) will pay to the Holder of a Security of
such series or any coupon appertaining thereto Additional Amounts as may be
specified as contemplated by Section 301. Whenever in this Indenture there is
mentioned, in any context, the payment of the principal of (or premium, if any)
or interest, if any, on any Security of any series or payment of any related
coupon or the net proceeds received on the sale or exchange of any Security of
any series, such mention shall be deemed to include mention of the payment of
Additional Amounts provided by the terms of such series established pursuant to
Section 301 to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to such terms. Express mention of
the payment of Additional Amounts (if applicable) in any provisions hereof shall
not be construed as excluding Additional Amounts (where applicable) in those
provisions hereof where such express mention is not made.
Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment of principal or premium, if any, is made), and at least 10 days prior to each date of payment of principal, premium, if any, or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers' Certificate or Subsidiary Guarantor's Officer's Certificate (in respect of any Security that is a Guaranteed Security), the Company or any Subsidiary Guarantor (if the Securities are Guaranteed Securities) will furnish the Trustee and the Company's Paying Agent or Paying Agents, if other than the Trustee, with an Officers' Certificate or Subsidiary Guarantor's Officer's Certificate (in respect of any Security that is a Guaranteed Security) instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal, premium
or interest on the Securities of that series shall be made to Holders of Securities of that series or any related coupons who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of the series. If any such withholding shall be required, then such Officers' Certificate or Subsidiary Guarantor's Officer's Certificate (in respect of any Security that is a Guaranteed Security) shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of that series or related coupons and the Company or any Subsidiary Guarantor (if the Securities are Guaranteed Securities) will pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal, premium, if any, or interest with respect to any Securities of a series or related coupons until it shall have received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of a series or related coupons without withholding or deductions until otherwise advised. The Company and each Subsidiary Guarantor agree to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate or Subsidiary Guarantor's Officer's Certificate (in respect of any Security that is a Guaranteed Security) furnished pursuant to this Section or in reliance on the Company's not furnishing such an Officers' Certificate or any Subsidiary Guarantor's not furnishing a Subsidiary Guarantor's Officer's Certificate (in respect of any Security that is a Guaranteed Security).
SECTION 1005. Limitation on Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon or with respect to any Property or interest in any Property of the Company or that of any of its Restricted Subsidiaries, or any income or profits therefrom (in each case, whether the Property is owned at the date of this Indenture or thereafter acquired), unless the Securities are secured equally and ratably with (or prior to) any and all other Obligations secured by the Lien, provided, however, that these restrictions shall not apply to or prevent the creation, incurrence, assumption or existence of Permitted Liens.
Permitted Liens shall mean:
(1) Liens existing on the date of this Indenture;
(2) Liens to secure or provide for the payment of all or part of the purchase price of any Property or the cost of construction or improvement thereof; provided that no such Lien shall extend to or cover any other of the Property of the Company or any Restricted Subsidiary;
(3) Liens existing on Property at the time such Property is acquired by the Company or any Restricted Subsidiary; provided that such Liens (x) are not created,
Incurred or assumed in contemplation of such Property being acquired and
(y) do not extend to or cover any other Property of the Company or any
Restricted Subsidiary;
(4) Liens existing on Property of any entity at the time such entity is merged with or into or consolidated with the Company or a Restricted Subsidiary; provided that such Liens (x) are not created, Incurred or assumed in contemplation of such merger or consolidation and (y) do not extend to any other Property of the Company or any Restricted Subsidiary;
(5) Liens securing Permitted Hedging Obligations;
(6) Liens for taxes, assessments or governmental charges that are not yet delinquent or that are being contested in good faith by any appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate reserve provision, if any, as is required in conformity with Generally Accepted Accounting Principles shall have been made;
(7) Liens arising by reason of any judgment, decree or order of any court, so long as any such Lien is being contested in good faith and is bonded or such judgment, decree or order does not exceed $50,000,000, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order have not been finally terminated or the period within which such proceedings may be initiated has not expired;
(8) Liens to secure pledges or deposits made in the ordinary course of business in connection with bids, tenders or contracts (other than for payment of indebtedness) or to secure guarantees, statutory or regulatory obligations or surety or performance bonds each made in the ordinary course of business;
(9) Liens imposed by law such as carriers', warehousemens', and mechanics' Liens, in each case arising in the ordinary course of business and with respect to amounts not yet due or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as is required in conformity with Generally Accepted Accounting Principles shall have been made;
(10) Survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties incidental to the conduct of the business or to the ownership of Properties which were not incurred in connection with indebtedness or other extensions of credit and which do not in the aggregate materially and adversely affect the value of the Properties or materially impair their use in the operation of the business;
(11) Liens securing letters of credit entered into in the ordinary course of business;
(12) Liens to secure pollution control revenue bonds or industrial revenue bonds;
(13) Liens securing Non-Recourse Obligations of Unrestricted Subsidiaries;
(14) Liens granted on the capital stock of Unrestricted Subsidiaries for the purpose of securing the Obligations of such Unrestricted Subsidiaries;
(15) Liens pursuant to Capitalized Leases or Synthetic Leases permitted to be entered into under Section 1008;
(16) Liens arising by reason of leases and subleases of Property pursuant to a Sale/Leaseback Transaction allowed pursuant to Section 1006 that do not materially interfere with the ordinary conduct of the business of the Company or any Restricted Subsidiary;
(17) Liens created in connection with worker's compensation, unemployment insurance and other social security statutes or regulations;
(18) Liens by a Wholly-Owned Subsidiary to the Company or any Restricted Subsidiary;
(19) Liens on Property, other than Capital Stock of Restricted Subsidiaries, to secure Obligations so long as the sum of the amount of outstanding Obligations secured by Liens Incurred pursuant to this provision does not exceed the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the end of the most recent fiscal quarter for which financial statements are available; and
(20) The replacement, extension or renewal (or successive replacements, extensions or renewals), as a whole or in part, of any Lien or of any agreement referred to above in clauses (1) through (19), inclusive, or the replacement, extension or renewal (not exceeding the outstanding principal amount of Indebtedness secured thereby together with any premium, interest, fee or expense payable in connection with any such replacement, extension or renewal) is limited to all or part of the same Property that secured the Lien replaced, extended or renewed (plus improvements thereon or additions or accessions thereto).
SECTION 1006. Limitation on Sale of Assets. Except for a sale of all or
substantially all of the Company's assets, as provided in Section 801, and other
than (1) assets required to be sold to conform with governmental regulations,
(2) sales or dispositions of surplus, obsolete or worn out equipment, (3) sales
or dispositions of ownership interests in Unrestricted Subsidiaries, or (4) any
other sale or disposition so long as after giving effect to such events, the
Rating
Agencies shall have confirmed their ratings on the Securities in effect
immediately prior to such sale or disposition, the Company may not, and may not
permit any Restricted Subsidiary to, make any Asset Sale (other than short-term,
readily marketable investments purchased for cash management purposes with funds
not representing the proceeds of other Asset Sales) if, on a pro forma basis,
the aggregate net book value of all such Asset Sales during the most recent
12-month period would exceed 15% of Consolidated Net Tangible Assets computed as
of the most recent quarter preceding such sale; provided, however, that any such
Asset Sale shall be disregarded for purposes of this 15% limitation if the Net
Cash Proceeds are within 270 days thereafter (i) invested in a Permitted
Business, (ii) used to purchase and retire Obligations ranking equal in right of
payment to the Securities or (iii) used to redeem the Securities at a redemption
price equal to 100% of the principal amount of the Securities to be redeemed,
plus accrued and unpaid interest thereon through the applicable redemption date,
plus a make-whole premium equal to, with respect to any Security, the excess of
(a) the aggregate present value as of the date of prepayment of the expected
future cash flows of the Security (for the avoidance of doubt, these amounts
shall include all principal and interest payable with respect to the Security)
(exclusive of interest accrued to the date of prepayment) that, but for the
prepayment, would have been payable if the prepayment had not been made,
determined by discounting such amounts at a rate that is equal to the applicable
treasury rate plus the percentage set forth in the Security then to be prepaid
over (b) the aggregate principal amount of the Security then to be prepaid.
In addition, on a cumulative basis, the Company may not sell or otherwise dispose of more than 25% of the assets or Capital Stock in Fossil, unless Net Cash Proceeds from such sale are invested in other on-nuclear generating assets or the capital stock of entities engaged in fossil generation and related businesses.
SECTION 1007. Limitation on Dividends and Other Payment Restrictions. Other than pursuant to this Indenture or as otherwise may be required by law, the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or cause to become, or as a result of the acquisition of any Person or Property, or upon any Person becoming a Restricted Subsidiary, remain subject to, any consensual encumbrance or consensual restriction of any kind on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock;
(ii) make payments on any Obligations owed to the Company or any Restricted Subsidiary;
(iii) make loans or advances to the Company or to any Restricted Subsidiary;
(iv) transfer an of its Property to the Company or to any Restricted Subsidiary; or
(v) make payments under a Subsidiary Guaranty with respect to any Guaranteed Securities.
The foregoing shall not prohibit:
(a) encumbrances and restrictions resulting from customary provisions relating to (i) transfers of Property that restrict the subletting or assignment of any lease or (ii) transfers of Property that are contained in licenses and that relate to the Property covered thereby, in each case entered into in the ordinary course of business;
(b) encumbrances and restrictions on transfers of Property existing on any assets at the time such assets are acquired (or the entity owning such assets is acquired) by an Restricted Subsidiary, whether by merger, consolidation, purchase of such assets or otherwise; provided that such restrictions and encumbrances (i) are not created, Incurred or assumed in contemplation of such assets or entity being acquired by the Restricted Subsidiary and (ii) do not extend to any other assets of the Restricted Subsidiary; and
(c) restrictions on transfers of Property created in connection with sales or purchases of electricity, energy, capacity, natural gas, coal, ancillary services, environmental credits and/or entitlements, utility services, fuel, water, related transportation services and other similar products and services, in each case, in the ordinary course of business; provided that restrictions arising from any transaction or series of related transactions pursuant to this clause (c) shall not be materially more restrictive, taken as a whole, than encumbrances and restrictions customarily accepted as industry standard for similar transactions.
SECTION 1008. Limitations on Obligations.
(a) Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including without limitation, Acquired Obligations), except for (i) the Subsidiary Guaranties; (ii) Obligations existing on the date hereof; (iii) Obligations of ER&T related to the purchase and sale of fuel, capacity, energy (including, but not limited to, electric power, natural gas and coal), environmental credits or entitlements, utility services, fuel, water, related transportation services and other similar or related products and services in the ordinary course of business; (iv) Obligations of Nuclear related to the purchase and sale of fuel and related transportation services in the ordinary course of business; (v) Permitted Hedging Obligations of ER&T; (vi) Obligations incurred in exchange for, or the net proceeds of which are used to refund, refinance, or replace Obligations described under this Section, provided that the average life of the refinancing Obligations shall not be shorter than average life of the Obligations refinanced and the principal amount of the refinancing obligations shall not exceed the principal amount of the Obligations so refinanced; and (vii) Obligations to the Company or any other Restricted Subsidiary which are subordinated to the Subsidiary Guaranty with respect to any Guaranteed Securities of the Restricted Subsidiary Incurring the Obligations.
The foregoing notwithstanding, Restricted Subsidiaries may Incur Obligations not otherwise permitted by the preceding paragraph in an aggregate amount outstanding after giving
effect to such Incurrence not to exceed at any one time the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the last day of the preceding month.
(b) Subsidiaries Other Than Restricted Subsidiaries
Except for parental guaranties of debt service reserves, surety bonds, equity guarantees, performance bonds and bid bonds entered into in the ordinary course of business aggregating at any one time not more than $100 million, we shall not permit any Subsidiary that is not a Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including, without limitation, Acquired Obligations) that are recourse to us or any Restricted Subsidiary.
SECTION 1009. Guaranty of ER&T Obligations. If the Securities of a series so provide, the Company will unconditionally guarantee the due and punctual payment of all Obligations of ER&T. If applicable, in case of the failure of ER&T punctually to pay any such Obligation, the Company hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, as if such payment were made by ER&T. Any such guarantee shall be subordinate to the Company's obligations under this Indenture.
SECTION 1010. Payment of Dividends by ER&T to the Company. If any for so long as the Company guarantees the Obligations of ER&T pursuant to Section 1009 hereunder, the Company shall cause ER&T, to the extent permitted by applicable law, to pay, at least quarterly, dividends or distributions to the Company of the excess cash not then required for the business operations of ER&T.
SECTION 1011. Statement as to Compliance. Each of the Company and each Subsidiary Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 1011, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.
SECTION 1012. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any term, provision or condition, and as
specified pursuant to Section 301(13) for Securities of any series, in any
covenants of the Company added to Article Ten pursuant to Section 301(12) or
Section 301(13) in connection with the Securities of a series, if before or
after the time for such compliance, except as otherwise contemplated in the
clause (3) of Section 902 hereof, the Holders of at least a majority in
principal amount of all outstanding Securities, by Act of such Holders, waive
such compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to be Redeemed. If less than all the Securities of any series issued on the same day with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall be given in the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof.
Any notice that is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice.
All notices of redemption shall include the CUSIP number of any Security to be redeemed and shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any, to the Redemption Date payable as provided in Section 1106,
(3) if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date, the Redemption Price and accrued interest, if any, to the Redemption Date payable as provided in Section 1106 will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after said date,
(6) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any,
(7) that the redemption is for a sinking fund, if such is the case,
(8) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished, and
(9) if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made.
Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price. Prior to 10:00 a.m. on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (unless otherwise specified pursuant to Section 301) accrued interest on, all the Securities or portions thereof which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest, if any) such Securities shall if the same were interest-bearing cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with said notice, together with all coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of coupons for such interest; and provided further that installments of interest on Registered Securities whose Stated Maturity is prior to (or, if specified pursuant to Section 301, on) the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise
provided in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the Redemption Price shall, until paid, bear interest from the Redemption Date at the rate of interest set forth in such Security or, in the case of an Original Issue Discount Security, at the Yield to Maturity of such Security.
SECTION 1107. Securities Redeemed in Part. Any Registered Security which is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Registered Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. If a Security for any series in global form is so surrendered, the Company shall execute, and the Trustee shall authenticate and deliver to the depository for such Security in global form as shall be specified in the Company Order with respect thereto to the Trustee, without service charge, a new Security for such series in global form in a denomination equal to and in exchange for, the unredeemed portion of the principal of the Security in global form so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of any Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments With Securities. The Company may, in satisfaction of all or any part of any mandatory sinking fund payment with respect to the Securities of a series, (1) deliver Outstanding Securities of such series (other than any previously called for redemption) together in the case of any Bearer Securities of such series
with all unmatured coupons appertaining thereto and (2) apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities; provided that such Securities so delivered or applied as a credit have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for Securities of any series, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and will also deliver to the Trustee any Securities to be so delivered and credited. If such Officers' Certificate shall specify an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article. Repayment of Securities of any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article.
SECTION 1302. Repayment of Securities. Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at the Repayment Price thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that on or before the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in Dollars (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the
Repayment Price of, and (unless otherwise specified pursuant to Section 301) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date.
SECTION 1303. Exercise of Option. Securities of any series subject to repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. To be repaid at the option of the Holder, any Security so providing for such repayment, with the "Option to Elect Repayment" form on the reverse of such Security duly completed by the Holder (or by the Holder's attorney duly authorized in writing), must be received by the Trustee at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities) not earlier than 45 days nor later than 30 days prior to the Repayment Date. If less than the entire Repayment Price of such Security is to be repaid in accordance with the terms of such Security, the portion of the Repayment Price of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of such Security surrendered that is not to be repaid, must be specified. Any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of the series of which such Security to be repaid is a part. Except as provided in Section 1003 and except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company.
SECTION 1304. When Securities Presented for Repayment Become Due and Payable. If Securities of any series providing for repayment at the option of the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with all coupons, if any, appertaining thereto maturing after the Repayment Date, the Repayment Price of such Security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to Section 301, only upon presentation and surrender of such coupons; and provided further that installments of interest on Registered Securities, whose Stated Maturity is prior to (or, if specified pursuant to Section 301, on) the Repayment Date shall be payable (but without interest thereon, unless the Company shall default in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be accompanied by all appurtenant coupons maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.
If any Security surrendered for repayment shall not be so repaid upon surrender thereof, the Repayment Price shall, until paid, bear interest from the Repayment Date at the rate of interest set forth in such Security or, in the case of an Original Issue Discount Security, at the Yield to Maturity of such Security.
SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance. If pursuant to Section 301 provision is made for either or both of (a) defeasance of the Securities of or within a series under Section 1402 or (b) covenant defeasance of the Securities of or within a series under Section 1403, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to have Section 1402 (if applicable) or Section 1403 (if applicable) be applied to such Outstanding Securities and any coupons appertaining thereto upon compliance with the conditions set forth below in this Article.
SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such
Outstanding Securities and any coupons appertaining thereto on the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Outstanding
Securities and any coupons appertaining thereto, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1405 and the other
Sections of this Indenture referred to in clauses (A) and (B) of this Section,
and to have satisfied all its other obligations under such Securities and any
coupons appertaining thereto and this Indenture insofar as such Securities and
any coupons appertaining thereto are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Outstanding Securities and any
coupons appertaining thereto to receive, solely from the trust fund described in
Section 1404 and as more fully set forth in such Section, payments in respect of
the principal of (and premium, if any) and interest, if any, on such Securities
and any coupons appertaining thereto when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 305, 306,
1002 and 1003 and with respect to the payment of Additional Amounts, if any, on
such Securities as contemplated by Section 1004, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article. Subject to
compliance with this Article Fourteen, the Company may exercise its option under
this Section notwithstanding the prior exercise of its option under Section 1403
with respect to such Securities and any coupons appertaining thereto.
SECTION 1403. Covenant Defeasance. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from any obligations under any covenant specified pursuant to Section 301, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such Securities and any coupons appertaining thereto shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenant, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(4) or 501(8) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto:
(a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto, (1) an amount in Dollars, or (2) Government Obligations applicable to such Securities and coupons appertaining thereto which, through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium, if any) and interest, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (3) a combination thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, (i) the principal of (and premium, if any) and interest, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto.
(b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound.
(c) No Default or Event of Default with respect to such Securities and any coupons appertaining thereto shall have occurred and be continuing on the date of such deposit or, insofar as Sections 501(6) and 501(7) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).
(d) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.
(e) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 1402 or the covenant defeasance under
Section 1403 (as the case may be) have been complied with and an Opinion of
Counsel to the effect that either (i) as a result of a deposit pursuant to
subsection (a) above and the related exercise of the Company's option under
Section 1402 or Section 1403 (as the case may be), registration is not required
under the Investment Company Act of 1940, as amended, by the Company, with
respect to the trust funds representing such deposit or by the trustee for such
trust funds or (ii) all necessary registrations under said Act have been
effected.
(g) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 301.
SECTION 1405. Deposited Money and Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, if any, but such money need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto.
Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May be Called. If Securities of a series are issuable as Bearer Securities, a meeting of Holders of Securities of such series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.
SECTION 1502. Call, Notice and Place of Meetings. (a) The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in the Borough of Manhattan, The City of New York or in London as the Trustee shall determine. Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution, any Subsidiary Guarantor (if the Securities are Guaranteed Securities), by or pursuant to a Subsidiary Guarantor's Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company any Subsidiary Guarantor, if applicable, or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York or in London for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.
SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel, any representatives of the Company and its counsel and any representatives of any Subsidiary Guarantor and its counsel.
SECTION 1504. Quorum; Action. The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of not less than a majority in principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 902, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series:
(i) there shall be no minimum quorum requirement for such meeting; and
(ii) the principal amount of the Outstanding Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture.
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of Meetings. (a) Notwithstanding any provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.
(b) Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof.
(c) The Trustee shall, by an instrument in writing appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company, any Subsidiary Guarantor or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.
(d) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.
(e) Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meetings. The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for
or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any Series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1502 and, if applicable, Section 1504. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, another to any Subsidiary Guarantor and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
ARTICLE SIXTEEN
SUBSIDIARY GUARANTY
SECTION 1601. Subsidiary Guaranty. The Subsidiary Guaranty set forth in this Article Sixteen shall only be in effect with respect to Securities of a series to the extent such Subsidiary Guaranty is made applicable to such series in accordance with Section 301. Each Subsidiary Guarantor hereby unconditionally guarantees to each Holder of a Guaranteed Security authenticated and delivered by the Trustee, and to the Trustee on behalf of each such Holder, the due and punctual payment of the principal of, any premium and interest on such Guaranteed Security, whether at maturity, by acceleration, redemption, repayment or otherwise, in accordance with the terms of such Guaranteed Security and this Indenture. In case of the failure of the Company punctually to pay any such principal, premium or interest, each Subsidiary Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at maturity, upon acceleration, redemption, repayment or otherwise, and as if such payment were made by the Company.
Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be as principal and not merely as surety, and shall be absolute, irrevocable and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any Guaranteed Security or this Indenture, any failure to enforce the provisions of any Guaranteed Security or this Indenture, or any waiver, modification, consent or indulgence granted with respect thereto by the Holder of such Guaranteed Security or the Trustee, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger, insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to any such Guaranteed Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Subsidiary Guaranty will not be discharged except by
payment in full of the principal of, any premium and interest on the Guaranteed Securities and the complete performance of all other obligations contained in the Guaranteed Securities.
This Subsidiary Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment on any Guaranteed Security, in whole or in part, is rescinded or must otherwise be repaid to the Company or any Subsidiary Guarantor upon the bankruptcy, liquidation or reorganization of the Company, any Subsidiary Guarantor or otherwise.
Each Subsidiary Guarantor shall be subrogated to all rights of the Holder of any Guaranteed Security against the Company in respect of any amounts paid to such Holder by any Subsidiary Guarantor pursuant to the provisions of this Subsidiary Guaranty; provided, however, that each Subsidiary Guarantor shall not be entitled to enforce, or to receive any payments arising out of or based upon, such right of subrogation until the principal of, any premium and interest on all Guaranteed Securities shall have been paid in full.
* * * * * *
This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
PSEG POWER LLC
[SEAL]
By: /s/ Morton A. Plawner
-----------------------------------
Name: Morton A. Plawner
Title: Vice President and Treasurer
|
PSEG ENERGY RESOURCES AND TRADE LLC
By: /s/ Morton A. Plawner
-----------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
PSEG FOSSIL LLC
By: /s/ Morton A. Plawner
-----------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
PSEG NUCLEAR LLC
By: /s/ Morton A. Plawner
-----------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
THE BANK OF NEW YORK,
as Trustee
By: /s/ Marie E. Trimboli
-----------------------
Name: Marie E. Trimboli
Title: Vice President
|
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, as of the date hereof, and except as set forth
below, the above-captioned Securities held by you for our account (i) are owned
by person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institution hereby agrees, on its own behalf or through its agent,
that you may advise PSEG Power LLC or its agent that such financial institution
will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
United States Internal Revenue Code of 1986, as amended, and the regulations
thereunder), or (iii) are owned by United States or foreign financial
institution(s) for purposes of resale during the restricted period (as defined
in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, in
addition, if the owner is a United States or foreign financial institution
described in clause (iii) above (whether or not also described in clause (i) or
(ii)), this is to further certify that such financial institution has not
acquired the Securities for purposes of resale directly or indirectly to a
United States person or to a person within the United States or its possessions.
As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.
A-1-1
We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above-captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.
This certificate excepts and does not relate to [U.S.$] ____________of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a Permanent Global Security or an exchange for and delivery of definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify.
We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.
Dated: ________________, 20__
[To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii) the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable]
[Name of Person Making Certification]
A-1-2
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND
CLEARSTREAM BANKING IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY
OR TO OBTAIN INTEREST PAYABLE PRIOR
TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities to be delivered]
This is to certify that, based solely on written certifications that we
have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
in the form attached hereto, as of the date hereof, [U.S.$] ______________
principal amount of the above-captioned Securities (i) is owned by person(s)
that are not citizens or residents of the United States, domestic partnerships,
domestic corporations or any estate or trust the income of which is subject to
United States Federal income taxation regardless of its source ("United States
person(s)"), (ii) is owned by United States person(s) that are (a) foreign
branches of United States financial institutions (financial institutions, as
defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) are herein
referred to as "financial institutions") purchasing for their own account or for
resale, or (b) United States person(s) who acquired the Securities through
foreign branches of United States financial institutions and who hold the
Securities through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such financial institution has agreed, on
its own behalf or through its agent, that we may advise PSEG Power LLC or its
agent that such financial institution will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in United States Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.
A-2-1
We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.
Dated: _______________, 20__
[To be dated no earlier than the Exchange Date or the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable]
Euroclear Bank S.A./N.V., as Operator of the Euroclear System Clearstream Banking, Luxembourg, S.A.
By___________________________
A-2-2
EXHIBIT B
FORM OF SUBSIDIARY GUARANTY
For value received, __________, __________, and __________, each a [List State of Organization and Corporate Form] (each herein called a "Guarantor" and together called the "Guarantors", which terms include any successor Person under the Indenture referred to in the Note upon which this Guarantee is endorsed), jointly and severally, hereby irrevocably and unconditionally guarantees to the Holder of the Note upon which this Guarantee is endorsed, and to the Trustee on behalf of each such Holder, the due and punctual payment of the principal of (and premium, if any, on), make-whole amount, if any, on and interest, if any, on such Note and the due and punctual payment of any sinking fund payments provided for pursuant to the terms of any such Note when and as the same shall become due and payable, whether at the maturity by declaration of acceleration, call for redemption, request for redemption, repayment at the option of the Holder or otherwise, in accordance with the terms of said Note and of the Indenture. In case of the failure of the issuer of the Note (the "Issuer") punctually to make any such payment of principal (or premium, if any), or make-whole amount, if any, or interest, if any or any sinking fund payment, the Guarantors, jointly and severally, hereby agree to cause any such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity (as defined in the Indenture), by declaration of acceleration, call for redemption, request for redemption, repayment at the option of the Holder or otherwise, and as if such payment were made by the Issuer.
Each Guarantor hereby agrees that its obligations hereunder shall be as if it were principal debtor and not merely surety, and shall be absolute, irrevocable and unconditional, irrespective of the validity, regularity or enforceability of said Note or the Indenture, the absence of any action to enforce the same, any waiver or consent by the Holder of said Note or by the Trustee or the Paying Agent with respect to any provisions thereof or of the Indenture, the recovery of any judgment against the Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to said Note or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged except by complete performance of its obligations contained in the Indenture, said Note and this Guarantee.
The Holder of the Note on which this Guarantee is endorsed is entitled to the further benefits relating thereto set forth in the Note and the Indenture. No reference herein to the Indenture and no provision of this Guarantee, said Note or the Indenture shall alter or impair the guarantee of each Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal of (and premium, if any, on), or make-whole amount, if any, and
interest, if any, or any sinking fund payment in respect of, the Note upon which this Guarantee is endorsed.
The Indenture, the Note and the Guarantee shall be governed by and construed in accordance with the laws of the State of New York.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS GUARANTEE SET FORTH IN SAID NOTE AND IN THE INDENTURE, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the within Note has been executed by the Trustee, directly or through an authenticating agent, by manual or facsimile signature of an authorized signatory.
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be duly executed.
Dated: __________ __, ____
___________________
By: _______________________
Name:
Title:
___________________
By: _______________________
Name:
Title:
___________________
By: _______________________
Name:
|
Title:
Exhibit 4.2
PSEG Power LLC
6.875% Senior Notes Due 2006
7.75% Senior Notes Due 2011
8.625% Senior Notes Due 2031
April 9, 2001
Morgan Stanley & Co. Incorporated
Salomon Smith Barney, Inc.
UBS Warburg LLC
Banc of America Securities LLC
Banc One Capital Markets, Inc.
Chase Securities Inc.
First Union Securities, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into April 9, 2001, among PSEG POWER LLC, a Delaware limited liability company (the "Company"), PSEG NUCLEAR LLC, a Delaware limited liability company ("Nuclear"), PSEG FOSSIL LLC, a Delaware limited liability company ("Fossil"), PSEG ENERGY RESOURCES AND TRADE LLC, a Delaware limited liability company ("ER&T"), and MORGAN STANLEY & CO. INCORPORATED, Salomon Smith Barney, Inc., UBS Warburg LLC, Banc of America Securities LLC, Banc One Capital Markets, Inc., Chase Securities Inc. and First Union Securities, Inc. (collectively, the "Purchase Agents"). Nuclear, Fossil and ER&T are individually referred to herein as a "Guarantor" and collectively referred to herein as the "Guarantors," as the context requires.
This Agreement is made pursuant to the Purchase Agreement dated April 9, 2001, among the Company, as issuer of the Notes (as defined below), Nuclear, Fossil and ER&T, as Guarantors of the Notes, and the Purchase Agents (the "Purchase Agreement"), which provides for, among other things, the sale by the Company to the Purchase Agents of an aggregate of $500,000,000 principal amount of the Company's 6.875% Senior Notes Due 2006, $800,000,000
principal amount of the Company's 7.75% Senior Notes Due 2011, and $500,000,000 principal amount of the Company's 8.625% Senior Notes Due 2031 (collectively, the "Notes"). Each of Nuclear, Fossil and ER&T will jointly and severally and unconditionally guarantee the payment of principal and interest and any make-whole premium on the Notes (each, a "Guarantee" and collectively, the "Guarantees"). The Notes and the Guarantees will be issued under an indenture, dated as of April 16, 2001 (the "Indenture"), among the Company, Nuclear, Fossil, ER&T, and The Bank of New York, a New York banking corporation, as Trustee (the "Trustee"). The Notes will be issued in accordance with terms set forth in resolutions adopted by the Company's Sale and Pricing Committee on April 9, 2001.
In order to induce the Purchase Agents to enter into the Purchase Agreement, the Company and each Guarantor has agreed to provide to the Purchase Agents and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is one of the conditions to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the Purchase Agreement.
"Company" shall have the meaning set forth in the preamble hereto and shall also include the Company's successors.
"Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof.
"ER&T" shall have the meaning set forth in the preamble hereto and shall include ER&T's successors.
"Exchange Offer" shall mean the exchange offer by the Company and each Guarantor of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" shall mean securities issued by the Company and the
Guarantors under the Indenture containing terms identical to the Securities
(except that (i) interest on the notes issued by the Company pursuant to the
Exchange Offer shall accrue from the last date on which interest was paid on the
Notes or, if no such interest has been paid on the Notes, from April 16, 2001,
(ii) the Exchange Securities will not contain restrictions on transfer under the
1933 Act, and (iii) the Exchange Securities will not provide for any Special
Interest Premium thereon) to be offered to Holders of Securities in exchange for
Securities pursuant to the Exchange Offer.
"Fossil" shall have the meaning set forth in the preamble hereto and shall include Fossil's successors.
"Guarantee" and "Guarantees" shall have the meanings set forth in the preamble hereto.
"Guarantor" and "Guarantors" shall have the meanings set forth in the preamble hereto.
"Holder" shall mean the Purchase Agents, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers.
"Indenture" shall have the meaning set forth in the preamble hereto and shall include any amendments or supplements thereto.
"Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Notes; provided that whenever the consent or approval of Holders of a specified percentage of Notes is required hereunder, Notes held by the Company, its affiliates or any of its direct or indirect subsidiaries, including each Guarantor, shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount.
"Notes" shall have the meaning set forth in the preamble hereto.
"Nuclear" shall have the meaning set forth in the preamble hereto and shall include Nuclear's successors.
"Participating Broker-Dealer" shall have the meaning set forth in Section 4(a) hereof.
"Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.
"Purchase Agents" shall have the meaning set forth in the preamble hereto.
"Purchase Agreement" shall have the meaning set forth in the preamble hereto.
"Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein.
"Registrable Securities" shall mean the Securities; provided, however, that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act or are eligible to be sold pursuant to Rule 144(k) under the 1933 Act, or (iii) when such Securities shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to the
performance of or compliance by the Company and each Guarantor with this
Agreement, including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees and
expenses, including fees and disbursements of counsel for the placement or sales
agent or underwriters in connection with any such registration or filing, (ii)
all fees and expenses incurred in connection with compliance with state
securities or blue sky laws (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Exchange Securities or Registrable Securities),
(iii) all expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the performance of
and compliance with this Agreement, (iv) all rating agency fees, (v) all fees
and disbursements relating to the qualification of the Indenture under
applicable securities laws, (vi) the fees and disbursements of the Trustee and
its counsel and any exchange agent or custodian, (vii) the fees and
disbursements of counsel for the Company and each Guarantor, and, in the case of
a Shelf Registration Statement, the fees and disbursements of one counsel for
the Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Purchase Agents) and (viii) the fees and
disbursements of the independent public accountants of the Company and each
Guarantor, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, including an Exchange Offer Registration Statement or a
Shelf Registration Statement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
"Special Interest Premium" shall have the meaning set forth in Section 2(d) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean the Notes and the Guarantees.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantors pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities under the Indenture.
