IOWA 4911 47-0819200
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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666 GRAND AVENUE
DES MOINES, IOWA 50303
(515) 242-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
JOHN A. RASMUSSEN, JR., ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
MIDAMERICAN FUNDING, LLC
666 GRAND AVENUE
DES MOINES, IOWA 50303
(515) 242-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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 BEING 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, 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(D) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
Offering Proposed Amount of
Title of Each Class of Amount to be Price Aggregate Registration
Securities to be Registered Registered per Security(1) Offering Price(1) Fee
------------------------------------------------------------------------ --------------- ------------------ -------------------
5.85% Senior Secured Exchange Notes due 2001 $200,000,000 100% $200,000,000 $55,600
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6.339% Senior Secured Exchange Notes due 2009 $175,000,000 100% $175,000,000 $48,650
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6.927% Senior Secured Exchange Bonds due 2029 $325,000,000 100% $325,000,000 $90,350
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(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457.
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1999
PROSPECTUS
MIDAMERICAN FUNDING, LLC
Exchange Offer for
5.85% Senior Secured Notes due 2001
6.339% Senior Secured Notes due 2009
6.927% Senior Secured Bonds due 2029
This is an offer to exchange our outstanding 5.85% Senior Secured Notes due 2001, 6.339% Senior Secured Notes due 2009 and 6.927% Senior Secured Bonds due 2029 you now hold for new, substantially identical 5.85% Senior Secured Exchange Notes due 2001, 6.339% Senior Secured Exchange Notes due 2009 and 6.927% Senior Secured Exchange Bonds due 2029 that will be free of the transfer restrictions that apply to the initial securities. This offer will expire at 5:00 p.m., New York City time, on _____________, unless we extend it. You must tender the initial securities by the deadline to obtain exchange securities and the liquidity benefits they offer.
We agreed with the initial purchasers of the initial securities to make this offer and register the issuance of the exchange securities following the closing for the initial securities. This offer applies to any and all initial securities tendered before the expiration of the exchange offer.
The exchange securities will not trade on any established exchange. The exchange securities have the same financial terms and covenants as the initial securities, and are subject to the same business and financial risks.
A DESCRIPTION OF THOSE RISKS BEGINS ON PAGE 11.
The terms of the exchange offer will include the following:
o We will exchange all initial securities that are validly tendered and not withdrawn prior to the expiration of the exchange offer.
o You may withdraw tenders of initial securities at any time prior to the expiration of the exchange offer.
o We will not receive any proceeds from the exchange offer.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________, 1999
TABLE OF CONTENTS
PAGE
Prospectus Summary..................................................... 1 Risk Factors........................................................... 11 The Exchange Offer..................................................... 16 Use of Proceeds........................................................ 26 Capitalization......................................................... 26 Selected Financial Data................................................ 27 Management's Discussion and Analysis of Financial Condition and Results of Operation......................... 30 Our Business and the Business of MHC and MidAmerican Energy............ 54 Management............................................................. 60 Ownership of Our Membership Interests.................................. 62 Description of the Securities.......................................... 63 Plan of Distribution................................................... 85 United States Federal Income Tax Considerations........................ 86 Legal Matters.......................................................... 87 Experts................................................................ 87 Incorporation by Reference............................................. 87 Where You Can Find More Information.................................... 87 Index to Financial Statements.......................................... F-1 |
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus and may not contain all of the information that is important to you. This prospectus includes specific terms of the securities that are subject to the exchange offer, as well as information regarding our business and detailed financial data. We encourage you to read the prospectus in its entirety. Unless the context clearly indicates otherwise, the terms "we," "our" or "us" as used in this prospectus refer to MidAmerican Funding, LLC, the obligor on your securities. You should pay special attention to the "Risk Factors" section beginning on page 11 of this prospectus.
MIDAMERICAN FUNDING, LLC
We are an Iowa limited liability company that was formed in March 1999 to facilitate the acquisition by MidAmerican Energy Holdings Company (formerly CalEnergy Company, Inc.) of MHC Inc. (formerly MidAmerican Energy Holdings Company). We refer to this acquisition as the merger throughout this prospectus. We are a direct wholly-owned subsidiary of MidAmerican Holdings. We own all of the outstanding common stock of MHC, which owns all of the common stock of MidAmerican Energy Company. We conduct no business other than activities related to the issuance of the securities and the ownership of MHC.
Our principal executive offices are located at 666 Grand Avenue, Des Moines, Iowa 50303, and our telephone number is (515) 242-4000.
MIDAMERICAN HOLDINGS
MidAmerican Holdings is a fast-growing global energy company with an increasingly diversified portfolio of regulated and nonregulated assets. The focus of MidAmerican Holdings has evolved over time from development and acquisition activities in the domestic and international power generation markets to strategic electric and gas utility acquisitions, with a particular emphasis on investment-grade countries such as the United States, the United Kingdom, Australia, Canada, New Zealand and the countries of Western Europe. This focus has provided MidAmerican Holdings with increased scale, skill, revenue diversity, credit quality, quality of cash flows and additional growth opportunities associated with each of the acquired businesses. MidAmerican Holdings' investments in related activities (e.g. producing gas fields, gas reserves and advanced utility information systems) are primarily intended to support and augment the profitability of its existing core businesses.
MidAmerican Holdings, headquartered in Des Moines, Iowa, has approximately 9,800 employees and is the largest publicly traded company in Iowa. Through its retail utility subsidiaries, MidAmerican Energy in the United States and Northern Electric plc in the United Kingdom, MidAmerican Holdings provides electric service to 2.2 million customers and natural gas service to 1.2 million customers worldwide. Through CalEnergy Generation, MidAmerican Holdings' independent power production and nonregulated business subsidiary, and MidAmerican Energy's utility operations, MidAmerican Holdings manages and owns interests in approximately 8,300 net megawatts of diversified power generation facilities in operation, construction and development.
On October 25, 1999, MidAmerican Holdings announced that an investor group comprised of Berkshire Hathaway Inc., Walter Scott, Jr. and David L. Sokol had reached agreement to acquire MidAmerican Holdings for $35.05 per share in cash. The purchase price together with the assumption of debt represents a total enterprise value of approximately $9 billion. Upon completion of the transaction, which is expected to occur by April 2000, MidAmerican Holdings would become a privately owned company with publicly traded fixed income securities.
MIDAMERICAN ENERGY AND MHC
MidAmerican Energy is the largest combined electric and gas utility in Iowa with approximately 652,900 electric and 621,500 gas customers. It has gas and electric operations in Iowa, Illinois and South Dakota and gas operations in Nebraska. The regulated service area is comprised of 10,600 square miles with a total population of approximately 1.7 million. MidAmerican Energy owns installed generation capacity of approximately 4,000
megawatts, comprised of 71% coal, 19% natural gas and 10% nuclear fuel sources. Due to its geographic location and fuel sources, MidAmerican Energy is a low cost producer of electricity in the Mid-Continent Area Power Pool, which is known as MAPP. From time to time, MidAmerican Energy supplies electricity to other utilities in major energy markets in the midwestern United States, such as the Chicago, St. Louis, Kansas City, Milwaukee and Minneapolis areas. MidAmerican Energy's gas operations are served by at least four major gas pipelines on which MidAmerican Energy has rights to firm and interruptible pipeline capacity. Approximately 88% of the total revenues of MHC in 1998 came from MidAmerican Energy.
MidAmerican Energy is subject to regulation and oversight by one or more of the Federal Energy Regulatory Commission, the Iowa Utilities Board, the Illinois Commerce Commission and other regulatory bodies. These governmental agencies regulate the following aspects of MidAmerican Energy's business, among other things: the issuance of securities, accounting policies and practices, electric interconnections and transmission services, retail rates and affiliate transactions.
MidAmerican Energy is a wholly-owned subsidiary of MHC. In addition to its regulated business conducted through MidAmerican Energy, MHC conducts nonregulated businesses through its subsidiaries MidAmerican Capital Company, Midwest Capital Group and MidAmerican Services Company, including real estate development, financial and energy investments and energy services.
The following chart shows the ownership structure of MidAmerican Holdings, us and our subsidiaries.
MIDAMERICAN
HOLDINGS
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| 100%
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MIDAMERICAN FUNDING
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| 100%
100% | 100%
--------------------------------MHC-------------------------------
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MIDAMERICAN 100% | 100% MIDAMERICAN
CAPITAL ----------------------- SERVICES
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MIDAMERICAN MIDWEST
ENERGY CAPITAL
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THE MERGER
On March 12, 1999 our subsidiary, MAVH Inc., was merged with and into MHC pursuant to a merger agreement among MidAmerican Holdings, MAVH, MHC and another subsidiary of MidAmerican Holdings. The merger resulted in MHC becoming our direct wholly-owned subsidiary and an indirect wholly-owned subsidiary of MidAmerican Holdings. MidAmerican Holdings paid $27.15 in cash for each outstanding share of MHC common stock for a total of $2.42 billion. The merger was financed with the net proceeds of the initial securities and an equity contribution from MidAmerican Holdings. In connection with the merger, MidAmerican Holdings became an exempt public utility holding company.
SUMMARY OF OUR EXCHANGE OFFER
On March 11, 1999 we completed the offering of $200,000,000 aggregate principal amount of our 5.85% Senior Secured Notes due 2001, $175,000,000 aggregate principal amount of our 6.339% Senior Secured Notes due 2009 and $325,000,000 aggregate principal amount of our 6.927% Senior Secured Bonds due 2029 in reliance on exemptions from the registration requirements of the Securities Act. Throughout this prospectus, we refer to the securities described in the preceding sentence as the initial Securities. As part of the offering of the initial Securities, we entered into a registration rights agreement with the initial purchasers of the initial Securities in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer for the initial Securities. Below is a summary of that exchange offer.
The Exchange Offer.......................... We are offering to exchange up to $700,000,000 principal
amount of exchange Securities which have been registered
under the Securities Act for up to $700,000,000
principal amount of initial Securities. We will
exchange initial Securities only in integral multiples
of $1,000.
In order to be exchanged, an initial Security must be
properly tendered and accepted. We will exchange all
initial Securities that are validly tendered and not
withdrawn. As of the date of this prospectus, there are
$700,000,000 principal amount of initial Securities
outstanding. We will issue exchange Securities promptly
after the expiration of the exchange offer.
Resales Without
Further Registration................... Based on interpretations by the staff of the Securities
and Exchange Commission, we believe that the exchange
Securities issued in the exchange offer may be offered
for resale, resold or otherwise transferred by you
without compliance with the registration and prospectus
delivery requirements of the Securities Act, so long as:
o you are acquiring the exchange Securities in
the ordinary course of your business;
o you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate, in
a distribution of the exchange Securities; and
o you are not our "affiliate."
By tendering your initial Securities as described below,
you will be making representations to this effect.
Transfer Restrictions on
Exchange Securities.................... If you are our affiliate or are engaged in, intend to
engage in or have any arrangement or understanding with
any person to participate in, the distribution of the
exchange Securities:
o you cannot rely on the applicable interpretations of
the staff of the Securities and Exchange
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Commission; and
o you must comply with the registration requirements of
the Securities Act in connection with any resale
transaction.
Each broker or dealer that receives exchange Securities for
its own account in exchange for initial Securities that
were acquired as a result of market-making or other trading
activities must acknowledge that it will deliver this
prospectus in connection with any offer to resell, resale
or other transfer of the exchange Securities issued in the
exchange offer.
Expiration Date............................. 5:00 p.m., New York City time, on _________, unless we
extend the expiration date.
Accrued Interest on the
Exchange Securities
and Initial Securities................. The exchange Securities will bear interest from the most
recent date to which interest has been paid on the
initial Securities. If your initial Securities are
accepted for exchange, then you will waive interest on
the initial Securities accrued to the date the exchange
Securities are issued.
Conditions to the
Exchange Offer......................... The exchange offer is subject to conditions. We may
assert or waive these conditions in our sole discretion.
Procedures for Tendering
Initial Securities..................... If you wish to tender your initial Securities, you must
complete, sign and date the letter of transmittal, or a
facsimile of it, in accordance with its instructions,
and transmit the letter of transmittal, together with
your initial Securities and any other required
documentation, and The Bank of New York, who is the
exchange agent, must receive your documentation at the
address set forth in the letter of transmittal by 5:00
p.m. New York City time, on the expiration date. By
executing the letter of transmittal, you will represent
to us that you are acquiring the exchange Securities in
the ordinary course of your business, that you are not
participating, do not intend to participate and have no
arrangement or understanding with any person to
participate, in the distribution of exchange Securities,
and that you are not our "affiliate."
Special Procedures for
Beneficial Holders..................... If you are the beneficial holder of initial Securities
that are registered in the name of your broker, dealer,
commercial bank, trust company or other nominee, and you
wish to tender in the exchange offer, you should
promptly contact the person in whose name your initial
Securities are registered and instruct that person to
tender on your behalf.
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Guaranteed Delivery Procedures.............. If you wish to tender your initial Securities and you
cannot deliver your certificates, the letter of
transmittal or any other required documents to the
exchange agent before the expiration date, you may
tender your initial Securities according to the
guaranteed delivery procedures.
Withdrawal Rights........................... You may withdraw the tender of your initial Securities
at any time before 5:00 p.m., New York City time, on the
expiration date.
Acceptance of Initial Securities
and Delivery of Exchange Securities.... Subject to conditions explained later in this prospectus,
we will accept for exchange any and all initial Securities
which are properly tendered in the exchange offer before
5:00 p.m., New York City time, on the expiration date. The
exchange Securities will be delivered promptly after the
expiration date.
Exchange Agent.............................. The Bank of New York is serving as exchange agent in
connection with the exchange offer.
Federal Income Tax Considerations........... We believe that your exchange of initial Securities for
exchange Securities pursuant to the exchange offer will not
result in any gain or loss to you for United States federal
income tax purposes.
Use of Proceeds............................. We will not receive any proceeds from the issuance of
exchange Securities pursuant to the exchange offer. We
will pay all expenses incident to the exchange offer.
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SUMMARY OF THE TERMS OF THE SECURITIES
The form and terms of the exchange Securities and the initial Securities are identical in all material respects, except that transfer restrictions and registration rights applicable to the initial Securities do not apply to the exchange Securities. The exchange Securities will evidence the same debt as the initial Securities and will be governed by the same indenture. Where we refer to "Securities" in this prospectus, we are referring to both initial Securities and exchange Securities.
Initial Securities.................. The initial securities include the following:
o $200,000,000 principal amount of 5.85% Senior
Secured Notes due 2001
o $175,000,000 principal amount of 6.339% Senior
Secured Notes due 2009
o $325,000,000 principal amount of 6.927% Senior
Secured Bonds due 2029
Exchange Securities................. The exchange securities include the following:
o $200,000,000 principal amount of 5.85% Senior
Secured Exchange Notes due 2001
o $175,000,000 principal amount of 6.339% Senior
Secured Exchange Notes due 2009
o $325,000,000 principal amount of 6.927% Senior
Secured Exchange Bonds due 2029
Maturity............................ o In the case of the 2001 Securities, the entire principal
amount on March 1, 2001.
o In the case of the 2009 Securities, the entire
principal amount on March 1, 2009.
o In the case of the 2029 Securities, the entire
principal amount on March 1, 2029.
Interest............................ Annual rate:
o 5.85%, in the case of the 2001 Securities;
o 6.339%, in the case of the 2009 Securities; and
o 6.927%, in the case of the 2029 Securities.
Interest payment frequency: every six months on March 1
and September 1.
Collateral.......................... The Securities are secured by a pledge of all of the
common stock of MHC.
Ranking............................. The Securities:
o are our direct senior secured obligations;
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o rank on an equal basis with all of our other
existing and future senior obligations;
o rank senior to all of our existing and future
subordinated indebtedness; and
o effectively rank junior to all indebtedness and other
liabilities, including preferred stock, of our direct
and indirect subsidiaries (to the extent of the assets
of the subsidiaries).
The indenture for the Securities does not restrict the
incurrence of additional unsecured indebtedness by our
subsidiaries and permits our subsidiaries to incur a
significant amount of secured indebtedness. At September
30, 1999, MHC and its direct and indirect subsidiaries had
total indebtedness, including preferred stock, of
approximately $1,316 million, all of which is effectively
senior to the Securities.
Ratings............................. The Securities have been assigned ratings of BBB+ by
Standard & Poor's Ratings Group, BBB+ by Duff & Phelps
Credit Rating Co. and Baa1 by Moody's Investors Service,
Inc.
Covenants Limiting
Our Activities................ The indenture contains covenants which, among other things
and subject to exceptions described later in this
prospectus, restrict our ability to:
o make distributions unless no event of default exists
or would result from the distribution and either:
(1) at the time and as a result of the distribution, our
leverage ratio does not exceed 0.67:1 and our interest
coverage ratio is not less than 2.2:1; or
(2) at such time our senior secured long term debt is
rated at least BBB by Standard & Poor's and Duff &
Phelps, and at least Baa2 by Moody's.
o enter into any business operations other than:
(1) the transactions contemplated by the indenture and the
other financing documents related to the offering of
the Securities;
(2) activities related to the management and ownership of
MHC;
(3) entering into and performing any agreements to
accomplish the activities described in clauses (1) and
(2) above; and
(4) exercising any corporate powers that are incidental to
or necessary, suitable or convenient for the
accomplishment of the activities described in clauses
(1), (2) and (3) above.
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However, we may enter into additional business operations
from time to time in the future if, prior to doing so, we
obtain written confirmation from the rating agencies that
the entering into of the new business operations will not
result in a downgrade of the ratings for the Securities.
o merge or consolidate with or into any other person or
transfer or lease all or substantially all of our
assets to another person.
o incur any indebtedness other than:
(1) as a part of our permitted businesses and activities;
and
(2) other indebtedness so long as the rating agencies
confirm that the incurrence of such indebtedness will
not result in a downgrade of the ratings for the
Securities.
o issue, assume or guarantee indebtedness secured by a
lien, other than the Securities or any other
indebtedness issued under the indenture.
The covenants and restrictions which limit our ability to
pay dividends or make other distributions will cease to be
in effect if the rating agencies confirm in writing that,
without these covenants and restrictions, our long-term
senior secured debt would still be rated at least BBB+ by
each of Standard & Poor's and Duff & Phelps and at least
Baa1 by Moody's.
Covenants Limiting the Activities
of Our Significant Subsidiaries....... The indenture also restricts, among other things and
subject to exceptions described later in this prospectus,
the ability of our significant subsidiaries to:
o incur any indebtedness at the MHC level other than
indebtedness outstanding on the closing date for the
initial Securities under MHC's existing agreements and
extensions of this indebtedness.
o issue, assume or guarantee indebtedness secured by a
lien, other than liens permitted under the indenture.
o enter into new businesses and activities other than
those types of businesses and activities in which we
are or MidAmerican Energy is engaged today and any
other business or activity which is deemed necessary,
useful or desirable in connection with such businesses
and activities.
The indenture defines a significant subsidiary as any
subsidiary whose gross assets or gross revenues represent
at least 25% of our gross assets or gross revenues.
Optional Redemption....................... Each series of Securities will be redeemable in whole or
in part at our option at any time at a redemption price
equal to the sum of:
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o the greater of:
(1) 100% of the principal amount of the series of
Securities being redeemed, and
(2) the sum of the present values of the remaining
scheduled payments of principal of and interest on the
series of Securities being redeemed, discounted to the
date of redemption on a semiannual basis at the
treasury yield (plus 15 basis points in the case of
the 2009 Securities or 25 basis points in the case of
the 2029 Securities), plus
o accrued and unpaid interest on the Securities being
redeemed to the date of redemption.
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RISK FACTORS
You should carefully consider the following factors before deciding to
tender your initial Securities in the exchange offer.
YOUR FAILURE TO EXCHANGE YOUR INITIAL SECURITIES FOR EXCHANGE SECURITIES COULD
RESULT IN YOUR HOLDING ILLIQUID SECURITIES WHICH CANNOT BE RESOLD UNLESS YOU
REGISTER THEM UNDER THE SECURITIES ACT OR FIND AN EXEMPTION FROM REGISTRATION.
The initial Securities were not registered under the Securities Act or
under the securities laws of any state and may not be resold, offered for
resale or otherwise transferred unless they are subsequently registered or
resold pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. If you do not exchange
your unregistered initial Securities for registered exchange Securities
pursuant to the exchange offer, you will not be able to resell, offer to resell
or otherwise transfer the initial Securities unless they are registered under
the Securities Act or unless you resell them, offer to resell them or otherwise
transfer them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, we will no longer
be under an obligation to register the initial Securities under the Securities
Act except in the limited circumstances provided under the registration rights
agreement between us and the initial purchasers of the initial Securities. In
addition, to the extent that initial Securities are tendered for exchange and
accepted in the exchange offer, the trading market for the untendered and
tendered but unaccepted initial Securities could be illiquid.
OUR ABILITY TO MAKE PAYMENTS ON THE SECURITIES IS DEPENDENT ON THE RECEIPT OF
DISTRIBUTIONS FROM OUR SUBSIDIARIES AND OUR SUBSIDIARIES CANNOT MAKE THESE
DISTRIBUTIONS UNTIL THEY MAKE PAYMENTS ON THEIR OWN INDEBTEDNESS.
We conduct our operations predominantly through MHC and substantially
all of our consolidated assets related to operations are held by MHC and its
subsidiaries. Our ability to pay interest on the Securities is entirely
dependent upon our receipt of dividends and other distributions from MHC and its
subsidiaries. The availability of distributions from our subsidiaries is subject
to the satisfaction of various covenants and conditions contained in the
applicable subsidiaries' existing and future financing documents and to utility
regulatory restrictions. Our subsidiaries, including MHC and MidAmerican Energy,
will not have any obligation to pay any amounts due pursuant to the Securities
or to make any funds available for payment, and do not guarantee any payment on
the Securities. Any right we may have to receive assets of any of our
subsidiaries upon any liquidation or reorganization of the subsidiary would be
effectively subordinated to the claims of any of the subsidiary's creditors and
preferred stockholders.
The indenture contains limitations on our ability and the ability of
MHC to incur additional secured or unsecured indebtedness. However, the
indenture contains no restrictions on the amount of additional unsecured
indebtedness which may be incurred by our subsidiaries (other than MHC). In
addition, the indenture permits our subsidiaries (other than MHC) to incur
significant additional amounts of secured indebtedness. At September 30, 1999,
MHC and its subsidiaries had total indebtedness, including preferred stock, of
approximately $1,316 million, all of which would be effectively senior to the
Securities.
IF WE DEFAULT UNDER THE INDENTURE AND YOU FORECLOSE ON AND SELL THE STOCK
PLEDGED TO SECURE OUR OBLIGATIONS, THE PRICE YOU RECEIVE FOR THE STOCK MAY NOT
BE SUFFICIENT TO PAY ALL AMOUNTS DUE ON THE SECURITIES.
The Securities are secured by a pledge of all of the common stock of
MHC. There is currently no market for this stock. We cannot assure you that if
the Securities were to become due and payable because of an event of default
under the indenture that the proceeds from the sale of the MHC stock would be
sufficient to pay all amounts due on the Securities.
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BECAUSE MIDAMERICAN ENERGY IS OUR WHOLLY-OWNED SUBSIDIARY, WE ARE SUBJECT TO THE
OPERATING UNCERTAINTIES ASSOCIATED WITH UTILITIES.
The operation of a utility involves many risks, including the breakdown
or failure of power generation equipment, pipelines, transmission lines,
distribution lines or other equipment or processes, fuel interruption, and
performance below expected levels of output or efficiency. Sales and revenues of
a utility may also be adversely affected by general economic and business
conditions and weather conditions in its territory. Each generating facility may
depend on a single or limited number of entities to supply or transport gas,
coal or other fuels, to dispose of wastes or to wheel electricity. The failure
of any of these third parties to fulfill its contractual obligations could have
a material adverse impact on MidAmerican Energy and, accordingly, on us.
THE UTILITY INDUSTRY IN WHICH SOME OF OUR SUBSIDIARIES PARTICIPATE IS UNDERGOING
RESTRUCTURING AS IT IS BEING DEREGULATED, MAKING IT SUBJECT TO INCREASED
COMPETITION.
Throughout the United States, the utility industry continues to move
towards a competitive environment. Although the extent of deregulation varies
between states, increased competition is becoming a reality in virtually every
region of the country. Numerous states have passed restructuring legislation,
some of which initiated a phase-in of customer choice in 1998. Legislators and
regulators in many other states are addressing the issue.
As part of many restructuring legislation packages, electric utilities
are required to unbundle traditional services previously provided as a "packaged
product" under their rate tariffs. Unbundling allows customers to choose their
energy supplier and the level of energy delivery and retail services they
desire. Gas utilities are also experiencing separation of the merchant and
delivery functions for all classes of customers.
The generation segment of the electric industry will be significantly
impacted by competition. The introduction of competition in the wholesale market
has resulted in a proliferation of power marketers and a substantial increase in
market activity. As retail competition evolves, margins will be pressured by
competition from other utilities, power marketers and self-generation. In
addition, many states are implementing or considering regulatory initiatives
that would increase access to electric utilities' transmission and distribution
systems for independent power producers, utilities, power marketers and
electricity customers.
Although the anticipated changes in the electric utility industry may
create opportunities, they will also create additional challenges and risks for
utilities. Competition will put pressure on margins for traditional electric
services.
These and other industry restructuring efforts by states in the Midwest
(such as Iowa and Illinois) where MidAmerican Energy has or expects to have
substantial operations could materially impact the results of operations of
MidAmerican Energy and, accordingly, our results of operations, in a manner
which is difficult to predict.
MIDAMERICAN ENERGY IS SUBJECT TO COMPREHENSIVE ENERGY REGULATION BY GOVERNMENTAL
AGENCIES AND THE RECOVERY OF ITS FULL FUEL COSTS IS DEPENDENT ON REGULATORY
ACTION.
MidAmerican Energy is subject to comprehensive regulation by several
utility regulatory agencies, which significantly influences its operating
environment and its ability to recover its costs from utility customers.
Further, in connection with the approval by the Iowa Utilities Board of the
merger, MHC agreed, among other things, to use all commercially reasonable
efforts to maintain an investment grade credit rating for MidAmerican Energy and
its long-term debt and to seek the approval of the Iowa Utilities Board of a
reasonable utility capital structure if MidAmerican Energy's common equity level
decreases below 42% of total capitalization unless such equity level decreases
to below 39% due to circumstances beyond the control of MidAmerican Energy.
The regulatory environment presently applicable to MidAmerican Energy
has to date, in general, given MidAmerican Energy an exclusive right to serve
customers within its electric service territory and, in turn, the obligation to
provide electric service to those customers. Base electricity rates for Iowa
customers include a factor
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which provides for the recovery of a representative level of fuel costs.
However, to the extent actual fuel costs vary from that factor, earnings are
impacted.
We cannot assure you that regulations described above will not change
or that additional regulations will not become applicable to MidAmerican
Energy's business in the future. Changes in regulations or additional
regulations could have an adverse impact on MidAmerican Energy's results of
operations and, accordingly, our results of operations.
WE AND OUR SUBSIDIARIES ARE SUBJECT TO ENVIRONMENTAL REGULATIONS WHICH COULD BE
DIFFICULT AND COSTLY TO COMPLY WITH.
We and our subsidiaries are subject to a number of environmental laws
and regulations affecting many aspects of our and our subsidiaries' present and
future operations, including the disposal of various forms of waste, the
construction or permitting of new facilities and air and water quality. These
laws and regulations generally require us and our subsidiaries to obtain and
comply with a wide variety of environmental licenses, permits and other
approvals. We and our subsidiaries are also subject to a number of complex and
stringent environmental laws and regulations that both public officials and
private individuals may seek to enforce. We cannot assure you that existing
environmental regulations will not be revised or that new regulations seeking to
protect the environment will not be adopted or become applicable to us or our
subsidiaries. Revised or additional regulations which result in increased
compliance costs or additional operating restrictions could have a material
adverse effect on our results of operations.
In particular, regulatory compliance associated with the construction
of new facilities is a costly and time-consuming process. Intricate and rapidly
changing environmental regulations may require major expenditures for permitting
and create the risk of expensive delays or material impairment of project value
if projects cannot function as planned due to changing regulatory requirements
or local opposition.
WE ARE SUBJECT TO THE UNIQUE RISKS ASSOCIATED WITH NUCLEAR GENERATION.
The risks of nuclear generation risks include (1) the potential harmful
effects on the environment and human health resulting from the operation of
nuclear facilities and the storage, handling and disposal of high-level and
low-level radioactive materials, (2) limitations on the amounts and types of
insurance commercially available to cover losses that might arise in connection
with nuclear operations and (3) uncertainties with respect to the technological
and financial aspects of decommissioning nuclear plants at the end of their
licensed lives. The Nuclear Regulatory Commission has broad authority under
federal law to impose licensing and safety-related requirements for the
operation of nuclear generating facilities and in the event of non-compliance,
has the authority to impose fines or shut down a unit, or both, depending upon
its assessment of the severity of the situation, until compliance is achieved.
Revised safety requirements promulgated by the NRC have, in the past,
necessitated substantial capital expenditures at nuclear plants, including those
with which we have a long-term power purchase contract or in which we have an
ownership interest, such as the Cooper and Quad Cities units, and additional
such expenditures could be required in the future. In addition, although we have
no reason to anticipate a serious nuclear incident at the units in which we have
an interest, if such an incident did occur, it could have a material but
presently undeterminable adverse effect on our financial condition.
WE CANNOT PREDICT THE TYPE OR MAGNITUDE OF POTENTIAL PROBLEMS ASSOCIATED THE
"YEAR 2000" ISSUE AND THESE PROBLEMS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
RESULTS OF OPERATIONS.
The "year 2000" issue arises from the widespread use of computer
programs that rely on two-digit date codes to perform computations or
decision-making functions. Many of these programs may fail due to an inability
to properly interpret date codes beginning January 1, 2000. We and our
subsidiaries have undertaken an extensive ongoing project to address our
information technology and non-information technology (including embedded
technology) systems potentially affected by the year 2000 date change. We and
our subsidiaries have completed both (1) the inventory, assessment and planning
phases for substantially all of our systems and (2) the resolution and
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implementation phases for nearly all of our high-and medium-priority systems to
ensure that these systems are suitable for continued use into the year 2000.
Despite the comprehensive nature of our year 2000 project, it is
possible that MidAmerican Energy may experience random, widespread and/or
simultaneous failures in its generation, transmission and distribution systems
during January 2000. Although MidAmerican Energy is developing contingency plans
for anticipated risks of interruption to the generation or distribution of
energy, we cannot assure you that outages will not occur. Although the impact on
future operations and revenues is unknown, any failure of computer systems to
perform because of year 2000 implications could result in operating problems and
costs that are material to us. Although we believe the compliance project will
be completed sufficiently in advance of January 1, 2000, unforeseen and other
factors could cause delays in the project and/or require material expenditures,
which could have a material adverse effect on our results of operations. In
addition, we cannot assure you that we and our subsidiaries will not be
adversely affected by year 2000 problems experienced by third parties.
THERE IS NO EXISTING MARKET FOR THE EXCHANGE SECURITIES AND WE CANNOT ASSURE YOU
THAT AN ACTIVE TRADING MARKET WILL DEVELOP.
We are offering the exchange Securities to the holders of the initial
Securities. There is no existing market for the exchange Securities and we
cannot assure you that a market will develop. If a market for the exchange
Securities were to develop, future trading prices would depend on many factors,
including prevailing interest rates, our operating results and the market for
similar securities. We do not intend to apply for listing or quotation of the
exchange Securities on any securities exchange or stock market. As a result, it
may be difficult for you to find a buyer for your Securities at the time you
want to sell them, and even if you found a buyer, you might not get the price
you want.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE DEPENDENT ON
CIRCUMSTANCES AND EVENTS WHICH MAY BE OUTSIDE OF OUR CONTROL.
Some of the statements contained in this prospectus are forward-looking
statements, as defined in Section 21D of the Exchange Act, that are dependent on
circumstances and events that may be outside of our control. We identify these
statements by using words such as "expect," "believe," "anticipate," "estimate"
and "projected" and similar expressions. The forward-looking statements in this
prospectus involve known and unknown risks, uncertainties and other important
factors that could cause our actual results, performance or achievements to
differ materially from any future results, performance or achievements expressed
or implied by the forward-looking statements.
These risks, uncertainties and other important factors include, among
other things:
[] general economic and business conditions in the United States and the
midwestern United States and MidAmerican Energy's service territory
in particular;
[] governmental, statutory, regulatory or administrative initiatives
affecting us, MidAmerican Energy or the United States electricity
industry;
[] weather effects on sales and revenues;
[] general industry trends;
[] competition;
[] fuel and power costs and availability;
[] changes in business strategy, development plans or vendor
relationships;
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[] availability, term and deployment of capital;
[] availability of qualified personnel; and
[] risks relating to nuclear generation.
We do not have any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein to reflect any
change in our expectations regarding the statement or any change in events,
conditions or circumstances on which the statement is based.
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THE EXCHANGE OFFER
WE AGREED WITH THE INITIAL PURCHASERS OF THE INITIAL SECURITIES TO EFFECT THE
EXCHANGE OFFER PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT.
We sold the initial Securities on March 11, 1999 in a transaction exempt
from the registration requirements of the Securities Act. Credit Suisse First
Boston Corporation and Lehman Brothers Inc., Goldman Sachs & Co. and Merrill
Lynch & Co., as the initial purchasers, subsequently resold the initial
Securities to qualified institutional buyers in reliance on Rule 144A and under
Regulation S under the Securities Act. As of the date of this prospectus,
$700,000,000 aggregate principal amount of unregistered initial Securities are
outstanding.
We entered into a registration rights agreement with the initial
purchasers under which we agreed that we would, at our own cost:
[] use our reasonable best efforts to cause the registration statement,
of which this prospectus is a part, relating to the exchange offer to
be declared effective by the Securities and Exchange Commission prior
to December 7, 1999;
[] keep the exchange offer open for a period of not less than the
shorter of (1) the period ending when the last of the remaining
initial Securities is tendered into the exchange offer and (2) 30
days from the date notice is mailed to holders of the initial
Securities; and
[] maintain the registration statement continuously effective for a
period of not less than the longer of (1) the period until
consummation of the exchange offer and (2) 120 days after
effectiveness of the registration statement, subject to extension.
However, in the event that all resales of exchange Securities covered
by the registration statement have been made, the registration
statement need not remain continuously effective.
The description in this prospectus of provisions of the registration
rights agreement is a summary only and is subject to, and is qualified in its
entirety by, all the provisions of the registration rights agreement, a copy of
which is filed as an exhibit to the registration statement.
THERE WILL BE RESTRICTIONS ON THE ABILITY OF SOME HOLDERS TO RESELL THE EXCHANGE
SECURITIES.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties, we believe that a holder of initial
Securities who exchanges initial Securities for exchange Securities in the
exchange offer generally may offer the exchange Securities for resale, sell the
exchange Securities and otherwise transfer the exchange Securities without
further registration under the Securities Act and without delivery of a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
This does not apply, however, to a holder who is an affiliate of ours within
the meaning of Rule 405 of the Securities Act. We also believe that a holder
may offer, sell or transfer the exchange Securities only if the holder acquires
the exchange Securities in the ordinary course of its business and is not
participating, does not intend to participate and has no arrangement or
understanding with any person to participate in a distribution of the exchange
Securities.
Any holder of initial Securities using the exchange offer to participate
in a distribution of exchange Securities cannot rely on the no-action letters
referred to above. This category of holders includes a broker-dealer that
acquired initial Securities directly from us, but not as a result of
market-making activities or other trading activities. Consequently, this type
of holder must comply with the registration and prospectus delivery
requirements of the Securities Act in the absence of an exemption from these
requirements.
Each broker-dealer that receives exchange Securities for its own
account in exchange for initial Securities, where the initial Securities were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, may be a statutory underwriter and must acknowledge that it
will deliver a prospectus meeting the
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requirements of the Securities Act in connection with the resale of exchange
Securities received in exchange for initial Securities. The letter of
transmittal which accompanies this prospectus states that by so acknowledging
and by delivering a prospectus, a participating broker-dealer will not be
deemed to admit that it is an underwriter within the meaning of the Securities
Act. A participating broker-dealer may use this prospectus, as it may be
amended from time to time, in connection with resales of exchange Securities it
receives in exchange for initial Securities in the exchange offer. We will make
this prospectus available to any participating broker-dealer in connection with
any resale of this kind for a period of 30 days after the expiration date of
the exchange offer.
YOU MUST MAKE THE FOLLOWING REPRESENTATIONS AND ACKNOWLEDGEMENTS IN THE LETTER
OF TRANSMITTAL IN ORDER TO EXCHANGE YOUR INITIAL SECURITIES FOR EXCHANGE
SECURITIES.
Each holder of the initial Securities who wishes to exchange initial
Securities for exchange Securities in the exchange offer will be required to
represent and acknowledge, for the holder and for each beneficial owner of the
initial Securities, whether or not the beneficial owner is the holder, in the
letter of transmittal that:
[] the exchange Securities acquired pursuant to the exchange offer in
exchange for initial Securities are being obtained in the holder's
ordinary course of business;
[] neither the holder nor any beneficial is engaging in or intends to
engage in a distribution of exchange Securities;
[] neither the holder nor any beneficial owner has an arrangement or
understanding with any person to participate in the distribution of
exchange Securities;
[] if the holder or any beneficial owner is a resident of the State of
California, it falls under the self-executing institutional investor
exemption set forth under applicable California law;
[] if the holder or any beneficial owner is a resident of the
Commonwealth of Pennsylvania, it falls under the self-executing
institutional investor exemption set forth under applicable
Pennsylvania law;
[] any person who is a broker-dealer registered under the Exchange Act,
or is participating in the exchange offer for the purpose of
distributing the exchange Securities must comply with the
registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the exchange
Securities or interests therein acquired by such person and cannot
rely on the position of the staff of the Securities and Exchange
Commission set forth in certain no-action letters;
[] it understands that a secondary resale transaction described above
and any resales of exchange Securities or interests therein obtained
by the holder in exchange for initial Securities or interests therein
originally acquired by the holder directly from us should be covered
by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Securities and Exchange
Commission; and
[] neither the holder nor any beneficial owner is our "affiliate," as
such term is defined under Rule 405 promulgated under the Securities
Act.
WE MAY BE REQUIRED TO FILE A SHELF REGISTRATION STATEMENT COVERING RESALES OF
THE INITIAL SECURITIES.
If applicable law or interpretations of the staff of the Securities and
Exchange Commission are changed so that the exchange Securities received by
holders who make all of the above representations in the letter of transmittal
are not or would not be, upon receipt, transferable by each holder without
restriction under the Securities Act, we will, at our cost:
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o file a shelf registration statement covering resales of the initial
Securities,
o use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or
prior to December 7, 1999, and
o use our reasonable best efforts to keep effective the shelf
registration statement until the earlier of two years after March 11,
1999, subject to exceptions, or the time when all of the applicable
initial Securities are no longer outstanding.
We may postpone or suspend the filing or the effectiveness of any shelf
registration statement if such action is taken by us in good faith and for
valid business reasons. We will, if and when we file the shelf registration
statement, provide to each holder of the initial Securities copies of the
prospectus which is a part of the shelf registration statement, notify each
holder when the shelf registration statement has become effective and take
other actions as are required to permit unrestricted resales of the initial
Securities.
THE INTEREST RATE ON THE INITIAL SECURITIES WILL INCREASE IF A REGISTRATION
STATEMENT IS NOT DECLARED EFFECTIVE BY DECEMBER 7, 1999.
In the event that neither the exchange offer registration statement nor a
shelf registration statement has been declared effective by December 7, 1999,
the interest rate on the initial Securities will increase by 0.50% per annum
until the exchange offer registration statement or the shelf registration
statement is declared effective. Upon consummation of the exchange offer,
holders of initial Securities will not be entitled to any increase in the rate
of interest on the initial Securities, but will be entitled to the benefits of
the indenture under which the initial Securities were issued.
THE GENERAL TERMS OF THE EXCHANGE OFFER ARE DESCRIBED IN THE FOLLOWING
PARAGRAPHS.
We hereby offer, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange
exchange Securities for a like aggregate principal amount of initial Securities
properly tendered on or prior to the expiration date and not properly withdrawn
in accordance with the procedures described below. We will issue, promptly
after the expiration date, the exchange Securities in exchange for a like
principal amount of outstanding initial Securities tendered and accepted in
connection with the exchange offer. You may tender your initial Securities in
whole or in part in a principal amount of $1,000 and integral multiples of
$1,000, provided that if any initial Securities are tendered for exchange in
part, the untendered principal amount of those initial Securities must be
$100,000 or any integral multiple of $1,000 in excess of $100,000.
The exchange offer is not conditioned upon any minimum principal amount of
initial Securities being tendered. As of the date of this prospectus,
$700,000,000 aggregate principal amount of the initial Securities is
outstanding.
If any tendered initial Securities are not accepted for exchange because
of an invalid tender or any other reason, certificates for any unaccepted
initial Securities will be returned, without expense to the tendering holder
thereof promptly after the expiration date.
You 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 initial Securities. We will pay all charges and expenses,
other than applicable taxes described below, in connection with the exchange
offer.
Neither we nor our board of managers makes any recommendation to you as to
whether to tender or refrain from tendering all or any portion of your initial
Securities pursuant to the exchange offer. In addition, no one has been
authorized to make this type of recommendation. You must make your own decision
whether to tender pursuant to the exchange offer and, if you do tender, the
aggregate amount of initial Securities to tender. In making
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these decisions, you should read this prospectus and the letter of transmittal
and consult with your advisers. You should make the decision whether to tender
based on your own financial position and requirements.
THE EXCHANGE OFFER IS SCHEDULED TO EXPIRE ON [_________], BUT WE HAVE THE
ABILITY TO EXTEND THE EXPIRATION DATE.
The exchange offer expires on the expiration date. The term "expiration
date" means 5:00 p.m., New York City time, on __________, unless we in our sole
discretion extend the period during which the exchange offer is open. If we do
so, the term "expiration date" will mean the latest time and date to which the
exchange offer is extended. We may extend the exchange offer at any time and
from time to time by giving oral or written notice to the exchange agent and by
timely public announcement. 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.
During any extension of the exchange offer, all initial Securities previously
tendered pursuant to the exchange offer will remain subject to the exchange
offer.
WE CAN WAIVE CONDITIONS TO THE EXCHANGE OFFER AND AMEND THE EXCHANGE OFFER IN
OTHER WAYS
We reserve the right (1) to delay accepting any initial Securities, to
extend the exchange offer or to terminate the exchange offer and not accept
initial Securities not previously accepted for any reason, including if any of
the conditions to the exchange offer described below are not satisfied and are
not waived by us, or (2) to amend the terms of the exchange offer in any
manner, whether prior to or after the tender of any of the initial Securities.
If any such delay, extension, termination or amendment occurs, we will give
oral or written notice to the exchange agent and will either issue a public
announcement or give notice to the holders of the initial Securities as
promptly as practicable.
If (1) we waive any material condition to the exchange offer or amend
the exchange offer in any other material respect and (2) the exchange offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day after the date that notice of the waiver or amendment
is first published, sent or given, then the exchange offer will be extended
until the expiration of the five business day period.
FOLLOWING IS A DESCRIPTION OF THE PROCEDURES YOU MUST FOLLOW IN ORDER TO TENDER
YOUR INITIAL SECURITIES IN THE EXCHANGE OFFER.
THE ITEMS YOU MUST SUBMIT IN ORDER TO TENDER YOUR INITIAL SECURITIES
To tender in the exchange offer, you must (1) complete, sign and date the
letter of transmittal, or a facsimile thereof, (2) have the signatures thereon
guaranteed if required by the letter of transmittal and (3) mail or otherwise
deliver the letter of transmittal, together with any other required documents
or an agent's message in case of book-entry delivery as described below, to the
exchange agent before the expiration date. In addition, either
o certificates for the initial Securities being tendered must be
received by the exchange agent along with the letter of transmittal
on or before the expiration date,
o a timely confirmation of a book-entry transfer of the initial
Securities, if this procedure is available, into the exchange agent's
account at The Depository Trust Company pursuant to the procedure for
book-entry transfer described below, along with the letter of
transmittal must be received by the exchange agent on or before the
expiration date, or
o you must comply with the guaranteed delivery procedures described
below.
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THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND SOLE RISK. IF YOU DELIVER BY
MAIL, WE RECOMMEND REGISTERED MAIL (RETURN RECEIPT REQUESTED AND PROPERLY
INSURED) OR AN OVERNIGHT DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR INITIAL
SECURITIES SHOULD BE SENT TO US.
SPECIAL CIRCUMSTANCES THAT MAY APPLY TO YOUR TENDER
To be tendered effectively, the initial Securities, letter of transmittal
and all other required documents, or, in the case of a participant in The
Depository Trust Company, an agent's message must be received by the exchange
agent prior to 5:00 p.m., New York City time, on the expiration date. Except in
the case of a participant in The Depository Trust Company who transfers initial
Securities by an agent's message, delivery of all documents must be made to the
exchange agent at its address set forth on the back of this prospectus. You may
also request your respective broker, dealer, commercial bank, trust company or
nominee to effect your tender for you.
Your tender of initial Securities will constitute an agreement between you
and us in accordance with the terms and subject to the conditions set forth in
the prospectus and in the letter of transmittal. If you tender less than all of
your initial Securities, you should fill in the amount of initial Securities
being tendered in the appropriate box on the letter of transmittal. The entire
amount of initial Securities delivered to the exchange agent will be deemed to
have been tendered unless you indicate otherwise.
Only a holder of initial Securities may tender initial Securities in the
exchange offer. The term "holder" means any person in whose name initial
Securities are registered on our books or any other person who has obtained a
properly completed bond power from the registered holder.
Any beneficial owner whose initial Securities are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct the
registered holder to tender on its behalf. If the beneficial owner wishes to
tender on its own behalf, the beneficial owner must, prior to completing and
executing the letter of transmittal and delivering its initial Securities,
either make appropriate arrangements to register ownership of the initial
Securities in the beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a firm (an "eligible institution") that is a
member of a recognized signature guarantee medallion program within the meaning
of Rule 17Ad-15 under the Exchange Act, unless the initial Securities tendered
pursuant thereto are tendered (1) by a registered holder who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal or (2) for the account of an
eligible institution. If signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, the guarantee must be by an eligible
institution.
If the letter of transmittal is signed by a person other than the
registered holder of any initial Securities listed therein, the initial
Securities must be endorsed or accompanied by bond powers and a proxy which
authorizes such person to tender the initial Securities on behalf of the
registered holder, in each case as the name of the registered holder appears on
the initial Securities. If the letter of transmittal or any initial Securities
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 person should so indicate when signing, and
unless waived by us, evidence satisfactory to us of their authority to so act
must be submitted with the letter of transmittal.
OUR RIGHTS IN CONNECTION WITH THE TENDERING PROCEDURES
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered initial Securities will be determined
by us in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all initial Securities not
properly tendered or any initial Securities which,
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if accepted by us, would be unlawful. We also reserve the right to waive any
irregularities or conditions of tender as to particular initial Securities. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of initial Securities must be cured within such time as we determine.
Neither we, the exchange agent or any other person will be under any duty to
give notification of defects or irregularities with respect to tenders of
initial Securities, nor will we or any of them incur any liability for failure
to give notification. Tenders of initial Securities will not be deemed to have
been made until any irregularities have been cured or waived. Any initial
Securities received by the exchange agent that are not properly tendered, and
which have defects or irregularities which have not been timely cured or
waived, will be returned without cost to the holder by the exchange agent as
soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion (1) to purchase
or make offers for any initial Securities that remain outstanding subsequent to
the expiration date or to terminate the exchange offer, and (2) to the extent
permitted by applicable law, to purchase initial Securities in the open market,
in privately negotiated transactions or otherwise. We have no present plan to
acquire any initial Securities which are not tendered in the exchange offer.
The terms of any purchases or offers could differ from the terms of the
exchange offer.
YOU MAY BE ABLE TO USE THE DEPOSITORY TRUST COMPANY IN CONNECTION WITH THE
TENDER OF YOUR INITIAL SECURITIES.
The exchange agent will make a request to establish an account with
respect to the initial Securities at The Depository Trust Company for purposes
of the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in The Depository
Trust Company may book-entry deliver initial Securities by causing The
Depository Trust Company to transfer the initial Securities into the exchange
agent's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedures for transfer on or prior to the
expiration date. If you are a participant in The Depository Trust Company and
transfer your initial Securities by an agent's message, you do not need to
transmit the letter of transmittal to the exchange agent to consummate your
exchange.
The term "agent's message" means a message transmitted through electronic
means by The Depository Trust Company to and received by the exchange agent and
forming a part of a book-entry confirmation, which states that The Depository
Trust Company has received an express acknowledgment from the participant in
The Depository Trust Company tendering the Securities that the participant has
received and agrees to be bound by the letter of transmittal and/or the notice
of guaranteed delivery discussed below, where applicable.
YOU MAY BE ABLE TO TENDER YOUR INITIAL SECURITIES BY PROVIDING A NOTICE OF
GUARANTEED DELIVERY
If you would like to tender your initial Securities, and (1) your initial
Securities are not immediately available, (2) time will not permit your initial
Securities or other required documents to reach the exchange agent before the
expiration date, or (3) the procedure for book-entry transfer cannot be
completed on a timely basis, your tender may still be effected if:
o the tender is made through an eligible institution;
o on or prior to the expiration date, the exchange agent receives from
the eligible institution a properly completed and duly executed
letter of transmittal, or in the case of a participant in The
Depository Trust Company, an agent's message, and notice of
guaranteed delivery, substantially in the form provided by us, or, in
the case of a participant in The Depository Trust Company, by an
agent's message, setting forth your name and address and the amount
of initial Securities tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery, the certificates for all physically tendered initial
Securities, in proper form for transfer, or a book-entry
confirmation, as the case may
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be, and any other documents required by the letter of transmittal,
will be deposited by the eligible institution with the exchange
agent; and
o the certificates for all physically tendered initial Securities, in
proper form for transfer, or a book-entry confirmation, as the case
may be, and any other documents required by the letter of transmittal
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.
A tender will be deemed to have been received as of the date when your
properly completed and duly signed letter of transmittal accompanied by your
initial Securities is received by the exchange agent, or if you are a
participant in The Depository Trust Company, as of the date when an agent's
message has been received by the exchange agent. Issuances of exchange
Securities in exchange for initial Securities tendered pursuant to a notice of
guaranteed delivery by an eligible institution will be made only against
deposit of the letter of transmittal (and any other required documents) and the
tendered initial Securities.
FOLLOWING IS A DESCRIPTION OF THE TERMS AND CONDITIONS OF THE LETTER OF
TRANSMITTAL. THESE TERMS AND CONDITIONS ARE PART OF THE EXCHANGE OFFER.
The letter of transmittal contains the following terms and conditions,
among others, which are part of the exchange offer:
[] You represent and warrant that you have full authority to tender your
initial Securities.
[] You agree to, upon our request, execute and deliver any additional
documents deemed by us to be necessary or desirable to complete the
tender of your initial Securities.
[] You acknowledge that the tender of your initial Securities will
constitute an agreement between you and us as to the terms and
conditions of the exchange offer described in this prospectus.
[] You make the representations and warranties described above.
[] Your obligations under the letter of transmittal will be binding on
your successors, assigns, executors, administrators, trustees in
bankruptcy and legal and personal representatives.
YOU MAY WITHDRAW A TENDER OF YOUR INITIAL SECURITIES PRIOR TO THE EXPIRATION
DATE.
Initial Securities tendered pursuant to the exchange offer may be
withdrawn at any time prior to 5:00 p.m. New York City time, on the expiration
date. For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
exchange agent at its address set forth on the back of this prospectus. Any
notice of withdrawal must specify the name of the person having tendered the
initial Securities to be withdrawn, identify the initial Securities to be
withdrawn, specify the name in which the initial Securities are registered if
different from that of the withdrawing holder, accompanied by evidence
satisfactory to us that the person withdrawing the tender has succeeded to the
beneficial ownership of the initial Securities being withdrawn. If certificates
for initial Securities have been delivered or otherwise identified to the
exchange agent, then, prior to the release of the certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
eligible institution unless such holder is an eligible institution. If initial
Securities have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at The Depository Trust Company to be credited with the withdrawn
initial Securities and otherwise comply with the Depository Trust Company's
procedures. If any initial Securities are tendered for exchange but are not
exchanged for any reason, or if any initial Securities are submitted for a
greater principal amount than the holder desires to exchange, the unaccepted or
nonexchanged initial Securities will be returned to the
22
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holder without cost to the holder as soon as practicable after withdrawal,
rejection of tender, termination of the exchange offer or submission of
nonexchanged initial Securities.
IF YOU WITHDRAW YOUR TENDER, YOU MAY RETENDER YOUR INITIAL SECURITIES PRIOR TO
THE EXPIRATION DATE IN ACCORDANCE WITH THE PROCEDURES FOR TENDERING DESCRIBED
ABOVE.
Withdrawals of tenders of initial Securities may not be rescinded. Initial
Securities 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 above.
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,
and our determination will be final and binding on all parties. Neither we, any
affiliates or assigns of ours, the exchange agent nor any other person will 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.
FOLLOWING IS A DESCRIPTION OF HOW WE WILL ACCEPT INITIAL SECURITIES AND DELIVER
EXCHANGE SECURITIES.
Upon the terms and subject to the conditions of the exchange offer, we
will exchange, and will issue to the exchange agent, exchange Securities for
initial Securities validly tendered and not withdrawn promptly after the
expiration date. For the purposes of the exchange offer, we will be deemed to
have accepted for exchange validly tendered initial Securities when and if we
have given oral or written notice thereof to the exchange agent. The exchange
agent will act as agent for the tendering holders of initial Securities for the
purposes of receiving exchange Securities from us and causing the initial
Securities to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the exchange offer, delivery of exchange
Securities to be issued in exchange for accepted initial Securities will be
made by the exchange agent only after timely receipt by the exchange agent of
certificates for such initial Securities or a timely book-entry confirmation of
the initial Securities into the exchange agent's account at The Depository
Trust Company, a properly completed and duly executed letter of transmittal and
all other required documents, or, in the case of a book-entry delivery, an
agent's message.
THE CIRCUMSTANCES IN WHICH WE WILL NOT BE REQUIRED TO EFFECT THE EXCHANGE OFFER
ARE DESCRIBED BELOW.
Notwithstanding any other provisions of the exchange offer, or any
extension of the exchange offer, we will not be required to accept for
exchange, or to exchange, any initial Securities for any exchange Securities,
and, as described below, may terminate the exchange offer (whether or not any
initial Securities have previously been accepted for exchange) or may waive any
conditions to or amend the exchange offer, if any of the following conditions
has occurred or exists or has not been satisfied:
o the exchange offer, or the making of any exchange by a holder,
violates any applicable law or any applicable interpretation of the
staff of the Securities and Exchange Commission;
o in our reasonable judgment there is be threatened, instituted or
pending any action or proceeding before, or any injunction, order or
decree has been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission, (1)
seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the exchange
offer, (2) assessing or seeking any damages as a result thereof, or
(3) resulting in a material delay in our ability to accept for
exchange or exchange some or all of the initial Securities pursuant
to the exchange offer;
o any statute, rule, regulation, order or injunction is sought,
proposed, introduced, enacted, promulgated or deemed applicable to
the exchange offer or any of the transactions contemplated by the
exchange
23
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offer by any government or governmental authority, domestic or
foreign, or any action will have been taken, proposed or threatened
by any government, governmental authority, agency or court, domestic
or foreign, that in our reasonable judgment might directly or
indirectly result in any of the consequences referred to in clauses
(1), (2) or (3) immediately above or, in our reasonable judgment,
might result in the holders of exchange Securities having obligations
with respect to resales and transfers of exchange Securities which
are greater than those described in the interpretations of the staff
of the Securities and Exchange Commission referred to in this
prospectus, or would otherwise make it inadvisable to proceed with
the exchange offer;
o there will have occurred (1) any general suspension of trading in, or
general limitation on prices for, securities on the New York Stock
Exchange, (2) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any
limitation by any governmental agency or authority that adversely
affects the extension of credit to us, or (3) a commencement of a
war, armed hostilities or other similar international calamity
directly or indirectly involving the United States, or, in the case
any of the foregoing exists at the time of commencement of the
exchange offer, a material acceleration or worsening thereof; or
o a material adverse change will have occurred or be threatened in our
business, condition (financial or otherwise), operations, stock
ownership or prospects.
The foregoing conditions are for our sole benefit and may be asserted by
us with respect to all or any portion of the exchange offer regardless of the
circumstances (including any action or inaction by us) giving rise to such
condition or may be waived by us in whole or in part at any time or from time
to time in our sole discretion. Our failure at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, and each right
will be deemed an ongoing right which may be asserted at any time or from time
to time. In addition, we have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to amend the exchange offer.
Any determination by us concerning the fulfillment or non-fulfillment of any
conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any initial Securities
tendered and no exchange Securities will be issued in exchange for any such
initial Securities, if at such time any stop order will be threatened or in
effect with respect to (1) the registration statement of which this prospectus
constitutes a part or (2) the qualification of the indenture under the Trust
Indenture Act of 1939.
THE BANK OF NEW YORK WILL ACT AS EXCHANGE AGENT FOR THE EXCHANGE OFFER.
The Bank of New York has been appointed as the exchange agent for the
exchange offer. The Bank of New York also acts as trustee under the indenture.
Delivery of letters of transmittal and any other required documents and
questions, requests for assistance and requests for additional copies of this
prospectus or the letter of transmittal, should be directed to the exchange
agent at its address and numbers set forth on the back of this prospectus.
Except in the case of a participant in The Depository Trust Company who
transfers initial Securities by an agent's message, delivery to an address
other than as set forth herein, or transmissions of instructions via a
facsimile or telex number other than to the exchange agent as set forth herein,
will not constitute a valid delivery.
WE ARE REQUIRED TO PAY THE FEES AND EXPENSES DESCRIBED BELOW IN CONNECTION
WITH THE EXCHANGE OFFER.
We have not retained any dealer-manager or similar agent in connection
with the exchange offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of the exchange offer. We will, however, pay
the exchange agent reasonable and customary fees for its services and will
reimburse it for reasonable out-of-pocket expenses in connection therewith. We
will also pay brokerage houses and other custodians, nominees
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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 initial Securities, and in handling tenders for their customers. We
estimate that the expenses we will incur in connection with the exchange offer,
including the fees and expenses of the exchange agent and printing, accounting
and legal fees, will be approximately $200,000.
YOU MAY BE REQUIRED TO PAY TRANSFER TAXES IN CONNECTION WITH YOUR TENDER.
Holders who tender their initial Securities for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, exchange Securities are to be delivered to, or are to be issued in the
name of, any person other than a registered holder of the initial Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of initial Securities 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 from payment is not submitted
with the letter of transmittal, the amount of such transfer taxes will be
billed directly to the tendering holder.
NO ONE ELSE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH INFORMATION REGARDING THE
EXCHANGE OFFER.
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those
contained in this prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by us.
Neither the delivery of this prospectus nor any exchange made under this
prospectus will, under any circumstances, create any implication that there has
been no change in our affairs since the respective dates as of which
information is given in this prospectus.
The exchange offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of initial Securities in any jurisdiction in which the
making of the exchange offer or the acceptance thereof would not be in
compliance with the laws of the jurisdiction. However, we may, at our
discretion, take such action as we may deem necessary to make the exchange
offer in any such jurisdiction and extend the exchange offer to holders of
initial Securities in the jurisdiction. In any jurisdiction that has securities
laws or blue sky laws which require the exchange offer to be made by a licensed
broker or dealer, the exchange offer is being made on behalf of us by one or
more registered brokers or dealers which are licensed under the laws of the
jurisdiction.
YOU WILL NOT HAVE APPRAISAL RIGHTS.
Holders of initial Securities will not have dissenters' rights or
appraisal rights in connection with the exchange offer.
THE FEDERAL INCOME TAX CONSEQUENCES OF YOUR EXCHANGE.
The exchange of initial Securities for exchange Securities will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of the
exchange.
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USE OF PROCEEDS
The exchange offer satisfies an obligation under the registration rights
agreement. We will not receive any cash proceeds from the exchange offer.
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth our capitalization as of September 30,
1999. This table should be read in conjunction with our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus.
SEPTEMBER 30, 1999
(UNAUDITED)
---------------------
Common Shareholders' Equity:..................... $1,836,163
MidAmerican Enery preferred securities, not
subject to mandatory redemption............... 31,759
Preferred securities, subject to mandatory
redemption:
MidAmerican Energy preferred securities....... 50,000
MidAmerican Energy-obligated preferred
securities of subsidiary trust holding
solely MidAmerican Energy junior
subordinated debentures.................. 101,598
Long-term debt:
MidAmerican Funding .......................... 702,742
MidAmerican Energy long-term debt............. 759,683
Nonregulated subsidiaries notes............... 70,000
Notes payable.................................... 89,115
Current portion of long-term debt................ 215,635
----------
Total capitalization........................ $3,856,695
==========
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SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data of MHC for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 set forth below have been derived from audited financial statements of MHC. The selected consolidated financial data of MHC for the nine months ended September 30, 1998 and January 1, 1999 through March 11, 1999, and the selected consolidated financial data of MidAmerican Funding for the period March 12, 1999 through September 30, 1999, set forth below have been derived from unaudited financial statements. You should read the financial data set forth below in conjunction with the historical consolidated financial statements of MHC and MidAmerican Funding and related notes thereto included and incorporated by reference in this registration statement.
The summary pro forma as adjusted information of MidAmerican Funding is based on the historical financial data of MHC and MidAmerican Funding and gives effect to the offering of the initial Securities and the merger, using proceeds from the offering and the equity contributions from MidAmerican Holdings. In each case, the information is presented as if such transactions had occurred at the beginning of the period presented, with respect to the statement of operations data and other financial data. The summary pro forma as adjusted financial information does not purport to represent what the results of operations or financial condition of MidAmerican Funding actually would have been had the merger and the related financing transactions in fact occurred on the assumed dates, nor does it purport to project the results of operations and financial position for any future period. You should read the summary pro forma as adjusted financial information set forth below in conjunction with the unaudited pro forma condensed consolidated financial statements and the historical consolidated financial statements of MHC and the related notes thereto appearing elsewhere in this registration statement.
HISTORICAL DATA
| MIDAMERICAN
MHC (THE PREDECESSOR) | FUNDING
------------------------------------------------------ ------------------- | ------------
NINE MONTHS |
YEARS ENDED DECEMBER 31, ENDED JAN. 1 - | MAR. 12 -
------------------------------------------------------ SEPT. 30, MAR. 11, | SEPT. 30,
1994 1995 1996 1997 1998 1998 1999 | 1999
---------- --------- --------- --------- ---------- --------- -------- | -----------
|
Revenues................. $1,635,187 $1,655,474 $1,911,204 $1,969,537 $1,775,924 $1,333,464 $383,066 | $961,885
Operating income(1)...... 264,783 292,464 349,399 276,726 271,412 235,372 58,898 | 166,863
Income from continuing |
operations(2)(7)...... 123,098 119,705 143,761 139,332 127,154 107,105 16,789 | 108,628
Net income............... 120,189 122,764 131,046 135,104 131,318 113,355 17,210 | 119,886
|
OTHER FINANCIAL DATA: |
Ratio of earnings to |
fixed charges(3)...... 2.4x 2.5x 2.8x 2.8x 2.8x 3.1x 2.7x | 3.3x
|
| MIDAMERICAN
MHC (THE PREDECESSOR) | FUNDING
-------------------------------------------------------------------------- | ----------------
AS OF DECEMBER 31, | AS OF SEPT. 30,
1994 1995 1996 1997 1998 | 1999
----------- ----------- ----------- ----------- ----------- | --------------
|
|
BALANCE SHEET DATA: |
Total assets.................. $4,388,894 $4,470,097 $4,521,848 $4,278,091 $4,244,336 | $5,264,570
Long-term debt(4)............. 1,471,127 1,468,617 1,474,701 1,178,769 1,045,548 | 1,748,060
Power purchase contract....... 137,809 125,729 111,222 97,504 83,127 | 83,127
Short-term borrowings......... 124,500 184,800 161,990 138,054 339,826 | 89,115
Preferred stock: |
Not subject to mandatory.. |
redemption.............. 89,955 89,945 31,769 31,763 31,759 | 31,759
Subject to mandatory |
redemption(5)........... 50,000 50,000 150,000 150,000 150,000 | 151,598
Common equity(6).............. 1,204,112 1,225,715 1,239,946 1,301,286 1,200,950 | 1,836,163
|
PRO FORMA DATA
MIDAMERICAN FUNDING
---------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
--------------- ------------------
INCOME STATEMENT DATA:
Revenues.............................. $1,775,924 $1,344,951
Operating income...................... 241,053 219,725
Income from continuing operations(7).. 76,099 130,628
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges(3)........................ 1.9x 3.1x
|
(1) MHC's 1995 operating income reflects $33,400 of costs related to a restructuring and workforce reduction plan implemented and completed in 1995.
(2) In 1998, MHC recorded after-tax gains totaling $15,700 for sales of several properties and investments, including a portion of its investment in the common stock of McLeodUSA, Inc. Also, in 1998, MHC expensed $4,200 for transaction costs related to the merger. In 1997, MHC recorded after-tax gains totaling $11,200 for sales of assets of certain railcar businesses and a portion of a its investment in McLeodUSA, Inc. common stock. MHC recorded after-tax losses of approximately $10,200 and $9,400 for the write-down of certain nonregulated assets during 1995 and 1996, respectively. In 1996, MHC incurred $8,700 of costs in connection with its merger proposal to IES Industries, Inc.
(3) For purposes of computing historical ratios of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represent the aggregate of (a) the pre-tax income of MidAmerican Funding, and (b) fixed charges. "Fixed charges" represent interest (whether expensed or capitalized), amortization of deferred financing and bank fees, and the portion of rentals considered to be representative of the interest factor (one-third of lease payments) and preferred stock dividend requirements of majority-owned subsidiaries.
(4) Includes amounts due within one year.
(5) Post-1995 years include MHC-obligated mandatorily redeemable preferred securities of a subsidiary trust holding solely MidAmerican junior subordinated debentures.
(6) Common equity increased in 1997 primarily due to recording the market value an investment in McLeodUSA, Inc. common stock.
(7) In May 1999, MidAmerican Funding sold most of its investment in the common stock of McLeodUSA, Inc. and recorded an after-tax gain of $47,114.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
COMPANY STRUCTURE
The current corporate structure of MidAmerican Funding, LLC (Funding or Company) is the result of the merger transaction completed on March 12, 1999, involving MHC (formerly MidAmerican Energy Holdings Company) and CalEnergy Company, Inc. (CalEnergy). CalEnergy, through a reincorporation transaction, was renamed MidAmerican Energy Holdings Company (Holdings). Funding, a wholly-owned subsidiary of Holdings, acquired all of the outstanding common stock of MHC. Holdings is an exempt public utility holding company headquartered in Des Moines. References to MHC regarding information, events or transactions prior to the merger relate to the former MidAmerican Energy Holdings Company.
MHC is a holding company for MidAmerican Energy Company (MidAmerican), MidAmerican Capital Company (MidAmerican Capital), Midwest Capital Group, Inc. (Midwest Capital), MidAmerican Services Company and MidAmerican Realty Services Company (MidAmerican Realty). Prior to December 1, 1996, MidAmerican held the capital stock of MidAmerican Capital and Midwest Capital. Effective December 1, 1996, each share of MidAmerican common stock was exchanged for one share of MHC common stock. As part of the transaction, MidAmerican distributed the capital stock of MidAmerican Capital and Midwest Capital to MHC.
In October 1999, MHC distributed its investment in MidAmerican Realty to Holdings in conjunction with an initial public offering of common stock of HomeServices.Com, a successor company to MidAmerican Realty.
DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis (MD&A) addresses the financial statements of Funding and MHC. The financial statements of Funding include the results of MHC beginning March 12, 1999. Due to its significance, the results for MidAmerican are described specifically in the "Results of Operations" section of MD&A. Information related to MidAmerican also relates to MHC. Information related to MidAmerican Capital and Midwest Capital pertains only to the discussion of the financial condition and results of operations of MHC.
As discussed above, MHC's investment in MidAmerican Realty was distributed to Holdings in October 1999. Accordingly, results of operations for MidAmerican Realty are reflected as discontinued operations for each period and entity presented.
FORWARD-LOOKING STATEMENTS
From time to time, the Company or one of its subsidiaries individually may make forward-looking statements within the meaning of the federal securities laws that involve judgments, assumptions and other uncertainties beyond the control of the Company or any of its subsidiaries individually. These forward-looking statements may include, among others, statements concerning revenue and cost trends, cost recovery, cost reduction strategies and anticipated outcomes, pricing strategies, changes in the utility industry, planned capital expenditures, financing needs and availability, statements of the Company's expectations, beliefs, future plans and strategies, anticipated events or trends and similar comments concerning matters that are not historical facts. Investors and other users of the forward-looking statements are cautioned that such statements are not a guarantee of future performance of the Company and that such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include weather effects on sales and revenues, fuel prices, competitive factors, general economic conditions in the Company's service territory, interest rates, inflation and federal and state regulatory actions.
RESULTS OF OPERATIONS - 1996-1998
MHC:
The following tables provide a summary of the earnings contributions of MHC's operations for each of the years ended December 31:
1998 1997 1996
-------- ------- -------
Net Income (in millions)
Continuing operations
Utility $110.6 $119.5 $154.7
Nonregulated operations 16.5 19.8 (11.0)
Discontinued operations 4.2 (4.2) (12.7)
--------- --------- --------
Consolidated earnings $131.3 $135.1 $131.0
====== ====== ======
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MIDAMERICAN:
The following table provides a summary of the earnings contributions of MidAmerican's operations for each of the years ended December 31:
1998 1997 1996
------- -------- --------
(In millions)
Earnings on Common Stock
Continuing operations $110.6 $119.5 $154.7
Discontinued operations * - - (10.1)
------- --------- --------
Consolidated earnings $110.6 $119.5 $144.6
====== ====== ======
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* 1996 includes the net losses of MidAmerican Capital and Midwest Capital prior to their transfer to MHC on December 1, 1996.
EARNINGS SUMMARY
The following discussion details significant impacts on the results of operations for MHC, the predecessor to Funding, for the years ended December 31, 1998, 1997 and 1996.
Although utility earnings for 1998 were lower than in the prior year, a reduction was anticipated because of the electric pricing settlements achieved in 1996 and 1997 in Iowa and Illinois. Warmer-than-normal temperatures during the heating season also had a negative impact on 1998 earnings. Growth in the number of customers and in other sales factors contributed positively to earnings in 1998. Additionally, MidAmerican's successful performance in the non-retail (off-system) energy market helped offset decreases from weather and reductions in electric retail prices. Utility operating expenses increased as MidAmerican continued strengthening its customer service and marketing capabilities and adding to its information technology resources.
Beginning the second half of 1997 and continuing throughout 1998, MidAmerican charged to expense additional amortization of deferred energy efficiency costs, ongoing energy efficiency costs and certain Cooper Nuclear Station costs consistent with ratemaking treatment. These items significantly increased other operating expenses. In conjunction with expensing these items, MidAmerican began recovery of these costs from its customers, which resulted in additional revenues.
Realized after-tax gains on the sale of McLeodUSA stock and other nonregulated investments not aligned with MHC's corporate vision are also included in 1998 earnings.
DISCONTINUED OPERATIONS
MHC:
During 1996, MHC discontinued some of its nonregulated operations. The income or loss from those operations and the losses on disposal are reflected as discontinued operations in each of the periods presented in the Consolidated Statements of Income. Net assets of the discontinued operations are separately presented in the Consolidated Balance Sheets as Investment in Discontinued Operations.
In the fourth quarter of 1996, MHC and KCS Energy, Inc. (KCS) of Edison, New Jersey, signed a definitive agreement to sell a portion of MHC's nonregulated operations to KCS for $210 million in cash and warrants to purchase KCS common stock. The sale, which included MHC's oil and gas exploration and development operations, was completed in January 1997. MHC recorded an after-tax loss of $7.1 million for the transaction in 1996 and an additional $0.9 million in 1997.
In October 1997, MHC also divested a subsidiary that developed and operated a computerized information system which facilitated real-time exchange of power in the electric industry. MHC recorded a $4.0 million anticipated after-tax loss on disposal of those operations in September 1996 and an additional $3.2 million after-tax loss on disposal in September 1997.
In October 1999, MHC distributed its investment in MidAmerican Realty to Holdings in conjunction with an initial public offering of common stock of HomeServices.Com, a successor company to MidAmerican Realty.
MIDAMERICAN:
MidAmerican received $15.3 million in cash in 1996 as final settlement for the sale of a former coal mining subsidiary which was reflected as discontinued operations in 1982 by one of MidAmerican's predecessors. The final settlement included reacquisition by the buyer of preferred equity issued to MidAmerican and the settlement of reclamation reserves. MidAmerican recorded an after-tax loss on disposal of $3.3 million for the transaction in September 1996. This transaction is included in discontinued operations in the consolidated financial statements of MidAmerican as well as MHC. Discontinued operations of MidAmerican includes the net earnings/loss of MidAmerican Capital and Midwest Capital for periods prior to their December 1, 1996, transfer to MHC.
UTILITY GROSS MARGIN
REGULATED ELECTRIC GROSS MARGIN:
1998 1997 1996
-------- -------- -------
(In millions)
Operating revenues $1,170 $1,126 $1,099
Cost of fuel, energy and capacity 226 236 234
-------- ------- --------
Electric gross margin $ 944 $ 890 $ 865
======= ======= =======
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1998 vs 1997 -
Electric gross margin improved $54 million in 1998 compared to 1997. An increase in revenues from energy efficiency cost recovery and the Cooper Tracker (discussed below) accounted for $26.1 million and $2.5 million, respectively, of the increase in margin. Increases in revenues from these factors are substantially offset by increases in other operating expenses.
Regarding the increase in energy efficiency revenues, on September 29, 1997, MidAmerican began recovering from customers its remaining deferred energy efficiency costs and current, ongoing energy efficiency costs. Deferred energy efficiency costs are costs previously incurred by MidAmerican which, in accordance with rate treatment, were not charged to expense until recovery from customers began. Recovery of deferred energy efficiency costs occurs over a four-year period from the date collection begins. Approximately $44.4 million of MidAmerican's 1998 electric revenues were from the recovery of energy efficiency
program costs compared to $18.3 million in 1997. Collection of deferred energy efficiency costs will decrease starting in 1999 as various recovery periods are completed. Refer to the discussion under Energy Efficiency in the "Operating Activities and Other Matters" section of MD&A for further discussion.
The Cooper Tracker allows MidAmerican to collect on a current basis the Iowa portion of expenses for Cooper Nuclear Station (Cooper) capital improvement advances. Prior to the Cooper Tracker, which began in July 1997, capital improvement advances were capitalized when incurred and amortized over future periods in accordance with rate treatment.
Electric margin also improved due to an increase in sales volume. In total, electric retail sales for 1998 increased 2.7% compared to 1997. Moderate but steady growth in the number of customers increased electric gross margin by $8.6 million compared to 1997. In addition, an increase in sales that are not dependent on weather contributed $15.5 million to the increase. When compared to normal, the impact of temperatures resulted in an estimated $2 million reduction of electric gross margin for 1998 compared to a $4 million reduction in 1997 - or, a $2 million increase in margin for 1998 compared to 1997. Temperatures in 1998 were warmer-than-normal during the heating seasons and hotter-than-normal during the cooling season.
As anticipated, the effect of rate proceedings in 1996 and 1997 reduced electric gross margin for 1998 compared to 1997. Revenues in 1998 reflect the full-year effect of a June 1997 price reduction for Illinois customers and a small price reduction in August 1998 related to Illinois utility industry restructuring. Prices for Iowa residential customers were reduced $10 million annually in July 1997 and $5 million annually in June 1998. Since July 1997, MidAmerican has reduced prices a total of approximately $10 million annually for its Iowa commercial and industrial customers. The commercial and industrial price reductions were achieved through negotiated contracts, a pilot project and tariffed rate reductions. The combined effect of price reductions decreased revenues and electric margin by $17.0 million for 1998 compared to 1997.
Prior to July 11, 1997, MidAmerican was allowed to recover its energy costs from most of its electric utility customers through energy adjustment clauses (EACs) included in revenues. Effective July 11, 1997, the EAC was eliminated for Iowa customers as part of MidAmerican's Iowa pricing plan. Previously, variations in energy costs did not affect gross margin or net income due to corresponding changes in revenues collected through the EACs. With the elimination of the Iowa EAC, fluctuations in energy costs now may have an impact on gross margin and net income.