"Underwriter" shall have the meaning set forth in Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering" shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Company and the Guarantors shall use their best efforts to cause to be filed an Exchange Offer Registration Statement covering the offer by the Company and the Guarantors to the Holders to exchange all of the Registrable Securities for Exchange Securities and to have such Exchange Offer Registration Statement remain effective until the closing of the Exchange Offer. The Company and the Guarantors shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and shall use their best efforts to have the Exchange Offer consummated not later than 60 days after such effective date. The Company and the Guarantors shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law,:
(i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of at least 30 business days from the date such notice is mailed) (collectively, the "Exchange Dates");
(iii) that any Registrable Security not tendered will remain outstanding and Notes not tendered will continue to accrue interest, but that any Registrable Security not tendered will not retain any rights under this Agreement (except in the case of the Purchase Agents and Participating Broker-Dealers as provided herein);
(iv) that Holders electing to have a Registrable Security exchanged for an Exchange Security pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in such notice prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election to exchange a Registrable Security for an Exchange Security, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing his election to have such Registrable Securities exchanged.
As soon as practicable after the last Exchange Date, the Company and each Guarantor shall:
(i) accept for exchange Registrable Securities or portions thereof tendered and not validly withdrawn under the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and the Guarantors and issue, and cause the Trustee to promptly authenticate and mail to each Holder, an Exchange Security equal in principal amount to the principal amount of the Notes surrendered by such Holder.
The Company and the Guarantors shall use their best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the SEC. The Company shall inform the Purchase Agents of the names and addresses of the Holders to whom the Exchange Offer is made, and the Purchase Agents shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated by February 25, 2002, (iii) the Exchange Offer has been completed and, in
the opinion of counsel for the Purchase Agents, a Registration Statement must be filed and a Prospectus must be delivered by the Purchase Agents in connection with any offering or sale of Registrable Securities, (iv) any Registrable Securities validly tendered pursuant to the Exchange Offer are not exchanged for Exchange Securities within 10 days of being accepted in the Exchange Offer, (v) any Purchase Agent so requests with respect to Registrable Securities that are not eligible to be exchanged in the Exchange Offer, (vi) the Exchange Offer is not available to any Holder, or (vii) any Holder of Registrable Securities that participates in the Exchange Offer does not receive freely transferable Exchange Securities in exchange for its Registrable Securities, the Company and the Guarantors shall use their best efforts to cause to be filed as soon as practicable after (but in no event more than 45 days after) such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities and to have such Shelf Registration Statement declared effective by the SEC. In the event the Company and the Guarantors are required to file a Shelf Registration Statement solely as a result of the matters referred to in clause (iii) of the preceding sentence, the Company and the Guarantors shall use their best efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) hereof with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Purchase Agents after completion of the Exchange Offer. The Company and the Guarantors agree to use their best efforts to keep the Shelf Registration Statement continuously effective for the lesser of two years from the Closing Date or until all of the Registrable Securities are eligible for resale pursuant to Rule 144 under the 1933 Act or such shorter period that will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the "Effectiveness Period"). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registrations or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.
(c) The Company and the Guarantors shall pay all Registration Expenses in connection with the registration of Registrable Securities and/or Exchange Securities pursuant to Section 2(a) and Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court,
such Registration Statement will be deemed not to have become effective during
the period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. In the event that
(i) the Exchange Offer is not consummated or the Shelf Registration Statement is
not declared effective by the SEC on or prior to February 25, 2002, or (ii) the
Shelf Registration Statement has been declared effective by the SEC but
thereafter ceases to be effective without being succeeded within 45 days after
the Shelf Registration Statement cease to be effective by an additional
registration statement covering the Registrable Securities that is declared
effective by the SEC, the interest rate on the Securities will be increased by
.50% per annum (the "Special Interest Premium") until the Exchange Offer is
consummated or the Shelf Registration Statement is declared effective or again
becomes effective, as the case may be. All accrued Special Interest Premium
shall be paid to the Holders in the same manner and on the same dates as
interest is payable on the Notes.
(e) Without limiting the remedies available to the Purchase Agents and the
Holders, the Company and each Guarantor acknowledge that any failure by the
Company or any Guarantor to comply with their obligations under Section 2(a) or
Section 2(b) hereof may result in material irreparable injury to the Purchase
Agents or the Holders for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of any such failure, the Purchase Agents or any Holder may obtain such
relief as may be required to specifically enforce the obligations of the Company
and each Guarantor under Section 2(a) or Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company and each Guarantor with respect to the Registration Statements under Section 2(a) and Section 2(b) hereof, the Company and each Guarantor shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and the Guarantors and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use their best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current during the period described under Section 4(3) of the 1933 Act and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;
(c) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Purchase Agents, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as
many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto, and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law;
(d) use their best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company and each Guarantor shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process, or (iii) subject itself to taxation in any such jurisdiction if it is not already so subject to taxation;
(e) in the case of a Shelf Registration, notify each Holder of Registrable
Securities, counsel for the Holders and counsel for the Purchase Agents promptly
and, if requested by any such Holder or counsel, confirm such advice in writing
(i) when a Registration Statement has become effective and when any
post-effective amendment thereto has been filed with the SEC and becomes
effective, (ii) of any request by the SEC or any state securities authority for
amendments or supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Securities
covered thereby, the representations and warranties of the Company or any
Guarantor contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to the offering of Registrable
Securities cease to be true and correct in all material respects or if the
Company or any Guarantor receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading and (vi) of any determination by the Company
or any Guarantor that a post-effective amendment to a Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least one business day prior to the closing of any sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company and the Guarantors agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after the initial filing of a Registration Statement, provide copies of such document to the Purchase Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Purchase Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Purchase Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Purchase Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall object;
(k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of the applicable Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use their best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use their best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company and the Guarantors are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements;
(o) use their best efforts to cause the Exchange Securities or Registrable Securities, as the case may be, to be rated by at least two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company or any Guarantor has received notification of the matters to be incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the aggregate principal amount of Notes being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and the Guarantors and their direct and indirect subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed to be incorporated by reference therein, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from
the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Subsidiary of any Guarantor, or of any business acquired by the Company and the Guarantors for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the aggregate principal amount of the Notes being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company and the Guarantors may require each Holder of Registrable Securities to furnish to the Company and the Guarantors such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company or any Guarantor of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(j) hereof, and, if so directed by the Company or any Guarantor, such Holder will deliver to the Company and the Guarantors (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company or any Guarantor shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365 day period and any such suspensions may not exceed 30 days for each suspension and there may not be more than two suspensions in effect during any 365 day period.
The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (collectively, the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.
The Company and the Guarantors understand that it is the staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by the Purchase Agents or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the staff recited in Section 4(a) above; provided that:
(i) the Company and the Guarantors shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(j) hereof, for a period exceeding 90 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company and the Guarantors to deliver and shall not deliver such Prospectus after such period in connection with resales of Exchange Securities contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the extent not
required by the positions of the staff of the SEC or the 1933 Act and the rules
and regulations thereunder, will be in conformity with the reasonable request to
the Company and the Guarantors by the Purchase Agents or with the reasonable
request in writing to the Company and the Guarantors by one or more
broker-dealers who certify to the Purchase Agents, the Company and the
Guarantors in writing that they anticipate that they will be Participating
Broker-Dealers; and provided further that, in connection with such application
of the Shelf Registration procedures set forth in Section 3 hereof to an
Exchange Offer Registration, the Company shall be obligated (x) to deal only
with one entity representing the Participating Broker-Dealers, which shall be
Morgan Stanley & Co. Incorporated unless it elects not to act as such
representative, (y) to pay the fees and expenses of only one counsel
representing the Participating Broker-Dealers, which shall be
counsel to the Purchase Agents unless such counsel elects not to so act, and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above.
(c) The Purchase Agents shall have no liability to the Company, the Guarantors or any Holder with respect to any request that they may make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) The Company and each of the Guarantors, jointly and severally, agree to indemnify and hold harmless the Purchase Agents, each Holder and each Person, if any, who controls any Purchase Agent or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Purchase Agent or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Purchase Agent, any Holder or any such controlling or affiliated Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company or any Guarantor shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Purchase Agents or any Holder furnished to the Company and the Guarantors in writing through Morgan Stanley & Co. Incorporated or any selling Holder expressly for use therein. In connection with any Underwritten Offering permitted by Section 3 hereof, the Company and each of the Guarantors will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and each of the Guarantors, the Purchase Agents and the other selling Holders, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company or any Guarantor, any Purchase Agent and any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company and each of the Guarantors to the Purchase Agents and the Holders, but only with reference to information relating to such Holder furnished to the Company or any Guarantor in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the "indemnified party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Purchase Agents and all Persons, if any, who control any Purchase Agent within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company and the Guarantors, their directors, their officers who sign the Registration Statement and each Person, if any, who controls the Company or any Guarantor within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all Persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Purchase Agents and Persons who control the Purchase Agents, such firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In such case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company and the Guarantors. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request, and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company, a Guarantor and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, a Guarantor or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective principal amount of Registrable Securities of such Holder that were registered pursuant to a Registration Statement.
(e) The Company, each of the Guarantors and each Holder agree that it
would not be just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Purchase Agents, any Holder or any Person controlling any Purchase Agent or
any Holder, or by or on behalf of the Company or any Guarantor, their officers
or directors or any Person controlling either the Company or any Guarantor,
(iii) acceptance of any of the Exchange Securities and (iv) any sale of
Registrable Securities pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company and each of the Guarantors have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Guarantor's other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority of the aggregate principal amount of the outstanding Notes affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company and the Guarantors by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect to the
Purchase Agents, the address set forth in the Purchase Agreement; and (ii) if to
the Company and the Guarantors, initially at the address for the Company and
each Guarantor set forth in the Purchase Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Purchase Agents (in their capacity as Purchase Agents) shall have no liability or obligation to the Company or any Guarantor with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement.
(e) Third Party Beneficiary. Each Holder and any Participating Broker-Dealer shall be third party beneficiaries to the agreements made hereunder among the Company, the Guarantors, and the Purchase Agents, and the Purchase Agents shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
PSEG Power LLC
By: /s/ Morton A. Plawner
-------------------------------------
Name: Morton A. Plawner
Title: Vice President and Treasurer
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PSEG Nuclear LLC
By: /s/ Morton A. Plawner
-------------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
PSEG Fossil LLC
By: /s/ Morton A. Plawner
-------------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
PSEG Energy Resources and Trade LLC
By: /s/ Morton A. Plawner
-------------------------------------
Name: Morton A. Plawner
Title: Treasurer
|
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY, INC.
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
FIRST UNION SECURITIES, INC.
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ Todd J. Singer
---------------------
Name: Todd J. Singer
Title: Vice President
|
Exhibit 4.3
GLOBAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITORY") TO PSEG POWER LLC OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR.
CUSIP NO. 69362B AA 0 $[PRINCIPAL AMOUNT]
No. R-1
PSEG POWER LLC
6-7/8% Senior Note due 2006
|
GLOBAL NOTE
PSEG POWER LLC, a Delaware limited liability company (herein referred to as the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[PRINCIPAL AMOUNT] (or such lesser amount as shall be the outstanding principal amount of this Global Note shown in Schedule A hereto) on April 15, 2006 (the "Stated Maturity Date"), unless redeemed in accordance with the provisions of this Global Note, and to pay interest on the outstanding principal amount of this Global Note from April 16, 2001, semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001 (each, an "Interest Payment Date") at 6-7/8% per annum until the principal hereof is paid or duly provided for. Interest payable on each Interest Payment Date will include interest accrued from and including April 16, 2001 or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, to but excluding such Interest Payment Date. Interest will be computed based on a 360-day year consisting of twelve 30-day months.
Each of Nuclear, Fossil and ER&T has jointly, severally and unconditionally, guaranteed the payment of principal, premium, if any, and interest with respect to this Global Note.
The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, except as provided below, be paid to the person (the "Holder") in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on the fifteenth day (whether or not a Business Day (as defined below)) immediately preceding the applicable Interest Payment Date (a "Regular Record Date"). Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the Holder of this Global Note not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture.
For purposes of this Global Note, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close.
Payments of principal, premium, if any, and interest with respect to this Global Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of pubic and private debts. Payment of the principal of and any premium on this Global Note on the Stated Maturity Date or date of earlier redemption will be made in immediately available funds against presentation of this Global Note at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York. Payments of interest on an Interest Payment Date will be made, at the option of the Company, by check mailed to the Holder entitled thereto at the applicable address appearing in the Security Register or by transfer of immediately available funds to an account maintained by the payee with a bank located in the United States of America; provided, however, that so long as Cede & Co. is the Holder of this Global Note, payments of interest on an Interest Payment Date will be made in immediately available funds.
Any payment of principal, premium or interest required to be made with respect to this Global Note on a day that is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day and no additional interest shall be payable on the next succeeding Business Day as a result of such delayed payment.
General. This Global Note is one of the duly authorized series of securities of the Company (the "Securities"), issued or to be issued under the Indenture, dated as of April 16, 2001, among The Bank of New York, as trustee (the "Trustee"), the Company, Fossil, Nuclear and ER&T (together with all supplements thereto, the "Indenture"), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, Fossil, Nuclear, ER&T, the Trustee and each of the holders of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered and transferred. The Notes will be limited to $500,000,000 aggregate principal amount, except as permitted in the Indenture, and will be subject, without the consent of the holders of any series of Securities under the Indenture, to the issuance of additional Notes in the future having the same terms, other than the date of original issuance and the date on which interest begins to accrue, so as to form one series with the Notes. All terms used in this Global Note which are not defined herein shall have the meanings given to them in the Indenture.
Guarantee of ER&T Obligations; Payment of Dividends by ER&T to the
Company. The provisions of Section 1009 of the Indenture relating to the
guarantee of the Obligations of ER&T by the Company and the provisions of
Section 1010 of the Indenture relating to the payment of dividends by ER&T to
the Company shall apply to this Global Note.
Events of Default. If an Event of Default with respect to the Notes shall have occurred and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.
Redemption. This Global Note (or portion thereof) will be redeemable at
the option of the Company, in whole or in part at any time, on at least 30 days
but not more than 60 days prior written notice mailed to the Holder hereof, at a
price the (the "Redemption Price") equal to the greater of (i) 100% of the
principal amount of this Global Note (or portion thereof) to be redeemed, or
(ii) the sum, as determined by the Calculation Agent (as defined below), of the
present values of the principal amount of this Global Note (or portion thereof)
to be redeemed and the remaining scheduled payments of interest thereon from the
date of redemption (the "Redemption Date") to April 15, 2006 (the "Remaining
Life"), discounted from their respective payment dates to the Redemption Date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined below) plus 30 basis points, plus, in either
case, unpaid interest thereon accrued to the Redemption Date.
If money sufficient to pay the Redemption Price of this Global Note (or portion hereof) to be redeemed on a Redemption Date is deposited with the Trustee or a Paying Agent on or before such Redemption Date and certain other conditions are satisfied, then on and after such Redemption Date, interest will cease to accrue on this Global Note (or such portion hereof) called for redemption.
This Global Note will not be entitled to the benefit of, or be subject to, any sinking fund.
Certain Definitions. "Comparable Treasury Issue" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, the United
States Treasury security selected by the Independent Investment Banker (as defined below) as having the maturity comparable to the Remaining Life of this Global Note (or portion hereof) to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life of this Global Note (or portion hereof) to be redeemed.
"Calculation Agent" means The Bank of New York or such successor Calculation Agent as is appointed by the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, (a) the average of four Reference Treasury Dealer Quotations (as defined below) for the Redemption Date for this Global Note (or portion hereof) to be redeemed, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, obtained by the Calculation Agent, or, (b) if the Calculation Agent obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means each of four primary U.S. Government securities dealers in New York City selected by the Trustee in consultation with the Company and initially will include Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc. If any Reference Treasury Dealer ceases to be a primary U.S. government securities dealer, the Trustee will substitute another primary U.S. government securities dealer for that dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Calculation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Calculation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date: (a) the yield
for the maturity corresponding to the Comparable Treasury Issue, under the
heading that represents the average for the immediately preceding week appearing
in the most recently published statistical release designated "H.15(519)" or any
successor publication that is published weekly by the Board of Governors of the
Federal Reserve System and that establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," provided, that if no maturity is within three
months before or after the Stated Maturity Date, the yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate shall be interpolated or extrapolated
from those yields on a straight line basis, rounding to the nearest month; or
(b) if the release referred to in clause (a) (or any successor release) is not
published during the week preceding the calculation date or does not contain the
yields referred to above, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date. The
Treasury Rate will be calculated on the third Business Day preceding the
Redemption Date.
Reports. So long as this Global Note remains Outstanding, the Company will file with the Trustee, within 30 days of filing them with the Securities and Exchange Commission (the "SEC"), copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the Company is not subject to the requirements of Section 13 or Section 15(d) of the Exchange Act and this Global Note remains Outstanding, the Company must nevertheless file with the SEC (if permitted) and the Trustee, on the date upon which the Company would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the Trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if the Company was subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that the Company will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so.
Modification and Waivers; Obligations of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and each Guarantor and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company, each Guarantor and the Trustee with the consent of the Holders of a majority in aggregate principal amount of all Securities issued under the Indenture at the time Outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Outstanding Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the Holders of a majority in aggregate principal amount of the Outstanding Securities of an individual series, to waive, on behalf of all of the Holders of Securities of such individual series, certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Global Note and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal, premium, if any, and interest with respect to this Global Note at the times, place and rate, and in the coin or currency herein prescribed.
Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Global Note and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Global Note.
Authorized Denominations. The Notes are issuable only in registered form without coupons in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Registration of Transfer or Exchange of this Global Note. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Global Note is registrable in the Security Register upon surrender of this Global Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Global Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Global Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations herein and therein set forth, the Global Notes are exchangeable for a like aggregate principal amount of Global Notes of different authorized denominations, as requested by the Holders surrendering the same.
This Global Note is a Global Security within the meaning of the Indenture. If The Depository Trust Company is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by the Company within 90 days or an Event of Default under the Indenture has occurred and is continuing, the Company will issue Notes in certificated form in exchange for this Global Security. In addition, the Company may at any time determine not to have Notes represented by one or more Global Securities and, in such event, will issue Notes in certificated form in exchange in whole for this Global Security. In any such instance, an owner of a beneficial interest in this Global Note will receive Notes in certificated form equal in principal amount to such beneficial interest and to have such Notes registered in its name. Notes so issued in certificated form will be issued in denominations of $100,000 and integral multiples of $1,000 in excess thereof and will be issued in registered form only, without coupons.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Global Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of this Global Note as the owner hereof for all purposes, whether or not this Global Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Interests in this Global Note are exchangeable or transferable in whole or in part for interests in the Temporary Regulation S Global Note or Regulation S Global Note, in each case of the same series, only if such exchange or transfer complies with the Indenture.
Governing Law. This Global Note shall be governed by and construed in accordance with the law of the State of New York.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal.
Dated: , 2001 PSEG POWER LLC
By: _______________________
President
Attest: ___________________
Secretary
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Dated: __________________
By: _______________________ Authorized Signatory
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec. or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
SCHEDULE A
The following exchanges of Notes for Notes represented by this Temporary Global Note have been made:
===============================================================================================================
Change in
Principal
Principal Amount of this Principal
amount of this Global Note amount of this Notation made
Global Note as Date exchange due to Global Note by or on behalf
of , 2001 made exchange due to exchange of the Company
---------------------------------------------------------------------------------------------------------------
$[PRINCIPAL
AMOUNT]
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Exhibit 4.4
GLOBAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITORY") TO PSEG POWER LLC OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR.
CUSIP NO. 69362B AD 4 $[PRINCIPAL AMOUNT]
No. R-1
PSEG POWER LLC
7-3/4% Senior Note due 2011
|
GLOBAL NOTE
PSEG POWER LLC, a Delaware limited liability company (herein referred to as the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[PRINCIPAL AMOUNT] (or such lesser amount as shall be the outstanding principal amount of this Global Note shown in Schedule A hereto) on April 15, 2011 (the "Stated Maturity Date"), unless redeemed in accordance with the provisions of this Global Note, and to pay interest on the outstanding principal amount of this Global Note from April 16, 2001, semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001 (each, an "Interest Payment Date") at 7-3/4% per annum until the principal hereof is paid or duly provided for. Interest payable on each Interest Payment Date will include interest accrued from and including April 16, 2001 or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, to but excluding such Interest Payment Date. Interest will be computed based on a 360-day year consisting of twelve 30-day months.
Each of Nuclear, Fossil and ER&T has jointly, severally and unconditionally, guaranteed the payment of principal, premium, if any, and interest with respect to this Global Note.
The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, except as provided below, be paid to the person (the "Holder") in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on the fifteenth day (whether or not a Business Day (as defined below)) immediately preceding the applicable Interest Payment Date (a "Regular Record Date"). Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the Holder of this Global Note not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture.
For purposes of this Global Note, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close.
Payments of principal, premium, if any, and interest with respect to this Global Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of pubic and private debts. Payment of the principal of and any premium on this Global Note on the Stated Maturity Date or date of earlier redemption will be made in immediately available funds against presentation of this Global Note at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York. Payments of interest on an Interest Payment Date will be made, at the option of the Company, by check mailed to the Holder entitled thereto at the applicable address appearing in the Security Register or by transfer of immediately available funds to an account maintained by the payee with a bank located in the United States of America; provided, however, that so long as Cede & Co. is the Holder of this Global Note, payments of interest on an Interest Payment Date will be made in immediately available funds.
Any payment of principal, premium or interest required to be made with respect to this Global Note on a day that is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day and no additional interest shall be payable on the next succeeding Business Day as a result of such delayed payment.
General. This Global Note is one of the duly authorized series of securities of the Company (the "Securities"), issued or to be issued under the Indenture, dated as of April 16, 2001, among The Bank of New York, as trustee (the "Trustee"), the Company, Fossil, Nuclear and ER&T (together with all supplements thereto, the "Indenture"), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, Fossil, Nuclear, ER&T, the Trustee and each of the holders of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered and transferred. The Notes will be limited to $800,000,000 aggregate principal amount, except as permitted in the Indenture, and will be subject, without the consent of the holders of any series of Securities under the Indenture, to the issuance of additional Notes in the future having the same terms, other than the date of original issuance and the date on which interest begins to accrue, so as to form one series with the Notes. All terms used in this Global Note which are not defined herein shall have the meanings given to them in the Indenture.
Guarantee of ER&T Obligations; Payment of Dividends by ER&T to the
Company. The provisions of Section 1009 of the Indenture relating to the
guarantee of the Obligations of ER&T by the Company and the provisions of
Section 1010 of the Indenture relating to the payment of dividends by ER&T to
the Company shall apply to this Global Note.
Events of Default. If an Event of Default with respect to the Notes shall have occurred and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.
Redemption. This Global Note (or portion thereof) will be redeemable at
the option of the Company, in whole or in part at any time, on at least 30 days
but not more than 60 days prior written notice mailed to the Holder hereof, at a
price the (the "Redemption Price") equal to the greater of (i) 100% of the
principal amount of this Global Note (or portion thereof) to be redeemed, or
(ii) the sum, as determined by the Calculation Agent (as defined below), of the
present values of the principal amount of this Global Note (or portion thereof)
to be redeemed and the remaining scheduled payments of interest thereon from the
date of redemption (the "Redemption Date") to April 15, 2011 (the "Remaining
Life"), discounted from their respective payment dates to the Redemption Date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined below) plus 35 basis points, plus, in either
case, unpaid interest thereon accrued to the Redemption Date.
If money sufficient to pay the Redemption Price of this Global Note (or portion hereof) to be redeemed on a Redemption Date is deposited with the Trustee or a Paying Agent on or before such Redemption Date and certain other conditions are satisfied, then on and after such Redemption Date, interest will cease to accrue on this Global Note (or such portion hereof) called for redemption.
This Global Note will not be entitled to the benefit of, or be subject to, any sinking fund.
Certain Definitions. "Comparable Treasury Issue" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, the United
States Treasury security selected by the Independent Investment Banker (as defined below) as having the maturity comparable to the Remaining Life of this Global Note (or portion hereof) to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life of this Global Note (or portion hereof) to be redeemed.
"Calculation Agent" means The Bank of New York or such successor Calculation Agent as is appointed by the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, (a) the average of four Reference Treasury Dealer Quotations (as defined below) for the Redemption Date for this Global Note (or portion hereof) to be redeemed, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, obtained by the Calculation Agent, or, (b) if the Calculation Agent obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means each of four primary U.S. Government securities dealers in New York City selected by the Trustee in consultation with the Company and initially will include Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc. If any Reference Treasury Dealer ceases to be a primary U.S. government securities dealer, the Trustee will substitute another primary U.S. government securities dealer for that dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Calculation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Calculation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date: (a) the yield
for the maturity corresponding to the Comparable Treasury Issue, under the
heading that represents the average for the immediately preceding week appearing
in the most recently published statistical release designated "H.15(519)" or any
successor publication that is published weekly by the Board of Governors of the
Federal Reserve System and that establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," provided, that if no maturity is within three
months before or after the Stated Maturity Date, the yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate shall be interpolated or extrapolated
from those yields on a straight line basis, rounding to the nearest month; or
(b) if the release referred to in clause (a) (or any successor release) is not
published during the week preceding the calculation date or does not contain the
yields referred to above, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date. The
Treasury Rate will be calculated on the third Business Day preceding the
Redemption Date.
Reports. So long as this Global Note remains Outstanding, the Company will file with the Trustee, within 30 days of filing them with the Securities and Exchange Commission (the "SEC"), copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the Company is not subject to the requirements of Section 13 or Section 15(d) of the Exchange Act and this Global Note remains Outstanding, the Company must nevertheless file with the SEC (if permitted) and the Trustee, on the date upon which the Company would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the Trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if the Company was subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that the Company will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so.
Modification and Waivers; Obligations of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and each Guarantor and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company, each Guarantor and the Trustee with the consent of the Holders of a majority in aggregate principal amount of all Securities issued under the Indenture at the time Outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Outstanding Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the Holders of a majority in aggregate principal amount of the Outstanding Securities of an individual series, to waive, on behalf of all of the Holders of Securities of such individual series, certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Global Note and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal, premium, if any, and interest with respect to this Global Note at the times, place and rate, and in the coin or currency herein prescribed.
Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Global Note and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Global Note.
Authorized Denominations. The Notes are issuable only in registered form without coupons in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Registration of Transfer or Exchange of this Global Note. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Global Note is registrable in the Security Register upon surrender of this Global Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Global Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Global Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations herein and therein set forth, the Global Notes are exchangeable for a like aggregate principal amount of Global Notes of different authorized denominations, as requested by the Holders surrendering the same.
This Global Note is a Global Security within the meaning of the Indenture. If The Depository Trust Company is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by the Company within 90 days or an Event of Default under the Indenture has occurred and is continuing, the Company will issue Notes in certificated form in exchange for this Global Security. In addition, the Company may at any time determine not to have Notes represented by one or more Global Securities and, in such event, will issue Notes in certificated form in exchange in whole for this Global Security. In any such instance, an owner of a beneficial interest in this Global Note will receive Notes in certificated form equal in principal amount to such beneficial interest and to have such Notes registered in its name. Notes so issued in certificated form will be issued in denominations of $100,000 and integral multiples of $1,000 in excess thereof and will be issued in registered form only, without coupons.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Global Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of this Global Note as the owner hereof for all purposes, whether or not this Global Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Interests in this Global Note are exchangeable or transferable in whole or in part for interests in the Temporary Regulation S Global Note or Regulation S Global Note, in each case of the same series, only if such exchange or transfer complies with the Indenture.
Governing Law. This Global Note shall be governed by and construed in accordance with the law of the State of New York.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal.
Dated: , 2001 PSEG POWER LLC
By: _______________________________
President
Attest: ___________________________
Secretary
|
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Dated: __________________
By: _______________________________ Authorized Signatory
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec. or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
SCHEDULE A
SCHEDULE OF EXCHANGES
The following exchanges of Notes for Notes represented by this Temporary Global Note have been made:
===============================================================================================================
Change in
Principal
Principal Amount of this Principal
amount of this Global Note amount of this Notation made
Global Note as Date exchange due to Global Note by or on behalf
of , 2001 made exchange due to exchange of the Company
---------------------------------------------------------------------------------------------------------------
$[PRINCIPAL
AMOUNT]
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===============================================================================================================
|
Exhibit 4.5
GLOBAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITORY") TO PSEG POWER LLC OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR.
CUSIP NO. 69362B AG 7 $[PRINCIPAL AMOUNT]
No. R-1
PSEG POWER LLC
8-5/8% Senior Note due 2031
|
GLOBAL NOTE
PSEG POWER LLC, a Delaware limited liability company (herein referred to as the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[PRINCIPAL AMOUNT] (or such lesser amount as shall be the outstanding principal amount of this Global Note shown in Schedule A hereto) on April 15, 2031 (the "Stated Maturity Date"), unless redeemed in accordance with the provisions of this Global Note, and to pay interest on the outstanding principal amount of this Global Note from April 16, 2001, semi-annually in arrears on April 15 and October 15 of each year, commencing October 15, 2001 (each, an "Interest Payment Date") at 8-5/8% per annum until the principal hereof is paid or duly provided for. Interest payable on each Interest Payment Date will include interest accrued from and including April 16, 2001 or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, to but excluding such Interest Payment Date. Interest will be computed based on a 360-day year consisting of twelve 30-day months.
Each of Nuclear, Fossil and ER&T has jointly, severally and unconditionally, guaranteed the payment of principal, premium, if any, and interest with respect to this Global Note.
The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, except as provided below, be paid to the person (the "Holder") in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on the fifteenth day (whether or not a Business Day (as defined below)) immediately preceding the applicable Interest Payment Date (a "Regular Record Date"). Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the Holder of this Global Note not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture.
For purposes of this Global Note, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close.
Payments of principal, premium, if any, and interest with respect to this Global Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of pubic and private debts. Payment of the principal of and any premium on this Global Note on the Stated Maturity Date or date of earlier redemption will be made in immediately available funds against presentation of this Global Note at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York. Payments of interest on an Interest Payment Date will be made, at the option of the Company, by check mailed to the Holder entitled thereto at the applicable address appearing in the Security Register or by transfer of immediately available funds to an account maintained by the payee with a bank located in the United States of America; provided, however, that so long as Cede & Co. is the Holder of this Global Note, payments of interest on an Interest Payment Date will be made in immediately available funds.
Any payment of principal, premium or interest required to be made with respect to this Global Note on a day that is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day and no additional interest shall be payable on the next succeeding Business Day as a result of such delayed payment.
General. This Global Note is one of the duly authorized series of securities of the Company (the "Securities"), issued or to be issued under the Indenture, dated as of April 16, 2001, among The Bank of New York, as trustee (the "Trustee"), the Company, Fossil, Nuclear and ER&T (together with all supplements thereto, the "Indenture"), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, Fossil, Nuclear, ER&T, the Trustee and each of the holders of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered and transferred. The Notes will be limited to $500,000,000 aggregate principal amount, except as permitted in the Indenture, and will be subject, without the consent of the holders of any series of Securities under the Indenture, to the issuance of additional Notes in the future having the same terms, other than the date of original issuance and the date on which interest begins to accrue, so as to form one series with the Notes. All terms used in this Global Note which are not defined herein shall have the meanings given to them in the Indenture.
Guarantee of ER&T Obligations; Payment of Dividends by ER&T to the
Company. The provisions of Section 1009 of the Indenture relating to the
guarantee of the Obligations of ER&T by the Company and the provisions of
Section 1010 of the Indenture relating to the payment of dividends by ER&T to
the Company shall apply to this Global Note.
Events of Default. If an Event of Default with respect to the Notes shall have occurred and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.
Redemption. This Global Note (or portion thereof) will be redeemable at
the option of the Company, in whole or in part at any time, on at least 30 days
but not more than 60 days prior written notice mailed to the Holder hereof, at a
price the (the "Redemption Price") equal to the greater of (i) 100% of the
principal amount of this Global Note (or portion thereof) to be redeemed, or
(ii) the sum, as determined by the Calculation Agent (as defined below), of the
present values of the principal amount of this Global Note (or portion thereof)
to be redeemed and the remaining scheduled payments of interest thereon from the
date of redemption (the "Redemption Date") to April 15, 2011 (the "Remaining
Life"), discounted from their respective payment dates to the Redemption Date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined below) plus 40 basis points, plus, in either
case, unpaid interest thereon accrued to the Redemption Date.
If money sufficient to pay the Redemption Price of this Global Note (or portion hereof) to be redeemed on a Redemption Date is deposited with the Trustee or a Paying Agent on or before such Redemption Date and certain other conditions are satisfied, then on and after such Redemption Date, interest will cease to accrue on this Global Note (or such portion hereof) called for redemption.
This Global Note will not be entitled to the benefit of, or be subject to, any sinking fund.
Certain Definitions. "Comparable Treasury Issue" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, the United
States Treasury security selected by the Independent Investment Banker (as defined below) as having the maturity comparable to the Remaining Life of this Global Note (or portion hereof) to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life of this Global Note (or portion hereof) to be redeemed.