Under the Iowa pricing settlement, revenues from off-system sales are considered a component of total energy costs. Accordingly, electric margin in 1998 reflects MidAmerican's strong performance in the off-system market relative to 1997. Margins on off-system sales, which account for most of MidAmerican's sales for resale, contributed $14.2 million more to gross margin in 1998 than in 1997. Though related sales volumes decreased 11.5% compared to the 1997 level, MidAmerican obtained improved margins per unit for the 1998 sales. Refer to comments on the energy market under "Industry Evolution" in the "Operating Activities and Other Matters" section of MD&A.
1997 vs. 1996 -
Electric margin for 1997 increased $25 million compared to 1996. An increase in revenues from energy efficiency cost recovery accounted for $9.0 million of the increase in margin while revenues from the Cooper Tracker totaled $3.9 million in 1997, the first year for that collection mechanism.
Retail sales of electricity increased 2.6% compared to 1996 sales. A moderate but steady growth in the number of customers contributed $11.1 million to the increase in electric gross margin. Compared to 1996, sales and gross margin improved due to the impact of temperatures in MidAmerican's service territory. Although temperatures overall were milder than normal in both years, comparatively, margin for 1997 increased $5 million over 1996 margin due to the effect of weather. When compared to normal, the impact of temperatures
resulted in a $4 million reduction of electric gross margin in 1997 compared to a $9 million reduction in the 1996 margin. Additionally, revenues and margin increased due to an improvement in sales not dependent on weather.
As discussed above, the Iowa EAC was eliminated in July 1997. Energy costs per unit for the remainder of 1997 were below the amount recovered in rates under the Iowa pricing plan and resulted in an increase to gross margin. Margins on off-system sales contributed $3.2 million more to electric margin in 1997 than in 1996. Additionally, the 1997 electric margin benefited from a $6.2 million increase in transmission revenues.
In total, price reductions decreased electric gross margin by $21.4 million in 1997 compared to 1996. In addition to the price reductions discussed above, MidAmerican reduced prices for its Illinois customers by $13.1 million annually on November 3, 1996, in conjunction with a rate reduction proceeding. In Iowa, MidAmerican reduced its electric retail prices by $8.7 million effective November 1, 1996. This was the first reduction related to MidAmerican's pricing plan filed in June 1996. Refer to "Rate Matters" in "Liquidity and Capital Resources" later in MD&A for further information regarding prices in Iowa.
REGULATED GAS GROSS MARGIN:
1998 1997 1996
-------- -------- --------
(In millions)
Operating revenues $ 430 $ 536 $ 537
Cost of gas sold 243 346 345
------ ------ ------
Gas gross margin $ 187 $ 190 $ 192
===== ===== =====
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1998 vs. 1997 -
MidAmerican's regulated gas revenues include purchase gas adjustment clauses (PGAs) through which MidAmerican is allowed to recover the cost of gas sold from most of its gas utility customers. Consequently, fluctuations in the cost of gas sold do not affect gross margin or net income because revenues reflect comparable fluctuations in revenues from PGAs. A decrease in the 1998 per-unit cost of gas compared to 1997 reduced revenues and cost of gas sold by approximately $59 million. MidAmerican recently made a filing with the IUB that would modify the use of the PGA beginning May 1, 2000. Refer to Small Volume Gas Transportation under the "Operating Activities and Other Matters" section of MD&A for further discussion.
Recovery of gas energy efficiency costs resulted in a $9.2 million increase in revenues and gross margin for 1998 compared to 1997. As discussed in the "Electric Gross Margin" section, on September 29, 1997, MidAmerican began recovery of its deferred energy efficiency costs that had not previously been approved for recovery. Approximately $17.5 million of MidAmerican's 1998 gas revenues were from the recovery of energy efficiency program costs compared to $8.3 million in 1997. Again, increases in revenues from energy efficiency cost recovery are substantially offset by corresponding increases in other operating expenses.
Unusually mild temperatures during the 1998 heating seasons resulted in a decrease in gas margin for 1998. Temperatures in 1998 were 15.6% warmer than normal, reducing gas gross margin in 1998 by an estimated $18 million compared to normal. In 1997, temperatures were closer to normal, resulting in a reduction of the 1997 margin of only $2 million. Comparing the two years then, gas margin decreased $16 million in 1998 due to the variation in temperatures. Customer growth, which contributed $1.6 million to gas margin in 1998, and other sales factors helped mitigate the negative effect of weather on the 1998 margin. In total, retail sales of natural gas in 1998 decreased 12.7% compared to 1997.
1997 vs. 1996 -
Gas gross margin for 1997 decreased $2 million compared to 1996. On a comparative basis, the 1997 gas margin decreased an estimated $10 million due to the effect of weather. Temperatures in 1997 were close to normal, resulting in a $2 million reduction in margin, while temperatures in 1996 were 10.1% colder than normal, contributing $8 million to the 1996 gas gross margin. The decrease in gross margin due to weather was partially
offset by a $2.3 million increase from growth in the number of retail customers. In total, retail sales of natural gas in 1997 decreased 7.1% compared to 1996 sales.
Revenues from energy efficiency cost recovery contributed $3.4 million more to gas margin in 1997 than in 1996. Revenues and cost of gas sold increased approximately $25 million in 1997 due to an increase in the average cost of gas per unit compared to 1996.
REGULATED OPERATING EXPENSES
OTHER OPERATING EXPENSES
Regulated other operating expenses increased $32.3 million for 1998 compared to 1997. An increase in energy efficiency costs accounted for $31.6 million of the increase in other operating expenses compared to 1997. Refer to the "Electric Gross Margin" section for further comments on energy efficiency costs.
Operating expenses related to Cooper increased due in part to the ratemaking treatment for Cooper capital improvements, as discussed in the "Electric Gross Margin" section. Cooper capital improvement advances are now expensed when incurred. MidAmerican is recovering the Iowa portion of these costs through the Cooper Tracker, while recovery in Illinois is included in base rates. This change accounted for a $1.7 million increase in nuclear operations costs compared to 1997. Excluding those costs, nuclear operations expenses decreased $8.2 million for 1998 compared to 1997 due to an extended outage at the Quad Cities Station.
MidAmerican continued its focus on customer service and reliability during 1998. Further emphasis on customer service operations and marketing-related efforts, resulted in increases in customer service costs, IT consulting costs, advertising costs and other related expenses. Increases in such expenses accounted for a majority of the remaining increase. The impact of these items was partially offset by a decrease in employee benefits expenses.
Regulated other operating expenses increased $79.4 million in 1997 compared to 1996. Nuclear operating costs increased $14.0 million compared to 1996. Of that increase, $4.5 million related to the change in rate treatment of Cooper capital improvement advances. An increase in energy efficiency costs, including amortization of historical costs and charging expense for current costs, accounted for $13.1 million of the increase in other operating expenses.
MidAmerican's efforts to improve its customer service and reliability resulted in increases in consulting costs, advertising and other related expenses. In addition, 1997 reflects increases in uncollectable accounts expense, employee incentive compensation and certain employee benefits expenses. Other operating expenses for 1997 also reflect an increase in transmission wheeling expense due in part to changes required by FERC Order Nos. 888 and 889.
MAINTENANCE
Maintenance expenses increased $9.4 million in 1998 compared to 1997. An increase in maintenance costs at the Quad Cities Station accounted for $8.0 million of the total. Additionally, MidAmerican incurred repair costs for storms in June 1998, totaling $3.8 million, compared to $2.0 million in 1997 for costs related to a snowstorm in October of that year.
Maintenance expenses increased $9.5 million for 1997 compared to 1996. The main cause of the increase was an adjustment in 1996 to align power plant inventory accounting of predecessor companies which reduced 1996 expense by $6.2 million. Restoration costs for the October 1997 snowstorm also contributed to the increase, while maintenance expenses at the Quad Cities Station decreased $2.5 million in 1997 compared to 1996.
DEPRECIATION AND AMORTIZATION
The increase in 1998 expense compared to 1997 is due to additional decommissioning funding for Quad Cities Station, an increase in utility plant and regulatory accruals.
PROPERTY AND OTHER TAXES
Deregulation of the Illinois electric utility industry resulted in changes in the way certain taxes are assessed in Illinois. The changes resulted in a decrease in MidAmerican's tax expense for 1998 compared to 1997. One of the taxes is now assessed directly on the energy consumer instead of through the utility. Accordingly, MidAmerican's electric revenues reflect an equal reduction in 1998. Property taxes increased $8.8 million in 1997 compared to 1996 due primarily to an increase in the assessed value for Iowa property tax purposes.
NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES
MIDAMERICAN:
Revenues and Cost of Sales -
Revenues from wholesale natural gas marketing operations increased $32.5 million in 1998 compared to 1997 due to an increase of 18 million MMBtus (88%) in related sales volumes. A decrease in the average price per unit, reflective of a lower cost of gas per unit, partially offset the effect of increased sales. Cost of sales related to natural gas marketing for 1998 reflects the increase in sales and the decrease in the average cost of gas per unit. Total gross margin (total price less cost of gas) on nonregulated natural gas sales was unchanged compared to 1997.
Other activities contributing to the increase in nonregulated revenues for 1998 relate to work for other utilities and work beyond the meter for customers. In addition, the 1998 amount includes revenues of CBEC Railway, a subsidiary of MidAmerican that operates rail services on a section of railroad track it owns. MidAmerican's revenues in 1998 and 1997 also include pre-tax income from awards for successful performance under its incentive gas procurement program. Under the program, if MidAmerican's cost of gas varies from an established reference price range, then the savings or cost is shared between customers and shareholders. The awards totaled $4.3 million and $4.9 million in 1998 and 1997, respectively.
For the comparison of 1997 with 1996, revenues from wholesale natural gas marketing operations increased $23.1 million due to an increase in sales volumes of 7 million MMBtus (51%). In addition, the average price per unit increased, reflecting an increase in the average cost of gas per unit. Cost of sales related to natural gas marketing for 1997 reflects the increases in sales and the average cost of gas per unit. Total gross margin on nonregulated natural gas sales decreased $0.3 million compared to 1996.
Nonregulated revenues for 1997 also reflect a $2.2 million increase compared to 1996 in MidAmerican's award for performance under its incentive gas procurement program.
Other Nonregulated Operating Expenses -
Other operating expenses increased in 1998 compared to 1997 due to costs related to work for other utilities, costs of work beyond the meter for MidAmerican customers, costs of appliance services and costs of initiatives for new products and services in preparation for deregulation.
The increase in 1997 costs compared to 1996 relates to appliance services and initiatives for new products and services.
MHC:
Revenues of MidAmerican Capital and Midwest Capital decreased a total of $163 million in 1998 compared to 1997, primarily due to lower volumetric sales associated with the expiration of wholesale gas contracts which were not replaced. Accordingly, nonregulated cost of gas sold decreased significantly in 1998 from 1997.
Nonregulated other operating expenses for 1998 a decrease of approximately $5.7 million due primarily to administrative costs in 1997 which are no longer incurred because of the absence of operations MHC sold in 1997.
NON-OPERATING INCOME AND INTEREST EXPENSE
MIDAMERICAN:
Interest and Dividend Income-
In December 1997, MidAmerican sold its billed accounts receivable. A portion of the consideration for the sale was a subordinated note from the purchaser. Interest income on that note caused the increase in 1998 compared to 1997. Refer to FINANCING ACTIVITIES, PLANS AND AVAILABILITY later in MD&A for discussion of the sale.
Other, Net -
Other, Net, for 1998 and 1997 reflects the discount on sold accounts receivable, net of a fee for servicing the accounts. The net discount reduced Other, Net by $7.0 million and $0.3 million in 1998 and 1997, respectively.
In September 1997, MidAmerican received a $15 million cash payment from Nebraska Public Power District (NPPD) as settlement for a lawsuit filed by MidAmerican against NPPD. Approximately $12 million was refunded to MidAmerican's customers. The remaining amount was retained by MidAmerican for recovery of litigation costs in the lawsuit. Other, Net for 1997 reflects $2.2 million of pre-tax income for recovery of litigation costs incurred in prior years.
In addition, Other, Net includes the recognition of deferred income from energy efficiency programs totaling $0.2 million, $5.0 million and $3.3 million for 1998, 1997 and 1996, respectively. As discussed in the gross margin sections, MidAmerican started recovery of its remaining deferred energy efficiency costs in September 1997. Accordingly, carrying costs for, or return on, deferred balances are now being collected from customers and are reflected in revenues.
In 1996, MidAmerican recorded an initial pre-tax gain of $3.2 million on its sale of the certain storage gas supplies. MidAmerican recorded an additional $0.8 million gain in the second quarter of 1997 after receiving favorable treatment on the transaction from the Iowa Utilities Board (IUB).
Other, Net for 1997 reflects a net loss on reacquired long-term debt of $0.9 million compared to a $1.1 million net gain in 1996.
Other, Net for 1996 includes approximately $8.7 million of expenses for costs incurred by MidAmerican for its merger proposal to IES Industries Inc. in 1996.
Fixed Charges -
During 1998, MidAmerican reduced its long-term debt through maturities and refinancing. Refer to "Financing Activities, Plans and Availability" later in MD&A for more details.
An increase in the average amount of commercial paper outstanding in 1998 compared to 1997 resulted in a decrease in other interest expense for 1998.
Preferred securities of MidAmerican's subsidiary trust were issued in December 1996. MidAmerican preferred shares were reacquired at that time, resulting in the decrease in preferred dividends. Preferred dividends include net gains or losses on the reacquisition of MidAmerican preferred shares. Net losses on reacquisitions totaled $1.4 million and $1.6 million for 1997 and 1996, respectively.
MHC:
Dividend Income -
Dividend income decreased for 1998 due to MidAmerican Capital's reduced holdings of preferred stock.
Realized Gains and Losses on Securities, Net -
Net realized gains on securities for 1998 includes a $14.0 million pre-tax gain on the sale of shares of McLeodUSA common stock. Realized gains on securities in 1997 also includes an $8.0 million pre-tax gain on the sale of shares of McLeodUSA common stock.
Other, Net -
Other, net for 1998 includes a $2.7 million gain on the sale of railcars and a $2.9 million gas on the sale of real estate. During 1997, MHC sold all of the assets of its railcar repair services subsidiary and most of the assets of its railcar leasing subsidiary and recorded pre-tax gains totaling $10.0 million. Write-downs of nonregulated investments decreased Other, net by $15.6 million in 1996.
RESULTS OF OPERATION -- 1999
The following is a discussion of the historical unaudited interim results for Funding and its predecessor MHC for the year to date periods ending September 30, 1999 and 1998. Results for Funding include the results from MHC beginning March 12, 1999, in conjunction with the MidAmerican merger. Certain impacts of the MidAmerican merger are reflected in Funding's results of operations, predominantly interest costs on debt issued by Funding to complete the merger and the effects of purchase accounting, including goodwill amortization and the impacts of fair value adjustments to the carrying value of assets and liabilities. While MHC's results of operations are not included in the results of operations of Funding for all of 1999, management believes that discussion of trends in the ongoing operations that now comprise Funding provides meaningful information.
REGULATED ELECTRIC GROSS MARGIN:
MidAmerican's electric gross margin for the nine-month period ended September 30, 1999, decreased $5 million from the comparable period in 1998. The impact of various factors affecting electric margin are discussed in the following paragraphs.
Collection of deferred energy efficiency costs decreased in 1999 compared to the 1998 period due to the completion of one of the four recovery periods. Changes in revenues from energy efficiency cost recovery are substantially offset by corresponding changes in other operating expenses. Refer to the discussion under "Energy Efficiency" in the "Operating Activities and Other Matters" section of MD&A for further discussion.
Revenues and gross margin for the 1999 periods reflect price reductions which were not in effect, or were only partially in effect, during 1998. In June 1998, revenues from Iowa residential customers were reduced $5 million annually. Since July 1997, MidAmerican has reduced revenues from its Iowa commercial and industrial customers a total of approximately $10 million annually through negotiated contracts and a tariffed rate reduction. These reductions were only partially in effect in the 1998 period. Revenues from Illinois customers were reduced $0.9 million in August 1998 related to Illinois utility industry restructuring. MidAmerican also recorded a refund accrual for a revenue sharing arrangement in Iowa. Refer to "Rate Matters: Electric" in the "Operating Activities and Other Matters" section of MD&A for a discussion of revenue sharing.
Temperatures during the nine months ended September 30, 1999, were milder than those for the same period in 1998, reducing electric margin. An increase in sales not dependent on weather and moderate growth in the number of customers increased revenues, significantly offsetting the impact of the mild weather. In total, retail sales of electricity in the first nine months of 1999 were almost equal to those of the same period of 1998.
MidAmerican also sells energy and capacity in the off-system market. Margins on off-system sales, which account for most of MidAmerican's sales for resale, increased primarily due to lower costs per unit of energy sold, which in part is due to the improved availability of Quad Cities Nuclear Station in 1999. Additionally, favorable sales prices during the hot temperatures in July 1999 contributed to the increase.
Deregulation of the Illinois electric utility industry resulted in changes in the way certain taxes are assessed in Illinois. One of the taxes is now assessed directly on the energy consumer instead of through the utility. Accordingly, MidAmerican's electric revenues and electric margin reflect reductions this tax collection change.
REGULATED GAS GROSS MARGIN:
MidAmerican's regulated gas revenues include purchase gas adjustment clauses (PGAs) through which MidAmerican is allowed to recover the cost of gas sold from most of its gas utility customers. Consequently, fluctuations in the cost of gas sold do not affect gross margin or net income because revenues reflect comparable fluctuations in revenues from PGAs. A decrease in the per-unit cost of gas for the nine-months ended September 30, 1999 reduced revenues and cost of gas compared to the same period in 1998.
Recovery of gas energy efficiency program costs decreased for the 1999 nine-month period compared to the same period in 1998. Again, changes in revenues from energy efficiency cost recovery are substantially offset by corresponding changes in other operating expenses. Refer to the discussion under "Energy Efficiency" in the "Operating Activities and Other Matters" section of MD&A for further discussion.
On January 22, 1999, the IUB approved a $6.7 million annual interim increase in gas rates for Iowa retail customers effective immediately. An additional increase was implemented on May 27, 1999, as a result of the IUB's approval of a final rate increase of $13.9 million annually.
Temperatures in the first nine months of 1999 were cooler than 1998, resulting in an increase in gas gross margin for the period. The effect of cooler temperatures and customer growth resulted in an increase in retail sales of natural gas in the first nine months of 1999 compared to the 1998 period, also contributing to the margin improvement.
REGULATED OPERATING EXPENSES
Other operating expenses decreased for the nine months ended September 30, 1999, compared to the same period in 1998.
As mentioned in the gross margin discussions, the recovery of one phase of deferred energy efficiency costs is complete, and accordingly, the costs for that phase have been fully amortized to expense. As a result, energy efficiency costs decreased in the nine months ended September 30, 1999 compared to the same period in 1998.
Reductions in gas distribution costs, marketing and sales-related expenses, certain administrative and general costs and customer service costs also contributed to the decrease in other operating expenses in the nine months ended September 30, 1999 compared to the same period in 1998.
Maintenance expenses increased for the nine months ended September 30, 1999 compared to the same period in 1998 due to the timing of generating plant maintenance and an increase in gas distribution maintenance. The increases in these areas were partially offset by a decrease in both 1999 periods for maintenance at the Quad Cities Station.
Property and other taxes decreased for the nine months ended September 30, 1999 compared to the same period in 1998. MidAmerican's Iowa property tax decreased for the 1999 period due to reduced assessed values. Deregulation of the Illinois electric utility industry resulted in changes in the way certain taxes are assessed in Illinois. The changes resulted in decreases in MidAmerican's tax expense for 1999 compared to 1998. One of the taxes is now assessed directly on the energy consumer instead of through the utility. Accordingly, MidAmerican's electric revenues reflect an equal reduction in 1999 for this tax collection change.
NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES
Revenues from nonregulated operations increased for the nine months ended September 30, 1999 compared to the same period in 1998 primarily due to increased sales of wholesale natural gas. Nonregulated cost of sales increased for the same reason.
Revenues for the nine months ended September 30, 1999 reflect revenues from MidAmerican's market access service project, which began in the third quarter of 1999. This pilot project allows customers with at least 4MW of load that are participating in the project to choose their electric power supplier. MidAmerican's revenues from project participants related to non-supply services, such as distribution and transmission, continue to be reflected in regulated electric revenues.
Nonregulated other operating costs increased for the nine months ended September 30, 1999 compared to the same period in 1998, primarily due to amortization of goodwill at Funding associated with the MidAmerican merger. Increased nonregulated operating costs at MidAmerican related to nonregulated marketing initiatives.
NON-OPERATING INCOME AND INTEREST EXPENSE
Interest and Dividend Income --
Interest income increased for the nine months ended September 30, 1999 compared to the same period in 1998 due to an increase in temporary cash investments, primarily due to the sale of McLeodUSA common stock described below.
Realized Gains and Losses on Securities, Net --
In May 1999 most of the shares of McLeodUSA common stock held by MHC was sold in a secondary offering. A pre-tax gain of $78.2 million resulting from this transaction is reflected in realized gains and losses on securities, net.
Other Net --
Other, net non-operating income decreased for the nine months ended September 30, 1999 compared to the same period in 1998, primarily due to costs related to the MidAmerican merger accrued at MHC. Additionally, in gains on the sale of nonregulated investments are included in the 1998 period.
Fixed Charges --
Interest on long-term debt increased for the nine months ended September 30, 1999 compared to the same period in 1998. The increase due to primarily to interest on $700 million in debt issued by Funding in conjuction with the MidAmerican merger, partially offset by a decrease in interest expense resulting from debt maturities at MHC in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Funding has available a variety of sources of liquidity and capital resources, both internal and external. These resources provide funds required for current operations, construction expenditures, dividends, debt retirement and other capital requirements.
As reflected on the Consolidated Statements of Cash Flows, MHC had net cash provided from operating activities of $334 million in 1998 compared to $392 million in 1997. For the period ended September 30, 1999 Funding had net cash provided from operating activities of $47.5 million.
INVESTING ACTIVITIES AND PLANS
UTILITY CONSTRUCTION EXPENDITURES
MidAmerican's primary need for capital is utility construction expenditures. For the first nine months of 1999, utility construction expenditures totaled $116 million, including allowance for funds used during construction (AFUDC) and Quad Cities Station nuclear fuel purchases. All such expenditures were met with cash generated from utility operations, net of dividends.
Forecasted utility construction expenditures, including AFUDC, for 1999 are $179 million and $720 million for 2000 through 2003. Capital expenditure needs are reviewed regularly by MidAmerican's management and may change significantly as a result of such reviews. MidAmerican presently expects that all utility construction expenditures for the next five years will be met with cash generated from utility operations, net of dividends. The actual level of cash generated from utility operations is affected by, among other things, economic conditions in the utility service territory, weather and federal and state regulatory actions.
NUCLEAR DECOMMISSIONING
Each licensee of a nuclear facility is required to provide financial assurance for the cost of decommissioning its licensed nuclear facility. In general, decommissioning of a nuclear facility means to safely remove the facility from service and restore the property to a condition allowing unrestricted use by the operator. Based on information presently available, MidAmerican expects to contribute approximately $42 million during the period 1999 through 2003 to an external trust established for the investment of funds for decommissioning the Quad Cities Station. Approximately 65% of the trust's funds are now invested in domestic corporate debt and common equity securities. The remainder is invested in investment grade municipal and U.S. Treasury bonds.
In addition, MidAmerican makes payments to Nebraska Public Power District (NPPD) related to decommissioning Cooper. These payments are reflected in other operating expenses in the Consolidated Statements of Income. NPPD estimates call for MidAmerican to pay approximately $57 million to NPPD for Cooper decommissioning during the period 1999 through 2003. NPPD invests the funds predominately in U.S. Treasury Bonds and other U.S. Government securities. Approximately 20% was invested in domestic corporate debt. MidAmerican's obligation for Cooper decommissioning may be affected by the actual plant shutdown date and the status of the power purchase contract at that time. In July 1997, NPPD filed a lawsuit in United States District Court for the District of Nebraska naming MidAmerican as the defendant and seeking a declaration of MidAmerican's rights and obligations in connection with Cooper nuclear decommissioning funding. Refer to Part II, Item 1. Legal Proceedings, for further discussion of the litigation.
Cooper and Quad Cities Station decommissioning costs charged to Iowa customers are included in base rates, and recovery of increases in those amounts must be sought through the normal ratemaking process. Decommissioning costs charged to Illinois customers are recovered through a rate rider on customer billings.
INVESTMENTS
MidAmerican Capital invests in a variety of marketable securities which it holds for indefinite periods of time. In the Consolidated Statements of Cash Flows, the lines Purchase of Securities and Proceeds from Sale of Securities consist primarily of the gross amounts of these activities, including realized gains and losses on investments in marketable securities.
FINANCING ACTIVITIES, PLANS AND AVAILABILITY
MIDAMERICAN
MidAmerican currently has authority from the FERC to issue short-term debt in the form of commercial paper and bank notes aggregating $400 million. As of September 30, 1999, MidAmerican had a $250 million revolving credit facility agreement and a $5 million bank line of credit. MidAmerican's commercial paper borrowings are supported by the revolving credit facility and the line of credit. MidAmerican also has a revolving credit facility which is dedicated to providing liquidity for its obligations under outstanding pollution control revenue bonds that are periodically remarketed.
In 1997, MidAmerican entered into a revolving agreement, which expires in 2002, to sell all of its right, title and interest in the majority of its billed accounts receivable to MidAmerican Energy Funding Corporation (Funding Corp.), a special purpose entity established to purchase accounts receivable from MidAmerican. Funding Corp. in turn sold receivable interests to outside investors. In consideration for the sale, MidAmerican received $70 million in cash and the remaining balance in the form of a subordinated note from Funding Corp. As of September 30, 1999, the revolving cash balance was $66 million due to a decline during the second quarter of 1999 in accounts receivable available for sale. The agreement is structured as a true sale, as determined by Statement of Financial Accounting Standards (SFAS) No. 125, under which the creditors of Funding Corp. will be entitled to be satisfied out of the assets of Funding Corp. prior to any value being returned to MidAmerican or its creditors. Therefore, the accounts receivable sold are not reflected on MidAmerican's Consolidated Balance Sheets. As of September 30, 1999, $98.6 million of accounts receivable, net of reserves, were sold under the agreement.
MidAmerican has authorization from the FERC to issue up to an additional $500 million in various forms of long-term debt. MidAmerican will also need authorization from the ICC prior to issuing any securities. If 90% or more of the proceeds from a securities issuance are used for refinancing purposes, MidAmerican need only provide the ICC with an "informational statement" prior to the issuance which sets forth the type, amount and use of the proceeds of the securities to be issued. If less than 90% of the proceeds are used for refinancing, MidAmerican must file a comprehensive application seeking authorization prior to issuance. The ICC is required to hold a hearing before issuing its authorization.
MHC:
As of September 30, 1999, MHC had lines of credit totaling $44 million to provide for short-term financing needs, under which no debt was outstanding.
As of September 30, 1999, MidAmerican Capital had unsecured revolving credit facilities in the amount of $6 million, under which no debt was outstanding. MidAmerican Capital has $115 million of long-term debt maturities and sinking fund requirements for 1999 through 2003 related to debt outstanding at September 30, 1999.
Midwest Capital currently has a $25 million line of credit with MidAmerican, of which $5 million was outstanding at December 31, 1998.
OPERATING ACTIVITIES AND OTHER MATTERS
INDUSTRY EVOLUTION
The utility industry continues to evolve into an increasingly competitive environment. In virtually every region of the country, legislative and regulatory actions are being taken which result in customers having more choices in their energy decisions.
In the electric industry, the traditional vertical integration of generation, delivery and marketing is being unbundled, with the generation and marketing functions being deregulated. For local gas distribution businesses, the supply, local delivery and marketing functions are similarly being separated and opened to competitors for all classes of customers. While retail electric competition is presently not permitted in Iowa, MidAmerican's primary market, legislation to do so was introduced in the Iowa legislature in the last session. Deregulation of the gas supply function related to small volume customers is also being considered by the IUB. MidAmerican is actively participating in the legislative and regulatory processes shaping the new environment in which its businesses will operate.
The generation and retail portions of MidAmerican's electric business will be most affected by competition. The introduction of competition in the wholesale market has resulted in a proliferation of power marketers and a substantial increase in market activity. As retail choice evolves, competition from other traditional utilities, power marketers and customer-owned generation could put pressure on utility margins.
During the transition to full competition, increased volatility in the marketplace can be expected. With the elimination of the energy adjustment clause in Iowa, MidAmerican is exposed to movements in energy prices. Although MidAmerican has sufficient low cost generation under typical operating conditions for its retail electric needs, a loss of adequate generation by MidAmerican at a time of high market prices could subject MidAmerican to losses on its energy sales.
LEGISLATIVE AND REGULATORY EVOLUTION
In December 1997, the Governor of Illinois signed into law a bill to restructure Illinois' electric utility industry and transition it to a competitive market. Under the law, beginning October 1, 1999, larger non-residential customers in Illinois and 33% of the remaining non-residential Illinois customers are allowed to select their provider of electric supply services. All other non-residential customers will have supplier choice starting December 31, 2000. Residential customers all receive the opportunity to select their electric supplier on May 1, 2002.
The law required a 15% electric rate reduction for all Illinois residential customers in 1998. To satisfy its obligation, MidAmerican received credit for its 1996 and 1997 Illinois rate reductions, totaling $15.5 million, and reduced rates an additional $0.9 million annually, effective August 1, 1998. MidAmerican is exempted from the requirement to join an independent system operator (ISO) or to form an in-state ISO.
In addition, the law provides for Illinois earnings above a certain level of ROE to be shared equally between customers and MidAmerican beginning in April 2000. MidAmerican's ROE level will be based on a rolling two-year average, with the first determination being based on an average of 1998 and 1999. The ROE level at which MidAmerican will be required to share earnings is a multi-step calculation of average 30-year Treasury Bond rates plus 5.50% for 1998 and 1999. Legislation passed in July 1999 increases the benchmark for 2000 through 2004 to 8.5% above the 30-year Treasury bond rate. If the resulting average Treasury Bond rate were equal to the December 1998 30-year Treasury Bond rate, the ROE level above which sharing must occur would be approximately 10.6% for 1998 and 1999 and 13.6% for 2000 through 2004. The law allows MidAmerican to mitigate the sharing of earnings above the threshold ROE through accelerated cost recognition that would reduce MidAmerican's earnings. MidAmerican continues to evaluate its strategy regarding the sharing mechanism.
The law also addresses charges to customers for transition costs based on a lost-revenue approach. These transition fees, designed to help utilities recover stranded costs, will end December 31, 2006, subject to possible extension. MidAmerican continues its involvement in proceedings which detail the new competitive environment and to evaluate the impact of the law on its operations and the opportunities the law presents.
In Iowa, a replacement of the prior utility property tax system, which was supported by MidAmerican, went into effect on January 1, 1999. The replacement tax is primarily a consumption-based tax on the user of energy and assures stability in tax collections as the industry is deregulated in Iowa. With resolution of the utility property tax issue, MidAmerican is pursuing the adoption of electric utility industry restructuring legislation. Progress was made during the 1999 Iowa legislative session, and MidAmerican continues working toward adoption of new legislation in a future session.
RESIDENTIAL AND COMMERCIAL PILOT PROJECT
On August 21, 1998, the IUB issued an Order approving MidAmerican's proposal to allow at least 15,000 Iowa families and 2,000 small businesses to have the opportunity to select among competing electricity providers. The two-year pilot program will allow participating retail customers in the selected test area to choose among several electricity providers, including MidAmerican, and to have that energy delivered by MidAmerican. Customer enrollment is currently allowed and the pilot may begin in 1999 should additional suppliers register. Businesses in the test area will be eligible for the program if their annual peak demand is less than four megawatts. New suppliers participating in the program will have to be certified by the IUB and meet specified requirements.
ACCOUNTING EFFECTS OF INDUSTRY RESTRUCTURING
A possible consequence of competition in the utility industry is that SFAS 71 may no longer apply. SFAS 71 sets forth accounting principles for operations that are regulated and meet certain criteria. For operations that meet the criteria, SFAS 71 allows, among other things, the deferral of costs that would otherwise be expensed when incurred. A majority of MidAmerican's electric and gas utility operations currently meet the criteria required by SFAS 71, but its applicability is periodically reexamined. On December 16, 1997, MidAmerican's generation operations serving Illinois were no longer subject to the provisions of SFAS 71 due to passage of industry restructuring legislation in Illinois. Thus, in 1997 MidAmerican was required to write off the regulatory assets and liabilities from its balance sheet related to its Illinois generation operations. The net amount of such write-offs was not material. If other portions of its utility operations no longer meet the criteria of SFAS 71, MidAmerican could be required to write off the related regulatory assets and liabilities from its balance sheet, and thus, a material adjustment to earnings in that period could result. As of September 30, 1999, MidAmerican had $266 million of regulatory assets on its Consolidated Balance Sheet.
ENERGY EFFICIENCY
MidAmerican's regulatory assets as of September 30, 1999, included $47.9 million of deferred energy efficiency costs. Based on the current level of recovery, MidAmerican expects to recover these costs by the end of 2001. MidAmerican is also allowed to recover its ongoing energy efficiency costs on a current basis. Recovery of these costs is being collected from customers based on projected annual costs of $17.4 million, which may be adjusted annually. Amortization of the deferred energy efficiency costs and current expenditures for energy efficiency costs will be reflected in other operating expenses over the related periods of recovery. The total of such costs for the years 1999, 2000 and 2001 is estimated to be $43 million, $40 million and $35 million, respectively.
RATE MATTERS: ELECTRIC
Through several steps from mid-1997 to the end of 1998, electric prices for Iowa industrial customers were reduced by an amount which will have a $6 million annual impact on revenues, and electric prices for Iowa commercial customers were reduced by an amount which will have a $4 million annual impact on revenues. The
reductions were achieved through a retail access pilot project, negotiated individual electric contracts and a $1.5 million tariffed rate reduction for certain non-contract commercial customers.
The negotiated electric contracts have differing terms and conditions as well as prices. The contracts range in length from five to ten years, and some have price renegotiation and early termination provisions exercisable by either party. The vast majority of the contracts are for terms of seven years or less, although, some large customers have agreed to ten-year contracts. Prices are set as fixed prices; however, many contracts allow for potential price adjustments with respect to environmental costs, government imposed public purpose programs, tax changes, and transition costs. While the contract prices are fixed (except for the potential adjustment elements), the costs MidAmerican incurs to fulfill these contracts will vary. On an aggregate basis the annual revenues under contract are approximately $180 million.
If MidAmerican's annual Iowa electric jurisdictional ROE exceeds 12%, then earnings above the 12% level will be shared equally between customers and MidAmerican; if the ROE exceeds 14%, then two-thirds of MidAmerican's share of those earnings above the 12% level will be used for accelerated recovery of certain regulatory assets. A 1997 pricing plan settlement agreement precludes MidAmerican from filing for increased rates prior to 2001 unless the ROE falls below 9%. Other parties signing the agreement are prohibited from filing for reduced rates prior to 2001 unless the ROE, after reflecting credits to customers, exceeds 14%. On April 14, 1999, the IUB approved, subject to additional refund, MidAmerican's 1998 ROE calculation. During the second quarter of 1999, MidAmerican refunded $2.2 million to its Iowa non-contract customers related to the ROE calculation for 1998. The agreement also eliminated MidAmerican's energy adjustment clause, and, as a result, the cost of fuel is not directly passed on to customers.
RATE MATTERS: GAS
In October 1998, MidAmerican made a filing with the IUB requesting a rate increase for its Iowa retail gas customers. An interim rate increase of approximately $6.7 million annually was approved by the IUB on January 22, 1999, effective immediately. On April 23, 1999, the IUB issued an order approving a settlement agreement between MidAmerican, the OCA and other parties which provides for an annual increase of $13.9 million. The new rates were implemented May 27, 1999.
In November 1998, MidAmerican filed with the South Dakota Public Utilities Commission (SDPUC) requesting a rate increase for its South Dakota retail gas customers. The SDPUC in April 1999 approved a rate increase of $2.4 million annually, effective May 1, 1999.
On September 1, 1999, MidAmerican filed with the ICC requesting a rate increase totaling $3.2 million annually for its Illinois retail gas customers. An ICC decision is anticipated prior to August 2000.
ENVIRONMENTAL MATTERS
The EPA and state environmental agencies have determined that contaminated wastes remaining at certain decommissioned MGP facilities may pose a threat to the public health or the environment if such contaminants are in sufficient quantities and at such concentrations as to warrant remedial action.
MidAmerican is evaluating 27 properties which were, at one time, sites of gas manufacturing plants in which it may be a PRP. The purpose of these evaluations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether MidAmerican has any responsibility for remedial action. MidAmerican's estimate of probable remediation costs for these sites as of September 30, 1999, was $21 million. This estimate has been recorded as a liability and a regulatory asset for future recovery through the regulatory process. Refer to Note B (1) of Notes to Consolidated Financial Statements for further discussion of MidAmerican's environmental activities related to MGP sites and cost recovery.
Although the timing of potential incurred costs and recovery of such costs in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on MidAmerican's financial position or results of operations.
Following recommendations provided by the Ozone Transport Assessment Group, the EPA, in November 1997, issued a Notice of Proposed Rulemaking which identified 22 states and the District of Columbia as making significant contribution to nonattainment of the ozone standard in downwind states in the eastern half of the United States. The nonattainment of the downwind states is based on the ozone standard established prior to the 1997 revisions discussed below. In September 1998, the EPA issued its final rules in this proceeding. Iowa is not subject to the emissions reduction requirements in the final rules, and, as such, MidAmerican's facilities are not currently subject to additional emissions reductions as a result of this initiative.
On July 18, 1997, the EPA adopted revisions to the NAAQS for ozone and a
new standard for fine particulate matter. Based on data to be obtained from
monitors located throughout the states, the EPA will make a determination of
whether the states have any areas that do not meet the air quality standards
(i.e., areas that are classified as nonattainment). If a state has area(s)
classified as nonattainment area(s), the state is required to submit a State
Implementation Plan specifying how it will reach attainment of the standards
through emission reductions or other means.
In May 1999, the U.S. District Court of Appeals for the District of Columbia Circuit remanded the standards adopted in July 1997 back to the EPA indicating the EPA had not expressed sufficient justification for the basis of establishing the standards and ruling that the EPA has exceeded its constitutionally-delegated authority in setting the standards. The EPA has appealed the court's ruling to the full panel of the U.S. District Court of Appeals for the District of Columbia Circuit. Argument in the appeal proceeding is scheduled for the fall of 1999. As a result of the court's decision and the current status of the standards, the impact of any new standards on MidAmerican is currently unknown.
In December 1997, negotiators from more than 150 nations met in Kyoto, Japan to negotiate an international agreement designed to address global climate change impacts by attempting to reduce so-called greenhouse gas emissions. Some scientists contend that these gases build up in the Earth's atmosphere and cause global temperatures to rise. The primary target of these emissions is carbon dioxide (CO2) which is formed by, among other things, the combustion of fossil fuels. The agreement currently calls for the United States to reduce its emissions of CO2 and other greenhouse gases to 7% below 1990 levels in the 2008-2012 time frame. The United States became a signatory to the agreement on November 12, 1998. In order for the agreement to become binding upon the United States, ratification by the U.S. Senate is necessary. The cost to the utility industry in general, and to MidAmerican, of reducing its CO2 emissions levels by 7% below 1990 levels would depend on available technology at the time, but could be material.
QUAD CITIES NUCLEAR POWER STATION
Quad Cities Station is operated by, and 75% owned by, Commonwealth Edison Company (ComEd). On May 6, 1999, the Nuclear Regulatory Commission (NRC) advised ComEd that it had classified Quad Cities Station in the NRC's Routine Oversight category (the best of the NRC's three new categories) for nuclear power plants, removing the station from the Trending (adversely) Letter status initiated in January 1998. During the first nine months of 1999, the station capacity factor was in excess of 93.5%.
GENERATING CAPABILITY
In July 1999, retail customer usage of electricity caused an hourly peak demand of 3,833 MW on MidAmerican's energy system. MidAmerican is interconnected with certain Iowa and neighboring utilities and is involved in an electric power pooling agreement known as Mid-Continent Area Power Pool (MAPP). Each MAPP participant is required to maintain for emergency purposes a net generating capability reserve of at least 15% above
its system peak demand. MidAmerican was able to maintain its capacity reserve requirement during the hot weather in July 1999 and was not adversely affected by the resultant high prices in the off-system market.
MidAmerican believes it has adequate electric capacity reserve and continues to manage its generating resources to ensure an adequate reserve in the future. However, significantly higher-than-normal temperatures during the cooling season could cause MidAmerican's reserve to fall below the 15% minimum. If MidAmerican fails to maintain the appropriate reserve, significant penalties could be contractually imposed by MAPP.
ACTIVITIES REGARDING YEAR 2000 DATE ISSUES
The following discussion of year 2000 issues describes MidAmerican's plans to address technical problems relating to calculations, manipulations, storage and other uses of date-sensitive data which could cause some computer-controlled systems, applications and processes (hereinafter referred to as "Systems") to incorrectly process critical financial and operational information, or stop processing altogether. The discussion contains by necessity many forward-looking statements. MidAmerican wishes to avail itself of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and in order to do so includes the following meaningful cautionary statements with regard to the forward looking statements of its year 2000 plans. MidAmerican's intentions, expectations, and predictions relating to its year 2000 efforts are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Such risks and uncertainties include, among others, the effects of weather, federal and state regulatory actions, and other matters, many of which are beyond MidAmerican's control. In addition, MidAmerican claims the full protections established by the Year 2000 Information and Readiness Disclosure Act for Year 2000 Statements and Year 2000 Readiness Disclosure.
PROJECT DESCRIPTION
MidAmerican has undertaken an extensive ongoing project to address its information technology (IT) and non-IT (including embedded technology) Systems potentially affected by the year 2000 date change. MidAmerican's approach is based on a five-phase project methodology - inventory, assessment, planning, resolution and implementation - designed to result in the identification and evaluation of potential problems, and remediation of MidAmerican's Systems. MidAmerican generally defines the five phases as follows:
1. Inventory Phase - The purpose of the inventory phase is to identify and document Systems used by MidAmerican that may have a date-sensitive function.
2. Assessment Phase - The purpose of the assessment phase is to collect information about inventoried Systems, including the business and technical context in which individual Systems operate, to make an informed judgment concerning an appropriate plan to mitigate year 2000 related risks.
3. Planning Phase - The purpose of the planning phase is to develop strategic and tactical plans for Systems that require replacement, repairs, upgrades or other appropriate actions (collectively referred to as "remedial actions").
4. Resolution Phase - The purpose of the resolution phase is to execute the plan developed during the preceding phases. Testing of Systems and/or components of Systems, as well as any preceding or subsequent remedial action, is commenced during this phase.
5. Implementation Phase - The purpose of the implementation phase is to examine the Systems to determine whether they will function adequately in a production environment and to perform follow-up administrative tasks as required to develop appropriate documentation in support of year 2000 readiness.
MidAmerican classifies all Systems ranging from low- to high-priority based on their importance to carrying out MidAmerican's business mission. System priority is based on potential impacts resulting from year
2000 problems on public and employee safety, prolonged and widespread service outages, long-term shareholder value, and ability to comply with regulatory requirements. In the case of low-priority Systems, year 2000 readiness may be delayed beyond January 1, 2000, or perhaps indefinitely. MidAmerican plans to use the last two months of 1999 to perform post-implementation testing, address selected lower priority Systems and conduct preparedness exercises.
Vendors, customers and other third parties may affect MidAmerican's ability to achieve year 2000 readiness. Because service reliability and financial stability are dependent on MidAmerican's supply chain, a concerted effort is being made to investigate important third parties to assess their ability to continue to supply products or services to, or purchase products or services from, MidAmerican.
STATE OF READINESS
Due to factors such as the overlapping nature of the project phases and the varying degree of complexity of the Systems being addressed, it is difficult to accurately determine the status of completion of a particular phase of the project at any given point in time. MidAmerican uses three methods to measure the status of project completion:
1. As an entity with public utility operations, MidAmerican must comply with certain year 2000 regulatory requirements imposed by the North American Electric Reliability Council (NERC). NERC reporting data is limited primarily to Systems that are directly associated with transmission grid stability. The transmission grid consists of the interconnected transmission systems of North American utilities. Reporting categories include nuclear generation, non-nuclear generation, Energy Management Systems and Supervisory Control and Data Acquisition (SCADA) system, telecommunications systems, substation controls and system protection, and IT business information systems. MidAmerican reported in its July compliance filing with NERC that it is "100% Y2K Ready" on systems considered mission-critical by NERC definition.
2. A "checklist" approach is used to monitor the completion status of each System that is unique to a given organizational group. For example, identical substation meters may be located in several individual substations, but the meter is counted as only one System. All Systems are viewed as equivalent, regardless of priority, in the checklist approach. Systems are categorized as complete or not complete, without regard to percentage of completion of the System in total or percentage of completion of any particular phase of the project. As of September 30, 1999, there were 5,554 separate Systems in MidAmerican's inventory. Of these, over 99% had been completed.
3. MidAmerican's internally developed measure is more sensitive than the methods discussed above and is based on business risk/priority, weighted tasks and weighted phases. Only high- and medium-risk/priority Systems are included in the status of completion calculation. The data related to Systems that could impact grid stability pertains only to those Systems that directly affect MidAmerican's customers. Also, progress toward completion is measured. As of September 30, 1999, MidAmerican as a whole is generally in the resolution phase. Percentage of completion for six areas of business operations is a follows:
A. IT - Applications: 95-100% complete
B. IT - Operations & Infrastructure: 95-100% complete
C. Generation: 95-100% complete
D. Energy Delivery: 95-100% complete
E. Retail: 95-100% complete
F. Corporate Services (excluding IT): 95-100% complete
The investigation of supply chain issues consists of documenting the nature of business relationships in correspondence, surveys and meetings with third parties and making determinations regarding their year 2000 readiness status based on the responses received. MidAmerican has initiated contact with vendors and business partners it considers to represent a significant financial or operational risk if they were to experience year 2000
problems. In addition, interconnected utilities and wholesale customers, as well as high-volume retail customers, have been contacted for the purpose of reviewing the status of their year 2000 readiness efforts. To date, information made available to MidAmerican has not been uniform in terms of quality and quantity. Although none of the information has suggested that the year 2000 readiness efforts of these vendors, business partners and customers have been inadequate, MidAmerican intends to maintain ongoing communications with some third parties through the few months of 1999. MidAmerican will also continue monitoring information about specific products in MidAmerican's inventory.
COSTS
As of September 30, 1999 approximately $10.2 million in operating expenses have been incurred to carry out year 2000 activities. It is anticipated that up to $2.8 million in additional operating expenses and capital costs will need to be incurred to complete the project. Although additional unforeseen costs may be incurred, at this time MidAmerican has not become aware of any material costs which may arise in order to achieve year 2000 readiness. Future progress toward achievement of year 2000 readiness could change this outlook.
MidAmerican has renovated or replaced several high-priority Systems (e.g., management information, materials management information, work management information, customer service, electric outage management, meter control and inventory, and others) to gain enhanced functionalities. For example, the development and installation of a new customer service system (CSS) and related applications was an outcome of the merger which created MidAmerican in July of 1995. Although potential year 2000 problems existing in the predecessor companies' CSS products were recognized, the decision to implement the new CSS was primarily in response to integration difficulties and the need for additional application functionalities. The costs of these renovations and replacements are not reported herein as their development and installation was not driven by year 2000 concerns.
CONTINGENCY PLANS
A contingency plan identifying credible worst-case scenarios has been developed. The contingency plan is comprised of both mitigation and recovery aspects. Mitigation entails planning to reduce the impact of unresolved year 2000 problems, and recovery entails planning to restore services in the event that year 2000 problems occur. MidAmerican's contingency plan has been reviewed by senior management. Although the plan is substantially complete, it will be refined throughout the remainder of the year based on results of contingency planning drills and changes in circumstances.
Although a number of factors come into play in defining reasonably likely worst case scenarios, the loss of voice and data communications, volatile load patterns, and inability to control generation and/or return generation units to service are viewed as the most serious threats. The relative seriousness of these threats is based on recognition that the occurrence of any of these types of problems could have an immediate and significant effect on service reliability and financial performance.
MidAmerican participated in contingency planning drills coordinated by NERC on April 9, 1999 and September 8-9, 1999. The drills focused on managing problems resulting from a simulated partial loss of voice and data communications services. During those drills, MidAmerican did not experience any unexpected results.
RISKS
Despite the comprehensive nature of MidAmerican's year 2000 project and the results the project is designed to produce, MidAmerican may experience random, widespread and simultaneous failures in its generation, distribution and Systems during year 2000 transition periods. Contingency plans for any known or reasonably anticipated risk of interruption to the generation or distribution of energy are being developed to plan for resources needed to be put in place to reduce the potential outage period to a minimum. Although the impact on future operations and revenues is unknown, failure of MidAmerican's Systems to perform because of year 2000 implications could result in operating problems and costs material to MidAmerican.
Although management believes the project will be completed sufficiently in advance of January 1, 2000, unforeseen and other factors could cause delays in the project, the results of which may have a material effect on MidAmerican's results of operations. In addition, there is no assurance that MidAmerican will not be affected by year 2000 problems experienced by third parties.
ACCOUNTING ISSUES
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", which was delayed by SFAS 137 and is effective for fiscal years beginning after June 15, 2000. SFAS 133 requires an entity to recognize all of its derivatives as either assets or liabilities in its statement of financial position and measure those instruments at fair value. The Company is in the process of evaluating the impact of this accounting standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MidAmerican is exposed to market risk, including changes in the market price of certain commodities. To manage the price volatility relating to these exposures, MidAmerican enters into various financial derivative instruments. A Risk Management Committee governs the overall direction, structure, conduct and control of the Company's risk management activities, including the use of financial derivative instruments. Responsibilities of the Risk Management Committee include authorization and communication of risk management policies and procedures, strategic hedging program guidelines, appropriate market and credit risk limits, and appropriate systems for recording, monitoring and reporting the results of transactional and risk management activities.
MidAmerican uses hedge accounting for commodity-related instruments pertaining to its natural gas purchasing operations.
COMMODITY PRICE RISK
Regulated Natural Gas Operations-
Under the current regulatory framework, MidAmerican is allowed to recover in revenues the cost of gas sold from most of its regulated gas customers through a purchased gas adjustment clause (PGA). MidAmerican derived approximately 94% of its regulated gas revenues from such customers in 1998. Since the majority of MidAmerican's firm natural gas supply contracts contain pricing provisions based on a daily or monthly market index, MidAmerican's regulated gas customers, although ensured of the availability of gas supplies, retain the risk associated with market price volatility.
MidAmerican enters into natural gas futures and swap agreements to mitigate a portion of the market risk retained by its regulated gas customers through the PGA. These financial derivative activities are recorded as hedge accounting transactions, with net amounts exchanged or accrued under swap agreements and realized gains or losses on futures contracts included in the cost of gas sold and recovered in revenues from regulated gas customers. At December 31, 1998, MidAmerican had entered into the following financial derivative instruments for regulated operations:
Futures Contracts:
Net Contract Volumes- Long (Short) (240,000) MMBtu
Unrealized Gain (Loss) at 12/31/98 (in thousands) $(1,843)
Swap Contracts:
Contract Volumes 7,200,000 MMBtu
Unrealized Gain (Loss) at 12/31/98 (in thousands) $225
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A $0.05 increase in underlying natural gas prices would increase unrealized losses on the above futures contracts by approximately $12,000 and would increase unrealized gains on the above swap contracts by approximately $360,000.
Nonregulated Natural Gas Operations-
MidAmerican also derives revenues from nonregulated sales of natural gas. Pricing provisions are individually negotiated with these customers and may include fixed prices or prices based on a daily or monthly market index. MidAmerican enters into natural gas futures and swap agreements to offset the financial impact of variations in natural gas commodity prices for physical delivery to non-regulated customers. These financial derivative activities are recorded as hedge accounting transactions, with net amounts exchanged or accrued under swap agreements and realized gains or losses on futures contracts included in the cost of gas sold. At December 31, 1998, MidAmerican had entered into the following financial derivative instruments for non-regulated operations:
Futures Contracts:
Net Contract Volumes- Long (Short) (110,000) MMBtu
Unrealized Gain (Loss) at 12/31/98 (in thousands) $28
Swap Contracts:
Contract Volumes 9,122,181 MMBtu
Unrealized Gain (Loss) at 12/31/98 (in thousands) $(3,121)
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A $0.05 increase in underlying natural gas prices would decrease unrealized gains on the above futures contracts by approximately $6,000 and would decrease unrealized losses on the above swap contracts by approximately $456,000. Unrealized gains and losses on financial derivatives entered into for nonregulated operations have little ultimate impact on MidAmerican's earnings and cash flow as these amounts are offset by corresponding changes in the theoretical value of underlying contracts for physical delivery of natural gas to nonregulated customers.
1997 Total Natural Gas Operations-
At December 31, 1997, MidAmerican had entered into the following financial derivative instruments for natural gas operations:
Futures Contracts:
Net Contract Volumes- Long (Short) 2,000,000 MMBtu
Unrealized Gain (Loss) at 12/31/97 (in thousands) $(386)
Swap Contracts:
Contract Volumes 6,968,807 MMBtu
Unrealized Gain (Loss) at 12/31/97 (in thousands) $(885)
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INTEREST RATE RISK
The Company is exposed to market value risk from changes in interest rates on its preferred stock investments. The Company reviews the interest rate sensitivity of these securities and purchases put options and enters into "short" positions in futures contracts on U.S. Treasury securities for other than trading purposes in order to reduce related interest rate risk. The Company's intent is to manage the risk arising from changes in the general level of interest rates with a change in market value of the hedging instruments. The Company does not purchase or sell hedging instruments for speculative purposes.
The following table demonstrates the impact of varying interest rate changes to the market value at December 31, 1998: (amounts in millions)
--------------------------- ----------------- -------------------- --------------------- --------------------
Preferred Futures and Total Portfolio Change in Market
Stock Market Options Market Market Value Value of Total
Vaule Value Portfolio
--------------------------- ----------------- -------------------- --------------------- --------------------
Interest Rate Change
--------------------------- ----------------- -------------------- --------------------- --------------------
200 basis pt decrease $150.8 $ - $150.8 $10.6
--------------------------- ----------------- -------------------- --------------------- --------------------
100 basis pt decrease 144.4 0.1 144.5 4.3
--------------------------- ----------------- -------------------- --------------------- --------------------
Current interest rates 137.3 2.9 140.2 -
--------------------------- ----------------- -------------------- --------------------- --------------------
100 basis pt increase 129.2 10.0 139.2 (1.0)
--------------------------- ----------------- -------------------- --------------------- --------------------
200 basis pt increase 120.9 17.3 138.2 (2.0)
--------------------------- ----------------- -------------------- --------------------- --------------------
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The number of hedging instrument contracts entered into, or their notional amount, is dependent on, among other things, the duration of the portfolio, specific call provisions of each fixed rate preferred stock, the slope of the Treasury yield curve, the expected volatility of Treasury yields and the cost of using futures and/or options. The notional amount of the Company's hedging instruments at December 31, 1998 and 1997, respectively are set forth in the following table:
1998 1997
----------------------- --------------------- -------------------- --------------------- --------------------
Contracts Notional Amt. Contracts Notional Amt.
----------------------- --------------------- -------------------- --------------------- --------------------
Put Options 697 $89,064 815 $ 98,182
----------------------- --------------------- -------------------- --------------------- --------------------
Futures Contracts 33 4,217 142 17,107
----------------------- --------------------- -------------------- --------------------- --------------------
----------------------- --------------------- -------------------- --------------------- --------------------
Total 730 $93,281 957 $115,289
----------------------- --------------------- -------------------- --------------------- --------------------
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The notional amounts of these hedging instruments do not represent the amounts exchanged by the parties and are not a measure of the Company's financial exposure through its use of these hedging instruments. The Company is exposed only to the initial purchase price of the put options and to changes in the market value of the futures contracts.
OUR BUSINESS AND THE BUSINESS OF MHC AND MIDAMERICAN ENERGY
OUR BUSINESS
We were formed as an Iowa limited liability company on March 9, 1999 to issue the initial Securities and facilitate the merger. MidAmerican Holdings is our sole member. We currently own all of the outstanding common stock of MHC. We do not engage in any business other than activities associated with the issuance of the Securities and the ownership of MHC.
THE BUSINESS OF MHC
MHC is an exempt public utility holding company headquartered in Des Moines, Iowa, and incorporated in the State of Iowa. MHC's interests include:
[] 100% of the common stock of MidAmerican Energy;
[] 100% of the common stock of MidAmerican Capital;
[] 100% of the common stock of Midwest Capital; and
[] 100% of the common stock of MidAmerican Services.
MidAmerican Energy is primarily engaged in the business of generating, transmitting, distributing and selling electricity and distributing, selling and transporting natural gas. MidAmerican Capital manages marketable securities and passive investment activities, nonregulated wholesale and retail natural gas businesses, security services and other energy-related, nonregulated activities. Midwest Capital functions as a regional business development company in MidAmerican Energy's service territory. MidAmerican Services, which was formed in April 22, 1997, provides comprehensive energy services to utilities and other companies.
Prior to the initial public offering described below, MidAmerican Holdings' real estate brokerage and related services were conducted through MHC's subsidiary, MidAmerican Realty Services. On October 14, 1999, HomeServices.Com, the successor to MidAmerican Realty, sold 35% of its common stock in an initial public offering. The remaining 65% is owned by MidAmerican Holdings.
For the nine months ended September 30, 1999, 93% of MHC's operating revenues (excluding MidAmerican Realty Services) were from MidAmerican Energy, 4% were from MidAmerican Capital and 3% were from Midwest Capital. For the year ended December 31, 1998, 95% of MHC's operating revenues (excluding MidAmerican Realty Services) were from MidAmerican Energy, 5% were from MidAmerican Capital and less than 1% were from Midwest Capital.
THE BUSINESS OF MIDAMERICAN ENERGY
OVERVIEW OF MIDAMERICAN ENERGY'S BUSINESS
Currently, most of MidAmerican Energy's business is conducted in a
rate-regulated environment and accordingly, many of its decisions as to the
source and use of resources and other strategic matters are evaluated from a
utility business perspective. However, beginning January 1, 1998, MidAmerican
Energy began managing its operations as four distinct business units:
generation, transmission, energy delivery and retail. Under this corporate
framework, MidAmerican Energy believes that its preparations for, and
opportunities to succeed in, the future electric and gas energy environment
will be enhanced. With the establishment of these four business units,
MidAmerican Energy believes that it is able to focus on the specific needs and
anticipated risks and opportunities of its major business units in a more
flexible manner. Some administrative functions are handled by a corporate
services group which supports all of the business units.
Although specific functions may be moved between business units as future circumstances warrant, the principal focus of each business unit has been established:
[] Generation--Significant functions of the generation business unit include the production and purchase of energy and the sale of wholesale energy.
[] Transmission--The transmission business unit coordinates all activities related to MidAmerican Energy's transmission facilities, including monitoring access to and assuring the reliability of the transmission system.
[] Energy Delivery--Energy delivery includes the distribution of electricity and natural gas to end-users, and related activities.
[] Retail--Retail includes marketing, customer service and related functions for core and complementary products and services.
ELECTRICITY AND GAS DISTRIBUTION AND SALES
MidAmerican Energy distributes electricity in Council Bluffs, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo, Iowa, the Quad Cities (Davenport and Bettendorf, Iowa and Rock Island, Moline and East Moline, Illinois) and a number of adjacent communities and areas. MidAmerican Energy distributes natural gas in Cedar Rapids, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo, Iowa, the Quad Cities, Sioux Falls, South Dakota, and a number of adjacent communities and areas. As of September 30, 1999, MidAmerican Energy had approximately 655,100 retail electric customers and 627,700 retail natural gas customers.
In addition to retail sales, MidAmerican Energy delivers electricity to other utilities and municipalities who distribute it to end-use customers. These sales are referred to as sales for resale. MidAmerican Energy also transports natural gas, for a fee, through its distribution system for certain large customers who have independently secured their own supply of natural gas.
MidAmerican Energy's electric and gas operations are conducted under franchises, certificates, permits and licenses obtained from state and local authorities. The franchises, with various expiration dates, are typically for 25-year terms.
MidAmerican Energy has a residential, agricultural, commercial and diversified industrial customer group in which no single industry or customer accounted for more than 3% (food and kindred products industry) of its total 1998 electric operating revenues or 3% (food and kindred products industry) of its total 1998 gas operating margin. Among the primary industries served by MidAmerican Energy are those which are concerned with the manufacturing, processing and fabrication of primary metals, real estate, food products, farm and other non-electrical machinery, and cement and gypsum products.
For the year ended December 31, 1998, MidAmerican Energy derived approximately 69% of its gross operating revenues from its regulated electric business and 25% from its regulated gas business. For 1997 and 1996, the corresponding percentages were 65% electric and 31% gas, and 66% electric and 32% gas, respectively.
MidAmerican Energy's historical electric sales by customer class as a percentage of total electric sales and MidAmerican Energy's retail electric sales data by state as a percentage of total retail electric sales are each shown below:
TOTAL ELECTRIC SALES OF MIDAMERICAN ENERGY BY CUSTOMER CLASS
1998 1997 1996
---- ---- ----
Residential............................. 22.2% 20.9% 21.1%
Small General Service................... 17.5 16.5 16.2
Large General Service................... 28.1 27.4 27.6
Other................................... 4.4 4.4 4.5
Sales for Resale........................ 27.8 30.8 30.6
---- ------ -----
Total.............................. 100.0% 100.0% 100.0%
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RETAIL ELECTRIC SALES OF MIDAMERICAN ENERGY BY STATE
1998 1997 1996
---- ---- ----
Iowa.................................... 88.4% 88.6% 88.7%
Illinois................................ 10.9 10.7 10.6
South Dakota............................ 0.7 0.7 0.7
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Total.............................. 100.0% 100.0% 100.0%
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In an Iowa pricing settlement approved in 1997 by the Iowa Utilities Board, MidAmerican Energy was given permission to negotiate individual contracts with its industrial and commercial electric customers. The negotiated contracts have differing terms and conditions as well as prices. The contracts range in length from five to ten years, and some have price renegotiation and early termination provisions exercisable by either party. A vast majority of the contracts are for terms of seven years or less, although some large customers have agreed to 10-year contracts. Prices are set as fixed prices; however, many contracts allow for potential price adjustments with respect to environmental costs, government imposed public purpose programs, tax changes and transition costs. While the contract prices are fixed (except for the potential adjustment elements), the costs MidAmerican Energy incurs to fulfill these contracts will vary. MidAmerican Energy presently intends to manage this risk through hedging and other similar arrangements. On an aggregate basis, the annual revenues under these contracts are approximately $180,000,000.
In addition, MidAmerican Energy is precluded by the 1997 settlement agreement from filing for an increase in its Iowa electric rates prior to 2001, unless its annual return on common equity falls below 9%. Likewise, the other parties to the agreement, including the Office of the Consumer Advocate, are prohibited from seeking a reduction in MidAmerican Energy's electric rates prior to 2001, unless the return on common equity, adjusted for the equal sharing between shareholders and customers of earnings above a 12% return on common equity, exceeds 14%.
Historical gas sales, excluding transportation throughput, by customer class as a percentage of total gas sales and by state as a percentage of total retail gas sales are shown below:
TOTAL REGULATED GAS SALES OF MIDAMERICAN ENERGY BY CUSTOMER CLASS
1998 1997 1996
---- ---- ----
Residential................................ 59.9% 60.8% 61.1%
Small General Service...................... 32.1 33.1 33.3
Large General Service...................... 3.7 4.2 4.6
Sales for Resale and Other................. 4.3 1.9 1.0
------- ------ ------
Total................................. 100.0% 100.0% 100.0%
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RETAIL GAS SALES OF MIDAMERICAN ENERGY BY STATE
1998 1997 1996
---- ---- ----
Iowa........................................ 79.0% 79.1% 78.0%
Illinois.................................... 10.2 10.4 11.0
South Dakota................................ 10.1 9.8 10.3
Nebraska.................................... 0.7 0.7 0.7
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Total....................................... 100.0% 100.0% 100.0%
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There are seasonal variations in MidAmerican Energy's electric and gas businesses which are principally related to the use of energy for air conditioning and heating. In 1998, 40% of MidAmerican Energy's electric revenues were reported in the months of June, July, August and September, reflecting the use of electricity for cooling, and 54% of MidAmerican Energy's gas revenues were reported in the months of January, February, March and December, reflecting the use of gas for heating.
MIDAMERICAN ENERGY'S ELECTRIC SYSTEM
The annual hourly peak demand on MidAmerican Energy's electric system occurs principally as a result of air conditioning use during the cooling season. In July 1999, MidAmerican Energy recorded an hourly peak demand of 3,833 megawatts, which is 190 megawatts more than MidAmerican Energy's previous record hourly peak of 3,643 megawatts set in 1998.
MidAmerican Energy's accredited 1998 summer net generating capability was 4,425 megawatts. Accredited net generating capability represents the amount of MidAmerican Energy-owned generation or generation under power purchase contracts available to meet the requirements on MidAmerican Energy's electric system, net of the effect of participation purchases and sales. The net generating capability at any time may be lower than it would otherwise be due to regulatory restrictions, fuel restrictions and generating units being temporarily out of service for inspection, maintenance, refueling or modifications.
MidAmerican Energy is interconnected with Iowa utilities and utilities in neighboring utilities and is involved in an electric power pooling agreement known as MAPP. MAPP is a voluntary association of electric utilities doing business in Iowa, Minnesota, Nebraska and North Dakota and portions of Montana, South Dakota and Wisconsin and the Canadian provinces of Saskatchewan and Manitoba. Its membership also includes power marketers, regulatory agencies and independent power producers. MAPP facilitates operation of the regional transmission system, serves as a power and energy market clearing house and is responsible for the safety and reliability of the bulk electric system.
Each MAPP participant is required to maintain for emergency purposes a net generating capability reserve of at least 15% above its system peak demand. If a participant's capability reserve falls below the 15% minimum, significant penalties could be contractually imposed by MAPP. MidAmerican's reserve margin for 1998 was approximately 20%.
THE NET GENERATING CAPACITY OWNED BY MIDAMERICAN ENERGY
The table below sets forth the owned net operating capacity of MidAmerican Energy's power plants as of September 30, 1999. It operates all of these plants other than those indicated with an asterisk.
Net
Ownership Capacity Owned
Council Bluffs Energy Center units 1 & 2..... 100% 131 megawatts
Council Bluffs Energy Center unit 3.......... 79% 534 megawatts
Louisa Generation Station.................... 88% 616 megawatts
Neal Generation Station units 1 & 2.......... 100% 435 megawatts
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Neal Generation Station unit 3............... 72% 371 megawatts
Neal Generation Station unit 4............... 41% 253 megawatts
Ottumwa Generation Station*.................. 52% 372 megawatts
Quad-Cities Power Station units 1 & 2*....... 25% 383 megawatts
Riverside Generation Station................. 100% 135 megawatts
Combustion Turbines.......................... 100% 758 megawatts
Moline Water Power........................... 100% 3 megawatts
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Total Net Generating Capacity Owned..... 3,996 megawatts
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ENVIRONMENTAL MATTERS
For information relating to MidAmerican Energy's environmental matters, reference is made to Note B to our consolidated financial statements appearing elsewhere in this prospectus.
LITIGATION
COOPER LITIGATION
On July 23, 1997, the Nebraska Public Power District (or NPPD) filed a complaint, in the United States District Court for the District of Nebraska, naming MidAmerican Energy as the defendant and seeking declaratory judgment as to three issues under the parties' long-term power purchase agreement for the capacity and energy of MidAmerican Energy's Cooper Nuclear Station. More specifically, NPPD sought a declaratory judgment in the following respects: (1) that MidAmerican Energy is obligated to pay 50% of all costs and expenses associated with decommissioning Cooper, and that in the event NPPD continues to operate Cooper after expiration of the power purchase agreement (September 2004), MidAmerican Energy is not entitled to reimbursement of any decommissioning funds it has paid to date or will pay in the future; (2) that the current method of allocating transition costs as part of the decommissioning cost is proper under the power purchase agreement; and (3) that the current method of investing decommissioning funds is proper under the power purchase agreement.
MidAmerican Energy filed its answer and contingent counterclaims. The
contingent counterclaims filed by MidAmerican Energy are generally as follows:
(1) that MidAmerican has no duty under the power purchase agreement to reimburse
or pay 50% of the decommissioning costs unless certain conditions occur; (2)
that NPPD has the duty to repay all amounts that MidAmerican Energy has
prefunded for decommissioning in the event NPPD operates the plant after the
term of the power purchase agreement; (3) that NPPD is equitably estopped from
continuing to operate the plant after the term of the power purchase agreement;
(4) that NPPD has granted MidAmerican Energy an option to continue taking 50% of
the power from the plant; (5) that the term "monthly power costs" as defined in
the power purchase agreement does not include costs and expenses associated with
decommissioning the plant; (6) that MidAmerican Energy has no duty to pay for
nuclear fuel, operation and maintenance projects or capital improvements that
have useful lives after the term of the power purchase agreement; (7) that
transition costs are not included in any decommissioning costs and expenses; (8)
that NPPD has breached its duty to MidAmerican Energy in making investments of
certain funds; (9) that reserves in certain accounts are excessive and should be
refunded to MidAmerican Energy; and (10) that NPPD must credit MidAmerican
Energy for certain payments by MidAmerican for low-level radioactive waste
disposal.
On October 6, 1999, the Court rendered summary judgment for NPPD on the above-mentioned issue concerning liability for decommissioning (issue one in the first paragraph above) and the related contingent counterclaims filed by MidAmerican Energy (issues one, two, three and five in the second paragraph above). The Court referred all remaining issues in the case to mediation, and cancelled the November 1999 trial date. MidAmerican Energy plans to appeal the Court's summary judgment ruling and will participate in mediation in an attempt to resolve the remaining issues. MidAmerican Energy and NPPD are currently involved in discovery.
LITIGATION
NORTH STAR STEEL COMPANY
On December 8, 1997, North Star Steel Company, a MidAmerican Energy electric retail customer, filed a complaint in the United States District Court for the Southern District of Iowa naming MHC and MidAmerican Energy as defendants. The complaint alleged that MidAmerican Energy's refusal to allow North Star to obtain retail electric service from an unspecified alternative energy company amounted to a violation of federal antitrust laws. North Star sought to recover an unspecified
level of damages, and to require MidAmerican Energy to provide retail wheeling service so that North Star could obtain electricity from an unnamed supplier. On June 23, 1998, the District Court issued an Order Granting Summary Judgment in favor of MidAmerican Energy. On July 20, 1998, North Star appealed that decision to the United States Court of Appeals for the Eighth Circuit. On July 7, 1999, the United States Court of Appeals for the Eighth Circuit affirmed the District Court grant of summary judgment in favor of MidAmerican Energy. On October 5, 1999, North Star filed a petition for a writ of certiorari seeking to have the U.S. Supreme Court agree to review a decision by the 8th Circuit Court of Appeals which had upheld a ruling by the U.S. District Court for the Southern District of Iowa granting summary judgment in favor of MidAmerican Energy. In a related matter North Star unsuccessfully appealed to the Iowa District Court an Iowa Utilities Board declaratory ruling that was favorable to MidAmerican Energy.
MANAGEMENT
OUR BOARD OF MANAGERS AND EXECUTIVE OFFICERS
Below are our current managers and executive officers and their positions with us:
NAME POSITION David L. Sokol......... Chairman, Chief Executive Officer and Manager Gregory E. Abel........ President and Chief Operating Officer Patrick J. Goodman..... Vice President and Treasurer Steven A. McArthur..... Vice President, Secretary and Manager John A. Rasmussen, Jr.. Vice President and General Counsel Delbert D. Weber....... Independent Manager |
DAVID L. SOKOL, 42, has been our Chairman and Chief Executive Officer and Chairman of our Board of Managers since our formation in March 1999. Mr. Sokol has been Chairman of MidAmerican Holdings since May 1994 and Chief Executive Officer of MidAmerican Holdings since April 1993. He has served as a director of MidAmerican Holdings since 1991. From January 1992 until October 1992, Mr. Sokol was Chairman, Chief Executive Officer, President and a Director of JWP, Inc. From November 1990 until February 1991, Mr. Sokol was the President and Chief Executive Officer of Kiewit Energy Company.
GREGORY E. ABEL, 36, has been our President and Chief Operating Officer since our formation in March 1999. Mr. Abel joined MidAmerican Holdings in 1992. At MidAmerican Holdings he has held various executive positions including responsibility for engineering, construction, accounting and various administrative functions. Mr. Abel is a Chartered Accountant and from 1984 to 1992 was employed by Price Waterhouse in San Francisco, where he was responsible for clients in the energy industry.
PARTRICK J. GOODMAN, 32, has been our Vice President and Treasurer since August 1999. Mr. Goodman is also Senior Vice President and Chief Financial Officer of MidAmerican Holdings. Prior to joining MidAmerican Holdings in 1995, for more than five years prior thereto Mr. Goodman was a financial manager for National Indemnity Company and a senior associate at PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.).
STEVEN A. MCARTHUR, 41, has been our Vice President and Secretary and a member of our Board of Managers since our formation in March 1999. Mr. McArthur is Senior Vice President and Secretary of MidAmerican Holdings. Mr. McArthur joined MidAmerican Holdings in 1991. From 1988 to 1991, he was an attorney in the Corporate Finance Group at Shearman & Sterling in San Francisco. From 1984 to 1988, Mr. McArthur was an attorney in the Corporate Finance Group at Winthrop, Stimson, Putnam & Roberts in New York.
JOHN A. RASMUSSEN, JR., 53, has been our Vice President and General Counsel since March 1999. Mr. Rasmussen has also been Senior Vice President and General Counsel of MidAmerican Holdings since March 1999, of MHC since December 1, 1996 and of MidAmerican Energy since November 1, 1996. Mr. Rasmussen served as Group Vice President and General Counsel of MidAmerican Energy from July 1, 1995 to November 1, 1996. He served as Vice President and General Counsel of Midwest Power Systems Inc. and Midwest Resources Inc., each a predecessor to MidAmerican Energy, from 1990 to 1995.
DELBERT D. WEBER, 67, has been our Independent Manager since March 1999. Dr. Weber serves as President of the Omaha Community Foundation, a position he assumed on September 1, 1998. He retired in July 1997 as Chancellor Emeritus, after serving as Chancellor of the University of Nebraska at Omaha for 20 years. Dr.
Weber has also served on the boards of directors of several prominent Omaha-based charities and community organizations.
Our articles of organization require the unanimous affirmative vote or consent of our Board of Managers, including the Independent Manager, to (1) institute bankruptcy or insolvency proceedings, (2) consent to the institution of such proceedings against us, (3) dissolve or liquidate, make assignments for the benefit of creditors, (4) take other similar actions, (5) change our form of organization or jurisdiction of formation or (6) amend various provisions of our articles of organization. In all such matters, our Board of Managers will owe their fiduciary obligations to us and our creditors.
None of our managers or executive officers receive any compensation in excess of $60,000 for serving in these positions.
THE DIRECTORS AND EXECUTIVE OFFICERS OF MHC AND MIDAMERICAN ENERGY
Below are the current managers and executive officers of MHC and MidAmerican Energy and their positions with those companies:
NAME POSITION COMPANY
---- -------- -------
David L. Sokol................... Chairman and Chief Executive Officer/Chairman....... MHC/MidAmerican Energy
Gregory E. Abel.................. President/Chief Executive Officer................... MHC/MidAmerican Energy
Ronald W. Stepien................ President........................................... MidAmerican Energy
Jack L. Alexander................ Senior Vice President............................... MidAmerican Energy
Patrick J. Goodman............... Senior Vice President and Chief Financial MHC and MidAmerican Energy
Officer..........................................
Keith D. Hartje.................. Senior Vice President............................... MidAmerican Energy
Steven A. McArthur............... Senior Vice President............................... MHC and MidAmerican Energy
John A. Rasmussen, Jr............ Senior Vice President and General Counsel........... MHC and MidAmerican Energy
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RONALD W. STEPIEN, 52, has been President of MidAmerican Energy since November 1, 1998. Mr. Stepien served as Executive Vice President of MidAmerican Energy from November 1, 1996 to October 31, 1998 and as Group Vice President of MidAmerican Energy from 1995 to October 31, 1996. He served as Vice President of Iowa-Illinois Gas and Electric Company, a predecessor company, from 1990 to 1995.