"Calculation Agent" means The Bank of New York or such successor Calculation Agent as is appointed by the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, (a) the average of four Reference Treasury Dealer Quotations (as defined below) for the Redemption Date for this Global Note (or portion hereof) to be redeemed, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, obtained by the Calculation Agent, or, (b) if the Calculation Agent obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means each of four primary U.S. Government securities dealers in New York City selected by the Trustee in consultation with the Company and initially will include Morgan Stanley & Co. Incorporated and Salomon Smith Barney, Inc. If any Reference Treasury Dealer ceases to be a primary U.S. government securities dealer, the Trustee will substitute another primary U.S. government securities dealer for that dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Calculation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Calculation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date: (a) the yield
for the maturity corresponding to the Comparable Treasury Issue, under the
heading that represents the average for the immediately preceding week appearing
in the most recently published statistical release designated "H.15(519)" or any
successor publication that is published weekly by the Board of Governors of the
Federal Reserve System and that establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," provided, that if no maturity is within three
months before or after the Stated Maturity Date, the yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
will be determined and the Treasury Rate shall be interpolated or extrapolated
from those yields on a straight line basis, rounding to the nearest month; or
(b) if the release referred to in clause (a) (or any successor release) is not
published during the week preceding the calculation date or does not contain the
yields referred to above, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date. The
Treasury Rate will be calculated on the third Business Day preceding the
Redemption Date.
Reports. So long as this Global Note remains Outstanding, the Company will file with the Trustee, within 30 days of filing them with the Securities and Exchange Commission (the "SEC"), copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the Company is not subject to the requirements of Section 13 or Section 15(d) of the Exchange Act and this Global Note remains Outstanding, the Company must nevertheless file with the SEC (if permitted) and the Trustee, on the date upon which the Company would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the Trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if the Company was subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that the Company will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so.
Modification and Waivers; Obligations of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and each Guarantor and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company, each Guarantor and the Trustee with the consent of the Holders of a majority in aggregate principal amount of all Securities issued under the Indenture at the time Outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Outstanding Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the Holders of a majority in aggregate principal amount of the Outstanding Securities of an individual series, to waive, on behalf of all of the Holders of Securities of such individual series, certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Global Note and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal, premium, if any, and interest with respect to this Global Note at the times, place and rate, and in the coin or currency herein prescribed.
Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Global Note and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Global Note.
Authorized Denominations. The Notes are issuable only in registered form without coupons in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Registration of Transfer or Exchange of this Global Note. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Global Note is registrable in the Security Register upon surrender of this Global Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Global Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Global Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations herein and therein set forth, the Global Notes are exchangeable for a like aggregate principal amount of Global Notes of different authorized denominations, as requested by the Holders surrendering the same.
This Global Note is a Global Security within the meaning of the Indenture. If The Depository Trust Company is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by the Company within 90 days or an Event of Default under the Indenture has occurred and is continuing, the Company will issue Notes in certificated form in exchange for this Global Security. In addition, the Company may at any time determine not to have Notes represented by one or more Global Securities and, in such event, will issue Notes in certificated form in exchange in whole for this Global Security. In any such instance, an owner of a beneficial interest in this Global Note will receive Notes in certificated form equal in principal amount to such beneficial interest and to have such Notes registered in its name. Notes so issued in certificated form will be issued in denominations of $100,000 and integral multiples of $1,000 in excess thereof and will be issued in registered form only, without coupons.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Global Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of this Global Note as the owner hereof for all purposes, whether or not this Global Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Interests in this Global Note are exchangeable or transferable in whole or in part for interests in the Temporary Regulation S Global Note or Regulation S Global Note, in each case of the same series, only if such exchange or transfer complies with the Indenture.
Governing Law. This Global Note shall be governed by and construed in accordance with the law of the State of New York.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal.
Dated: , 2001 PSEG POWER LLC
By: _______________________
President
Attest: ___________________
Secretary
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Dated: __________________
By: _______________________ Authorized Signatory
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec. or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
Dated: _____________________ Signed: ___________________________
___________________________
(Sign exactly as your name appears
on the other side of this Security)
|
Signature Guarantee: ___________________________________________________________
SCHEDULE A
The following exchanges of Notes for Notes represented by this Temporary Global Note have been made:
===============================================================================================================
Change in
Principal
Principal Amount of this Principal
amount of this Global Note amount of this Notation made
Global Note as Date exchange due to Global Note by or on behalf
of , 2001 made exchange due to exchange of the Company
---------------------------------------------------------------------------------------------------------------
$[PRINCIPAL
AMOUNT]
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Exhibit 5
September 10, 2001
PSEG Power LLC
80 Park Plaza
Newark, NJ 07101
RE: PSEG Power LLC
Registration Statement on Form S-4
$500,000,000 6-7/8% Senior Notes due 2006
$800,000,000 7-3/4% Senior Notes due 2011
$500,000,000 8-5/8% Senior Notes due 2031
Ladies and Gentlemen:
I am Associate General Counsel of Public Service Enterprise Group Incorporated and in that capacity have acted as counsel for its wholly-owned subsidiaries, PSEG Power LLC (the "Company"), PSEG Fossil LLC ("Fossil"), PSEG Nuclear LLC ("Nuclear") and PSEG Energy Resources and Trade LLC ("ER&T"), each a Delaware limited liability company), in connection with their preparation and filing of a Registration Statement on Form S-4, to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), relating to an offer (the "Exchange Offer") to exchange up to $500,000,000 aggregate principal amount of the Company's 6-7/8 % Senior Notes due 2006, $800,000,000 aggregate principal amount of the Company's 7-3/4 % Senior Notes due 2011 and $500,000,000 aggregate principal amount of the Company's 8-5/8 % Senior Notes due 2031, respectively, (the "Exchange Notes") for a like principal amount of its outstanding 6-7/8 % Senior Notes due 2006, 7-3/4 % Senior Notes due 2011 and 8-5/8 % Senior Notes due 2031, respectively, (the "Original Notes") under an indenture dated as of April 16, 2001 (the "Indenture") between and among the Company, Fossil, Nuclear, ER&T and The Bank of New York as Trustee (the "Trustee").
In connection with this opinion, I, or members of my staff, have examined such documents and records as I have deemed necessary or appropriate as a basis for the opinion set forth herein. In such examination, I have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In making such examination of documents, I have assumed that the parties thereto, other than the Company, Fossil, Nuclear and ER&T, had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action
corporate or other and execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties.
My opinion set forth herein is limited to the laws of the State of New Jersey and federal laws of the United States. I do not express any opinion with respect to the law of any other jurisdiction or the securities or blue sky laws of any state.
Based upon and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, I am of the opinion that when (a) the Exchange Notes have been duly executed and authenticated in accordance with the terms of the Indenture and delivered upon consummation of the Exchange Offer against receipt of the Original Notes surrendered in exchange therefore in accordance with the terms of the Exchange Offer and (b) the Registration Statement shall have become effective under the Act and the Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended, the Exchange Notes will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereinafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).
I hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement. I also consent to the reference to me under the caption "Legal Opinions" in the Registration Statement.
Very truly yours,
James T. Foran Associate General Counsel
Exhibit 8
September 10, 2001
PSEG Power LLC
80 Park Plaza
Newark, NJ 07101
RE: PSEG Power LLC
Exchange Offer for
$500,000,000 6-7/8 % Senior Notes due 2006;
$800,000,000 7-3/4 % Senior Notes due 2011; and
$500,000,000 8-5/8 % Senior Notes due 2031
Certain Federal Income Tax Considerations
Ladies and Gentlemen:
I am Associate General Counsel of Public Service Enterprise Group Incorporated and in that capacity have acted as counsel for its wholly-owned subsidiary, PSEG Power LLC, a Delaware limited liability company (the "Company"), in connection with the preparation of a Registration Statement on Form S-4 (the "Registration Statement), which is being filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), relating to an offer (the "Exchange Offer") to exchange up to $500,000,000 aggregate principal amount of the Company's 6-7/8 % Senior Notes due 2006, $800,000,000 aggregate principal amount of the Company's 7-3/4 % Senior Notes due 2011 and $500,000,000 aggregate principal amount of the Company's 8-5/8 % Senior Notes due 2031, respectively, (collectively, the "Exchange Notes") for a like principal amount of its outstanding 6-7/8 % Senior Notes due 2006, 7-3/4 % Senior Notes due 2011 and 8-5/8 % Senior Notes due 2031, respectively, (collectively, the "Original Notes").
I, or members of my staff, have reviewed a copy of the Registration Statement and such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below.
Based on the foregoing, I am of the opinion that if the offer and sale of the Exchange Notes are conducted in the manner described in the Prospectus and if the terms of the Exchange Notes are as contemplated by the Registration Statement, then the exchange of the Original Notes for Exchange Notes pursuant to the Exchange Offer will
not constitute a significant modification of the terms of the Original Notes and, therefore, such exchange will not constitute an exchange for federal income tax purposes and will have no federal income tax consequences to holders of the Original Notes.
The opinion expressed herein is based upon existing statutory, regulatory, and judicial authority, any of which may be changed at any time with retroactive effect. In addition, my opinion is based solely on the documents that I have examined, the authenticity of which I assume, such other information as I have deemed necessary or appropriate. My opinion cannot be relied upon if any of the facts contained in such documents or information is, or later becomes, inaccurate. Finally, my opinion is limited to the tax matters specifically covered herein, and I have not been asked to address, nor have I addressed, any other tax consequences of the Exchange Offer.
I hereby consent to the filing of this opinion as Exhibit 8 to the Registration Statement. I also consent to the reference to me under the captions "Federal Income Tax Considerations" and "Legal Opinions" in the Registration Statement.
Very truly yours,
James T. Foran Associate General Counsel
WHOLESALE POWER CONTRACT
between
PSEG ENERGY RESOURCES & TRADE LLC
and
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
TABLE OF CONTENTS
Section Title Page ------------- ---- 1.0 Definitions.........................................................1 2.0 Commitments and Availability........................................4 3.0 Point of Delivery...................................................4 4.0 Scheduling .........................................................5 5.0 Scheduling Coordination Services....................................5 6.0 Authority to Act as Agent...........................................6 7.0 Billing and Payment ...............................................7 8.0 Price...............................................................8 9.0 Events of Default...................................................9 10.0 Interruptions and Curtailments.....................................10 11.0 Indemnification....................................................10 12.0 Limitation of Liability............................................10 13.0 Force Majeure......................................................10 14.0 Term ..............................................................11 15.0 Miscellaneous......................................................11 |
WHOLESALE POWER CONTRACT
THIS WHOLESALE POWER CONTRACT ("Agreement"), made and entered into as of this day of, 1999 by and between PSEG Energy Resources & Trade LLC, a Delaware limited liability company, herein referred to as "ERT", and Public Service Electric and Gas Company, a New Jersey Corporation, herein referred to as "PSE&G".
WITNESSETH
WHEREAS, on April 21, 1999 the New Jersey Board of Public Utilities ("NJBPU") issued an order summarizing the terms of a final order to be issued ("NJBPU Order") requiring PSE&G to transfer all of its nuclear and fossil electric generating assets to one or more separate affiliated corporate entities;
WHEREAS, the NJBPU Order directs PSE&G to supply Basic Generation Service ("BGS") for a period of at least three years to those retail customers served from its system that choose not to purchase their power supply from alternative competitive suppliers;
WHEREAS, the NJBPU Order requires that, in order to ensure the reliability of supply for BGS provided by PSE&G, to remove the risk of price volatility from the regulated utility in providing such service, and to further ensure that PSE&G can meet its obligations under its Off-Tariff Rate Agreements, PSE&G shall enter into a full requirements contract with an affiliate for energy, capacity, losses and ancillary services needed by PSE&G for such specified retail load during the time period that PSE&G is acting as the BGS supplier in its service territory,
WHEREAS, ERT and PSE&G are entering into this Agreement for the purpose of establishing the terms and conditions under which ERT will supply such full requirements service to PSE&G for energy, capacity, losses and ancillary services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the Parties hereto agree as follows:
1.0 DEFINITIONS
For all purposes of this Agreement the following terms as used in this Agreement shall have the following meanings. Except where the context otherwise requires, definitions and terms expressed in the singular will include the plural and vice versa.
"Adjustment Interest Rate" means the prime interest rate for currency as published from time to time under "Money Rates" by The Wall Street Journal, or its successor, as of the payment due date and/or default date, plus 2%, but in no event shall the Adjustment Interest Rate exceed the maximum interest rate permitted by law.
"Aggregate Retail Load" means the BGS and Off-Tariff Rate Agreement retail load of PSE&G during the Delivery Term.
"Agreement" means this Wholesale Power Contract, including attachments, and any amendments hereto entered into by PSE&G and ERT.
"Ancillary Services" means one or more of those services that are defined as ancillary services under the PJM OATT or under the applicable open access transmission tariff of another transmission service provider pursuant to which ERT is or may be supplying such services.
"BGS" means the retail electric generation service provided by PSE&G to its customers in New Jersey in accordance with the New Jersey Electric Discount and Energy Competition Act of 1999, the BPU Order and PSE&Gs BGS tariffs on file with the BPU;
"Capacity" means the capacity reserves that ERT agrees to sell and PSE&G agrees to purchase pursuant to this Agreement in order to satisfy the requirements for capacity pursuant to the PJM Reliability Assurance Agreement during the Delivery Term.
"Commission" means the Federal Energy Regulatory Commission or any successor federal agency having regulatory jurisdiction over the Agreement.
"Energy" means the electric energy that ERT agrees to sell and PSE&G agrees to purchase pursuant to this Agreement to serve the Aggregate Retail Load during the Delivery Term.
"ERT" means PSEG Energy Resources & Trade LLC, a subsidiary of Public Service Enterprise Group Incorporated, and a limited liability company organized under the laws of the State of Delaware, its successors or assigns.
"Delivery Term" means the period commencing on the latest of (a) October 1, 1999, (b) the date on which all acceptances and approvals required for this Agreement to become effective have been obtained, or (c) the date this Agreement is executed by the Parties at closing, and ending on July 31, 2002, during which ERT will be obligated to sell and PSE&G will be obligated to purchase Power, losses and Ancillary Services for PSE&G's Aggregate Retail Load.
"Due Diligence" means the exercise of good faith efforts to perform a required act on a timely basis and in accordance with Prudent Utility Practice, using the technical and manpower resources reasonably available.
"NJBPU" means the New Jersey Board of Public Utilities.
"NJBPU Order" means the April 21, 1999 Order issued by the NJBPU ordering, among other things, PSE&G to transfer all electric generating assets to an affiliate(s) and to enter into a full requirements agreement with an affiliate for energy, capacity, Ancillary Services, and losses for PSE&G's BGS customers and Off-Tariff Rate Agreement Customers;
"Off-Tariff Rate Amendments" Those agreements implemented by the NJBPU prior to the
execution of this Agreement whereby PSE&G provides electric service to specified customers. The list of such agreements is attached hereto as Attachment 1.
"Parties" means ERT and PSE&G or the assignee or successor of rights and obligations to this Agreement. Party means one of the Parties.
"PJM" means PJM Interconnection, LLC, the independent system operator for the PJM control area organized and operating pursuant to the PJM Operating Agreement.
"PJM Operating Agreement " means the Amended and Restated Operating Agreement of PJM Interconnection, LLC, dated June 2, 1997 and effective January 1, 1998, as such agreement may be amended from time to time.
"PJM OATT" means the PJM Open Access Transmission Tariff administered by PJM, as such Tariff may be amended from time to time.
"Point of Delivery" means a point on the electric transmission system, where Power is to be made available to PSE&G under this Agreement. The Point of Delivery shall be the PSE&G Zone within PJM.
"Power" means Capacity and Energy.
"Physically Firm" means that (1) Capacity to meet the Aggregate Retail Load shall be provided throughout the Delivery Term and (2) that either Party shall be relieved of its obligations to deliver or receive Energy (but not of its obligation to make payment then due and becoming due with respect to Energy delivered) only to the extent that, and for the period during which, performance is prevented by Force Majeure.
"Prudent Utility Practice" means any of the practices, methods, and acts required or approved by PJM acting pursuant to the PJM OATT or PJM Operating Agreement, or engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods, and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method, or act, but rather to be a spectrum of acceptable practices, methods, or acts.
"Relevant Control Area" means an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied in order to:
(i) match, at all times, the power output of the generators within the electric power system(s) and Capacity and/or Energy purchased from entities outside the electric power system(s), with the load within the electric power system(s);
(ii) maintain, within the limits in accordance with Prudent Utility Practice, scheduled interchange with other relevant control areas;
(iii) maintain the frequency of the electric power system(s) within reasonable limits in accordance with Prudent Utility Practice; and
(iv) provide sufficient generating capacity to maintain operating reserves in accordance with Prudent Utility Practice.