JACK L. ALEXANDER, 51, has been Senior Vice President of MidAmerican Energy since November 1, 1998. Mr. Alexander served as Vice President of MidAmerican Energy from November 1, 1996 to October 31, 1998 and in various executive and management positions with MidAmerican Energy and its predecessors Midwest Power Systems Inc. and Midwest Resources Inc. for more than five years prior thereto.
KEITH D. HARTJE, 49, has been Senior Vice President of MidAmerican Energy since March 12, 1999 and Vice President of MidAmerican Energy from November 1, 1996 to March 12, 1999. Mr. Hartje served in various executive and management positions with MidAmerican Energy and its predecessors Midwest Power Systems Inc. and Midwest Resources Inc. for more than five years prior thereto.
For information regarding Messrs. Sokol, Abel, Goodman, McArthur and Rasmussen see the description of our Board of Managers and executive officers above.
OWNERSHIP OF OUR MEMBERSHIP INTERESTS
All of our membership interests are owned by MidAmerican Holdings. As of September 30, 1999, our total capitalization was $1,836 million. There is no public trading market for our membership interests. None of our managers or executive officers beneficially own any of our equity interests. MidAmerican Holdings' common stock is publicly traded on the New York, Pacific and London Stock Exchanges.
DESCRIPTION OF THE SECURITIES
The Securities will be issued under and governed by an indenture, as supplemented by a First Supplemental Indenture, dated as of March 11, 1999, between the Company and Bank of New York, as trustee. The following summary of the material terms contained in the indenture and the Securities is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, and all the provisions of the indenture and the Securities, including the definitions of terms not defined in this prospectus. This summary does not restate the indenture in its entirety. We urge you to read the indenture because it, and not this description, defines your rights as holders of these Securities. We have filed copies of the indenture and the registration rights agreement as exhibits to the registration statement that includes this prospectus.
The form and terms of the exchange Securities and the initial Securities are identical in all material respects, except that transfer restrictions and registration rights applicable to the initial Securities do not apply to the exchange Securities. The exchange Securities will evidence the same debt as the initial Securities and will be governed by the same indenture. Where we refer to "Securities" in this prospectus, we are referring to both initial Securities and exchange Securities.
As used in this description, the term "Company" refers only to MidAmerican Funding, LLC, and not to any of its subsidiaries or affiliates.
GENERAL
The indenture does not limit the aggregate principal amount of the debt securities that may be issued under the indenture and provides that debt securities may be issued from time to time in one or more series.
The 5.85% Senior Secured Notes due 2001 and 5.85% Senior Secured Exchange Notes due 2001 (collectively, the "2001 Notes") will be issued in the aggregate principal amount of $200 million. The 2001 Notes will mature, and shall be repaid at their principal amount, on March 1, 2001.
The 6.339% Senior Secured Notes due 2009 and 6.339% Senior Secured Exchange Notes due 2009 (collectively, the "2009 Notes") will be issued in the aggregate principal amount of $175 million. The 2009 Notes will mature, and shall be repaid at their principal amount, on March 1, 2009.
The 6.927% Senior Secured Bonds due 2029 and 6.927% Senior Secured Exchange Bonds due 2029 (collectively, the "Bonds") will be issued in the aggregate principal amount of $325 million. The Bonds will mature, and shall be repaid at their principal amount, on March 1, 2029.
Each Security will bear interest at the relevant rate per annum stated above from March 11, 1999, or from the most recent interest payment date to which interest has been paid or provided for. Interest on the Securities will be payable semiannually on March 1 and September 1 of each year, commencing September 1, 1999, to the holders of record at the close of business on the preceding February 15 and August 15, respectively, until the relevant principal amount has been paid or made available for payment. Interest on the Securities will be computed on the basis of a 360-day year of twelve 30-day months.
If neither the exchange offer is consummated nor a shelf registration with respect to the resale of the Securities is declared effective by December 7, 1999, the interest rate on each series of the Securities will increase by 0.5% from and including such date, until the consummation of an exchange offer or the effective date of a shelf registration statement. If the exchange offer is not consummated or the shelf registration statement is not declared effective by March 12, 2001, such increase in interest rates will become permanent.
Any 2001 Notes that remain outstanding after the consummation of the exchange offer, together with all 2001 Exchange Notes issued in connection with the exchange offer, will be treated as a single class of securities under the indenture. Any 2009 Notes that remain outstanding after the consummation of the exchange offer, together with all 2009 Exchange Notes issued in connection with the exchange offer, will be treated as a single class of securities under the indenture. Any Bonds that remain outstanding after the consummation of the exchange offer, together with all Exchange Bonds issued in connection with the exchange offer, will be treated as a single class of securities under the indenture.
RANKING
The Securities will be senior secured obligations of the Company ranking on an equal basis with all other existing and future senior obligations of the Company. The Securities will rank senior to all existing and future subordinated indebtedness of the Company. The Securities will effectively rank junior to all indebtedness and other liabilities, including preferred stock, of the Company's Subsidiaries, to the extent of the assets of such Subsidiaries. The indenture contains restrictions on the ability of the Company and MHC to incur additional indebtedness. The indenture contains no restrictions on the amount of additional unsecured indebtedness which the Company's Subsidiaries, other than MHC, may incur. In addition, the indenture permits each of the Company's Subsidiaries, other than MHC, to incur significant additional amounts of secured indebtedness.
Prior to the initial offering of the Securities in March 1999, the Company did not have any debt obligations. The Company conducts its operations predominantly through MHC, its wholly owned subsidiary, and substantially all of the Company's consolidated assets relating to operations are held by MHC and its Subsidiaries, including MidAmerican Energy. Because the Company is a holding company, its rights and the rights of its creditors, including Holders of the Securities, in respect of claims on the assets of each of the Company's Subsidiaries upon any liquidation or administration are structurally subordinated to, and therefore will be subject to the prior claims of, each such Subsidiary's preferred stockholders and creditors (including trade creditors of and holders of debt issued by such subsidiary), except to the extent that the Company may itself be a creditor with recognized claims against such Subsidiary. At September 30, 1999, MHC and its direct and indirect Subsidiaries had total indebtedness, including preferred stock, of approximately $1.316 million, all of which would be effectively senior to the Securities.
The ability of the Company to pay interest on the Securities is, to a large extent, dependent upon the receipt by it of dividends and other distributions from its direct and indirect Subsidiaries, and from MidAmerican Energy in particular. The Company believes that such payments, which will be funded by cash flows generated through MidAmerican Energy's operations, will be sufficient to enable the Company to meet all of its obligations as they become due, including the Company's obligations under the Securities. The availability of distributions from the Company's Subsidiaries is subject to the satisfaction of various covenants and conditions contained in the applicable Subsidiaries' existing and future financing documents and certain utility regulatory restrictions.
COLLATERAL
The Securities will be secured by a pledge of all of the capital stock of
MHC.
Unless there is an Event of Default, the Company will be able to vote, as it sees fit in its sole discretion, the pledged shares of capital stock.
If the Company meets the conditions to its defeasance option or its covenant defeasance option as described below under the caption "--Defeasance and Covenant Defeasance," or the indenture is otherwise discharged, the lien of the indenture on the pledged shares will terminate and the pledged shares will be released to the Company without any further action by the trustee or any other person.
The proceeds of any sale of the collateral securing the Securities (the "Collateral") following an Event of Default might not be sufficient to satisfy the payments due on the Securities. If an Event of Default occurs under the
indenture, the trustee, on behalf of the holders of the Securities, in addition to any rights or remedies available to it under the indenture, may take such action as it deems advisable to protect and enforce its right in the Collateral, including the institution of foreclosure proceedings. The proceeds received by the trustee from any foreclosure will be applied by the trustee, first, to pay the expenses of such foreclosure and fees and other amounts then payable to the trustee under the indenture and, second, to pay the Securities.
COVENANTS
Except as otherwise described under "--Defeasance and Covenant Defeasance" below, for so long as any Securities remain outstanding or any amount remains unpaid on any of the Securities, the Company will comply with the terms of the covenants described below.
PAYMENT OF PRINCIPAL AND INTEREST
The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and the indenture.
MAINTENANCE OF OFFICE OR AGENCY
The Company will maintain in the Borough of Manhattan, The City of New York, (1) an office or agency of a paying agent where the Securities may be paid and notices and demands to or upon the Company in respect of the Securities and the indenture may be served and (2) an office or agency of a registrar where Securities may be surrendered for registration of transfer and exchange. The Company will give prompt written notice to the trustee of the location, and any change in the location, of any such office or agency. If at any time the Company fails to maintain any required office or agency or fails to furnish the trustee with the address of that office or agency, all presentations, surrenders, notices and demands may be served at the office of the trustee.
AVAILABLE INFORMATION
Notwithstanding that the Company may not be required to be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, from and after the date of effectiveness of the registration statement required to be filed by the registration rights agreement, the Company will file or cause to be filed with the SEC and provide the trustee with 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, with respect to the Company specified in Sections 13 and 15(d) of the Exchange Act. If the Company is subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, it will also provide such information, documents or reports to the Holders of the Securities. Prior to the effective date of that registration statement, the Company shall provide, upon written request of the Holders of the Securities or prospective Holders of the Securities who are qualified institutional buyers and are designated by existing Holders, with a copy to the trustee, such information with respect to the Company as is required by Rule 144A to enable resales of the Securities to be made pursuant to Rule 144A. The Company also will comply with the other provisions of Section 314(a) of the Trust Indenture Act.
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
The Company may not consolidate with or merge with or into any other Person, or convey, transfer or lease its consolidated properties and assets substantially as an entirety, in one transaction or in a series of related transactions, to any Person, or permit any Person to merge into or consolidate with the Company, unless:
(1) (x) the Company will be the surviving or continuing Person or (y) if other than the Company, the surviving or continuing Person or purchaser or lessee will be a corporation incorporated under the laws of the United States of America, one of the States thereof or the District of Columbia or Canada and expressly assumes by supplemental indenture the Company's obligations under the Securities and the indenture;
(2) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; and
(3) the Company or such other surviving or continuing Person, as applicable, shall continue to have a valid, perfected, first priority interest in the Collateral.
LIMITATION ON DISTRIBUTIONS
The indenture provides that the Company shall only declare, recommend, make or pay any Distribution to any of its shareholders if there exists no Event of Default and no Event of Default will result from making that Distribution, and either:
(1) at the time and as a result of that Distribution, the Company's Leverage Ratio does not exceed 0.67:1 and the Company's Interest Coverage Ratio is not less than 2.2:1; or
(2) if it is not in compliance with the foregoing ratios, at such time its senior secured long term debt rating is at least BBB, or its then equivalent, with S&P and DCR and Baa2, or its then equivalent, with Moody's.
This "Limitation on Distributions" covenant will cease to be in effect if the Rating Agencies confirm in writing that, without this covenant, the Company's senior secured long term debt would still be rated at least BBB+, or its then equivalent, from each of S&P and DCR and Baa1, or its then equivalent, from Moody's. If the restriction on Distributions ceases to be in effect, the Company will be under no obligation to reinstate such restriction or otherwise observe its terms if such ratings are thereafter lowered or withdrawn.
In order to obtain the release of the restriction on Distributions, the Company shall deliver to the trustee written confirmation from each Rating Agency of the ratings conditions described in the preceding paragraph.
LIMITATION ON INDEBTEDNESS OF THE COMPANY AND OF MHC
The indenture provides that the Company will not incur any Indebtedness other than (1) as part of the Company's permitted businesses and activities described under "--Limitation on Business Activities" below and (2) other Indebtedness incurred subsequent to receipt of written confirmation from the Rating Agencies that such incurrence would not result in a Ratings Downgrade.
The indenture further provides that the Company will not permit MHC to incur any Indebtedness other than Indebtedness outstanding on the date of original issue of the Securities under MHC's agreements then in existence and extensions of such Indebtedness.
LIMITATION ON LIENS
The indenture permits the Company to incur certain unsecured indebtedness and does not in any way restrict or prevent any Subsidiary other than MHC from incurring unsecured indebtedness. With respect to secured indebtedness, however, the indenture provides that neither the Company nor any Significant Subsidiary will issue, assume or guarantee any Indebtedness secured by a Lien upon any property or assets (other than cash or cash equivalents) of the Company or such Significant Subsidiary, as applicable, without effectively providing that the outstanding Securities (together with, if the Company so determines, any other indebtedness or obligation then existing or thereafter created ranking equally with the Securities) shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured. The foregoing restriction on Liens will not, however, apply to the following "Permitted Liens":
(1) Liens in existence on the date of original issue of the Securities;
(2) any Lien created or arising over any property which is acquired, constructed or created by the Company or any of its Significant Subsidiaries, but only if (A) such Lien secures only principal amounts (not exceeding the cost of such acquisition, construction or creation) raised for the purposes of such acquisition, construction or creation, together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof, (B) such Lien is created or arises on or before 180 days after the completion of such acquisition, construction or creation and (C) such Lien is confined solely to the property so acquired, constructed or created;
(3) any Lien securing amounts not more than 180 days overdue or otherwise being contested in good faith;
(4) (a) rights of financial institutions to offset credit balances in connection with the operation of cash management programs established for the benefit of the Company and/or a Significant Subsidiary or in connection with the issuance of letters of credit for the benefit of the Company and/or a Significant Subsidiary;
(b) any Lien securing Indebtedness of the Company and/or a Significant Subsidiary incurred in connection with the financing of accounts receivable;
(c) any Lien incurred or deposits made in the ordinary course of business, including, but not limited to, (A) any mechanics', materialmen's, carriers', workmen's, vendors' and other like Liens and (B) any Liens securing amounts in connection with workers' compensation, unemployment insurance and other types of social security;
(d) any Lien upon specific items of inventory or other goods and proceeds of the Company and/or a Significant Subsidiary securing obligations of the Company and/or a Significant Subsidiary in respect of bankers' acceptances issued or created for the account of such person to facilitate the purchase, shipment or storage of such inventory or other goods;
(e) any Lien incurred or deposits made securing the performance of tenders, bids, leases, trade contracts (other than for borrowed money), statutory obligations, surety bonds, appeal bonds, government contracts, performance bonds, return-of-money bonds, letters of credit not securing borrowings and other obligations of like nature incurred in the ordinary course of business;
(f) any Lien created by the Company or a Significant Subsidiary under or in connection with or arising out of any transactions or arrangements entered into in connection with the hedging or management of risks relating to the electricity or natural gas distribution industry;
(g) any Lien constituted by a right of set off or right over a margin call account or any form of cash or cash collateral or any similar arrangement for obligations incurred in respect of Currency, Interest Rate or Commodity Agreements;
(h) any Lien arising out of title retention or like provisions in connection with the purchase of goods and equipment in the ordinary course of business;
(i) any Lien securing reimbursement obligations under letters of credit, guaranties and other forms of credit enhancement given in connection with the purchase of goods and equipment in the ordinary course of business; and
(j) any Lien securing obligations under Currency, Interest Rate or Commodity Agreements;
(5) Liens in favor of the Company or a Subsidiary;
(6) (a) Liens on any property or assets acquired from a corporation which is merged with or into the Company or a Significant Subsidiary, or any Liens on the property or assets of any corporation or other entity existing at the time such corporation or other entity becomes a subsidiary of the Company and, in either such case, is not created in anticipation of any such transaction, unless such Lien was created to secure or provide for the payment of any part of the purchase price of such corporation;
(b) any Lien on any property or assets existing at the time of acquisition thereof and which is not created in anticipation of such acquisition, unless such Lien was created to secure or provide for the payment of any part of the purchase price of such property or assets; and
(c) any Lien created or outstanding on or over any asset of any company which becomes a Significant Subsidiary on or after the date of the issuance of the Securities where such Lien is created before the date on which such company becomes a Significant Subsidiary;
(7) (a) Liens required by any contract, statute or regulation in order to permit the Company or a Significant Subsidiary to perform any contract or subcontract made by it with or at the request of a governmental entity or any department, agency or instrumentality thereof, or to secure partial, progress, advance or any other payments by the Company or a Significant Subsidiary to such governmental unit pursuant to the provisions of any contract, statute or regulation;
(b) any Lien securing industrial revenue, development, pollution control or similar bonds issued by or for the benefit of the Company or a Significant Subsidiary, provided that such industrial revenue, development, pollution control or similar bonds do not provide recourse generally to the Company and/or such Significant Subsidiary; and
(c) any Lien securing taxes or assessments or other applicable governmental charges or levies;
(8) (a) any Lien which arises pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings and any Lien which secures the reimbursement obligation for any bond obtained in connection with an appeal taken in any court proceeding, so long as the execution or other enforcement of such Lien arising pursuant to such legal process is effectively stayed and the claims secured thereby are being contested in good faith and, if appropriate, by appropriate legal proceedings, and any Lien in favor of a plaintiff or defendant in any action before a court or tribunal as security for costs and/or expenses; and
(b) any Lien arising by operation of law or by order of a court or tribunal or any lien arising by an agreement of similar effect, including, without limitation, judgment Liens;
(9) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Liens referred to in the foregoing clauses, for amounts not exceeding the principal amount of the Indebtedness secured by the Lien so extended, renewed or replaced, provided that such extension, renewal or replacement Lien is limited to all or a part of the same property or assets that were covered by the Lien extended, renewed or replaced (plus improvements on such property or assets);
(10) any Lien created in connection with Project Finance Debt;
(11) any Lien created by MidAmerican Energy that is then permitted to be created under the terms of its then existing mortgages and indentures on the terms in effect at the time of creation of the Lien;
(12) any Lien created in connection with the securitization of some or all of the assets of MidAmerican Energy and the associated issuance of Indebtedness as authorized by applicable state or federal law in connection with the restructuring of jurisdictional electric or gas businesses; and
(13) any Lien on stock created in connection with a mandatorily convertible or exchangeable stock or debt financing, provided that any such financing may not be secured by or otherwise involve the creation of a Lien on any capital stock of MHC or MidAmerican Energy or any successor thereto.
Notwithstanding the foregoing, the Company and/or a Significant Subsidiary may create Liens over any of their respective properties or assets so long as the aggregate amount of Indebtedness secured by all such Liens, excluding the amount of Indebtedness secured by Liens described in clauses (1) through (13) above, does not exceed 10% of Consolidated Net Tangible Assets in the aggregate calculated as of the date of creation of such Liens, based upon the Consolidated Net Tangible Assets appearing on the most recently available balance sheet for the most recently concluded calendar quarter.
LIMITATION ON BUSINESS ACTIVITIES
The indenture provides that the Company will not enter into any business operations other than:
(1) the transactions contemplated by the indenture, the Escrow Agreement, the registration rights agreement and the Merger Agreement,
(2) activities related to the acquisition, management and ownership of MHC,
(3) entering into and performing any agreements to accomplish the foregoing and
(4) exercising any corporate powers that are incidental to or necessary, suitable or convenient for the accomplishment of the foregoing;
provided, that the Company may enter into additional business operations from time to time in the future if, prior to doing so, it obtains written confirmation from the Rating Agencies that the entering into of such new businesses will not result in a Ratings Downgrade.
The indenture further provides that the Company will cause its Significant Subsidiaries to engage only in:
(1) those types of businesses and other activities in which the Company or MHC or any of its direct or indirect subsidiaries or controlled partnerships or joint ventures (collectively, "MidAmerican Group") are engaged in on the date of original issuance of the Securities, including, without limitation, any geographic or other expansion of such businesses or activities, and
(2) any other business or activity which is deemed necessary, useful or desirable in connection with such existing businesses and activities or any such permitted additional geographic or other expansions of such businesses and activities.
OPERATIONAL COVENANTS
The indenture contains additional affirmative covenants (which are collectively referred to in this prospectus as the "Operational Covenants") requiring the Company and its Significant Subsidiaries to:
(1) comply with specified Project Documents (as defined in the indenture) and maintain all utility facilities that are operated by the Company or any Significant Subsidiary in accordance with reasonably prudent utility practices;
(2) obtain and maintain necessary governmental approvals and other approvals and consents required in connection with all utility facilities which are operated by the Company or any Significant Subsidiaries for so long as such facilities remain in operation;
(3) preserve and maintain good title or valid leasehold rights in the real property owned or leased by them from time to time and the personal property owned by them from time to time, subject to Permitted Liens;
(4) comply with all applicable laws and governmental approvals;
(5) obtain and maintain customary insurance, subject to reasonable availability and costs;
(6) pay and discharge all material taxes, assessments, charges and claims, other than those which are the subject of a good faith contest and for which adequate reserves have been established; and
(7) if a casualty or condemnation shall occur in respect of facilities which are operated and controlled by the Company or its Significant Subsidiaries, diligently pursue all rights to compensation;
in each case subject to an exception for any noncompliance or other failure that would not reasonably be expected to have a material adverse effect on the ability of the Company to perform its regularly scheduled payment obligations under the Securities. The Operational Covenants will no longer be applicable to the Securities, and the failure to comply with such covenants, restrictions and other provisions will no longer constitute a default or an Event of Default under the indenture, following the first date upon which:
(1) MidAmerican Holdings' senior secured long term debt securities (the "Reference Securities") are rated Baa3 or better by Moody's and BBB- or better by each of S&P and DCR (or, in any case, if such person ceases to rate such Reference Securities for reasons outside the control of the Company, the equivalent investment grade credit rating from any other "nationally recognized statistical rating organization," within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, selected by the Company as a replacement rating agency), and provided no Event of Default or event which with notice or passage of time would constitute an Event of Default shall exist on such date, and
(2) MidAmerican Holdings has redeemed, repurchased or defeased, by way of covenant defeasance or other defeasance, all of its 9-1/2% Senior Notes due 2006 issued pursuant to the terms of the indenture, dated as of September 20, 1996, between MidAmerican Holdings and IBJ Schroder Bank & Trust Company.
MODIFICATION OF THE INDENTURE
The indenture contains provisions permitting the Company and the trustee to modify the indenture or any supplemental indenture or the rights of the Holders of Securities of each series to be affected with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Securities of each series to be affected, subject to the same conditions described below under "--Modification or Waiver of Certain Covenants."
The indenture also contains provisions permitting the Company and the trustee to amend the indenture by entering into one or more supplemental indentures in certain circumstances without the consent of the Holders of any Securities:
(1) to cure any ambiguity,
(2) to correct or supplement any provision in the indenture which may be defective or inconsistent with any other provision in the indenture,
(3) to evidence the merger of the Company or the replacement of the trustee and
(4) to make any other changes that do not materially adversely affect the rights of any Holders of Securities.
EVENTS OF DEFAULT
An Event of Default with respect to the Securities is defined in the indenture as:
(1) default for 30 days in the payment of any interest on the Securities;
(2) default for three days in the payment of principal of or any premium on the Securities at maturity, upon redemption, upon required purchase, upon acceleration or otherwise;
(3) material default in the performance, or breach, of any material covenant or obligation of the Company in the indenture (which shall not include, among other things, the Operational Covenants) and continuance of such material default or breach for a period of 90 days after written notice specifying such default is given to the Company by the trustee or to the Company and the trustee by the Holders of at least a majority in aggregate principal amount of the Securities;
(4) default in the performance, or breach, of any of the Operational Covenants (if then effective) which would reasonably be expected to result in a material adverse effect on the financial condition of the Company and its Subsidiaries, taken as a whole, and continuance of such default or breach for a period of 90 days after written notice specifying such default is given to the Company by the trustee or to the Company and the trustee by the Holders of at least a majority in aggregate principal amount of the Securities, subject to various cure and ratings confirmation exceptions in the case of defaults involving the Project Document covenants;
(5) the trustee fails to have a perfected security interest in the pledged capital stock of MHC for a period of 10 days;
(6) default in the payment of the principal of any bond, debenture, note or other evidence of indebtedness, in each case for money borrowed, or in the payment of principal under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for Borrowed Money, of the Company or any Significant Subsidiary if such Indebtedness for Borrowed Money is not Project Finance Debt and provides for recourse generally to the Company, which default for payment of principal is in an aggregate principal amount exceeding $75,000,000 when such indebtedness becomes due and payable, whether at maturity, upon redemption or acceleration or otherwise, if such default shall continue unremedied or unwaived for more than 30 Business Days and the time for payment of such amount has not been expressly extended, until such time as such payment default is remedied, cured or waived; and
(7) the failure of the Company or a Significant Subsidiary generally to pay its debts as they become due, or the admission in writing of its inability to pay its debts generally, or the making of a general assignment for the benefit of its creditors, or the institution of any proceeding by or against the Company or a Significant Subsidiary (other than any such proceeding brought against the Company or a Significant Subsidiary that is dismissed within 180 days from the commencement thereof) seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition (in each case, other than a solvent liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition) of it or its debts under any law relating to bankruptcy, insolvency, reorganization, moratorium or relief of debtors, or seeking the entry of an order for relief or appointment of an administrator, receiver, trustee, intervenor or other similar official for it or for any substantial part of its property, or the taking of any action by the Company or a Significant Subsidiary to authorize or consent to any of the actions described in this subparagraph (7).
The Company will give the trustee notice by facsimile or other written communication satisfactory to the trustee of any Event of Default within five days after the occurrence of that Event of Default becoming known to the Company, and of the measures it is taking to remedy that Event of Default.
If an Event of Default with respect to the Securities shall occur and be continuing, either the trustee or (x) in the case of an Event of Default described under clause (1) or (2) under "Events of Default" above, the Holders of at least 33% in aggregate principal amount of the Securities, or (y) in the case of any other Event of Default, the Holders of a majority in aggregate principal amount of the Securities, may declare the principal amount of the Securities, and any interest accrued thereon, to be due and payable immediately. At any time after such declaration of acceleration has been made, but before a judgment or decree for payment of money has been obtained, if all Events of Default have been cured or waived (other than the non-payment of principal of the Securities which has become due solely by reason of such declaration of acceleration), then, and in every such case, the Holders of a majority in aggregate principal amount of the outstanding Securities may, by written notice to the Company and to the trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such rescission or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
No Holder of the Securities of a series shall have any right to institute any proceeding, judicial or otherwise, with respect to the indenture, or for the appointment of a receiver or trustee, or for any other remedy under the indenture, unless:
(a) such Holder has previously given written notice to the trustee of a continuing Event of Default with respect to the Securities;
(b) the Holders of not less than 33% or a majority, as applicable, in principal amount of the Securities shall have made written request to the trustee to institute proceedings in respect of such Event of Default in its own name as trustee;
(c) such Holder or Holders have offered the trustee indemnity satisfactory to the trustee against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the trustee, for 90 days after its receipt of such notice, request and offer of indemnity, has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to the trustee during that 90-day period by the Holders of a majority in principal amount of the outstanding Securities.
As noted above, actions to be taken by the Holders of the Securities with respect to an Event of Default, including giving notice to the Company and the trustee of an Event of Default, declaring an acceleration of the Securities, rescinding a declaration of acceleration, exercising remedies with respect to the Collateral and instituting and controlling proceedings following an Event of Default, may be taken by the holders of the specified percentages of the aggregate principal amount of Securities outstanding. For purposes of voting on modifications to the indenture or supplemental indentures or the rights of Holders of the Securities, the consent of a majority in aggregate principal amount of the outstanding Securities of each series to be affected is required. For these purposes, each of the 2001 Notes, the 2009 Notes and the Bonds will be treated as a separate series of Securities under the indenture. However, as a result of voting together as one class with respect to matters involving an Event of Default, holders of one or two series of the Securities will likely be able to control the actions taken with respect to an Event of Default without obtaining the consent of holders of the other series of Securities.
OPTIONAL REDEMPTION
GENERAL
The Securities of each series will be redeemable in whole or in part, at the option of the Company at any time, at a redemption price equal to the greater of:
(1) 100% of the principal amount of the series of Securities being redeemed; or
(2) the sum of the present values of the remaining scheduled payments of principal of and interest on the series of Securities being redeemed discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield, in the case of the 2001 Notes, the Treasury Yield plus 15 basis points, in the case of the 2009 Notes and the Treasury Yield plus 25 basis points, in the case of the Bonds,
plus, for (1) or (2) above, whichever is applicable, accrued interest on such Securities to the date of redemption.
Notice of redemption shall be given not less than 30 days nor more than 60 days prior to the date of redemption. If fewer than all the Securities are to be redeemed, selection of Securities of a series for redemption will be made by the trustee in any manner the trustee deems fair and appropriate.
Unless the Company defaults in payment of the Redemption Price (as defined below), from and after the Redemption Date, the Securities or portions of Securities called for redemption will cease to bear interest, and the holders of those Securities will have no right in respect of those Securities except the right to receive the applicable Redemption Price.
OPTIONAL REDEMPTION PROVISIONS
Under the procedures described above, the price payable upon the optional redemption at any time of a Security (the "Redemption Price") is determined by calculating the present value (the "Present Value") at such time of each remaining payment of principal of or interest on such Security and then totaling those Present Values. If the sum of those Present Values is equal to or less than 100% of the principal amount of such Security, the Redemption Price of such Security will be 100% of its principal amount (redemption at par). If the sum of those Present Values is greater than 100% of the principal amount of such Security, the Redemption Price of such Security will be such greater amount (redemption at a premium). In no event may a Security be redeemed optionally at less than 100% of its principal amount.
The Present Value at any time of a payment of principal of or interest on a Security is calculated by applying to such payment the discount rate (the "Discount Rate") applicable to such payment. The Discount Rate applicable at any time to payment of principal of or interest on a Security equals the equivalent yield to maturity at such time of a fixed rate United States treasury security having a maturity comparable to the maturity of such payment plus 0 basis points (in the case of the 2001 Notes), 15 basis points (in the case of the 2009 Notes) and 25 basis points (in the case of the Bonds), such yield being calculated on the basis of the interest rate borne by such United States treasury security and the price at such time of such security. The United States treasury security employed in the calculation of a Discount Rate (a "Relevant Security") as well as the price and equivalent yield to maturity of such Relevant Security will be selected or determined by an Independent Investment Banker.
Whether the sum of the Present Values of the remaining payments of principal of and interest on a Security to be redeemed optionally will or will not exceed 100% of its principal amount and, accordingly, whether such Security will be redeemed at par or at a premium will depend on the Discount Rate used to calculate such Present Values. Such Discount Rate, in turn, will depend upon the equivalent yield to maturity of a Relevant Security, which yield will itself depend on the interest rate borne by, and the price of, the Relevant Security. While the interest rate borne by the Relevant Security is fixed, the price of the Relevant Security tends to vary with interest rate levels prevailing from time to time. In general, if at a particular time the prevailing level of interest rates for a newly issued United States treasury security having a maturity comparable to that of a Relevant Security is higher than the level of interest rates for newly issued United States treasury securities having a maturity comparable to such Relevant Security prevailing at the time the Relevant Security was issued, the price of the Relevant Security will be lower than its issue price. Conversely, if at a particular time the prevailing level of interest rates for a newly issued United States treasury security having a maturity comparable to that of a Relevant Security is lower than the level of interest rates prevailing for newly issued United States treasury securities having a maturity comparable to the Relevant Security at the time the Relevant Security was issued, the price of the Relevant Security will be higher than its issue price.
Because the equivalent yield to maturity on a Relevant Security depends on the interest rate it bears and its price, an increase or a decrease in the level of interest rates for newly issued United States treasury securities with a maturity comparable to that of a Relevant Security above or below the levels of interest rates for newly issued United States treasury securities having a maturity comparable to the Relevant Security prevailing at the time of issue of the Relevant Security will generally result in an increase or a decrease, respectively, in the Discount Rate used to determine the Present Value of a payment of principal of or interest on a Security. An increase or a decrease in the Discount Rate, and therefore an increase or a decrease in the levels of interest rates for newly issued United States treasury securities having a maturity comparable to the Relevant Security, will result in a decrease or an increase, respectively, of the Present Value of a payment of principal of or interest on a Security. In other words, the Redemption Price varies inversely with the levels of interest rates for newly issued United States treasury securities having a maturity comparable to the Comparable Treasury Issue. As noted above, however, if the sum of the Present Values of the remaining payments of principal of and interest on a Security proposed to be redeemed is less than its principal amount, such Security may only be redeemed at par.
DEFEASANCE AND COVENANT DEFEASANCE
The Company, at its option, may elect (a) to be discharged from any and all obligations in respect of a series of Securities ("Defeasance") (except in each case for the obligations to, among other things, register the transfer or exchange of such Securities, replace stolen, lost or mutilated Securities, maintain paying agencies, hold moneys for payment in trust and pay when due all principal and interest solely out of moneys held in trust) or (b) not to comply with certain covenants ("Covenant Defeasance") of the indenture with respect to a series of Securities described above under "Consolidation, Merger, Conveyance, Sale or Lease," "Limitation on Distributions", "Limitation on Indebtedness of the Company and MHC", "Limitation on Liens", "Limitation on Business Activities" and "Operational Covenants"; if, in either case, the Company irrevocably deposits with the trustee, as trust funds in trust specifically pledged as security for, and dedicated solely to, the benefit of the Holder or Holders of such Securities of such series, (1) money or (2) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money, or (3) a combination thereof, in each case in an amount sufficient, in the opinion of a nationally recognized firm of independent accountants, to pay and discharge the principal of and premium and interest on the outstanding Securities of such series on the dates such payments are due in accordance with the terms of the Securities of such series, or if the Company has designated a Redemption Date pursuant to the next paragraph, to and including the Redemption Date so designated by the Company. Other conditions precedent to effecting Defeasance or Covenant Defeasance include:
(1) that the Securities will not be delisted by any securities exchange on which they are then traded as a result of the deposit of trust funds in trust;
(2) no Event of Default or event which with notice or lapse of time would become an Event of Default (including by reason of such deposit) with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit; and
(3) such Defeasance or Covenant Defeasance shall not result in the breach or violation of, or constitute a default under, any other material agreement or instrument by which the Company is bound.
To exercise any such option, the Company is required to deliver to the trustee:
(a) an opinion of independent counsel of recognized standing to the effect that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit, which in the case of Defeasance must be based on a change in law or a ruling by the U.S. Internal Revenue Service, and
(b) an officer's certificate as to compliance with all conditions precedent provided for in the indenture relating to the satisfaction and discharge of the Securities of such series.
If the Company wishes to deposit or cause to be deposited money or U.S. Government Obligations to pay or discharge the principal of and interest, if any, on the outstanding Securities of a series to and including a Redemption Date on which all of the outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a board resolution delivered to the trustee on or before the date of deposit of such money or U.S. Government Obligations, and such board resolution shall be accompanied by an irrevocable Company request that the trustee give notice of such redemption in the name and at the expense of the Company not less than 30 nor more than 60 days prior to such Redemption Date in accordance with the indenture.
If the trustee or the paying agent is unable to apply any moneys deposited in trust to effect a Defeasance or Covenant Defeasance by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then any obligations from which the Company had been discharged or released shall be revived and reinstated as though no such deposit of moneys in trust had occurred, until such time as the trustee or paying agent is permitted so to apply all of such moneys deposited in trust.
MODIFICATION OR WAIVER OF CERTAIN COVENANTS
The Company may omit in any particular instance to comply with any term, provision or condition in the indenture with respect to the Securities of a series if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the outstanding Securities of that series shall, by act of such Holders, either modify the covenant or waive such compliance in such instance or generally waive compliance with such term, provision or condition; provided that no such modification shall, without the consent of each Holder of Securities of that series:
(1) change the stated maturity upon which the principal of or the interest on the Securities of that series is due and payable;
(2) reduce the principal amount or redemption price of the Securities of that series or the rate of interest on the Securities of that series;
(3) change any place of payment or the currency in which the Securities of that series or any premium or the interest on the Securities of that series is payable;
(4) impair the right to institute suit for the enforcement of any such payment on or after the stated maturity of those Securities (or, in the case of redemption, on or after the Redemption Date for those Securities); or
(5) reduce the percentage in principal amount of the outstanding Securities of that series, the consent of Holders of which is required for any waiver of compliance with certain provisions of the indenture or certain defaults under the indenture and their consequences provided for in the indenture.
The Securities owned by the Company or any of its affiliates shall be deemed not to be outstanding for, among other purposes, consenting to any such modification.
TRANSFER
The Securities will be issued in registered form and will be transferable only upon the surrender of the Securities being transferred for registration of transfer. The Company may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges. See "--Book-Entry, Delivery and Form."
CONCERNING THE TRUSTEE
The Bank of New York, as successor to IBJ Whitehall Bank & Trust Company, is the trustee under the indenture and has been appointed by the Company as registrar and paying agent with respect to the Securities.
GOVERNING LAW
The indenture and the Securities will be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.
BOOK-ENTRY, DELIVERY AND FORM
GENERAL
Except as described below, the Securities will be issued in the form of one or more fully registered Securities in global form ("Global Notes"). The Global Notes will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of the Depositary or its nominee. Securities sold to "institutional accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, will be delivered as definitive fully registered certificates.
Upon issuance of the Global Notes, the Depositary or its nominee will credit, on its book-entry registration and transfer system, the principal amount of Securities sold to qualified institutional buyers pursuant to Rule 144A represented by such Global Notes to the account of institutions that have accounts with the Depositary or its nominee participants (the "DTC Participants") and Euroclear will credit on its book-entry registration and transfer system the number of Securities sold to certain persons in offshore transactions in reliance on Regulation S under the Securities Act also represented by Global Notes to the account of institutions that have accounts with Euroclear or its nominee participants (the "Euroclear Participants" and, collectively with the DTC Participants, the "Participants"). Ownership of beneficial interests in the Global Notes will be limited to Participants or persons that may hold interests through Participants. Ownership of beneficial interests in the Global Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary or its nominee (with respect to the Participants' interests) for such Global Notes, or by Participants or persons that hold interests through Participants (with respect to beneficial interests of persons other than Participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of those securities in definitive form. Such laws may impair the ability to transfer or pledge beneficial interests in the Global Notes.
So long as the Depositary or its nominee is the registered holder of any Global Notes, the Depositary or its nominee, as the case may be, will be considered the sole legal owner of such Securities for all purposes under the indenture and the Securities. Except as described below, owners of beneficial interests in Global Notes will not be entitled to have those Global Notes registered in their names, will not receive or be entitled to receive physical delivery in exchange for those Global Notes and will not be considered to be the owners or holders of those Global Notes for any purpose under the indenture or the Securities. The Company understands that under existing industry practice, if an owner of a beneficial interest in a Global Note desires to take any action that the Depositary, as the holder of that Global Note, is entitled to take, the Depositary would authorize the Participants to take such action, and that the Participants would authorize beneficial owners owning through such Participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.
The Company will make available to the trustee by the applicable interest payment date or maturity date any payment of principal or interest due on the Securities. As soon as practicable thereafter, the trustee will make such payments to the Depositary or its nominee, as the case may be, as the registered owner of the Global Notes representing such Securities in accordance with existing arrangements between the trustee and the Depositary.
The Company expects that the Depositary or its nominee, upon receipt of any payment of principal or interest in respect of the Global Notes, will credit immediately the accounts of the related Participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of the Depositary. The Company also expects that payments by Participants to owners of beneficial interests in the 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 in bearer form or registered in "street name," and will be the responsibility of such Participants.
None of the Company, the trustee, or any payment agent for the Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in any of the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for other aspects of the relationship between the Depositary and its Participants or the relationship between such Participants and the owners of beneficial interests in the Global Notes owning through such Participants.
Unless and until exchanged in whole or in part for Securities in definitive form in accordance with the terms of the Securities, the Global Notes may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary of any such nominee to a successor of the Depositary or a nominee of each successor.
Although the Depositary has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among Participants of the Depositary, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the trustee nor the Company will have any responsibility for the performance by the Depositary or its Participants or indirect Participants of their respective obligations under the rules and procedures governing their operations. The Company and the trustee may conclusively rely on, and shall be protected in relying on, instructions from the Depositary for all purposes.
CERTIFICATED NOTES
Securities that are originally issued to institutional "accredited investors" who are not qualified institutional buyers will be issued in certificated form.
The Global Notes shall be exchangeable for corresponding certificated Securities registered in the name of persons other than the Depositary or its nominee only if:
(1) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for any of the Global Notes or at any time ceases to be a clearing agency registered under the Exchange Act;
(2) there shall have occurred and be continuing an Event of Default with respect to the applicable Securities; or
(3) the Company executes and delivers to the trustee, an order that the Global Notes shall be so exchangeable.
Any certificated Securities will be issued only in fully registered form, and shall be issued without coupons in denominations of $1,000 and integral multiples of $1,000. Any certificated Securities issued will be registered in the names and in the denominations requested by the Depositary.
THE CLEARING SYSTEM
The Depositary has advised the Company as follows: The Depositary is limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary was created to hold securities of institutions that have accounts with the Depositary and to facilitate the clearance and settlement of securities transactions among it Participants in such securities through electronic book-entry changes in accounts of Participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's Participants include securities brokers and dealers, bank, trust companies, clearing corporations and certain other organizations. Access to the Depositary's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, whether directly or indirectly.
CERTAIN DEFINITIONS
The following is a summary of some of the defined terms used in the indenture. We refer you to the indenture for the full definition of all these terms, as well as any other terms used in this prospectus for which no definition is provided.
"Capitalized Lease Obligations" means all lease obligations of the Company and its Subsidiaries which, under GAAP, are or will be required to be capitalized, in each case taken at the amount thereof accounted for as indebtedness in conformity with such principles.
"Comparable Treasury Issue" means, in the case of the 2001 Notes, the 2009 Notes and the Bonds, the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of such Securities 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 Securities.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(1) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (2) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, the Reference
Treasury Dealer Quotation for such Redemption Date.
"Consolidated Current Liabilities" means the consolidated current liabilities of the Company and its Subsidiaries, but excluding the current portion of long term Indebtedness which would otherwise be included therein, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Debt" means, at any time, the sum of the aggregate outstanding principal amount of all Indebtedness for Borrowed Money (including, without limitation, the principal component of Capitalized Lease Obligations, but excluding Currency, Interest Rate or Commodity Agreements and all Consolidated Current Liabilities and Project Finance Debt) of the Company and its Subsidiaries, as determined on a consolidated basis in conformity with GAAP.
"Consolidated EBITDA" means, for any period, the sum of the amounts for
such period of the Company's (1) Consolidated Net Operating Income, (2)
Consolidated Interest Expense, (3) income taxes and deferred taxes (other than
income taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (4) depreciation expense,
(5) amortization expense and (6) all other non-cash items reducing Consolidated
Net Operating Income, less all non-cash items increasing Consolidated Net
Operating Income, all as determined on a consolidated basis in conformity with
GAAP; provided that, to the extent that the Company has any Subsidiary that is
not a wholly owned Subsidiary, Consolidated EBITDA shall be reduced by an
amount equal to the Consolidated Net Operating Income of such Subsidiary
multiplied by the quotient of (A) the number of shares of outstanding common
stock of such Subsidiary not owned on the last day of such period by the
Company or any
Subsidiary of the Company divided by (B) the total number of shares of outstanding common stock of such Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness for Borrowed Money (including amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; and all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financing) and the net costs associated with Interest Rate Agreements and all but the principal component of rentals in respect of Capitalized Lease Obligations, paid, accrued or scheduled to be paid or to be accrued by the Company and each of its Subsidiaries during such period, excluding, however, any amount of such interest of any Subsidiary of the Company if the net operating income (or loss) of such Subsidiary is excluded from the calculation of Consolidated Net Operating Income for such Subsidiary pursuant to clause (2) of the definition thereof (but only in the same proportion as the net operating income (or loss) of such Subsidiary is excluded), less consolidated interest income, all as determined on a consolidated basis in conformity with GAAP; provided that, to the extent that the Company has any Subsidiary that is not a wholly owned Subsidiary, Consolidated Interest Expense shall be reduced by an amount equal to such interest expense of such Subsidiary multiplied by the quotient of (A) the number of shares of outstanding common stock of such Subsidiary not owned on the last day of such period by the Company or any Subsidiary of the Company divided by (B) the total number of shares of outstanding common stock of such Subsidiary on the last day of such period.
"Consolidated Net Operating Income" means, for any period, the aggregate of the net operating income (or loss) of the Company and its Subsidiaries for such period, as determined on a consolidated basis in conformity with GAAP; provided that the following items shall be excluded from any calculation of Consolidated Net Operating Income (without duplication):
(1) the net operating income (or loss) of any person (other than a Subsidiary) in which any other person has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or another Subsidiary of the Company during such period;
(2) the net operating income (or loss) of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net operating income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation or license; and
(3) all extraordinary gains and extraordinary losses.
"Consolidated Net Tangible Assets" means at any time, the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the most recently available consolidated balance sheet of the Company and its Subsidiaries (provided that such balance sheet is of a date not more than 60 days prior to a Measurement Date) prepared in accordance with GAAP, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the Consolidated Current Liabilities of the Company appearing on such balance sheet.
"Currency, Interest Rate or Commodity Agreements" means an agreement or transaction involving any currency, interest rate or energy price or volumetric swap, cap or collar arrangement, forward exchange transaction, option, warrant, forward rate agreement, futures contract or other derivative instrument of any kind for the hedging or management of foreign exchange, interest rate or energy price or volumetric risks, it is being understood, for purposes of this definition, that the term "energy" shall include, without limitation, coal, gas, oil and electricity.
"DCR" means Duff & Phelps Credit Rating Co., and any of its Subsidiaries or successors.
"Distribution" means any dividend, distribution or payment (including by way of redemption, repurchase, retirement, return or repayment) in respect of shares of capital stock of the Company.
"Escrow Agreement" means the Escrow Agreement dated as of March 11, 1999, between the Company and IBJ Whitehall Bank & Trust Company, as escrow agent thereunder.
"Excluded Subsidiary" means any Subsidiary of the Company:
(1) in respect of which neither the Company nor any Subsidiary of the Company (other than another Excluded Subsidiary) has undertaken any legal obligation to give any guarantee for the benefit of the holders of any Indebtedness for Borrowed Money (other than to another member of the Group) other than in respect of any statutory obligation and the Subsidiaries of which are all Excluded Subsidiaries; and
(2) which has been designated as such by the Company by written notice to the trustee; provided that the Company may give written notice to the trustee at any time that any Excluded Subsidiary is no longer an Excluded Subsidiary whereupon it shall cease to be an Excluded Subsidiary.
"Existing Rating" means, for any Rating Agency on any date of determination, the Rating assigned to the Securities by such Rating Agency as of such date.
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time.
"Group" means the Company and its Subsidiaries and "member of the Group" shall be construed accordingly.
"Incur" means, with respect to any Indebtedness, to incur, create, issue, assume or guarantee such Indebtedness.
"Indebtedness" means, with respect to the Company or any of any its Subsidiaries at any date of determination (without duplication):
(1) all Indebtedness for Borrowed Money;
(2) all obligations in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto);
(3) all obligations to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except trade payables;
(4) all Capitalized Lease Obligations;
(5) all indebtedness of other persons secured by a mortgage, charge, lien, pledge or other security interest on any asset of the Company or any of its Subsidiaries, whether or not such indebtedness is assumed; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of the secured indebtedness;
(6) all indebtedness of other persons of the types specified in the preceding clauses (1) through (5), to the extent such indebtedness is guaranteed by the Company or any of its Subsidiaries; and
(7) to the extent not otherwise included in this definition, obligations under Currency, Interest Rate or Commodity Agreements.
The amount of Indebtedness at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, upon the occurrence of the contingency giving rise to the obligation, the maximum liability of any contingent obligations of the types specified in the preceding clauses (1) through (7) at such date; provided that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP.
"Indebtedness For Borrowed Money" means any indebtedness (whether being principal, premium, interest or other amounts) for:
(1) money borrowed;
(2) payment obligations under or in respect of any trade acceptance or trade acceptance credit; or
(3) any notes, bonds, debentures, debenture stock, loan stock or other debt securities offered, issued or distributed whether by way of public offer, private placement, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash;
provided, however, in each case, that such term shall exclude:
(a) any indebtedness relating to any accounts receivable securitizations, (x) any Indebtedness of the type permitted to be secured by Liens pursuant to clause (13) under the caption "--Limitation on Liens" contained in this prospectus above;
(b) any Trust Preferred Securities which are issued and outstanding on the date of original issue of the Securities or any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any such existing Trust Preferred Securities, for amounts not exceeding the principal amount or liquidation preference of the Trust Preferred Securities so extended, renewed or replaced, and
(c) any Trust Preferred Securities issued in replacement or in connection with a refinancing of any preferred securities or preferred stock which is issued and outstanding on the date of original issue of the Securities, for amounts not exceeding the liquidation preference of the preferred securities or preferred stock so replaced or refinanced.
"Independent Investment Banker" means an independent investment banking institution of international standing appointed by the Company.
"Independent Manager" means an individual who is not, at time of his or her appointment or any time thereafter, and was not at any time during the preceding five years:
(1) a direct or indirect legal or beneficial owner of any shares of the capital stock of, or membership interests in, the Company, CalEnergy or any of CalEnergy's subsidiaries, except that an Independent Manager may own shares of the capital stock of, or membership interests in, CalEnergy or any of its direct or indirect subsidiaries having a value, at all times during which such person is the Independent Manager, not exceeding 1% of such person's assets;
(2) a director, officer, employee, manager, trustee, partner, affiliate, family member, major supplier, major contractor or major creditor of the Company or of any of the Company's affiliates (except solely by virtue of serving as an Independent Manager of the Company); or
(3) a person who, directly or indirectly, controls (except solely by virtue of serving as an Independent Manager of the Company) (A) the Company, (B) any affiliate of the Company or (C) any person or entity set forth in clause (2) above.
The term "major supplier" means a person or entity to which the Company or its affiliates, as applicable, has outstanding indebtedness for borrowed money in a sum sufficiently large as would reasonably be expected to influence the judgment of the proposed Independent Manager adversely to the interests of the Company and its creditors. The term "major contractor" means a person or entity that has contracts with the Company in a sum sufficiently large as would reasonably be expected to influence the judgment of the proposed Independent Manager adversely to the interests of the Company and its creditors. The term "major creditor" means a person or entity to which the Company or its affiliates, as applicable, has outstanding indebtedness for borrowed money in a sum sufficiently large as would reasonably be expected to influence the judgment of the proposed Independent Manager adversely to the interests of the Company or its other creditors. The term "family member" means any child, stepchild, grandchild, parent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships. The term "affiliate" means any person or entity controlling, controlled by, or under common control with the Company, whether by virtue of the holding of voting securities, the election of members of the Board of Directors or another governing body or otherwise.
"Interest Coverage Ratio" means, with respect to the Company on any Measurement Date, the ratio of (1) the aggregate amount of Consolidated EBITDA of the Company for the four fiscal quarters for which financial information in respect thereof is available immediately prior to such Measurement Date to (2) the aggregate Consolidated Interest Expense during such four fiscal quarters.
"Investments" in any Person means any loan or advance to, any net payment on a guarantee of, any acquisition of capital stock, equity interest, obligation or other security of, or capital contribution or other investment in, such Person. Investments exclude advances to customers and suppliers in the ordinary course of business.
"Leverage Ratio" means the ratio of Consolidated Debt to Total Capital, calculated on the basis of the most recently available consolidated balance sheet of the Company and its consolidated Subsidiaries (provided that such balance sheet is as of a date not more than 60 days prior to a Measurement Date) prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, security interest or other encumbrance; provided, however, that the term "Lien" shall not mean any easements, rights-of-way, restrictions and other similar encumbrances and encumbrances consisting of zoning restrictions, leases, subleases, restrictions on the use of property or defects in the title thereto.
"Measurement Date" means the record date for any Distribution.
"MidAmerican Merger" means the consummation of the transactions contemplated by the MidAmerican Merger Agreement, as a result of which MHC becomes a direct wholly-owned Subsidiary of the Company.
"Moody's" means Moody's Investors Service, Inc., and any of its Subsidiaries or successors.
"Project Finance Debt" means:
(1) any Indebtedness to finance or refinance the ownership, acquisition, development, design, engineering, procurement, construction, servicing, management and/or operation of any project or asset which is incurred by an Excluded Subsidiary;
(2) any Indebtedness to finance or refinance the ownership, acquisition, development, design, engineering, procurement, construction, servicing, management and/or operation of any project or asset in respect
of which the person or persons to whom any such Indebtedness is or may be owed by the relevant borrower (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than an Excluded Subsidiary) for the repayment thereof other than:
(a) recourse to such member of the Group for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from, or ownership interests or other investments in, such project or asset; and/or
(b) recourse to such member of the Group for the purpose only of enabling amounts to be claimed in respect of such Indebtedness in an enforcement of any encumbrance given by such member of the Group over such project or asset or the income, cash flow or other proceeds deriving therefrom (or given by any shareholder or the like, or other investor in, the borrower or in the owner of such project or asset over its shares or the like in the capital of, or other investment in, the borrower or in the owner of such project or asset) to secure such Indebtedness, provided that the extent of such recourse to such member of the Group is limited solely to the amount of any recoveries made on any such enforcement; and/or
(c) recourse to such borrower generally, or directly or indirectly to a member of the Group, under any form of assurance, indemnity, undertaking or support, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not being a payment obligation or an obligation to procure payment by another or an indemnity in respect thereof or any obligation to comply or to procure compliance by another with any financial ratios or other tests of financial condition) by the person against which such recourse is available; and
(3) any Indebtedness which is issued by MidAmerican Realty Services Company other than any such Indebtedness incurred after the Effective Date which is guaranteed by the Company, MHC or MidAmerican Energy.
"Rating" means, for each Rating Agency, the credit rating assigned to the Securities by such Rating Agency.
"Rating Agency" means (1) S&P, (2) Moody's and (3) DCR, and any of their respective Subsidiaries or successors, or, in any case, if such person ceases to rate any series of Securities for reasons outside the control of the Company, any other "nationally recognized statistical rating organization" (within the meaning of Rule 15c3-l(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended) selected by the Company as a replacement Rating Agency.
"Rating Downgrade" means a lowering by any Rating Agency of the Existing Rating assigned to the Securities by such Rating Agency.
"Redemption Date" means any date on which the Company redeems all or any portion of the Securities in accordance with the terms of the indenture.
"Reference Treasury Dealer" means a primary U.S. government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption Date).
"S&P" means Standard & Poor's Ratings Group, and any of its Subsidiaries or successors.
"Significant Subsidiary" means, at any particular time, any Subsidiary of the Company whose gross assets or gross revenues (having regard to the Company's direct and/or indirect beneficial interest in the shares, or the like, of that Subsidiary) represent at least 25% of the consolidated gross assets or, as the case may be, consolidated gross revenues of the Company.
"Subsidiary" means, with respect to any person, any corporation, association, partnership, limited liability company or other business entity of which 50% or more of the total voting power of shares of capital stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned, directly or indirectly, by (1) such person, (2) such person and one or more Subsidiaries of such person or (3) one or more Subsidiaries of such person.
"Total Capital" of any Person is defined to mean, as of any date, the sum (without duplication) of (a) Indebtedness for Borrowed Money, (b) consolidated stockholder's equity of such Person and its consolidated Subsidiaries (excluding any preferred stock in stockholder's equity) and (c) preferred stock and Trust Preferred Securities of such Person and its consolidated Subsidiaries.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Trust Preferred Securities" shall mean (without duplication) any trust preferred securities or related debt or guaranties.
"U.S. Government Obligation" means:
(1) any security which is (a) a direct obligation of the United States for the payment of which the full faith and credit of the United States is pledged or (b) an obligation 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, in the case of clause (a) or (b), is not callable or redeemable at the option of the issuer thereof; and
(2) any depositary receipt issued by a bank (as defined in the Securities Act) as custodian with respect to any security specified in clause (1) above and held by such bank for the account of the holder of such depositary receipt or with respect to any specific payment of principal of or interest on any such security held by any such bank, 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 U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange Securities for its own account as a result of market-making activities or other trading activities in connection with the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange Securities. This prospectus, as it may be amended or supplemented from time to time, may be used by participating broker-dealers during the period referred to below in connection with resales of exchange Securities received in exchange for initial Securities if the initial Securities were acquired by the participating broker-dealers for their own accounts as a result of their market-making or other trading activities. 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 Securities for a period ending 120 days after the registration statement of which this prospectus is a part has been declared effective (subject to extension) or, if earlier, when all exchange Securities have been disposed of by the participating broker-dealer.
We will not receive any proceeds from the issuance of the exchange Securities offered by this prospectus. Exchange Securities received by broker-dealers for their own accounts in connection with 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 Securities or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to prevailing market prices or at negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers and/or the purchasers of any exchange Securities. Any broker-dealer that resells exchange Securities that were received by it for its own account in connection with the exchange offer and any broker-dealer that participates in a distribution of exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any resale of exchange Securities and any commissions or concessions received by any of those 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 a "underwriter" within the meaning of the Securities Act.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR UNITED STATES HOLDERS
The following discussion is the opinion of Latham & Watkins, our counsel, as to the material federal income tax consequences expected to result to you if you exchange your initial Securities for exchange Securities in the exchange offer. This opinion is based on:
[] the facts described in the registration statement of which this prospectus is a part;
[] the Internal Revenue Code of 1986, as amended;
[] current, temporary and proposed treasury regulations promulgated under the Internal Revenue Code;
[] the legislative history of the Internal Revenue Code;
[] current administrative interpretations and practices of the Internal Revenue Service; and
[] court decisions.
all as of the date of this prospectus. In addition, the administrative interpretations and practices of the Internal Revenue Service include its practices and policies as expressed in private letter rulings that are not binding on the Internal Revenue Service, except with respect to the particular taxpayers who requested and received those rulings. Future legislation, treasury regulations, administrative interpretations and practices and/or court decisions may adversely affect, perhaps retroactively, the tax considerations contained in this discussion. Any change could apply retroactively to transactions preceding the date of the change. The tax considerations contained in this discussion may be challenged by the Internal Revenue Service and may not be sustained by a court if challenged by the Internal Revenue Service, and we have not requested, and do not plan to request, any rulings from the Internal Revenue Service concerning the tax treatment of the exchange of initial Securities for exchange Securities.
Certain holders may be subject to special rules not discussed below, including, without limitation:
[] insurance companies;
[] financial institutions or broker-dealers;
[] tax-exempt organizations;
[] stockholders holding securities as part of a conversion transaction, or a hedge or hedging transaction or as a position in a straddle for tax purposes;
[] foreign corporations or partnerships; and
[] persons who are not citizens or residents of the United States.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING INITIAL SECURITIES FOR EXCHANGE SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of initial Securities for exchange Securities will be treated as a "non-event" for federal income tax purposes, because the exchange Securities will not be considered to differ materially in kind or extent from the initial Securities. Therefore, no material federal income tax consequences will result to you from exchanging initial Securities for exchange Securities.
LEGAL MATTERS
The validity of the exchange Securities will be passed upon for us by Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997, and the related consolidated statements of operations and cash flows for each of the three years in the period ended December 31, 1998, included in this prospectus have been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report appearing in this prospectus, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
INCORPORATION BY REFERENCE
This prospectus incorporates documents by reference which are not presented in, or delivered with, this prospectus. We will provide without charge copies (without exhibits, except those specifically incorporated by reference) of these documents to each person to whom this prospectus has been delivered upon request.
The following documents, previously filed by MidAmerican Energy with the Securities and Exchange Commission pursuant to the Exchange Act (File No. 1-11505), are hereby incorporated by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1998;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999.
3. Current Report on Form 8-K dated March 12, 1999.
The information regarding MidAmerican Energy contained in this prospectus should be read together with the information in the documents incorporated by reference. Any statement contained in a document incorporated by reference will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus modifies or supersedes the statement in the document incorporated by reference. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to be a part of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 with the Securities and Exchange Commission pursuant to Securities Act with respect to our offering of the exchange Securities. This prospectus does not contain all of the information in the registration statement. You will find additional information about us and the exchange Securities in the registration statement. Any statement made in this prospectus concerning the provisions of legal documents are not necessarily complete and you should read the documents that are filed as exhibits to the registration statement.
We are subject to the informational requirements of the Exchange Act and file periodic reports, registration statements, proxy statements and other information with the Securities and Exchange Commission. You may inspect and copy the registration statement, including exhibits, and our periodic reports, registration statements, proxy statements and other information we file with the Securities and Exchange Commission at the Public Reference Section of the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Securities and Exchange Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Securities and Exchange Commission maintains a web site that contains reports, proxy and information statements and other materials that are filed through the Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. This Web site can be accessed at http://www.sec.gov.
INDEX TO FINANCIAL STATEMENTS
MHC INC.
Page
----
Consolidated Statements of Income
For the Years Ended December 31, 1998, 1997 and 1996.......... F-2
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 1998, 1997 and 1996.......... F-3
Consolidated Balance Sheets
As of December 31, 1998 and 1997.............................. F-4
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996.......... F-5
Consolidated Statements of Capitalization
As of December 31, 1998 and 1997.............................. F-6
Consolidated Statements of Retained Earnings
For the Years Ended December 31, 1998, 1997 and 1996.......... F-7
Notes to Consolidated Financial Statements......................... F-8
Report of Independent Accountants.................................. F-36
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MIDAMERICAN FUNDING, LLC AND MHC INC. (PREDECESSOR)
Interim Consolidated Statements of Income
For the nine months ended September 30, 1999 and 1998 ... F-37
Interim Consolidated Statements of Comprehensive Income
For the nine months ended September 30, 1999 and 1998 .... F-38
Interim Consolidated Balance Sheets
As of September 30, 1999 and 1998 ........................ F-39
Interim Consolidated Statements of Cash Flows
For the nine months ended September 30, 1999 and 1998 .... F-40
Notes to Interim Consolidated Financial Statements................. F-41
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION... F-47
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MHC INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31
-----------------------
1998 1997 1996
---- ---- ----
OPERATING REVENUES
Regulated electric............................................ $1,169,810 $1,126,300 $1,099,008
Regulated gas................................................. 429,870 536,306 536,753
Nonregulated.................................................. 176,244 306,931 275,443
---------- ---------- ----------
1,775,924 1,969,537 1,911,204
---------- ---------- ----------
OPERATING EXPENSES
Regulated:
Cost of fuel, energy and capacity......................... 225,736 235,760 234,317
Cost of gas sold.......................................... 243,451 346,016 345,014
Other operating expenses.................................. 470,328 438,007 358,579
Maintenance............................................... 110,387 100,543 91,131
Depreciation and amortization............................. 182,211 170,540 164,592
Property and other taxes.................................. 87,276 90,651 81,715
---------- ---------- ----------
1,319,389 1,381,517 1,275,348
---------- ---------- ----------
Nonregulated:
Cost of sales............................................. 144,417 276,711 249,453
Other..................................................... 40,706 34,583 37,004
---------- ---------- ----------
185,213 311,294 286,457
---------- ---------- ----------
Total operating expenses.................................. 1,504,512 1,692,811 1,561,805
---------- ---------- ----------
OPERATING INCOME.............................................. 271,412 276,726 349,399
---------- ---------- ----------
NON-OPERATING INCOME
Interest income............................................... 9,262 5,318 4,012
Dividend income............................................... 10,251 13,792 16,985
Realized gains and losses on securities, net.................. 11,204 7,798 1,895
Other, net.................................................... 5,096 15,891 (9,781)
---------- ---------- ----------
35,813 42,799 13,111
---------- ---------- ----------
FIXED CHARGES
Interest on long-term debt.................................... 80,908 89,898 102,909
Other interest expense........................................ 12,682 10,034 10,941
Preferred dividends of subsidiaries........................... 12,932 14,468 10,689
Allowance for borrowed funds.................................. (3,377) (2,597) (4,212)
103,145 111,803 120,327
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 204,080 207,722 242,183
INCOME TAXES.................................................. 76,926 68,390 98,422
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS............................. 127,154 139,332 143,761
---------- ---------- ----------
DISCONTINUED OPERATIONS
Income (Loss) from operations (net of income taxes)........... 4,164 (118) 2,117
Loss on disposal (net of income taxes)........................ - (4,110) (14,832)
---------- ---------- ----------
4,164 (4,228) (12,715)
---------- ---------- ----------
NET INCOME.................................................... $ 131,318 $ 135,104 $ 131,046
========== ========== ==========
AVERAGE COMMON SHARES OUTSTANDING............................. 94,038 98,058 100,752
EARNINGS PER COMMON SHARE - BASIC:
Continuing operations......................................... $ 1.35 $ 1.42 $ 1.43
Discontinued operations....................................... 0.05 (0.04) (0.13)
---------- ---------- ----------
Earnings per average common share............................. $ 1.40 $ 1.38 $ 1.30
========== ========== ==========
EARNINGS PER COMMON SHARE - DILUTED:
Continuing operations......................................... $ 1.35 $ 1.42 $ 1.43
Discontinued operations....................................... 0.04 (0.04) (0.13)
---------- ---------- ----------
Earnings per average common share............................. $ 1.39 $ 1.38 $ 1.30
========== ========== ==========
DIVIDENDS DECLARED PER SHARE.................................. $ 1.20 $ 1.20 $ 1.20
========== ========== ==========
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The accompanying notes are an integral part of these statements.
MHC INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
YEARS ENDED DECEMBER 31
-----------------------
1998 1997 1996
---- ---- ----
Net Income.................................................... $ 131,318 $ 135,104 $ 131,046
--------- --------- ---------
Other Comprehensive Income, Net
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) during period............... (14,743) 223,927 1,501
Less reclassification adjustment for realized gains
(losses) reflected in net income during period......... 11,204 7,787 (4,612)
--------- --------- ---------
(25,947) 216,140 6,113
Income tax expense (benefit).................................. (9,002) 75,567 2,468
--------- --------- ---------
Other comprehensive income (loss), net.................... (16,945) 140,573 3,645
--------- --------- ---------
Comprehensive Income.......................................... $ 114,373 $ 275,677 $ 134,691
========= ========= =========
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The accompanying notes are an integral part of these statements.
MHC INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31
-----------------
1998 1997
---- ----
ASSETS
UTILITY PLANT
Electric.......................................................... $4,255,058 $4,084,920
Gas ............................................................. 786,169 756,874
---------- ----------
5,041,227 4,841,794
Less accumulated depreciation and amortization.................... 2,426,564 2,275,099
---------- ----------
2,614,663 2,566,695
Construction work in progress..................................... 26,369 55,418
---------- ----------
2,641,032 2,622,113
---------- ----------
POWER PURCHASE CONTRACT........................................... 150,401 173,107
---------- ----------
CURRENT ASSETS
Cash and cash equivalents......................................... 6,107 10,468
Receivables, less reserves of $503 and $347, respectively......... 181,817 207,471
Inventories....................................................... 94,771 86,091
Other............................................................. 40,430 18,452
---------- ----------
323,125 322,482
---------- ----------
INVESTMENTS AND NONREGULATED PROPERTY, NET........................ 762,060 799,524
---------- ----------
INVESTMENT IN DISCONTINUED OPERATIONS............................. 43,907 -
---------- ----------
OTHER ASSETS...................................................... 323,811 360,865
---------- ----------
TOTAL ASSETS...................................................... $4,244,336 $4,278,091
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity....................................... $1,200,950 $1,301,286
MidAmerican preferred securities, not subject to
mandatory redemption........................................... 31,759 31,763
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities............................... 50,000 50,000
MidAmerican-obligated preferred securities of subsidiary trust
holding solely MidAmerican junior subordinated debentures.... 100,000 100,000
Long-term debt (excluding current portion)........................ 939,553 1,034,211
---------- ----------
2,322,262 2,517,260
---------- ----------
CURRENT LIABILITIES
Notes payable..................................................... 339,826 138,054
Current portion of long-term debt................................. 105,995 144,558
Current portion of power purchase contract........................ 15,034 14,361
Accounts payable.................................................. 167,348 145,855
Taxes accrued..................................................... 107,332 92,629
Interest accrued.................................................. 15,533 22,355
Other............................................................. 51,316 43,641
---------- ----------
802,384 601,453
---------- ----------
Other Liabilities
Power purchase contract........................................... 68,093 83,143
Deferred income taxes............................................. 733,448 756,920
Investment tax credit............................................. 77,421 83,127
Other............................................................. 240,728 236,188
---------- ----------
1,119,690 1,159,378
---------- ----------
Total Capitalization and Liabilities.............................. $4,244,336 $4,278,091
========== ==========
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The accompanying notes are an integral part of these statements.
MHC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31
-----------------------
1998 1997 1996
---- ---- ----
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................... $ 131,318 $ 135,104 $ 131,046
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization............................... 200,920 197,454 190,511
Net decrease in deferred income taxes and
investment tax credit, net................................ (24,800) (71,191) (7,894)
Amortization of other assets................................ 40,264 33,761 20,541
(Gain)/loss from discontinued operations.................... (4,164) 4,228 12,715
Gain on sale of securities, assets and other investments.... (24,629) (9,996) (10,132)
Other-than-temporary decline in value of investments........ 273 3,795 15,566
Cash inflows (outflows) of accounts receivable securitization (10,000) 70,000 -
Impact of changes in working capital, net of effects
from discontinued operations.............................. 42,046 32,973 (53,752)
Other....................................................... (17,092) (3,883) 22,786
--------- --------- ---------
Net cash provided......................................... 334,136 392,245 321,387
--------- --------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures.............................. (193,354) (166,932) (154,198)
Quad Cities Nuclear Power Station decommissioning trust fund... (11,409) (9,819) (8,607)
Deferred energy efficiency expenditures........................ - (12,258) (20,390)
Nonregulated capital expenditures.............................. (45,466) (14,066) (55,788)
Purchase of securities......................................... (143,324) (159,770) (198,947)
Proceeds from sale of securities............................... 217,459 180,890 243,290
Proceeds from sale of assets and other investments............. 38,162 57,433 33,285
Investment in discontinued operations.......................... (39,743) 181,321 (5,984)
Other investing activities, net................................ (3,618) (1,360) 8,308
--------- --------- ---------
Net cash provided (used) ................................... (181,293) 55,439 (159,031)
--------- --------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid.......................................... (113,144) (117,605) (120,770)
Issuance of long-term debt, net of issuance cost............... 158,414 - 99,500
Retirement of long-term debt, including reacquisition cost..... (302,477) (122,300) (136,616)
Reacquisition of preferred shares.............................. (4) (6) (58,176)
Reacquisition of common shares................................. (101,765) (96,618) -
Issuance of preferred shares, net of issuance cost............. - - 96,850
Increase (decrease) in MidAmerican Capital Company
unsecured revolving credit facility......................... - (174,500) 44,500
Net increase (decrease) in notes payable....................... 201,772 (23,936) (22,810)
--------- --------- ---------
Net cash used............................................... (157,204) (534,965) (97,522)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (4,361) (87,281) 64,834
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................. 10,468 97,749 32,915
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 6,107 $ 10,468 $ 97,749
========= ========= =========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized...................... $ 90,801 $ 96,805 $ 107,179
========= ========= =========
Income taxes paid.............................................. $ 100,917 $ 130,521 $ 85,894
========= ========= =========
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The accompanying notes are an integral part of these statements.
MHC INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
AS OF DECEMBER 31
-----------------
1998 1997
---- ----
COMMON SHAREHOLDERS' EQUITY
Common shares, no par; 350,000,000 shares authorized;
91,201,582 and 95,300,882 shares outstanding, respectively......... $ 724,778 $ 753,873
Retained earnings...................................................... 355,000 409,296
Accumulated other comprehensive income, net............................ 121,172 138,117
---------- ----------
1,200,950 51.7% 1,301,286 51.7%
---------- ----- ---------- -----
MIDAMERICAN PREFERRED SECURITIES (100,000,000 SHARES AUTHORIZED) Cumulative
shares outstanding not subject to mandatory redemption:
$3.30 Series, 49,451 and 49,481 shares, respectively............... 4,945 4,948
$3.75 Series, 38,305 and 38,310 shares, respectively............... 3,831 3,831
$3.90 Series, 32,630 shares ....................................... 3,263 3,263
$4.20 Series, 47,362 and 47,369 shares, respectively............... 4,736 4,737
$4.35 Series, 49,945............................................... 4,994 4,994
$4.40 Series, 50,000 shares........................................ 5,000 5,000
$4.80 Series, 49,898 shares........................................ 4,990 4,990
---------- ----------
31,759 1.4% 31,763 1.2%
---------- ----- ---------- -----
Cumulative shares outstanding; subject to mandatory redemption:
$5.25 Series, 100,000 shares....................................... 10,000 10,000
$7.80 Series, 400,000 shares....................................... 40,000 40,000
---------- ----------
50,000 2.1% 50,000 2.0%
---------- ----- ---------- -----
MIDAMERICAN-OBLIGATED PREFERRED SECURITIES
MidAmerican-obligated mandatorily redeemable cumulative
preferred securities of subsidiary trust holding solely
MidAmerican junior subordinated debentures:
7.98% Series, 4,000,000 shares.................................... 100,000 4.3% 100,000 4.0%
---------- ----- ---------- -----
LONG-TERM DEBT MidAmerican mortgage bonds:
7.875% Series, due 1999........................................... - 60,000
6% Series, due 2000............................................... 35,000 35,000
6.75% Series, due 2000............................................ 75,000 75,000
7.125% Series, due 2003........................................... 100,000 100,000
7.70% Series, due 2004............................................ 55,630 55,630
7% Series, due 2005............................................... 90,500 90,500
7.375% Series, due 2008........................................... 75,000 75,000
8% Series, due 2022............................................... - 50,000
7.45% Series, due 2023............................................ 6,940 6,940
8.125% Series, due 2023........................................... - 100,000
6.95% Series, due 2025............................................ 12,500 12,500
MidAmerican pollution control revenue obligations:
5.15% to 5.75% Series, due periodically through 2003.............. 7,704 8,064
5.95% Series, due 2023 (secured by general mortgage bonds)........ 29,030 29,030
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The accompanying notes are an integral part of these statements.
MHC INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
AS OF DECEMBER 31
-----------------
1998 1997
---- ----
LONG-TERM DEBT (CONTINUED)
Variable rate series -
Due 2016 and 2017, 3.7%........................................ $ 37,600 $ 37,600
Due 2023 (secured by general mortgage bonds, 3.7%)............. 28,295 28,295
Due 2023, 3.7%................................................. 6,850 6,850
Due 2024, 3.7%................................................. 34,900 34,900
Due 2025, 3.7%................................................. 12,750 12,750
MidAmerican notes:
8.75% Series, due 2002............................................ 240 240
6.5% Series, due 2001............................................. 100,000 100,000
6.375% Series, due 2006........................................... 160,000 -
6.4% Series, due 2003 through 2007................................ 2,000 2,000
Obligation under capital lease........................................ 1,539 2,104
Unamortized debt premium and discount, net............................ (1,925) (3,192)
---------- ----------
Total utility.................................................. 869,553 919,211
---------- ----------
Nonregulated subsidiaries notes:
7.76% Series, due 1999............................................ - 45,000
8.52% Series, due 2000 through 2002............................... 70,000 70,000
---------- ----------
Total nonregulated subsidiaries................................ 70,000 115,000
---------- ----------
939,553 40.5% 1,034,211 41.1%
---------- ----- ---------- -----
Total Capitalization.................................................. $2,322,262 100.0% $2,517,260 100.0%
========== ===== ========== =====
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MHC INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31
-----------------------
1998 1997 1996
---- ---- ----
BEGINNING OF YEAR.................................................... $ 409,296 $ 440,971 $ 430,589
--------- --------- ---------
NET INCOME........................................................... 131,318 135,104 131,046
--------- --------- ---------
DEDUCT (ADD):
Loss on repurchase of common shares.................................. 72,470 49,174 -
Dividends declared on common shares of $1.20......................... 113,144 117,605 120,770
Other................................................................ - - (106)
--------- --------- ---------
185,614 166,779 120,664
--------- --------- ---------
END OF YEAR.......................................................... $ 355,000 $ 409,296 $ 440,971
========= ========= =========
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The accompanying notes are an integral part of these statements.
MHC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) COMPANY STRUCTURE:
MHC Inc. (Company or MHC), formerly known as MidAmerican Energy Holdings Company, is a holding company for MidAmerican Energy Company (MidAmerican), MidAmerican Capital Company (MidAmerican Capital), Midwest Capital Group, Inc. (Midwest Capital) and MidAmerican Realty Services Company (MidAmerican Realty). Effective March 12, 1999, MHC is a wholly owned subsidiary of MidAmerican Funding LLC, which in turn is a wholly owned subsidiary of MidAmerican Energy Holdings Company, formerly known as CalEnergy Company, Inc. Prior to December 1, 1996, MidAmerican held the capital stock of MidAmerican Capital and Midwest Capital. Effective December 1, 1996, each share of MidAmerican common stock was exchanged for one share of Holdings common stock. As part of the transaction, MidAmerican distributed the capital stock of MidAmerican Capital and Midwest Capital to Holdings.
(b) CONSOLIDATION POLICY AND PREPARATION OF FINANCIAL STATEMENTS:
The accompanying Consolidated Financial Statements include the Company and its subsidiaries. For 1998, certain nonregulated operations of MidAmerican, which were previously included in Other, Net in the income statements, are presented in nonregulated operations lines. Prior year amounts have been reclassified accordingly. Amounts related to MidAmerican Realty are reflected as discontinued operations. (Refer to Note 25). All significant intercompany transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
(c) REGULATION:
MidAmerican's utility operations are subject to the regulation of the Iowa Utilities Board (IUB), the Illinois Commerce Commission (ICC), the South Dakota Public Utilities Commission, and the Federal Energy Regulatory Commission (FERC). MidAmerican's accounting policies and the accompanying Consolidated Financial Statements conform to generally accepted accounting principles applicable to rate-regulated enterprises and reflect the effects of the ratemaking process.
Statement of Financial Accounting Standards (SFAS) No. 71 sets forth accounting principles for operations that are regulated and meet certain criteria. For operations that meet the criteria, SFAS 71 allows, among other things, the deferral of costs that would otherwise be expensed when incurred. A possible consequence of the changes in the utility industry is the discontinued applicability of SFAS 71. The majority of MidAmerican's electric and gas utility operations currently meet the criteria of SFAS 71, but its applicability is periodically reexamined. On December 16, 1997, MidAmerican's generation operations serving Illinois were no longer subject to the provisions of SFAS 71 due to passage of industry restructuring legislation in Illinois. Thus, in 1997, MidAmerican was required to write off the regulatory assets and liabilities from its balance sheet related to its Illinois generation operations. The net amount of such write-offs was not material. If other portions of its utility operations no longer meet the criteria of SFAS 71, MidAmerican could be required to write off the related regulatory assets and liabilities from its balance sheet and thus, a material adjustment to earnings in that period could result. The following regulatory assets, primarily included in Other Assets in the Consolidated Balance Sheets, represent probable future revenue to MidAmerican because these costs are expected to be recovered in charges to utility customers (in thousands):
1998 1997
---- ----
Deferred income taxes........................ $148,036 $143,851
Energy efficiency costs...................... 74,509 111,471
Debt refinancing costs....................... 40,233 34,923
FERC Order 636 transition costs.............. - 9,279
Environmental costs.......................... 23,427 20,417
Enrichment facilities decommissioning........ 8,659 8,781
Unamortized costs of retired plant .......... 3,537 5,771
Other........................................ 7,088 4,796
-------- --------
Total.................................... $305,489 $339,289
======== ========
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(d) REVENUE RECOGNITION:
Revenues are recorded as services are rendered to customers. MidAmerican records unbilled revenues, and related energy costs, representing the estimated amount customers will be billed for services rendered between the meter-reading dates in a particular month and the end of such month. Accrued unbilled revenues were $79.8 million and $80.2 million at December 31, 1998 and 1997, respectively, and are included in Receivables on the Consolidated Balance Sheets.
MidAmerican's Illinois and South Dakota jurisdictional sales, or approximately 12% of total retail electric sales, and the majority of its total retail gas sales are subject to adjustment clauses. These clauses allow MidAmerican to adjust the amounts charged for electric and gas service as the costs of gas, fuel for generation or purchased power change. The costs recovered in revenues through use of the adjustment clauses are charged to expense in the same period.
(e) DEPRECIATION AND AMORTIZATION:
MidAmerican's provisions for depreciation and amortization for its utility operations are based on straight-line composite rates. The average depreciation and amortization rates for the years ended December 31 were as follows:
1998 1997 1996
---- ---- ----
Electric.......................... 3.9% 3.8% 3.8%
Gas............................... 3.4% 3.4% 3.7%
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Utility plant is stated at original cost which includes overhead costs, administrative costs and an allowance for funds used during construction.
The cost of repairs and minor replacements is charged to maintenance expense. Property additions and major property replacements are charged to plant accounts. The cost of depreciable units of utility plant retired or disposed of in the normal course of business is eliminated from the utility plant accounts and such cost, plus net removal cost, is charged to accumulated depreciation. An allowance for the estimated annual decommissioning costs of the Quad Cities Nuclear Power Station (Quad Cities Station) equal to the level of funding is included in depreciation expense. See Note 4(e) for additional information regarding decommissioning costs.
(f) INVESTMENTS AND NONREGULATED PROPERTY, NET:
Investments, managed primarily through the Company's nonregulated subsidiaries, and nonregulated property, net include the following amounts as of December 31 (in thousands):
1998 1997
---- ----
Marketable securities............................ $393,554 $467,207
Equipment leases................................. 72,068 73,928
Nuclear decommissioning trust fund............... 116,973 93,251
Energy projects.................................. 17,891 21,180
Special-purpose funds............................ 9,069 10,057
Real estate...................................... 42,413 42,424
Corporate owned life insurance................... 43,945 33,471
Coal transportation property..................... 12,538 14,516
Communications................................... 19,750 10,000
Security ........................................ 9,664 8,551
Other............................................ 24,195 24,939
-------- --------
Total.......................................... $762,050 $799,524
======== ========
|
Marketable securities generally consist of preferred stocks, common stocks and mutual funds held by MidAmerican Capital. Investments in marketable securities classified as available-for-sale are reported at fair value with net unrealized gains and losses reported as a net of tax amount in Common Shareholders' Equity until realized. Investments in marketable securities that are classified as held-to-maturity are reported at amortized cost. An other-than-temporary decline in the value of a marketable security is recognized through a write-down of the investment to earnings.
Investments held by the nuclear decommissioning trust fund for the Quad Cities Station units are classified as available-for-sale and are reported at fair value with net unrealized gains and losses reported as adjustments to the accumulated provision for nuclear decommissioning.
(g) CONSOLIDATED STATEMENTS OF CASH FLOWS:
The Company considers all cash and highly liquid debt instruments purchased with a remaining maturity of three months or less to be cash and cash equivalents for purposes of the Consolidated Statements of Cash Flows.
Net cash provided (used) from changes in working capital, net of effects from discontinued operations was as follows (in thousands):
1998 1997 1996
---- ---- ----
Receivables............................... $ 35,654 $ 34,544 $(84,802)
Inventories............................... (8,680) 4,773 (5,629)
Other current assets ..................... (21,978) (7,421) 6,732
Accounts payable.......................... 21,493 (23,950) 47,751
Taxes accrued............................. 14,703 10,375 356
Interest accrued.......................... (6,821) (6,158) (2,122)
Other current liabilities................. 7,675 20,810 (16,038)
-------- -------- --------
Total................................... $ 42,046 $ 32,973 $(53,752)
======== ======== ========
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(h) ACCOUNTING FOR LONG-TERM POWER PURCHASE CONTRACT:
Under a long-term power purchase contract with Nebraska Public Power District (NPPD), expiring in 2004, MidAmerican purchases one-half of the output of the 778-megawatt Cooper Nuclear Station (Cooper). The Consolidated Balance Sheets include a liability for MidAmerican's fixed obligation to pay 50% of NPPD's Nuclear Facility Revenue Bonds and other fixed liabilities. A like amount representing MidAmerican's right to purchase power is shown as an asset.
Cooper capital improvement costs prior to 1997, including carrying costs, were deferred in accordance with then applicable rate regulation and are being amortized and recovered in rates over either a five-year period or the term of the NPPD contract. Beginning July 11, 1997, the Iowa portion of capital improvement costs is recovered currently from customers and is expensed as incurred. MidAmerican began charging the remaining Cooper capital improvement costs to expense as incurred in January 1997.
The fuel cost portion of the power purchase contract is included in Cost of Fuel, Energy and Capacity on the Consolidated Statements of Income. All other costs MidAmerican incurs in relation to its long-term power purchase contract with NPPD are included in Other Operating Expenses on the Consolidated Statements of Income.
See Notes 4(d), 4(e) and 4(f) for additional information regarding the power purchase contract.
(i) ACCOUNTING FOR DERIVATIVES:
1) Preferred Stock Hedge Instruments:
The Company is exposed to market value risk from changes in interest rates for certain fixed rate sinking fund preferred and perpetual preferred stocks (fixed rate preferred stocks) included in Investments on the Consolidated Balance Sheets. The Company reviews the interest rate sensitivity of these securities and purchases put options on U.S. Treasury securities (put options) to reduce interest rate risk on preferred stocks. The Company does not purchase or sell put options for speculative purposes. The Company's intent is to substantially offset any change in market value of the fixed rate preferred stocks due to a change in interest rates with a change in market value of the put options.
The preferred stocks are publicly traded securities and, as such, changes in their fair value are reported, net of income taxes, as a part of Accumulated Other Comprehensive Income, Net in shareholders' equity. Unrealized gains and losses on the associated put options are included in the determination of the fair value of the preferred stocks. The fair value of the put options, including unrealized gains and losses, included in the determination of the fair value of the preferred securities as of December 31, 1998 and 1997, was $2.9 million and $1.9 million, respectively. Realized gains and losses on the put options are included in Realized Gains and Losses on Securities, Net in the Consolidated
Statements of Income in the period the underlying hedged fixed rate preferred stocks are sold. At December 31, 1998, the Company held put options with a notional value of $89.1 million.
2) Gas Futures Contracts and Swaps:
The Company uses gas futures contracts and swap contracts to reduce the volatility in the price of natural gas purchased to meet the needs of its customers. Investments in natural gas futures contracts, which total $0.3 million and $1.6 million as of December 31, 1998 and 1997, respectively, are included in Receivables on the Consolidated Balance Sheets. Gains and losses on gas futures contracts that qualify for hedge accounting are deferred and reflected as adjustments to the carrying value of the hedged item or included in Other Assets on the Consolidated Balance Sheets until the underlying physical transaction is recorded if the instrument is used to hedge an anticipated future transaction. The net gain or loss on gas futures contracts is included in the determination of income in the same period as the expense for the physical delivery of the natural gas. Realized gains and losses on gas futures contracts and the net amounts exchanged or accrued under the natural gas swap contracts are included in Cost of Gas Sold or Nonregulated Costs of Sales consistent with the expense for the physical commodity. Deferred net gains (losses) related to the Company's gas futures contracts are $(1.9) million and $(0.4) million as of December 31, 1998 and 1997, respectively.
The Company periodically evaluates the effectiveness of its natural gas hedging programs. If a high degree of correlation between prices for the hedging instruments and prices for the physical delivery is not achieved, the contracts are recorded at fair value and the gains or losses are included in the determination of income. At December 31, 1998, the Company held the following hedging instruments:
Weighted Average
Notional Volume Market Value
(MMBtu) (Per MMBtu)
--------------- ------------
Natural Gas Futures (Long).................... 6,970,000 $1.857
Natural Gas Futures (Short)................... 7,320,000 $1.854
Natural Gas Swaps (Variable to Fixed)......... 16,322,181
Weighted average variable price...... $1.922
Weighted average fixed price......... $2.098
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3) New Accounting Pronouncement:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which established accounting and reporting standards for derivative instruments and for hedging activities. SFAS 133 is effective for the Company on January 1, 2000. SFAS 133 requires an entity to recognize all of its derivatives as either assets or liabilities in its statement of financial position and measure those instruments at fair value. If certain conditions are met, such instruments may be designated as hedges. Changes in the value of hedge instruments would not impact earnings, except to the extent that the instrument is not perfectly effective as a hedge. An entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use in assessing the effectiveness of the derivative. The Company is in the process of evaluating the impact of this accounting pronouncement.
(j) GOODWILL:
The Company's Consolidated Balance Sheets include goodwill related to various acquisitions. The following schedule summarizes the goodwill, net of accumulated amortization, remaining on the Consolidated Balance Sheets as of December 31 (in thousands):
1998 1997
---- ----
Natural gas utility operations....................... $13,925 $14,723
Natural gas marketing companies...................... 3,736 4,107
Security companies................................... 8,816 7,763
------- -------
$26,477 $26,593
======= =======
|
Goodwill is amortized using the straight-line method. Amortization expense included in the Company's Consolidated Statements of Income totaled $1.5 million, $1.4 million and $1.1 million for 1998, 1997 and 1996, respectively. The weighted average remaining life of goodwill as of December 31, 1998, is 18 years.
(k) DETAIL OF OTHER COMPREHENSIVE INCOME - INCOME TAXES:
For fiscal years beginning after December 15, 1997, full sets of general-purpose financial statements are required to display comprehensive income and its components in a financial statement that is displayed with the same prominence as the other financial statements. Comprehensive income refers, in general, to changes in the Company's equity, except those resulting from transactions with shareholders. "Unrealized holding gains (losses)" reflects the overall increase (decrease) in the market value of marketable securities held by the Company as available-for-sale. The "reclassification adjustment" removes any gains (losses) that have been realized from sales of those securities and reflected in the Company's Net Income. The following table shows the income tax expense or benefit related to each component (in thousands):
1998 1997 1996
---- ---- ----
Unrealized holding gains (losses) during period
Before income taxes............................... $(14,743) $223,927 $ 1,501
Income tax (expense)/benefit...................... 5,081 (78,289) (525)
-------- -------- --------
(9,662) 145,638 976
-------- -------- --------
Less reclassification adjustment for realized gains
(losses) reflected in net income during period
Before income taxes............................... 11,204 7,787 (4,612)
Income tax (expense)/benefit...................... (3,921) (2,722) 1,943
-------- -------- --------
7,283 5,065 (2,669)
-------- -------- --------
Other Comprehensive Income............................ $(16,945) $140,573 $ 3,645
======== ======== =======
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(2) LONG-TERM DEBT:
The Company's sinking fund requirements and maturities of long-term debt for 1999 through 2003 are $106 million, $134 million, $125 million, $25 million and $105 million, respectively.
MidAmerican's Variable Rate Pollution Control Revenue Obligations bear interest at rates that are periodically established through remarketing of the bonds in the short-term tax-exempt market. MidAmerican, at its option, may change the mode of interest calculation for these bonds by selecting from among several alternative floating or fixed rate modes. The interest rate shown in the Consolidated Statements of Capitalization is the weighted average interest rate as of December 31, 1998 and 1997. MidAmerican maintains dedicated revolving credit facility agreements or renewable lines of credit to provide liquidity for holders of these issues.
Substantially all of the former Iowa-Illinois Gas and Electric Company, a predecessor company, utility property and franchises, and substantially all of the former Midwest Power Systems Inc., a predecessor company, electric utility property in Iowa, or approximately 80% of gross utility plant, is pledged to secure mortgage bonds.
(3) JOINTLY OWNED UTILITY PLANT:
Under joint plant ownership agreements with other utilities, MidAmerican had undivided interests at December 31, 1998, in jointly owned generating plants as shown in the table below.
The dollar amounts below represent MidAmerican's share in each jointly owned unit. Each participant has provided financing for its share of each unit. Operating Expenses on the Consolidated Statements of Income include MidAmerican's share of the expenses of these units (dollars in millions).
Nuclear Coal fired
----------- -----------------------------------------------------
Council
Quad Cities Neal Bluffs Neal Ottumwa Louisa
Units Unit Unit Unit Unit Unit
No. 1 & 2 No. 3 No. 3 No. 4 No. 1 No. 1
----------- ---- ------ ---- ------- ------
In service date 1972 1975 1978 1979 1981 1983
Utility plant in service $242 $127 $298 $161 $210 $530
Accumulated depreciation $ 98 $ 82 $175 $ 92 $109 $252
Unit capacity-MW 1,529 515 675 624 716 700
Percent ownership 25.0% 72.0% 79.1% 40.6% 52.0% 88.0%
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(4) COMMITMENTS AND CONTINGENCIES:
(a) CAPITAL EXPENDITURES:
Utility construction expenditures for 1999 are estimated to be $194 million, including $9 million for Quad Cities Station nuclear fuel. Nonregulated capital expenditures depend upon the availability of investment opportunities and other factors. During 1999, such expenditures are estimated to be approximately $9 million.
(b) MANUFACTURED GAS PLANT FACILITIES:
The United States Environmental Protection Agency (EPA) and the state environmental agencies have determined that contaminated wastes remaining at certain decommissioned manufactured gas plant facilities may pose a threat to the public health or the environment if such contaminants are in sufficient quantities and at such concentrations as to warrant remedial action.
MidAmerican is evaluating 27 properties which were, at one time, sites of gas manufacturing plants in which it may be a potentially responsible party (PRP). The purpose of these evaluations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether MidAmerican has any responsibility for remedial action. MidAmerican is currently conducting field investigations at eighteen sites and has conducted interim removal actions at five of the eighteen sites. In addition, MidAmerican has completed investigations and removals at four sites. MidAmerican is continuing to evaluate several of the sites to determine the future liability, if any, for conducting site investigations or other site activity.
MidAmerican's estimate of probable remediation costs for the sites discussed above as of December 31, 1998, was $24 million. This estimate has been recorded as a liability and a regulatory asset for future recovery. The ICC has approved the use of a tariff rider which permits recovery of the actual costs of litigation, investigation and remediation relating to former MGP sites. MidAmerican's present rates in Iowa provide for a fixed annual recovery of MGP costs. MidAmerican intends to pursue recovery of the remediation costs from other PRPs and its insurance carriers.
The estimate of probable remediation costs is established on a site specific basis. The costs are accumulated in a three-step process. First, a determination is made as to whether MidAmerican has potential legal liability for the site and whether information exists to indicate that contaminated wastes remain at the site. If so, the costs of performing a preliminary investigation and the costs of removing known contaminated soil are accrued. As the investigation is performed and if it is determined remedial action is required, the best estimate of remediation costs is accrued. If necessary, the estimate is revised when a consent order is issued. The estimated recorded liabilities for these properties include incremental direct costs of the remediation effort, costs for future monitoring at sites and costs of compensation to employees for time expected to be spent directly on the remediation effort. The estimated recorded liabilities for these properties are based upon preliminary data. Thus, actual costs could vary significantly from the estimates. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action and changes in technology relating to remedial alternatives. In addition, insurance recoveries for some or all of the costs may be possible, but the liabilities recorded have not been reduced by any estimate of such recoveries.
Although the timing of potential incurred costs and recovery of such costs in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on MidAmerican's financial position or results of operations.
(c) CLEAN AIR ACT:
Following recommendations provided by the Ozone Transport Assessment Group, the EPA, in November 1997, issued a Notice of Proposed Rulemaking which identified 22 states and the District of Columbia as making a significant contribution to nonattainment of the ozone standard in downwind states in the eastern half of the United States. In September 1998, the EPA issued its final rules in this proceeding. Iowa is not subject to the emissions reduction requirements in the final rules, and, as such, MidAmerican's facilities are not currently subject to additional emissions reductions as a result of this initiative.
On July 18, 1997, the EPA adopted revisions to the National Ambient Air Quality Standards (NAAQS) for ozone and a new standard for fine particulate matter. Based on data to be obtained from monitors located throughout each state, the EPA will determine which states have areas that do not meet the air quality standards (i.e., areas that are classified as nonattainment). If a state has area(s) classified as nonattainment area(s), the state is required to submit a State Implementation Plan specifying how it will reach attainment of the standards through emission reductions or other means. In August 1998, the Iowa Environmental Protection Commission adopted by reference the NAAQS for ozone and fine particulate matter.
The impact of the new standards on MidAmerican will depend on the attainment status of the areas surrounding MidAmerican's operations and MidAmerican's relative contribution to the nonattainment status. The attainment status of areas in the state of Iowa will not be known for two to three years. However, if MidAmerican's operations are determined to contribute to nonattainment, the installation of additional control equipment, such as scrubbers and/or selective catalytic reduction, on MidAmerican's units could be required. The cost to install such equipment could be significant. MidAmerican will continue to follow the attainment status of the areas in which it operates and evaluate the potential impact of the status of these areas on MidAmerican under the new regulations.
(d) LONG-TERM POWER PURCHASE CONTRACT:
Payments to NPPD cover one-half of the fixed and operating costs of Cooper (excluding depreciation but including debt service) and MidAmerican's share of nuclear fuel cost (including nuclear fuel disposal) based on energy delivered. The debt service portion is approximately $1.5 million per month for 1999 and is not contingent upon the plant being in service. In addition, MidAmerican pays one-half of NPPD's decommissioning funding related to Cooper.
The debt amortization and Department of Energy (DOE) enrichment plant decontamination and decommissioning component of MidAmerican's payments to NPPD were $14.4 million, $13.8 million and $14.5 million and the net interest component was $2.9 million, $3.8 million and $3.6 million each for the years 1998, 1997 and 1996, respectively.
MidAmerican's payments for the debt principal portion of the power purchase contract obligation and the DOE enrichment plant decontamination and decommissioning payments are $15.0 million, $15.8 million, $16.6 million, $17.4 million and $18.3 million for 1999 through 2003, respectively.
(e) DECOMMISSIONING COSTS:
Based on site-specific decommissioning studies that include decontamination, dismantling, site restoration and dry fuel storage cost, MidAmerican's share of expected decommissioning costs for Cooper and Quad Cities Station, in 1998 dollars, is $256 million and $242 million, respectively. In Illinois, nuclear decommissioning costs are included in customer billings through a mechanism that permits annual adjustments. Such costs are reflected as base rates in Iowa tariffs.
For purposes of developing a decommissioning funding plan for Cooper, NPPD assumes that decommissioning costs will escalate at an annual rate of 4.0%. Although Cooper's operating license expires in 2014, the funding plan assumes decommissioning will start in 2004, the anticipated plant shutdown date.
As of December 31, 1998, MidAmerican's share of funds set aside by NPPD in internal and external accounts for decommissioning was $97.5 million. In addition, the funding plan also assumes various funds and reserves currently held to satisfy NPPD bond resolution requirements will be available for plant decommissioning costs after the bonds are retired in early 2004. The funding schedule assumes a long-term return on funds in the trust of 6.75% annually. Certain funds will be required to be invested on a short-term basis when decommissioning begins and are assumed to earn at a rate of 4.0% annually. NPPD is recognizing decommissioning costs over the life of the power sales contract. MidAmerican makes payments to NPPD related to decommissioning Cooper. These payments are included in MidAmerican's power purchase costs. The Cooper decommissioning component of MidAmerican's payments to NPPD was $7.9 million, $11.3 million and $9.9 million for the years 1998, 1997, and 1996, respectively, and is included in Other Operating Expenses in the Consolidated Statements of Income. Earnings from the internal and external trust funds, which are recognized by NPPD as the owner of the plant, are tax exempt and serve to reduce future funding requirements.
External trusts have been established for the investment of funds for decommissioning the Quad Cities Station. The total accrued balance as of December 31, 1998, was $117.0 million and is included in Other Liabilities and a like amount is reflected in Investments and represents the fair value of the assets held in the trusts.
MidAmerican's provision for depreciation included costs for Quad Cities Station nuclear decommissioning of $11.4 million, $9.8 million and $8.6 million for 1998, 1997 and 1996, respectively. The provision charged to expense is equal to the funding that is being collected in rates. The decommissioning funding component of MidAmerican's Illinois and Iowa tariffs assumes decommissioning costs, related to the Quad Cities Station, will escalate at an annual rate of 4.9% and the assumed annual return on funds in the trust is 6.9%. Earnings, net of investment fees, on the assets in the trust fund were $1.7 million, $4.5 million and $3.2 million for 1998, 1997 and 1996, respectively. See Note (14) for information regarding unrealized gains and losses.
(f) NUCLEAR INSURANCE:
MidAmerican maintains financial protection against catastrophic loss associated with its interest in Quad Cities Station and Cooper through a combination of insurance purchased by NPPD (the owner and operator of Cooper) and Commonwealth Edison (ComEd, the joint owner and operator of Quad Cities Station), insurance purchased directly by MidAmerican, and the mandatory industry-wide loss funding mechanism afforded under the Price-Anderson Amendments Act of 1988. The general types of coverage are: nuclear liability, property coverage and nuclear worker liability.
NPPD and ComEd each purchase nuclear liability insurance for Cooper and Quad Cities Station, respectively, in the maximum available amount of $200 million. In accordance with the Price-Anderson Amendments Act of 1988, excess liability protection above that amount is provided by a mandatory industry-wide program under which the licensees of nuclear generating facilities could be assessed for liability incurred due to a serious nuclear incident at any commercial nuclear reactor in the United States. Currently, MidAmerican's aggregate maximum potential share of such an assessment for Cooper and Quad Cities Station combined is $88.1 million per incident, payable in installments not to exceed $10 million annually.
The property coverage provides for property damage, stabilization and decontamination of the facility, disposal of the decontaminated material and premature decommissioning. For Quad Cities Station, ComEd purchases primary and excess property insurance protection for the combined interests in Quad Cities, with coverage limits totaling $2.1 billion. For Cooper, MidAmerican and NPPD separately purchase primary and excess property insurance protection for their respective obligations, with coverage limits of $1.375 billion each. This structure provides that both MidAmerican and NPPD are covered for their respective 50% obligation in the event of a loss totaling up to $2.75 billion. MidAmerican also directly purchases extra expense/business interruption coverage for its share of replacement power and/or other extra expenses in the event of a covered accidental outage at Cooper or Quad Cities Station. The coverages purchased directly by MidAmerican, and the property coverages purchased by ComEd, which includes the interests of MidAmerican, are underwritten by an industry mutual insurance company and contain provisions for retrospective premium assessments should two or more full policy-limit losses occur in one policy year. Currently, the maximum retrospective amounts that could be assessed against MidAmerican from industry mutual policies for its obligations associated with Cooper and Quad Cities Station combined, total $11.2 million.
The master nuclear worker liability coverage, which is purchased by NPPD and ComEd for Cooper and Quad Cities Station, respectively, is an industry-wide guaranteed-cost policy with an aggregate limit of $200 million for the nuclear industry as a whole, which is in effect to cover tort claims of workers in nuclear-related industries as a result of radiation exposure.
(g) COAL AND NATURAL GAS CONTRACT COMMITMENTS:
MidAmerican has entered into supply and related transportation contracts for its fossil fueled generating stations. The contracts, with expiration dates ranging from 1999 to 2003, require minimum payments of $110.2 million, $75.8 million, $28.0 million, $8.1 million and $2.6 million for the years 1999 through 2003, respectively. The Company expects to supplement these coal contracts with spot market purchases to fulfill its future fossil fuel needs.
MidAmerican has entered into various natural gas supply and transportation contracts for its utility operations. The minimum commitments under these contracts are $57.4 million, $40.1 million, $33.3 million, $18.7 million and $13.7 million for the years 1999 through 2003, respectively, and $60.7 million for the total of the years thereafter.
(h) OPERATING LEASE COMMITMENTS:
The Company has entered into various operating lease agreements covering facilities, computer and transportation equipment. Rental payments on operating leases were $23.7 million for 1998, $20.8 million for 1997, and $21.3 million for 1996. The approximate future minimum annual commitments under all operating leases are $13.6
million, $12.0 million, $7.4 million, $5.7 million and $3.9 million for the years 1999 through 2003, respectively, and $9.7 million for the total of the years thereafter.
(5) COMMON SHAREHOLDERS' EQUITY:
Common shares outstanding changed during the years ended December 31 as shown in the table below (in thousands):
1998 1997 1996
---------------- --------------- -----------------
Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
Balance, beginning of year............ $753,873 95,301 $801,431 100,752 $801,227 100,752
Changes due to:
Repurchase of common shares....... (29,295) (4,099) (47,444) (5,451) - -
Stock options..................... (168) - 210 - 623 -
Capital stock expense ........... 368 - (289) - (419) -
Other............................. - - (35) - - -
-------- ------ -------- ------ -------- -------
Balance, end of year.................. $724,778 91,202 $753,873 95,301 $801,431 100,752
======== ====== ======== ====== ======== =======
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(6) RETIREMENT PLANS:
The Company has primarily noncontributory defined benefit pension plans covering substantially all employees. Benefits under the plans are based on participants' compensation, years of service and age at retirement. Funding is based upon the actuarially determined costs of the plans and the requirements of the Internal Revenue Code and the Employee Retirement Income Security Act. MidAmerican has been allowed to recover funding contributions in rates.
The Company currently provides certain health care and life insurance (postretirement) benefits for retired employees. Under the plans, substantially all of the Company's employees may become eligible for these benefits if they reach retirement age while working for the Company. However, the Company retains the right to change these benefits anytime at its discretion. MidAmerican expenses postretirement benefit costs on an accrual basis and includes provisions for such costs in rates.
The Company also maintains noncontributory, nonqualified supplemental executive retirement plans for active and retired participants.
Net periodic pension, supplemental retirement and postretirement benefit costs includes the following components for the years ended December 31 (in thousands):
Pension Cost Postretirement Cost
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Service cost................................ $ 11,284 $ 10,092 $ 12,323 $ 3,558 $ 2,680 $ 2,118
Interest cost............................... 29,941 29,623 31,109 9,344 8,822 8,341
Expected return on plan assets.............. (42,578) (37,617) (33,635) (3,651) (2,573) (1,895)
Amortization of net transition obligation... (2,591) (2,591) (2,591) 5,291 5,291 5,291
Amortization of prior service cost.......... 1,871 1,871 3,183 650 650 -
Amortization of prior year (gain) loss...... (2,802) (1,797) 806 - (298) -
Regulatory deferral of incurred cost........ - 5,423 568 - 4,888 5,112
-------- --------- -------- ------- ------- -------
Net periodic (benefit) cost................. $ (4,875) $ 5,004 $ 11,763 $15,192 $19,460 $18,967
======== ========= ======== ======= ======= =======
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The pension plan assets are in external trusts and are comprised of corporate equity securities, United States government debt, corporate bonds, and insurance contracts. Postretirement benefit plans assets are in external trusts
and are comprised primarily of corporate equity securities, corporate bonds, money market investment accounts and municipal bonds.
Although the supplemental executive retirement plans had no assets as of December 31, 1998, the Company had Rabbi trusts which held corporate-owned life insurance to provide funding for the future cash requirements. Because these plans are nonqualified, the fair value of these assets is not included in the following table. The cash value of the life insurance policies was $27.2 million and $21.5 million at December 31, 1998 and 1997, respectively.
The projected benefit obligation and accumulated benefit obligation for the supplemental executive plans were $55.1 million and $49.9 million, respectively, as of December 31, 1998, and $48.6 million and $40.3 million, respectively, as of December 31, 1997.
The following table presents a reconciliation of the beginning and ending balances of the benefit obligation, fair value of plan assets and the funded status of the aforementioned plans to the net amounts recognized in the Company's Consolidated Balance Sheets as of December 31 (dollars in thousands):
Pension Benefits Postretirement Benefits
--------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Reconciliation of benefit obligation:
Benefit obligation at beginning of year ........ $ 430,043 $ 428,713 $ 127,347 $ 116,505
Service cost ................................... 11,285 10,091 3,558 2,680
Interest cost .................................. 29,941 29,623 9,344 8,822
Participant contributions ...................... 127 125 1,404 1,704
Plan amendments ................................ -- (16,211) (21,607) 8,927
Actuarial (gain) loss .......................... 15,793 8,088 9,463 (3,025)
Benefits paid .................................. (30,714) (30,386) (9,321) (8,266)
--------- --------- --------- ---------
Benefit obligation at end of year .......... 456,475 430,043 120,188 127,347
--------- --------- --------- ---------
Reconciliation of the fair value of plan assets:
Fair value of plan assets at beginning of year . 483,668 427,828 52,174 36,783
Employer contributions ......................... 3,445 6,362 10,095 19,668
Participant contributions ...................... 127 125 1,404 1,704
Actual return on plan assets ................... 67,982 79,739 8,741 2,285
Benefits paid .................................. (30,714) (30,386) (9,321) (8,266)
--------- --------- --------- ---------
Fair value of plan assets at end of year ... 524,508 483,668 63,093 52,174
--------- --------- --------- ---------
Funded status .................................. 68,033 53,625 (57,095) (75,173)
Unrecognized net loss (gain) ................... (101,860) (95,051) (6,873) (11,248)
Unrecognized prior service cost ................ 19,868 21,739 2,555 8,277
Unrecognized net transition obligation (asset) . (13,748) (16,339) 57,543 79,370
--------- --------- --------- ---------
Net amount recognized in MHC's
Consolidated Balance sheets ............. $ (27,707) $ (36,026) $ (3,870) $ 1,226
========= ========= ========= =========
Amounts recognized in the Consolidated Balance
Sheets of MHC consist of:
Prepaid benefit cost ........................... $ 4,350 $ -- $ -- $ 1,226
Accrued benefit liability ...................... (49,874) (47,591) (3,870) --
Intangible asset ............................... 17,817 11,565 -- --
--------- --------- --------- ---------
Net amount recognized ...................... $ (27,707) $ (36,026) $ (3,870) $ 1,226
========= ========= ========= =========
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Pension and Postretirement
Assumptions
--------------------------
1998 1997
--------- ------------
Assumptions used were:
Discount rate...................................... 6.75% 7.0%
Rate of increase in compensation levels............ 5.0% 5.0%
Weighted average expected long-term
rate of return on assets....................... 9.0% 9.0%
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The postretirement plan was amended on January 1, 1999, increasing the retiree co-payment for prescription drugs. This decrease in benefit obligation is reflected for December 31, 1998.
For purposes of calculating the postretirement benefit obligation, it is assumed health care costs for covered individuals prior to age 65 will increase by 8.4% in 1999 and that the rate of increase thereafter will decline by 1.0% annually to an ultimate rate of 5.25% by the year 2003. For covered individuals age 65 and older, it is assumed health care costs will increase by 6.0% in 1999 and 5.5% in 2000.
If the assumed health care trend rates used to measure the expected cost of benefits covered by the plans were increased by 1.0%, the total service and interest cost for 1998 would increase by $2.4 million, and the postretirement benefit obligation at December 31, 1998, would increase by $18.3 million. If the assumed health care trend rates were to decrease by 1.0%, the total service and interest cost for 1998 would decrease by $1.9 million and the postretirement benefit obligation at December 31, 1998, would decrease by $15.3 million.
The Company sponsors defined contribution pension plans (401(k) plans) covering substantially all employees. The Company's contributions vary depending on the plan, but are based primarily on each participant's level of contribution and cannot exceed the maximum allowable for tax purposes. The Company's total contributions were $5.6 million, $4.6 million and $4.4 million for 1998, 1997 and 1996, respectively.
(7) STOCK-BASED COMPENSATION PLANS:
The Company has stock-based compensation arrangements for employees and directors as described below. The Company accounts for these plans under Accounting Principles Board Opinion No. 25 and the related interpretations. The total compensation cost recognized in income for stock-based compensation awards was $0.3 million, $1.3 million, and $0.6 million for 1998, 1997, and 1996, respectively. Had the Company used Statement of Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), pro-forma net income for common stock would be $130.9 million, $135.3 million, and $130.9 million, while earnings per share would be $1.39, $1.38, and $1.30 for the years ended 1998, 1997, and 1996 respectively.
Stock options and performance share awards have been granted pursuant to the MidAmerican Energy Company 1995 Long-Term Incentive Plan (the Plan). Up to four million shares are authorized to be granted under the Plan.
Stock Options - Under the Plan, the Board of Directors granted options to purchase shares of the Company's common stock (the Options) at the fair market value of the shares on the date of the grant. The options granted in 1998 and 1997 vest over a 3-year period at a rate of 33.3% per year and options granted in 1995 and 1996 vest over a 4-year period at a rate of 25% per year. Under the plan, all options expire ten years after the date of grant. Stock option activity for 1998, 1997, and 1996 is summarized as follows:
1998 1997 1996
------------------ ------------------ -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
------- ------ -------- ------ ------- --------
Outstanding, beginning of year............. 566,666 $15.12 800,000 $14.66 700,000 $14.50
Granted .................................. 289,000 $25.25 46,666 $17.36 100,000 $15.75
Exercised.................................. (70,000) $14.50 (165,000) $14.58 - -
Forfeited.................................. (10,000) $17.38 (115,000) $14.93 - -
------- ------ ------- ------ ------- ------
Outstanding, end of year................... 775,666 $18.72 566,666 $15.12 800,000 $14.66
======= ====== ======= ====== ======= ======
Exercisable, end of year................... 369,710 $14.70 315,000 $14.54 175,000 $14.50
======= ====== ======= ====== ======= ======
Weighted average fair value of
options granted during year.............. $3.21 $1.66 $1.48
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The fair value of the options granted were estimated as of the date of the grant using the Black-Scholes option pricing model. The model assumed:
1998 1997 1996
--------- --------- ----------
Dividend rate per share.................... $ 1.20 $ 1.20 $ 1.20
Expected volatility........................ 17.52% 16.55% 17.62%
Expected life.............................. 10 Years 10 Years 10 Years
Risk free interest rate.................... 5.27% 6.14% 6.53%
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The options outstanding at December 31, 1998, have an exercise price range of $14.50 to $25.25, with a weighted average contractual life of 8.27 years.
Performance Shares - Under the Plan, participants were granted contingent shares of MHC common stock. The shares are contingent upon the attainment of specified performance measures within a 3-year performance period. During the performance period, the participant is entitled to receive dividends and vote the stock. The stock is vested upon achievement of the performance measures. If the specified criteria is not met within the 3-year performance period, the shares are forfeited. The following table provides certain information regarding contingent performance incentive shares granted under the Plan:
1998 1997 1996
---------- ---------- ----------
Number of performance shares granted................. 77,441 77,105 68,189
Fair value at date of grant (in thousands)........... $ 1,645 $ 1,335 $ 1,176
Weighted average per share amount.................... $21.2372 $ 17.3125 $ 17.2500
End of performance period............................ 6/30/01 6/30/00 6/30/99
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In addition, the Company granted 1,200 restricted shares to each non-employee director in 1998 and 800 restricted shares to each non-employee director in 1997 and 1996, respectively. Non-employee directors are restricted from disposing of granted shares until such time as they cease to be a director of the company. The following table provides certain information regarding the directors restricted shares granted under the Plan.
1998 1997 1996
-------- -------- --------
Number of shares granted ................. 14,400 11,200 12,000
Fair value at date of grant (in thousands) $ 295 $ 194 $ 207
Weighted average price per share amounts . $20.4658 $17.3125 $17.2500
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Employee Stock Ownership Plan - Employees of the Company are allowed to purchase Company stock up to the lesser of 15% of their annual compensation or $25,000 at a 15% discount. The number of shares acquired by employees under the plan were 146,299, 140,943, and 150,899 in 1998, 1997 and 1996, respectively. The Company acquired shares in the open market for this plan. Participants who purchase shares under the Plan are required to hold purchased shares for 180 days.
(8) SHORT-TERM BORROWING:
Interim financing of working capital needs and the construction program may be obtained from the sale of commercial paper or short-term borrowing from banks. Information regarding short-term debt follows (dollars in thousands):
1998 1997 1996
-------- -------- --------
Balance at year-end.......................................... $339,826 $138,054 $161,990
Weighted average interest rate
on year-end balance...................................... 6.0% 5.9% 5.4%
Average daily amount outstanding
during the year.......................................... $187,466 $117,482 $151,318
Weighted average interest rate on average daily
amount outstanding during the year....................... 5.6% 5.7% 5.5%
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MidAmerican has authority from FERC to issue short-term debt in the form of commercial paper and bank notes aggregating $400 million. As of December 31, 1998, MidAmerican had a $250 million revolving credit facility and lines of credit totaling $90 million and MHC had lines of credit totaling $145 million. MidAmerican's commercial paper borrowings are supported by the revolving credit facility and the line of credit. As of December 31, 1998, commercial paper and bank notes totaled $206.2 million and $99.1 million for MidAmerican and MHC, respectively.
MidAmerican Capital has two unsecured revolving credit facility agreements totaling $114 million which mature March 31, 1999. Borrowings under these agreements may be on a fixed rate, floating rate or competitive bid rate basis. As of December 31, 1998, $34.6 million was borrowed under these facilities. All subsidiary long-term borrowings outstanding at December 31, 1998, are without recourse to MHC.
(9) RATE MATTERS:
As a result of a negotiated settlement in Illinois, MidAmerican reduced its Illinois electric service rates by annual amounts of $13.1 million and $2.4 million, effective November 3, 1996, and June 1, 1997, respectively. MidAmerican implemented an additional $0.9 million annual rate reduction for its Illinois residential customers, effective August 1, 1998, in connection with Illinois' electric utility restructuring law.
On June 27, 1997, the IUB approved a March 1997 settlement agreement between MidAmerican, the Iowa Office of Consumer Advocate (OCA) and other parties. Four major components of the settlement and their status are as follows:
1) On an annualized basis, prices for residential customers were reduced $8.5 million, $10.0 million and $5.0 million effective November 1, 1996, July 11, 1997, and June 1, 1998, respectively, for a total annual decrease of $23.5 million.
2) Prices for industrial customers were reduced by $6 million annually and prices for commercial customers were reduced by $4 million annually. MidAmerican was given permission to implement these reductions through a retail access pilot project, negotiated individual contracts and tariffed rate reductions. On January 1, 1999, MidAmerican reduced base rates for certain non-contract commercial customers by approximately $1.5 million annually, subject to IUB approval. Additionally, MidAmerican will make a one-time refund for reductions that were not in place by the June 1, 1998, deadline. The remainder of the commercial and industrial price reductions were achieved through negotiated contracts and a retail access pilot project.
The negotiated contracts have differing terms and conditions as well as prices. The contracts range in length from five to ten years, and some have price renegotiation and early termination provisions exercisable by either party. The vast majority of the contracts are for terms of seven years or less, although, some large customers have agreed to 10-year contracts. Prices are set as fixed prices; however, many contracts allow for potential price adjustments with respect to environmental costs, government imposed public purpose programs, tax changes, and transition costs. While the contract prices are fixed (except for the potential adjustment elements), the costs MidAmerican incurs to fulfill these contracts will vary. On an aggregate basis the annual revenues under contract are approximately $180 million.
3) The Iowa energy adjustment clause (EAC) was eliminated. Prior to July 11, 1997, MidAmerican collected fuel costs from Iowa customers on a current basis through the EAC, and thus, fuel costs had little impact on net income. Since then, base rates for Iowa customers include a factor for recovery of a representative level of fuel costs. If the actual per-unit fuel cost varies from that factor, pre-tax earnings are affected. The fuel cost factor was to be reviewed in February 1999 and adjusted prospectively if the actual 1998 fuel cost per unit varied by more than 15% above or below the factor included in base rates. Based on 1998 actual fuel costs, MidAmerican will reduce the fuel cost recovery factor in 1999 base rates. The estimated annual reduction in revenues associated with this adjustment is $1.1 million.
4) If MidAmerican's annual Iowa electric jurisdictional return on common equity exceeds 12%, an equal sharing between customers and shareholders of earnings above the 12% level begins; if it exceeds 14%, two-thirds of MidAmerican's share of those earnings will be used for accelerated recovery of certain regulatory assets. The agreement precludes MidAmerican from filing for increased rates prior to 2001 unless the return on common equity falls below 9%. Other parties signing the agreement are prohibited from filing for reduced rates prior to 2001 unless the return on common equity, after reflecting credits to customers, exceeds 14%.
Under a restructuring law enacted in 1997, a similar sharing mechanism is in place for Illinois operations. Two-year average ROE's greater than a two-year average benchmark will trigger an equal sharing of earnings on the excess. The benchmark is a calculation of average 30-year Treasury Bond rates plus 5.5% for 1998 and 1999 and 6.5% for 2000 through 2004. The initial calculation, due March 31, 2000, will be based on 1998 and 1999 results.
(10) DISCONTINUED OPERATIONS:
In the third quarter of 1996, the Company announced the discontinuation of certain nonstrategic businesses in support of its strategy of becoming the leading regional energy and complementary services provider. In November of 1996, the Company signed a definitive agreement with KCS Energy, Inc. (KCS) to sell an oil and gas exploration and development subsidiary and completed the sale on January 3, 1997. The Company recorded an after-tax loss of $7.1 million for the disposition in 1996 and an additional $0.9 million in 1997. In October 1997, the Company sold its subsidiary that developed and operated a computerized information system facilitating the real-time exchange of power in the electric industry. The Company recorded a $4.0 million estimated after-tax loss on disposal in the third quarter of 1996 and an additional $3.2 million in September 1997. In addition, in the third quarter of 1996 the Company received a final settlement from the sale of a coal mining subsidiary which was reflected as a discontinued operation by a predecessor company in 1982. The final settlement, which resulted in an after-tax loss of $3.3 million, included the reacquisition of preferred equity by the buyer and the settlement of reclamation reserves.
Proceeds received from the disposition of the oil and gas subsidiary included $210 million in cash and 870,000 warrants, after a stock split in 1997, to purchase KCS common stock. The warrants were valued at $6 million. Proceeds received from the disposition of the subsidiary that operates a computerized information system for the exchange of power in the electric industry included an unsecured note receivable for $0.7 million and warrants to purchase twenty percent of the acquirer which have been valued at zero. Proceeds received from the disposition of the coal mining subsidiary settlement were $15 million.
On October 6, 1999, the Company distributed its holding in the capital stock of MidAmerican Realty to MidAmerican Energy Holdings Company. The operations are the result of several acquisitions beginning in May 1998. Refer to Note (22), "Acquisitions."
Revenues from discontinued activities, as well as the results of operations and the estimated loss on the disposal of discontinued operations for the years ended December 31 are as follows (in thousands):
1998 1997 1996
Operating Revenues .............. $ 164,226 $ -- $ 233,952
========= ========= =========
Income from Operations
Income (loss) before income taxes $ 7,251 $ (200) $ 1,638
Income tax benefit (expense) .... (3,087) 82 479
--------- --------- ---------
Income (loss) from Operations ... $ 4,164 $ (118) $ 2,117
========= ========= =========
Loss on Disposal
Income (loss) before income taxes $ -- $ (10,106) $ 9,047
Income tax benefit (expense) .... -- 5,996 (23,879)
--------- --------- ---------
Loss on disposal ................ $ -- $ (4,110) $ (14,832)
========= ========= =========
|
(11) CONCENTRATION OF CREDIT RISK:
The Company's electric utility operations serve 565,000 customers in Iowa, 85,000 customers in western Illinois and 3,000 customers in southeastern South Dakota. The Company's gas utility operations serve 489,000 customers in Iowa, 65,000 customers in western Illinois, 64,000 customers in southeastern South Dakota and 4,000 customers in northeastern Nebraska. The largest communities served by the Company are the Iowa and Illinois Quad-Cities; Des Moines, Sioux City, Cedar Rapids, Waterloo, Iowa City and Council Bluffs, Iowa; and Sioux Falls, South Dakota. The Company's utility operations grant unsecured credit to customers, substantially all of whom are local businesses and residents. As of December 31, 1998, billed receivables from the Company's utility customers totaled $20.1 million.
As described in Note 18, billed receivables related to utility services have been sold to a wholly owned unconsolidated subsidiary.
MidAmerican Capital has investments in preferred stocks of companies in the utility industry. As of December 31, 1998, the total cost of these investments was $54 million. MidAmerican Capital has an investment in the common stock of McLeodUSA Incorporated, the total cost of which was $44 million at December 31, 1998.
MidAmerican Capital has entered into leveraged lease agreements with companies in the airline industry. As of December 31, 1998, the receivables under these agreements totaled $33 million.
(12) PREFERRED SHARES:
The $5.25 Series Preferred Shares, which were not redeemable prior to November 1, 1998, for any purpose, are subject to mandatory redemption on November 1, 2003 at $100 per share. The $7.80 Series Preferred Shares have sinking fund requirements under which 66,600 shares will be redeemed at $100 per share each May 1, beginning in 2001 through May 1, 2006.
The total outstanding cumulative preferred stock of MidAmerican not subject to mandatory redemption requirements may be redeemed at the option of the Company at prices which, in the aggregate, total $32.2 million. The aggregate total the holders of all preferred stock outstanding at December 31, 1998, are entitled to upon involuntary bankruptcy is $181.8 million plus accrued dividends. Annual dividend requirements for all preferred stock outstanding at December 31, 1998, total $12.9 million.
During 1996, MidAmerican redeemed all shares of the $1.7375 Series of preferred stock. The redemptions were made at a premium, which resulted in a charge to net income of $1.6 million.
(13) SEGMENT INFORMATION:
In 1998, the Company adopted SFAS 131, "Disclosures About Segments of an Enterprise and Related Information."
The Company has two reportable operating segments: electric and gas. The electric segment derives most of its revenue from retail sales of regulated electricity to residential, commercial and industrial customers, and sales to other utilities; whereas the gas segment derives most of its revenue from retail sales of regulated natural gas to residential, commercial and industrial customers. The gas segment also earns significant revenues by transporting gas owned by others through its distribution systems. Pricing for electric and gas sales are established separately by regulated agencies; therefore, management also reviews each segment separately to make decisions regarding allocation of resources and in evaluating performance. Common operating costs, interest income, interest expense, income tax expense, and equity in the net loss of investees are allocated to each segment.
The following tables provide certain Company information on an operating segment basis as of and for the years ended December 31 (in thousands):
1998 1997 1996
---------- ---------- ------------
SEGMENT PROFIT INFORMATION
Electric:
Revenues......................................... $1,169,810 $1,126,300 $1,099,008
Depreciation and amortization expense............ 156,546 145,931 140,939
Interest income.................................. 4,945 1,820 1,360
Interest expense................................. 66,784 71,138 72,484
Income tax expense............................... 75,831 64,017 90,544
Equity in the net loss of investees.............. (219) (161) -
Net income....................................... 109,539 101,534 119,583
GAS:
Revenues......................................... 429,870 536,306 536,753
Depreciation and amortization expense............ 25,665 24,609 23,653
Interest income.................................. 1,169 501 237
Interest expense................................. 14,011 14,412 13,580
Income tax expense (benefit)..................... (800) 9,698 20,023
Equity in the net loss of investee............... (45) (32) -
Net income....................................... (435) 14,177 28,460
NONREGULATED AND OTHER (a):
Revenues........................................... 176,244 306,931 275,443
Depreciation and amortization...................... 3,086 3,436 4,854
Interest income.................................... 3,148 2,997 2,415
Interest expense................................... 9,418 11,785 23,574
Income tax expense (benefit)....................... 1,895 (5,325) (12,145)
Equity in net income of investees.................. 6,039 1,273 2,510
Net income......................................... 22,760 19,784 (16,997)
SEGMENT ASSET INFORMATION
ELECTRIC:
Total assets....................................... $2,891,646 $2,833,256 $3,031,287
Capital expenditures............................... 158,596 128,544 116,243
Investment in equity method investments............ 1,388 1,292 -
GAS:
Total assets....................................... 670,862 681,649 730,575
Capital expenditures............................... 34,758 38,388 37,955
Investment in equity method investments............ 256 615 -
Nonregulated and other (a):
Total assets....................................... 681,828 763,186 759,986
Capital expenditures............................... 45,466 14,066 55,788
Investment in equity method investments............ 10,171 10,212 17,613
|
(a) "Nonregulated and Other" consists of MidAmerican Capital, Midwest Capital, CBEC Railway and other nonregulated operations and holding company net loss and corporate assets.
Dividend income related to MHC common stock held by MidAmerican Capital of $0.5 and $0.4 million for 1998 and 1997, respectively, is included in Nonregulated and Other Net Income above but has been eliminated in Net Income in the Consolidated Statements of Income. In addition, a realized gain of $4.2 million from MidAmerican Capital's sale of such stock to MHC in 1998 has also been eliminated in Net Income in the Consolidated Statements of Income.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments. Tariffs for the Company's utility services are established based on historical cost ratemaking. Therefore, the impact of any realized gains or losses related to financial instruments applicable to the Company's utility operations is dependent on the treatment authorized under future ratemaking proceedings.
Cash and cash equivalents - The carrying amount approximates fair value due to the short maturity of these instruments.
Quad Cities Station nuclear decommissioning trust fund - Fair value is based on quoted market prices of the investments held by the fund.
Marketable securities - Fair value is based on quoted market prices.
Debt securities - Fair value is based on the discounted value of the future cash flows expected to be received from such investments.
Equity investments carried at cost - Fair value is based on an estimate of the Company's share of partnership equity, offers from unrelated third parties or the discounted value of the future cash flows expected to be received from such investments.
Notes payable - Fair value is estimated to be the carrying amount due to the short maturity of these issues.
Preferred shares - Fair value of preferred shares with mandatory redemption provisions is estimated based on the quoted market prices for similar issues.
Long-term debt - Fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
The following table presents the carrying amount and estimated fair value of certain financial instruments as of December 31 (in thousands):
1998 1997
----------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ---------- -----------
Financial Instruments Owned by the Company:
Equity investments carried at cost ........ $ 27,464 $ 27,372 $ 29,707 $ 32,209
Financial Instruments Issued by the Company:
MidAmerican preferred securities; subject
to mandatory redemption ................. $ 50,000 $ 53,317 $ 50,000 $ 53,650
MidAmerican-obligated preferred securities;
subject to mandatory redemption ......... $ 100,000 $ 102,500 $ 100,000 $ 104,250
Long-term debt, including current portion . $1,045,548 $1,088,650 $1,178,769 $1,214,951
|
The amortized cost, gross unrealized gain and losses and estimated fair value of investments in debt and equity securities at December 31 are as follows (in thousands):
1998
-----------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
Available-for-sale:
Equity securities ........ $ 225,836 $ 214,927 $ (15,789) $ 424,974
Municipal bonds .......... 28,645 2,037 (8) 30,674
U.S. Government securities 15,411 1,410 -- 16,821
Corporate securities ..... 28,051 698 (4) 28,745
Cash equivalents ......... 6,470 -- -- 6,470
--------- --------- --------- ---------
$ 304,413 $ 219,072 $ (15,801) $ 507,684
========= ========= ========= =========
Held-to-maturity:
Equity securities ........ $ 2,843 $ -- $ -- $ 2,843
Debt securities .......... 11,837 -- -- 11,837
--------- --------- --------- ---------
$ 14,680 $ -- $ -- $ 14,680
========= ========= ========= =========
|
1997
-----------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ---------
Available-for-sale:
Equity securities ......... $ 257,316 $ 226,747 $ (10,522) $ 473,541
Municipal bonds ........... 35,217 2,116 (1) 37,332
U. S. Government securities 18,753 800 (4) 19,549
Corporate securities ...... 13,579 222 (3) 13,798
Cash equivalents .......... 9,862 -- -- 9,862
--------- --------- --------- ---------
$ 334,727 $ 229,885 $ (10,530) $ 554,082
========= ========= ========= =========
Held-to-maturity:
Equity securities ......... $ 6,376 $ -- $ -- $ 6,376
Debt securities ........... 4,567 345 -- 4,912
--------- --------- --------- ---------
$ 10,943 $ 345 $ -- $ 11,288
========= ========= ========= =========
|
At December 31, 1998, the debt securities held by the Company had the following maturities (in thousands):
Available for Sale Held to Maturity
----------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- --------- ---------- ---------
Within 1 year............................... $ 1,397 $ 1,397 $9,757 $9,757
1 through 5 years........................... 21,793 22,852 11 11
5 through 10 years.......................... 14,595 15,820 2,069 2,069
Over 10 years............................... 14,891 16,387 - -
|
The proceeds and the gross realized gains and losses on the disposition of investments held by the Company for the years ended December 31, are as follows (in thousands):
1998 1997 1996
-------- --------- ---------
Proceeds from sales....................... $230,804 $211,691 $250,772
Gross realized gains...................... 23,050 14,320 9,920
Gross realized losses..................... (14,199) (6,480) (7,950)
|
During 1996, the Company sold a portion of its held-to-maturity securities due to a significant deterioration in the issuer's credit worthiness. Such securities had a carrying value of $4.8 million and proceeds from the sale were $4.3 million.
(15) INCOME TAX EXPENSE:
Income tax expense from continuing operations includes the following for the years ended December 31 (in thousands):
1998 1997 1996
-------- -------- --------
Current
Federal............................... $ 80,837 $ 91,627 $ 80,165
State................................. 20,736 21,619 22,100
-------- -------- --------
101,573 113,246 102,265
-------- -------- --------
Deferred
Federal............................... (11,861) (29,257) 2,627
State................................. (5,633) (8,242) (264)
-------- -------- --------
(17,494) (37,499) 2,363
-------- -------- --------
Investment tax credit, net................ (7,153) (7,357) (6,206)
-------- -------- --------
Total................................. $ 76,926 $ 68,390 $ 98,422
======== ======== ========
|
Included in Deferred Income Taxes in the Consolidated Balance Sheets as of December 31 are deferred tax assets and deferred tax liabilities as follows (in thousands):
1998 1997
---------- -----------
Deferred tax assets
related to:
Investment tax credits........................ $ 52,139 $ 55,998
Unrealized losses............................. 7,391 7,880
Pensions...................................... 15,677 17,339
Nuclear reserves and decommissioning.......... 17,715 15,287
Other......................................... 5,360 6,464
-------- --------
Total...................................... $ 98,282 $102,968
======== ========
Deferred tax liabilities
related to:
Depreciable property.......................... $496,295 $504,594
Income taxes recoverable
through future rates........................ 198,364 197,877
Unrealized gains.............................. 75,070 81,501
Energy efficiency............................. 27,186 40,902
Reacquired debt............................... 16,385 15,346
FERC Order 636................................ (941) 2,857
Other......................................... 19,371 16,811
-------- --------
Total...................................... $831,730 $859,888
======== ========
|
The following table is a reconciliation between the effective income tax rate, before preferred stock dividends of a subsidiary trust, indicated by the Consolidated Statements of Income and the statutory federal income tax rate for the years ended December 31:
1998 1997 1996
---- ---- ----
Effective federal and state
income tax rate.............................. 36% 31% 39%
Amortization of investment tax credit.......... 3 3 2
State income tax, net of federal income
tax benefit.................................. (5) (4) (6)
Dividends received deduction................... 2 2 2
Other.......................................... (1) 3 (2)
Statutory federal income tax rate.............. 35% 35% 35%
|
(16) INVENTORIES:
Inventories include the following amounts as of December 31 (in
thousands):
1998 1997
------- --------
Materials and supplies, at average cost........ $30,914 $31,425
Coal stocks, at average cost................... 22,266 14,225
Gas in storage, at LIFO cost................... 37,306 35,430
Fuel oil, at average cost...................... 1,294 2,344
Other ......................................... 2,991 2,667
Total........................................ $94,771 $86,091
|
At December 31, 1998 prices, the current cost of gas in storage was $43.0 million.
(17) MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF MIDAMERICAN ENERGY FINANCING I:
In December 1996, MidAmerican Energy Financing I (the Trust), a wholly owned statutory business trust of MidAmerican, issued 4,000,000 shares of 7.98% Series MidAmerican-obligated mandatorily redeemable preferred securities (the Preferred Securities). The sole assets of the Trust are $103.1 million of MidAmerican 7.98% Series A Debentures due 2045 (the Debentures). There is a full and unconditional guarantee by MidAmerican of the Trust's obligations under the Preferred Securities. MidAmerican has the right to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarters. If interest payments on the Debentures are deferred, distributions on the Preferred Securities will also be deferred. During any deferral, distributions will continue to accrue with interest thereon, and MidAmerican may not declare or pay any dividend or other distribution on, or redeem or purchase, any of its capital stock.
The Debentures may be redeemed by MidAmerican on or after December 18, 2001, or at an earlier time if there is more than an insubstantial risk that interest paid on the Debentures will not be deductible for federal income tax purposes. If the Debentures, or a portion thereof, are redeemed, the Trust must redeem a like amount of the Preferred Securities. If a termination of the Trust occurs, the Trust will distribute to the holders of the Preferred Securities a like amount of the Debentures unless such a distribution is determined not to be practicable. If such determination is made, the holders of the Preferred Securities will be entitled to receive, out of the assets of the trust after satisfaction of its liabilities, a liquidation amount of $25 for each Preferred Security held plus accrued and unpaid distributions.
(18) SALE OF ACCOUNTS RECEIVABLE:
In 1997 MidAmerican entered into a revolving agreement, which expires in 2002, to sell all of its right, title and interest in the majority of its billed accounts receivable to MidAmerican Energy Funding Corporation (Funding Corp.), a special purpose entity established to purchase accounts receivable from MidAmerican. Funding Corp. in turn has sold receivable interests to outside investors. In consideration of the sale, MidAmerican received $70 million in cash and the remaining balance in the form of a subordinated note from Funding Corp. In 1998, the revolving balance was reduced to $60 million due to a decline in accounts receivable available for sale. The agreement is structured as a true sale under which the creditors of Funding Corp. will be entitled to be satisfied out of the assets of Funding Corp. prior to any value being returned to MidAmerican or its creditors and, as such, the accounts receivable sold are not reflected on MHC's Consolidated Balance Sheets. At December 31, 1998, $97.4 million of accounts receivable, net of reserves, was sold under the agreement.
(19) EARNINGS PER SHARE
Reconciliation for the Income and Shares of the Basic and Diluted per share computations for income from continuing operations for the years ended December 31 are as follows (in thousands, except per share amounts):
1998 1997
--------------------------------- --------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-------- -------- --------- -------- --------- ----------
Income from Continuing
Operations.......................... $127,154 $139,332
-------- --------
Basic EPS
Income Available to Common
Shareholders........................ $127,154 94,038 $1.35 $139,332 98,058 $1.42
===== =====
Effect of Dilutive Securities
Stock Options........................... -- 171 -- 107
-------- ------ -------- ------
Diluted EPS
Income Available to Common
Shareholders........................ $127,154 94,209 $1.35 $139,332 98,165 $1.42
======== ====== ===== ======== ====== =====
|
1996
-----------------------------------
Per Share
Income Shares Amount
-------- -------- ---------
Income from Continuing Operations...................... $143,761
--------
Basic EPS
Income Available to Common
Shareholders........................................ $143,761 100,752 $1.43
=====
Effect of Dilutive Securities
Stock Options ......................................... -- 89
-------- -------
Diluted EPS
Income Available to Common
Shareholders........................................ $143,761 100,841 $1.43
======== ======= =====
|
(20) UNAUDITED QUARTERLY OPERATING RESULTS:
1998
--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ----------- ----------- -----------
(In thousands, except per share amounts)
Operating revenues ....................... $ 488,148 $ 389,352 $ 455,964 $ 442,460
Operating income ......................... 77,285 52,210 105,877 36,040
Income from continuing operations ........ 38,733 19,326 49,046 20,049
Income (loss) from discontinued operations -- 1,674 4,576 (2,086)
Earnings on common stock ................. 38,733 21,000 53,622 17,963
Earnings per average common share and
earnings per average common share
assuming dilution:
Income from continuing operations ........ $ 0.41 $ 0.20 $ 0.52 $ 0.21
Income (loss) from discontinued operations -- 0.02 0.05 (0.02)
--------- --------- --------- ---------
$ 0.41 $ 0.22 $ 0.57 $ 0.19
========= ========= ========= =========
|
1997
--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ----------- ----------- -----------
(In thousands, except per share amounts)
Operating revenues ....................... $ 589,045 $ 395,580 $ 446,207 $ 538,705
Operating income ......................... 78,487 57,442 99,315 41,482
Income from continuing operations ........ 34,174 24,176 49,705 31,277
Income (loss)from discontinued operations (234) 408 (2,793) (1,609)
Earnings on common stock ................. 33,940 24,584 46,912 29,668
Earnings per average common share and
Earnings per average common share
assuming dilution:
Income from continuing operations ........ $ 0.34 $ 0.24 $ 0.51 $ 0.33
Income (loss) from discontinued operations -- 0.01 (0.03) (0.02)
--------- --------- --------- ---------
$ 0.34 $ 0.25 $ 0.48 $ 0.31
========= ========= ========= =========
|
The quarterly data reflect seasonal variations common in the utility industry.
(21) OTHER INFORMATION:
Non-Operating - Other, Net, as shown on the Consolidated Statements of Income includes the following for the years ended December 31 (in thousands):
1998 1997 1996
--------- ------- -----------
Gain on sale of assets, net............................. $ 7,409 $10,213 $ 974
Discount on sold receivables....................... (8,716) (439) -
Subservice fee from Funding Corp........................ 1,714 153 -
Merger costs............................................ (4,243) - (8,689)
Income from equity method investments................... 3,765 1,273 2,510
Special purpose fund income............................. 2,088 1,989 3,301
Other-than-temporary declines in value
of investments and other assets..................... - (3,443) (15,566)
Energy efficiency carrying charges...................... 197 4,993 3,255
Gain on sale of cushion gas............................. - 855 3,182
Gain (loss) on reacquisition of long-term debt.......... - (923) 1,105
NPPD settlement......................................... - 2,248 -
Other................................................... 2,882 (1,028) 147
-------- ------- --------
Total................................................... $ 5,096 $15,891 $ (9,781)
======== ======= ========
|
(22) ACQUISITIONS:
In 1998, the Company established MidAmerican Realty as a holding company for its real estate brokerage operations. The Company, through MidAmerican Realty, then acquired several real estate brokerage operations and related businesses.
The Company purchased all of the outstanding capital stock of the following companies: Iowa Realty Co. Inc., Edina Financial Services, Inc., Home Real Estate Company of Omaha and CBS Real Estate Company. Additionally, the Company purchased all assets of J.C. Nichols Residential, Inc. and Nebraska Land Title & Abstract Company. The aggregate cost of these acquisitions was $108 million.
Each acquisition was accounted for as a purchase business combination. All identifiable assets acquired and liabilities assumed were assigned a portion of the acquisition price equal to their fair value at the date of acquisition. The Company's Consolidated Income Statements reflect the results of operations of the acquired businesses from the date of their respective acquisition dates, which range from May 27, 1998, through September 1, 1998, except for a minor acquisition in December 1998.
As discussed in Note (10), the Company distributed its holding in the capital stock of MidAmerican Realty to MidAmerican Energy Holdings Company in October 1999 and has reflected these operations as discontinued operations.
(23) SUBSEQUENT EVENTS (UNAUDITED):
On August 11, 1998, a definitive merger agreement was entered into between the Company and CalEnergy Company, Inc. (CalEnergy), a global provider of energy services. On March 12, 1999, the merger transaction was completed, and the Company became an indirect wholly owned subsidiary of CalEnergy, which subsequently changed its name to MidAmerican Energy Holdings Company. In accordance with the merger agreement, each outstanding share of the Company's common stock was converted to the right to receive $27.15 in cash.
On October 25, 1999, an investor group including Berkshire Hathaway, Inc. (Berkshire) reached a definitive agreement to acquire the new MidAmerican Energy Holdings Company for $35.05 per share in cash, along with the assumption of debt. Berkshire will invest approximately $1.25 billion in common stock and a non-dividend-paying convertible preferred stock of the surviving corporation, giving Berkshire an approximate 75% interest in the Company's parent on a fully diluted basis. Berkshire will also invest $800 million in non-transferable trust preferred stock. The other investors, who in total will invest approximately $300 million are Walter Scott, former chairman of Peter Kiewit Sons' Inc. and a Board Member of the new MidAmerican Energy Holdings Company, and David L. Sokol, the Chairman and Chief Executive Officer of the same.
REPORT OF INDEPENDENT ACCOUNTANTS
To MHC Inc.and Subsidiaries:
We have audited the accompanying consolidated financial statements of MHC Inc. (formerly MidAmerican Energy Holdings Company) and subsidiaries listed in the accompanying index on page 1. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MHC Inc. and subsidiaries as of December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
|
Kansas City, Missouri
January 22, 1999, except with respect to the
third paragraph in Note (10) and related
information, as to which the date is
October 6, 1999.
MIDAMERICAN FUNDING, LLC
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
MIDAMERICAN
FUNDING MHC (PREDECESSOR)
---------------- --------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
OPERATING REVENUES
Regulated electric ....................................... $685,376 $ 208,963 $ 907,440
Regulated gas ............................................ 164,967 139,564 303,644
Nonregulated ............................................. 111,542 34,539 122,380
-------- --------- ----------
961,885 383,066 1,333,464
-------- --------- ----------
OPERATING EXPENSES
Regulated:
Cost of fuel, energy and capacity ....................... 125,396 40,232 174,190
Cost of gas sold ........................................ 85,019 79,910 171,096
Other operating expenses ................................ 232,420 93,940 343,072
Maintenance ............................................. 67,138 18,302 82,509
Depreciation and amortization ........................... 107,535 39,417 132,560
Property and other taxes ................................ 42,785 15,758 66,213
-------- --------- ----------
660,293 287,559 969,640
-------- --------- ----------
Nonregulated:
Cost of sales ........................................... 97,659 30,188 105,460
Other ................................................... 37,070 6,421 22,992
-------- --------- ----------
134,729 36,609 128,452
-------- --------- ----------
Total operating expenses ................................ 795,022 324,168 1,098,092
-------- --------- ----------
OPERATING INCOME ......................................... 166,863 58,898 235,372
-------- --------- ----------
NON-OPERATING INCOME
Interest income .......................................... 14,638 1,411 7,517
Dividend income .......................................... 3,159 1,331 7,792
Realized gains and losses on securities, net ............. 78,066 15,214 (230)
Other, net ............................................... (445) (18,133) 4,466
-------- --------- ----------
95,418 (177) 19,545
-------- --------- ----------
FIXED CHARGES
Interest on long-term debt ............................... 65,174 14,814 61,617
Other interest expense ................................... 5,486 3,145 9,073
Preferred dividends of subsidiaries ...................... 6,327 2,831 9,699
Allowance for borrowed funds ............................. (682) (235) (2,749)
-------- --------- ----------
76,305 20,555 77,640
-------- --------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .... 185,976 38,166 177,277
INCOME TAXES ............................................. 77,348 21,377 70,172
-------- --------- ----------
INCOME FROM CONTINUING OPERATIONS ........................ 108,628 16,789 107,105
INCOME FROM DISCONTINUED OPERATIONS ...................... 11,258 421 6,250
-------- --------- ----------
NET INCOME ............................................... $119,886 $ 17,210 $ 113,355
======== ========= ==========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN FUNDING, LLC
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS) (UNAUDITED)
MIDAMERICAN
FUNDING MHC (PREDECESSOR)
---------------- --------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
NET INCOME ...................................................... $119,886 $17,210 $ 113,355
-------- ------- ---------
OTHER COMPREHENSIVE INCOME, NET
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) during period ................ 80,252 79,236 (88,982)
Less reclassification adjustment for realized gains (losses)
reflected in net income during period ........................ 78,066 15,214 (230)
-------- ------- ---------
2,186 64,022 (88,752)
Income tax expense (benefit) .................................... 450 22,408 (30,981)
-------- ------- ---------
Other comprehensive income (loss), net ......................... 1,736 41,614 (57,771)
-------- ------- ---------
COMPREHENSIVE INCOME ............................................ $121,622 $58,824 $ 55,584
======== ======= =========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN FUNDING, LLC
INTERIM CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (UNAUDITED)
AS OF
SEPTEMBER 30, 1999
-------------------
ASSETS
UTILITY PLANT
Electric ..................................................................... $2,038,514
Gas .......................................................................... 477,745
----------
2,516,259
Less accumulated depreciation and amortization ............................... 69,171
----------
2,447,088
Construction work in progress ................................................ 31,330
----------
2,478,418
----------
POWER PURCHASE CONTRACT ...................................................... 102,677
----------
CURRENT ASSETS
Cash and cash equivalents .................................................... 1,651
Receivables .................................................................. 136,025
Inventories .................................................................. 109,180
Other ........................................................................ 39,726
----------
286,582
----------
INVESTMENTS AND NONREGULATED PROPERTY, NET ................................... 586,532
----------
INVESTMENT IN DISCONTINUED OPERATIONS ........................................ 53,283
----------
OTHER ASSETS ................................................................. 1,757,078
----------
TOTAL ASSETS ................................................................. $5,264,570
==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity .................................................. $1,836,163
MidAmerican Energy preferred securities, not subject to mandatory redemption . 31,759
Preferred securities, subject to mandatory redemption:
MidAmerican Energy preferred securities ..................................... 50,000
MidAmerican Energy-obligated preferred securities of subsidiary trust holding
solely MidAmerican Energy junior subordinated debentures .................. 101,598
Long-term debt (excluding current portion) ................................... 1,532,425
----------
3,551,945
----------
CURRENT LIABILITIES
Notes payable ................................................................ 89,115
Current portion of long-term debt ............................................ 215,635
Current portion of power purchase contract ................................... 15,034
Accounts payable ............................................................. 182,895
Taxes accrued ................................................................ 97,167
Interest accrued ............................................................. 21,921
Other ........................................................................ 62,288
----------
684,055
----------
OTHER LIABILITIES
Power purchase contract ...................................................... 68,093
Deferred income taxes ........................................................ 553,851
Investment tax credit ........................................................ 73,173
Other ........................................................................ 333,453
----------
1,028,570
----------
TOTAL CAPITALIZATION AND LIABILITIES ......................................... $5,264,570
==========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN FUNDING, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
MIDAMERICAN
FUNDING MHC (PREDECESSOR)
---------------- --------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................... $ 119,886 $ 17,210 $ 113,355
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization ..................................... 123,050 40,329 149,014
Net increase (decrease) in deferred income taxes and
investment tax credit, net ...................................... (99,036) 1,228 (14,539)
Amortization of other assets ...................................... 25,503 8,053 30,336
Gain on sale of securities, assets and other investments .......... (79,191) (15,478) (6,346)
Other-than-temporary decline in value of investments .............. -- -- 110
Loss (income) from discontinued operations ........................ (11,258) (421) (6,250)
Cash inflows (outflows) of accounts receivable
securitization .................................................. (4,357) 10,000 --
Impact of changes in working capital, net of effects from
discontinued operations ......................................... (59,477) 41,707 43,628
Other ............................................................. 32,391 (3,822) 2,945
------------ ---------- ----------
Net cash provided ............................................... 47,511 98,806 312,253
------------ ---------- ----------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .................................. (99,072) (16,924) (114,225)
Quad Cities Nuclear Power Station decommissioning trust
fund .............................................................. (6,089) (2,188) (8,533)
Nonregulated capital expenditures .................................. (15,913) (6,058) (39,482)
Purchase of assets and long term investments ....................... (788) (140) --
Purchase of securities ............................................. (62,015) (12,307) (134,067)
Proceeds from sale of securities ................................... 447,988 75,452 149,751
Proceeds from sale of assets and other investments ................. 2,116 1,097 28,842
Purchase of MidAmerican Energy Holdings ............................ (2,441,962) -- --
Investment in discontinued operations .............................. 2,797 (493) (28,990)
Other investing activities, net .................................... 5,063 (1,044) (467)
------------ ---------- ----------
Net cash provided (used) .......................................... (2,167,875) 37,395 (147,171)
------------ ---------- ----------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid .............................................. -- (31,598) (85,029)
Issuance of long-term debt, net of issuance cost ................... 702,969 167 158,440
Retirement of long-term debt, including reacquisition cost ......... (735) (127) (233,304)
Reacquisition of preferred shares .................................. -- -- (4)
Reacquisition of common shares ..................................... -- (50,629) (25,597)
Equity contribution of parent ...................................... 1,708,913 -- --
Notes receivable from affiliate .................................... (88,295) -- --
Net increase (decrease) in notes payable ........................... (200,837) (49,874) 21,018
------------ ---------- -----------
Net cash provided (used) .......................................... 2,122,015 (132,061) (164,476)
------------ ---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 1,651 4,140 606
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................... -- 6,107 10,468
------------ ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................... $ 1,651 $ 10,247 $ 11,074
============ ========== ===========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .......................... $ $ -- $ 66,754
============ ========== ===========
Income taxes paid .................................................. $ $ 149 $ 58,411
============ ========== ===========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. GENERAL:
MidAmerican Funding, LLC (Company) is an Iowa limited liability company and a direct wholly owned subsidiary of MidAmerican Energy Holdings Company. The Company's direct wholly owned subsidiary is MHC Inc. (MHC), a public utility holding company. MHC's principal subsidiary is MidAmerican Energy Company (MidAmerican), a public utility with electric and natural gas operations.
The current corporate structure is the result of a merger transaction completed on March 12, 1999, involving MHC (formerly MidAmerican Energy Holdings Company) and CalEnergy Company, Inc. (CalEnergy). CalEnergy, through a reincorporation transaction, was renamed MidAmerican Energy Holdings Company (Holdings). Holdings is an exempt public utility holding company headquartered in Des Moines, Iowa.
In conjunction with the transaction, the Company paid $27.15 in cash for each outstanding share of MHC common stock for a total of approximately $2.42 billion in a merger pursuant to which MHC became a direct wholly owned subsidiary of the Company. The MidAmerican Merger has been accounted for as a purchase business combination and as such the results of operations of the Company include the results of MHC beginning March 12, 1999. The purchase price has been allocated to assets acquired and liabilities assumed based on preliminary valuations and the Company is awaiting final valuations. The Company recorded goodwill of approximately $1.5 billion which is being amortized using the straight line method over a 40 year period.
On March 11, 1999, MidAmerican Funding, LLC, a wholly owned subsidiary of the Company, issued $200 million of 5.85% Senior Secured Notes due 2001, $175 million of 6.339% Senior Secured Notes due 2009, and $325 million of 6.927% Senior Secured Bonds due 2029. The proceeds from the offering were used to complete the MidAmerican Merger.