"Scheduling Coordination Services " means those services other than Power, losses, and Ancillary Services that ERT provides under this Agreement. Scheduling Coordination Services include forecasting Aggregate Retail Load, load following, load scheduling, load balancing, tracking the installed capacity obligations for Aggregate Retail Load within the Relevant Control Area, and acting as PSE&G's agent for the purposes of scheduling transmission service using PSE&G's PJM network Transmission Service or other Transmission Service and managing PSE&G's fixed transmission rights and providing other notices, elections and reports as may be necessary to comply with other Relevant Control Area requirements. Scheduling Coordination Services shall not include any obligation to provide or arrange for retail distribution services after the Point of Delivery.
"Transmission Service" means the delivery of Power and Ancillary Services pursuant to the PJM OATT or pursuant to another open access transmission tariff or transmission agreement on file with the Commission.
2.0 COMMITMENTS AND AVAILABILITY
(a) ERT agrees to provide and PSE&G agrees to receive Power, Ancillary Services and losses to meet the full requirements of PSE&Gs Aggregate Retail Load during the Delivery Term.
(b) ERT agrees to provide Scheduling Coordination Services, in accordance with the terms and conditions of this Agreement, to PSE&G for PSE&G's Aggregate Retail Load during the Delivery Term.
(c) Energy will be delivered and provided in the form of three-phase, sixty (60) Hertz, alternating current, with reasonable % variations of frequency and voltage allowed consistent with Prudent Utility Practices.
(d) ERT shall have the sole discretion to select Power supply resources to provide sufficient quantities of Capacity, Energy, losses and Ancillary Services to PSE&G to meet Aggregate Retail Load; provided, however, that ERT shall comply with all federal and state laws and regulations that require PSE&G or ERT to have a specified environmental mix of power or to disclose the sources of Power used to supply Capacity and Energy during the Delivery Term.
3.0 POINT OF DELIVERY
3.1 Title to Capacity, Energy, losses and Ancillary Services made available in accordance with this Agreement shall pass to PSE&G at the Points of Delivery.
3.2 ERT shall be responsible for arranging, supplying and paying for any and all transformer, transmission, subtransmission, and/or distribution losses with respect to transformation and delivery of Capacity, Energy and Ancillary Services.
3.3 Power shall be delivered to the Points of Delivery using PSE&G's network Transmission Service acquired under the PJM OATT or other Transmission Service acquired to serve the Aggregate Retail Load. It is anticipated that PJM will issue one bill for network Transmission Service during the Delivery Term. To the extent that one PJM transmission bill is issued, the Parties agree that ERT will be responsible for payment and receipt of credits set forth on that portion of the PJM transmission bill associated with the PJM accounts listed in Attachment 2. PSE&G shall be responsible for payment of the remaining portion of the PJM bill associated with network Transmission Service for the Aggregate Retail Load.
3.4 Except as provided in 3.2, PSE&G is responsible for arranging and paying for all distribution services at and from the Point of Delivery.
4.0 SCHEDULING
4.1 ERT shall schedule with PJM all Capacity, Energy and Ancillary Services sold under this Agreement.
5.0 SCHEDULING COORDINATION SERVICES
5.1 General.
ERT shall be PSE&G's exclusive provider of Power, losses and Ancillary Services for PSE&G's Aggregate Retail Load during the Delivery Term, and PSE&G agrees that it will not generate, purchase or otherwise obtain Power, losses or Ancillary Services for use by its Aggregate Retail Load during the Delivery Term unless otherwise agreed to in writing by ERT.
5.2 Responsibilities of PSE&G.
PSE&G will be responsible during the Delivery Term for:
(a) providing ERT with timely and accurate information regarding the BGS and Off-Tariff Rate Agreement retail load being served under this Agreement in order to permit ERT to properly forecast and schedule for PSE&G's Aggregate Retail Load and bill PSE&G. The information provided to ERT by PSE&G will be of a comparable type and in a comparable format to the information PSE&G would provide to any licensed retail supplier serving load in PSE&G's distribution territory. PSE&G shall provide to ERT the details of its Aggregate Retail Load to the degree necessary for ERT to properly and timely forecast, schedule and bill PSE&G for such load. In addition, PSE&G shall provide timely notice to ERT of any changes, either additions or deletions (including loss of or addition of customers and any anticipated change in customer usage or usage patterns), to the retail load being served by PSE&G;
(b) making and maintaining all arrangements, including necessary contractual arrangements, with PJM to ensure that adequate network Transmission Service has been obtained to serve PSE&G's Aggregate Retail Load during the Delivery Term;
(c) all retail sales of Power to its customers, including but not limited to distribution of Power to retail customers and all billing and collection services associated with providing service to retail customers;
(d) coordinating all forecasting, scheduling and billing with ERT; and
(e) providing ERT all authorizations or other demonstrations of authority required for ERT to gain access to PSE&G's PJM account for the provision of Scheduling Coordination Services, to the extent permitted by PJM rules.
(f) Paying any load imbalance charges, penalties, costs associated with acquiring or selling supplies due to a shortage or excess of Capacity or Energy, or any other costs attributable to a failure by PSE&G to fulfill its obligations hereunder.
5.3 Responsibilities of ERT.
ERT shall be responsible during the Delivery Term for:
(a) preparation of load forecasts for the Aggregate Retail Load based upon the information supplied by PSE&G;
(b) making available sufficient quantities of Power and Ancillary Services to meet the needs of the forecasted Aggregate Retail Load;
(c) arranging for transmission using PSE&G's network Transmission Service or other transmission Service and Ancillary Services necessary to deliver sufficient quantities of Power to the Point of Delivery;
(d) scheduling and coordinating with PJM the delivery of Energy to the Points of Delivery; and (e) complying with all environmental disclosure requirements as described in Section 2(d).
5.4 No Retail Service
By the provision of Scheduling Coordination Services, ERT in no respect agrees to sell energy or capacity directly to any retail customers or engage in any other retail functions;
6.0 AUTHORITY TO ACT AS AGENT
6.1 In accordance with the NJBPU Order, PSE&G hereby transfers to ERT and
authorizes ERT to act as its agent for the purpose of scheduling, electing and/or using all rights, including fixed transmission rights and their credits, associated with the provision of service for PSE&G's Aggregate Retail Load under this Agreement. ERT shall be responsible for costs related to such scheduling activities to the same degree that it would be responsible for those costs for other load serving entities.
6.2 During the Delivery Term, ERT shall have the authority to direct the administration of PSE&Gs Active Load Management ("ALM") services that are not otherwise ordered by PJM. ERT will cooperate and coordinate all such activities with PSE&G. ERT will be responsible to provide adequate notice to PSE&G regarding the commencement and cessation of ALM activities, and PSE&G will be responsible to provide subsequent notice to ALM customers.
7.0 BILLING AND PAYMENT
7.1 Billing Period
As soon as practicable after the end of each billing period, ERT will render to PSE&G an invoice for Capacity, Energy and Ancillary Services provided during the preceding billing period.
7.2 Timeliness of Payment
All bills for service shall be due and payable, unless otherwise agreed upon, in accordance with ERT's invoice instructions five (5) calendar days after receipt of the billing statement. The invoice will be sent via facsimile or other means agreed to by the Parties. PSE&G will make payments by wire transfer, or by other mutually agreeable method(s), to the account of ERT as designated by ERT. Any amounts, both principal and interest, remaining unpaid after the due date will be deemed delinquent and will accrue interest at the Adjustment Interest Rate, such interest to be calculated from the due date to the date the unpaid amount is paid in full.
7.3 Disputed Bills
PSE&G may, in good faith, challenge the correctness of any bill rendered
under the Agreement no later than twelve (12) months after the date the bill was
rendered. In the event a bill or portion thereof, or any other claim or
adjustment arising hereunder, is challenged, PSE&G shall nevertheless pay the
entire amount of the statement when due, with notice of the objection given to
ERT at that time. Any billing challenge shall be in writing and shall state the
specific basis for the challenge. If it is subsequently determined or agreed
that an adjustment to the bill is appropriate, a revised bill shall be prepared
by ERT. A bill rendered under the Agreement shall be binding on PSE&G twelve
(12) months after the bill is rendered, except to the extent of any specific
challenge to the bill made by the PSE&G prior to such time.
7.4 Billing Adjustments
ERT shall have the right to adjust any bill rendered under the Agreement for any errors in arithmetic, computation, meter readings, estimating, or otherwise no later than twelve (12) months after the date the bill was rendered. Any billing adjustment shall be in writing and shall state the
specific basis for the adjustment. A billing adjustment shall constitute a new bill for the purposes of this Section. An adjusted bill shall be binding on ERT twelve (12) months after the bill is rendered.
Over-payments or underpayments resulting from a billing adjustment or billing challenge shall bear interest calculated at the Adjustment Interest Rate. In the case of an underpayment, interest shall accrue from the due date of the bill to which the adjustment or challenge relates to the date the additional charge is paid. In the case of an overpayment, interest shall accrue from the date the amount being refunded was received by ERT to the date the refund is made.
7.5 New Taxes
ERT shall pay for all excise, severance, production, sales, occupation and other taxes of like nature levied in respect to the Capacity or Energy, their sale, and the handling thereof prior to the Point of Delivery. PSE&G shall pay for all such taxes levied on such Capacity or Energy at and from the Point of Delivery. At ERT's request, PSE&G shall provide evidence of its wholesale tax exempt status in a form satisfactory to ERT. Absent such documentation, PSE&G shall be responsible for such applicable tax.
7.6 Creditworthiness
ERT may request reasonable assurances, in a form satisfactory to ERT, of PSE&G's continuing ability to pay for Power delivered pursuant to this Agreement at any time during the Term if all of PSE&G's ratings by nationally recognized rating agencies fall below investment grade.
8.0 PRICE
8.1 Price for Energy, Capacity and Ancillary Services for PSE&G's BGS Customers. The price that PSE&G will pay ERT for Energy, Capacity and Ancillary Services provided to PSE&G for its retail BGS customers shall be the amount computed for each billing period equal to the full amount charged for BGS to PSE&G's retail customers pursuant to PSE&G's retail tariffs, on file with the BPU, less any sales and use tax during the Delivery Term. Such amount shall be taken directly from portions of PSE&G's retail tariff for electric service on file with the BPU.
8.2 Price for Energy, Capacity and Ancillary Services for PSE&G's Off-Tariff Rate Agreement Customers. The price that PSE&G will pay ERT for Energy, Capacity and Ancillary Services provided to PSE&G for its Off-Tariff Rate Agreement customers shall be the amount computed for each billing period equal to PSE&G's retail delivery to Off-Tariff Rate Agreement customers, multiplied by the comparable BGS rate for such customers pursuant to PSE&G's retail tariffs, on file with the BPU, less sales and use tax during the Delivery Term. Such amount shall be taken directly from portions of PSE&G's retail tariff for electric service on file with the BPU.
8.3 Price Stability Charge. The price for services provided under this Agreement shall also include a price stability charge. In exchange for ensuring the reliability of PSE&G's BGS service and for removing the risk of price volatility from PSE&G, and to further ensure that PSE&G
is capable of meeting its contractual obligations in its Off-Tariff Rate Agreements, the BPU ordered that PSE&G pay ERT an additional charge associated with the price stability of ERT's affiliate's combustion turbine assets, which shall be based on the installed capacity of those assets. The additional charge will be an amount computed for each billing period equal to the full actual amount collected by PSE&G for its unsecuritized generation stranded costs in accordance with the BPU Order through its Market Transition Charge (MTC) and other means during the Term of this Agreement.
9.0 EVENTS OF DEFAULT
"Events of Default" with respect to a Party ("Defaulting Party") to the Agreement shall mean:
(a) the failure by the Defaulting Party to make, when due, any payment under the Agreement if such failure is not remedied on or before the third (3rd) business day after notice of such failure to pay is received by the Party;
(b) the failure by the Defaulting Party to observe and perform its material obligations in accordance with this Agreement;
(c) the Defaulting Party or any entity guaranteeing the obligations of
that Party (i) is generally not paying its debts as they become due;
(ii) files or consents by answer or otherwise to the filing against
it of any petition or case seeking relief under any Federal, State
or foreign bankruptcy. insolvency or similar law (collectively,
"Bankruptcy Laws"); (iii) makes a general assignment for the benefit
of its creditors; (iv) applies for or consents to the appointment of
a custodian, receiver, trustee, conservator or other officer with
similar powers over it or over any substantial part of its property
("Custodian"); or (v) takes corporate action for the purpose of any
of the foregoing; (vi) is dissolved; (vii) becomes insolvent or is
unable or admits in writing its inability generally to pay debts as
they become due; (viii) or is unable to provide adequate assurances
to the other Party of its continued ability to perform; provided,
however, that any such assurances required to be given with respect
to creditworthiness, shall be governed by Section 7.6 above.
(d) a court or governmental authority. agency, instrumentality or official of competent jurisdiction enters or issues an order or decree with respect to the Defaulting Party (i) appointing a Custodian; (ii) constituting an order for relief under, or approving a petition or case for relief or reorganization or any other petition or case to take advantage of, any Bankruptcy Laws; or (iii) ordering its dissolution, winding-up or liquidation.
In the Event of Default under paragraph (b), the Defaulting Party will have one (1) day to cure the default following receipt of a "Notice of Default" from the Non-Defaulting Party. If the default is not cured within said one (1) day, the Non-Defaulting Party will have the right to obtain adequate assurances as described in Section 7.6 effective immediately from default date or to seek appropriate legal or equitable remedies.
10.0 INTERRUPTIONS AND CURTAILMENTS
10.1 The Power sold to PSE&G pursuant to this Agreement shall be Physically Firm, provided, however, that ERT shall not be responsible for any deficiencies in power quality of the supply, if such deficiency is without negligence on ERT's part. In the event of an interruption or curtailment by a Party, the Party interrupting the service shall, as promptly as reasonably practicable, give notice of such interruption or curtailment to the other Party.
In the event that ERT is prevented from delivering Power or Ancillary Services to the Point of Delivery, ERT shall use Prudent Utility Practices to restore such delivery as soon as possible.
10.2 Duty to Mitigate
Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party's performance or non-performance of this Agreement.
11.0 INDEMNIFICATION
PSE&G shall indemnify, defend and hold ERT harmless from and against all loss, cost and expense, including court costs and reasonable attorney fees, for any claims, suits, judgments, demands, actions or liabilities (collectively "injuries") growing out of the operations conducted or performance hereunder by PSE&G except for any such injuries caused by the gross negligence or willful misconduct of ERT. ERT shall indemnify, defend and hold PSE&G harmless from and against all loss, cost and expense, including court costs and reasonable attorney fees, for any claims, suits, judgments, demands, actions or liabilities (collectively "injuries") growing out of the operations conducted or performance hereunder by ERT, except for any such injuries caused by the gross negligence or willful misconduct of PSE&G.
12.0 LIMITATION OF LIABILITY
For breach of any provision for which an express remedy or measure of damages is provided in this Agreement, the liability of the defaulting Party shall be limited as set forth in such provision, and all other damages or remedies are hereby waived. If no remedy or measure of damages is expressly provided, the liability of the defaulting Party shall be limited to direct damages only and all other damages and remedies are hereby waived. In no event shall either Party be liable to the other Party for consequential, incidental, punitive, exemplary or indirect damages in tort, for contract or otherwise.
13.0 FORCE MAJEURE
As used in this Agreement, "Force Majeure" means any cause beyond the reasonable control of, and without the fault or negligence of, the Party claiming Force Majeure. It shall include, without limitation, sabotage, strikes or other labor difficulties, riots or civil disturbance, acts of God, act of public enemy, drought, earthquake, flood, explosion, fire, lightning, landslide, or similarly cataclysmic
occurrence, or appropriation, diversion or interruption of Power by PJM or any court or governmental authority having jurisdiction thereof, or any other cause, whether of the kind herein enumerated, or otherwise, not within the control of the Party claiming suspension and which by the exercise of Due Diligence such Party is unable to prevent or overcome. Economic hardship of either Party shall not constitute a Force Majeure under this Agreement, including (i) the loss of the PSE&G's markets or inability economically to use or resell Capacity and/or Energy, and (ii) the loss or failure of ERT's ability to sell Capacity and/or Energy to a market at a more advantageous price.
If either Party to this Agreement is rendered wholly or partly unable to perform its obligations thereunder because of Force Majeure as defined above, that Party shall be excused from whatever performance is affected by the Force Majeure to the extent so affected, provided that:
(i) the non-performing Party promptly, but in no case longer than three (3) business days after the occurrence of the Force Majeure, gives the other Party written notice describing the particulars of the occurrence;
(ii) the suspension of performance shall be of no greater scope and of no longer duration than is reasonably required by the Force Majeure, and
(iii) the non-performing Party used Due Diligence to remedy its inability to perform.