Unaudited pro forma consolidated revenue and net income of the Company and MHC for the nine months ended September 30, 1999 and 1998, as if the acquisition had occurred at the beginning of the year after giving effect to certain pro forma adjustments related to the acquisition, including the senior secured notes and bonds, were $1.34 billion and $142.9 million respectively, compared to $1.33 billion and $86.6 million respectively, for the same period last year.
The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the financial position, the results of operations and the changes in cash flows for the periods presented. The financial statements reflect operations of the Company's real estate brokerage subsidiary as discontinued operations. Refer to Note H for further information. Prior year amounts have been reclassified to a basis consistent with the current year presentation. All significant intercompany transactions have been eliminated. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these financial statements be read in conjunction with the audited consolidated financial statements of MHC and the notes thereto included elsewhere in this registration statement.
B. ENVIRONMENTAL MATTERS:
(1) MANUFACTURED GAS PLANT FACILITIES--
The United States Environmental Protection Agency (EPA) and the state environmental agencies have determined that contaminated wastes remaining at certain decommissioned manufactured gas
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
plant (MGP) facilities may pose a threat to the public health or the environment if such contaminants are in sufficient quantities and at such concentrations as to warrant remedial action.
MidAmerican is evaluating 27 properties which were, at one time, sites of gas manufacturing plants in which it may be a potentially responsible party (PRP). The purpose of these evaluations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether MidAmerican has any responsibility for remedial action. MidAmerican is currently conducting field investigations at eighteen sites and has conducted interim removal actions at six of the eighteen sites. In addition, MidAmerican has completed investigations and removals at four sites. MidAmerican is continuing to evaluate several of the sites to determine the future liability, if any, for conducting site investigations or other site activity.
MidAmerican's estimate of probable remediation costs for the sites discussed above as of September 30, 1999, was $21 million. This estimate has been recorded as a liability and a regulatory asset for future recovery. The Illinois Commerce Commission (ICC) has approved the use of a tariff rider which permits recovery of the actual costs of litigation, investigation and remediation relating to former MGP sites. MidAmerican's present rates in Iowa provide for a fixed annual recovery of MGP costs. MidAmerican intends to pursue recovery of the remediation costs from other PRPs and its insurance carriers.
The estimate of probable remediation costs is established on a site specific basis. The costs are accumulated in a three-step process. First, a determination is made as to whether MidAmerican has potential legal liability for the site and whether information exists to indicate that contaminated wastes remain at the site. If so, the costs of performing a preliminary investigation and the costs of removing known contaminated soil are accrued. As the investigation is performed and if it is determined remedial action is required, the best estimate of remediation costs is accrued. If necessary, the estimate is revised when a consent order is issued. The estimated recorded liabilities for these properties include incremental direct costs of the remediation effort, costs for future monitoring at sites and costs of compensation to employees for time expected to be spent directly on the remediation effort. The estimated recorded liabilities for these properties are based upon preliminary data. Thus, actual costs could vary significantly from the estimates. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action and changes in technology relating to remedial alternatives. In addition, insurance recoveries for some or all of the costs may be possible, but the liabilities recorded have not been reduced by any estimate of such recoveries.
Although the timing of potential incurred costs and recovery of such costs in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on MidAmerican's financial position or results of operations.
(2) CLEAN AIR ACT--
Following recommendations provided by the Ozone Transport Assessment Group, the EPA, in November 1997, issued a Notice of Proposed Rulemaking which identified 22 states and the District of Columbia as making a significant contribution to nonattainment of the ozone standard in downwind states in the eastern half of the United States. The nonattainment of the downwind states is based on the ozone standard established prior to the 1997 revisions discussed below. In September 1998, the EPA issued its final rules in this proceeding. Iowa is not subject to the emissions reduction requirements in the final rules, and, as such, MidAmerican's facilities are not currently subject to additional emissions reductions as a result of this initiative.
On July 18, 1997, the EPA adopted revisions to the National Ambient Air Quality Standards (NAAQS) for ozone and a new standard for fine particulate matter. Based on data to be obtained from monitors located throughout each state, the EPA will determine which states have areas that do
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
not meet the air quality standards (i.e., areas that are classified as nonattainment). If a state has area(s) classified as nonattainment area(s), the state is required to submit a State Implementation Plan specifying how it will reach attainment of the standards through emission reductions or other means.
In May 1999, the U.S. District Court of Appeals for the District of Columbia Circuit remanded the standards adopted in July 1997 back to the EPA indicating the EPA had not expressed sufficient justification for the basis of establishing the standards and ruling that the EPA has exceeded its constitutionally-delegated authority in setting the standards. The EPA has appealed the court's ruling to the full panel of the U.S. District Court of Appeals for the District of Columbia Circuit. Argument in the appeal proceeding is scheduled for the fall of 1999. As a result of the court's decision and the current status of the standards, the impact of any new standards on MidAmerican is currently unknown.
C. RATE MATTERS:
(1) ELECTRIC--
In Iowa on June 1, 1998, prices for electric residential customers were reduced by an amount which will have a $5.0 million annual impact on revenues. The decrease was the last of three for Iowa residential customers as a result of a 1997 settlement agreement.
Through several steps from mid-1997 to the end of 1998, electric prices for Iowa industrial customers were reduced by an amount which will have a $6 million annual impact on revenues, and electric prices for Iowa commercial customers were reduced by an amount which will have a $4 million annual impact on revenues. The reductions were achieved through a retail access pilot project, negotiated individual electric contracts and a $1.5 million tariffed rate reduction for certain non-contract commercial customers.
The negotiated electric contracts have differing terms and conditions as well as prices. The contracts range in length from five to ten years, and some have price renegotiation and early termination provisions exercisable by either party. The vast majority of the contracts are for terms of seven years or less, although, some large customers have agreed to ten-year contracts. Prices are set as fixed prices; however, many contracts allow for potential price adjustments with respect to environmental costs, government imposed public purpose programs, tax changes, and transition costs. While the contract prices are fixed (except for the potential adjustment elements), the costs MidAmerican incurs to fulfill these contracts will vary. On an aggregate basis the annual revenues under contract are approximately $180 million.
If MidAmerican's annual Iowa electric jurisdictional return on common equity (ROE) exceeds 12%, then earnings above the 12% level will be shared equally between customers and MidAmerican; if the ROE exceeds 14%, two-thirds of MidAmerican's share of those earnings above the 12% level will be used for accelerated recovery of certain regulatory assets. The 1997 pricing plan settlement agreement precludes MidAmerican from filing for increased rates prior to 2001 unless the ROE falls below 9%. Other parties signing the agreement are prohibited from filing for reduced rates prior to 2001 unless the ROE after reflecting credits to customers, exceeds 14%. On April 14, 1999, the Iowa Utilities Board (IUB) approved, subject to additional refund, MidAmerican's 1998 ROE calculation. During the second quarter of 1999, MidAmerican refunded $2.2 million to its Iowa non-contract customers related to the ROE calculation for 1998.
Under an Illinois restructuring law enacted in 1997, a similar sharing mechanism is in place for MidAmerican's Illinois electric operations. Two-year average ROEs greater than a two-year average benchmark will trigger an equal sharing of earnings on the excess. The benchmark is a calculation of average 30-year Treasury Bond rates plus 5.5% for 1998 and 1999. Legislation passed in July 1999 increases the benchmark for 2000 through 2004 to 8.5% above the 30-year Treasury bond rate. The initial calculation, which is still being defined and is due March 31, 2000, will be based on 1998 and 1999 results.
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) GAS--
In October 1998, MidAmerican made a filing with the IUB requesting a rate increase for its Iowa retail gas customers. An interim rate increase of approximately $6.7 million annually was approved by the IUB on January 22, 1999, effective immediately. On April 23, 1999, the IUB issued an order approving a settlement agreement between MidAmerican, the Iowa Office of Consumer Advocate (OCA) and other parties which provides for an annual increase of $13.9 million. The new rates were implemented May 27, 1999.
In November 1998, MidAmerican filed with the South Dakota Public Utilities Commission (SDPUC) requesting a rate increase for its South Dakota retail gas customers. The SDPUC, on April 23, 1999, issued an order approving a rate increase of $2.4 million annually, effective May 1, 1999.
D. ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:
MidAmerican's utility operations are subject to the regulation of the IUB, the ICC, the SDPUC, and the Federal Energy Regulatory Commission (FERC). MidAmerican's accounting policies and the accompanying Consolidated Financial Statements conform to generally accepted accounting principles applicable to rate-regulated enterprises and reflect the effects of the ratemaking process.
Statement of Financial Accounting Standards (SFAS) No. 71 sets forth accounting principles for operations that are regulated and meet certain criteria. For operations that meet the criteria, SFAS 71 allows, among other things, the deferral of costs that would otherwise be expensed when incurred. A possible consequence of the changes in the utility industry is the discontinued applicability of SFAS 71. The majority of MidAmerican's electric and gas utility operations currently meet the criteria of SFAS 71, but its applicability is periodically reexamined. On December 16, 1997, MidAmerican's generation operations serving Illinois were no longer subject to the provisions of SFAS 71 due to passage of industry restructuring legislation in Illinois. Thus in 1997, MidAmerican was required to write off the regulatory assets and liabilities from its balance sheet related to its Illinois generation operations. The net amount of such write-offs was not material. If other portions of its utility operations no longer meet the criteria of SFAS 71, MidAmerican could be required to write off the related regulatory assets and liabilities from its balance sheet and thus, a material adjustment to earnings in that period could result.
E. MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:
The MidAmerican Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely MidAmerican Junior Subordinated Debentures included in the Consolidated Balance Sheets were issued by MidAmerican Energy Financing I (the Trust), a wholly owned statutory business trust of MidAmerican. The sole assets of the Trust are $103.1 million of MidAmerican 7.98% Series A Debentures due 2045.
F. SEGMENT INFORMATION:
The Company has two reportable operating segments: electric and gas. The electric segment derives most of its revenue from retail sales of regulated electricity to residential, commercial, and industrial customers and sales to other utilities; whereas the gas segment derives most of its revenue from retail sales of regulated natural gas to residential, commercial, and industrial customers. The gas segment also earns significant revenues by transporting gas owned by others through its distribution systems. Pricing for electric and gas sales are established separately by regulatory agencies; therefore, management also reviews each segment separately to make decisions regarding allocation of resources and to evaluate performance. Common operating costs are allocated to each segment.
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following tables provide certain MidAmerican information on an operating segment basis (in thousands):
MIDAMERICAN
FUNDING MHC
---------------- ----------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
Electric:
Revenues ...................................... $685,376 $208,963 $907,440
Operating income .............................. 198,249 38,886 233,638
Gas:
Revenues ...................................... 164,967 139,564 303,644
Operating income (loss) ....................... (8,199) 22,082 6,269
Nonregulated and other (a):
Revenues ...................................... 111,542 34,539 122,380
Operating income (loss) ....................... (23,187) (2,070) (4,535)
SEPTEMBER 30,
1999
------------
Total Assets:
Electric ...................................... $2,685,075
Gas ........................................... 649,934
Nonregulated and other (a) .................... 1,876,278
Investment in discontinued operations ......... 53,283
|
(a) "Nonregulated and other" consists of MidAmerican Capital, Midwest Capital, CBEC Railway and other nonregulated MidAmerican activities, and holding company net loss and corporate assets.
G. DETAIL OF OTHER COMPREHENSIVE INCOME--INCOME TAXES:
Comprehensive income refers, in general, to changes in the Company's equity, except those resulting from transactions with shareholders. "Unrealized holding gains (losses)" reflects the overall increase (decrease) in the market value of marketable securities held by the Company as available-for-sale. The "reclassification adjustment" removes any gains (losses) that have been realized from sales of those securities and reflected in the Company's Net Income. The following table shows the income tax expense or benefit related to each component (in thousands):
MIDAMERICAN
FUNDING MHC
---------------- ----------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
Unrealized holding gains (losses) during period,
Before income taxes .............................. $ 80,252 $ 79,236 $ (88,982)
Income tax (expense)/benefit ..................... (31,504) (27,733) 31,061
--------- --------- ---------
48,748 51,503 (57,921)
--------- --------- ---------
Less reclassification adjustment for realized gains
(losses) reflected in net income during period
Before income taxes .............................. 78,066 15,214 (230)
Income tax (expense)/benefit ..................... (31,054) (5,325) 80
--------- --------- ---------
47,012 9,889 (150)
--------- --------- ---------
Other Comprehensive Income ........................ $ 1,736 $ 41,614 $ (57,771)
========= ========= =========
|
MIDAMERICAN FUNDING, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H. DISCONTINUED OPERATIONS:
On October 6, 1999, the Company distributed its investment in the capital stock of its real estate brokerage subsidiary to Holdings, the Company's parent. Accordingly, the financial statements reflect those operations as discontinued operations. The operations are the result of several acquisitions beginning in May 1998. Revenues from discontinued operations, as well as the results of such operations are as follows (in thousands):
MIDAMERICAN
FUNDING MHC
---------------- ----------------------------------
MARCH 12, 1999 JANUARY 1, 1999 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 30, MARCH 11, SEPTEMBER 30,
1999 1999 1998
---------------- ----------------- --------------
OPERATING REVENUES ................. $220,265 $58,047 $87,770
======== ======= =======
INCOME FROM OPERATIONS
Income before income taxes ......... $ 19,025 $ 648 $10,699
Income tax expenses ................ 7,767 227 4,449
-------- ------- -------
$ 11,258 $ 421 $ 6,250
======== ======= =======
|
I. REALIZED GAINS AND LOSSES ON SECURITIES, NET:
In May 1999, the Company sold most of its investment in the common stock of McLeodUSA, Inc. Realized gains and losses on securities, net, reflects a $78.2 million gain on the sale of 6,741,116 shares in the March 12, 1999 through September 30, 1999 period. Income taxes on the transaction totaled $31.1 million, resulting in an after-tax gain of $47.1 million.
J. SUBSEQUENT EVENT:
On October 25, 1999, an investor group including Berkshire Hathaway, Inc. (Berkshire) reached a definitive agreement to acquire MidAmerican Energy Holdings Company for $35.05 per share in cash, along with the assumption of debt. Berkshire will invest approximately $1.25 billion in common stock and a non-dividend-paying convertible preferred stock of the surviving corporation, giving Berkshire an approximate 75% interest in Holdings, on a fully diluted basis. Berkshire will also invest $800 million in non-transferable trust preferred stock. The other investors, who in total will invest approximately $300 million are Walter Scott, former chairman of Peter Kiewit Sons' Inc. and a board member of Holdings, and David L. Sokol, the Chairman and Chief Executive Officer of Holdings.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of MidAmerican Funding and MHC, combined and adjusted to give effect on a pro forma basis to the Offering and on a pro forma as adjusted basis to the Offering and the MidAmerican Merger and the transactions contemplated thereby, as described in the notes thereto. MidAmerican Funding had no results of operations prior to the Offering and the MidAmerican Merger. These statements should be read in conjunction with the historical financial statements and notes of MHC which are included and incorporated by reference in this registration statement. See "Incorporation by Reference."
The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 1998, and for the nine months ended September 30, 1999, present the results of operations for MidAmerican Funding as if the Offering and the MidAmerican Merger had occurred at the beginning of the period presented. In addition, the statements of income do not reflect discontinued operations. A pro forma balance sheet is not required as of September 30, 1999, since both the Offering and the MidAmerican Merger are reflected in the historical balance sheet of MidAmerican Funding as of that date which is included elsewhere in this registration statement.
The pro forma adjustments are estimates based upon information currently available and certain assumptions that management believes are reasonable under the circumstances. MidAmerican Funding's actual consolidated financial statements reflect the effects of the MidAmerican Merger on and after the effective time of the MidAmerican Merger rather than the dates indicated above. The unaudited pro forma condensed consolidated financial statements neither purport to represent what the combined results of operations or financial condition actually would have been had the MidAmerican Merger and related transactions in fact occurred on the assumed dates, nor to project MidAmerican Funding's results of operations and financial position for any future period.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MIDAMERICAN MHC
FUNDING (PREDECESSOR)
---------------- ----------------
MARCH 12, 1999 JAN. 1, 1999 OFFERING
THROUGH THROUGH AND MERGER
SEPT. 30, 1999 MARCH 11, 1999 ADJUSTMENTS PRO FORMA
---------------- ---------------- ----------------- ------------
(NOTE 1) (NOTE 2) (NOTES 3, 4 & 5)
OPERATING REVENUES
Regulated electric .................................. $685,376 $ 208,963 $ -- $ 894,339
Regulated gas ....................................... 164,967 139,564 -- 304,531
Nonregulated ........................................ 111,542 34,539 -- 146,081
-------- --------- -------- ----------
961,885 383,066 -- 1,344,951
-------- --------- -------- ----------
OPERATING EXPENSES
Regulated:
Cost of fuel, energy and capacity .................. 125,396 40,232 (759) 164,869
Cost of gas sold ................................... 85,019 79,910 -- 164,929
Other operating expenses ........................... 232,420 93,940 (124) 326,236
Maintenance ........................................ 67,138 18,302 -- 85,440
Depreciation and amortization ...................... 107,535 39,417 -- 146,952
Property and other taxes ........................... 42,785 15,758 -- 58,543
-------- --------- -------- ----------
660,293 287,559 (883) 946,969
-------- --------- -------- ----------
Nonregulated:
Cost of sales ...................................... 97,659 30,188 (345) 127,502
Other .............................................. 37,070 6,421 7,264 50,755
-------- --------- -------- ----------
134,729 36,609 6,919 178,257
-------- --------- -------- ----------
Total operating expenses ........................... 795,022 324,168 6,036 1,125,226
-------- --------- -------- ----------
OPERATING INCOME .................................... 166,863 58,898 (6,036) 219,725
-------- --------- -------- ----------
NON-OPERATING INCOME
Interest income ..................................... 14,638 1,411 -- 16,049
Dividend income ..................................... 3,159 1,331 -- 4,490
Realized gains and losses on securities, net ........ 78,066 15,214 -- 93,280
Other, net .......................................... (445) (18,133) 19,709 1,131
-------- --------- -------- ----------
95,418 (177) 19,709 114,950
-------- --------- -------- ----------
FIXED CHARGES
Interest on long-term debt .......................... 65,174 14,814 8,046 88,034
Other interest expense .............................. 5,486 3,145 -- 8,631
Preferred dividends of subsidiaries ................. 6,327 2,831 543 9,701
Allowance for borrowed funds ........................ (682) (235) -- (917)
-------- --------- -------- ----------
76,305 20,555 8,589 105,449
-------- --------- -------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES ....................................... 185,976 38,166 5,084 229,226
INCOME TAXES ........................................ 77,348 21,377 (128) 98,598
-------- --------- -------- ----------
INCOME FROM CONTINUING OPERATIONS ................... $108,628 $ 16,789 $ 5,212 $ 130,628
======== ========= ======== ==========
|
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Reflects the historical results of MidAmerican Funding subsequent to the MidAmerican Merger.
2. Reflects the historical results of MHC prior to the MidAmerican merger.
3. Immediately prior to the MidAmerican Merger, MidAmerican Funding issued $700 million of senior debt at a weighted average interest rate of 6.5%. The adjustments to interest on long-term debt are net of the amortization of related deferred debt issue costs and credits from a rate swap arrangement.
4. On March 12, 1999, MidAmerican Funding purchased MHC for $2,439.8 million, including transaction costs. The transaction was accounted for as a purchase business combination. The pro forma statements of income reflect amortization of balance sheet adjustments made to reflect the effect of the MidAmerican Merger on MHC's assets and liabilities. Adjustments made to the assets and liabilities were as follows (in thousands):
Goodwill .............................................................. $1,477,440
Other current assets .................................................. (16,674)
Power purchase contract ............................................... (34,295)
Other non-current assets .............................................. (217,340)
Other non-current liabilities ......................................... (61,034)
Long-term debt ........................................................ (5,782)
Deferred taxes ........................................................ 120,038
MidAmerican-obligated preferred securities of subsidiary trust ........ (543)
----------
$1,261,810
==========
|
A. The adjustment to power purchase contract was to reflect MHC's long-term power purchase contract at fair value based on the estimated market prices for similar purchases with similar remaining maturities.
B. The adjustment to other non-current assets was to reflect the fair value of MHC's investments in Quad Cities Nuclear Power Station, real estate and certain other investments.
C. The other non-current liabilities adjustment was to reflect MHC's compensation obligations and to reflect MHC's long-term fuel contracts at fair value based on the estimated market prices for similar purchases with similar remaining maturities.
D. Goodwill is amortized using the straight line method over 40 years and is reflected in nonregulated other operating expenses.
E. Other purchase accounting adjustments are being amortized using the straight line or other applicable method over the remaining estimated lives of the related assets and liabilities.
F. Income tax expense for the effects of the pro forma adjustments which affect taxable income is at an effective rate of 40%.
5. Other, net includes an adjustment to add back MHC merger transaction costs totaling $19.2 million for the nine months ended September 30, 1999, and $4.2 million for the year ended December 31, 1998.
CONTACT INFORMATION FOR THE EXCHANGE AGENT
By Registered or Certified Mail By Hand Delivery:
or Overnight Delivery:
The Bank of New York
The Bank of New York 101 Barclay Street
101 Barclay Street New York, New York 10286
New York, New York 10286 Attention: [____________]
Attention: [____________]
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By Facsimile (for Eligible Institutions Only):
For Information or Confirmation by Telephone:
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
MidAmerican Funding, LLC, an Iowa limited liability company, is organized under the Limited Liability Company Act of the State of Iowa, and, pursuant to Section 242 of such Act and in accordance with the limitations set forth therein, its Articles of Organization provide for the indemnification of any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his being or having been a manager, officer or employee of MidAmerican Funding, LLC. The Operating Agreement of MidAmerican Funding, LLC, dated as of March 9, 1999, by MidAmerican Energy Holdings Company (formerly CalEnergy Company, Inc.), provides for indemnification of the managers, officers and employees of MidAmerican Funding, LLC to the full extent permitted by the Articles of Organization and the Limited Liability Company Act.
MidAmerican Energy Holdings Company maintains an insurance policy providing for indemnification of the officers and directors of its subsidiaries against liabilities and expenses incurred by any of them in certain stated proceedings and under stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Organization of MidAmerican Funding, LLC
3.2 Operating Agreement of MidAmerican Funding, LLC
4.1 Indenture, dated as of March 11, 1999, by and between MidAmerican Funding, LLC and IBJ
Whitehall Bank & Trust Company, as Trustee
4.2 First Supplemental Indenture, dated as of March 11, 1999,
by and between MidAmerican Funding, LLC and IBJ Whitehall
Bank & Trust Company, as Trustee
4.3 Form of Specimen Certificate of 5.85% Senior Secured Exchange Note due 2001
4.4 Form of Specimen Certificate of 6.339% Senior Secured Exchange Note due 2009
4.5 Form of Specimen Certificate of 6.927% Senior Secured Exchange Bond due 2029
4.6 Registration Rights Agreement, dated March 9, 1999, by and among MidAmerican Funding, LLC,
Credit Suisse First Boston Corporation, Lehman Brothers, Inc., Goldman Sachs & Co. and
Merrill Lynch & Co.
5.1 Opinion of Latham & Watkins regarding the validity of the exchange Securities
10.1 Power Sales Contract between Iowa Power Inc. and Nebraska Public Power District,
dated September 22, 1967 (Filed as Exhibit 4-C-2 to Iowa Power Inc.'s Registration
Statement, Registration No. 2-27681)
10.2 Amendments No. 1 and 2 to Power Sales Contract between Iowa Power Inc. and
Nebraska Public Power District (Filed as Exhibit 4-C-2a to Iowa Power Inc.'s Registration
Statement, Registration No. 2-35624)
10.3 Amendment No. 3 dated August 31, 1970, to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 5-C-2-b
to Iowa Power Inc.'s Registration Statement, Registration No. 2-42191)
10.4 Amendment No. 4 dated March 28, 1974 to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 5-C-2-c
to Iowa Power Inc.'s Registration Statement, Registration No. 2-51540)
10.5 Amendment No. 5 dated September 2, 1997 to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 10.2
to MidAmerican Holdings' and MidAmerican Energy's respective Quarterly Reports on
combined Form 10-Q for the quarter ended September 30, 1997, Commission
File Nos. 1-12459 and 1-11505, respectively)
12.1 Computation of Ratio of Earnings to Fixed Charges
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21 Subsidiaries of MidAmerican Funding, LLC
23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of
1939 of The Bank of New York
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal to tender 5.85% Senior
Secured Notes due 2001, 6.339% Senior Secured Notes due
2009 and 6.927% Senior Secured Bonds due 2029 of
MidAmerican Funding, LLC
99.2 Form of Letter to Registered Holders and DTC Participants from MidAmerican Funding, LLC
regarding the exchange offer
99.3 Form of Instruction to Registered Holder or DTC Participant from Beneficial Owner of 5.85%
Senior Secured Notes due 2001, 6.339% Senior Secured Notes due 2009 and/or 6.927% Senior
Secured Bonds due 2029 of MidAmerican Funding, LLC
99.4 Form of Letter to Clients from Registered Holder or DTC Participant regarding the exchange
offer
99.5 Form of Notice of Guaranteed Delivery
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(b) Financial Statement Schedules
Financial statement schedules are not included because the required information is inapplicable or is presented in the financial statements or the notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(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. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
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(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information 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.
The undersigned registrant hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
The undersigned registrant hereby undertakes as follows: prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the application form.
The undersigned registrant hereby undertakes that every prospectus (i) that is filed pursuant to the immediately preceding paragraph or (ii) that purports to meet the requirements of Section l0(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has 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 registrant of expenses incurred or paid by a director, officer or controlling person of the registrant 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 registrant 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 the issue.
The undersigned registrant hereby undertakes to file an application of 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 Securities and Exchange Commission under section 305(b)(2) of the Trust Indenture Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Omaha, State of Nebraska, on November 8, 1999.
MIDAMERICAN FUNDING, LLC
By: /s/ Steven A. McArthur
---------------------------
Name: Steven A. McArthur
Title: Vice President and Secretary
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KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven A. McArthur his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this registration statement (including post-effective amendments), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities, as of the dates indicated.
Signature Title Date
/s/ David L. Sokol Chairman and Chief Executive November 8, 1999
-------------------------------------- Officer; Manager
David L. Sokol
/s/ Gregory E. Abel President and Chief Operating Officer November 8, 1999
--------------------------------------
Gregory E. Abel
/s/ Patrick J. Goodman Vice President November 8, 1999
-------------------------------------- (principal financial officer and
Patrick J. Goodman principal accounting officer)
/s/ Steven A. McArthur Vice President and Secretary; Manager November 8, 1999
--------------------------------------
Steven A. McArthur
/s/ John A. Rasmussen, Jr. Vice President and General Counsel November 8, 1999
--------------------------------------
John A. Rasmussen, Jr.
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II-5
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Organization of MidAmerican Funding, LLC
3.2 Operating Agreement of MidAmerican Funding, LLC
4.1 Indenture, dated as of March 11, 1999, by and between MidAmerican Funding, LLC and IBJ
Whitehall Bank & Trust Company, as Trustee
4.2 First Supplemental Indenture, dated as of March 11, 1999, by
and between MidAmerican Funding, LLC and IBJ Whitehall Bank &
Trust Company, as Trustee
4.3 Form of Specimen Certificate of 5.85% Senior Secured Exchange Note due 2001
4.4 Form of Specimen Certificate of 6.339% Senior Secured Exchange Note due 2009
4.5 Form of Specimen Certificate of 6.927% Senior Secured Exchange Bond due 2029
4.6 Registration Rights Agreement, dated March 9, 1999, by and among MidAmerican Funding, LLC,
Credit Suisse First Boston Corporation, Lehman Brothers, Inc., Goldman Sachs & Co. and
Merrill Lynch & Co.
5.1 Opinion of Latham & Watkins regarding the validity of the exchange Securities
10.1 Power Sales Contract between Iowa Power Inc. and Nebraska Public Power District,
dated September 22, 1967 (Filed as Exhibit 4-C-2 to Iowa Power Inc.'s Registration
Statement, Registration No. 2-27681)
10.2 Amendments No. 1 and 2 to Power Sales Contract between Iowa Power Inc. and
Nebraska Public Power District (Filed as Exhibit 4-C-2a to Iowa Power Inc.'s Registration
Statement, Registration No. 2-35624)
10.3 Amendment No. 3 dated August 31, 1970, to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 5-C-2-b
to Iowa Power Inc.'s Registration Statement, Registration No. 2-42191)
10.4 Amendment No. 4 dated March 28, 1974 to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 5-C-2-c
to Iowa Power Inc.'s Registration Statement, Registration No. 2-51540)
10.5 Amendment No. 5 dated September 2, 1997 to the Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District, dated September 22, 1967 (Filed as Exhibit 10.2
to MidAmerican Holdings' and MidAmerican Energy's respective Quarterly Reports on
combined Form 10-Q for the quarter ended September 30, 1997, Commission
File Nos. 1-12459 and 1-11505, respectively)
12.1 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of MidAmerican Funding, LLC
23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939
of The Bank of New York
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal to tender 5.85% Senior Secured
Notes due 2001, 6.339% Senior Secured Notes due 2009 and
6.927% Senior Secured Bonds due 2029 of MidAmerican Funding,
LLC
99.2 Form of Letter to Registered Holders and DTC Participants from MidAmerican Funding, LLC
regarding the exchange offer
99.3 Form of Instruction to Registered Holder or DTC Participant from Beneficial Owner of 5.85%
Senior Secured Notes due 2001, 6.339% Senior Secured Notes due 2009 and/or 6.927% Senior
Secured Bonds due 2029 of MidAmerican Funding, LLC
99.4 Form of Letter to Clients from Registered Holder or DTC Participant regarding the exchange
offer
99.5 Form of Notice of Guaranteed Delivery
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ARTICLES OF ORGANIZATION
OF
MIDAMERICAN FUNDING, LLC
The undersigned Organizer of a limited liability company organized under the Iowa Limited Liability Company Act, Chapter 490A, Code of Iowa, does hereby adopt the following Articles of Organization for such limited liability company (the "Company").
ARTICLE I
NAME OF THE LIMITED LIABILITY COMPANY
The name of the Company shall be MidAmerican Funding, LLC.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The street address of the Company's initial registered office in Iowa, and the name of its initial registered agent at that office is:
Paul J. Leighton 666 Grand Avenue Des Moines, IA 50303-0657
ARTICLE III
PRINCIPAL OFFICE
The address of the principal office of the Company is 666 Grand Avenue, Des Moines, IA 50303.
ARTICLE IV
PURPOSE
A. The purpose for which the Company is organized is to enter into and consummate the transactions contemplated by (i) the Indenture, to be dated as of March 11, 1999, as supplemented by the First Supplemental Indenture, to be dated as of March 11, 1999, each
among the Company and IBJ Whitehall Bank & Trust Company, as Trustee (as supplemented, the "Indenture"), (ii) the Escrow Agreement, to be dated as of March 11, 1999, between the Company and IBJ Whitehall Bank & Trust Company, as Escrow Agent, (iii) the Registration Rights Agreement, to be dated as of March 11, 1999, between the Company and the Initial Purchasers party thereto and (iv) the Merger Agreement, dated August 11, 1998, among CalEnergy Company, Inc. ("CalEnergy"), MAVH, Inc. ("Merger Sub"), Maverick Reincorporation Sub, Inc. and MidAmerican Energy Holdings Company ("Holdings"), the sole common shareholder of MidAmerican Energy Company (the agreements referred to in (i)-(iv) above are referred to herein as the "Operative Documents"); engage in activities related to the acquisition, management and ownership of Merger Sub and Holdings as its successor upon the consummation of the Merger Agreement; enter into and perform any agreements to accomplish such purposes; and engage in any lawful act or activity, and exercise any powers permitted to limited liability companies, organized under the laws of Iowa, that are incidental to or necessary, suitable or convenient for the accomplishment of such purposes.
B. As long as any of the securities issued under the Indenture (the "Securities") are outstanding, the Company shall not do any of the following:
(i) engage in any business or activity other than those set forth in section (A) of this Article IV;
(ii) except as expressly provided in these Articles of Organization, shall not incur any debt, liability or obligation other than as part of the business or activity set forth in section (A) of this Article IV;
(iii) incur any indebtedness of, or assume, guarantee or become obligated for the debts of, or hold its credit or assets as being available to satisfy the obligations of, CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(iv) except as provided for in the Operative Documents and except as contemplated by the Merger Agreement, shall not enter into any transaction of merger or consolidation, purchase or otherwise acquire all or substantially all of the assets of any other person or entity, change its form of organization or its business, liquidate or dissolve itself (or suffer any liquidation or dissolution); provided, however, that (A) the Company may incur debt to finance the acquisition of all or a portion of any assets used in its businesses, and (B) the Company may merge with or into any other person or entity, in each case only if no default exists or shall occur under the Operative Documents as a result thereof, and in the event that the Company is not the surviving entity (1) the surviving entity shall, simultaneously with such merger, assume all the obligations of the Company under the Operative Documents and the other credit arrangements to which it was a party, (2) the surviving entity shall continue to have a valid, perfected, first priority security interest in any applicable collateral securing the Securities, (3) after giving effect to such merger, the merger shall not result in a material adverse effect on such entity's financial condition, and (4) after giving effect to such merger, no default shall have
occurred or be continuing under the Operative Documents and the other credit arrangements to which it is a party;
(v) seek to have its indebtedness or other obligations guaranteed by, or secured by a pledge of the assets of, CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(vi) commingle its bank accounts or other assets with those of any other entity;
(vii) acquire any obligations or securities of its members;
(viii) operate or purport to operate as an integrated, single economic unit with respect to any other person or entity;
(ix) seek or obtain credit or incur any obligation to any third party based upon the assets of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries) or induce any such third party to reasonably rely on the creditworthiness of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries), or suggest in any way that its assets are directly available to pay the claims of creditors of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(x) without the unanimous affirmative vote or consent of the Board of Managers of the Company, including the affirmative vote or consent of the Independent Manager (as defined below), (A) institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, (D) make any assignment for the benefit of creditors, (E) admit in writing its inability to pay its debts generally as they become due, (F) dissolve or liquidate, in whole or in part, (G) change its form of organization or jurisdiction of organization; (H) amend this Article IV or Article VII of these Articles of Organization or add, remove or amend any provision of these Articles of Organization in a manner that would interfere with the operation of this Article IV or Article VII, or (I) or take any limited liability company action (including any amendment, repeal or other modification of any provision of these Articles of Organization) in furtherance of any such action.
C. The Company shall:
(i) maintain books and records separate from those of any other person or entity;
(ii) maintain its accounts separate from those of any other person or entity;
(iii) conduct its business solely in its own name;
(iv) maintain financial statements separate from those of any other entity, separately identifying its own assets, liabilities and financial affairs;
(v) pay its indebtedness and other liabilities out of its own funds and assets;
(vi) observe all limited liability company formalities required by law, these Articles of Organization and its operating agreement;
(vii) maintain an arm's-length relationship with each of its affiliates;
(viii) pay the salaries of its own employees and officers and maintain a sufficient number of employees in light of its contemplated business operations;
(ix) allocate fairly and reasonably any overhead for office space or other expenses incurred by any affiliate on behalf of the Company;
(x) use stationery, invoices, checks and other business forms separate from those of any other person or entity;
(xi) correct any known misunderstanding regarding its identity separate from that of any other person or entity; and
(xii) maintain adequate capital in light of its contemplated business operations.
ARTICLE V
PERIOD OF DURATION
A. The Company's existence shall commence upon the acceptance of these Articles of Organization by the Secretary of State of Iowa for filing and shall be perpetual, unless sooner dissolved pursuant to the terms of its operating agreement, or as otherwise provided by law.
B. To the extent permitted by law, the commencement of bankruptcy, insolvency, receivership or other similar proceeding, by or against the members, including the events listed in Section 490A.712 of the Act, shall not cause the dissolution of the Company or the cessation of the members' interests in the Company.
ARTICLE VI
WRITTEN OPERATING AGREEMENT
Any operating agreement entered into by the member or members of the Company, and any amendments or restatements thereof, shall be in writing. No oral agreement among any of the members or managers of the Company shall be deemed or construed to constitute any portion of, or otherwise affect the interpretation of, any written operating agreement of the Company, as amended and in existence from time to time.
ARTICLE VII
BOARD OF MANAGERS
A. The business and affairs of the Company shall be governed by a board of managers, which shall include at all times at least one individual who is an Independent Manager (as defined below). The rights and powers exercised by the Independent Manager in the management of the business and affairs of the Company may not be delegated. The actions of a member or any other person acting in any capacity other than as a manager of the Company shall not bind the Company.
B. An "Independent Manager" shall be an individual who is not, at the
time of his or her appointment or any time thereafter, and was not at any time
during the preceding five years: (i) a direct or indirect legal or beneficial
owner of any shares of the capital stock or membership interests, as applicable,
of the Company, CalEnergy or any of CalEnergy's subsidiaries, except that an
Independent Manager may own shares of the capital stock or membership interests,
as applicable, of CalEnergy or any of its direct or indirect subsidiaries having
a value, at all times in which such person is the Independent Manager, not
exceeding 1% of such person's assets, (ii) a director, officer, employee,
manager, trustee, partner, affiliate, family member, major supplier, major
contractor or major creditor of the Company or of any of the Company's
affiliates (except solely by virtue of serving as an Independent Manager of the
Company) or (iii) a person who, directly or indirectly, controls (except solely
by virtue of serving as an Independent Manager of the Company) (A) the Company,
(B) any affiliate of the Company or (C) any person or entity set forth in clause
(ii) of this section (B). The term "major supplier" means a person or entity to
which the Company or its affiliates, as applicable, has outstanding indebtedness
for borrowed money in a sum sufficiently large as would reasonably be expected
to influence the judgment of the proposed Independent Manager adversely to the
interests of the Company and its creditors. The term "major contractor" means a
person or entity that has contracts with the Company in a sum sufficiently large
as would reasonably be expected to influence the judgment of the proposed
Independent Manager adversely to the interests of the Company and its creditors.
The term "major creditor" means a person or entity to which the Company or its
affiliates, as applicable, has outstanding indebtedness for borrowed money in a
sum sufficiently large as would reasonably be expected to influence the judgment
of the proposed Independent Manager adversely to the interests of the
Company or its other creditors. The term "family member" means any child, stepchild, grandchild, parent, grandparent, spouse, sibling, niece, nephew, mother-in-law, father in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships. The term "affiliate" means any person or entity controlling, controlled by, or under common control with the Company, whether by virtue of the holding of voting securities, the election of members of the Board of Managers or another governing body or otherwise.
C. In the event of the insolvency of the Company and with regard to any action requiring the affirmative vote of the Independent Manager, the Managers will owe their fiduciary duties to the Company and its creditors.
ARTICLE VIII
LIMITATION OF LIABILITY
A. A manager of the Company shall not be personally liable to the Company or its members for monetary damages for breach of fiduciary duty as a manager, except for liability:
(i) for any breach of the manager's duty of loyalty to the Company or its members; or
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or
(iii) for any transaction from which the manager derives an improper personal benefit or a wrongful distribution in violation of Section 490A.807 of the Act.
B. If, after the date these Articles of Organization are filed with the
Iowa Secretary of State, the Act is amended to authorize action further
eliminating or limiting the personal liability of managers, then the liability
of a manager of the Company shall be deemed eliminated or limited to the fullest
extent permitted by the Act, as so amended. Any repeal or modification of
Section A or this Section B of this Article VIII, by the members of the Company
shall be prospective only and shall not adversely affect any right or protection
of a manager of the Company existing at the time of such repeal or modification.
ARTICLE IX
INDEMNIFICATION
A. Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative, investigative or arbitration and whether formal or informal ("proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a manager, officer or employee, of the Company or is or was serving at the request of the Company as a director, manager, officer or employee of another corporation or of a partnership, limited liability
company, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity while serving as a manager, officer or employee or in any other capacity while serving as a manager, officer or employee, shall be indemnified and held harmless by the Company to the fullest extent authorized by the Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than the Act permitted the Company to provide prior to such amendment), against all reasonable expenses, liability and loss (including without limitation attorneys' fees, all costs, judgments, fines, Employee Retirement Income Security Act excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith. Such right shall be a contract right and shall include the right to be paid by the Company expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by a manager, officer or employee in his or her capacity as a manager, officer or employee (and not in any other capacity in which service was or is rendered by such person while a manager, officer or employee including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Company of (i) a written undertaking, by or on behalf of such manager, officer or employee, to repay all amounts so advanced if it should be determined ultimately that such manager, officer or employee is not entitled to be indemnified under this Article IX or otherwise, or (ii) a written affirmation by or on behalf of such manager, officer or employee that, in such person's good faith belief, such person has met the standards of conduct set forth in the Act.
B. If a claim under Section A is not paid in full by the Company within thirty (30) days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses of prosecuting such claim. It shall be a defense to any such action that the claimant has not met the standards of conduct which make it permissible under the Act for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. The failure of the Company (including its Board of Managers, independent legal counsel or its members) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Act, shall not be a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct.
C. Indemnification provided hereunder shall, in the case of the death of the person entitled to indemnification, inure to the benefit of such person's heirs, executors or other lawful representatives. The invalidity or unenforceability of any provision of this Article IX shall not affect the validity or enforceability of any other provision of this Article IX.
D. The rights conferred on any person by this Article IX shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Organization, operating agreement, agreement, vote of members or disinterested managers or otherwise.
E. The Company may maintain insurance, at its expense, to protect itself and any such manager, officer, employee or agent of the Company or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Act.
ARTICLE X
AMENDMENTS
Subject to the last sentence of Section B of Article VIII, these Articles may be amended, repealed, changed or modified in accordance with the provisions of the Act and the Company's operating agreement. The foregoing notwithstanding, as long as any of the Securities are outstanding, (i) subject to clause (ii) below, the provisions of Article IV, V and Article VII of these Articles of Organization shall not be changed, amended, repealed or effected in any way unless the Company complies with the provisions of section (B)(x) of Article IV and (ii) paragraphs (B)(i), (ii) and (iv) of Article IV may be amended or modified if, prior to the effectiveness of such amendment or modification, the Company obtains written confirmation from each of Standard & Poor's Ratings Group, Moody's Investors Service, Inc. and Duff & Phelps Credit Rating Co. (or, if any such agency ceases to rate the Securities for any reason outside the control of the Company, any other "nationally recognized statistical rating organization" within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, selected by the Company as a replacement rating agency; each a "Rating Agency"), that such amendment or modification will not result in lowering by any Rating Agency of the credit rating assigned to the Securities by such Rating Agency as of the date of such amendment or modification.
IN WITNESS WHEREOF, the aforesaid organizer has caused the execution of the foregoing Articles of Organization on this 9th day of March 1999.
/s/ Paul J. Leighton
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Paul J. Leighton, Organizer
of MidAmerican Funding, LLC
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OPERATING AGREEMENT
OF
MIDAMERICAN FUNDING, LLC
OPERATING AGREEMENT of MIDAMERICAN FUNDING, LLC, an Iowa limited liability company (the "COMPANY"), dated as of March 9, 1999, by CalEnergy Company, Inc., a Delaware corporation, the sole "MEMBER".
W I T N E S S E T H:
WHEREAS, the Member desires to form a limited liability company pursuant to the provisions of the Limited Liability Company Act of the State of Iowa, as amended from time to time (the "ACT");
WHEREAS, the Member hereby constitutes itself a limited liability company for the purposes and on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
INTRODUCTORY PROVISIONS
SECTION 1.1. CERTAIN DEFINITIONS. As used herein:
"ACT" shall have the meaning set forth in the recitals hereto.
"AFFILIATE" shall mean, with respect to any Person, any other Person who controls, is controlled by or is under common control with such Person.
"ARTICLES" means the Articles of Organization of the Company as filed with the Secretary of State of Iowa, as it shall be amended from time to time.
"BANKRUPTCY ACTION" has the meaning specified in SECTION 3.1(C).
"CALENERGY" means CalEnergy Company, Inc., and its successors and assigns.
"CAPITAL CONTRIBUTION" means a contribution by the Member to the capital of the Company pursuant to this Agreement.
"CHAIRMAN" has the meaning specified in SECTION 3.5.
"CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall include a reference to any amendatory or successor provision thereto.
"FISCAL YEAR" means the calendar year.
"INDEMNIFIED PERSONS" has the meaning specified in SECTION 3.10.
"INDEPENDENT MANAGER" has the meaning specified in Section B of Article VII of the Articles.
"LEGAL REQUIREMENT" means any federal, state, or local law or regulation excluding regulations which are contrary to applicable law.
"MAJORITY BOARD VOTE" means, in the case of any vote by the Board of Managers, the affirmative vote of the majority of the Managers present at a meeting where Quorum is present.
"NOTICES" has the meaning specified in SECTION 8.2(A).
"PERSON" means an individual, corporation, association, limited liability company, limited liability partnership, partnership, estate, trust, unincorporated organization or a government or any agency or political subdivision thereof.
"QUORUM" has the meaning specified in SECTION 3.8.
"SECRETARY" has the meaning specified in SECTION 3.5.
"TRANSFER" means any direct or indirect sale, assignment, gift, hypothecation, pledge or other disposition, whether voluntary or by operation of law, of an Interest.
"TREASURY REGULATIONS" means the regulations promulgated by the U.S. Department of the Treasury under the Code.
SECTION 1.2. NAME. The name of the Company shall be "MIDAMERICAN
FUNDING, LLC"
SECTION 1.3. PRINCIPAL PLACE OF BUSINESS. The Company's principal place of business shall be at such place as the Member shall designate from time to time.
SECTION 1.3.1. PURPOSES.
A. The purpose for which the Company is organized is to enter into and consummate the transactions contemplated by (i) the Indenture, to be dated as of March 11, 1999, as supplemented by the First Supplemental Indenture, to be dated as of March 11, 1999, each among the Company and IBJ Whitehall Bank & Trust Company, as Trustee (as supplemented, the "Indenture"), (ii) the Escrow Agreement, to be dated as of March 11, 1999, between the Company and IBJ Whitehall Bank & Trust Company, as Escrow Agent, (iii) the Registration Rights Agreement, to be dated as of March 11, 1999, between the Company and the Initial Purchasers party thereto and (iv) the Merger Agreement, dated August 11, 1998, among CalEnergy, MAVH, Inc. ("Merger Sub"), Maverick Reincorporation Sub, Inc. and MidAmerican
Energy Holdings Company ("Holdings"), the sole common shareholder of MidAmerican Energy Company (the agreements referred to in (i) - (iv) above are referred to herein as the "Operative Documents"); engage in activities related to the acquisition, management and ownership of Merger Sub and Holdings as its successor upon the consummation of the Merger Agreement; enter into and perform any agreements to accomplish such purposes; and engage in any lawful act or activity, and exercise any powers permitted to limited liability companies, organized under the laws of Iowa, that are incidental to or necessary, suitable or convenient for the accomplishment of such purposes.
B. As long as any of the securities issued under the Indenture (the "Securities") are outstanding, the Company shall not do any of the following:
(i) engage in any business or activity other than those set forth in paragraph A of this Section 1.3.1;
(ii) except as expressly provided in the Articles, shall not incur any debt, liability or obligation other than as part of the business or activity set forth in paragraph A of this Section 1.3.1;
(iii) incur any indebtedness of, or assume, guarantee or become obligated for the debts of, or hold its credit or assets as being available to satisfy the obligations of, CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(iv) except as provided for in the Operative Documents and except as contemplated by the Merger Agreement, shall not enter into any transaction of merger or consolidation, purchase or otherwise acquire all or substantially all of the assets of any other person or entity, change its form of organization or its business, liquidate or dissolve itself (or suffer any liquidation or dissolution); provided, however, that (A) the Company may incur debt to finance the acquisition of all or a portion of any assets used in its businesses, and (B) the Company may merge with or into any other person or entity, in each case only if no default exists or shall occur under the Operative Documents as a result thereof, and in the event that the Company is not the surviving entity (1) the surviving entity shall, simultaneously with such merger, assume all the obligations of the Company under the Operative Documents and the other credit arrangements to which it was a party, (2) the surviving entity shall continue to have a valid, perfected, first priority security interest in any applicable collateral securing the Securities, (3) after giving effect to such merger, the merger shall not result in a material adverse effect on such entity's financial condition, and (4) after giving effect to such merger, no default shall have occurred or be continuing under the Operative Documents and the other credit arrangements to which it is a party;
(v) seek to have its indebtedness or other obligations guaranteed by, or secured by a pledge of the assets of, CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(vi) commingle its bank accounts or other assets with those of any other entity;
(vii) acquire any obligations or securities of its members;
(viii) operate or purport to operate as an integrated, single economic unit with respect to any other person or entity;
(ix) seek or obtain credit or incur any obligation to any third party based upon the assets of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries) or induce any such third party to reasonably rely on the creditworthiness of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries), or suggest in any way that its assets are directly available to pay the claims of creditors of CalEnergy or any of CalEnergy's subsidiaries (except for the Company and its subsidiaries);
(x) without the unanimous affirmative vote or consent of the Board of Managers of the Company, including the affirmative vote or consent of the Independent Manager, (A) institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, (D) make any assignment for the benefit of creditors, (E) admit in writing its inability to pay its debts generally as they become due, (F) dissolve or liquidate, in whole or in part, (G) change its form of organization or jurisdiction of organization; (H) amend Article IV or Article VII of the Articles or add, remove or amend any provision of such Articles in a manner that would interfere with the operation of such Article IV or Article VII, or (I) or take any limited liability company action (including any amendment, repeal or other modification of any provision of the Articles) in furtherance of any such action.
C. The Company shall:
(i) maintain books and records separate from those of any other person or entity;
(ii) maintain its accounts separate from those of any other person or entity;
(iii) conduct its business solely in its own name;
(iv) maintain financial statements separate from those of any other entity, separately identifying its own assets, liabilities and financial affairs;
(v) pay its indebtedness and other liabilities out of its own funds and assets;
(vi) observe all limited liability company formalities required by law, the Articles and this Agreement;
(vii) maintain an arm's-length relationship with each of its affiliates;
(viii) pay the salaries of its own employees and officers and maintain a sufficient number of employees in light of its contemplated business operations;
(ix) allocate fairly and reasonably any overhead for office space or other expenses incurred by any affiliate on behalf of the Company;
(x) use stationery, invoices, checks and other business forms separate from those of any other person or entity;
(xi) correct any known misunderstanding regarding its identity separate from that of any other person or entity; and
(xii) maintain adequate capital in light of its contemplated business operations.
SECTION 1.4. DURATION. A. The Company shall be formed upon the filing of the Articles with the Office of the Secretary of State of Iowa pursuant to the Act and shall continue until dissolved pursuant to SECTION 7.1.
B. To the extent permitted by law, the commencement of bankruptcy, insolvency, receivership or other similar proceeding, by or against the members, including the events listed in Section 490A.712 of the Act, shall not cause the dissolution of the Company or the cessation of the members' interests in the Company.
SECTION 1.5. LIMITATION OF LIABILITY. A. The liability of a manager or employee of the Company to third parties for obligations of the Company shall be limited to the fullest extent provided in the Act and other applicable law. Any amendment, repeal or modification of the foregoing sentence shall not adversely affect any right or protection of a manager of the Company existing hereunder with respect to any act or omission occurring prior to such amendment, repeal or modification.
B. In the event the Act is amended after approval of this Section by the Members so as to authorize limited liability company action further eliminating or limiting the liability of a Member or manager of the Company, then the liability of a Member or manager of the Company shall be eliminated or limited to the fullest extent permitted by the Act, as so amended from time to time. The provisions of this Section shall not be deemed to limit or preclude indemnification of a Member or manager by the Company for any liability of a Member or manager or preclude indemnification of a Member or manager by the Company for any liability of a Member or manager which has not been eliminated by the provisions of this Section.
ARTICLE II.
CAPITAL CONTRIBUTIONS; OTHER FINANCING;
INTERESTS IN THE COMPANY
SECTION 2.1. CAPITAL CONTRIBUTIONS. Member has made the Capital Contribution as of the date hereof and shall have a Contribution Percentage of 100%.
SECTION 2.2. WITHDRAWAL OF CAPITAL; LIMITATION ON DISTRIBUTIONS. The
Member shall not be entitled to withdraw any part of its Capital Contributions
to, or to receive any distributions from, the Company except as provided in
SECTION 6.1 and SECTION 7.2. The Member shall not be entitled to demand or
receive (i) interest on its Capital Contributions or (ii) any property from the
Company other than cash, except as provided in SECTION 7.2(A).
ARTICLE III.
MANAGEMENT
SECTION 3.1. MANAGEMENT BY MANAGERS.
(a) BOARD OF MANAGERS. Subject to SECTION 3.9, the management of the property, business and affairs of the Company shall be vested in, and conducted under the direction and control of, the Board of Managers, and, except as expressly set forth herein or unless expressly authorized by the Board of Managers, no Member shall have the power or authority to act for or to bind the Company.
(b) POWERS OF THE BOARD OF MANAGERS. Subject to any vote or consent of Members as may be expressly required under the Act or any provision of this Agreement (unless not permitted under the Act or other applicable Legal Requirement), the Board of Managers shall have the power and authority, on behalf of and in the name of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company.
(c) UNANIMOUS CONSENT. The Company shall not without the unanimous affirmative vote of the Board of Managers, and the affirmative vote of the Independent Manager:
(i) institute proceedings to have the Company adjudicated bankrupt or insolvent;
(ii) consent to the institution of bankruptcy or insolvency proceedings against the Company;
(iii) file a petition or consent to a petition seeking reorganization or relief on behalf of the Company under any applicable federal or state law relating to bankruptcy;
(iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar official) of the Company or a substantial portion of its property;
(v) make any assignment for the benefit of the Company's creditors;
(vi) cause the Company to admit in writing its inability to pay its debts generally as they become due;
(vii) take any action, or cause the Company to take any action, in furtherance of any of the foregoing (any of the above foregoing actions, a "Bankruptcy Action"); or
(viii) merge or consolidate the Company.
(d) FIDUCIARY DUTY. The fiduciary duty of the Managers shall not include a duty to take any Bankruptcy Action. No Manager or officer of the Company shall be liable to the Company or any Member on account of such Manager's or officer's good faith reliance on the provisions of this Section 3.1(d) and neither the Company nor any Member shall have any claim for breach of fiduciary duty or otherwise against any Manager or officer for failing to take any Bankruptcy Action. With respect to a vote in connection with a Bankruptcy Action, the Managers shall owe their fiduciary duties to the Company and its creditors.
(e) ADDITIONAL POWERS OF THE BOARD OF MANAGERS. In addition to any rights and powers that may be expressly provided for in this Agreement, and, subject to SECTIONS 3.1(C), 3.1(D) and 3.9, the Board of Managers shall possess all of the rights and powers of a board of directors of a corporation formed under the Iowa Business Company Act.
SECTION 3.2. ELECTION, NUMBER, QUALIFICATION, REMOVAL AND REPLACEMENT OF MANAGERS.
(a) The Board of Managers shall be elected by a vote of the Majority-in-Interest of the Members.
(b) There shall be three (3) Managers on the Board of Managers. At all times there shall be at least one Independent Manager. The rights and powers exercised by the Independent Manager in the management and business affairs of the Company may not be delegated.
(c) Each person designated as a Manager shall hold office until his or her successor is duly designated in accordance with this SECTION 3.2 or until his or her earlier resignation, removal (in accordance with SECTION 3.2(E)), death, disability, disqualification or otherwise.
(d) Any Manager may resign at any time upon written notice delivered to the Board of Managers, with a copy to each Member, which shall be effective upon the date
set forth therein or, if no such date is specified, upon delivery of such notice to the Board of Managers.
(e) Any Manager may be removed, with or without cause, at any time by a Majority-in-Interest of the Members.
(f) Any vacancy on the Board of Managers resulting from resignation, removal, death, disability, disqualification or otherwise, of a Manager shall be filled by the Members.
(g) The election of a Manager shall be effective upon written notice delivered to the Company by the Members.
SECTION 3.3. UNANIMOUS AFFIRMATIVE VOTE OF MANAGERS REQUIRES VOTE OF INDEPENDENT MANAGER.
If the Independent Manager resigns, dies or becomes incapacitated, or such position is otherwise vacant, no action requiring the unanimous affirmative vote of the managers shall be taken until a successor Independent Manager is elected and qualified and approves such action.
SECTION 3.4. INITIAL BOARD OF MANAGERS. The initial Board of Managers shall be David L. Sokol and Steven A. McArthur. Delbert D. Weber shall serve as the initial Independent Manager.
SECTION 3.5. MEETINGS OF THE BOARD OF MANAGERS, NOTICES OF MEETINGS AND AGENDAS FOR MEETINGS.
(a) The Board of Managers shall (i) elect from among themselves one Manager to act as chairman of the Board of Managers (the "CHAIRMAN") who, in addition to having the same powers and duties as the other Managers, shall also preside at all meetings of the Board of Managers, and (ii) appoint one person (who may, but need not be, a Manager) to act as secretary of, and to record the minutes of, all meetings of the Board of Managers (the "SECRETARY"). In the absence of the Chairman at any meeting of the Board of Managers, any other Manager selected by the Board of Managers shall act as Chairman of such meeting. In the absence of the Secretary at any meeting of the Board of Managers, any other Person (who may, but need not be, a Manager) selected by the Board of Managers shall act as Secretary at such meeting.
(b) Meetings of the Board of Managers shall be held on such dates as may be agreed from time to time by the Board of Managers. Meetings of the Board of Managers shall be held at the Company's principal place of business set forth in SECTION 1.3, whether within or outside the State of Iowa, or at such other location (whether within or outside the State of Iowa) as may be agreed from time to time by the unanimous vote of the Board of Managers.
(c) With respect to meetings of the Board of Managers, the Secretary shall deliver (or cause to be delivered) at the direction of the Chairman, not later than five (5) days before the meeting date, to each Manager, with a copy to each Member, a written notice of, and agenda for, such meeting.
(d) Notice of any meeting of the Board of Managers required to be given under SECTION 3.5(C) need not be given to any Manager who submits a written waiver of notice signed by such Manager either before or after the subject meeting.
(e) Any Manager who wishes to have any matter discussed or acted upon at any meeting of the Board of Managers which matter is not specified in the subject agenda for such meeting may, not later than two (2) days prior to the meeting date, give written notice to the Chairman, with a copy to the Secretary, each of the other Managers and each of the Members, specifying such additional matter(s), whereupon the initial agenda for the subject meeting shall be deemed to have been amended to include such matters.
(f) In addition to the Managers, the Member shall have the right to attend any or all meetings of the Board of Managers, but shall have no right to participate in any vote of the Board of Managers. In addition, the Board of Managers may, by Majority Board Vote, invite any other Person to attend, as an observer, any meeting of the Board of Managers.
SECTION 3.6. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if all of the Managers then comprising the Board of Managers consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Managers.
SECTION 3.7. TELEPHONIC MEETINGS. Managers shall have the right to participate in a meeting of the Board of Managers by means of conference telephone or similar communications equipment by means of which all Persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.
SECTION 3.8. QUORUM; ACTION OF THE BOARD; ADJOURNMENTS.
(a) The presence, in person, of a majority of the Managers comprising the Board of Managers, and for those actions of the Board of Managers taken pursuant to SECTION 3.1(C), the presence of a majority of the Board of Managers including the presence of the Independent Manager, shall constitute a quorum (a "QUORUM") for the transaction of business; provided that with respect to any regular meeting, notice thereof shall have been delivered to (or waived by) each Manager in accordance with SECTION 3.5(D).
(b) Each Manager shall have one vote and, except as required by SECTION 3.1(c), a Majority Board Vote shall be the act of the Board of Managers.
(c) At any meeting of the Board of Managers at which a Quorum is not present, the meeting shall be adjourned to another time or place and notice thereof shall be given
in accordance with SECTION 3.5(B). At the adjourned meeting, the Managers may, provided a Quorum is present, transact any business which might have been transacted at the original meeting.
SECTION 3.9. MANAGEMENT RIGHTS. The Management of the Company rests exclusively with the Board of Managers, except as to duties granted to the Members of the Company pursuant to this SECTION 3.9. Notwithstanding anything herein to the contrary, to the extent that such actions are permitted by the Articles, the Company may not take any of the following actions without first obtaining the consent of the Member:
(a) the merger, consolidation or other reorganization of the Company;
(b) the liquidation, reorganization or recapitalization of the Company; or
(c) the issuance, repurchase or redemption of any Membership Interests or any rights to purchase Membership Interests.
In addition, the business and affairs of the Company shall be operated in such a manner as the Board of Managers deems reasonable and necessary or appropriate to preserve the limited liability of the managers, the separateness of the Company from the business of its members, and as long as the Securities are outstanding, the special purpose, bankruptcy remote status of the Company. To the extent permitted by law, as long as the Securities are outstanding, the Board of Managers shall make decisions with respect to the business and daily operations of the Company independent of, and not dictated by, any member or any affiliate of any member.
SECTION 3.10. INDEMNIFICATION. (a) Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, or arbitration and whether formal or informal ("PROCEEDING"), by reasons of the fact that he or she, or a person of whom he or she is the legal representative, is or was a manager or employee of the Company or is or was serving at the request of the Company as a manager or employee of another limited liability company or of a corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity while serving as a manager or employee or in any other capacity while serving as a manager or employee (each, an "INDEMNIFIED PERSON"), shall be indemnified and held harmless by the Company to the fullest extent authorized by the Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than the permitted the Company to provide prior to such amendment), against all reasonable expenses, liability and loss (including, without limitation, attorneys' fees, all costs, judgments, fines, Employee Retirement Income Security Act excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith. Such right shall be a contract right and shall include the right to be paid by the Company expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that the payment of such expenses incurred by a manager or employee in his or her capacity as a manager
or employee (and not in any other capacity in which service was or is rendered by such person while a manager or employee, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Company of (i) a written undertaking, by or on behalf of such manager or employee, to repay all amounts so advanced if it should be determined ultimately that such manager or employee is not entitled to be indemnified under this Section 3.10 or otherwise, or (ii) a written affirmation by or on behalf of such manager or employee that, in such person's good faith belief, such person has met the standards of conduct set forth in the Act.
(b) If a claim under clause (a) is not paid in full by the Company within thirty (30) days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful, in whole or in part, the claimant shall be entitled to also be paid the expenses of prosecuting such claim. It shall be a defense to any such action that the claimant has not met the standards of conduct which make it permissible under the Act for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. The failure of the Company (including its Board of Managers, independent legal counsel or its Members) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Act shall not be a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct.
(c) Indemnification provided hereunder shall, in the case of the death of the person entitled to indemnification, inure to the benefit of such person's heirs, executors or other lawful representatives. The invalidity or unenforceability of any provision of this Section 3.10 shall not affect the validity or enforceability of any other provision of this Article III.
(d) Any action taken or omitted to be taken by any manager or employee in good faith and in compliance with or pursuant to any order, determination, approval or permission made or given by a commission, board, official or other agency of the United States or of any state or other governmental authority with respect to the property or affairs of the Company or any such business corporation, not-for-profit corporation, joint venture, trade association or other entity over which such commission, board, official or agency has jurisdiction or authority or purports to have jurisdiction or authority shall be presumed to be in compliance with the standard of conduct set forth in Section 490.A.707 (or any successor provision) of the Act whether or not it may thereafter be determined that such order, determination, approval or permission was unauthorized, erroneous, unlawful or otherwise improper.
(e) Unless finally determined, the termination of any litigation, whether by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that the action taken or omitted to be taken by the person seeking indemnification did not comply with the standard of conduct set forth in Section 490.A.707 (or any successor provision) of the Act.
(f) The rights conferred on any person by this Section 3.10 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the this Agreement, vote of the Members or Independent Managers or otherwise.
(g) The Company may maintain insurance, at its expense, to protect itself and any such manager or employee of the Company or another limited liability company, corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Iowa Act.
ARTICLE IV.
BOOKS; ELECTIONS; BUDGETS; FISCAL YEAR
SECTION 4.1. ADMINISTRATIVE SERVICES, BOOKS, RECORDS AND REPORTS. The Member shall cause to be performed all general and administrative services on behalf of the Company in order to assure that complete and accurate books and records of the Company are maintained at the Company's principal place of business showing the names, addresses and Interests of each of the Members, all receipts and expenditures, assets and liabilities, profits and losses, and all other records necessary for recording the Company's business and affairs. For federal tax purposes, the items of taxable income, gain, loss, deduction and credits shall be directly taken into account by the Company.
ARTICLE V.
EMPLOYMENT OF AFFILIATES
SECTION 5.1. PARTIES EMPLOYED. Subject to any restrictions contained in the Articles and subject to the approval of a Majority-in-Interest of the Members, the Company may contract for services to be performed for the Company by the Member or Affiliates of the Member. In the case of the employment of the Member or of Affiliates of a Member, the compensation to be paid by the Company to such Member or Affiliates shall be not greater than the compensation generally paid to third parties for comparable services in comparable locations.
ARTICLE VI.
DISTRIBUTIONS
SECTION 6.1. DISTRIBUTIONS. Subject to any restrictions contained in the Articles, distributions shall be made at such time and in such amounts as determined by the Member shall be made to the Member in cash or other property.
SECTION 6.2. RESTORATION OF FUNDS. Except as otherwise provided by law, no Member shall be required to restore to the Company any funds properly distributed to it pursuant to SECTION 6.1.
ARTICLE VII.
DISSOLUTION AND LIQUIDATION
SECTION 7.1. DISSOLUTION.
(a) The Company may not be dissolved or liquidated, in whole or in part, without the unanimous affirmative vote or consent of the Board of Managers.
(b) Pursuant to Section 490.A.1301 of the Act, the Company elects that the bankruptcy, death, dissolution, expulsion, incapacity, or withdrawal of any Member, shall not constitute a dissolution of the Company.
(c) The Company shall be dissolved upon the entry of a decree of judicial dissolution under Section 490.A.1302 of the Act.
SECTION 7.2. WINDING UP AFFAIRS AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution of the Company, the Member shall proceed to wind
up the affairs of the Company, liquidate the remaining property and assets
of the Company and wind-up and terminate the business of the Company. The
Member shall cause a full accounting of the assets and liabilities of the
Company to be taken and shall cause the assets to be liquidated and the
business to be wound up as promptly as possible by the following method:
selling the Company assets and distributing the net proceeds therefrom
(after the payment of Company liabilities) to the Member.
(b) The proceeds of such liquidation shall be applied in the following
order of priority: (i) first, to the expenses of such liquidation; (ii)
second, to the debts and liabilities of the Company (including debts of the
Company to the Member or its Affiliates and any fees and reimbursements
payable under this Agreement), in the order of priority provided by law;
(iii) third, a reasonable reserve shall be set up to provide for any
contingent or unforeseen liabilities or obligations of the Company to third
parties (to be held and disbursed, at the discretion of the Member, by an
escrow agent selected by the Member) and at the expiration of such period as
the Member may deem advisable, the balance remaining in such reserve shall
be distributed as provided herein; (iv) fourth, to the Member in accordance
with SECTION 6.1.
(c) In connection with the liquidation of the Company, the Member shall have the first opportunity to make bids or tenders for all or any portion of the assets of the Company, and such assets shall not be sold to an outsider except only for a price higher than the highest and best bid of the Member.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. ARTICLES REQUIREMENTS. From time to time the Member shall sign and acknowledge all such writings as are required to amend the Articles or for the carrying out of the terms of this Agreement or, upon dissolution of the Company, to cancel such Articles. The Member is hereby designated as an authorized person to sign the Company's Articles and any other documents that are appropriate and necessary to effectuate the purpose of this Agreement.
SECTION 8.2. NOTICES.
(a) All Notices, consents, approvals, reports, designations, requests, waivers, elections and other communications (collectively, "NOTICES") authorized or required to be given pursuant to this Agreement shall be given in writing and either personally delivered to the Member to whom it is given or delivered by an established delivery service by which receipts are given or mailed by registered or certified mail, postage prepaid, or sent by telex or telegram or electronic telecopier, addressed to the Member at its address listed below its name on the signature page.
(b) All Notices shall be deemed given (i) when delivered personally to the recipient, (ii) when sent to the recipient (with receipt confirmed by sender's machine) by telecopy if during normal business hours of the recipient, otherwise on the next business day, or (iii) one (1) business day after the date sent to the recipient (three (3) business days in the case of international delivery) by reputable express courier service (charges prepaid). Any Member may change its address for the receipt of Notices at any time by giving Notice thereof to all of the other Members. Notwithstanding the requirement in SECTION 8.2(A) as to the use of registered or certified mail, any routine reports required by this Agreement to be submitted to Members at specified times may be sent by first-class mail.
SECTION 8.3. PARTIES IN INTEREST; THIRD-PARTY BENEFICIARIES.
(a) Neither this Agreement nor any of the rights, duties, or obligations of any party hereunder may be transferred or assigned by a party hereto, except in connection with a Transfer of the membership interest. Subject to the foregoing, this Agreement shall be binding upon, and inure to the benefit of the parties hereto and their respective successors and assigns.
(b) This Agreement shall not confer any rights or remedies upon any person or entity other than the parties hereto, the Indemnified Persons, the holders of long-term indebtedness of the Company and their respective permitted successors and assigns.
SECTION 8.4. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings among the Members with respect to the subject matter hereof.
SECTION 8.5. MODIFICATION. No change or modification of this Agreement shall be of any force unless such change or modification is in writing and has been signed by all of the Members. No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is in writing and signed by the Member against whom such waiver is claimed. Any change or modification of SECTIONS 1.3.1, 1.4, 3.1(C), 3.1(D), 3.3, 7.1, or 8.5 and the related definitions shall require the consent of the Independent Manager. No waiver of any breach shall be deemed to be a waiver of any other or subsequent breach.
SECTION 8.6. SEVERABILITY. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Furthermore, in lieu of any such invalid, illegal or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.
SECTION 8.7. FURTHER ASSURANCES. The Member shall execute such deeds, assignments, endorsements, evidences of Transfer and other instruments and documents and shall give such further assurances as shall be necessary to perform its obligations hereunder.
SECTION 8.8. GOVERNING LAW. This Agreement shall be governed by and be construed in accordance with the laws of the State of Iowa.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
SECTION 8.10. WAIVER OF PARTITION. Each Member hereby waives its right to bring an action for partition of any of the property owned by the Company.
SECTION 8.11. CONFLICTS. To the extent that any provision contained herein is in conflict or inconsistent with any provision contained in the Articles, the Articles shall control.
IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as of the day and date first set forth above.
CALENERGY COMPANY, INC.
Its Sole Member
By: /s/ Steven A. McArthur
-------------------------------------
Name: Steven A. McArthur
Title: Executive Vice President
and General Counsel
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MIDAMERICAN FUNDING, LLC
and
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
INDENTURE
Dated as of March 11, 1999
Debt Securities
TABLE OF CONTENTS
RECITALS OF THE COMPANY 1
ARTICLE I- DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION 1
SECTION 101. Definitions 1
Act 2
Affiliate 2
Applicable Procedures 2
Auditors 2
Authenticating Agent 2
Board of Directors 3
Board Resolution 3
Business Day 3
CalEnergy 3
Capitalized Lease Obligations 3
Cedelbank 3
Collateral 3
Commission 3
Company 3
Company Request or Company Order 3
Consolidated Current Liabilities 4
Consolidated Debt 4
Consolidated EBITDA 4
Consolidated Interest Expense 4
Consolidated Net Operating Income 5
Consolidated Net Tangible Assets 5
Corporate Trust Office 6
corporation 6
Covenant Defeasance 6
Currency, Interest Rate or Commodity Agreements 6
DCR 6
default 6
Defaulted Interest 6
Defeasance 6
Definitive Security 6
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Depositary 6
Discharged 7
Distribution 7
Dollar or $ 7
DTC 7
Effective Date 7
Escrow Agreement 7
Euroclear 7
Event of Default 7
Exchange Act 8
Exchange Securities 8
Excluded Subsidiary 8
Existing Rating 8
Expiration Date 8
GAAP 8
Global Security 8
Group 8
Holder 9
Holding Period 9
Incur 9
Indebtedness 9
Indebtedness For Borrowed Money 9
Indenture 10
Indirect Participant 10
Initial Principal Amount 10
Initial Securities 10
interest 10
Interest Coverage Ratio 10
Interest Payment Date 11
Investments 11
Leverage Ratio 11
Lien 11
Material Adverse Effect 11
Maturity 11
MAVH Inc. Collateral 11
MAVH Inc. Pledged Shares 11
Measurement Date 11
MHC 12
MHC Inc. Collateral 12
MHC Inc. Pledged Shares 12
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MidAmerican Energy 12
MidAmerican Group 12
MidAmerican Merger 12
MidAmerican Merger Agreement 12
Moody's 12
Notice of Default 12
Obligations 12
Officers' Certificate 12
Opinion of Counsel 12
Optional Definitive Security Request 13
Original Issue Discount Security 13
Outstanding 13
Participant 14
Paying Agent 14
Permanent Global Security 14
Permitted Liens 14
Person 15
Place of Payment 15
Pledged Securities 15
Pledged Shares 15
Predecessor Security 15
Principal Amount 15
Private Exchange 15
Private Exchange Securities 15
Project Documents 15
Project Finance Debt 15
QIB 17
Rating 17
Rating Agency 17
Rating Event Date 17
Ratings Downgrade 17
Redemption Date 17
Redemption Price 17
Reference Securities 17
Registered Exchange Offer 17
Registered Security 17
Registration Rights Agreement 18
Regular Record Date 18
Regulation S 18
Regulation S Global Security 18
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Regulation S Security 18
Relevant Date 18
Responsible Officer 18
Restricted Definitive Securities 18
Restricted Period 18
Restricted Securities 18
Rule 144 19
Rule 144A 19
Rule 144A Global Security 19
Rule 144A Security 19
S&P 19
Securities 19
Securities Act 19
Security Register and Security Exchange Agent/Registrar 19
Shelf Registration Statement 19
Significant Subsidiary 19
Special Record Date 19
Stated Maturity 20
Subsidiary 20
Temporary Cash Investments 20
Total Capital 20
Transactions 21
Transfer Agent 21
Trust Indenture Act 21
Trust Preferred Securities 21
Trustee 21
United States and U.S. 21
U.S. Government Obligation 21
Unrestricted Security 22
SECTION 102. Certificates and Opinions 22
SECTION 103. Form of Documents Delivered to Trustee 22
SECTION 104. Acts of Holders; Record Dates 23
SECTION 105. Notices, Etc., to Trustee and Company 26
SECTION 106. Notice to Holder; Waiver 27
SECTION 107. Effect of Headings and Table of Contents 27
SECTION 108. Successors and Assigns 27
SECTION 109. Separability Clause 28
SECTION 110. Benefits of Indenture 28
SECTION 111. Governing Law 28
SECTION 112. Legal Holidays 28
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SECTION 113. Incorporation by Reference of Trust Indenture Act 28
ARTICLE II-SECURITY FORMS 29
SECTION 201. Forms Generally 29
SECTION 202. (a) Form of Face of Initial Security 31
SECTION 202. (b) Form of Reverse of Initial Security 39
SECTION 203. (a) Form of Face of Exchange Security 49
SECTION 203. (b) Form of Reverse of Exchange Security 54
SECTION 204. Form of Trustee's Certificate of Authentication 62
SECTION 205. Form of Trustee's Certificate of Authentication by an
Authenticating Agent 62
ARTICLE III-THE SECURITIES 64
SECTION 301. Amount Unlimited; Issuable in Series 64
SECTION 302. Denominations 67
SECTION 303. Execution, Authentication, Delivery and Dating 68
SECTION 304. Temporary Securities 69
SECTION 305. Registrar and Paying Agent; Registration, Registration
of Transfer and Exchange 70
SECTION 306. Restricted Securities 72
(a) Transfer and Exchange. 72
(b) Removal of Transfer Restrictions. 73
SECTION 307. Global Securities 74
(a) Form and Legend. 74
(b) Transfer and Exchange. 74
(c) Beneficial Interests. 76
(d) Special Provisions Regarding Transfer of
Beneficial Interests in a Regulation S
Global Security. 77
(e) Special Provisions Regarding Transfer of
Beneficial Interests in a Rule 144A Global
Security. 79
(f) Special Provisions Regarding Transfer of
Restricted Definitive Securities. 81
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities 84
SECTION 309. Payment of Interest; Interest Rights Reserved 85
SECTION 310. Persons Deemed Owners 87
SECTION 311. Cancellation 87
SECTION 312. Computation of Interest 88
SECTION 313. Certification Form 88
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SECTION 314. CUSIP and ISIN Numbers. 103
ARTICLE IV-SATISFACTION, DISCHARGE AND DEFEASANCE 104
SECTION 401. Satisfaction and Discharge of Indenture 104
SECTION 402. Defeasance, Discharge and Covenant Defeasance 105
(a) Defeasance and Discharge of a Series
of Securities. 105
(b) Covenant Defeasance 106
(c) Conditions to Defeasance or Covenant Defeasance 106
SECTION 403. Application of Trust Money 108
SECTION 404. Reinstatement 109
ARTICLE V-REMEDIES 110
SECTION 501. Events of Default 110
SECTION 502. Acceleration of Maturity; Rescission and Annulment 113
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee 114
SECTION 504. Trustee May File Proofs of Claim 115
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities 116
SECTION 506. Application of Money Collected 116
SECTION 507. Limitation on Suits 117
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest 118
SECTION 509. Restoration of Rights and Remedies 118
SECTION 510. Rights and Remedies Cumulative 118
SECTION 511. Delay or Omission Not Waiver 119
SECTION 512. Control by Holders 119
SECTION 513. Waiver of Past Defaults 119
SECTION 514. Undertaking for Costs 120
ARTICLE VI-THE TRUSTEE 120
SECTION 601. Certain Duties and Responsibilities 120
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SECTION 602. Notice of Defaults 122
SECTION 603. Certain Rights of Trustee 122
SECTION 604. Not Responsible for Recitals or Issuance of Securities 124
SECTION 605. May Hold Securities 124
SECTION 606. Money Held in Trust 124
SECTION 607. Compensation and Reimbursement 124
SECTION 608. Disqualification; Conflicting Interests 125
SECTION 609. Corporate Trustee Required; Eligibility 125
SECTION 610. Resignation and Removal; Appointment of
Successor Trustee 126
SECTION 611. Acceptance of Appointment by Successor 128
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business 129
SECTION 613. Preferential Collecting of Claims Against Company 129
SECTION 614. Authenticating Agents 134
ARTICLE VII-HOLDERS' LISTS AND REPORTS BY TRUSTEE
AND COMPANY 136
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders 136
SECTION 702. Preservation of Information; Communications
to Holders 136
SECTION 703. Reports by Trustee 136
SECTION 704. Reports by Company 138
ARTICLE VIII-CONSOLIDATION, MERGER, CONVEYANCE,
SALE OR LEASE 138
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms 138
SECTION 802. Successor Corporation to be Substituted 139
ARTICLE IX-SUPPLEMENTAL INDENTURES 139
SECTION 901. Supplemental Indenture without Consent of Holders 139
SECTION 902. Supplemental Indentures with Consent of Holders 141
SECTION 903. Execution of Supplemental Indentures 142
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SECTION 904. Effect of Supplemental Indentures 143
SECTION 905. Conformity with Trust Indenture Act 143
SECTION 906. Reference in Securities to Supplemental Indentures 143
ARTICLE X-COVENANTS 144
SECTION 1001. Payment of Principal, Premium, if any, and Interest 144
SECTION 1002. Maintenance of Office or Agency 144
SECTION 1003. Money for Securities Payments to Be Held in Trust 145
SECTION 1004. Limitation on Liens 146
SECTION 1005. Limitation on Distributions 150
SECTION 1006. Limitation on Indebtedness of the Company 151
SECTION 1007. Limitation on Indebtedness of MHC 151
SECTION 1008. Limitation on Business Activities 152
SECTION 1009. Operational Covenants 152
SECTION 1010. Change in Operational Covenants When CalEnergy
Securities Rated Investment Grade and Certain
CalEnergy Securities Have Been Redeemed 153
SECTION 1011. Statement by Officers as to Default 154
SECTION 1012. Modification or Waiver of Certain Covenants 154
SECTION 1013. Further Assurances 155
SECTION 1014. Copies Available to Holders 155
SECTION 1015. Reports by Company 155
ARTICLE XI-REDEMPTION OF SECURITIES 156
SECTION 1101. Applicability of Article 156
SECTION 1102. Election to Redeem; Notice to Trustee 156
SECTION 1103. Selection by Trustee of Securities to Be Redeemed 157
SECTION 1104. Notice of Redemption 157
SECTION 1105. Deposit of Redemption Price 158
SECTION 1106. Securities Payable on Redemption Date 158
SECTION 1107. Securities Redeemed in Part 159
ARTICLE XII-SINKING FUNDS 160
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SECTION 1201. Applicability of Article 160
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities 160
SECTION 1203. Redemption of Securities for Sinking Fund 160
ARTICLE XIII-MEETINGS OF HOLDERS OF SECURITIES 162
SECTION 1301. Purposes of Meeting 162
SECTION 1302. Place of Meetings 162
SECTION 1303. Voting at Meetings 163
SECTION 1304. Voting Rights, Conducts and Adjournment 163
SECTION 1305. Revocation of Consent by Holders 164
ARTICLE XIV-SECURITY AND PLEDGE OF COLLATERAL 164
SECTION 1401. Grant of Security Interest 164
SECTION 1402. Delivery of Collateral 166
SECTION 1403. Representations and Warranties 166
SECTION 1404. Further Assurances 167
SECTION 1405. Dividends; Voting Rights 168
SECTION 1406. Trustee Appointed Attorney-in-Fact 169
SECTION 1407. Trustee May Perform 169
SECTION 1408. Trustee's Duties 169
SECTION 1409. Remedies upon Event of Default 169
SECTION 1410. Application of Proceeds 170
SECTION 1411. Continuing Lien 170
SECTION 1412. Certificates and Opinions 171
SECTION 1413. Additional Agreements 171
ARTICLE XV-MISCELLANEOUS 171
SECTION 1501. Consent to Jurisdiction; Appointment of Agent to
Accept Service of Process 171
SECTION 1502. Counterparts 174
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CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
--------------- ----------
ss.310 (a)(1)........................................................609
(a)(2)........................................................609
(a)(3).............................................Not Applicable
(a)(4).............................................Not Applicable
(b)......................................................608, 610
ss.311 (a)...........................................................613
(b)...........................................................613
(c)................................................Not Applicable
ss.312 (a)......................................................701, 702
(b)...........................................................702
(c)...........................................................702
ss.313 (a)...........................................................703
(b)...........................................................703
(c)...........................................................703
(d)...........................................................703
ss.314 (a)...........................................................704
(a)(4)...................................................101, 704
(b)................................................Not Applicable
(c)(1)........................................................102
(c)(2)........................................................102
(c)(3).............................................Not Applicable
(d)................................................Not Applicable
(e)...........................................................102
(f)................................................Not Applicable
ss.315 (a)...........................................................601
(b)...........................................................602
(c)...........................................................601
(d)...........................................................601
(e)...........................................................514
ss.316 (a)...........................................101 ("Outstanding")
(a)(1)(A)................................................502, 512
(a)(1)(B).....................................................513
(a)(2).............................................Not Applicable
(b)...........................................................508
(c)...........................................................104
ss.317 (a)(1)........................................................503
(a)(2)........................................................504
(b)..........................................................1003
ss.318 (a)...........................................................113
(b)................................................Not Applicable
(c)...........................................................113
-------------------
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.
INDENTURE, dated as of March 11, 1999, between MIDAMERICAN FUNDING, LLC, an Iowa limited liability company (herein called the "Company"), having its principal office at 302 South Thirty-Sixth Street, Suite 400, Omaha, Nebraska 68131, and IBJ Whitehall Bank & Trust Company, a New York banking corporation as trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of certain of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as provided in this Indenture.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE
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 respective 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 to the extent applicable;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States and, except as otherwise herein expressly provided, the term "generally accepted accounting principles," with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation; 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 Article Six, are defined in that Article.
"Act ", when used with respect to any Holder, has the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling", and "controlled" have meanings correlative to the foregoing.
"Applicable Procedures" means the rules and procedures of DTC and, as applicable, Euroclear and Cedel, in each case pertaining to beneficial interests in a Global Security.
"Auditors" means the auditors for the time being of the Company or, in the event of their being replaced by the Company or being unable or unwilling to carry out any action requested of them pursuant to the terms of the Indenture, such other firm of internationally recognized accountants as the Company may select for the purpose.
"Authenticating Agent" means any Person authorized to authenticate and deliver Securities on behalf of the Trustee pursuant to Section 614.
"Board of Directors" means either the board of directors of the Company or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution of the Company certified by the Secretary or any Assistant Secretary or by other authorized designee of the Board of Directors to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
"Business Day ", when used with respect to the Place of Payment of the Securities of any series, means each day which is not a Saturday, a Sunday or a day on which banking institutions in any Place of Payment for the Securities of that series are authorized or obligated by law to remain closed.
"CalEnergy" means CalEnergy Company, Inc., a Delaware corporation.
"Capitalized Lease Obligations" means all lease obligations of the Company and its Subsidiaries which, under GAAP, are or will be required to be capitalized, in each case taken at the amount thereof accounted for as indebtedness in conformity with such principles.
"Cedelbank" means Cedelbank, societe anonyme, or its successors.
"Collateral" has the meaning specified in Section 1401.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order signed in the name of the Company by the Chairman of the Board of Directors, the President or a Vice President of the Company and by the Treasurer, an Assistant Treasurer, Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.
"Consolidated Current Liabilities" means the consolidated current liabilities of the Company and its Subsidiaries but excluding the current portion of long term
Indebtedness which would otherwise be included therein, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Debt" means, at any time, the sum of the aggregate outstanding principal amount of all Indebtedness for Borrowed Money (including, without limitation, the principal component of Capitalized Lease Obligations, but excluding Currency, Interest Rate or Commodity Agreements and all Consolidated Current Liabilities and Project Finance Debt) of the Company and its Subsidiaries, as determined on a consolidated basis in conformity with GAAP.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of the Company's (i) Consolidated Net Operating Income, (ii)
Consolidated Interest Expense, (iii) income taxes and deferred taxes (other than
income taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation expense,
(v) amortization expense and (vi) all other non-cash items reducing Consolidated
Net Operating Income, less all non-cash items increasing Consolidated Net
Operating Income, all as determined on a consolidated basis in conformity with
GAAP; provided that, to the extent that the Company has any Subsidiary that is
not a wholly owned Subsidiary, Consolidated EBITDA shall be reduced by an amount
equal to the Consolidated Net Operating Income of such Subsidiary multiplied by
the quotient of (A) the number of shares of outstanding common stock of such
Subsidiary not owned on the last day of such period by the Company or any
Subsidiary of the Company divided by (B) the total number of shares of
outstanding common stock of such Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness for Borrowed Money (including amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; and all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financing) and the net costs associated with Interest Rate Agreements and all but the principal component of rentals in respect of Capitalized Lease Obligations, paid, accrued or scheduled to be paid or to be accrued by the Company and each of its Subsidiaries during such period, excluding, however, any amount of such interest of any Subsidiary of the Company if the net operating income (or loss) of such Subsidiary is excluded from the calculation of Consolidated Net Operating Income for such Subsidiary pursuant to clause (ii) of the definition thereof (but only in the same proportion as the net operating income (or loss) of such Subsidiary is excluded), less consolidated interest income, all as determined on a
consolidated basis in conformity with GAAP; provided that, to the extent that the Company has any Subsidiary that is not a wholly owned Subsidiary, Consolidated Interest Expense shall be reduced by an amount equal to such interest expense of such Subsidiary multiplied by the quotient of (A) the number of shares of outstanding common stock of such Subsidiary not owned on the last day of such period by the Company or any Subsidiary of the Company divided by (B) the total number of shares of outstanding common stock of such Subsidiary on the last day of such period.
"Consolidated Net Operating Income" means, for any period, the aggregate of the net operating income (or loss) of the Company and its Subsidiaries for such period, as determined on a consolidated basis in conformity with GAAP; provided that the following items shall be excluded from any calculation of Consolidated Net Operating Income (without duplication): (i) the net operating income (or loss) of any Person (other than a Subsidiary) in which any other person has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or another Subsidiary of the Company during such period; (ii) the net operating income (or loss) of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net operating income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation or license; and (iii) all extraordinary gains and extraordinary losses.
"Consolidated Net Tangible Assets" means at any time, the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the most recently available consolidated balance sheet of the Company and its Subsidiaries (provided that such balance sheet is of a date not more than 60 days prior to a Measurement Date) prepared in accordance with GAAP, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the Consolidated Current Liabilities of the Company appearing on such balance sheet.
"Corporate Trust Office" means the principal office of the Trustee in The City of New York, at which at any particular time its corporate trust business shall be administered, which at the date hereof is located at One State Street, News York, New York 10004.
"corporation" includes corporations, associations, companies and business trusts.
"Covenant Defeasance" has the meaning specified in Section 402(b).
"Currency, Interest Rate or Commodity Agreements" means an agreement or transaction involving any currency, interest rate or energy price or volumetric swap, cap or collar arrangement, forward exchange transaction, option, warrant, forward rate agreement, futures contract or other derivative instrument of any kind for the hedging or management of foreign exchange, interest rate or energy price or volumetric risks; it being understood, for purposes of this definition, that the term "energy" shall include, without limitation, coal, gas, oil and electricity.
"DCR" means Duff & Phelps Credit Rating Co. and any subsidiary or successor thereof.
"default" means, for purposes of Section 601 hereof, an "Event of Default" as specified in Section 501 hereof. For purposes of Section 310(b) of the Trust Indenture Act (if applicable to the Securities of any series), "default" shall mean an "Event of Default" as specified in Section 501 hereof, but exclusive of any period of grace or requirement of notice.
"Defaulted Interest" has the meaning specified in Section 309.
"Defeasance" has the meaning specified in Section 402(a).
"Definitive Security" means a physical security in fully registered form.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 301, and, if so provided pursuant to Section 301 with respect to the
Securities of a series, any successor to such Person. If at any time there is
more than one such Person, "Depositary" shall mean, with respect to any series
of Securities, the qualifying entity which has been appointed with respect to
the Securities of that series.
"Discharged" means, with respect to the Securities of any series, the discharge of the entire indebtedness represented by, and obligations of the Company under, the Securities of such series and the satisfaction of all the obligations of the Company under this Indenture relating to the Securities of such series, except (A) the rights of Holders of the Securities of such series to receive, from the trust fund described in Section 403 hereof, payment of the principal of and interest and premium,
if any, on the Securities of such series when such payments are due, (B) the
Company's obligations with respect to the Securities of such series with respect
to registration, transfer, exchange and maintenance of a Place of Payment and
(C) the rights, powers, trusts, duties, protections and immunities of the
Trustee under this Indenture.
"Distribution" means any dividend, distribution or payment (including by way of redemption, repurchase, retirement, return or repayment) in respect of shares of capital stock of the Company.
"Dollar" 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 debt.
"DTC" means The Depository Trust Company or its successors, or any successor clearing agency which is registered as such under the Exchange Act and approved by the Company.
"Effective Date" means the effective date of the MidAmerican Merger, as provided for in the certificate(s) of merger that is filed and accepted by the appropriate state authorities.
"Escrow Agreement" means the Escrow Agreement between the Company and IBJ Whitehall Bank &Trust Company, as Escrow Agent, dated as of March 11, 1999.
"Euroclear" means the Euroclear System or its successors.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Securities" means any Securities to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to any Registration Rights Agreement.
"Excluded Subsidiary" means any Subsidiary of the Company
(i) in respect of which neither the Company nor any Subsidiary of the Company (other than another Excluded Subsidiary) has undertaken
any legal obligation to give any guarantee for the benefit of the holders of any Indebtedness for Borrowed Money (other than to another member of the Group) other than in respect of any statutory or regulatory obligation and the Subsidiaries of which are all Excluded Subsidiaries; and
(ii) which has been designated as such by the Company by written notice to the Trustee; provided that the Company may give written notice to the Trustee at any time that any Excluded Subsidiary is no longer an Excluded Subsidiary whereupon it shall cease to be an Excluded Subsidiary.
"Existing Rating" means, for any Rating Agency on any date of determination, the Rating assigned to the Securities of any series by such Rating Agency as of such date.
"Expiration Date" has the meaning specified in Section 104.
"GAAP" means generally accepted accounting principles in the United States, as in effect from time to time.
"Global Security" means a Registered Security which evidences all or part of a series of Securities and which is issued to the Depositary for such series or its nominee.
"Group" means the Company and its Subsidiaries and "member of the Group" shall be construed accordingly.
"Holder ", "holder of Securities", "Securityholder" and other similar terms mean the Person in whose name a Security is registered in the Security Register.
"Holding Period" has the meaning specified in Section 201.
"Incur" means, with respect to any Indebtedness, to incur, create, issue, assume or guarantee such Indebtedness.
"Indebtedness" means, with respect to the Company or any of its Subsidiaries at any date of determination (without duplication), (i) all Indebtedness for Borrowed Money, (ii) all obligations in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (iii) all obli-
gations to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except trade payables, (iv) all Capitalized Lease Obligations,
(v) all indebtedness of other persons secured by a mortgage, charge, lien,
pledge or other security interest on any asset of the Company or any of its
Subsidiaries, whether or not such indebtedness is assumed; provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of the secured
indebtedness, (vi) all indebtedness of other persons of the types specified in
the preceding clauses (i) through (v), to the extent such indebtedness is
guaranteed by the Company or any of its Subsidiaries, and (vii) to the extent
not otherwise included in this definition, obligations under Currency, Interest
Rate or Commodity Agreements. The amount of Indebtedness at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, upon the occurrence of the contingency giving rise to the
obligation, the maximum liability of any contingent obligations of the types
specified in the preceding clauses (i) through (vii) at such date; provided that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Indebtedness For Borrowed Money" means any indebtedness (whether
being principal, premium, interest or other amounts) for (i) money borrowed,
(ii) payment obligations under or in respect of any trade acceptance or trade
acceptance credit, or (iii) any notes, bonds, debentures, debenture stock, loan
stock or other debt securities offered, issued or distributed whether by way of
public offer, private placement, acquisition consideration or otherwise and
whether issued for cash or in whole or in part for a consideration other than
cash; provided, however, in each case, that such term shall exclude (w) any
indebtedness relating to any accounts receivable securitizations, (x) any
Indebtedness of the type permitted to be secured by Liens pursuant to Section
1004(m) herein, (y) any Trust Preferred Securities which are issued and
outstanding on the date of original issue of the Securities or any extension,
renewal, or replacement (or successive extensions, renewals or replacements), as
a whole or in part, of any such existing Trust Preferred Securities, for amounts
not exceeding the principal amount or liquidation preference of the Trust
Preferred Securities so extended, renewed or replaced, and (z) any Trust
Preferred Securities issued in replacement or in connection with a refinancing
of any preferred securities or preferred stock which is issued and outstanding
on the date or original issue of the Securities, for amounts not exceeding the
liquidation preference of the preferred securities or preferred stock so
replaced or refinanced.
"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 and shall include the terms of particular series of Securities established as contemplated by Section 301.
"Indirect Participant" means a Person that holds a beneficial interest in a Global Security through a person that has an account with DTC.
"Initial Principal Amount" has the meaning specified in Section 202.
"Initial Securities" means Securities of any series issued under this Indenture which are offered and sold pursuant to an exemption from registration under the Securities Act.
"interest ", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity at the rate prescribed in such Original Issue Discount Security.
"Interest Coverage Ratio" means, with respect to the Company on any Measurement Date, the ratio of (i) the aggregate amount of Consolidated EBITDA of the Company for the four fiscal quarters for which financial information in respect thereof is available immediately prior to such Measurement Date to (ii) the aggregate Consolidated Interest Expense during such four fiscal quarters.
"Interest Payment Date ", when used with respect to any installment or interest in respect of a Security, means the Stated Maturity of such installment of interest.
"Investments" in any Person means any loan or advance to, any net payment on a guarantee of, any acquisition of capital stock, equity interest, obligation or other security of, or capital contribution or other investment in, such Person. Investments exclude advances to customers and suppliers and similar payments in the ordinary course of business.
"Leverage Ratio" means the ratio of Consolidated Debt to Total Capital, calculated on the basis of the most recently available consolidated balance sheet of the Company and its consolidated Subsidiaries (provided that such balance sheet is as of a date not more than 60 days prior to a Measurement Date) prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, security interest or other encumbrance; provided, however, that the term "Lien" shall not mean any easements, rights-of-way, restrictions and other similar encumbrances and encumbrances consisting of zoning restrictions, leases, subleases, restrictions on the use of property or defects in the title thereto.
"Material Adverse Effect" means a material adverse effect on the financial condition of the Company and its Subsidiaries, taken as a whole.
"Maturity ", when used with respect to any Security or any installment of principal thereof, means the date on which the principal of such Security or installment of principal, as applicable, becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"MAVH Inc. Collateral" has the meaning specified in Section 1401(a).
"MAVH Inc. Pledged Shares" has the meaning specified in Section 1401(a).
"Measurement Date" means the record date for any Distribution.
"MHC" means MidAmerican Energy Holdings Company (to be renamed "MHC Inc." upon consummation of the MidAmerican Merger), an Iowa corporation, and its successors.
"MHC Inc. Collateral" has the meaning specified in Section 1401(b).
"MHC Inc. Pledged Shares" has the meaning specified in Section 1401(b).
"MidAmerican Energy" means MidAmerican Energy Company, an Iowa corporation, and its successors.
"MidAmerican Group" has the meaning specified in Section 1008(c).
"MidAmerican Merger" means the consummation of the transactions contemplated by the MidAmerican Merger Agreement, as a result of which MHC becomes a direct wholly-owned Subsidiary of the Company.
"MidAmerican Merger Agreement" means the Agreement and Plan of Merger dated as of August 11, 1998 among CalEnergy, Maverick Reincorporation Sub, Inc., MHC and MAVH Inc., as the same may be amended from time to time.
"Moody's" means Moody's Investors Service, Inc., and any Subsidiary or successor thereof.
"Notice of Default" means a written notice of the kind specified in
Section 501(4).
"Obligations" has the meaning specifying in Section 1401.
"Officers' Certificate" means a certificate signed by the Chairman of the Board of Directors, the President or any Vice President of the Company and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, and delivered to the Trustee. One of the Officers signing an Officers' Certificate delivered pursuant to Section 1011 shall be the prinicpal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who, unless otherwise specified herein or required by the Trust Indenture Act, may be an employee of or regular counsel for the Company, or may be other counsel to the Company.
"Optional Definitive Security Request" has the meaning specified in
Section 307(b)(ii).
"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 the Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption money or U.S. Governmental Obligations in the necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 310 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, (a) the principal amount of an Original Issue Discount Security that shall be deemed to be outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, (b) if the principal amount of a Security payable at Maturity is to be determined by reference to an index or indices, the principal amount of such Security that shall be deemed to be Outstanding shall be the face amount thereof, (c) if, as of such date, the principal amount payable at the Stated Maturity of a Security is not determinable, the principal amount of such Security which shall be deemed to be Outstanding shall be the amount as established as contemplated by Section 301, (d) the principal amount of a Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner established as contemplated by Section 301, of the principal amount of such Security (or, in the case of a Security described in clause (a) or (b) above, of the amount determined as provided in such clause), and (e) Securities owned by the Company or any other obligor upon the Securities or any Subsidiary of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned as described in (e) above which have been pledged in good faith may be regarded as Outstanding if the pledgee certifies to 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 Subsidiary of the Company or of such other obligor.
"Participant" means a Person that has an account with DTC.
"Paying Agent" means IBJ Whitehall Bank & Trust Company until a successor Paying Agent shall have become such pursuant to the applicable provisions of this Indenture and, thereafter, "Paying Agent" shall mean such successor Paying Agent.
"Permanent Global Security" means a Global Security that is, at the time of the initial issuance of the related series of Securities, issued in permanent form.
"Permitted Liens" means liens permitted by clauses (a) through (m) under Section 1004.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Place of Payment ," when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest, if any, on the Securities of that series are payable as specified in or as contemplated by Section 301.
"Pledged Securities" has the meaning specified in Section 1413.
"Pledged Shares" has the meaning specified in Section 1401.
"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 purpose of this definition, any Security authenticated and delivered under Section 308 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen security.
"Principal Amount" has the meaning specified in Section 202.
"Private Exchange" means the offer by the Company, pursuant to any Registration Rights Agreement, to the initial purchaser(s) of any series of Securities to issue and deliver to such initial purchaser(s), in exchange for the Initial Securities held by such initial purchaser(s) as part of the initial distribution, a like aggregate principal amount of Private Exchange Securities.
"Private Exchange Securities" means Securities issued pursuant to this Indenture in connection with a Private Exchange effected pursuant to any Registration Rights Agreement.
"Project Documents" means all material energy sales and power contracts, steam supply agreements, operation and maintenance agreements, fuel supply agreements and transmission agreements to which the Company or any Significant Subsidiary is a party and all material utility licenses governing the business of the Company or any Significant Subsidiary.
"Project Finance Debt" means:
(i) any Indebtedness to finance or refinance the ownership, acquisition, development, design, engineering, procurement, construction, servicing, management and/or operation of any project or asset which is incurred by an Excluded Subsidiary;
(ii) any Indebtedness to finance or refinance the ownership, acquisition, development, design, engineering, procurement, construction, servicing, management and/or operation of any project or asset in respect of which the person or persons to whom any such Indebtedness is or may be owed by the relevant borrower (whether or not a member of the Group) has or have no recourse whatsoever to any member of the Group (other than an Excluded Subsidiary) for the repayment thereof other than:
(a) recourse to such member of the Group for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from, or ownership interests or other investments in, such project or asset; and/or
(b) recourse to such member of the Group for the purpose only of enabling amounts to be claimed in respect of such Indebtedness in an enforcement of any encumbrance given by such member of the Group over such project or asset or the income, cash flow or other proceeds deriving therefrom (or given by any shareholder or the like, or other investor in the borrower or in the owner of such project or asset over its shares or the like in the capital of, or other investment in, the borrower or in the owner of such
project or asset) to secure such Indebtedness, provided that the extent of such recourse to such member of the Group is limited solely to the amount of any recoveries made on any such enforcement; and/or
(c) recourse to such borrower generally, or directly or indirectly to a member of the Group, under any form of assurance, indemnity, undertaking or support, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not being a payment obligation or an obligation to procure payment by another or an indemnity in respect thereof or any obligation to comply or to procure compliance by another with any financial ratios or other tests of financial condition) by the person against which such recourse is available; and
(iii) any Indebtedness which is issued by MidAmerican Realty Services Company other than any such Indebtedness incurred after the Effective Date which is guaranteed by the Company, MHC or MidAmerican Energy.
"QIB" means a Qualified Institutional Buyer, as defined in Rule 144A.
"Rating" means, for each Rating Agency, the credit rating assigned to the Securities of any series by such Rating Agency.
"Rating Agency" means (i) S&P, (ii) Moody's and (iii) DCR, any of their respective Subsidiaries or successors, or, in any case, if such person ceases to rate any series of Securities for reasons outside the control of the Company, any other "nationally recognized statistical rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act) selected by the Company as a replacement Rating Agency.
"Rating Event Date" has the meaning specified in Section 1010(a).
"Ratings Downgrade" means a lowering by any of the Rating Agencies of the Existing Rating assigned to all series of the Securities by such Rating Agency.
"Redemption Date" means any date on which the Company redeems all or any portion of any Security in accordance with the terms of this Indenture.
"Redemption Price ," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture, exclusive of accrued and unpaid interest.
"Reference Securities" has the meaning specified in Section 1010(a).
"Registered Exchange Offer" means an offer by the Company, pursuant to any Registration Rights Agreement, to certain Holders of a series of Initial Securities, to issue and deliver to such Holders, in exchange for such Initial Securities, a like aggregate principal amount of Exchange Securities which have been registered under the Securities Act.
"Registered Security" means any Security that is payable to a registered owner or registered assigns thereof as registered in the Security Register.
"Registration Rights Agreement" means any Registration Rights Agreement which may from time to time be entered into between the Company and the initial purchaser(s) of any series of Initial Securities issued and sold under this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.
"Regulation S" means Regulation S promulgated under the Securities Act, or any successor provision thereto and as may be amended from time to time.
"Regulation S Global Security" has the meaning specified in Section 201.
"Regulation S Security" means Securities of any series offered and sold in their initial distribution to non-US Persons in offshore transactions in reliance on Regulation S, until such time as the Restricted Period shall have terminated.
"Relevant Date" means, for any payment made with respect to the Securities of any series, the later of (i) the date on which such payment first becomes due and (ii) if the full amount payable has not been received in The City of New York by the Depositary or by the Trustee on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Holders in accordance with this Indenture.
"Responsible Officer ," when used with respect to the Trustee, means any officer within the Corporate Trust Office, including any secretary, vice president, managing director, assistant vice president, assistant secretary (if any), assistant treasurer or any other officer 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 his knowledge of and familiarity with the particular subject.
"Restricted Definitive Securities" means Definitive Securities that are Restricted Securities.
"Restricted Period" has the meaning specified in Section 201.
"Restricted Securities" means Securities required to bear a legend containing Securities Act transfer restrictions, in substantially the form specified in Section 202.
"Rule 144" means Rule 144 promulgated under the Securities Act, or any successor provision thereto and as may be amended from time to time.
"Rule 144A" means Rule 144A promulgated under the Securities Act, or any successor provision thereto and as may be amended from time to time.
"Rule 144A Global Security" has the meaning specified in Section 201.
"Rule 144A Security" means Securities of any series offered and sold in their initial resale distribution to QIBs in reliance on Rule 144A, until such time as the Holding Period shall have terminated.
"S&P" means Standard & Poor's Rating Group, and any, Subsidiary or successor thereof.
"Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Security Register" and "Security Exchange Agent/Registrar" have the respective meanings specified in Section 305.
"Shelf Registration Statement" means any registration statement filed with the Commission by the Company, in connection with the offer and sale of any series of Initial Securities or Private Exchange Securities pursuant to any Registration Rights Agreement.
"Significant Subsidiary" means, at any particular time, any Subsidiary of the Company whose gross assets or gross revenues (having regard to the Company's direct and/or indirect beneficial interest in the shares, or the like, of that Subsidiary) represent at least 25% of the consolidated gross assets or, as the case may be, consolidated gross revenues of the Company.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 311.
"Stated Maturity ", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association, partnership or other business entity of which 50% or more of the total voting power of shares of capital stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned, directly or indirectly, by (i) such person, (ii) such person and one or more Subsidiaries of such person or (iii) one or more Subsidiaries of such person.
"Temporary Cash Investments" means any of the following: (i) any investment in direct obligations of the United States or any agency thereof or obligations guaranteed by the United States or any agency thereof, in each case, maturing within 360 days of the date of acquisition thereof, (ii) investment in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company (including the Trustee) which is organized under the laws of the United States, any state thereof or any foreign country recognized by the United States having capital, surplus and undivided profits aggregating in excess of $250,000,000 and whose debt is rated "A" (or such similar equivalent rating) or higher by at least one Rating Agency or any money-market fund sponsored by any registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a nationally recog-
nized broker-dealer, (iv) investments in commercial paper, maturing not more
than 90 days after the date of acquisition, issued by a corporation (other than
an affiliate of the Company) organized and in existence under the laws of the
United States or any foreign country recognized by the United States with a
rating at the time as of which any investment therein is made of "P-2" (or
higher) according to Moody's or "A-2" (or higher) according to S&P and DCR and
(v) securities with maturities of six months or less from the date of
acquisition backed by standby or direct pay letters of credit issued by any bank
satisfying the requirements of clause (ii) above.
"Total Capital" of any Person means, as of any date, the sum (without duplication) of (a) Indebtedness for Borrowed Money, (b) consolidated stockholder's equity of such Person and its consolidated Subsidiaries (excluding any preferred stock included in stockholder's equity) and (c) preferred stock and Trust Preferred Securities of such Person and its consolidated Subsidiaries.
"Transactions" means the transactions contemplated by the MidAmerican Merger Agreement, the Escrow Agreement, Registration Rights Agreement and this Indenture.
"Transfer Agent" means any Person authorized by the Company to effectuate the exchange or transfer of any Security on behalf of the Company hereunder.
"Trust Indenture Act" means the U.S. Trust Indenture Act of 1939, as amended.
"Trust Preferred Securities" shall mean (without duplication) any trust preferred securities or related debt or guaranties.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.
"United States" and "U.S." means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.
"U.S. Government Obligation" means any (a) security which is (i) a direct
obligation of the United States for the payment of which the full faith and
credit of the United States is pledged or (ii) an obligation of a person
controlled or supervised by and acting as an agency of instrumentality of the
United States the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States, which, in the case of clause (i) or
(ii), is not callable or redeemable at the option of the issuer thereof, and (b)
depositary receipt issued by a bank (as defined in the Securities Act) as
custodian with respect to any security specified in clause (a) above and held by
such bank for the account of the holder of such depositary receipt or with
respect to any specific payment of principal of or interest on any such security
held by any such bank, 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 U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Unrestricted Security" has the meaning specified in Section 201.
SECTION 102. Certificates and Opinions
Except as otherwise expressly provided by this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee (i) an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the Officers' Certificate required by Section 1011) shall include:
(1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2) a 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 covenant or condition 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 with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or instrument required to be given or executed by a Person which is not a natural person may be given or executed on behalf of such Person by any duly authorized designee of such Person.
Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders of any
series of Securities may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by each such Holder in Person or by an
agent duly appointed in writing, and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section 104.
Without limiting the generality of the foregoing, unless otherwise established
in or pursuant to a Board Resolution or set forth or determined in an Officers'
Certificate, or established in one or more indentures supplemental hereto, in
each case pursuant to Section 301, (i) a Holder of any Security may make, give
or take, by a proxy or proxies duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided in
this Indenture to be made, given or taken by the Holder of any such Security,
(ii) a Holder of any such Security, including a Depositary that is a Holder of a
Global Security, entitled hereunder to take any action hereunder with regard to
such Security may do so with regard to all or any part of the principal amount
of such Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of the principal
amount of such Security; and (iii) a Depositary that is a Holder of a Global
Security may provide its proxy or proxies to the beneficial owners of interest
in such Global Security through the Depositary's standing instructions and
customary practices.
(b) The fact and date of the execution by any Person of any such instrument, writing or proxy may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument, writing or proxy acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument, writing or proxy, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
(d) 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 or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) The Company may, in its discretion, by Board Resolution, set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, consent, waiver or Act provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series; provided that the Company shall have no obligation to set a record date; and provided further that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to any applicable Expiration Date (as defined below) by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect); provided, however, that no new record date may be established with the purpose or effect of rendering, and no other provision of this paragraph shall be construed to render, ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities entitled to join in the giving or making of
(i) any Notice of Default, (ii) any declaration of acceleration referred to in
Section 502, (iii) any request to institute proceedings referred to in Section
507(2) or (iv) any direction referred to in Section 512; provided that if the
Trustee does not set any record
date within ten days after first receiving any such notice, declaration, rescission and annulment, request or direction, as the case may be, then the record date shall be the close of business on the date on which the Trustee first receives any such notice, declaration, rescission and annulment, request or direction, as the case may be. If any record date is set by the Trustee pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to any applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect); provided, however, that no new record date may be established with the purpose or effect of rendering, and no other provision of this paragraph shall be construed to render, ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken based on such record date previously set. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section 104(e), the party hereto which sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other parties hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 106, on or prior to the earlier of (i) the existing Expiration Date and (ii) the proposed new Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 90th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.
SECTION 105. Notices, Etc., to Trustee and Company
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holder; Waiver
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each 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 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.
If, by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to give such notice by mail, then such notification as shall be made at the direction of the Company in a manner reasonably calculated, to the extent practicable under the circumstances, to provide prompt notice shall constitute a sufficient notification for every purpose hereunder.
Any notice required or permitted hereunder may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
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 shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause
In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto 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 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
SECTION 112. Legal Holidays
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of any Security established as contemplated by Section 301 hereof which specifically states that such provision shall apply in lieu of this Section)) payment of interest, if any, or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 113. Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture, as then supplemented.
"indenture trustee" or "institutional trustee" means the Trustee. "obligor" in the indenture securities means the Company and any other obligor in the indenture securities.
All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions.
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally
The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, a Board Resolution or one or more indentures supplemental hereto, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon (i) as may be required by law or to comply with the rules of (a) any securities exchange, (b) DTC or any other clearing agency registered as such under the Exchange Act or (c) Euroclear or Cedel; or (ii) as may, consistently herewith, be determined by the Officers executing such Securities, as evidenced by their execution thereof. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by an authorized Director or officer of the Company and delivered to the Trustee at or prior to the delivery of the Company Or-
der contemplated by Section 303 for the authentication and delivery of such Securities.
The Trustee's certificate of authentication shall be in substantially the form set forth in this Article.
The definitive Securities shall be printed, typewritten, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the Officers executing such Securities, as evidenced by their execution thereof.
Except as otherwise provided pursuant to Section 301, Initial Securities of any series offered and sold in their initial resale distribution to QIBs in reliance on Rule 144A shall initially be issued in the form of one or more Global Securities of such series in definitive, fully registered form, substantially in the form set forth in this Article, with such applicable legends as are provided for in Section 202. Such Global Securities shall be duly executed by the Company and authenticated by the Trustee as hereinafter provided, and deposited with the Depositary, which will hold such Global Securities for the benefit of DTC. Until such time as the Holding Period (as defined below) shall have terminated, each such Security shall be referred to as a "Rule 144A Global Security." The aggregate principal amount of any Rule 144A Global Security may be adjusted by endorsements to Schedule A on the reverse thereof in any situation where adjustment is permitted or required by this Indenture. Unless the Company determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed from a Rule 144A Security in accordance with the procedures set forth in Section 306(b) after such time as the applicable Holding Period shall have terminated, and each such Security shall thereafter be held as an "Unrestricted Security." As used herein, the term "Holding Period," with respect to Rule 144A Securities of any series, means the period referred to in Rule 144(k) or any successor provision thereto and as may be amended or revised from time to time, beginning from the later of (i) the original issue date of such Securities or (ii) the last date on which the Company or any affiliate of the Company was the beneficial owner of such Securities (or any predecessor thereof).
Except as otherwise provided pursuant to Section 301, Initial Securities of any series offered and sold in their initial distribution to non-US Persons in offshore transactions in reliance on Regulation S shall initially be issued in the form of one or more Global Securities of such series in definitive, fully registered form, substantially in the form set forth in this Article, with such applicable legends as are provided for in Section 202. Such Global Securities shall be duly executed by the Company and authenticated by the Trustee as herein provided, and deposited with the
Depositary, which will hold such Global Securities for the benefit of DTC, for
credit initially only to such accounts at Euroclear or Cedel as DTC's
Participants may direct. Until such time as the Restricted Period (as defined
below) shall have terminated, each such Global Security shall be referred to as
a "Regulation S Global Security." The aggregate principal amount of any
Regulation S Global Security may be adjusted by endorsements to Schedule A on
the reverse thereof in any situation where adjustment is permitted or required
by this Indenture. Unless the Company determines otherwise in accordance with
applicable law, the legend setting forth transfer restrictions shall be removed
from a Regulation S Security in accordance with the procedures set forth in
Section 306(b) after such time as the applicable Restricted Period shall have
terminated, and each such Security shall thereafter be held as an "Unrestricted
Security." As used herein, the term "Restricted Period," with respect to
Regulation S Securities of any series, means the period of 40 consecutive days
beginning on and including the later of (i) the date on which interests in such
Securities are offered to Persons other than distributors (as defined in
Regulation S) and (ii) the original issue date of such Securities. Except as
otherwise provided pursuant to Section 301, no Regulation S Global Security
shall be issued except as provided in this paragraph to evidence Securities
offered and sold in their initial distribution in reliance on Regulation S.
Except as otherwise provided pursuant to Section 306(b), Initial Securities of
any series offered and sold in their initial resale distribution to purchasers
who are institutional "accredited investors" as described in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act (each an "IAI") and who are not QIBs
shall be issued in the form of fully registered, definitive, physical
certificates, substantially in the form set forth in this Article, with such
applicable legends as are provided for in Section 202 hereto (such securities as
held by an IAI are herein referred to as "Restricted Definitive Securities").
Unless the Company determines otherwise in accordance with applicable law, the
legend setting forth transfer restrictions shall be removed from a Restricted
Definitive Security in accordance with the procedures set forth in Section
306(b) after such time as the applicable Holding Period shall have terminated,
and each such Security shall thereafter be held as an "Unrestricted Security."
As used herein, the term "Holding Period," with respect to Restricted Definitive
Securities of any series, means the period referred to in Rule 144(k) or any
successor provision thereto and as may be amended or revised from time to time,
beginning from the later of (i) the original issue date of such Securities or
(ii) the last date on which the Company or any affiliate of the Company was the
beneficial owner of such Securities (or any predecessor thereof).
SECTION 202. (a) Form of Face of Initial Security
[IF THE SECURITY IS TO BE A GLOBAL SECURITY, INSERT--THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY THE DEPOSITARY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, THE DEPOSITARY, HAS AN INTEREST HEREIN.
[IF THE SECURITY IS TO BE A RESTRICTED SECURITY, INSERT THE APPLICABLE
LANGUAGE-- [THIS SECURITY HAS BEEN INITIALLY RESOLD IN RELIANCE ON RULE 144A
UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN
ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE:] [THIS SECURITY HAS
INITIALLY BEEN RESOLD TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DESCRIBED BY
RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING
LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE
INDENTURE:] [THIS SECURITY HAS BEEN ISSUED IN RELIANCE ON REGULATION S UNDER THE
SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE
WITH ITS TERMS AND THE TERMS OF THE INDENTURE:]]
[IF THE SECURITY IS TO BE A RESTRICTED SECURITY, INSERT--
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF
INTERESTS HEREIN (1) REPRESENTS THAT [(A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),] [(B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DESCRIBED BY RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT OR] [(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION,] (2) AGREES THAT BEGINNING FROM THE
LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS
SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE
144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" THAT PRIOR TO SUCH TRANSFER, FURNISHED
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE TIME OF TRANSFER OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. UNLESS THE
COMPANY DETERMINES OTHERWISE IN
ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY (1) UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) OR (2) WITH RESPECT TO SECURITIES SOLD IN RELIANCE ON REGULATION S, FOLLOWING THE EXPIRATION OF 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH INTERESTS IN THIS SECURITY ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE ORIGINAL ISSUE DATE OF THIS SECURITY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "US PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.]
MIDAMERICAN FUNDING, LLC
[Title of Security]
No. __________ $_________
CUSIP No._________
[ISIN No. ________]
[Common Code:_________]
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MIDAMERICAN FUNDING, LLC, a limited liability company organized under
the laws of Iowa (herein called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to [name of registered owner or its registered assigns]
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT--] the Initial Principal Amount
specified on Schedule A hereto (such Initial Principal Amount, as it may from
time to time be adjusted by endorsement on Schedule A hereto, is hereinafter
referred to as the "Principal Amount")] [IF THIS SECURITY IS NOT A GLOBAL
SECURITY, INSERT--the principal sum of ____________ Dollars (the "Principal
Amount")] on ________, [IF THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY,
INSERT--and to pay interest thereon from ___________ or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on _________________ and ___________________ in each year,
commencing ______________, _____________ until the Principal Amount hereof is
paid or made available for payment. [IF APPLICABLE, INSERT--; provided that any
Principal Amount and premium, and any such installment of interest, which is
overdue shall bear interest at the rate of ___% per annum (or, if lower, the
maximum rate legally enforceable), from the dates such amounts are due until
they are paid or made available for payment, [and such interest shall be payable
on demand] [IF APPLICABLE, INSERT-- provided further that if an Illiquidity
Event (as defined in the Registration Rights Agreement) occurs, interest will
accrue on this Security at a rate of [ ]% per annum from and including the date
on which any such Illiquidity Event shall occur, until but excluding the date on
which all Illiquidity Events have been cured, provided, however, that if such
Illiquidity is not cured within two years after the consummation of the
MidAmerican Merger, such increase in interest rate will become permanent.] The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the __________ or _________ (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered on
such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.
[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT--
The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of [yield to maturity] % per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. [Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of [yield to maturity] % per annum (or, if lower, the maximum rate legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and interest, if any, on this Security will be made at any place of payment or at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; provided however, that payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or a Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
[INSERT ANY SPECIAL NOTICE PROVISIONS REQUIRED BY ANY STOCK EXCHANGES
UPON WHICH THE SECURITIES OF A SERIES ARE TO BE LISTED.]
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
Title:
Attest:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
Dated:____________ By:______________________
Authorized Signatory
SECTION 202. (b) Form of Reverse of Initial Security
MIDAMERICAN FUNDING, LLC
[Title of the Securities]
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This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March __, 1999 (herein called the "Original Indenture"), among the Company and IBJ Whitehall Bank & Trust Company, as trustee, principal paying agent, security exchange agent/registrar and transfer agent (herein called the "Trustee", which term includes any successor trustee under the Original Indenture) [INSERT PARTICULARS WITH RESPECT TO ANY INDENTURES SUPPLEMENTAL THERETO PURSUANT TO WHICH THE SECURITIES OF THIS SERIES ARE BEING ISSUED] to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof [IF APPLICABLE, INSERT-- limited in aggregate principal amount to $ ________________].
[IF APPLICABLE, INSERT -- This Security is not subject to redemption prior to maturity.]
[IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 or more than 60 days' notice to the Holders of such Securities as provided in the Indenture, [IF APPLICABLE, INSERT -- (1) on __________ in any year commencing with the year ___ and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the princi-
pal amount, and (2)] at any time [on or after __________ ___], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount):
If redeemed [IF APPLICABLE, INSERT -- on or before _________, %, and if redeemed] during the 12-month period beginning , of the years indicated:
and thereafter at a Redemption Price equal to _____% of the principal amount, together in the case of any such redemption [IF APPLICABLE, INSERT-- (whether through operation of the sinking fund or otherwise)] with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, all as provided in the Indenture.]
[IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice to the Holders of such Securities, as provided in the Indenture (1) on ____________ in any year commencing with the year and ending with the year ____ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ____________], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below:
If redeemed during the 12-month period beginning of the years indicated:
Redemption Price for
Redemption Price Redemption Otherwise
for Redemption Through Operation Than Through Operation
Year of Sinking Fund of the Sinking Fund
---- -------------------------------- -----------------------
|
and thereafter at a Redemption Price equal to ____% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, all as provided in the Indenture.]
[IF APPLICABLE, INSERT -- Notwithstanding the foregoing, the Company may not, prior to ___________, redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ____% per annum.]
[IF APPLICABLE, INSERT -- The sinking fund for this series provides for
the redemption on __________ in each year beginning with the year _________ and
ending with the year ___________ of [IF APPLICABLE, INSERT -- not less than
$_____ ("mandatory sinking fund") and, at the option of the Company, not more
than] $_____ aggregate principal amount of Securities of this series. Securities
of this series acquired or redeemed by the Company otherwise than through
[mandatory] sinking fund payments may be credited against subsequent [mandatory]
sinking fund payments otherwise required to be made [in the order in which they
become due].]
[IF APPLICABLE, INSERT -- The Securities of this series will be
redeemable in whole or in part, at the option of the Company at any time, at a
Redemption Price equal to the greater of (i) 100% of the principal amount of the
Securities of this series being redeemed or (ii) the sum of the present values
of the remaining scheduled payments of principal of and interest on the
Securities of this series being redeemed discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
a discount rate equal to the Treasury Yield plus ________basis points, plus, for
(i) or (ii) above, whichever is applicable, accrued interest on the Securities
of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining average life Securities of this series 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 average life of the Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day in New York City preceding such Redemption Date, as set forth in
the daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations
for U.S. Government Securities" or (ii) if such release (or any successor
release) is not published or does not contain such prices on such Business Day,
the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day in New York City preceding such redemption date).
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
Notice of redemption shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.]
[IF THE SECURITY IS A GLOBAL SECURITY AND IT IS SUBJECT TO REDEMPTION
OF ANY KIND, INSERT -- In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
[IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT --
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities of such series may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.]
[IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT --If an
Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series (the "Acceleration Amount") may be declared due and payable in the manner and with the effect provided in the Indenture. In case of a declaration of acceleration on or before __________ in any year, the Acceleration Amount per $_____ principal amount at Stated Maturity of the Securities shall be equal to the amount set forth in respect of such date below:
Acceleration Amount
per $ ___________
principal amount
Date of declaration at Stated Maturity
------------------- --------------------
|
and in case of a declaration of acceleration on any other date, the Acceleration Amount shall be equal to the Acceleration Amount as of the immediately preceding date set forth in the table above, plus accrued original issue discount (computed in accordance with the method used for calculating the amount of original issue discount that accrues for United States federal income tax purposes) from such next preceding date to the date of declaration at the yield to maturity. For the purpose of this computation the yield to maturity is ____%. Upon payment (i) of the Acceleration Amount so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.]
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver, or trustee or for any other remedy thereunder, unless (a) such
Holder shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities, (b) the Holders of not less
than 33% or a majority, as applicable, in principal amount of the Securities at
the time Outstanding under the Indenture shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee,
(c) such Holder shall have offered the Trustee indemnity satisfactory to the
Trustee against the costs, expenses and liabilities to be incurred in compliance
with such request, (d) the Trustee shall not have received from the Holders of a
majority in principal amount of Securities at the time Outstanding under the
Indenture a direction inconsistent with such request and (e) the Trustee for 90
days after its receipt of such notice from the Holder, request and offer of
indemnity shall have failed to institute any such proceeding. The foregoing
shall not apply to certain suits described in the Indenture, including any suit
instituted by the Holder of this Security for the enforcement of any payment of
principal hereof or any premium or interest hereon on or after the respective
due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of [IF THIS SECURITY IS A GLOBAL SECURITY, INSERT-- a Security of the series of which this Security is a part] [IF THIS SECURITY IS NOT A GLOBAL SECURITY, INSERT -- this SecuritY] is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest, if any, on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
[IF THIS SECURITY IS A DEFINITIVE REGISTERED SECURITY, INSERT --
Definitive Securities of the series of which this Security is a part are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple of $1,000 in excess thereof.]
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
[CUSTOMARY ABBREVIATIONS MAY BE USED IN THE NAME OF A HOLDER OF A
REGISTERED SECURITY OF THIS SERIES OR AN ASSIGNEE SUCH AS: TEN COM (= TENANTS IN COMMON), TEN ENT (= TENANTS BY THE ENTIRETIES), JT TEN (= JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON), CUST (= CUSTODIAN), AND U/G/M/A (= UNIFORM GIFTS TO MINORS ACT).]
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securi-
ties of this series. [IF THIS SECURITY IS A REGULATION S SECURITY, INSERT -- This Security will also bear an ISIN number and a Common Code. No representation is made as to the accuracy of such numbers as printed on the Securities of this series and reliance may be placed only on the other identification numbers printed hereon.]
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
[IF SECURITY IS A GLOBAL SECURITY, INSERT AS A SEPARATE PAGE--]
Schedule A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $____
Notation made
Principal on behalf of the
Date Principal Principal amount Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
---------- --------- --------- ---------- -----------------
|
SECTION 203. (a) Form of Face of Exchange Security
MIDAMERICAN FUNDING, LLC
[Title of Security]
No. __________ $_________
CUSIP No._________
MIDAMERICAN FUNDING, LLC, a limited liability company organized under the laws of Iowa (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to [name of registered owner or its registered assigns] the principal sum of Dollars (the "Principal Amount")] on ____________, [IF THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- and to pay interest thereon from __________ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on and in each year, commencing , until the Principal Amount hereof is paid or made available for payment. [IF APPLICABLE, INSERT--; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall bear interest at the rate of ___% per annum (or, if lower, the maximum rate legally enforceable), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the __________ or _________ (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date] and may be paid to [the bearer at the time of payment of such Defaulted Interest] [the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture].
[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- The
principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of [yield to maturity] % per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. [Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of [yield to maturity] % per annum (or, if lower, the maximum rate legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and interest, if any, on this Security will be made at any place of payment or at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; provided however, that payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or a Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
[INSERT ANY SPECIAL NOTICE PROVISIONS REQUIRED BY ANY STOCK EXCHANGES
UPON WHICH THE SECURITIES OF A SERIES ARE TO BE LISTED.]
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ______________________________
Name:
Title:
Attest:
By:__________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
Dated:____________ By:______________________
Authorized Signatory
|
SECTION 203. (b) Form of Reverse of Exchange Security
MIDAMERICAN FUNDING, LLC
[Title of the Securities]
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March __, 1999 (herein called the "Original Indenture"), among the Company and IBJ Whitehall Bank & Trust Company, as trustee, principal paying agent, security exchange agent/registrar and transfer agent (herein called the "Trustee", which term includes any successor trustee under the Original Indenture) [INSERT PARTICULARS WITH RESPECT TO ANY INDENTURE SUPPLEMENTAL THERETO PURSUANT TO WHICH THE SECURITIES OF THIS SERIES ARE BEING ISSUED] to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof [IF APPLICABLE, INSERT-- limited in aggregate principal amount to $ _____________].
[IF APPLICABLE, INSERT -- This Security is not subject to redemption prior to maturity.]
[IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 or more than 60 days' notice to the Holders of such Securities as provided in the Indenture, [IF APPLICABLE, INSERT -- (1) on ________________ in any year commencing with the year and ending with the year through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after ], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount):
If redeemed [IF APPLICABLE, INSERT -- on or before _________, _________%, and if redeemed] during the 12-month period beginning ______________, of the years indicated:
and thereafter at a Redemption Price equal to _____% of the principal amount, together in the case of any such redemption [IF APPLICABLE, INSERT-- (whether through operation of the sinking fund or otherwise)] with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, all as provided in the Indenture.]
[IF APPLICABLE, INSERT -- The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice to the Holders of such Securities, as provided in the Indenture (1) on _____________ in any year commencing with the year and ending with the year ______ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after _____________], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below:
If redeemed during the 12-month period beginning _________ of the years indicated:
Redemption Price for
Redemption Price Redemption Otherwise
for Redemption Through Operation Than Through Operation
Year of Sinking Fund of the Sinking Fund
---- -------------------------------- ------------------------
|
and thereafter at a Redemption Price equal to ______% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, all as provided in the Indenture.]
[IF APPLICABLE, INSERT -- Notwithstanding the foregoing, the Company may not, prior to __________, redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than % per annum.]
[IF APPLICABLE, INSERT -- The sinking fund for this series provides for the redemption on ___________ in each year beginning with the year and ending with the year __________ of [IF APPLICABLE, INSERT -- not less than $______ ("mandatory sinking fund") and, at the option of the Company, not more than] $ aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made [in the order in which they become due].]
[IF APPLICABLE, INSERT -- The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus ________ basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having an average life comparable to the remaining average life of Securities of this series 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 average life of the Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day in New York City preceding such Redemption Date, as set forth in
the daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations
for U.S. Government Securities" or (ii) if such release (or any successor
release) is not published or does not contain such prices on such Business Day,
the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an independent investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day in New York City preceding such redemption date).
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
Notice of redemption shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.]
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
[IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT --
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities of such series may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.]
[IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT --If an
Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series (the "Acceleration Amount") may be declared due and payable in the manner and with the effect provided in the Indenture. In case of a declaration of acceleration on or before __________ in any year, the Acceleration Amount per $______ principal amount at Stated Maturity of the Securities shall be equal to the amount set forth in respect of such date below:
Acceleration Amount
per $ ___________
principal amount
Date of declaration at Stated Maturity
------------------- -------------------
|
and in case of a declaration of acceleration on any other date, the Acceleration Amount shall be equal to the Acceleration Amount as of the immediately preceding date set forth in the table above, plus accrued original issue discount (computed in accordance with the method used for calculating the amount of original issue discount that accrues for United States federal income tax purposes) from such next preceding date to the date of declaration at the yield to maturity. For the purpose of this computation the yield to maturity is ____%. Upon payment (i) of the Acceleration Amount so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.]
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver, or trustee or for any other remedy thereunder, unless (a) such
Holder shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities, (b) the Holders of not less
than 33% or a majority, as applicable, in principal amount of the Securities at
the time Outstanding under the Indenture shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee,
(c) such Holder shall have offered the Trustee indemnity satisfactory to the
Trustee against the costs, expenses and liabilities to be incurred in compliance
with such request, (d) the Trustee shall not have received from the Holders of a
majority in principal amount of Securities at the time Outstanding under the
Indenture a direction inconsistent with such request and (e) the Trustee for 90
days after its receipt of such notice from the Holder, request and offer of
indemnity shall have failed to institute any such proceeding. The foregoing
shall not apply to certain suits described in the Indenture, including any suit
instituted by the Holder of this Security for the enforcement of any payment of
principal hereof or any premium or interest hereon on or after the respective
due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest, if any, on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
Definitive Securities of the series of which this Security is a part are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple of $1,000 in excess thereof.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
[CUSTOMARY ABBREVIATIONS MAY BE USED IN THE NAME OF A HOLDER OF A
REGISTERED SECURITY OF THIS SERIES OR AN ASSIGNEE SUCH AS: TEN COM (= TENANTS IN COMMON), TEN ENT (= TENANTS BY THE ENTIRETIES), JT TEN (= JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON), CUST (= CUSTODIAN), AND U/G/M/A (= UNIFORM GIFTS TO MINORS ACT).]
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:___________ By:__________________________
Authorized Signatory
|
SECTION 205. Form of Trustee's Certificate of Authentication by an Authenticating Agent
If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Trustee's Certificate of Authentication by such Authenticating Agent to be borne by the Securities of each such series shall be substantially as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
as Authenticating Agent
Dated:___________ By:__________________________
Authorized Signatory
|
ARTICLE III
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 303, set forth or determined in the manner provided in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series:
(1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 304, 305, 306, 307, 308, 906 or 1107, and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name the Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities of the series is payable;
(5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date;
(6) the place or places, if any, in addition to or in the place of the Corporate Trust Office, where the principal of (and premium, if any) and interest, if any, on Securities of the series shall be payable and where such Securities may be registered or transferred;
(7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof; and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; and any provisions in addition to or in lieu of the provisions of Article Twelve applicable to the Securities of such series;
(9) if other than denominations of $1,000 and any integral multiple of $1,000 in excess thereof, the denominations in which Securities of the series shall be issuable;
(10) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502;
(11) if other than such coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts, the coin or currency, including composite currencies such as the European Currency Unit, in which payment of the principal of (and premium, if any) and interest, if any, on the Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States for any purpose, including for purposes of the designation of "Outstanding" in Section 101;
(12) if the principal of (and premium, if any) or interest, if any, on the Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units which may be elected and the period or periods within which, and
the terms and conditions upon which, such election may be made and the amount so payable;
(13) if the amount of payments of principal of (and premium, if any) or interest, if any, on the Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined;
(14) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined);
(15) any provisions permitted by this Indenture relating to Events of Default or covenants of the Company with respect to such series of Securities;
(16) if the Securities of the series shall be issued in whole or in part in the form of one or more Global Securities, whether beneficial owners of interests in any such Global Security may exchange such interests for Securities of such series of like tenor and of authorized form and denomination and the circumstances under which any such changes may occur, if other than in the manner provided in Section 307(b)(ii), and any related certificates in addition to those set forth in Section 313;
(17) any deletion of, addition to or change in the Events of Default
which applies to any Securities of the series and any change in the
right of the Trustee or the requisite Holders of such Securities to
declare the principal amount thereof due and payable pursuant to
Section 502;
(18) any deletion of, addition to or change in the covenants set forth in Sections 1004, 1005, 1006, 1007, 1008, 1009 and 1010 which applies to Securities of the series;
(19) any information the Company shall be obligated to provide to the Trustee, and the Trustee shall be obligated to promptly forward to Holders of Securities of the series, pursuant to Section 703(b);
(20) the form of any legend(s) which shall be borne by any Restricted
Securities in addition to or in lieu of that set forth in Section 202;
any circumstances in addition to or in lieu of those set forth in
Section 306(b) in which such legend(s) may be removed or modified; any
circumstances in addition to or in lieu of those set forth in Section
306(a) in which definitive Securities may be registered for transfer;
and any certificates in addition to or in lieu of those set forth in
Section 313; and
(21) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and set forth in the Officers' Certificate referred to above or in any indenture supplemental hereto referred to above.
If any of the terms of the Securities of a series, including the form of Security of such series, are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by any authorized Officer of the Company, and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such series of Securities.
SECTION 302. Denominations
The Securities of each series shall be issuable in bearer form or in registered
form without coupons, except as otherwise expressly provided in a supplemental
indenture hereto, in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple of $1,000 in excess thereof.
SECTION 303. Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents. The signature of any such Person on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signature of any individual who was at any time the proper Officer of the Company shall bind the Company, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of authentication of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with an instrument or
instruments establishing such series of Securities as contemplated in Section
301 hereof, and 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. In authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee shall be entitled to receive, and (subject to
Section 601 and 603) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture;
(b) that the terms of such Securities have been established in conformity with the provisions of this Indenture; and
(c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general principles of equity and such other matters as counsel may specify therein.
Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall
not be necessary to deliver the documents otherwise required pursuant to Sections 201 and 301 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued and reasonably contemplate the issuance of each Security of such series.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee or an Authenticating Agent by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder 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 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
Pending the preparation of definitive Securities of any series, the Company may execute, and upon compliance by the Company with Section 303, the Trustee or the Authenticating Agent 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, and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the
temporary securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder except as provided in Section 306 (if in connection with a transfer). Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee or the Authenticating Agent shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor.
Upon any exchange of a portion of a temporary Global Security for a definitive Global Security for the individual Securities represented thereby pursuant to this Section 304 or Section 305, the temporary Global Security shall be endorsed by the Trustee to reflect the reduction of the principal amount of such temporary Global Security, and such principal amount shall be reduced for all purposes by the amount so exchanged and endorsed.
SECTION 305. Registrar and Paying Agent; Registration, Registration of Transfer and Exchange
The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration, transfers and exchanges of Securities. The Company shall maintain an office or agency of the Paying Agent in any Place of Payment where Securities of a series may be presented for payment. The Company may have one or more co-registrars and one or more additional paying agents, and the terms "Security Exchange Agent/Registrar" and "Paying Agent" shall include any additional co-registrars and paying agents, respectively.
The Company shall enter into an appropriate agency agreement with any Securities Exchange Agent/Registrar, Paying Agent or additional co-registrars or paying agents not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act and the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Security Exchange Agent/Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation there-
for pursuant to Section 607. The Company may act as Security Exchange Agent/Registrar or Paying Agent.
The Company hereby initially appoints the Trustee as "Security Exchange Agent/Registrar" for the purpose of registering Securities and transfers of Securities, and for the purpose of exchanging Securities, and as Paying Agent, all as herein provided.
Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee or the Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, any Security or Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and upon receipt of a Company Order the Trustee or the Authenticating Agent shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of Securities as provided in this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Exchange Agent/Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder 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 Sections 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption under Section 1104 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part, provided that such Security shall be immediately surrendered for redemption with written instructions for payment consistent with the provisions of this Indenture.
The provisions of this Section 305 are, with respect to any Global Security, subject to Section 307 hereof.
SECTION 306. Restricted Securities
(a) Transfer and Exchange.
(i) In General. Every Restricted Security shall be subject to the
restrictions on transfer provided in the applicable legend(s) required
to be set forth on the face of each Restricted Security pursuant to
Section 201 or as provided pursuant to Section 301, unless such
restrictions on transfer shall be waived or modified, in accordance
with applicable laws, by the written consent of the Company. Each of
the Holder of each Restricted Security, by its acceptance thereof,
agrees to be bound by such restrictions on transfer.
(ii) Special Provisions Regarding Transfer of Restricted Securities. Unless expressly provided otherwise in the Indenture, whenever any Restricted Definitive Security is presented or surrendered for registration of transfer, such Restricted Definitive Security must be accompanied by a certificate in substantially the form set forth in or contemplated by Section 313(b) (which may be attached to or set forth in the Restricted Definitive Security), appropriately completed, dated the date of such surrender and signed by the Holder of such Restricted Definitive Security, as to compliance with such restrictions on transfer, unless the Company shall have notified the Trustee that there is an effective registration statement under the Securities Act with respect to such Restricted Definitive Security. Neither the Security Exchange Agent/Registrar nor any Transfer Agent shall be required to accept for such registration of transfer or exchange any Restricted Definitive Security not so accompanied by a properly completed certificate.
(b) Removal of Transfer Restrictions.
Unless with respect to the whole or any portion of any Restricted Security the Company determines otherwise in accordance with applicable law, transfer restrictions and any restrictive legend(s) with respect to Restricted Securities of any series shall be removed by the Company (i) in the case of Rule 144A Securities and Restricted Definitive Securities, upon presentation of such Security by the Holder at any time on or after the expiration of the Holding Period, or (ii) in the case of Regulation S Securities, upon presentation or such Security by the Holder at any time on or after the expiration of the Restricted Period. Thereafter, upon registration of transfer of or exchange of such Securities, the Company shall execute, and the Trustee shall authenticate and deliver, an Unrestricted Security.
Except as otherwise provided in the preceding paragraph, if Securities are issued upon the registration of transfer, exchange or replacement of Securities bearing a legend or legends setting forth restrictions on transfer, or if a request is made to remove such legend(s) from a Security, the Securities so issued shall bear such legend(s), or such legend(s) shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence (which may include an opinion, reasonably satisfactory to the Company, of independent counsel experienced in matters of United States securities law) as may be reasonably required by the Company that neither such legend(s) nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 or Regulation S under the Securities Act or that such Securities are not "restricted securities" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence to the Company, the Trustee, at the direction of the Company, shall authenticate and deliver a Security that does not bear such legend(s). In the absence of bad faith on its part, the Trustee may conclusively rely upon such direction of the Company in authenticating and delivering a Security that does not bear such legend(s).
As used in this Section 306, the term "transfer" encompasses any sale, pledge or other transfer of any Securities referred to herein.
Notwithstanding anything else in this Indenture to the contrary, after a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring that any such Initial Security or such Private Exchange Security issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security without legends
will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities or upon receipt of directions to transfer such Holder's interest in the Global Security, as applicable.
Notwithstanding anything else in this Indenture to the contrary, upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the restricted securities legend set forth in Section 202 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities and Exchange Securities in certificated form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer.
Notwithstanding anything else in this Indenture to the contrary, upon the
consummation of a Private Exchange with respect to the Initial Securities
pursuant to which Holders of such Initial Securities are offered Private
Exchange Securities in exchange for their Initial Securities, all requirements
pertaining to such Initial Securities that Initial Securities issued to certain
holders be issued in global form will still apply, and Private Exchange
Securities in global form with the Restricted Securities Legend set forth in
Section 202 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
SECTION 307. Global Securities
(a) Form and Legend.
If the Company shall establish pursuant to Section 301 that certain of the Securities of a particular series are to be issued in the form of a Global Security, then the Company shall execute and the Trustee shall, in accordance with Section 303, authenticate and deliver, a Global Security or Securities which (i) shall represent, and shall be denominated in an aggregate amount equal to the aggregate principal amount of, all of the Securities of such series to be so represented, (ii) shall be registered in the name of the Depositary or its nominee, (iii) shall be delivered by the Trustee to the Depositary for such series or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the effect of the first two paragraphs of the form of face of Security set forth in Section 202.
(b) Transfer and Exchange.
(i) Transfers of Global Notes as such. Except as otherwise expressly
provided in this Indenture or any supplement thereto, a Global Security
representing all or a portion of the Securities of a series may not be
transferred in global form, except as a whole (i) by the Depositary for
such series to a nominee of such Depositary; (ii) by a nominee of such
Depositary to such Depositary or another nominee of such Depositary; or
(iii) by such Depositary or any such nominee to a successor Depositary
for such series or a nominee of such successor Depositary.
(ii) Exchanges of Globa1 Securities for Definitive Securities. A Global Security of a series shall be exchangeable, in whole but not in part, for definitive Securities of such series if (a) DTC notifies the Company and the Depositary that it is unwilling or unable to continue to hold book-entry interests in such Global Security or DTC at any time ceases to be a "clearing agency" registered as such under the Exchange Act, and, in either case, a successor is not appointed by the Company within 120 days; (b) while a Global Security is a Restricted Security the book-entry interests in such Global Security cease to be eligible for DTC services because the Securities of such series are neither (i) rated in one of the top four categories by a nationally recognized statistical rating organization nor (ii) included within a Self-Regulatory Organization system approved by the Commission for the reporting of quotation and trade information of securities eligible for transfer pursuant to Rule 144A, such as the PORTAL system; (c) the Depositary for Securities of such series notifies the Company that it is unwilling or unable to continue as Depositary with respect to such Global Security and no successor is appointed within 120 days; or (d) the Company in its sole discretion executes and delivers to the Trustee an Officers' Certificate providing that such Global Security shall be so exchangeable. Securities so issued in exchange for any such Global Security shall be of the same series, having the same interest rate, if any, and maturity and having the same terms as such Global Security, in authorized denominations and in the aggregate having the same principal amount as such Global Security and registered in such names as the Depositary for such Global Security shall direct based on the instructions of DTC. Upon such exchange, the surrendered Global Security shall be cancelled by the Trustee.
A Global Security of a series shall be exchangeable, in whole or in part, for definitive Registered Securities of such series if there shall have occurred and be continuing an Event of Default with respect to the Securities of such series and the Holder, in such circumstances, shall have requested in writing that all or a part of the
Global Security of such series be exchanged for one or more Definitive
Securities (an "Optional Definitive Security Request"). Upon any such surrender,
(i) the Company shall execute and the Trustee shall authenticate and deliver
without charge to each Person specified by DTC, in exchange for such Person's
beneficial interest in the Global Security, a new Security or Securities of the
same series in definitive registered form having the same interest rate, if any,
and maturity and having the same terms as such Global Security, in any
authorized denomination requested by such Person and of an aggregate principal
amount equal to such Person's beneficial interest in the Global Security; and
(ii) if the Global Security is being exchanged (x) as a whole, then the
surrendered Global Security shall be cancelled by the Trustee, or (y) in part,
then the principal amount of the surrendered Global Security shall be reduced by
an endorsement on Schedule A thereto in the appropriate amount.
Unless otherwise provided pursuant to a Board Resolution, Officers' Certificate or supplemental indenture in accordance with Section 301, Definitive Securities issued in exchange for a Global Security pursuant to this Section 307(b)(ii) shall be issued only in registered form and shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from DTC and its Participants or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Persons in whose names such Securities are so registered.
(c) Beneficial Interests.
Subject to Section 306 and Section 307, beneficial interests in a Global Security may be transferred in any manner consistent with the Applicable Procedures.
(d) Special Provisions Regarding Transfer of Beneficial Interests in a Regulation S Global Security.
The transfer of beneficial interests in a Regulation S Global Security shall be effected in a manner not inconsistent with the following provisions:
(i) Transfer Through a Rule 144A Global Security. If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Rule 144A Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 307(d)(i). Upon receipt by the Depositary of the instructions, order and certificate set forth below, the Depositary shall promptly
forward the same to the Security Exchange Agent/Registrar at the
Corporate Trust Office. Upon receipt by the Security Exchange
Agent/Registrar from the Depositary at the Corporate Trust Office of
(1) written instructions given in accordance with the Applicable
Procedures from a Participant directing the Depositary to cause to be
credited to a specified Participant's account a beneficial interest in
the Rule 144A Global Security equal to that of the beneficial interest
in the Regulation S Global Security to be so transferred, (2) a written
order given in accordance with the Applicable Procedures containing
information regarding the account of the Participant to be credited
with, and the account of the Participant held for Euroclear or Cedel
(as the case may be) to be debited for, such beneficial interest, and
(3) a certificate substantially in the form set forth in or
contemplated by Section 313(a) given by the transferor of such
beneficial interest, the Security Exchange Agent/Registrar, shall (A)
reduce the principal amount of the Regulation S Global Security, and
increase the principal amount of the Rule 144A Global Security, in each
case by an amount equal to the principal amount of the beneficial
interest in the Regulation S Global Security to be so transferred, as
evidenced by appropriate endorsements on Schedule A of the respective
Global Securities and (B) instruct the Depositary, which shall instruct
DTC (x) to make corresponding reductions and increases in the amounts
represented by the respective Global Securities and (y) to cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Security having a principal
amount equal to the amount by which the principal amount of the
Regulation S Global Security was reduced upon such transfer.
Delivery of a beneficial interest in the Regulation S Global Security of any series may not be taken in the form of a beneficial interest in the Rule 144A Global Security if immediately prior to the contemplated transfer no Rule 144A Global Security of the same series is then Outstanding.
(ii) Interests in Regulation S Global Security Initially to be Held Through Euroclear or Cedel. Until the termination of the Restricted Period with respect to Securities of a series, beneficial interests in a Regulation S Global Security of such series may be held only through Participants acting for and on behalf of Euroclear and Cedel; provided that this Section 307(d)(ii) shall not prohibit any transfer otherwise permissible under Section 307(d)(i).
(iii) Transfer Through Restricted Definitive Security. If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the
form of a Restricted Definitive Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance with
this Section 307(d)(iii). Upon receipt by the Depositary of the
instructions and certificate set forth below, the Depositary shall
promptly forward the same to the Security Exchange Agent/Registrar at
the Corporate Trust Office. Upon receipt by the Security Exchange
Agent/Registrar from the Depositary at the Corporate Trust Office of
(1) written instructions given in accordance with the Applicable
Procedures from a Participant directing the Depositary to cause to be
issued a Restricted Definitive Security to such Person in a principal
amount equal to that of the beneficial interest in the Global Security
to be so transferred and (2) a certificate substantially in the form
set forth in or contemplated by Section 313(e) given by the transferor
of such beneficial interest, the Security Exchange Agent/Registrar,
shall (A) reduce the principal amount of the Regulation S Global
Security by an amount equal to the principal amount of the beneficial
interest in the Regulation S Global Security to be so transferred, as
evidenced by appropriate endorsement on Schedule A of the Regulation S
Global Security and (B) cause to be issued a Restricted Definitive
Security to such Person in a principal amount equal to the amount by
which the principal amount of the Regulation S Global Security was
reduced upon such transfer.
(e) Special Provisions Regarding Transfer of Beneficial Interests in a Rule 144A Global Security." \l 2
The transfer of beneficial interests in a Rule 144A Global Security shall be effected in a manner not inconsistent with the following provisions:
(i) Transfer Through a Regulation S Global Security. If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 307(e)(i). Upon receipt by the Depositary of the instructions, order and certificate set forth below, the Depositary shall promptly forward the same to the Security Exchange Agent/Registrar at the Corporate Trust Office. Upon receipt by the Security Exchange Agent/Registrar from the Depositary at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Participant directing the
Depositary to cause to be credited to a specified Participant's account a beneficial interest in the Regulation S Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Participant held for Euroclear or Cedel (as the case may be) to be credited with, and the account of the Participant to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Section 313(c) given by the transferor of such beneficial interest, the Security Exchange Agent/Registrar, shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the Regulation S Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the Depositary, which shall instruct DTC (x) to make corresponding reductions and increases to the amounts represented by the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.
Delivery of a beneficial interest in the Rule 144A Global Security of any series may not be taken in the form of a beneficial interest in the Regulation S Global Security if immediately prior to the contemplated transfer no Regulation S Global Security of the same series is then Outstanding.
(ii) Transfer Through an Unrestricted Global Security. If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 307(e)(ii). Upon receipt by the Depositary of the instructions, order and certificate set forth below, the Depositary shall promptly forward the same to the Security Exchange Agent/Registrar at the Corporate Trust Office. Upon receipt by the Security Exchange Agent/Registrar from the Depositary at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Participant directing the Depositary to cause to be credited to a specified Participant's account a beneficial interest in the Unrestricted Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a writ-
ten order given in accordance with the Applicable Procedures containing information regarding the account of the Participant (and, in the case of any such transfer pursuant to Regulation S, the Euroclear or Cedel account for which such Participant's account is held) to be credited with, and the account of the Participant to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Section 313(d) given by the transferor of such beneficial interest, the Security Exchange Agent/Registrar, shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the Unrestricted Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the Depositary, which shall instruct DTC (x) to make corresponding reductions and increases to the transferor's beneficial interests in the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Unrestricted Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.
(ii) Transfer Through Restricted Definitive Security. If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 307(e)(iii). Upon receipt by the Depositary of the instructions and certificate set forth below, the Depositary shall promptly forward the same to the Security Exchange Agent/Registrar at the Corporate Trust Office. Upon receipt by the Security Exchange Agent/Registrar from the Depositary at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from a Participant directing the Depositary to cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Section 313(f) given by the transferor of such beneficial interest, the Security Exchange Agent/Registrar, shall (A) reduce the principal amount of the Rule 144A Global Security by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsement on Schedule A of the Rule 144A Global Security and cause to be issued a Restricted Definitive Se-
curity to such Person in a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer and (B) instruct the Depositary, which shall instruct DTC to make a corresponding reduction to the transferor's beneficial interest in the Rule 144A Global Security.