Neither Party to this Agreement will be required by the foregoing to settle a strike affecting it except when, according to its best judgment, such a settlement seems advisable. Nothing in this Section will excuse PSE&G from making payment for services provided under this Agreement.
14.0 TERM
The Term of this Agreement shall be the period commencing with the beginning of the Delivery Term and ending on July 31. 2003.
15.0 MISCELLANEOUS
15.1 Withdrawal.
If the Commission, or any court or agency having jurisdiction over this Agreement, finds any term or condition to be unjust, unreasonable, otherwise unlawful, or incompatible with regulatory policy, the Parties shall mutually withdraw all or any portion of this Agreement and enter into negotiations of such changes as are reasonably required to conform to the requirements of law; provided that the Parties may choose to terminate this Agreement if the Commission, or any court or agency having jurisdiction over this Agreement requires a material change hereto that either Party deems to be unacceptable.
15.2 Assignment.
Neither Party shall assign this Agreement or any part thereof without the prior written consent of the other Party (which such consent shall not be unreasonably withheld), except that either Party may assign this Agreement without the consent of the other Party to an affiliate or to any company which shall succeed by purchase, merger or consolidation to the electric properties substantially as an entirety of a Party. Any Party's transfer or assignment in violation of this section shall be void.
15.3 Applicable Laws, Regulations, Orders, Approvals, and Permits.
This Agreement is made subject to all existing or future applicable federal, state, and local laws and to all existing or future duly promulgated orders or other duly authorized actions of governmental authorities having jurisdiction over the matters contained in Agreement.
15.4 Choice of Law and Jurisdiction.
The interpretation and performance of this Agreement shall be in accordance with the laws of the State of New Jersey, excluding conflicts of law principles that would require the application of the laws of a different jurisdiction. Any dispute arising out of or related to this Agreement shall be litigated in a court of the State of New Jersey. Each Party expressly submits to the jurisdiction of the Courts of the State of New Jersey, and the federal courts situated in Newark and to service of process by certified mail.
15.5 Counterparts to this Agreement.
This Agreement may be executed in any number of counterparts each of which shall be an original, but all of which together shall constitute one and the same instrument.
15.6 Notices.
Unless otherwise provided in this Agreement, any notice, consent or other communication required to be made under this Agreement shall be in writing and shall be delivered in person, by certified mail (postage prepaid, return receipt requested) or by nationally recognized overnight courier (charges prepaid), in each case properly addressed to such Party as shown below, or sent by facsimile transmission to the facsimile number indicated below:
ERT:
Manager - Electric Trading Operations
PSEG Energy Resources & Trade LLC
80 Park Plaza
Newark, NJ 07101
PSE&G:
Manager - BGS Service
PSE&G
80 Park Plaza
Newark, NJ 07101
Either Party may from time to time change its address for the purpose of notices or other communications to that Party by a similar notice specifying a new address, but no such change shall be effective until it is actually received by the Party sought to be charged with its contents All notices and other communications required or permitted under this Agreement that are addressed as provided in this Section shall be deemed to have been given (i) upon delivery if given by overnight courier or regular mail or (ii) upon automatically generated confirmation if given by facsimile.
15.7 Confidentiality.
Each Party agrees that it will treat in strictest confidence all documents, materials and other information marked "Confidential" or" Proprietary" by the disclosing Party ("Confidential Information"), which it shall have obtained regarding the other Party during the course of the negotiations leading to, and its performance of, this Agreement (whether obtained before or after the date of this Agreement). Confidential Information shall not be communicated to any third person (other than to its affiliates, counsel, accountants, financial or tax advisors, or insurance consultants or in connection with its financing); provided that in the event the receiving Party is required by law, regulation or court order to disclose any Confidential Information, the receiving Party will promptly notify the disclosing Party in writing prior to making any such disclosure in order to facilitate the disclosing Party's seeking a protective order or other appropriate remedy from the proper authority and further provided that the receiving Party further agrees that if the disclosing Party ultimately discloses such Confidential Information to the requesting legal body, it will furnish only that portion of the Confidential Information which is legally required and will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Information. The obligations of nondisclosure and restricted use of Confidential Information shall survive the Closing and the expiration or other termination of this Agreement until such obligations expire in accordance with their respective terms.
15.8 Partial Invalidity.
Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. In the event that such a construction would be unreasonable or would deprive a Party of a material benefit under this Agreement, the Parties shall seek to amend this Agreement to remove the invalid provision and otherwise provide the benefit unless prohibited by law.
15.9 Waivers.
The failure of either Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of a Party thereafter to enforce each and every such provision. A waiver under this Agreement must be in writing and state that it is a waiver. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
15.10 Entire Agreement and Amendments.
This Agreement supersedes all previous representations, understandings, negotiations and agreements either written or oral between the Parties hereto or their representatives with respect to the subject matter hereof and constitutes the entire agreement of the Parties with respect to the subject matter hereof. No amendments or changes to this Agreement shall be binding unless made in writing and duly executed by both Parties and accepted or approved by the Commission.
15.11 No Third-Party Beneficiaries.
Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the Parties and their respective permitted successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to either Party, nor to give any third persons any right of subrogation or action against either Party.
15.12 Further Assurances.
If either Party determines in its reasonable discretion that any further instruments, assurances or other things are necessary or desirable to carry out the terms of this Agreement, the other Party will execute and deliver all such instruments and assurances and do all things reasonably necessary or desirable to carry out the terms of this Agreement.
15.13 Headings.
The headings contained in this Agreement arc solely for the convenience of the Parties and should not be used or relied upon in any manner in the construction or interpretation of this Agreement.
15.14 Sections.
Unless otherwise specified references in this Agreement to numbered Sections and Subsections shall be to Sections and Subsections of this Agreement.
15.15 Commission Review.
In connection with any Commission review of the Agreement, in the event the Commission modifies any term or condition, alters any charge(s), or in any way conditions its acceptance of the Agreement, and either Party determines that it is adversely affected in a material way by such Commission action and/or decision, the Parties hereby agree to promptly negotiate, in good faith, in an effort to reach agreement on terms and conditions mutually agreeable to the Parties relative to the subject matter of the Agreement. If no agreement is reached within sixty (60) days after such Commission action and/or decision either party shall have the right to terminate or cancel the Agreement by filing written notice of termination or cancellation with the Commission and serving a copy thereof on the other Party. Any such notice must be filed and served after such sixty (60) day period but no later than seventy-five (75) days after such Commission decision is final and not subject to any further administrative or judicial review; provided, however, that neither Party is obligated to seek such further review.
15.16 Changes.
This Agreement shall be changed solely by written amendment executed by both Parties. It is the intent of the Parties that this Agreement shall not be subject to change pursuant to Section 206 of the Federal Power Act except where the Commission determines pursuant to Section 206 that such change is required by the public interest.
15.17 Amendments Included.
Reference to, and the definition of, any document (including this Agreement) shall be deemed a reference to such document as it may be amended, amended and restated, supplemented or modified from time to time.
15.18 Successors Included.
Reference to any individual, corporation or other entity shall be deemed a reference to such individual, corporation or other entity, together with its successors and permitted assigns from time to time.
15.19 Number, Gender and Inclusion.
Defined terms in the singular shall include the plural and vice versa, and the masculine, feminine or neuter gender shall include all genders. Whenever the words "include," "includes," or "including" are used in this Agreement, they are not limiting and have the meaning as if followed by the words "without limitation."
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set forth at the beginning of this Agreement.
PSEG Energy Resources & Trade LLC
By:__________________________________
Public Service Electric and Gas Company
By:__________________________________
ATTACHMENT I
OFF-TARIFF RATE AGREEMENTS
APPROVED OR PENDING AS OF MARCH 3,1999
APPROVED
PSE&G OTRA 96-1 Circuit Foil
PSE&G OTRA 96-2 Ford
PSE&G OTRA 96-3 Merck
PSE&G OTRA 97-1 Ball Plastic
PSE&G OTRA 97-2 Aluminum Shapes
PSE&G OTRA 97-3 BASF
PSE&G OTRA 97-4 Camden Iron
PSE&G OTRA 97-5 Amerada Hess
PSE&G OTRA 97-6 Passaic Valley Sewerage Commission
PSE&G OTRA 97-7 Johnson & Johnson
PSE&G OTRA 97-8 Union Carbide
PSE&G OTRA 97-9 Port Authority Transit Corporation
PSE&G OTRA 98-1 Nabisco
PSE&G OTRA 98-2 Passaic Valley Sewerage Commission
One year extension of OTRA 97-6
PENDING
PSE&G OTRA 98-3 Marcal
PSE&G OTRA 99-1 Garwood Paper
PSE&G OTRA 99-2 Daily News
PSE&G OTRA 99-3 Huntsman
|
ATTACHMENT 2
PJM CHARGES AND CREDITS
TO BE PAID/RECEIVED BY ERT
Schedule 1, 3.2.1 Spot Market Energy charges
Schedule 1, 3.2.2 Regulation charges
Schedule 1, 3.2.3 Operating Reserves charges
Schedule 1, 3.2.4, 3.4.1 Transmission Congestion charges
Schedule 1, 3.4.2 Transmission Losses charges
Schedule 1, 3.2.6, 3.2.4 Emergency Energy charges
Schedule 1.3.6 Meter Error Correction charges
Schedule 11 Capacity Credit Market charges
Schedule 1, 3.3.1 Spot Market Energy credits
Schedule 1, 3.3.2 Regulation credits
Schedule 1 , 3.3.3 Operating Reserves credits
Schedule 1, 3.2.4, 3.4.1 Transmission Congestion credits with respect
to fixed transmission rights
Schedule 1, 3.2.5 Transmission Losses credits
Schedule 1, 3.2.6, 3.2.4 Emergency Energy credits
Schedule 11 Capacity Credit Market credits
Schedule IA RTO Scheduling, System Control and Dispatch
Service Charges
Schedule 2 Reactive Supply and Voltage Control from
Generation Sources Service charge
Schedule 3 Regulation and Frequency, Response Service
charges
Schedule 4 Energy Imbalance Service charges
Schedule 5 Operating Reserves - Spinning Reserve and
Supplemental Reserve Service charges
Schedule 7 Long-Term - Yearly Delivery
Schedule 7 Short-Term - Monthly Delivery
(Page 2-a)
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ATTACHMENT 2
PJM CHARGES AND CREDITS
TO BE PAID/RECEIVED BY ERT
Schedule 7 Short-Term - Weekly Deliver
Schedule 7 Short-Term - Daily Delivery
Schedule 7 Congestion and Losses
Schedule 7 Long-Term - Other Supporting Facilitates and
Taxes
Schedule 7 Short-Term - Other Supporting Facilities and
Taxes
Schedule 8 Monthly Delivery
Schedule 8 Weekly Delivery
Schedule 8 Daily Delivery
Schedule 8 Hourly Delivery
Schedule 8 Congestion and Losses
Schedule 8 Other Supporting Facilities and Taxes
Schedule 2 Reactive Supply and Voltage Control from
Generation Sources
Service credits
Schedule 4 Energy Imbalance Service credits
Section 27a Non-Finn Point-to-Point Transmission Service
credits
(Page 2-b)
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EXHIBIT 12
PSEG POWER LLC
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
For the Six
Months Ended Years Ended December 31,
------------- --------------------------------------------------------------
June 30, 2001 2000 1999 1998 1997 1996
------------- ------ ------ ------ ------ ------
Earnings as Defined in Regulation S-K (A):
Income from Continuing Operations $ 206 $ 313 $ 516 $ 237 $ 195 $ 187
Income Taxes (B) 140 208 291 156 101 129
Fixed Charges 114 210 131 256 269 269
------ ------ ------ ------ ------ ------
Earnings $ 460 $ 731 $ 938 $ 649 $ 565 $ 585
====== ====== ====== ====== ====== ======
Fixed Charges as Defined in Regulation S-K (C)
Total Interest Expense $ 114 $ 210 $ 114 $ 223 $ 232 $ 231
Subsidiaries' Preferred Securities
Dividend Requirements -- -- 12 25 26 16
Preferred Stock Dividends -- -- 3 5 7 13
Adjustment to Preferred Stock Dividends
to state on a pre-income tax basis -- -- 2 3 4 9
------ ------ ------ ------ ------ ------
Total Fixed Charges $ 114 $ 210 $ 131 $ 256 $ 269 $ 269
====== ====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges 4.04 3.48 7.16 2.54 2.10 2.17
====== ====== ====== ====== ====== ======
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(A) The term "earnings" shall be defined as pre-tax income from continuing operations. Add to pre-tax income the amount of fixed charges adjusted to exclude (a) the amount of any interest capitalized during the period and (b) the actual amount of any preferred stock dividend requirements of majority-owned subsidiaries which were included in such fixed charges amount but not deducted in the determination of pre-tax income.
(B) Includes State income taxes and Federal income taxes for other income and excludes taxes applicable to extraordinary item recorded in 1999.
(C) Fixed Charges represent (a) interest, whether expensed or capitalized, (b) amortization of debt discount, premium and expense, and (c) preferred securities dividend requirements of subsidiaries and preferred stock dividends, increased to reflect the pre-tax earnings requirement for PSEG Power LLC.
EXHIBIT 21
PSEG POWER LLC
SIGNIFICANT SUBSIDIARIES
State of
Name Ownership % Organization
---- ----------- ------------
PSEG Fossil LLC 100 Delaware
PSEG Nuclear LLC 100 Delaware
PSEG Energy Resources & Trade LLC 100 Delaware
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NOTE: The remaining subsidiaries of PSEG Power LLC are not significant subsidiaries as defined in Regulation SX.
Exhibit 23.2
Independent AUDITORS' consent
We consent to the use in this Registration Statement of PSEG Power LLC on Form S-4 of our report dated March 21, 2001, appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Parsippany, New Jersey
September 10, 2001
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Morton A. Plawner and James T. Foran, and each of them (with full power to act without the other), the true and lawful attorney-in-fact and agent for and on behalf of the undersigned, and in the undersigned's name, place and stead, in the undersigned's capacity as a Director or Officer or both, as the case may be, of PSEG Power LLC ("Power"), PSEG Fossil LLC, PSEG Nuclear LLC and/or PSEG Energy Resources & Trade LLC (together, the "Registrants") to sign the Registration Statement on Form S-4 to be filed by the Registrants with the Securities and Exchange Commission for the registration under the Securities Act of 1933 of $500,000,000 aggregate principal amount of Power's 67/8% Senior Notes due 2006, $800,000,000 aggregate principal amount of Power's 73/4% Senior Notes due 2011 and $500,000,000 aggregate principal amount of Power's 85/8% Senior Notes due 2031, and any and all amendments of such Registration Statement.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument, this 10th day of September, 2001.
/s/ E. James Ferland /s/ Frank Cassidy
------------------------- ----------------------------
E. James Ferland Frank Cassidy
/s/ Harold W. Keiser /s/ Steven R. Teitelman
------------------------- ----------------------------
Harold W. Keiser Steven R. Teitelman
/s/ Patricia A. Rado /s/ Thomas R. Smith
------------------------- ----------------------------
Patricia A. Rado Thomas R. Smith
/s/ Robert J. Dougherty, Jr.
----------------------------
Robert J. Dougherty, Jr.
/s/ R. Edwin Selover /s/ Michael J. Thomson
------------------------- ----------------------------
R. Edwin Selover Michael J. Thomson
/s/ Robert C. Murray /s/ Thomas M. O'Flynn
------------------------- ----------------------------
Robert C. Murray Thomas M. O'Flynn
|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
|
PSEG Power LLC
(Exact name of obligor as specified in its charter)
Delaware 22-3663480 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) |
PSEG Fossil LLC
(Exact name of obligor as specified in its charter)
Delaware 22-3663481 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) |
PSEG Nuclear LLC
(Exact name of obligor as specified in its charter)
Delaware 22-3663482 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) |
PSEG Energy Resources and Trade LLC
(Exact name of obligor as specified in its charter)
Delaware 22-3663483
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
80 Park Plaza - T16
Newark, New Jersey 07102
(Address of principal executive offices) (Zip code)
----------
|
6-7/8% Senior Notes due 2006 7-3/4% Senior Notes due 2011 8-5/8% Senior Notes due 2031
(Title of the indenture securities)
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it is subject.