(f) Special Provisions Regarding Transfer of Restricted Definitive Securities.
The transfer of Definitive Securities shall be effected in a manner not inconsistent with the following provisions:
(i) Transfer Through Regulation S Security. If the holder of a
Restricted Definitive Security wishes at any time to transfer such
interest to a Person who wishes to take delivery thereof in the form of
a beneficial interest in a Regulation S Global Security, such transfer
may be effected, subject to the Applicable Procedures, only in
accordance with this Section 307(f)(i). Upon receipt by the Security
Exchange Agent/Registrar at the Corporate Trust Office of (1) written
instructions from the transferor directing it to cause the Depositary
to cause to be credited to such Person a beneficial interest in the
Regulation S Global Security in a principal amount equal to that of the
Restricted Definitive Security to be so transferred and (2) a
certificate substantially in the form set forth in or contemplated by
Section 313(b) given by the transferor of such Restricted Definitive
Security, the Security Exchange Agent/Registrar, shall (A) increase the
principal amount of the Regulation S Global Security by an amount equal
to the principal amount of the beneficial interest in the Regulation S
Global Security to be received by such Person, as evidenced by
appropriate endorsement on Schedule A of the Regulation S Global
Security and cancel such Restricted Definitive Security and (B)
instruct the Depositary, which shall instruct DTC (x) to make
corresponding increases in the amount represented by the Regulation S
Global Security and (y) to cause to be credited to the account of the
Person specified in such instructions a beneficial interest in the
Regulation S Global Security having a principal amount equal to the
principal amount of the Restricted Definitive Security that was
cancelled.
(ii) Transfer Through Rule 144A Global Security. If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Global Security, such transfer may be effected, subject to
the Applicable Procedures, only in accordance with this Section
307(f)(ii). Upon receipt by the Security Exchange Agent/Registrar at
the Corporate Trust Office of (1) written instructions from the
transferor directing it to cause the Depositary to cause to be credited
to such Person a beneficial interest in the Rule 144A Global Security
in a principal amount equal to that of the Restricted Definitive
Security to be so transferred and (2) a certificate substantially in
the form set forth in or contemplated by Section 313(b) given by the
transferor of such Restricted Definitive Security, the Security
Exchange Agent/Registrar, shall (A) increase the principal amount of
the Rule 144A Global Security by an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to
be received by such Person, as evidenced by appropriate endorsement on
Schedule A of the Rule 144A Global Security and cancel such Restricted
Definitive Security and (B) instruct the Depositary, which shall
instruct DTC (x) to make corresponding increases in the amount
represented by the Rule 144A Global Security and (y) to cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Security having a principal
amount equal to the principal amount of the Restricted Definitive
Security that was cancelled.
(ii) Transfer Through Unrestricted Global Security. If the holder of a
Restricted Definitive Security wishes at any time to transfer such
interest to a Person who wishes to take delivery thereof in the form of
a beneficial interest in the Unrestricted Global Security, such
transfer may be effected, subject to the Applicable Procedures, only in
accordance with this Section 307(f)(iii). Upon receipt by the Security
Exchange Agent/Registrar at the Corporate Trust Office of (1) written
instructions from the transferor directing it to cause the Depositary
to cause to be credited to such Person a beneficial interest in the
Unrestricted Global Security in a principal amount equal to that of the
Restricted Definitive Security to be so transferred and (2) a
certificate substantially in the form set forth in or contemplated by
Section 313(b) given by the transferor of such Restricted Definitive
Security, the Security Exchange Agent/Registrar, shall (A) increase the
principal amount of the Unrestricted Global Security by an amount equal
to the principal amount of the beneficial interest in the Unrestricted
Global Security to be received by such Person, as evidenced by
appropriate endorsement on Schedule A of the Unrestricted Global
Security and cancel such Definitive Security and (B) instruct the
Depositary, which shall instruct DTC (x) to make corresponding
increases in the amount represented by the Rule 144A Global Security
and (y) to cause to be credited to the account of the Person specified
in such instructions a
beneficial interest in the Unrestricted Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.
(iv) Transfer Through Restricted Definitive Security. If the holder of
a Restricted Definitive Security wishes at any time to transfer such
interest to a Person who wishes to take delivery thereof in the form of
another Restrictive Definitive Security, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with this
Section 307(f)(iv). Upon receipt by the Depositary of the instructions
and certificate set forth below, the Depositary shall promptly forward
the same to the Security Exchange Agent/Registrar at the Corporate
Trust Office. Upon receipt by the Security Exchange Agent/Registrar
from the Depositary at the Corporate Trust Office of a certificate
substantially in the form set forth in or contemplated by Section
313(b) given by the transferor of such Restricted Definitive Security,
the Security Exchange Agent/Registrar, shall register the transfer of
such Restricted Definitive Securities.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities
If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such Security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security, in each such case without premium or penalty.
Upon the issuance of any new Security under this Section 308, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section 308 in exchange for any mutilated Security or in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.
The provisions of this Section 308 are exclusive and shall preclude (to the extent lawful) all other Rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Reserved
Except as may otherwise be established as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable and is punctually paid or duly provided for on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Payment of interest, if any, in respect of any Security will be made by check mailed to the address of the Person entitled thereto at such person's address appearing in the Security Register. Payment of interest, if any, in respect of any Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, and payment of interest, if any, in respect of a Permanent Global Security shall be made, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or a Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
Any interest on any Security of any series which is payable but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. Unless the Trustee is acting as the Security Exchange Agent/Registrar, promptly after such Special Record Date, the Company shall furnish the Trustee with a list, or shall make arrangements satisfactory to the Trustee with respect thereto, of the names and addresses of, and respective principal amounts of such Securities held by, the Holders appearing on the Security Register at the close of business on such Special Record Date. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of 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 so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the re-
quirements of any Securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange.
Subject to the foregoing provisions of this Section 309, 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 310. Persons Deemed Owners
Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 309) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. All such payments so made to any such person, or upon such person's order, shall be valid, and, to the extent of the sums so paid, effectual to satisfy and discharge the liability for monies payable upon any such Security.
Holders of beneficial interests in a Global Security of any series will not be entitled to receive certificates therefor, except in the limited circumstances set forth in Section 307(b)(ii). No holder of any beneficial interest in a Global Security shall have any rights under this Indenture with respect to such Global Security.
The Trustee shall not deem requests or directions from, or votes by, the Depositary for a Global Security of any series to be inconsistent if made on behalf of different holders of beneficial interests.
SECTION 311. Cancellation
All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securi-
ties so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 311, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be returned to the Company upon written request.
SECTION 312. Computation of Interest
Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest, if any, on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 313. Certification Form
(a) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by an owner of a beneficial interest in a Regulation S Global Security pursuant to Section 307(d)(i) of this Indenture, in connection with the transfer of a beneficial interest therein to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Rule 144A Global Security, such certification shall be provided substantially in the form of the following certificate (which may be attached to or set forth on the Security), including or omitting bracketed language as appropriate, but otherwise with only such changes as may be approved in writing by the Company:
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER OR EXCHANGE FROM REGULATION S
GLOBAL SECURITY TO RULE 144A GLOBAL SECURITY
(TRANSFERS PURSUANT TO SS.307(D)(I) OF THE INDENTURE)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re : MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $_____ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (ISIN No. _____) and held with the Depositary by means of a book-entry interest through [Euroclear] [Cedel] in the name of [insert name of transferor] (the "Transferor").] The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the "Transferee") in the form of any equal principal amount of Securities evidenced by one or more Rule 144A Global Securities (CUSIP No.____).
In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred pursuant to and in accordance with Rule 144A under the Securities Act of 1933, and, accordingly, the Transferor does hereby further certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters and initial purchasers of the Securities being transferred.
[Insert Name of Transferor]
By: ____________________________ Name:
Title:
Dated:
cc: MIDAMERICAN FUNDING, LLC
Signature Guaranty:_____________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
(b) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by a Holder of a Security pursuant to Section 306(a)(ii), 307(b)(ii) and 307(f) of this Indenture in connection with the transfer or exchange of a Restricted Definitive Security, such certification shall be provided substantially in the form of the following certificate (which may be attached to or set forth on the Security), including or omitting bracketed language as appropriate, but otherwise with only such changes as may be approved in writing by the Company:
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER AND EXCHANGE OF RESTRICTED DEFINITIVE
SECURITIES
(TRANSFERS PURSUANT TO SS.306(A)(II), 307(B)(II) AND SS.307(F)
OF THE INDENTURE)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re: MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $________________ principal amount of Securities presented or surrendered on the date hereof (the "Surrendered Securities") which are registered in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such Surrendered Securities registered in the name of a Person (the "Transferee") other than the Transferor (each such transaction being referred to herein as a "transfer").
In connection with such request and in respect of such Surrendered Securities, the Transferor does hereby certify that:
[CHECK ONE]
[ ] (1) the Surrendered Securities are being transferred to the Company or an Affiliate thereof;
[ ] (2) the Surrendered Securities are being transferred pursuant to and in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act") and, accordingly, the Transferor does hereby further certify that the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States;
[ ] (3) the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account or for one or more accounts with respect to which such Person exercise sole investment discretion, and such Person and each such account is an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act and is purchasing such Surrendered Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act in a transaction in accordance with any applicable securities laws of the United States or any state thereof.
or
[ ] (4) the Surrendered Securities are being transferred pursuant to and in accordance with Regulation S and:
(A) the offer of the Surrendered Securities was not made to a Person in the United States;
(B) either:
(i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf
reasonably believed that the transferee was outside the United States, or
(ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(D) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; or
[ ] (5) the Surrendered Securities are being transferred in a transaction permitted by Rule 144.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters and initial purchasers of the Securities being transferred.
[Insert Name of Transferor]
By: ____________________________ Name:
Title:
Dated:___________________
cc: MIDAMERICAN FUNDING, LLC
Signature Guaranty:_____________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined
by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
(c) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by an owner of a beneficial interest in a Rule 144A Global Security pursuant to Section 307(e)(i) of this Indenture in connection with the transfer of a beneficial interest therein to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Security, such certification shall be provided substantially in the form of the following certificate (which may be attached to or set forth on the Security), with only such changes as shall be approved in writing by the Company.
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL
SECURITY TO REGULATION S GLOBAL SECURITY
(TRANSFERS PURSUANT TO SS. 307(E)(I)
OF THE INDENTURE)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re: MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to US$__________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No.__________) and held through DTC in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Securities to a non-US Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more Regulation S Global Securities
(CUSIP No. ___________), which amount, immediately after such transfer, is to be held with DTC through Euroclear or Cedel or both (Common Code _________).
In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 903 or Rule 904 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor does hereby further certify that:
(1) the offer of the Securities was not made to a person in the United States;
(2) either:
(A) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or
(B) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with DTC through Euroclear or Cedel or both (Common Code ________).
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters or initial purchasers, if any, of the initial offering of such Securities being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By: ____________________________ Name:
Title:
Dated:
cc: MIDAMERICAN FUNDING, LLC
Signature Guaranty:____________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
(d) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by an owner of a beneficial interest in a Rule 144A Global Security pursuant to Section 307(e)(ii) of this Indenture in connection with the transfer of a beneficial interest in the Rule 144A Global Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, such certification shall be provided substantially in the form of the following certificate, with only such changes as shall be approved in writing by the Company.
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL
SECURITY TO UNRESTRICTED GLOBAL SECURITY
(TRANSFERS PURSUANT TO SS. 307(E)(II)
OF THE INDENTURE)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re: MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to US$ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. ) and held through DTC in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more Unrestricted Global Securities (CUSIP No. ).
In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with either Rule 903, Rule 904 or Rule 144 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule 904:
(A) the offer of the Securities was not made to a Person in the United States;
(B) either:
(i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or
(ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(D) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; or
(2) if the transfer has been effected pursuant to Rule 144, the Securities have been transferred in a transaction permitted by Rule 144.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters and initial purchasers, if any, of the Securities being transferred. Terms used in this certificate and not otherwise
defined in the Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By: _________________________ Name:
Title:
Dated: _______________
cc: MIDAMERICAN FUNDING, LLC
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
(e) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by an owner of a beneficial interest in a Regulation S Global Security pursuant to Section 307(d)(iii) of this Indenture, in connection with the transfer of a beneficial interest therein to a Person who wishes to take delivery thereof in the form of a Definitive Restricted Security, such certification shall be provided substantially in the form of the following certificate (which may be attached to or set forth on the Security), including or omitting bracketed language as appropriate, but otherwise with only such changes as may be approved in writing by the Company:
FORM OF TRANSFER CERTIFICATE FOR
TRANSFER OR EXCHANGE FROM REGULATION S GLOBAL
SECURITY TO RESTRICTED DEFINITIVE SECURITY
(TRANSFERS PURSUANT TO SS.307(D)(III) OF THE INDENTURe)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re : MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to U.S. $_______ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (ISIN No. _____) and held with the Depositary by means of a book-entry interest through [Euroclear] [Cedel] in the name of [insert name of transferor] (the "Transferor").] The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the "Transferee") in the form of an equal principal amount of Securities evidenced by a Definitive Restricted Security.
In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters and initial purchasers of the Securities being transferred.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
cc: MIDAMERICAN FUNDING, LLC
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
(f) Except as otherwise specified as contemplated by Section 301 for Securities of any series, whenever any certification is to be given by an owner of a beneficial interest in a Rule 144A Global Security pursuant to Section 307(e)(iii) of this Indenture in connection with the transfer of a beneficial interest in the Rule 144A Global Security to a Person who wishes to take delivery thereof in the form of a Definitive Restricted Security, such certification shall be provided substantially in the form of the following certificate, with only such changes as shall be approved in writing by the Company.
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL
SECURITY TO RESTRICTED DEFINITIVE SECURITY
(TRANSFERS PURSUANT TO SS. 307(E)(III)
OF THE INDENTURE)
IBJ Whitehall Bank & Trust Company,
as Trustee
One State Street
New York, New York 10004
Re: MIDAMERICAN FUNDING, LLC's [Title of Securities]
Reference is hereby made to the Indenture, dated as of March __, 1999 (the "Indenture"), between MIDAMERICAN FUNDING, LLC and IBJ Whitehall Bank & Trust Company, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to US$_________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. _________) and held through DTC in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by a Restricted Definitive Security.
In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Rule 144A Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the underwriters and initial purchasers, if any, of the Securities being transferred.
[Insert Name of Transferor]
By: ________________________ Name:
Title:
Dated: __________________
cc: MIDAMERICAN FUNDING, LLC
Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Exchange Agent/Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Exchange Agent/Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
SECTION 314. CUSIP and ISIN Numbers.
The Company in issuing the Securities may use "CUSIP" numbers or "ISIN" numbers (in either case, if then generally in use), and, if so, the Trustee shall use "CUSIP" or "ISIN" numbers, as applicable, in notices of redemption as a convenience to Holders; provided that the Trustee shall assume no responsibility for the accuracy of such numbers and any such redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 401. Satisfaction and Discharge of Indenture
This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and any rights to receive payments of any principal, premium or interest in respect thereof as provided in Section 1001), and the Trustee shall execute instruments in form and substance satisfactory to itself and to the Company acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 310 and
(ii) Securities for whose payment money has theretofore been deposited
in trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, or
(iv) are deemed paid and discharged pursuant to
Section 402, and the Company, 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 the
purpose an amount of (a) money or (b) U.S. Government
Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms
will pro-
vide not later than one day before the Stated Maturity or Redemption Date, as the case may be, money, or (c) a combination of money and such U.S. Government Obligations, in each case, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, 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 has paid, caused to be paid or made provision satisfactory to the Trustee for payment of 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 stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
following rights and obligations shall survive: (i) the obligations of the
Company to the Trustee under Section 607(3), (ii) the obligations of the Trustee
to any Authenticating Agent under Section 614, (iii) if money or U.S. Government
Obligations shall have been deposited with or received by the Trustee pursuant
to Section 401(1)(B) or Section 402, the obligations of the Trustee under
Section 403 and the last paragraph of Section 1003 and (iv) any rights of
registration of transfer, exchange or replacement of Securities provided in
Article Three and Sections 906, 1002 and 1107.
SECTION 402. Defeasance, Discharge and Covenant Defeasance
(a) Defeasance and Discharge of a Series of Securities. The Company shall be deemed to have been discharged from its obligations with respect to Outstanding Securities of any series, as provided in this Section 402(a) on and after the date the applicable conditions set forth in subsection (c) hereof are satisfied (hereinafter called "Defeasance") with respect to such Securities. For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness representing the Outstanding Securities of such series and to have satisfied all of its other respective obligations under the Securities of such series and this Indenture insofar as the Securities of such series are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of Securities of such series to receive,
solely from the trust fund described in Section 403 and as more fully set forth
in such Section, payments in respect of the principal of and any premium and
interest on such Securities of such series when payments are due, (ii) the
Company's obligations with respect to the Securities of such series under
Article Three and Sections 1002 and 1003, (iii) the rights (including without
limitation, the rights set forth in Section 607), powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Article. Subject to compliance
with this Article, the Company may defease any Securities pursuant to this
Section notwithstanding the prior Covenant Defeasance of such Series pursuant to
subsection (b) hereof.
(b) Covenant Defeasance . On and after the date the applicable conditions set
forth in subsection (c) hereof are satisfied (hereinafter called "Covenant
Defeasance") with respect to the Outstanding Securities of any series, (i) the
Company shall be released from its obligations under Sections 801, 1004, 1005,
1006, 1007, 1008 and 1009, and any covenants established as contemplated by
Section 301 or adopted by indenture supplemental hereto under Section 901(2) for
the benefit of the Holders of such Securities and (ii) the occurrence of any
event specified in Sections 501(3), 501(4), 501(5), 501(6), 501(7), 501(8) or
pursuant to Section 501(9) with respect to any obligations referred to in Clause
(i) shall be deemed not to be or result in an Event of Default, in each case
with respect to the Outstanding Securities of such series as provided in this
Section. For this purpose, such Covenant Defeasance means that the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified Section, whether
directly or indirectly by reason of any reference elsewhere herein to any such
Section or Article or by reason of any reference in any such Section or Article
to any other provision herein or in any other document, but the remainder of
this Indenture and the Securities of such series shall be unaffected thereby.
(c) Conditions to Defeasance or Covenant Defeasance . The following shall be the conditions to the Defeasance or the Covenant Defeasance pursuant to this Section 402 of the Outstanding Securities of any series:
(1) The Company shall elect by Board Resolution to effect a Defeasance or a Covenant Defeasance pursuant to this Section 402 with respect to the Outstanding Securities of any series specified in such Board Resolution;
(2) The Company shall irrevocably have deposited or caused to be deposited (except as provided in Section 607, Section 403(c) and the last paragraph of Section 1003) with the Trustee (specifying that each such deposit is pursuant to this Section 402) 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 the Outstanding Securities of such series, (a) money, or (b) U.S. Government Obligations which through the payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money, or (c) a combination thereof, in each case in an amount sufficient, in the opinion of a nationally recognized firm of independent 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, the principal of and any premium and interest on the Securities of such series on the respective Stated Maturities (or if the Company has designated a Redemption Date pursuant to the next sentence of this clause (2), to and including the Redemption Date so designated by the Company), in accordance with the terms of this Indenture and the Securities of such series. If the Company shall wish to deposit or cause to be deposited money or U.S. Government Obligations to pay or discharge the principal of (and premium, if any) and interest, if any, on the outstanding Securities of such series to and including a Redemption Date on which all of the outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a Board Resolution delivered to the Trustee on or prior to the date of deposit of such money or U.S. Government Obligations, and such Board Resolution shall be accompanied by an irrevocable Company Request that the Trustee give notice of such redemption in the name and at the expense of the Company not less than 30 nor more than 60 days prior to such Redemption Date in accordance with this Indenture;
(3) In the event of a Defeasance pursuant to Section 402(a), the Company shall have delivered to the Trustee an opinion of independent counsel of recognized standing stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of this instrument, there has been a change in the applicable U.S. federal income tax law, in either case (x) or (y) to the effect that, and based thereon such opinion shall confirm that, the Holders of such series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to the Outstanding Securities of such series and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur;
(4) In the event of a Covenant Defeasance pursuant to Section 402(b), the Company shall have delivered to the Trustee an opinion of independent coun-
sel of recognized standing to the effect that the Holders and any owners of beneficial interests in Outstanding Securities of such series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the deposit with and Covenant Defeasance to be effected with respect to the Outstanding Securities of such series and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Covenant Defeasance and discharge were not to occur;
(5) The Securities of such series, if then listed on any securities exchange, will not be delisted as a result of such deposit;
(6) No event which is, or after notice or lapse of time or both would become, an Event of Default (including by reason of such deposit) with respect to the Outstanding Securities of such series shall have occurred and be continuing at the time of such deposit;
(7) If the Trust Indenture Act shall be applicable to the Securities of such series, such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act);
(8) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company is a party or by which it is bound; and
(9) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with.
SECTION 403. Application of Trust Money
(a) Subject to the provisions of the last paragraph of Section 1003, all money or U.S. Government Obligations deposited with the Trustee pursuant to Sections 401 or 402 and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Sections 401 or 402, shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the persons entitled thereto, of the principal of (and premium, if any) and interest, if any, on
the Securities for whose payment such money has been deposited with or received by the Trustee.
(b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Trustee or the trust created hereby with respect to U.S. Government Obligations deposited pursuant to Sections 401 or 402 or the interest and principal received in respect thereof other than any such tax, fee or other charge which by law is payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any monies or U.S. Government Obligations held by it as provided in Sections 401 or 402 which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which, at the time of such certification, would have been required to be deposited to effect the discharge of the Indenture or of any series of Securities, or the Defeasance or Covenant Defeasance of the Securities of any series, as the case may be. This paragraph (c) shall not authorize the sale by the Trustee of any U.S. Government Obligations held under this Indenture.
SECTION 404. Reinstatement
If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Section 401 or 402 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 403 with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in Trust.
ARTICLE V
REMEDIES
SECTION 501. Events of Default
"Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events:
(1) default for a period of 30 days in the payment of any interest upon any Security of that series when it becomes due and payable and continuance of such default; or
(2) default for a period of three days in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or
(3) material default in the payment of any sinking fund installment, when and as due by the terms of a Security of that series; or
(4) material default in the performance, or breach, of any other material covenant or obligation of the Company in this Indenture (other than a covenant a default in whose performance or whose breach is elsewhere in this Section 501 (including Section 501(8)) specifically dealt with or which has expressly been included in this Indenture solely for the benefit of a series of Securities other than that series) and continuance of such material default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of a majority in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or
(5) the Trustee fails to have a perfected security interest in the pledged capital stock of MAVH Inc. (prior to the MidAmerican Merger) or MHC (following the MidAmerican Merger) for a period of 10 days; or
(6) default in the payment of the principal of any bond, debenture, note or other evidence of indebtedness, in each case for money borrowed by the Company or any Significant Subsidiary, or in the payment of principal under any mortgage, indenture (including this Indenture) or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for Borrowed Money of the Company or any Significant Subsidiary, if such Indebtedness for Borrowed Money is not Project Finance Debt
and provides for recourse generally to the Company, or any Significant Subsidiary which default for payment of principal is in an aggregate principal amount exceeding $75,000,000 (or its equivalent in any other currency or currencies) when such indebtedness becomes due and payable at Maturity, if such default shall continue unremedied or unwaived for more than 30 Business Days and the time for payment of such amount has not been expressly extended; provided, however, that, subject to the provisions of Sections 601 and 602, the Trustee shall not be deemed to have knowledge of such default unless either (a) a Responsible Officer of the Trustee shall have actual knowledge of such default or (b) the Trustee shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such mortgage, indenture or other instrument; and provided further, that if such default under such indenture or instrument shall be remedied or cured by the Company or such Significant Subsidiary or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been remedied, cured or waived without further action upon the part of the Trustee or any of the Holders; or
(7) the failure of the Company or a Significant Subsidiary generally to pay its debts as they become due, or the admission in writing of its inability to pay its debts generally, or the making of a general assignment for the benefit of its creditors, or the institution of any proceeding by or against the Company or a Significant Subsidiary (other than any such proceeding brought against the Company or a Significant Subsidiary that is dismissed within 180 days from the commencement thereof) seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition (in each case, other than a solvent liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition) of it or its debts under any law relating to bankruptcy, insolvency, reorganization, moratorium or relief of debtors, or seeking the entry of an order for relief or appointment of an administrator, receiver, trustee, intervenor or other similar official for it or for any substantial part of its property, or the taking of any action by the Company or a Significant Subsidiary to authorize or consent to any of the actions set forth in this subparagraph (7); or
(8) (a) default in the performance, or breach, of any of the operational covenants or obligation of the Company contained in Section 1009(2) through (7) hereof which would reasonably be expected to result in a Material Adverse
Effect and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of a majority in aggregate principal amount of the Outstanding Securities 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; provided, however, that if such default under such indenture or instrument shall be remedied or cured by the Company or such Significant Subsidiary or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been remedied, cured or waived without further action upon the part of the Trustee or any of the Holders; provided, however, that the period permitted for such cure shall not exceed 180 days; and provided, further, that no such violation shall be an Event of Default if, within 180 days from any such occurrence, the Company obtains confirmation from any Rating Agency to the effect that such violation will not result in a Ratings Downgrade; or (b) (1) any material Project Document then in existence ceases to be valid and binding and in full force and effect otherwise than pursuant to the scheduled expiration of the term thereof or any early termination permitted pursuant to the terms thereof, (2) any third party thereto denies that it has any liability or obligation under any material Project Document then in existence and such third party ceases performance thereunder or (3) any party to a Project Document then in existence (other than the Company) defaults in respect of any material obligation thereunder, and, in any such case, such cessation or default has resulted or would reasonably be expected to result in a Material Adverse Effect, provided, however, that no such event shall be an Event of Default if, within 180 days from any such occurrence, the Company (A) causes the third party to reaffirm the disaffirmed provisions and/or resume performance (as the case may be) or (B) enters into an alternate agreement which contains, as determined in good faith by the Company, substantially similar terms and conditions or, if such terms and conditions are no longer available on a commercially reasonable basis, the terms and conditions then available on a commercially reasonable basis, or (C) obtains confirmation from any Rating Agency to the effect that the loss of the benefits of such Project Document or the substitution of any alternate agreement for such Project Document will not result in a Ratings Downgrade; or
(9) any other Event of Default provided in the supplemental indenture or provided in or pursuant to the Board Resolution under which such series of Securities is issued or in the form of Security for such series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment
If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then either the Trustee or (a) in the case of an Event of Default described under subparagraph (1) or (2) of Section 501 above, the Holders of at least 33% in aggregate principal amount of the Outstanding Securities, or (b) in the case of any other Event of Default, the Holders of a majority in aggregate principal amount of the Outstanding Securities, may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof), and any interest accrued thereon, of all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such declaration of acceleration with respect to Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as hereinafter in this Article provided, if all Events of Default with respect to Securities have been cured or waived (other than the non-payment of principal of the Securities which has become due solely by reason of such declaration of acceleration), then, and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding Securities may, by written notice to the Company and the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such rescission or annulment shall affect any subsequent default or impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Securities.
SECTION 503.Collection of Indebtedness and Suits for Enforcement by Trustee
The Company covenants that if
(1) default is made in the payment of any interest on any Security of a series 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 a series at the Stated Maturity thereof and such default continues for a period of 3 days,
the Company will, upon written demand of the Trustee, pay to it, for the benefit of the Holders of such Securities of such series, the whole amount then due and payable on such Securities of such series for principal (and premium, if any) and interest, if any, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and any overdue interest, at the rate or rates prescribed therefor in such Securities of such series, 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 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, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities 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 other obligor upon such Securities, wherever situated.
If any Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights.
SECTION 504. Trustee May File Proofs of Claim
In case of the pendency of any receivership, insolvency, liquidation (other than a solvent liquidation), bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the Securities 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 for the payment of overdue principal 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 (and premium, if any) and interest 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 to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected
Any money collected by the Trustee pursuant to this Article shall be applied in the following order with respect to the Securities of any series, 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, upon presentation of the Securities 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 under Section 607;
SECOND: In case the principal and premium, if any, of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest, if any, on the Securities of such a series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee and to the extent permitted by law) upon the overdue installments of interest at the rate prescribed therefor in such Securities, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference;
THIRD: In case the principal or premium, if any, of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal and premium, if any, and interest, if any, with interest upon the overdue principal and premium, if any, and (to the extent that such interest has been collected by the Trustee and to the extent permitted by law) upon overdue installments of interest at the rate prescribed therefor in the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal and any premium and interest, without preference or priority of principal over interest, or of interest over principal or premium, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal and any premium and accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto.
SECTION 507. Limitation on Suits
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities;
(2) (a) in the case of an Event of Default described under subparagraph
(1) or (2) of Section 501 above, the Holders of at least 33% in
aggregate principal amount of the Outstanding Securities, or (b) in the
case of any other Event of Default, the Holders of a majority in
aggregate principal amount of the Outstanding Securities, 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 90 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 90-day period by the Holders of a majority in principal amount of the Outstanding Securities;
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
Subject to Section 507, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium,
if any) and (subject to Section 311) interest, if any, on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Company, the Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders
The Holders of a majority in principal amount of the Outstanding Securities 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, 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 action so directed would not be prejudicial to Holders of any other series of Outstanding Securities not taking part in such action; provided, further, that the Trustee shall be under no obligation to determine whether any such direction shall be so prejudicial.
SECTION 513. Waiver of Past Defaults
The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest, if any, on any Security, 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 affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs
All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant in such suit, but the provisions of this Section 514 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or interest, if any, on any Security on or after the Stated Maturity or Maturities expressed in such Security.
ARTICLE VI
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities
(a) Except during the continuance of a default with respect to the Securities of any series,
(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 examine the same to determine whether or not they conform to the requirements of this Indenture.
(b) In case a 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 man would exercise or use under the circumstances in the conduct of his 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 willful 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 judgment made in good faith by a Responsible Officer, unless the Trustee was negligent in ascertaining the pertinent facts;
(3) no provision of this Indenture shall require the Trustee to spend 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 repayment of such funds or adequate indemnity against such risk or liability satisfactory to the Trustee has not been assured to it; and
(4) 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 not less than a majority in principal amount of the Outstanding Securities of any series, determined as provided in Section 512, 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.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct of, or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 601.
SECTION 602. 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 by mail to all Holders of Securities of such series 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 fund installment with respect to 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 or a Responsible Officer of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no
such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section 602, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(d) 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;
(e) the Trustee shall be under no obligation to expend or risk its own funds or to exercise, at the request or direction of any of the Holders, any of the rights or powers vested in it by this Indenture pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled upon reasonable prior request and during normal business hours to examine the books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and shall not be liable for the actions or omissions of such agents appointed by it with due care; and
(h) The Trustee shall not be charged with knowledge of any default or Event of Default, as the case may be, with respect to the Securities of any series unless either (1) a Responsible Officer of the Trustee shall have actual knowledge of the default or an Event of Default, as the case may be, or (2) written notice of such default or Event of Default, as the case may be, shall have been given to the Trustee by the Company pursuant to Section 1011 hereof, by any other obligor on such Securities or by any Holder of such Securities.
SECTION 604. Not Responsible for Recitals or Issuance of Securities
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent nor any party hereto (other than the Company) assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent nor any party hereto (other than the Company) shall be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any Security Exchange Agent/Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Exchange Agent/Registrar or such other agent.
SECTION 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.
SECTION 602. Compensation and Reimbursement
The Company agrees
(1) to pay to the Trustee from time to time such compensation as is agreed upon in writing, which compensation shall not be limited by any provision of law regarding compensation of the trustee of an express trust;
(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel, which compensation, expenses and disbursements shall be set forth in sufficient written detail to the satisfaction of the Company), except any such expense, disbursement or advance as may be attributable to its or their negligence or bad faith; and
(3) to indemnify each of the Trustee, its officers, directors and employees for, and to hold it harmless against, any loss, liability or expense incurred without negligence, bad faith, or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Obligations under this Section 607(3) will survive the satisfaction and discharge of this Indenture pursuant to Section 401 hereof.
SECTION 608. Disqualification; Conflicting Interests
If the Trust Indenture Act shall be applicable to a series of Securities issued hereunder and the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, then the Trustee shall either eliminate such in-
terest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be eligible to act as trustee under the Trust Indenture Act and which shall have a combined capital and surplus of at least $50,000,000. If the Trustee does not have an office in The City of New York, the Trustee may appoint an agent in The City of New York reasonably acceptable to the Company to conduct any activities which the Trustee may be required under this Indenture to conduct in The City of New York. If the Trustee does not have an office in The City of New York or has not appointed an agent in The City of New York, the Trustee shall be a Participant in DTC and in the FAST distribution systems. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of a United States federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 609, 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 609, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor Trustee
(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
(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. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series, subject to Section 609.
(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.
If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days of such removal, the Trustee subject to such removal may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series, subject to Section 609.
(d) If at any time:
(1) the Trustee shall fail to comply with section 310(b) of the Trust Indenture Act pursuant to Section 608, with respect to any series of Securities to which the Trust Indenture Act may be applicable, after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by giving notice in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall 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.
(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, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but on request of the Company or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section 611, 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 612. Merger, Conversion, Consolidation or Succession to Business
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collecting of Claims Against Company
(a) Subject to subsection (b) of this Section 613, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within three months prior to a default, as defined in subsection (c) of this Section 613, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and the holders of other indenture securities, as defined in subsection (c) of this Section 613:
(1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest effected after the beginning of such three months' period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection (a), or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been applied by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three months' period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any such claim by any Person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third Person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three months' period;
(C) to realize, for its own account, but only to extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three months' period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default, as defined in subsection (c) of this Section 613, would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C) of this Section 613, against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D) of this Section 613, property substituted after the beginning of such three months' period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee shall be required to account for the funds and property held in such special account, the proceeds thereof shall be apportioned among the Trustee, the Holders and the holders of other indenture securities in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, as applicable, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee and the Holders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, as applicable, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, as applicable, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim.
Any Trustee which has resigned or been removed after the beginning of such three months' period shall be subject to the provisions of this Section 613 as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three months' period, it shall be subject to the provisions of this Subsection if and only if the following conditions exist:
(i) the receipt of property or reduction of claim, which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such three months' period; and
(ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal.
(b) There shall be excluded from the operation of subsection
(a) of this Section 613 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depository, or other similar capacity;
(4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction, as defined in subsection (c) of this Section 613;
(5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within
the classification of self-liquidating paper, as defined in subsection
(c) of this Section 613.
(c) For the purposes of this Section 613 only:
(1) the term "default" means any failure to make payment in full of the principal of or interest on any of the Securities or upon the other indenture securities when and as such principal or interest becomes due and payable;
(2) the term "other indenture securities" means securities upon which the Company is an obligor (as defined in the Trust Indenture Act) outstanding under any other indenture (i) under which the Trustee is also trustee, (ii) which contains provisions substantially similar to the provisions of this Section 613, and (iii) under which a default exists at the time of the apportionment of the funds and property held in such special account;
(3) the term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Code or Title 11 of the United States Code.
SECTION 614. Authenticating Agents
From time to time the Trustee, with the prior written approval of the Company, may appoint one or more Authenticating Agents with respect to one or more series of Securities with power to act on the Trustee's behalf and subject to its direction in the authentication and delivery of Securities of such series issued upon original issuance and upon exchange, registration of transfer or partial redemption thereof or in connection with transfers and exchanges under Sections 304, 305, 306, 307, 308 and ll07 as fully to all intents and purposes as though the Authenticating Agent had been expressly authorized by those Sections of this Indenture to authenticate and deliver Securities of such series. For all purposes of this Indenture, the authentication and delivery of Securities by an Authenticating Agent pursuant to this Section 614 shall be deemed to be authentication and delivery of such Securities "by the Trustee". Each such Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 614 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 an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 614, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 614.
Any corporation into which any Authenticating Agent may be merged or with which it may be consolidated, or any corporation resulting from, any merger or consolidation or to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 614, without the execution or filing of any paper or any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation.
An Authenticating Agent may resign at any time by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 614, the Trustee may appoint a successor Authenticating Agent with the prior written approval of the Company and shall mail notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as the names and addresses of such Holders appear on the Security Register. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 614.
The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 614 as may be agreed in a separate writing among the Company, the Trustee and such Authenticating Agent, and the Trustee shall be entitled to be reimbursed for such payments pursuant to Section 607.
If an appointment with respect to one or more series of Securities is made pursuant to this Section 614, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Securities of the series designated herein referred to in the within mentioned Indenture.
IBJ Whitehall Bank & Trust Company, as Trustee
as Authenticating Agent
Dated:__________ By: ________________________________
Authorized Signatory
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders
701.
The Company will furnish or cause to be furnished to the Trustee with respect to the Registered Securities of each series
(a) semi-annually, not later than 15 days after each Regular Record Date, or, in the case of any series of Registered Securities on which semi-annual interest is not payable, not more than 15 days after such semi-annual dates as may be specified by the Trustee, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date or semi-annual date, as the case may be, and
(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee is Security Exchange Agent/Registrar for any series of Registered Securities, no such list shall be required to be furnished with respect to any such series.
SECTION 702. Preservation of Information; Communications to Holders
The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Exchange Agent/Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished.
SECTION 703. Reports by Trustee
(a) Within 60 days after the initial Regular Record Date of each calendar year, commencing in 1999, the Trustee shall transmit by mail to all Holders of Securities a brief report dated as of such date, of such year with respect to any of the following events which may have occurred within the previous 12 months (but if no such event has occurred within such period no report need be transmitted):
(1) any change to its eligibility under Section 609 and its qualifications under Section 608;
(2) the creation of or any material change to a relationship specified in Section 608;
(3) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of one percent of the principal amount of the Securities outstanding on the date of such report;
(4) any change to the amount, interest rate and maturity date of all
other indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of
such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a
creditor relationship arising in any manner described in Sections
613(b)(2), (3), (4) or (6);
(5) any change to the property and funds, if any, physically in the possession of the Trustee as such on the date of such report;
(6) any additional issue of Securities which the Trustee has not previously reported; and
(7) any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 602.
(b) The Trustee shall transmit by mail to all Holders of Securities a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to subsection (a) of this Section 703 (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or
may claim a lien or charge, prior to that of the Securities, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the securities outstanding at such time, such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each U.S. stock exchange upon which any Securities are listed and with the Company. The Company will notify the Trustee when any Securities are listed on any U.S. stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms
The Company shall not consolidate with or merge with or into any Person, or convey, transfer or lease its consolidated properties and assets substantially as an entirety (in one transaction or in a series of related transactions) to any Person, or permit any Person to merge into or consolidate with the Company, unless (i)(x) the Company will be the surviving or continuing Person or (y) if other than the Company, the surviving or continuing Person or purchaser or lessee will be a corporation incorporated under the laws of the United States, one of the States thereof or the District of Columbia or Canada and expressly assumes by supplemental indenture the Company's obligations under each series of the Securities then Outstanding and under the Indenture, (ii) immediately before and after giving effect to such transaction, no Event of Default and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing, (iii) the Company or the other surviving or continuing Person shall continue to have a valid, perfected first priority interest in the Collateral after giving effect to such transaction
and (iv) the Company shall have delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, transfer or lease and such supplemental indenture (if any) comply with this Indenture.
SECTION 802. Successor Corporation to be Substituted
Upon any consolidation by the Company with or merger by the Company into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made 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 Person had been named as the Company herein, and thereafter the predecessor entity shall be relieved of all obligations and covenants under this Indenture and the Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indenture without Consent of Holders
Without the consent of any Holders, the Company 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 entity to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities;
(2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company;
(3) to add any additional Events of Default (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);
(4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to facilitate the issuance of Securities in uncertificated form, or to permit or facilitate the issuance of extendible Securities;
(5) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only as to the Securities of any series created by such supplemental indenture and Securities of any series subsequently created to which such change or elimination is made applicable by the subsequent supplemental indenture creating such series;
(6) to secure the Securities pursuant to the requirements of Section 1004 or otherwise;
(7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301;
(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, pursuant to the requirements of Section 611(b);
(9) to provide for any rights of the Holders of Securities of any series to require the repurchase of Securities of such series by the Company;
(10) to modify the restrictive legends set forth on the face of the
form of Security in Section 202 or as are otherwise set forth pursuant
to Section 201 and 301, or modify the form of certificate set forth in
Section 311; provided, however, that any such modification shall not
materially and adversely affect the interest of the Holders of the
Securities;
(11) to amend this Indenture to conform to the provisions of the Trust Indenture Act as in effect at the time of the execution of such supplemental indenture;
(12) to cure any ambiguity, omission or defect, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not materially and adversely affect the interests of the Holders of Securities of any series; or
(13) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to Holders, which does not involve a change described in clauses (1), (2) or (3) of Section 902 hereof and which, in the judgment of the Trustee, is not to the prejudice of the Trustee, or in order to provide for the duties, responsibilities and compensation of the Trustee as a transfer agent in the event one registered Security of any series is issued in the aggregate principal amount of all outstanding Securities of such series in which Holders will hold an interest.
SECTION 902. Supplemental Indentures with Consent of Holders
With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of principal of or interest, if any, on, any Security, or reduce the principal amount thereof or the rate of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or the 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, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or
(3) modify any of the provisions of this Section 902, 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, provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section
902, or the deletion of this proviso, in accordance with the
requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section 902 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture
shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act
Every supplemental indenture executed pursuant to this Article shall, if so required by the Trust Indenture Act, conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest
The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. An installment of principal of or interest on the Securities of a series shall be considered paid on the date it is due if the Trustee or Paying Agent holds at 11:00 a.m. New York City Time on that date money deposited by the Company in immediately available funds and designated for, and sufficient to pay, the installment in full.
Neither the Company nor any agent of the Company (including but not limited to the Paying Agent) will have any responsibility or liability for any aspect relating to payments made or to be made by the Depositary to DTC in respect of the
Global Securities of a series or the beneficial interests therein, subject only to limited indemnification rights of the Depository. None of the Company, the Trustee, the Paying Agent, the Depositary or any agent of any of the foregoing will have any responsibility or liability for any aspect relating to payments made or to be made by DTC on account of a Participant's or Indirect Participant's ownership of a beneficial interest in a Global Security or for maintaining, supervising or reviewing any records relating to a Participant's interests in such Global Security.
SECTION 1002. Maintenance of Office or Agency
The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities of any series may be presented or surrendered for payment, and where notices and demands to or upon the Company in respect of the Securities of such series and this Indenture may be served and an office or agency of a Security Exchange Agent/Registrar in such Place of Payment where Securities may be surrendered for registration of transfer or exchange. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of any 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, all such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee and the Company hereby appoints the Paying Agent as its agent to receive all such presentations, surrenders, notices and demands. In the event any such notice or demands are so made or served on the Paying Agent, the Paying Agent shall promptly forward copies thereof to the Company and the Trustee.
The Company may also from time to time designate one or more other offices or agencies (in or outside of such Place of Payment) where the Securities of one or more series and any appurtenant coupons 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 each Place of Payment for any series of Securities for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust
If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and
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 sufficient to pay the principal (and premium, if any) or interest, if any, so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, no later than 10:00 a.m. New York City Time, on each due date of the principal of (and premium, if any) or interest, if any, on any Securities of that series, deposit with a Paying Agent a sum in immediately available funds sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto.
The Company will cause each Paying Agent for any series of Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 1003, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest, if any, on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest, if any, on the Securities of that series; and
(3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by the Company or by any Paying Agent to the Trustee, the Company or such Paying Agent, as the case may be, shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest, if any, on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease.
SECTION 1004. Limitation on Liens
If this covenant shall be made applicable to the Securities of a particular series, (i) prior to the Effective Date, the Company will not issue, assume or guarantee any Indebtedness secured by a Lien upon any of its property or assets, except for the Lien of this Indenture and to the extent provided in the Escrow Agreement, and (ii) each of the Company and any Significant Subsidiary will not issue, assume or guarantee any Indebtedness secured by a Lien upon any property or assets (other than cash or cash equivalents) of the Company or such Significant Subsidiary, as applicable, without effectively providing that the Outstanding Securities (together with, if the Company so determines, any other indebtedness or obligation then existing or thereafter created ranking equally with such Securities) shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured. The foregoing restriction on Liens from and after the Effective Date will not, however, apply to:
(a) Liens in existence on the date of original issue of such series of Securities;
(b) any Lien created or arising over any property which is acquired,
constructed or created by the Company or any of its Significant
Subsidiaries, but only if (A) such Lien secures only principal amounts
(not exceeding the cost of such acquisition, construction or creation)
raised for the purposes of such acquisition, construction or creation,
together with any costs, expenses, interest and fees incurred in
relation thereto or a guarantee given in respect thereof, (B) such Lien
is created or arises on or before 180 days after the completion of such
acquisition, construction or creation and (C) such Lien is confined
solely to the property so acquired, constructed or created;
(c) any Lien securing amounts not more than 180 days overdue or otherwise being contested in good faith;
(d) (i) rights of financial institutions to offset credit balances in
connection with the operation of cash management programs established
for the benefit of the Company and/or a Significant Subsidiary or in
connection with the issuance of letters of credit for the benefit of
the Company and/or a Significant Subsidiary; (ii) any Lien securing
indebtedness of the Company and/or a Significant Subsidiary incurred in
connection with the financing of accounts receivable; (iii) any Lien
incurred or deposits made in the ordinary course of business,
including, but not limited to, (A) any mechanics', materialmen's,
carriers', workmen's, vendors' or other like Liens and (B) any Liens
securing amounts in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) any Lien upon
specific items of inventory or other goods and proceeds of the Company
and/or a Significant Subsidiary securing obligations of the Company
and/or a Significant Subsidiary in respect of bankers' acceptances
issued or created for the account of such person to facilitate the
purchase, shipment or storage of such inventory or other goods; (v) any
Lien incurred or deposits made securing the performance of tenders,
bids, leases, trade contracts (other than for borrowed money),
statutory obligations, surety bonds, appeal bonds, government
contracts, performance bonds, return-of-money bonds, letters of credit
not securing borrowings and other obligations of like nature incurred
in the ordinary course of business; (vi) any Lien created by the
Company or a Significant Subsidiary under or in connection with or
arising out of any transactions or arrangements entered into in
connection with hedging or management of risks relating to the
electricity industry or natural gas distribution industry; (vii) any
Lien constituted by a right of set off or right over a margin call
account or any form of cash or cash collateral or any similar
arrangement for obligations incurred in respect of Currency, Interest
Rate or Commodity Agreements; (viii) any Lien arising out of title
retention or like provisions in connection with the purchase of goods
and equipment in the ordinary course of business; (ix) any Lien
securing reimbursement obligations under letters of credit, guaranties
and other forms of credit enhancement given in connection with the
purchase of goods and equipment in the ordinary course of business; and
(x) any Lien securing obligations under Currency, Interest Rate or
Commodity Agreements;
(e) Liens in favor of the Company or a Subsidiary;
(f) (i) Liens on any property or assets acquired from an entity which is merged with or into the Company or a Significant Subsidiary, or any Liens on the property or assets of any corporation, limited liability company or other entity existing at the time such corporation, limited liability company or other entity becomes a Subsidiary of the Company and, in either such case, is not created in anticipation of any such transaction (unless such Lien is created to secure or provide for the payment of any part of the purchase price of such entity); (ii) any Lien on any property or assets existing at the time of acquisition thereof and which is not created in anticipation of such acquisition (unless such Lien was created to secure or provide for the payment of any part of the purchase price of such property or assets); and (iii) any Lien created or outstanding on or over any asset of any company which becomes a Significant Subsidiary on or after the date of the issuance of such Securities where such Lien is created prior to the date on which such company becomes a Significant Subsidiary;
(g) (i) Liens required by any contract, statute or regulation in order to permit the Company or a Significant Subsidiary to perform any contract or subcontract made by it with or at the request of a governmental entity or any department, agency or instrumentality thereof, or to secure partial, progress, advance or any other payments by the Company or a Significant Subsidiary to such governmental unit pursuant to the provisions of any contract, statute or regulation; (ii) any Lien securing industrial revenue, development, pollution control or similar bonds issued by or for the benefit of the Company or a Significant Subsidiary, provided that such industrial revenue, development, pollution control or similar bonds do not provide recourse generally to the Company and/or such Significant Subsidiary; and (iii) any Lien securing taxes or assessments or other applicable governmental charges or levies;
(h) (i) any Lien which arises pursuant to any order of attachment distraint or similar legal process arising in connection with court proceedings and any Lien which secures the reimbursement obligation for any bond obtained in connection with an appeal taken in any court proceeding, so long as the execution or other enforcement of such Lien arising pursuant to such legal process is effectively stayed and the claims secured thereby are being contested in good faith and, if appropriate, by appropriate legal proceedings, and any Lien in favor of a plaintiff or defendant in any action before a court or tribunal as security for costs and/or other expenses; and (ii) any Lien arising by operation of law or by order of a court or tribunal or any Lien arising
by an agreement of similar effect, including but not limited to judgment Liens;
(i) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Liens referred to in the foregoing clauses, for amounts not exceeding the principal amount of the Indebtedness secured by the Lien so extended, renewed or replaced, provided that such extension, renewal or replacement Lien is limited to all or a part of the same property or assets that were covered by the Lien extended, renewed or replaced (plus improvements on such property or assets);
(j) any Lien created in connection with Project Finance Debt;
(k) any Lien created by MidAmerican Energy that is then permitted to be created under the term of MidAmerican Energy's then existing mortgages and indentures on the terms in effect at the time of creation of the Lien;
(l) any Lien created in connection with the securitization of some or all of the assets of MidAmerican Energy and the associated issuance of Indebtedness as authorized by applicable state or federal law in connection with the restructuring of jurisdictional electric or gas businesses; and
(m) any Lien on stock created in connection with a mandatorily convertible or exchangeable stock or debt financing, provided that any such financing may not be secured by or otherwise involve the creation of a Lien on any capital stock of MHC or MidAmerican Energy or any successor thereto.
Notwithstanding the foregoing, the Company and/or a Significant Subsidiary may create Liens over any of their respective property or assets, so long as the aggregate amount of Indebtedness secured by all such Liens (excluding therefrom the amount of Indebtedness secured by Liens set forth in clauses (a) through (m), inclusive, above) does not exceed 10% of Consolidated Net Tangible Assets in the aggregate calculated as of the date of creation of such Liens (based upon the Consolidated Net Tangible Assets appearing on the most recently available balance sheet for the most recently concluded calendar quarter).
SECTION 1005. Limitation on Distributions
If this covenant shall be made applicable to the Securities of a particular series, the Company covenants and agrees that prior to the Effective Date, it shall not
declare, recommend, make or pay any Distribution to any of its shareholders except to the extent necessary to consummate the Transactions. If this covenant shall be made applicable to the Securities of a particular series, from and after the Effective Date, the Company covenants and agrees that, so long as any Securities of that series remain outstanding, the Company shall not declare, recommend, make or pay any Distribution to any of its shareholders unless there exists no Event of Default and no such Event of Default will result from the making of such Distribution and either:
(a) at the time and as a result of such Distribution, the Company's Leverage Ratio does not exceed 0.67:1 and the Company's Interest Coverage Ratio is not less than 2.2:1; or
(b) (if the Company is not in compliance with the foregoing ratios) at such time its senior secured long-term debt rating from the Rating Agencies is at least BBB (or its then equivalent) with S&P and DCR and Baa2 (or its then equivalent) with Moody's.
The foregoing restriction on Distributions shall cease to be in effect if the
Rating Agencies confirm that without the restrictions contained in this Section
1005 the Company's senior secured long term debt would still be rated at least
BBB+ (or its then equivalent) from each of S&P and DCR and Baa1 (or its then
equivalent) from Moody's. If the restriction on Distributions set forth in this
Section 1005 ceases to be in effect, the Company will be under no obligation to
reinstate such restriction or otherwise observe its terms in the event such
ratings are thereafter lowered or withdrawn.
In order to obtain the release of the restriction on Distributions, the Company shall deliver to the Trustee written confirmation from each Rating Agency of the ratings conditions as described in the preceding paragraph. Securities of any series which are entitled to the benefit of this Section 1005 and are authenticated and delivered after the release of the restriction on Distributions may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to the current inapplicability of such restriction.
SECTION 1006. Limitation on Indebtedness of the Company
If this covenant shall be made applicable to a particular series, the Company
shall not incur any Indebtedness other than (a) as part of the Company's
permitted businesses and activities that are described in Section 1008 hereof or
(b) other In-
debtedness incurred subsequent to receipt of written confirmation from the Rating Agencies that such incurrence would not result in a Ratings Downgrade.
SECTION 1007. Limitation on Indebtedness of MHC
The Company shall not permit MHC to Incur any Indebtedness other than Indebtedness of MHC outstanding on the date of original issuance of the Securities under MHC's agreements then in existence and extensions of such Indebtedness.
SECTION 1008. Limitation on Business Activities
(a) Prior to the Effective Date, the Company shall not engage in any business operations other than those in connection with the issuance of the Securities and the Transactions, and the Company shall not own any Investments (other than Temporary Cash Investments, Investments in Subsidiaries and Investments permitted by the Escrow Agreement) in any other Person.
(b) From and after the Effective Date, the Company shall not enter into any business operations other than (w) the transactions contemplated by the Indenture, the Escrow Agreement, the Registration Rights Agreement and the Merger Agreement, (x) activities related to the acquisition, management and ownership of MHC, (y) entering into and performing any agreements to accomplish the foregoing and (z) exercising any corporate or other powers that are incidental to or necessary, suitable or convenient for the accomplishment of the foregoing; provided, that the Company may enter into additional business operations from time to time in the future if, prior to doing so, it shall have obtained written confirmation from the Rating Agencies that the entering into of such new businesses will not result in a Ratings Downgrade.
(c) From and after the Effective Date, the Company shall cause its Significant Subsidiaries to engage only in (x) those types of businesses and other activities in which the Company or any of its direct or indirect subsidiaries or controlled partnerships or joint ventures (collectively, "MidAmerican Group") are engaged on the date hereof (including, without limitation, any geographic or other expansion of such businesses or activities) and (y) any other business or activity which is deemed necessary, useful or desirable in connection with such existing businesses and activities or any such permitted additional geographic or other expansions of such businesses and activities.
SECTION 1009. Operational Covenants
(a) The Company shall, and shall cause its Significant Subsidiaries to:
(1) comply with Project Documents and operate and maintain all utility facilities which are operated by the Company or any Significant Subsidiary in accordance with reasonably prudent utility practices;
(2) obtain and maintain all necessary governmental approvals and other consents and approvals required at any time in connection with all utility facilities which are operated by the Company or any Significant Subsidiary for so long as such facilities remain in operation;
(3) preserve and maintain good title or valid leasehold rights
in the real property owned or leased by them from time to time and the
personal property owned by them, from time to time, subject only to
Liens permitted to exist pursuant to the exceptions contained in
Section 1004(a)-(m) hereof;
(4) comply with all applicable laws and governmental approvals;
(5) obtain and maintain customary insurance, subject to reasonable availability and costs;
(6) pay and discharge all material taxes, assessments, charges and claims, other than those which are the subject of a good faith contest and for which adequate reserves have been established; and
(7) if a casualty or condemnation shall occur in respect of facilities which are operated and controlled by the Company or its Significant Subsidiaries, diligently pursue all rights to compensation.
(b) The Company and its Significant Subsidiaries are not required to comply with clauses (1) through (7) of Section 1009(a) above, in any particular instance if the failure to comply in such instance would not reasonably be expected to have a Material Adverse Effect.
SECTION 10.10 Change in Operational Covenants When CalEnergy Securities Rated Investment Grade and Certain CalEnergy Securities Have Been Redeemed
(a) In the event that (i) CalEnergy's senior unsecured long term debt securities (the "Reference Securities") are rated Baa3 or better by Moody's and BBB- or better by each of S&P and DCR (or, in any case, if such person ceases to rate such
Reference Securities for reasons outside the control of the Company, the equivalent investment grade credit rating from any other "nationally recognized statistical rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act) selected by the Company as a replacement rating agency) (the "Rating Event Date"), (ii) no Event of Default or event which with notice or passage of time would constitute an Event of Default shall exist on the Rating Event Date, and (iii) CalEnergy has redeemed, repurchased or defeased (by way of covenant defeasance or other defeasance) all of its 9 1/2% Senior Notes due 2006 issued pursuant to the terms of the Indenture, dated as of September 20, 1996, between CalEnergy and IBJ Schroder Bank & Trust Company, then Section 1009 of this Indenture shall be of no further force and effect and shall cease to apply to the Securities and the failure to comply with Section 1009 will not constitute a default or Event of Default under Article V of this Indenture.
(b) In the event that subsequent to the Rating Event Date, the Reference Securities shall thereafter be rated less than Baa3 by Moody's or less than BBB- by each of S&P and DCR (or such other rating agency selected by the Company as provided in Section 1010(a)(i) above), then the operational covenants contained in Section 1009 of this Indenture shall not be reinstated.
SECTION 1011. Statement by Officers as to Default
The Company will give the Trustee notice, in the form of an Officers' Certificate, of any Event of Default relating to the Company or of any condition or event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default relating to the Company within five (5) days after the occurrence of such Event of Default becomes known to the Company, and of the measures it is taking to remedy such Event of Default.
The Company will deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate, stating that in the course of the performance by the signers thereof of their duties as Officers of the Company they would normally have knowledge of any default by the Company in the performance and observance of any of the covenants contained in the Indenture, stating whether or not the signers have knowledge of any such default without regard to any period of grace or requirement of notice and, if so, specifying each such default of which such signer has knowledge and the nature thereof.
SECTION 1012. Modification or Waiver of Certain Covenants
The Company may omit in any particular instance to comply with any term, provision or condition set forth in this Indenture with respect to the Securities of any series if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either modify the covenant or waive such compliance in such instance or generally waive compliance with such term, provision or condition, provided that no such modification shall without the consent of each Holder of Securities of such series (a) change the stated maturity upon which the principal of or the interest on the Securities of such series is due and payable, (b) reduce the principal amount or redemption price thereof or the rate of interest thereon, (c) change any place of payment or the currency in which the Securities of such series or any premium or the interest thereon is payable, (d) impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after Redemption Date) or (e) reduce the percentage in principal amount of the outstanding Securities of such series, the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture. The Securities owned by the Company or any of its affiliates shall be deemed not to be Outstanding for, among other purposes, consenting to any such modification.
SECTION 1013. Further Assurances
The Company and the Trustee shall execute and deliver all such other documents, instruments and agreements and do all such other acts and things as may be reasonably required to enable the Trustee to exercise and enforce its rights under this Indenture and under the documents, instruments and agreements required under this Indenture and to carry out the intent of this Indenture.
SECTION 1014. Copies Available to Holders
Copies of this Indenture shall be furnished only to Holders upon the written request of such holder, without change, provided that such written request is made to the Company in accordance with Section 105.
SECTION 1015. Reports by Company
Notwithstanding that the Company may not be required to be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, from and after the date of effectiveness of any registration statement required to be filed by the Company pursuant to any Registration Rights Agreement or otherwise relating to a
particular series of Securities, the Company shall file with the Commission or cause to be filed with the Commission and provide copies to the Trustee (and, if the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, to the Holders of the Securities) with the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) that the Company is (or would be if it were still so subject) required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
Prior to the date on which the Company becomes subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the Company will provide, without charge, upon the written request of (x) a Holder of any Securities or (y) a prospective Holder of any of the Securities who is a QIB and is designated by an existing Holder of any of the Securities (in each case, with a copy to the Trustee), with the information with respect to the Company required to be delivered under Rule 144A(d)(4) under the Securities Act to enable resales of the Securities to be made pursuant to Rule 144A. The Company shall also comply with the other provisions of ss. 314(a) of the Trust Indenture Act.
ARTICLE XI
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 in or contemplated by Section 301 for Securities of any series) in accordance with this Article Eleven.
SECTION 1102. Election to Redeem; Notice to Trustee
The election of the Company to redeem any Securities shall be authorized by a Board Resolution and evidenced by an Officers' Certificate. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, or pursuant to an election by the Company which is subject to a condition specified 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 or condition.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed
If less than all the Securities of any series 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 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.
Securities shall be excluded from eligibility for selection for redemption if they are identified by certificate number in a written statement signed by an authorized officer of the Company and delivered to the Security Exchange Agent/Registrar at least 45 days prior to the Redemption Date as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Company or (b) an entity specifically identified in such written statement which is an Affiliate of the Company.
The Trustee shall promptly notify the Company 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 Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption
Notice of redemption shall be given not less than 30 days nor more than 60 days prior to the Redemption Date to each Holder of Securities to be redeemed in accordance with Section 106.
All notices of redemption shall include the CUSIP number and shall state:
1023.
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price
On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in same day funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date (to the extent that such amounts are not already on deposit at such time in accordance with the provisions of Sections 401, 402 or 1012).
SECTION 1106. Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest) such Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued and unpaid interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, and in the case of Registered Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 306.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
SECTION 1107. Securities Redeemed in Part
Any Security (including any Global Security) which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee upon written direction shall authenticate and deliver to the Holder of such Security without service charge, a new 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; provided, that if a Global Security is surrendered for partial redemption, no new Global Security shall be issued but instead the principal amount of the surrendered Global Security shall be reduced by an endorsement to Schedule A to such Global Security by the Security Exchange Agent/Registrar equal to the redeemed portion of the principal of the Global Security so surrendered, whereupon such Global Security shall be delivered to the Depositary; and provided further that following any such partial redemption the Securities selected for redemption and any beneficial interests therein shall not have had their principal amount reduced below the minimum authorized denomination for Securities of such series and for any beneficial interests therein. In the case of a partial redemption of the Global Securities, DTC (and, in turn, its Participants) shall have the responsibility to select the interests in such Global Securities to be redeemed in accordance with Applicable Procedures.
ARTICLE XII
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 Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities
In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Company may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Company or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Company and delivered to the Trustee for cancellation pursuant to Section 311, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section 1202, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Company through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund Redemption Price specified in such Securities.
SECTION 1203. Redemption of Securities for Sinking Fund
Not less than 30 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying (a) the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, (b) whether or not the Company intends to exercise its right, if any, to make an optional sinking fund payment with respect to such series on the next ensuing sinking fund payment date and, if so, the amount of such optional sinking fund payment, and (c) the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering
and crediting Securities of that series pursuant to Section 1202, and will also deliver to the Trustee any Securities to be so delivered. Such written statement shall be irrevocable and upon its receipt by the Trustee the Company shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Company, on or before any such 30th day, to deliver such written statement and Securities specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Company (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect therefor and (ii) that the Company will make no optional sinking fund payment with respect to such series as provided in this Section 1203.
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 1105, 1106 and 1107.
The Trustee shall not redeem or cause to be redeemed any Security of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund during the continuance of a default in payment of interest with respect to Securities of that series or an Event of Default with respect to the Securities of that series except that, where the mailing of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Company a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 513 or the default or Event of Default cured on or before the 30th day preceding the sinking fund payment date, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section 1203 to the redemption of such Securities.
ARTICLE XIII
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301. Purposes of Meeting
A meeting of the Holders may be called at any time from time to time pursuant to this Article Thirteen for any of the following purposes:
(1) to give any notice to the Company and to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to Article Nine hereof;
(2) to remove the Trustee and appoint a successor trustee pursuant to Article Six hereof;
(3) to consent to the execution of an indenture supplemental hereto pursuant to Section 902 hereof.
SECTION 1302. Place of Meetings
(a) The Trustee may at any time (upon not less than 21 days' notice) call a meeting of Holders to be held at such time and at such place in the location determined by the Trustee pursuant to this Section 1302. Notice of every meeting of Holders, 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 mailed to each Holder and published in the manner contemplated by Section 106 hereof.
(b) In case at any time the Company or the Holders of at least an
aggregate principal amount of the Securities sufficient to take action requested
in such notice, shall have requested the Trustee to call a meeting of the
Holders, 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 giving of the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders in the amount above specified may
determine the time (not less than 21 days after notice is given) and the place
in the location determined by the Company or the Holders pursuant to this
Section 1302 for such meeting and may call such meeting to take any action
authorized in Section 1301 hereof by giving notice thereof as provided in
Section 1302(a) hereof.
SECTION 1303. Voting at Meetings
To be entitled to vote at any meeting of Holders, a Person shall be (i) a Holder or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons so entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel, and any representatives of the Company and its counsel.
SECTION 1304. Voting Rights, Conducts and Adjournment
(a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding of Securities of a 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. Except as otherwise permitted or required by any such regulations, the holding of Securities of a series shall be proved in the manner specified in Article Two hereof and the appointment of any proxy shall be proved in such manner as is deemed appropriate by the Trustee or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company customarily authorized to certify to the holding of a security such as a Global Note.
(b) At any meeting of Holders, the representative of Persons holding or representing Securities of a series in an aggregate principal amount sufficient under the appropriate provision of this Indenture to take action upon the business for the transaction of which such meeting was called shall constitute a quorum. Any meetings of Holders duly called pursuant to Section 1303 hereof may be adjourned from time to time by vote of the Holders (or proxies for the Holders) of a majority of the Securities of a series represented at the meeting and entitled to vote, whether or not a quorum shall be present; and the meeting may be held as so adjourned without further notice. No action at a meeting of Holders shall be effective unless approved by Persons holding or representing Securities of a series in the aggregate principal amount required by the provision of this Indenture pursuant to which such action is being taken.
(c) At any meeting of Holders, each Holder or proxy shall be entitled to one vote for each $1,000 principal amount of outstanding Securities of a series held or represented.
SECTION 1305. Revocation of Consent by Holders
At any time prior to (but not after) the evidencing to the Trustee of the taking of any action at a meeting of Holders by the Holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is included in the Securities the Holders of which have consented to such action may, by filing written notice with the Trustee at its principal corporate trust office and upon proof of holding as provided herein, revoke such consent so far as concerns such Securities. Except as aforesaid any such consent given by the Holder of any Securities shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Securities and of any Securities issued in exchange therefore, in lieu thereof or upon transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Securities. Any action taken by the Holders of the percentage in aggregate principal amount of the Holders specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders of all the Securities.
ARTICLE XIV
SECURITY AND PLEDGE OF COLLATERAL
SECTION 1401. Grant of Security Interest. (a) To secure the full and punctual payment when due and the full and punctual performance of all of the obligations under the Securities and this Indenture (the "Obligations"), the Company hereby grants to the Trustee, for the benefit of the Trustee and the Holders, a security interest in all of its right, title and interest in and to the following, whether now owned or hereafter acquired or arising (the "MAVH Inc. Collateral"):
(i) all shares of the stock of MAVH Inc., an Iowa corporation and all shares of stock of MHC Inc., an Iowa corporation ("MHC Inc.") (collectively, the "MAVH Inc. Pledged Shares");
(ii) all certificates representing any of the foregoing; and
(iii) all dividends, cash, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing including, in any event, all shares of stock in MHC Inc. received in exchange for shares of stock in MAVH Inc. as a result of the MidAmerican Merger.
(b) The MAVH Inc. Collateral is also referred to hereinafter as the "Collateral" and the MAVH Inc. Pledged Shares are also referred to hereinafter as the "Pledged Shares."
(c) The foregoing security interest with respect to dividends or distributions in respect of the MAVH Inc. Pledged Shares shall be released in accordance with the provisions of Section 1405(a) hereof.
SECTION 1402. Delivery of Collateral. Any and all certificates or instruments representing or evidencing the Collateral shall be delivered to and held by or on behalf of the Trustee and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Trustee. The Trustee shall have the right, at any time after the occurrence and during the continuance of an Event of Default, in its discretion and without notice to the Company, to transfer to or to register in the name of the Trustee or any of its nominees any or all of the Collateral. In addition, the Trustee shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of different denominations.
SECTION 1403. Representations and Warranties. The Company hereby represents and warrants on the date of original issuance of Securities under this Indenture and upon each date the Company acquires any rights in property that constitutes "Collateral" hereunder as follows:
(a) It is the record and beneficial owner of the MAVH Inc. Pledged Shares described on Schedule I, free and clear of any Lien, except for the Lien created by this Indenture; and effective as of the MidAmerican Merger the Company will be the record and beneficial owner of the MHC Inc. Pledged Shares described on Schedule I as revised pursuant to Section 1404(ii), free and clear of any Lien, except for the Lien created by this Indenture.
(b) It has full corporate power, authority and legal right to pledge all the Collateral pledged by it pursuant to this Indenture.
(c) The MAVH Inc. Pledged Shares described on Schedule I have been, and all shares of stock of MHC Inc. that will be described on Schedule I as revised pursuant to Section 1404(ii) will be, duly authorized and are validly issued, fully paid and non-assessable.
(d) The pledge in accordance with the terms of this Indenture creates a valid and perfected first priority Lien on the MAVH Inc. Collateral and, at the time of the MidAmerican Merger, will create a valid and perfected first priority Lien on all shares of stock of MHC Inc. identified on Schedule I after revised in accordance with Section 1404(ii), in each case securing the payment and performance of the obligations of the Company under this Indenture and the Securities.
(e) The shares described in Schedule I hereto represent 100% of the shares of MAVH Inc. Common Stock owned by the Company on the date of this Indenture.
(f) The number of shares of stock of MHC Inc. that will be described in Schedule I as revised pursuant to Section 1404(ii) will at the time of the MidAmerican Merger represent 100% of the shares of MHC Inc. stock owned by the Company on the date of the MidAmerican Merger and at such time MHC Inc. will be a wholly owned subsidiary of the Company.
(g) The chief executive office of the Company is located (i) prior to the MidAmerican Merger, at 302 South 36th Street, Suite 400, Omaha, Nebraska 68131 and (ii) on and after the MidAmerican Merger, at 666 Grand Avenue, Des Moines, Iowa 50303.
SECTION 1404. Further Assurances. The Company agrees that at any time and from time to time, at the expense of the Company, the Company will promptly execute and deliver all further instruments and documents and take all further action that may be necessary or that the Trustee may reasonably request in order to perfect and protect any Lien granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies in accordance with the terms hereof with respect to any Collateral. Without limiting the foregoing, the Company shall: (i) prior to the MidAmerican Merger, promptly following the issuance by MAVH Inc. of any shares of MAVH Inc. stock after the date of original issuance of Securities under this Indenture, deliver all certificates evidencing such shares to the Trustee as MAVH Inc. Collateral and provide to the Trustee a revised Schedule I, (ii) upon consummation of the MidAmerican Merger, deliver to the Trustee all certificates evidencing shares of stock of MHC Inc. and provide to the Trustee a revised Schedule I
and (iii) not establish a new chief executive office (except as contemplated by
Section 1403(g)) until it has given the Trustee at least 30 days' prior written
notice of its intention to do so, clearly describing in such notice the intended
new location of its chief executive office and providing such other information
as the Trustee may reasonably request. Any revised Schedule I furnished pursuant
to clause (i) or (ii) shall reflect any changes made necessary by the applicable
acquisition or release, at which time the Company shall be deemed to make the
applicable representations and warranties set forth in paragraphs (a)-(d) and
(f) of Section 1403 with respect to such Schedule I, as so revised.
SECTION 1405. Dividends; Voting Rights. (a) Notwithstanding any other provision of this Agreement, so long as no Event of Default has occurred and is continuing, all the Liens created hereunder in respect of any dividends or distributions in respect of the Pledged Securities shall be released upon the payment of such dividends or distributions and, upon such payment, such dividends or distributions shall cease to be MAVH Inc. Collateral and/or Collateral, as the case may be.
(b) Upon the occurrence and during the continuance of an Event of Default and upon written notice thereof from the Trustee to the Company, the Trustee shall be entitled to receive and retain as Collateral all dividends paid and distributions made in respect of the Pledged Shares, whether so paid or made before or after any Event of Default. Any such dividends shall, if received by the Company, be received in trust for the benefit of the Trustee, be segregated from the other property or funds of the Company and be forthwith delivered to the Trustee as Collateral in the same form as so received (with any necessary endorsement).
(c) As long as no Event of Default shall have occurred and be continuing and until written notice thereof from the Trustee to the Company, the Company shall be entitled to receive all dividends and other distributions and to exercise any and all voting and other consensual rights relating to Pledged Shares or any part thereof for any purpose; provided, however, that no vote shall be cast, and no consent, waiver or ratification given or action taken, which would be inconsistent with or violate any provision of this Indenture or the Securities.
(d) Upon the occurrence and during the continuance of an Event of Default, all rights of the Company to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 1405(c) shall cease upon notice from the Trustee to the Company and upon the giving of such notice all such rights shall thereupon be vested in the Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights during the continu-
ance of such Event of Default; provided that such rights shall revert to the Company when such Event of Default is cured or otherwise ceases to exist.
(e) In order to permit the Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 1405(d), and to receive all dividends and distributions which it may be entitled to receive under Section 1405(b), the Company shall, if necessary, upon written notice of the Trustee, from time to time execute and deliver to the Trustee such instruments as the Trustee may reasonably request.
SECTION 1406. Trustee Appointed Attorney-in-Fact. The Company hereby appoints the Trustee as the Company's attorney-in-fact, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Trustee's discretion but only after the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Trustee may deem necessary or advisable in order to accomplish the purposes of this Article XIV, including to endorse and collect all instruments made payable to the Company representing any dividend, interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. This power, being coupled with an interest, is irrevocable.
SECTION 1407. Trustee May Perform. If the Company fails to perform any agreement contained in this Article XIV, the Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Trustee incurred in connection therewith shall be payable by the Company under Section 607.
SECTION 1408. Trustee's Duties. The powers conferred on the Trustee under this Article XIV are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys and Collateral actually received by it hereunder, the Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.
SECTION 1409. Remedies upon Event of Default. If any Event of Default shall have occurred and be continuing, the Trustee may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies provided a secured party upon the default of a debtor under the Uniform Commercial Code at that time, and the Trustee may also, with notice as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, upon such terms as the Trustee may determine to be commercially reasonable. The Trustee agrees to provide at least 10 days' written notice to the Company of the time and place of any public sale or the time after which any private sale is to be made and such notice shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned and notified at that time. The Trustee shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale conducted in a commercially reasonable manner. If so sold, the Company hereby waives any claims against the Trustee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Collateral to more than one offeree.
The Company recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Trustee may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire such securities for their own account, for investment, and not with a view to the distribution or resale thereof. The Company acknowledges and agrees that any such sale may result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner with respect to such restrictions. The Trustee may, but shall be under no obligation, to delay the sale of any of the Pledged Shares for the period of time necessary to permit the Company to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Company would agree to do so.
SECTION 1410. Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default and after the acceleration of the Securities pursuant to Section 502 (so long as such acceleration has not been rescinded), any cash held by the Trustee as Collateral and all cash proceeds received by the Trustee in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral, shall be applied by the Trustee in the manner specified in Section 506.
SECTION 1411. Continuing Lien. Subject to Section 1405(a), Indenture shall create a continuing Lien on the Collateral that shall (i) remain in full force and effect until all Obligations have been paid and/or satisfied in full, (ii) be binding upon the Company and its successors and assigns and (iii) enure to the benefit of the Trustee and its successors, transferees and assigns.
SECTION 1412. Certificates and Opinions. The Company shall comply with ss. 314(b) of the TIA, relating to Opinions of Counsel regarding the Lien of this Indenture and Officers' Certificates or other documents regarding fair value of the Collateral, to the extent such provisions are applicable.
SECTION 1413. Additional Agreements. The Company agrees that, upon the
occurrence and during the continuance of a Default hereunder, it will, at any
time and from time to time, upon the written request of the Trustee, use its
best efforts to take or to cause the issuer of the Pledged Shares and any other
securities distributed in respect of the Pledged Shares (collectively with the
Pledged Shares, the "Pledged Securities") to take such action and prepare,
distribute or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Trustee to permit the public sale of such
Pledged Securities. The Company further agrees, upon such written request
referred to above, to use its best efforts to qualify, file or register, or
cause the issuer of such Pledged Securities to qualify, file or register, any of
the Pledged Securities under the Blue Sky or other securities laws of such
states as may be requested by the Trustee and keep effective, or cause to be
kept effective, all such qualifications, filings or registrations. The Company
will bear all costs and expenses of carrying out its obligations under this
Section 1413. The Company acknowledges that there is no adequate remedy at law
for failure by it to comply with the provisions of this Section 1413 and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Section 1413 may be specifically
enforced.
ARTICLE XV
MISCELLANEOUS
SECTION 1501. Consent to Jurisdiction; Appointment of Agent to Accept Service of Process
(a) The Company irrevocably consents and agrees, for the benefit of the Holders from time to time of the Securities and the Trustee, that any legal action, suit or proceeding against it with respect to its obligations, liabilities or any other matter arising out of or in connection with this Indenture or the Securities may be brought in the United States District Court for the Southern District of New York or in the Supreme Court of New York in New York County, and, until amounts due and to become due in respect of the Securities have been paid, hereby irrevocably consents and submits to the nonexclusive jurisdiction of each such court and any appellate court of either of them in personam, generally and unconditionally with respect to any action, suit or proceeding for itself and in respect of its properties, assets and revenues.