--------------------------------------------------------------------------------
Name Address
--------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
|
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 16th day of August, 2001.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
-------------------
Name: MARY LAGUMINA
Title: VICE PRESIDENT
|
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS In Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .......... $ 2,811,275
Interest-bearing balances ................................... 3,133,222
Securities:
Held-to-maturity securities ................................. 147,185
Available-for-sale securities ............................... 5,403,923
Federal funds sold and Securities purchased under
agreements to resell ........................................ 3,378,526
Loans and lease financing receivables:
Loans and leases held for sale .............................. 74,702
Loans and leases, net of unearned income..................... 37,471,621
LESS: Allowance for loan and lease losses.................... 599,061
Loans and leases, net of unearned income and allowance ...... 36,872,560
Trading Assets ................................................. 11,757,036
Premises and fixed assets (including capitalized
leases) ..................................................... 768,795
Other real estate owned ........................................ 1,078
Investments in unconsolidated subsidiaries and
associated companies ........................................ 193,126
Customers' liability to this bank on acceptances
outstanding ................................................. 592,118
Intangible assets
Goodwill .................................................... 1,300,295
Other intangible assets ..................................... 122,143
Other assets ................................................... 3,676,375
-----------
Total assets ................................................... $70,232,359
===========
|
Dollar Amounts
ASSETS In Thousands
LIABILITIES
Deposits:
In domestic offices ......................................... $25,962,242
Noninterest-bearing......................................... 10,586,346
Interest-bearing............................................ 15,395,896
In foreign offices, Edge and Agreement
subsidiaries, and IBFs .................................... 24,862,377
Noninterest-bearing.......................................... 373,085
Interest-bearing............................................. 24,489,292
Federal funds purchased and securities sold under
agreements to repurchase .................................... 1,446,874
Trading liabilities ............................................ 2,373,361
Other borrowed money:
(includes mortgage indebtedness and obligations
under capitalized leases) ................................... 1,381,512
Bank's liability on acceptances executed and
outstanding ................................................. 592,804
Subordinated notes and debentures .............................. 1,646,000
Other liabilities .............................................. 5,373,065
-----------
Total liabilities .............................................. $63,658,235
===========
EQUITY CAPITAL
Common stock ................................................... 1,135,284
Surplus ........................................................ 1,008,773
Retained earnings .............................................. 4,426,033
Accumulated other comprehensive income ......................... 4,034
Other equity capital components ................................ 0
Total equity capital ........................................... 6,574,124
-----------
Total liabilities and equity capital ........................... $70,232,359
===========
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I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro, Senior Vice President and Comptroller
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
Thomas A. Renyi
Gerald L. Hassell Directors
Alan R. Griffith
Exhibit 99.1
LETTER OF TRANSMITTAL
PSEG POWER LLC
OFFER TO EXCHANGE ITS 6-7/8% SENIOR NOTES DUE 2006, 7-3/4% SENIOR NOTES DUE
2011 AND 8-5/8% SENIOR NOTES DUE 2031, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 6-7/8% SENIOR NOTES DUE 2006, 7-3/4% SENIOR NOTES DUE 2011 AND 8-5/8% SENIOR NOTES DUE 2031,
WHICH HAVE NOT BEEN SO REGISTERED.
PURSUANT TO THE PROSPECTUS DATED , 2001
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., EASTERN DAYLIGHT TIME, ON ,
2001, UNLESS THE OFFER IS EXTENDED.
To: THE BANK OF NEW YORK, Exchange Agent
Facsimile Transmissions:
By Hand Or Overnight Delivery: (Eligible Institutions Only) By Registered Or Certified Mail:
The Bank of New York The Bank of New York
Corporate Trust Department Corporate Trust Department
Attention: Attention:
To Confirm by Telephone
or for Information Call:
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DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Certain terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original Notes (as defined below) either if Original Notes are to be forwarded herewith or if tenders of Original Notes are to be made by book-entry transfer to an account maintained by The Bank of New York (the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus.
Holders of Original Notes whose certificates (the "Certificates") for such Original Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the expiration date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on a timely basis must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX: DESCRIPTION OF ORIGINAL NOTES
Please print Name and Address Please Show Certificate Principal Amount Principal Amount
of Registered Holder Number(s) Original Notes of Tendered of Original Notes
(Need not be Completed by Tendered (if Principal Amount
Book-Entry Holders) (Attach additional list of Original Notes
if needed) is Less than All)*
-------------------------------------------------------------------------------------------------------------------------
TOTAL
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* All Original Notes held shall be deemed tendered unless a lesser number is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:____________________________________________
DTC Account Number:_______________________________________________________
Transaction Code Number:__________________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holders(s):____________________________________________
Window Ticket Number (if any):____________________________________________
Date of Execution of Notice of Guaranteed Delivery:_______________________
Name of Institution which Guaranteed Delivery:____________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:______________
Tendering Institution: DTC Account Number:________________________________
Transaction Code Number:________________________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES
("PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES
OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_____________________________________________________________________
Address:__________________________________________________________________
To: The Bank of New York
Ladies and Gentlemen:
The undersigned hereby tenders to PSEG Power LLC, a limited liability company formed under the laws of the State of Delaware ("Power"), the above described aggregate principal amount of Power's 6-7/8% Senior Notes due 2006, 7-3/4% Senior Notes due 2011 and 8-5/8% Senior Notes due 2006 2031 (the "Original Notes") in exchange for a like aggregate principal amount of Power's 6-7/8% Senior Notes due 2006, 7-3/4% Senior Notes due 2011 and 8-5/8% Senior Notes due 2006 2031 (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated , 2001 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any portion of the Original Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of Power all right, title and interest in and to such Original Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of Power in connection with the Exchange Offer) with respect to the tendered Original Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Original Notes to Power together with all accompanying evidences of transfer and authenticity to, or upon the order of, Power, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be issued in exchange for such Original Notes, (ii) present Certificates for such Original Notes for transfer, and to transfer the Original Notes on the books of Power, and (iii) receive for the account of Power all benefits and otherwise exercise all rights of beneficial ownership of such Original Notes, all in accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENT(S) AND WARRANT(S) THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, POWER WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY POWER OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE ORIGINAL NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE EXCHANGE AND REGISTRATION RIGHTS AGREEMENT DATED April 9, 2001 (THE "REGISTRATION RIGHTS AGREEMENT").
THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE
OFFER.
The name(s) and address(es) of the registered holder(s) of the Original Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Original Notes. The Certificate number(s) and the Original Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above.
If any tendered Original Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Original Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Original Notes will be returned (or, in the case of Original Notes tendered by book-entry transfer, such Original Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to any one of the procedures described in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus and in the instructions hereto will, upon Power's acceptance for exchange of such tendered Original Notes, constitute a binding agreement among the undersigned and Power upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, Power may not be required to accept for exchange any of the Original Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance Instructions," below, the undersigned hereby directs that the Exchange Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Original Notes, that such Exchange Notes be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Original Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Original Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver Exchange Notes to the undersigned at the address shown below the undersigned's signature.
BY TENDERING ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY DELIVERING AN AGENT'S MESSAGE IN LIEU THEREOF, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF POWER WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY EXCHANGE NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. BY TENDERING ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF ORIGINAL NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH ORIGINAL NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
POWER HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES, WHERE SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED ORIGINAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY DELIVERING AN AGENT'S MESSAGE IN LIEU THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM POWER OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF (I) ANY FACT WHICH MAKES ANY STATEMENT CONTAINED IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR (II) ANY FACT WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR (III) OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL POWER HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR POWER HAS GIVEN NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE.
Holders of Original Notes whose Original Notes are accepted for exchange will not receive accrued interest on such Original Notes for any period from and after the last interest payment date to which interest has been paid or duly provided for on such Original Notes prior to the original issue date of the Exchange Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Original Notes, and the undersigned waives the right to receive any interest on such Original Notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after April 16, 2001.
All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable.
Please be advised that Power is making the Exchange Offer in reliance upon
the position of the staff of the Division of Corporation Finance of the
Securities and Exchange Commission set forth in certain interpretive letters
addressed to third parties in other transactions. In addition, Power has
authorized us to inform you as follows: Power has not entered into any
arrangement or understanding with any person to distribute the Exchange Notes to
be received in the Exchange Offer and, to the best of its information and
belief, each person participating in the Exchange Offer is acquiring the
Exchange Notes in its ordinary course of business and has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes to be received in the Exchange Offer. In this regard, Power will make each
person participating in the Exchange Offer aware that if such person is
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes to be acquired in the Exchange Offer, such person (a) could not rely on
the staff position enunciated in the interpretative letters referred to above
and (b) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. Power
acknowledges that such a secondary resale transaction by such person
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes should be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as applicable,
of Regulation S-K. Furthermore, Power will include in the transmittal letter to
be executed by an exchange offeree in order to participate in the Exchange Offer
(x) an acknowledgment that if such exchange offeree is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, it will deliver a prospectus in connection with any resale of such
Exchange Notes and (y) a statement that by so acknowledging and by delivering a
prospectus, such exchange offeree will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Dated: _____________, 2001.
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Original Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including
such opinions of counsel, certifications and other information as may be
required by Power for the Original Notes to comply with the restrictions
on transfer applicable to the Original Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
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Name(s): _______________________________________________________________________
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ________________________________________________
Tax ID Number:__________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature ___________________________________________________________
Dated: _____________, 2001.
Name of Firm: __________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, AND 6)
To be completed ONLY if the Exchange Notes or Original Notes not tendered are to be issued in the name of someone other than the registered holder of the Original Notes whose name(s) appear(s) above.
Issue
[ ] Original Notes not tendered to:
[ ] Exchange Notes to:
Name(s):___________________________________
Address: ____________________________________
(Include Zip Code)
Area Code and
Telephone Number: ___________________________
Tax ID Number: ______________________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, AND 6)
To be completed ONLY if the Exchange Notes or Original Notes not tendered are to be sent to someone other than the registered holder of the Original Notes whose name(s) appear(s) above.
[ ] Original Notes not tendered to:
[ ] Exchange Notes to:
Name(s):___________________________________
Address: ____________________________________
(Include Zip Code)
Area Code and
Telephone Number: ___________________________
Tax ID Number: ______________________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus and an Agent's Message is not delivered. Certificates, or timely confirmation of a book-entry transfer of such Original Notes into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the DTC participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that Power may enforce the Letter of Transmittal against such participant. Original Notes may be tendered in whole or in part in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available or (ii) who cannot deliver their Original Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Original Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. Pursuant to such procedures: (A) such tender must be made by or through an Eligible Institution (as defined below); (B) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Power, must be received by the Exchange Agent on or prior to the expiration date; and (C) the Certificates (or a book-entry confirmation (as defined in the Prospectus)) representing all tendered Original Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"Eligible Guarantor Institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Power will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Original Notes) of Original Notes tendered herewith, unless such holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or
(ii) such Original Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Original Notes" is inadequate, the Certificate number(s) and/or the principal amount of Original Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Original Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Original Notes which are to be tendered in the box entitled "Principal Amount of Original Notes Tendered (if Principal Amount of Original Notes is Less than All)." In such case, new Certificate(s) for the remainder of the Original Notes that were evidenced by your old Certificate(s) will be sent in accordance with the issuance and delivery instructions received promptly after the expiration date. All Original Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes may be withdrawn at any time on or prior to the expiration date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at any of its addresses set forth above or in the Prospectus on or prior to the expiration date. Any such notice of withdrawal must specify the name of the person who tendered the Original Notes to be withdrawn, the aggregate principal amount of Original Notes to be withdrawn, and (if Certificates for Original Notes have been tendered) the name of the registered holder of the Original Notes as set forth on the Certificate for the Original Notes, if different from that of the person who tendered such Original Notes. If Certificates for the Original Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Original Notes, the tendering holder must submit the serial numbers shown on the particular Certificates for the Original Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Original Notes tendered for the account of an Eligible Institution. If Original Notes have been tendered pursuant to the procedures for book-entry transfer set forth in the Prospectus under "The Exchange Offer -- Procedures for Tendering Original Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Original Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Original Notes may not be rescinded. Original Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the expiration date by following any of the procedures described in the Prospectus under "The Exchange Offer -- Procedures for Tendering Original Notes."
All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by Power, in its sole discretion, whose determination shall be final and binding on all parties. Power, any affiliates or assigns of Power, the Exchange Agent or any other person shall not be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Original Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Original Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to Power, in its sole discretion, of such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the Original Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless Exchange Notes are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Original Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as Power may require in accordance with the restrictions on transfer applicable to the Original Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if Exchange Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Original Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4.
7. IRREGULARITIES. Power will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Original Notes, which determination shall be final and binding on all parties. Power reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to Power, be unlawful, and Power also reserves the right to waive any conditions or irregularities in any tender of Original Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. Power's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Original Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Power, any affiliates or assigns of Power, the Exchange Agent, or any other person shall not be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at any of its addresses and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a holder whose tendered Original Notes are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Original Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Original Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Original Notes. If the Original Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.
10. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of Original Notes for exchange.
Neither Power, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes nor shall any of them incur any liability for failure to give any such notice.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Original Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed.
12. SECURITY TRANSFER TAXES. Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Original Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Original Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
SUBSTITUTE
FORM W-9
Department of
the Treasury
Internal
Revenue Service
Payor's Request for
Taxpayer Identification
Number (TIN)
and Certification
(TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS)
(SEE INSTRUCTION 9)
PAYOR'S NAME: THE BANK OF NEW YORK
PART 1-- PLEASE PROVIDE YOUR TIN: _________________
TIN IN THE BOX AT RIGHT AND Social Security Number CERTIFY BY SIGNING AND or Employer DATING BELOW Identification Number |
PART 2 -- Awaiting TIN [ ]
PART 3 -- CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT (1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting for a number to be
issued to me), (2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding, (ii) I have not
been notified by the internal revenue service ("IRS") that I am
subject to backup withholding as a result of a failure to report
all interest or dividends, or (iii) the irs has notified me that I
am no longer subject to backup withholding, and (3) any other
information provided on this form is true and correct.
Signature: ____________________ Date ______________
You must cross out item (2) in Part 3 above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2
OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
|
has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number.
Signature: ___________________________________ Date: _____________________, 2001
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
PSEG POWER LLC
OFFER TO EXCHANGE ITS 6-7/8% SENIOR NOTES DUE 2006, 7-3/4% SENIOR NOTES DUE 2011 AND 8-5/8% SENIOR NOTES DUE 2031, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 6-7/8% SENIOR NOTES DUE 2006, 7-3/4% SENIOR NOTES DUE 2011 AND 8-5/8% SENIOR NOTES DUE 2031, WHICH HAVE NOT BEEN SO REGISTERED.
PURSUANT TO THE PROSPECTUS DATED , 2001
As set forth in the Exchange Offer (as described in the Prospectus (as defined below)), this form or one substantially equivalent hereto must be used to accept the Exchange Offer if certificates for unregistered 91/8% Senior Notes due 2004 (the "Original Notes"), of PSEG Power LLC ("Power"), are not immediately available or time will not permit a holder's Original Notes or other required documents to reach the Exchange Agent on or prior to the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis. This form may be delivered by facsimile transmission, by registered or certified mail, by hand, or by overnight delivery service to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN
DAYLIGHT TIME, ON , 2000 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED BY POWER.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
Facsimile Transmissions:
Facsimile Transmissions:
By Hand Or Overnight Delivery: (Eligible Institutions Only) By Registered Or Certified Mail:
The Bank of New York The Bank of New York
Corporate Trust Department Corporate Trust Department
Attention: Attention:
To Confirm by Telephone
or for Information Call:
|
(Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to PSEG Power LLC, a Delaware limited liability company ("Power"), in accordance with Power's offer, upon the terms and subject to the conditions set forth in the prospectus dated , 2001 (the "Prospectus"), and in the accompanying Letter of Transmittal, receipt of which is hereby acknowledged, $ in the aggregate principal amount of Original Notes pursuant to the guaranteed delivery procedures described in the Prospectus.
Name(s) of Registered Holder(s):
(Please Type or Print)
Address:
Area Code and Telephone Number:
Certificate Number(s) for Original Notes (if available):
Total Principal Amount Tendered and
Represented by Certificate(s): $
Signature of Registered Holder(s):
Date:
[ ] The Depository Trust Company
(check if Original Notes will be tendered by book-entry transfer)
Account Number
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, being a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office in the United States, hereby guarantees (a) that the above-named person(s) "own(s)" the Original Notes tendered hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the Securities Exchange Act of 1934, as amended, (b) that the tender of such Original Notes complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the certificates representing the Original Notes tendered hereby or confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, within three New York Stock Exchange trading days after the expiration date.
Name of Firm:
Address:
Area Code and Telephone Number:
Authorized Signature:
Name:
Title:
Date:
NOTE: DO NOT SEND CERTIFICATES OF ORIGINAL NOTES WITH THIS FORM. CERTIFICATES FOR ORIGINAL NOTES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.