(b) The Company hereby designates, appoints, and empowers CT Corporation System, acting through its office at 1633 Broadway, New York, New York 10019, as the Company's designee, appointee and agent (the "Authorized Agent") to receive, accept and acknowledge for and on its behalf, and its properties, assets and revenues, service of any and all legal process, summons, notices and documents which may be served in any action, suit or proceeding brought against the Company pursuant to paragraph (a) of this Section. Such appointment shall be irrevocable until all amounts in respect of the principal of and any premium and interest due and to become due on or in respect of all the Securities issued under this Indenture have been paid by the Company to the Trustee pursuant to the terms hereof and of the Securities. Notwithstanding the foregoing, the Company reserves the right to appoint another Person satisfactory to the Trustee and located or with an office in the Borough of Manhattan, The City of New York, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. The Company shall give notice to the Trustee and all Holders of the appointment by it of a successor Authorized Agent. If for any reason CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Company will appoint a successor Authorized Agent in accordance with the two preceding sentences. The Company further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Indenture has been satisfied and discharged in accordance with Article Four hereof. The Company further hereby irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any action, suit or proceeding against the Company by serving a copy thereof upon the relevant agent for service of process referred to in this Section 1501 (whether or not the appointment of such agent shall for any reason prove to be ineffective or such agent shall accept or
acknowledge such service) or by mailing copies thereof by registered or certified air mail, postage prepaid, to the Company at its address specified in or designated pursuant to this Indenture. The Company agrees that the failure of any such designee, appointee and agent to give any notice of such service to it shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon. Nothing herein shall in any way be deemed to limit the ability of the holders of the Securities and the Trustee, to serve any such legal process, summons, notices and documents in any other manner permitted by applicable law or to obtain jurisdiction over the Company or bring actions, suits or proceedings against the Company in such other jurisdictions, and in such manner, as may be permitted by applicable law. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this Indenture brought in the United States District Court for the Southern District of New York or in the Supreme Court of New York in New York County, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
If for the purpose of obtaining judgment in any Court it is necessary to convert a sum due hereunder to the holder of any Security from U.S. dollars into another currency, the Company has agreed, and each holder by holding such Security will be deemed to have agreed, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures such Holder could purchase U.S. dollars with such other currency in The City of New York on the Business Day preceding the day on which final judgment is given.
The obligation of the Company in respect of any sum payable by it to the holder of a Security shall, notwithstanding any judgment in a currency (the "judgment currency") other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Holder of such security of any sum, adjudged to be so due in the judgment currency, the Holder of such Security may in accordance with normal banking procedures purchase Dollars with the judgment currency; if the amount of Dollars so purchased is less than the sum originally due to the holder of such Security in the judgment currency (determined in the manner set forth in the preceding paragraph), the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Holder of such Security against such loss, and if the amount of the Dollars so purchased exceeds the sum originally due to the Holder of such Security, such Holder agrees to remit to the Company such
excess, provided that such Holder shall have no obligation to remit any such excess as long as the Company shall have failed to pay such Holder any obligations due and payable under such Security, in which case such excess may be applied to such obligations of the Company under such Security in accordance with the terms thereof.
SECTION 1502. Counterparts
This instrument may be executed in any number of Counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers or directors duly authorized thereto, all as of the day and year first above written.
MIDAMERICAN FUNDING, LLC
By: /s/ Steven A. McArthur
--------------------------------
Name: Steven A. McArthur
Title: Vice President and
Secretary
|
IBJ WHITEHALL BANK &
TRUST COMPANY
By: /s/ Stephen J. Girulando -------------------------------- Name: Stephen J. Girulando Title: Vice President |
SCHEDULE I
Pledged Shares
Issuer Class of Security No. of Shares Certificate No.
------ ----------------- -------------- ---------------
MAVH Inc. Common Stock 10 2
|
MIDAMERICAN FUNDING, LLC
and
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
5.85% Senior Secured Notes due 2001
6.339% Senior Secured Notes due 2009
6.927% Senior Secured Bonds due 2029
First Supplemental Indenture
Dated as of March 11, 1999
FIRST SUPPLEMENTAL INDENTURE, dated as of March 11, 1999
(herein called the "First Supplemental Indenture"), between MIDAMERICAN FUNDING,
LLC., an Iowa limited liability comapny (hereinafter called the "Company"), and
IBJ Whitehall Bank & Trust Company, a banking corporation organized under the
laws of the state of New York, as Trustee (hereinafter called the "Trustee")
under the Original Indenture referred to below.
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture dated as of March 11, 1999 (hereinafter called the "Original Indenture"), to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), the form and terms of which are to be established as set forth in Sections 201 and 301 of the Original Indenture.
WHEREAS, Section 901 of the Original Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Original Indenture for, among other things, the purpose of establishing the form and terms of the Securities of any series as permitted in Sections 201 and 301 of the Original Indenture and of appointing an Authenticating Agent with respect to the Securities of any series;
WHEREAS, the Company desires to create three series of the Securities, one series of the Securities in an aggregate principal amount of two hundred million dollars ($200,000,000) to be designated the "5.85% Senior Secured Notes due 2001", one series of the Securities in an aggregate principal amount of one hundred seventy-five million dollars ($175,000,000) to be designated the "6.339% Senior Secured Notes due 2009", and one series of the Securities in an aggregate principal amount of three hundred twenty-five million dollars ($325,000,000) to be designated the "6.927% Senior Secured Bonds due 2029" (collectively the "Securities"), and all action on the part of the Company necessary to authorize the issuance of the Securities under the Original Indenture and this First Supplemental Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee as provided in the Original Indenture, the valid and binding obligations of the Company and to constitute these presents a valid and binding supplemental indenture and agreement according to its terms, have been done and performed;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
That in consideration of the premises and of the acceptance and purchase of the Securities by the holders thereof and of the acceptance of this trust by the Trustee, the Company covenants and agrees with the Trustee, for the equal benefit of holders of the Securities, as follows:
ARTICLE I
Definitions
The use of the terms and expressions herein is in accordance with the definitions, uses and constructions contained in the Original Indenture and the forms of Securities attached hereto as Exhibits A, B and C, respectively. In addition, for all purposes of this First Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise expressly requires, the following terms shall have the respective meanings assigned to them as follows and shall be construed as if defined in Article I of the Original Indenture:
"CalEnergy" means CalEnergy Company, Inc., a Delaware corporation, and its successors.
"Deadline Date" means September 7, 1999.
"Escrow Agent" means the escrow agent from time to time under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of March 11, 1999, between the Company and IBJ Whitehall Bank & Trust Company, as escrow agent thereunder.
"Exchange Security" means a security in global or definitive form substantially in the form set forth in Exhibit A.4, with respect to the 5.85% Senior Secured Notes due 2001, or in the form set forth in Exhibit B.4, with respect to the 6.339% Senior Secured Notes due 2009, or in the form set forth in Exhibit C.4, with respect to the 6.927% Senior Secured Bonds due 2029, in each case, to this First Supplemental Indenture.
"Global Security" means a Rule 144A Global Security or a Regulations S Global Security, in global form substantially in the form set forth in Exhibits A.1 and A.2, with respect to the 5.85% Senior Secured Notes due 2001, Exhibits B.1 and B.2, with respect to the 6.339% Senior Secured Notes due 2009, or in the form set forth in Exhibits C.1 and C.2, with respect to the 6.927% Senior Secured Bonds due 2029, in each case, to this First Supplemental Indenture.
"Initial Purchasers" means Credit Suisse First Boston Corporation, Lehman Brothers Inc., Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Mandatory Redemption Date" means the earlier of (a) September 27, 1999 if the MidAmerican Merger has not been consummated on or prior to the Deadline Date, or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the abandonment of the MidAmerican Merger by CalEnergy or the termination of the MidAmerican Merger Agreement.
"Mandatory Redemption Price" means a redemption price equal to 100% of the aggregate principal amount of the Securities, together with accrued and unpaid interest thereon on the Mandatory Redemption Date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
"Registration Rights Agreement" means the Registration Rights Agreement dated as of March 11, 1999 between the Company and the Initial Purchasers.
ARTICLE II
Terms and Issuance of the Securities
Section 201. Issue of Securities. Three series of Securities, which shall be designated the 5.85% Senior Secured Notes due 2001, the "6.339% Senior Secured Notes due 2009", the "6.927% Senior Secured Bonds due 2029", respectively (collectively, the "Securities"), shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, the terms, conditions and covenants of the Original Indenture and this First Supplemental Indenture (including the forms of Securities set forth in Exhibits A, B and C, as applicable). The aggregate principal amount of the 5.85% Senior Secured Notes due 2001, the aggregate principal amount of the 6.339% Senior Secured Notes due 2009 and the
aggregate principal amount of the 6.927% Senior Secured Bonds due 2029 which may be authenticated and delivered under the First Supplemental Indenture shall not exceed $200,000,000, $175,000,000 and $325,000,000, respectively.
Section 202. Mandatory Redemption. If (i) the MidAmerican Merger is not consummated on or prior to the Deadline Date or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to the Deadline Date, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash, at the Mandatory Redemption Price, as provided in paragraph 3 of the Securities.
The provisions of Article XI of the Original Indenture shall
apply to mandatory redemption of the Securities except as modified below. If the
Company is required to redeem all of the Securities pursuant to this Section 202
and paragraph 3 of the Securities, the Company shall notify the Trustee in
writing of the applicable Mandatory Redemption Date and shall also notify the
Escrow Agent concurrently with its notification to the Trustee. The Company
shall give such notices to the Trustee and Escrow Agent provided for in this
Section promptly after the occurrence of the event triggering the mandatory
redemption of the Securities. In the event of a mandatory redemption of the
Securities pursuant to this Section and paragraph 3 of the Securities, the
Company shall mail the notice of redemption required to be delivered to each
Holder of Securities by Section 1104 on the date it delivers the notices to the
Trustee and the Escrow Agent.
Section 203. Optional Redemption. The Securities may be redeemed, in whole or in part, at the option of the Company pursuant to the terms set forth in paragraph 2 of the series of Securities to be redeemed. The provisions of Article XI of the Original Indenture shall also apply to any optional redemption of Securities by the Company.
Section 204. Limitation on Liens. The covenant provided by
Section 1004 of the Original Indenture shall be applicable to the Securities.
Section 205. Limitation on Distributions. The covenant provided by Section 1005 of the Original indenture shall be applicable to the Securities.
Section 206. Limitation on Indebtedness of the Company. The covenant provided by Section 1006 of the Original Indenture shall be applicable to the Securities.
Section 207. Place of Payment. The Place of Payment in respect of the Securities will be in The City of New York, initially at the Corporate Trust Office of IBJ Whitehall Bank & Trust Company (which as of the date hereof is located at One State Street, New York, New York 10004 Attention: Capital Markets Trust Services.
Section 208. Form of Securities; Incorporation of Terms. The forms of the Securities shall be substantially in the forms of Exhibits A, B and C attached hereto, as applicable, the respective terms of which are herein incorporated by reference and which are part of this First Supplemental Indenture. The Securities shall be issued as one or more Global Securities in fully registered form and one or more Definitive Securities in fully registered form, as determined in accordance with Section 201 of the Original Indenture. The Global Securities shall be delivered by the Trustee to the Depositary, as the Holder thereof, or a nominee or custodian therefor, to be held by the Depositary in accordance with the Original Indenture.
Section 209. Exchange of the Global Securities. Each of the Global Securities shall be exchangeable for Definitive Securities only as provided in Section 307(b)(ii) of the Original Indenture.
Section 210. Regular Record Date for the Securities. The Regular Record Date for the Securities shall be the February 15 or August 15 immediately prior to each Interest Payment Date.
Section 211. Authorized Denominations. Beneficial interests in Global Securities, as well as Definitive Securities, may be held only in denominations of $1,000 and integral multiples of $1,000 in excess thereof.
ARTICLE III
DEPOSITARY
Section 301. Depositary. The Depository Trust Company, its nominees and their respective successors are hereby appointed Depositary with respect to the Global Securities.
ARTICLE IV
Section 401. Execution as Supplemental Indenture. This First Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture and, as provided in the Original Indenture, this First Supplemental Indenture forms a part thereof.
Section 402. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.
Section 403. Successors and Assigns. All covenants and agreements in this First Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
Section 404. Separability Clause. In case any provision in this First Supplemental Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 405. Benefits of First Supplemental Indenture. Nothing in this First Supplemental Indenture or in the Securities, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture.
Section 406. Execution and Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereof have caused this First Supplemental Indenture to be duly executed by their respective officers or directors duly authorized thereto, all as of the day and year first above written.
MIDAMERICAN FUNDING, LLC
By: /s/ Steven A. McArthur
----------------------------------
Name: Steven A. McArthur
Title: Vice President and Secretary
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IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
By: /s/ Steven J. Giurlando
-----------------------------------
Name: Steven J. Giurlando
Title: Vice President
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EXHIBIT A.1
FORM OF FACE OF RULE 144A GLOBAL SENIOR SECURED NOTE DUE 2001
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS
SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
$____________
No.___ CUSIP No. 59562H AA 8
MIDAMERICAN FUNDING, LLC., a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount") on March 1, 2001, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 5.85% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 5.85% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 6.35% per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidA-
merican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RULE 144A GLOBAL SENIOR SECURED NOTE DUE 2001
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
1. GENERAL
This Security is one of a duly authorized issue of Securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company, as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $200,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 0 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of
the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only,the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummate on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than
the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
[SCHEDULE OF ADJUSTMENTS]*
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT A.2
FORM OF FACE OF REGULATION S GLOBAL SENIOR SECURED NOTE DUE
2001
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN ISSUED IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
THE RIGHTS ATTACHED TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE INDENTURE.
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS IN THIS REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY FOLLOWING THE EXPIRATION OF 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH INTERESTS IN THIS SECURITY ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE ORIGINAL ISSUE DATE OF THIS SECURITY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2001
No. ____ $____________
ISIN No. US59562HAG39
MIDAMERICAN FUNDING, LLC, a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount"), on March 1, 2001, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 5.85% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 5.85% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 6.839% per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:__________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF REGULATION S GLOBAL SENIOR SECURED NOTE DUE 2001
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $200,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 0 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written
notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. ISIN NUMBER AND COMMON CODE
This Security will bear an ISIN number and a Common Code. No representation is made as to the accuracy of such numbers as printed on the Securities of this series and reliance may be placed only on the other identification numbers printed hereon.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT A.3
FORM OF FACE OF RESTRICTED DEFINITIVE SENIOR SECURED NOTE DUE 2001
THIS SECURITY HAS BEEN INITIALLY RESOLD TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DESCRIBED BY RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY
AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1)
REPRESENTS THAT IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" DESCRIBED BY RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, (2) AGREES THAT BEGINNING
FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF
THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN
RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE
UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO,
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD
REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
$_____________
No. ___ CUSIP No. 59562HAD 08
MIDAMERICAN FUNDING, LLC, a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term
includes any successor corporation or limited liability company under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ______, or registered assigns, the principal amount of 11 Million Dollars
(the "Principal Amount") on March 1, 2001, and to pay interest thereon from
March 11, 1999, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on March 1 and September 1 in
each year, commencing September 1, 1999 at the rate of 5.85% per annum, until
the Principal Amount hereof is paid or made available for payment; provided that
any Principal Amount and premium, and any such installment of interest, which is
overdue shall continue to bear interest at the aforesaid rate of 5.85% per annum
(to the extent that the payment of such interest shall be legally enforceable)
from the dates such amounts are due until they are paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the February 15 or August 15 (whether or not a Business
Day), as the case may be, immediately preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Person in whose name this Security (or one or more
Predecessor Securities) is registered on such Regular Record Date and may be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
If an Illiquidity Event (as defined in the Registration Rights Agreement)
occurs, interest will accrue on this Security at a rate of 6.35%per annum from
and including the date on which any such Illiquidity Event shall occur, until
but excluding the date on which all Illiquidity Events shall cease to exist or
shall otherwise have been cured, provided, however, that if such Illiquidity
Event has not ceased to exist or is not otherwise cured within two years after
the consummation of the MidAmerican Merger (as defined in the Indenture), such
increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company
from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By: __________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RESTRICTED DEFINITIVE SENIOR NOTE DUE 2001
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $200,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 0 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in
cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Inden-
ture shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee, (c) such Holder shall have offered the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee shall not have received from the Holders of a majority in principal amount of Securities at the time Outstanding under the Indenture a direction inconsistent with such request and (e) the Trustee for 90 days after its receipt of such notice from the Holder, request and offer of indemnity shall have failed to institute any such proceeding. The foregoing shall not apply to certain suits described in the Indenture, including any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
EXHIBIT B.1
FORM OF FACE OF RULE 144A GLOBAL SENIOR SECURED NOTE DUE 2009
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
$______________
No. ___ CUSIP No. 59562H AB 4
MIDAMERICAN FUNDING, LLC, a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount") on March 1, 2009, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.339% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.339% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 6.859%per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: _______________________________
Name:
Title:
Attest:
By:_________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RULE 144A GLOBAL SENIOR SECURED NOTE DUE 2009
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
1. GENERAL
This Security is one of a duly authorized issue of Securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company, as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $175,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 15 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corpo-
rate debt securities of comparable maturity to the remaining term of the Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Princi-
pal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul
such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT B.2
FORM OF FACE OF REGULATION S GLOBAL SENIOR SECURED NOTE DUE 2009
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN ISSUED IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
THE RIGHTS ATTACHED TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE INDENTURE.
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS IN THIS REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY FOLLOWING THE EXPIRATION OF 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH INTERESTS IN THIS SECURITY ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE ORIGINAL ISSUE DATE OF THIS SECURITY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
No. ____ $____________
ISIN No. US59562 HAH 12
MIDAMERICAN FUNDING, LLC, a limited liability company
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organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount") on March 1, 2009, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.339% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.339% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 6.839 per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:__________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF REGULATION S GLOBAL SENIOR SECURED NOTE DUE 2009
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $175,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 15 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
. "Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding, judicial or otherwise, with respect to
the Indenture, or for the appointment of a receiver, or trustee or for any other
remedy thereunder, unless (a) such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
securities, (b) the Holders of not less than 33% or a majority, as applicable,
in principal amount of the Securities at the time Outstanding under the
Indenture shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee, (c) such Holder
shall have offered the Trustee indemnity satisfactory to the Trustee against the
costs, expenses and liabilities to be incurred in compliance with such request,
(d) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities at the time Outstanding under the Indenture a
direction inconsistent with such request and (e) the Trustee for 90 days after
its receipt of such notice from the Holder, request and offer of indemnity shall
have failed to institute any such proceeding. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. ISIN NUMBER AND COMMON CODE
This Security will bear an ISIN number and a Common Code. No representation is made as to the accuracy of such numbers as printed on the Securities of this series and reliance may be placed only on the other identification numbers printed hereon.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT B.3
FORM OF FACE OF RESTRICTED DEFINITIVE SENIOR SECURED NOTE DUE 2009
THIS SECURITY HAS BEEN INITIALLY RESOLD TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DESCRIBED BY RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY
AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1)
REPRESENTS THAT IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" DESCRIBED BY RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, (2) AGREES THAT BEGINNING
FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF
THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN
RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE
UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO,
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD
REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
No. ____ $____________
CUSIP No. 59562H AE 8
MIDAMERICAN FUNDING, LLC., a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______, or registered assigns, the principal amount of [ ] Million Dollars (the "Principal Amount") on March 1, 2009, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.339% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.339% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 6.839%per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured, provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RESTRICTED DEFINITIVE SENIOR SECURED NOTE DUE 2009
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $175,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 15 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in
cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Inden-
ture shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee, (c) such Holder shall have offered the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee shall not have received from the Holders of a majority in principal amount of Securities at the time Outstanding under the Indenture a direction inconsistent with such request and (e) the Trustee for 90 days after its receipt of such notice from the Holder, request and offer of indemnity shall have failed to institute any such proceeding. The foregoing shall not apply to certain suits described in the Indenture, including any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
EXHIBIT C.1
FORM OF FACE OF RULE 144A GLOBAL SENIOR SECURED BOND DUE 2029
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
$_______________
No.____ CUSIP No. 59562H AC 2
MIDAMERICAN FUNDING, LLC, a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount") on March 1, 2029, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.927% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.927% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 7.427%per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By: __________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RULE 144A GLOBAL SENIOR SECURED BOND DUE 2029
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
1. GENERAL
This Security is one of a duly authorized issue of Securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company, as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $325,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corpo-
rate debt securities of comparable maturity to the remaining term of the Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Princi-
pal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul
such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT C.2
FORM OF FACE OF REGULATION S GLOBAL SENIOR SECURED BOND DUE 2029
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN ISSUED IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
THE RIGHTS ATTACHED TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE INDENTURE.
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS IN THIS REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY FOLLOWING THE EXPIRATION OF 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH INTERESTS IN THIS SECURITY ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE ORIGINAL ISSUE DATE OF THIS SECURITY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
No. ____ $____________
ISIN No. US59562H AJ 77
MIDAMERICAN FUNDING, LLC., a limited liability company
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organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal amount of [ ] Million Dollars (such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the "Principal Amount") on March 1, 2029, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.927% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.927% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 7.427%per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured; provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By:_________________________
Name:
Title:
Attest:
By: ____________________-
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF REGULATION S GLOBAL SENIOR SECURED BOND DUE 2029
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $325,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding, judicial or otherwise, with respect to
the Indenture, or for the appointment of a receiver, or trustee or for any other
remedy thereunder, unless (a) such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
securities, (b) the Holders of not less than 33% or a majority, as applicable,
in principal amount of the Securities at the time Outstanding under the
Indenture shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee, (c) such Holder
shall have offered the Trustee indemnity satisfactory to the Trustee against the
costs, expenses and liabilities to be incurred in compliance with such request,
(d) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities at the time Outstanding under the Indenture a
direction inconsistent with such request and (e) the Trustee for 90 days after
its receipt of such notice from the Holder, request and offer of indemnity shall
have failed to institute any such proceeding. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of a Security of the series of which this Security is a part is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. ISIN NUMBER AND COMMON CODE
This Security will bear an ISIN number and a Common Code. No representation is made as to the accuracy of such numbers as printed on the Securities of this series and reliance may be placed only on the other identification numbers printed hereon.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
SCHEDULE OF ADJUSTMENTS
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT C.3
FORM OF FACE OF RESTRICTED DEFINITIVE SENIOR SECURED BOND DUE 2029
THIS SECURITY HAS BEEN INITIALLY RESOLD TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DESCRIBED BY RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY
AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1)
REPRESENTS THAT IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" DESCRIBED BY RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, (2) AGREES THAT BEGINNING
FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF
THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN
RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE
UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO,
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH
APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY
UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
No. ____ $____________
CUSIP No. 59562H AF 5
MIDAMERICAN FUNDING, LLC, a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______, or registered assigns, the principal amount of [ ] Million Dollars (the "Principal Amount") on March 1, 2029, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.927% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.927% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If an Illiquidity Event (as defined in the Registration Rights Agreement) occurs, interest will accrue on this Security at a rate of 7.427%per annum from and including the date on which any such Illiquidity Event shall occur, until but excluding the date on which all Illiquidity Events shall cease to exist or shall otherwise have been cured, provided, however, that if such Illiquidity Event has not ceased to exist or is not otherwise cured within two years after the consummation of the MidAmerican Merger (as defined in the Indenture), such increase in interest rate will become permanent.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:_______________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF RESTRICTED DEFINITIVE SENIOR SECURED BOND DUE 2029
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $325,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding, judicial or otherwise, with respect to
the Indenture, or for the appointment of a receiver, or trustee or for any other
remedy thereunder, unless (a) such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities, (b) the Holders of not less than 33% or a majority, as applicable,
in principal amount of the Securities at the time Outstanding under the
Indenture shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee, (c) such Holder
shall have offered the Trustee indemnity satisfactory to the Trustee against the
costs, expenses and liabilities to be incurred in compliance with such request,
(d) the Trustee shall not have received from the Holders of a majority in
principal amount of Securities at the time Outstanding under the Indenture a
direction inconsistent with such request and (e) the Trustee for 90 days after
its receipt of such notice from the Holder, request and offer of indemnity shall
have failed to institute any such proceeding. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Com-
pany and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 88.
EXHIBIT 4.3
FORM OF FACE OF SENIOR EXCHANGE SECURED NOTE DUE 2001
OR PRIVATE EXCHANGE SENIOR SECURED NOTE DUE 2001
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*
[THIS SECURITY IS A PRIVATE EXCHANGE SECURITY AND ITS
PREDECESSOR SECURITY WAS INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT.] THIS SECURITY SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE
THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).]*
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
No. ___ $____________
CUSIP No. ____________
MIDAMERICAN FUNDING, LLC., a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______, or registered assigns, the principal amount of [ ] Million Dollars ([such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as]* the "Principal Amount") on March 1, 2001, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 5.85% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 5.85% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:_________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF SENIOR EXCHANGE SECURED NOTE DUE 2001
OR PRIVATE EXCHANGE SENIOR SECURED NOTE DUE 2001
MIDAMERICAN FUNDING, LLC
5.85% Senior Secured Notes due 2001
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $175,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 0 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
[In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal
Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]*
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.*
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all
*Include if Exchange Note is issued prior to the MidAmerican Merger.
Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and uncondi-
tional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives
and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
[SCHEDULE OF ADJUSTMENTS*]
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT 4.4
FORM OF FACE OF SENIOR SECURED EXCHANGE NOTE DUE 2009
AND PRIVATE EXCHANGE SENIOR SECURED NOTE DUE 2009
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*
[THIS SECURITY IS A PRIVATE EXCHANGE SECURITY AND ITS
PREDECESSOR SECURITY WAS INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT.] THIS SECURITY SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE
THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).]*
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
No. ____ $____________
CUSIP No. ____________
MIDAMERICAN FUNDING, LLC., a limited liability company
|
organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______, or registered assigns, the principal amount of [ ] Million Dollars ([such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as]* the "Principal Amount") on March 1, 2009, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.339% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.339% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:_____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF SENIOR SECURED EXCHANGE NOTE DUE 2009
AND PRIVATE EXCHANGE SENIOR SECURED NOTE DUE 2009
MIDAMERICAN FUNDING, LLC
6.339% Senior Secured Notes due 2009
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $175,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 15 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities
of this series.
"Comparable Treasury Price" means, with respect to any
Redemption Date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third Business Day in New York City preceding such Redemption Date, as
set forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
[In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal
Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]*
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.*
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all
*Include if Exchange Note is issued prior to the MidAmerican Merger.
Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and uncondi-
tional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives
and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
[SCHEDULE OF ADJUSTMENTS]*
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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EXHIBIT 4.5
FORM OF FACE OF SENIOR SECURED EXCHANGE BOND DUE 2029
AND PRIVATE EXCHANGE SENIOR SECURED BOND DUE 2029
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*
[THIS SECURITY IS A PRIVATE EXCHANGE SECURITY AND ITS
PREDECESSOR SECURITY WAS INITIALLY RESOLD IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT.] THIS SECURITY SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH OF THE HOLDER OF THIS SECURITY AND ANY OWNERS OF INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW, THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER, AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY PREDECESSOR HEREOF).]*
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
No. ____ $____________
CUSIP No. ____________
MIDAMERICAN FUNDING, LLC, a limited liability company
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organized under the laws of Iowa (herein called the "Company," which term includes any successor corporation or limited liability company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______, or registered assigns, the principal amount of [ ] Million Dollars ([such principal amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as]* the "Principal Amount") on March 1, 2029, and to pay interest thereon from March 11, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 1 and September 1 in each year, commencing September 1, 1999 at the rate of 6.927% per annum, until the Principal Amount hereof is paid or made available for payment; provided that any Principal Amount and premium, and any such installment of interest, which is overdue shall continue to bear interest at the aforesaid rate of 6.927% per annum (to the extent that the payment of such interest shall be legally enforceable) from the dates such amounts are due until they are paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Person in whose name this Security (or one or more Predecessor Securities) is registered on such Regular Record Date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at such additional offices or agencies as the Company from time to time may designate for such purpose, in such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public and private debts, provided, however, that, at the option of the Company, payment of the interest on this Security may be made only upon presentation and surrender hereof at any such office or agency and, at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of interest, if any, in respect of this Security may also be made, in the case of a Holder of at least U.S. $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. Dollar account maintained by the Holder with a bank in the United States; provided that such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
MIDAMERICAN FUNDING, LLC
By: ________________________________
Name:
Title:
Attest:
By:_________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY
as Trustee
Dated:______________ By: ________________________________ Authorized Signatory
FORM OF REVERSE OF SENIOR SECURED EXCHANGE BOND DUE 2029
AND PRIVATE EXCHANGE SENIOR SECURED BOND
MIDAMERICAN FUNDING, LLC
6.927% Senior Secured Bonds due 2029
1. GENERAL
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of March 11, 1999 (herein called the "Original Indenture"), between the Company and IBJ Whitehall Bank & Trust Company as trustee (herein called the "Trustee," which term includes any successor trustee under the Original Indenture), as supplemented by the First Supplemental Indenture, dated as of March 11, 1999 (together with the Original Indenture, the "Indenture") between the Company and the Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Terms defined in the Indenture which are not defined herein are used with the meanings assigned to them in the Indenture. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $325,000,000.
2. OPTIONAL REDEMPTION
The Securities of this series will be redeemable in whole or in part, at the option of the Company at any time, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities of this series being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities of this series being redeemed discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities of this series to the Redemption Date.
"Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities of this series 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 Securities of this series.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.
"Independent Investment Banker" means an investment banking institution of international standing appointed by the Company.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in New York City appointed by the Company.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Company, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Company by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such Redemption Date).
Notice of redemption pursuant to this paragraph 2 shall be given as provided for in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date.
If fewer than all the Securities of this series are to be redeemed, selection of Securities of this series for redemption will be made by the Trustee in any manner the Trustee deems fair and appropriate.
The Trustee may conclusively rely on an Officers' Certificate setting forth the calculation of the Redemption Price, which Officers' Certificate shall be delivered to the Trustee prior to the Redemption Date.
Unless the Company defaults in payment of the Redemption Price, from and after the Redemption Date, the Securities of this series or portions thereof called for redemption will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Redemption Price thereof.
[In the event of redemption of this Security in part only, the Trustee will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal
Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]*
3. MANDATORY REDEMPTION
In the event that (i) the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (ii) CalEnergy elects to abandon the MidAmerican Merger, or the MidAmerican Merger Agreement is terminated, in either case, on or prior to September 7, 1999, for any reason, the Company shall redeem all the Securities on the Mandatory Redemption Date, in cash at a redemption price (the "Mandatory Redemption Price") equal to the aggregate principal amount thereof plus accrued and unpaid interest thereon to the earlier of (a) September 27, 1999, in the event that the MidAmerican Merger is not consummated on or prior to September 7, 1999 or (b) the 20th day (or if such day is not a Business Day, the first Business Day thereafter) following the occurrence of an event described in (ii) above (such earlier date being referred to herein as the "Mandatory Redemption Date").
Notice of Redemption pursuant to this paragraph 3 shall be given as provided for in the Indenture promptly after the occurrence of the event triggering such mandatory redemption.
Unless the Company defaults in payment of the Mandatory Redemption Price, from and after the Mandatory Redemption Date, the Securities of this series will cease to bear interest, and the Holders thereof will have no right in respect of such Securities of this series except the right to receive the Mandatory Redemption Price thereof.*
4. DEFEASANCE
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
5. DEFAULTS AND REMEDIES
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. At any time after such declaration of acceleration with respect to Securities of this series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee as provided in the Indenture, if all
*Include if Exchange Note is issued prior to the MidAmerican Merger.
Events of Default with respect to Securities of this series have been cured or waived (other than the non-payment of principal of the Securities of this series which has become due solely by reason of such declaration of acceleration) then and in every such case, the Holders of a majority in aggregate principal amount of the Outstanding securities under the Indenture may, by written notice to the Company and to the Trustee, rescind and annul such declaration and its consequences on behalf of all of the Holders, but no such recision or annulment shall extend to or affect any subsequent default or impair any right consequent thereon.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver, or trustee or for any other remedy thereunder, unless
(a) such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities, (b) the Holders of
not less than 33% or a majority, as applicable, in principal amount of the
Securities at the time Outstanding under the Indenture shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee, (c) such Holder shall have offered the Trustee indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request, (d) the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding under the Indenture a direction inconsistent with such request
and (e) the Trustee for 90 days after its receipt of such notice from the
Holder, request and offer of indemnity shall have failed to institute any such
proceeding. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
6. AMENDMENT AND WAIVER
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the Indenture or any supplemental indenture or the rights and obligations of the Company and rights of the Holders of the Securities of any series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor on in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and uncondi-
tional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
7. TRANSFER AND EXCHANGE; DENOMINATIONS
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, (which initially shall be the corporate trust office of the Trustee), duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination as requested by the Holder surrendering the same.
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.
8. SUCCESSOR OBLIGORS
When a successor assumes all the obligations of its predecessor under the Securities of this series and the Indenture in accordance with the terms of the Indenture, the predecessor will be released from those obligations.
9. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities of this series and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee.
10. NO RECOURSE AGAINST OTHERS
No stockholder, director, officer, employee, incorporator or Affiliate of the Company shall have any liability for any obligation of the Company under the Securities of this series or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of the Securities of this series by accepting a Security of this series waives
and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities of this series.
11. AUTHENTICATION
This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security.
12. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities of this series as a convenience to the Holders of the Securities of this series.
13. GOVERNING LAW
This Security shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof.
14. DEFINED TERMS
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
SCHEDULE A
[SCHEDULE OF ADJUSTMENTS]*
Initial Principal Amount: U.S. $
Notation made
Principal on behalf of
Date Principal Principal Amount the Security
adjustment amount amount following Exchange
made increase decrease adjustment Agent/Registrar
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REGISTRATION RIGHTS AGREEMENT
MIDAMERICAN FUNDING, LLC
$200,000,000 5.85% Senior Secured Notes due 2001 $175,000,000 6.339% Senior Secured Notes due 2009 $325,000,000 6.927% Secured Bonds due 2029
March 9, 1999
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Ladies and Gentlemen:
In connection with the issue and sale of $200,000,000 principal amount of 5.85% Senior Secured Notes due 2001(the "2001 Notes"), $175,000,000 principal amount of 6.339% Senior Secured Notes due 2009 (the "2009 Notes") and $325,000,000 principal amount of 6.927% Secured Bonds due 2029 (the "Bonds" and together with the 2001 Notes and the 2009 Notes, the "Securities") issued by MidAmerican Funding, LLC, an Iowa limited liability company (the "Company"), pursuant to the terms of the Indenture (as defined below) and as an inducement to Credit Suisse First Boston Corporation, Lehman Brothers Inc., Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchasers") to enter into the Purchase Agreement dated March 9, 1999 (the "Purchase Agreement") between the Company and the Initial Purchasers, the Company hereby agrees to provide the registration rights set forth in this Registration Agreement (this "Agreement") for the benefit of the holders of the Securities. The execution of this Agreement is a condition to the purchase of the Securities under the Purchase Agreement.
SECTION 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings ascribed thereto, whether expressly or by reference to another agreement or document, in the Indenture. The definitions set forth in this Agreement shall equally apply to both the singular and plural forms of the terms
defined. As used in this Agreement, the following terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of Section 5 of this Agreement.
"Affiliate", with respect to any Person, shall mean any other Person, that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such first Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of Section 2, an "Affiliate" of the Company shall mean and include, in addition, any Person deemed an affiliate thereof under the Securities Act or the Exchange Act in connection with the Exchange Offer.
"Closing Date" shall mean the date of the initial issuance and sale of the Securities.
"Commission" shall mean the United States Securities and Exchange Commission.
"Company" shall have the meaning set forth in the first paragraph of this Agreement.
"Cure Date" shall have the meaning set forth in Section 4(a) of this Agreement.
"Effective Date" shall mean the date which is the earlier of (i) the 270th day after the consummation of the MidAmerican Merger and (ii) December 31, 1999.
"Effective Period" shall have the meaning set forth in Section 3
(a) of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer" shall have the meaning set forth in Section 2(a) of this Agreement.
"Exchange Offer Registration Statement" shall have the meaning set forth in Section 2(a) of this Agreement.
"Exchange Period" shall have the meaning set forth in Section 2(a) of this Agreement.
"Exchange Securities" shall have the meaning set forth in Section 2(a) of this Agreement.
"Exchanging Dealer" shall have the meaning set forth in Section 2(a) of this Agreement.
A "holder" of Registrable Securities shall mean the registered holder of such securities or any beneficial owner thereof.
"Holder Indemnified Party" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Holder Information" shall have the meaning set forth in Section 8(a) of this Agreement.
"Illiquidity Event" with respect to the Securities shall mean any of the following events:
(a) as of the Effective Date, both (i) an Exchange Offer has not been consummated and (ii) the Registrable Securities are not the subject of an Initial Shelf Registration Statement which has become effective; or
(b) the Exchange Securities offered in exchange for Registrable Securities are the subject of an Exchange Offer Registration Statement which was effective (and which, if applicable pursuant to Section 2(a), covered resales of such Exchange Securities) but which ceased to be effective for any reason prior to the end of the Exchange Period; or
(c) Registrable Securities are the subject of an Initial Shelf Registration Statement or Subsequent Shelf Registration Statement which was effective but which has ceased to be effective for any reason prior to the end of the Effective Period.
An Illiquidity Event shall be deemed to cease to exist on the date subsequent to the occurrence of such Illiquidity Event on which:
(i) in the case of an Illiquidity Event described in clause (a) above either (i) an Exchange Offer is consummated or (ii) an Initial Shelf Registration Statement covering such Registrable Securities shall become effective; or
(ii) in the case of an Illiquidity Event described in clause (b) above, either (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of the Exchange Securities offered in exchange for such Securities) shall become effective and an Exchange Offer for such Registrable Securities shall have commenced pursuant to an Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement covering such Registrable Securities shall become effective; or
(iii) in the case of an Illiquidity Event described in clause (c) above, a Subsequent Shelf Registration Statement covering such Registrable Securities shall become effective.
"Indenture" shall mean the Indenture to be dated as of March 11, 1999, as supplemented by the First Supplemental Indenture of even date therewith, and as amended or supplemented from time to time in accordance with the terms thereof, between the Company and the Trustee, and pursuant to which the Securities are to be issued.
"Initial Purchaser Securities" means Securities acquired by the Initial Purchasers as part of their initial distribution, and which at the time of the Exchange Offer, are still held by the Initial Purchasers.
"Initial Purchasers" shall have the meaning set forth in the first paragraph of this Agreement.
"Initial Shelf Registration Statement" shall have the meaning set forth in Section 3(a) of this Agreement.
"Inspectors" shall have the meaning set forth in Section 5(m) of this Agreement.
"Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an Underwritten Offering.
"MidAmerican Merger" shall mean the acquisition of MidAmerican Energy Holdings Company by the Company pursuant to the Agreement and Plan of Merger dated as of August 11, 1998 among CalEnergy Company, Inc., Maverick Reincorporation Sub, Inc., MidAmerican and the Company's subsidiary, MAVH, Inc.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Private Exchange" shall have the meaning set forth in Section 2(a).
"Private Exchange Securities" shall have the meaning set forth in
Section 2(a).
"Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments and all material incorporated by reference into such prospectus.
"Purchase Agreement" shall have the meaning set forth in the first paragraph of this Agreement.
"Records" shall have the meaning set forth in Section 5(m) of this Agreement.
"Registrable Securities" shall mean the Securities upon original issuance thereof (including Initial Purchaser Securities), and any Private Exchange Securities at all times subsequent thereto until, in the case of any such Security, (i) a Registration Statement covering such Security, or the Exchange Security to be exchanged for such Security (and, in the case of any Resale Security, any resale thereof), has been declared effective and such Security has been disposed of or exchanged (or, in any case where such Registration Statement covers the resale of Resale Securities, such Security has been exchanged and the Resale Security received
therefor has been resold), as the case may be, in accordance with such effective Registration Statement, (ii) it is sold in compliance with Rule 144 or would be permitted to be sold pursuant to Rule 144(k), (iii) it shall have been otherwise transferred and a new certificate for any such Security not bearing a legend restricting further transfer shall have been delivered by or on behalf of the Company and such Security shall be tradeable by each holder thereof without restriction under the Securities Act or the Exchange Act and without material restriction under the applicable blue sky or state securities laws or (iv) it ceases to be outstanding.
"Registration Statement" shall mean any registration statement (including any Shelf Registration Statement) of the Company that covers any of the Registrable Securities or the Exchange Securities, as the case may be, pursuant to the provisions of this Agreement, including the Prospectus which is part of such Registration Statement, amendments (including post-effective amendments) and supplements to such Registration Statement and all exhibits and appendices to any of the foregoing. For purposes of the foregoing, unless the context requires otherwise, a Registration Statement for an Exchange Offer shall not be deemed to cover Registrable Securities held by a Restricted Person unless such Registration Statement covers the resale of Resale Securities to be received by such Restricted Person pursuant to such Exchange Offer and any such Securities shall continue to be Registrable Securities.
"Resale Initial Purchasers" shall have the meaning set forth in
Section 8(a) of this Agreement.
"Resale Securities" shall mean any Exchange Security received by a Restricted Person pursuant to an Exchange Offer, and at all times subsequent thereto, until, subject to the time periods set forth herein, such Exchange Security has been resold by such Restricted Person.
"Restricted Person" shall mean (a) any Affiliate of the Company, (b) the Initial Purchasers or (c) any Affiliate of the Initial Purchasers (other than Affiliates of the Initial Purchasers that (i) are acquiring Exchange Securities in the ordinary course of business and do not have an arrangement with any Person to distribute Exchange Securities and (ii) may trade such Exchange Securities without restriction under the Securities Act).
"Rule 144" shall mean Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Rule 415" shall mean Rule 415 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Securities" shall have the meaning set forth in the first paragraph of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Shelf Notice" shall have the meaning set forth in Section 2(b) of this Agreement.
"Shelf Registration Statement" shall have the meaning set forth in
Section 3(b) of this Agreement.
"Special Counsel" shall mean Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Initial Purchasers, or any other firm acceptable to the Company, acting as special counsel to the holders of Registrable Securities or Exchange Securities.
"Subsequent Shelf Registration Statement" shall have the meaning set forth in Section 3(b) of this Agreement.
"TIA" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Trustee" shall mean IBJ Whitehall Bank & Trust Company, its successors and any successor trustee under the Indenture.
"Underwritten Registration" or "Underwritten Offering" shall mean a registration in which securities are sold to an underwriter or group of underwriters for reoffering to the public.
If, upon consummation of the Exchange Offer, the Initial Purchasers hold Initial Purchaser Securities, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Exchange Offer, shall issue and deliver to the Initial Purchasers upon the written request of the Initial Purchasers, and the delivery of the Initial Purchaser Securities to the Company, in exchange (the "Private Exchange") for the Initial Purchaser Securities, a like amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities law of the several states of the United States) to the Securities (the "Private Exchange Securities").
The Company shall, use its reasonable best efforts, for the benefit of the holders, at the Company's cost, to (i) cause the Exchange Offer Registration
Statement to become effective under the Securities Act at least 30 days prior to the Effective Date, (ii) keep the Exchange Offer open for a period of not less than the shorter of (A) the period ending when the last remaining Security is tendered into the Exchange Offer and (B) 30 days from the date notice is mailed to the holders of Securities (provided that in no event shall such period be less than the period required under applicable Federal and state securities laws), and (iii) maintain such Exchange Offer Registration Statement continuously effective for a period (the "Exchange Period") of not less than the longer of (A) the period until the consummation of the Exchange Offer and (B) 120 days after the effectiveness of the Exchange Offer Registration Statement, provided however, that in the event that all resales of Exchange Securities (including, subject to the time periods set forth herein, any Resale Securities and including, subject to the time periods set forth herein, any resales by Exchanging Dealers) covered by such Exchange Offer Registration Statement have been made, the Exchange Offer Registration Statement need not remain continuously effective for the period set forth in clause (B) above. Promptly following the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Securities so accepted for exchange; and (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. Upon consummation of the Exchange Offer, the Company shall deliver to the Trustee under the Indenture for cancellation all Securities tendered by the holders thereof pursuant to the Exchange Offer and not withdrawn prior to the date of consummation of the Exchange Offer. Each Restricted Person shall notify the Company promptly after reselling all Resale Securities held by such Restricted Person which are covered by any such Registration Statement.
Each holder of Registrable Securities to be exchanged in the Exchange Offer (other than any Restricted Person) shall be required as a condition to participating in the Exchange Offer to represent that (i) it is not an Affiliate of the Company, (ii) any Exchange Securities to be received by it shall be acquired in the ordinary course of its business and (iii) that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities. Upon consummation of an Exchange Offer in accordance with this Section 2 and compliance with the other provisions of this Section 2, the Company shall, subject to Sections 2(b) and 2(c), have no further obligation to register Registrable Securities pursuant to Section 3(a) of this Agreement; provided that the
other provisions of this Agreement shall continue to apply as set forth in such provisions.
The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing certain information regarding such Exchanging Dealer's prospectus delivery requirements on the cover page thereto, the "Exchange Offer Procedures" section and the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Private Exchange Securities acquired in exchange for Securities constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.
(a) In the event that the Company reasonably determines in good faith that (i)
the Exchange Securities would not, upon receipt in the Exchange Offer by any
holder of Registrable Securities (other than (x) any Restricted Person
(including the Initial Purchasers as holders of Initial Purchaser Securities),
and (y) any holder who is not acquiring such Exchange Securities in the ordinary
course of business or who has an arrangement with any person to participate in
the distribution of such Exchange Securities) be tradeable by each holder
thereof without restriction under the Securities Act and the Exchange Act and
without restriction under applicable blue sky or state securities laws, (ii)
after conferring with counsel, the Commission is unlikely to permit the Exchange
Offer Registration Statement to become effective prior to the Effective Date
(except in the circumstances set forth in Section 2(c)) or (iii) the Exchange
Offer may not be made in compliance with applicable laws, then the Company shall
promptly deliver notice thereof (the "Shelf Notice") to the holders of such
Registrable Securities and the Trustee and shall thereafter file an Initial
Shelf Registration Statement pursuant to, and otherwise comply with, the
provisions of Section 3(a). Following the delivery of a Shelf Notice in
accordance with this Section 2(b) and compliance with Section 3(a), the Company
shall not have any further obligation under this Section 2.
(b)
(c) In the event that (i) at the time of the Exchange Offer there are
outstanding any Initial Purchaser Securities, or (ii) the Company reasonably
determines in good faith that (x) the Exchange Securities would not, upon
consummation of any
resale thereof by a Restricted Person to any Person other than another
Restricted Person, be tradeable by each holder thereof without restriction under
the Securities Act (other than applicable prospectus requirements) and the
Exchange Act and without restriction under applicable blue sky or state
securities laws or (y) the Commission is unlikely to permit the Exchange Offer
Registration Statement to become effective prior to the Effective Date solely
because such Registration Statement covers resales of the Exchange Securities by
Restricted Persons, then the Company shall promptly deliver a Shelf Notice to
the Restricted Persons who are holders of Registrable Securities and the
Trustee, and the Company shall thereafter file an initial Shelf Registration
Statement with respect to any such Registrable Securities pursuant to, and
otherwise comply with, the provisions of Section 3(a); provided that such
Initial Shelf Registration Statement shall only cover resales of Registrable
Securities by Restricted Persons if a Shelf Notice is not then otherwise
required to be delivered pursuant to Section 2(b) and provided further that such
Initial Shelf Registration Statement covering Registrable Securities held by
Restricted Persons shall be kept effective for at least a period of 120 days and
is not required to remain effective with respect to such Registrable Securities
held by Restricted Persons thereafter. Following the delivery of a Shelf Notice
in accordance with this Section 2(c) and compliance with Section 3(a), the
Company shall not have any further obligation under this Section 2 with respect
to the filing of an offer to exchange the Registrable Securities held by the
Restricted Persons (including, without limitation, any obligation to provided
that an Exchange Offer Registration Statement filed pursuant to Section 2(a)
cover resales of Exchange Securities by Restricted Persons); provided that the
provisions of this Section 2 shall otherwise remain in full force and effect
with respect to Registrable Securities held by any person other than a
Restricted Person.
SECTION 3. Shelf Registration; Registrable Securities. With respect to the
Registrable Securities, if a Shelf Notice is delivered in accordance with
Section 2(b) or (c) of this Agreement, then the Company shall comply with the
following provisions of this Section 3:
(a) Initial Shelf Registration. The Company shall prepare and cause to be filed with the Commission a Registration Statement for an offering to be made on a continuous basis other than pursuant to an Underwritten Offering pursuant to Rule 415 covering all of the Registrable Securities (or, if a Shelf Notice is delivered solely pursuant to Section 2(c), all of the Registrable Securities held by any Restricted Persons) (the "Initial Shelf Registration Statement"); provided, however, that no holder shall be entitled to have its Registrable Securities covered by such Initial Shelf Registration Statement unless such holder agrees in writing, within 10 Business Days after actual receipt of a request therefrom, to be bound by all the provisions of this
Agreement applicable to such a holder. No holder shall be entitled to the
benefits of Section 4 of this Agreement unless and until such holder shall have
provided all information reasonably requested by the Company (after conferring
with counsel), and such holder shall not be entitled to such benefits with
respect to any period during which such information was not provided. Each
holder to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such holder
not materially misleading. The Initial Shelf Registration Statement shall be an
appropriate form permitting registration of such Registrable Securities for
resale by the holders thereof in the manner or manners reasonably designated by
them (but excluding any Underwritten Offerings). The Company shall use its
reasonable best efforts to (A) cause the Initial Shelf Registration Statement to
be declared effective under the Securities Act on or prior to the Effective Date
and (B) keep the Initial Shelf Registration Statement continuously effective
under the Securities Act for a period of two years after the Closing Date
(subject to extension pursuant to the last paragraph of Section 5 and subject,
with respect to Registrable Securities held by Restricted Persons, to the
limitations set forth in Section 2(c)) (such two-year period, as it may be
extended, being the "Effective Period"), or such shorter period ending when (1)
all Registrable Securities covered by the Initial Shelf Registration Statement
have been sold or (2) a Subsequent Shelf Registration Statement covering all of
such Registrable Securities remaining unsold has been declared effective under
the Securities Act or (3) all Registrable Securities may be sold pursuant to
subsection (k) of Rule 144.
(b)
(c) Notwithstanding any other provision hereof, the Company may
postpone or suspend the filing or the effectiveness of a Registration Statement
(or any amendments or supplements thereto), if (1) such action is required by
applicable law, or (2) such action is taken by the Company in good faith and for
valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, other pending
corporate developments, public filings with the Commission or other similar
events, so long as the Company promptly thereafter complies with the
requirements of Section 5(b) hereof, if applicable. Notwithstanding the
occurrence of any event referred to in the immediate preceding sentence (a
"Suspension"), such event shall not suspend, postpone or in any other manner
affect the running of the time period after which an Illiquidity Event shall be
deemed to occur and, if the filing or effectiveness of the Registration
Statement is postponed or suspended as a result of a Suspension, an Illiquidity
Event shall nonetheless exist if all other requirements set forth for the
occurrence of an Illiquidity Event shall be satisfied, and the provisions of
Section 4 requiring the accrual
payment of additional interest, as set forth in such Section, on the Registrable
Securities, shall be applicable.
(e) Subsequent Shelf Registrations. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effective Period, the Company may attempt to obtain the withdrawal of any order suspending the effectiveness thereof, and may amend such Initial Shelf Registration Statement or Subsequent Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement applicable to the Securities pursuant to Rule 415 covering all of such Registrable Securities remaining unsold (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is declared effective, the Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective for a period after the date of such effectiveness equal in length to the length of the Effective Period plus the aggregate number of days from the date of the order suspending the effectiveness of the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement to the date of the effectiveness of the Subsequent Shelf Registration Statement. As used herein, the term "Shelf Registration Statement" means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement.
SECTION 4. Additional Interest for Illiquidity.
(a) The Company acknowledges and agrees that the Initial Purchasers (and
any subsequent holders of the Securities) in reliance on the Company's covenant
to use its reasonable best efforts to (i) cause to become effective on or prior
to the Effective Date, (A) the Exchange Offer Registration Statement and to
consummate the Exchange Offer or (B) an Initial Shelf Registration Statement,
and (ii) maintain the respective effectiveness of such Registration Statements
as described herein. The Company further acknowledges and agrees that the
failure of the Company to fulfill such covenants will have an adverse effect on
the holders of the Securities. Therefore, the Company agrees that from and after
the date on which any Illiquidity Event occurs, additional interest (in addition
to the interest otherwise payable with respect to the Registrable Securities)
shall accrue with respect to the Securities until but not including the date on
which such Illiquidity Event shall cease to exist (and provided no other
Illiquidity Event with respect to any Securities shall then be continuing), at
the rate of one half of one percent (0.50%) per annum, provided, however, that
if such Illiquidity Event has not ceased to exist or is not otherwise cured
within two years after the consummation of the MidAmerican Merger, such increase
in interest rate will become permanent. In each case, such additional interest
shall be payable by the Company to the holders of all Securities at the times,
in the manner and subject to the same terms and conditions set forth in the
Indenture, as nearly as may be, as though the interest rates provided in such
Securities had been increased by one half of one percent (0.50%) per annum.
Subject to the provisions of this Section 4, the Company agrees that it shall be
liable to the holders of all Securities for the payment of any and all
additional interest on the Securities that shall accrue pursuant to this
Section 4.
Any such additional interest accrued on any such Securities but unpaid on the date on which such interest ceases to accrue (the "Cure Date") shall be due and payable on the first interest payment date following the next record date following such Cure Date (or the record date occurring on such Cure Date, if such Cure Date is a record date) to the holders of record of such Securities on such record date.
(a) The Company shall promptly notify the holders of the Securities and the
Trustee of the occurrence of any Illiquidity Event of which it has knowledge.
(b)
(c) Notwithstanding the foregoing, the Company shall not be required to pay
the additional interest described in clause (a) of this Section 4 to a holder
with
respect to the Registrable Securities held by such holder if the applicable Illiquidity Event arises by reason of the failure of such holder to provide such information (i) the Company may reasonably request, with reasonable prior written notice, for use in the Shelf Registration Statement or any Prospectus included therein to the extent the Company reasonably determines that such information is required to be included therein by applicable law, (ii) the NASD or the Commission may request in connection with such Shelf Registration Statement, or (iii) is required to comply with the agreements of such holder contained in clause (a) of Section 3 to the extent compliance thereof is necessary for the Shelf Registration Statement to be declared effective.
SECTION 5. Registration Procedures. In connection with the registration of any Registrable Securities or Exchange Securities pursuant to Sections 2 and 3 hereof, the Company shall use its reasonable best efforts to effect such registration to permit the sale of such Registrable Securities or Exchange Securities in accordance with any permitted intended method or methods of disposition thereof, and pursuant thereto the Company shall:
(a) prepare and cause to be filed with the Commission a Registration Statement
or Registration Statements as prescribed by Sections 2 and 3 of this Agreement,
and use its best efforts to cause each such Registration Statement to become
effective and remain effective for the applicable period as provided herein;
provided, however, that (i) during the period in which the initial Registration
Statement is open for the Restricted Persons, the Company shall afford any
Restricted Person which is a holder of Registrable Securities or Exchange
Securities and the Special Counsel, upon such holder's written request to the
Company, an opportunity to review copies of all such documents proposed to be
filed, and (ii) if such filing is pursuant to Section 3, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto
(including documents that would be incorporated therein by reference after the
initial filing of the Registration Statement), the Company shall afford the
Special Counsel for all holders of the Registrable Securities covered by such
Registration Statement an opportunity to review copies of all such documents
proposed to be filed;
(b)
(c) prepare and cause to be filed with the Commission such amendments and
post-effective amendments to each Shelf Registration Statement as may be
necessary to keep such Registration Statement continuously effective for the
applicable period as provided herein; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the Commission promulgated thereunder with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented in accordance with the intended
methods of disposition by the sellers of Registrable Securities covered thereby
set forth therein;
(e) if a Shelf Registration Statement is filed pursuant to Section 3 hereof,
notify the selling holders of Registrable Securities promptly after the Company
becomes aware thereof, and confirm such notice in writing, (i) when a Prospectus
or any Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective amendment, when
the same has become effective, (ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or Prospectus or
the initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Securities for offer or sale in any jurisdiction, or the initiation
of any proceeding for such purpose, (v) of the existence of any fact known to
the Company which results in such Registration Statement or related Prospectus
or any document incorporated therein by reference containing any untrue
statement of a material fact or omitting to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (which notice may be
accompanied by an instruction that such notice constitutes material non-public
information and to suspend the use of the prospectus until the requisite changes
have been made, and which instruction shall require that such holders shall not
communicate such material non-public information to any third party and shall
not sell or purchase, or offer to sell or purchase, any securities of the
Company after receipt of such notice) and (vi) if the Company reasonably
determines that the filing of a post-effective amendment to such Registration
Statement would be appropriate;
(f)
(g) if a Shelf Registration Statement is filed pursuant to Section 3, use its
reasonable efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction and, if any such order is issued, to obtain the withdrawal of any
such order at the earliest possible moment;
(h)
(i) if a Shelf Registration Statement is filed pursuant to Section 3, furnish to
each selling holder of Registrable Securities who so requests (at such holder's
address set forth in the Securities Register) without charge, one conformed copy
of the Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(j)
(k) if a Shelf Registration Statement is filed pursuant to Section 3, deliver to
each selling holder of Registrable Securities without charge, as many copies of
the Prospectus (including each preliminary prospectus) and each amendment or
supplement thereto as such persons may reasonably request; and, subject to the
last paragraph of this Section 5, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto;
(m) prior to any public offering of Registrable Securities, register or qualify,
or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the selling holders reasonably request in writing (provided that, if Registrable
Securities are offered other than through an Underwritten Offering, the Company
agrees to cause its counsel to perform blue sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
5(g)); keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective; and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; provided, however, that the
Company will not be required to qualify as a foreign corporation, or to do
business, to file a general consent or take any action which would subject it to
service of process in any jurisdiction or take any action which would subject
itself to taxation in any such jurisdiction;
(n)
(o) if a Shelf Registration Statement is filed pursuant to Section 3, cooperate
with the Trustee, and the selling holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company, and enable such
Registrable Securities to be in such authorized denominations and registered in
such names as the holders may reasonably request at least three business days
prior to any such sale;
(p)
(q) if a Shelf Registration Statement is filed pursuant to Section 3, upon the
occurrence of any event contemplated by Section 5(c), prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to 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 an 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. If the Company so notifies the holders to suspend the use of the
Prospectus after the occurrence of such an event, the holders shall suspend use
of the Prospectus, and not communicate such material non-public information to
any third party, and not sell or purchase, or offer to sell or purchase, any
securities of the Company, until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission;
(r)
(s) use its reasonable best efforts to cause the Registrable Securities covered
by the Registration Statement to continue to be rated by the rating agencies
that initially rated the Securities during the period that the Registration
Statement is required hereunder to remain effective (it being acknowledged,
however, that the foregoing shall not be deemed to require the Company to
maintain the rating of such Registrable Securities at the rating given the
Securities);
(t)
(u) prior to the effective date of the first Registration Statement relating to
the Registrable Securities or the Exchange Securities, as the case may be, (i)
provide the Trustee with printed certificates for such securities in definitive
form or in a global form eligible for deposit with The Depository Trust Company
and (ii) provide a CUSIP number for such Registrable Securities or Exchange
Securities represented by such certificates;
(w) if a Shelf Registration Statement is filed pursuant to Section 3, enter into such reasonably required agreements and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of such Registrable Securities;
(y) in the event of any Underwritten Offering (which shall only be undertaken at the option of the Company), if a Shelf Registration Statement is filed
pursuant to Section 3, make available prior to the filing thereof for inspection
by a representative of the holders of a majority in aggregate principal amount
of the Registrable Securities being sold, and the Special Counsel, on the one
hand, or underwriter on the other hand (collectively, the "Inspectors"), during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records"), and cause the officers, directors and employees of the Company and
its subsidiaries to supply all relevant information as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities; provided, however, that, as a condition to supplying such
information, the Company shall receive an agreement in writing from the Special
Counsel agreeing that any information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such Inspector (other than as to
holders of Registrable Securities) and by any holders of Registrable Securities
receiving such information, unless (i) disclosure of such information is
required pursuant to applicable law or by court or administrative order, (ii)
disclosure of such information is, in the reasonable opinion of counsel to the
Company, necessary to avoid or correct a misstatement or omission of a material
fact in the Registration Statement, Prospectus, or any supplement or
post-effective amendment thereto or disclosure is otherwise required by law,
(iii) such information becomes generally available to the public other than as a
result of a disclosure by any Inspector or any such holder of Registrable
Securities in violation of this Section 5(m) or (iv) such information is
approved for release by the Company, in writing;
(z)
(aa) use its best efforts to cause the Indenture or the trust indenture provided
for in Section 2, as the case may be, to be qualified under the TIA not later
than the effective date of such Registration Statement; and, in connection
therewith, cooperate with the Trustee under such Indenture and the holders of
the Registrable Securities 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 its best efforts to cause such 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 Commission to enable the Indenture to be
so qualified in a timely manner; and
(bb)
(cc) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of, the Commission.
(ee) For purposes of the covenants set forth in this Section 5, references to a Shelf Registration Statement, including a Shelf Registration Statement filed pursuant to Section 3, shall be deemed to include any Registration Statement, filed pursu-
ant to Section 2, which covers, for the period set forth therein, resales of
Exchange Securities held by Restricted Persons as provided in Section 2, and, in
connection with such resales such Restricted Persons shall be entitled to
exercise all rights, receive all notices and copies of documents, and otherwise
receive all benefits afforded to sellers or holders of Registrable Securities
under this Section 5 in connection with a Shelf Registration Statement. Without
limiting the generality of the foregoing, the Company agrees to fulfill its
obligations set forth in Sections 5(a), (b), (c) , (d) , (e) , (f) , (h) , (i) ,
(l) , and (m) with respect to any such Registration Statement filed pursuant to
Section 2 insofar as it covers such resales.
(ff)
(gg) The Company may require each seller of Registrable Securities as to which
any registration is being effected, as a condition thereto, to furnish to the
Company such information regarding the holder and the distribution of such
Registrable Securities as the Company may, from time to time, request in
writing, including without limitation stating that (i) it is not an Affiliate of
the Company, (ii) the amount of Registrable Securities held by such holder prior
to the Exchange Offer, (iii) the amount of Registrable Securities owned by such
holder to be exchanged in the Exchange Offer and representing that such holder
is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange
Securities to be issued, and (iv) it is acquiring the Exchange Securities in its
ordinary course of business and to covenant and agree to promptly notify the
Company if any such information so provided by such seller ceases to be true and
correct and will promptly thereafter furnish the Company with corrected
information. The Company may exclude from such registration the Registrable
Securities of any Person who fails to furnish such information within a
reasonable time after receiving such request.
(hh)
(ii) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5 (c) (ii) , 5 (c) (iii)
, 5 (c) (v) or 5 (c) (vi) hereof , such holder shall forthwith discontinue
disposition of such. Registrable Securities covered by such Registration
Statement or Prospectus until such holder is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto and, if so directed by
the Company, such holder will deliver to the Company (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, or certify in writing as to the destruction
thereof. In the event the Company shall give any such notice, the length of the
Effective Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 5(i) or (y) the Advice.
(jj)
SECTION 6. Delivery of Prospectus; Notification Upon Resale. Each of the Initial
Purchasers acknowledges that it is the position of the staff of the Commission
that any broker-dealer that receives Exchange Securities for its own account in
exchange for Registrable Securities pursuant to the Exchange Offer must deliver
a prospectus in connection with any resale of such Resale Securities, By so
acknowledging, each such Initial Purchaser shall not be deemed to admit that, by
delivering a prospectus, it is an underwriter within the meaning of the
Securities Act.
The Initial Purchasers shall notify the Company promptly upon the completion of the resale of the Resale Securities received by the Initial Purchasers pursuant to the Exchange Offer.
SECTION 7. Registration Expenses.
The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4; provided, however, that the Company shall bear or reimburse the holders for the reasonable fees and disbursements of only one counsel, the Special Counsel, in accordance with the terms of the Purchase Agreement; provided, further, however, that if the Company permits an Underwritten Offering, the Company shall not be responsible for any fees and expenses of any underwriter including any underwriting discounts and commissions or any legal fees and expenses of counsel to the underwriters (except for the reasonable fees and disbursements of counsel in connection with state securities or Blue Sky qualification of any of the Registrable Securities or the Exchange Securities).
SECTION 8. Indemnification and Contribution.
(a) The Company agrees to (A) indemnify and hold harmless each holder
of Registrable Securities (including the Initial Purchasers which hold
Registrable Securities, including Resale Securities, for their own accounts)
(each, a "Resale Initial Purchasers") and each person, if any, who controls any
such person within the meaning of either the Securities Act or the Exchange Act
and each director, officer, employee or agent of each such Person (each a
"Holder Indemnified Party") against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them are subject under
the Securities Act, the Exchange Act, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof), arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement covering Registrable Securities
held by such person or any Prospectus relating to any such Registration
Statement, or any amendment thereof or supplement thereto and all documents
incorporated by reference therein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading, and (B) reimburse each such Holder Indemnified Party for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto, in
reliance upon and in conformity with written information relating to such holder
provided by such holder to the Company by any holder specifically for use
therein (collectively, the "Holder Information"); provided, further, however,
that the indemnity obligations arising out of this Section 8 with respect to any
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary Prospectus shall not inure to the benefit of any holder
or any controlling Person of such holder if such holder failed to send or
deliver to the Person asserting any such losses a copy of the final Prospectus
with or prior to the delivery of the written confirmation of the sale of the
Registrable Securities or the Exchange Securities, as the case may be, and such
final Prospectus would have cured the untrue statement or omission giving rise
to such losses. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(a) As a condition to the inclusion of a holder's Registrable Securities in a
Registration Statement, such holder shall agree to (i) indemnify and hold
harmless the Company and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act, and each director, officer,
employee or agent of each such person, against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them are
subject under the Securities Act, the Exchange Act, or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a Registration Statement covering Registrable
Securities held by such holder or any Prospectus relating to any such
Registration Statement or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, and (ii) reimburse
each such indemnified party for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; in each and every
case under clause (i) and (ii) above to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement or Prospectus in any amendment
thereof or supplement thereto, in reliance upon and in conformity with the
Holder Information provided by such holder. This indemnity agreement will be in
addition to any liability which any such holder may otherwise have. In no event
shall the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such holder upon the sale (or, in the case of Resale
Securities, the resale) of the Registrable Securities giving rise to such
indemnification obligation.
(b)
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof
(enclosing a copy of all papers served); but the omission to so notify the
indemnifying party (i) shall not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise learn of such action
and such omission results in the forfeiture by the indemnifying party or
material impairment of substantial rights and defenses and (ii) shall not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligations provided in
paragraph (a) or (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election to so assume the defense of such claim or
action, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than costs
of investigation; provided that if (i) the defendants in any such action include
both the indemnified party and the indemnifying party, the indemnified party
shall have received the written opinion of counsel reasonably acceptable to the
indemnifying party that representation of both parties by the same counsel would
be inappropriate due to actual or likely conflicts of interest between them, or
(ii) the indemnifying party shall not have employed counsel for the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action, then the indemnified party or parties shall
have the right to select one firm of separate counsel (in addition to the fees
and expenses of local counsel) to assert any separate legal defenses and to
otherwise defend such action on behalf of such indemnified party or parties. No
indemnifying party shall be liable for any settlement of any action or claim for
monetary damages which an indemnified party may effect without the written
consent of the indemnifying party, which consent shall not be unreasonably
withheld.
(e) If the indemnification provided for in Section 8(a) or (b) hereof is for any reason, other than as specified in such provisions, unavailable to or insufficient to hold harmless an indemnified party, then each indemnifying party shall contribute to the aggregate losses, claims, damages or liabilities (or actions in respect thereof) referred to in Section 8(a) or (b) hereof in such proportion as is appropriate to reflect the relative fault and benefits to the Company on the one hand and such holders on the other hand in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the Company and such holders shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any untrue statement or omission. The obligations of the holders in this Section 8(d) are several in proportion to their respective obligations hereunder and not joint. Notwithstanding the provisions of this Section 8(d), in no event shall any holder of Registrable Securities be required to contribute any amount which is in excess of (i) the aggregate principal amount of Securities sold or exchanged by such holder less (ii) the amount of any damages that such person has otherwise been required to pay by reason of such alleged untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each Holder
Indemnified Party shall have the same rights to contribution as a holder, and
each person who controls the Company within the meaning of either the Securities
Act or the Exchange Act and each officer, director, employee and agent of such
person, shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought; but the
omission to so notify such party or parties (x) shall not relieve the party or
parties from whom contribution may be sought from any liability under this
paragraph (d) unless and to the extent it did not otherwise learn of such action
and such omission results in the forfeiture by the party or parties from whom
contribution may be sought or material impairment of substantial rights and
defenses and (y) shall not, in any event, relieve such party or parties from any
obligations other than under this Section 8 (d).
(f)
(g) The provisions of this Section 8 will remain in full force and effect,
regardless of any investigation made by or on behalf of any holder of
Registrable Securities, the Initial Purchasers, the Company or any of the
officers, directors or controlling persons referred to in this Section 8 and
will survive the sale (or, in the case of Resale Securities, the resale) by a
holder of Registrable Securities of such Registrable Securities.
(h)
SECTION 9. Underwritten Registrations (If Any). No holder may participate in any
Underwritten Registration, which Underwritten Registration shall only be
undertaken at the option of the Company, unless such holder (a) agrees to sell
such holder' s Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
SECTION 10. Termination. In the event that no Securities are sold to the Initial Purchasers pursuant to the Purchase Agreement, this Agreement shall automatically terminate, without liability on the part of any party. Upon the fulfillment of all obligations on the part of the Company to register the Securities as set forth herein (including maintaining the effectiveness of any applicable Registration State-
ments), this Agreement shall terminate; provided, that the provisions of Sections 7 and 8 hereof shall survive any termination and remain in full force and effect.
SECTION 11. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, and shall not, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities herein or otherwise conflicts with the provisions hereof.
(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 has obtained the written consent of holders of at least a majority of the then outstanding aggregate principal amount of the Registrable Securities (or, after the consummation of any Exchange Offer in accordance with Section 2, of Exchange Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Restricted Person hereunder occurring within the period in which the Initial Registration Statement is open for the Restricted Persons, the Company shall obtain the written consent of each such Restricted Person against which such amendment, modification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except for the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold or exchanged pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority in aggregate principal amount of the Registrable Securities being sold or exchanged by such holders pursuant to such Registration Statement; provided, however, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provision of the immediately preceding sentence. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Resale Initial Purchasers and that does not directly or indirectly affect the rights of holders of Registrable Securities or Exchange Securities may be given by each of the Resale Initial Purchasers affected thereby.
(c) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or per-
mitted hereunder shall be made in writing and delivered by hand delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a holder of Registrable Securities, at the most current address given by such holder to the Company in accordance with the provisions of this Section 11(c), which address initially is, with respect to the Initial Purchasers, at the address set forth in the Purchase Agreement and thereafter at the address for such holders of Registrable Securities set forth in the Security Register applicable to such Registrable Securities; and
(i) if to the Company, initially at the address 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 11(c).
All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when received, if telecopied.
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 and assigns of each of the parties, including without limitation and without the need for an express assignment or any consent by the Company thereto, subsequent holders of Registrable Securities.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT 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. Each of the parties hereto hereby submits to the non-exclusive jurisdiction of the Federal and State Courts of the Borough of Man-
hattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
(h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement, together with the Purchase Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, together with the Purchase Agreement, supersedes all prior agreements and understandings between the parties with respect to such subject matter.
(j) Securities Held by the Company, etc. Whenever the consent or approval of holders of a specified percentage of principal amount of Registrable Securities is required hereunder, Registrable Securities held by the Company or any of its Affiliates (other than subsequent holders of Registrable Securities if such subsequent holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the holders of such required percentage.
Please confirm that the foregoing correctly sets forth this agreement between the Company and you.
Very truly yours,
MIDAMERICAN FUNDING, LLC
By: /s/ Steven A. McArthur Name: Steven A. McArthur Title: Vice President and Secretary |
Accepted:
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Jonathan D. Bram ----------------------------------- Name: Jonathan D. Bram Title: Managing Director |
[LATHAM & WATKINS LETTERHEAD]
November __, 1999
EXHIBIT 5.1
MidAmerican Funding, LLC
666 Grand Avenue
Des Moines, Iowa 50303
Re: Registration Statement on Form S-4; $700,000,000 Aggregate Principal Amount of Senior Secured Notes and Bonds
Ladies and Gentlemen:
In connection with the registration of (i) $200,000,000 5.85% Senior Secured Exchange Notes due 2001 (the "2001 Securities"), (ii) $175,000,00 6.339% Senior Secured Exchange Notes due 2009 (the "2009 Securities") and (iii) $325,000,000 6.927% Senior Secured Exchange Bonds due 2029 (the "2029 Securities" and, collectively with the 2001 Securities and the 2009 Securities, the "Securities") by MidAmerican Funding, LLC, an Iowa limited liability company (the "Registrant"), under the Securities Act of 1933, as amended, on Form S-4 filed with the Securities and Exchange Commission (the "Commission") on November __, 1999 the "Registration Statement"), you have requested our opinion with respect to the matters set forth below.
In our capacity as your special counsel, we have made such legal and factual examinations and inquiries as we have deemed necessary or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon
MidAmerican Finding, LLC
oral or written statements and representations of officers and other representatives of the Registrant and others.
We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York, including statutory and reported decisional law thereunder, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state.
Capitalized terms used herein without definition have the meanings assigned to them in the Registration Statement.
Subject to the foregoing and the other matters set forth herein, it is our opinion that as of the date hereof:
When the Securities have been duly executed, issued, authenticated and delivered by or on behalf of the Registrant, the Securities will constitute legally valid and binding obligations of the Registrant, enforceable against the Registrant in accordance with their terms.
The opinions rendered in the preceding paragraph relating to the enforceability of the Securities are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; and (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or law, and the discretion of the court before which any proceeding therefor may be brought.
We have not been requested to express, and with your knowledge and consent do not render, any opinion as to the applicability to the obligations of the Registrant under the Indenture and the Securities of Section 548 of the United States Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor and Creditor Law) relating to fraudulent transfers and obligations.
To the extent that the obligations of the Registrant under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that: (i) each of the Registrant and the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has the requisite organizational and legal power and authority to perform its obligations under the Indenture and the Securities, (c) is duly qualified to engage in the activities contemplated by the Indenture and (d) has duly authorized, executed and delivered the Indenture; (ii) the Securities have been duly authorized by all necessary limited liability company action of the Registrant; (iii) the Indenture is the legally valid, binding and enforceable obligation of the Trustee, enforceable against the Trustee in accordance with its terms; and (iv) the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations. We have also assumed, with your
MidAmerican Finding, LLC
consent, that the choice of law provisions in the Indenture would be enforced by any court in which enforcement thereof might be sought.
We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters" in the Prospectus.
Very truly yours,
EXHIBIT 12.1
MIDAMERICAN FUNDING, LLC
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
MHC INC. (PREDECESSOR)
YEAR ENDED DECEMBER 31,
------------------------------------------------
1994 1995 1996 1997
Income from continuing operations $ 123,098 $ 119,705 $143,761 $139,332
Pre-tax (gain) loss of less than 50% owned persons (270) 9,079 (698) 2,234
--------- --------- -------- --------
122,828 128,784 143,063 141,566
--------- --------- -------- --------
Add (Deduct):
Total income taxes 60,457 66,803 98,422 68,390
Interest on long-term debt 101,267 105,550 102,909 89,898
Other interest charges 6,446 9,449 10,941 10,034
Preferred stock dividends of subsidiary 10,551 8,059 10,401 6,488
Preferred stock dividends of subsidiary trust - - 288 7,980
Interest on leases 1,211 1,088 375 268
--------- --------- -------- --------
179,932 190,949 223,336 183,058
--------- --------- -------- --------
EARNINGS AVAILABLE FOR FIXED CHARGES 302,760 319,733 366,399 324,624
--------- --------- -------- --------
Fixed Charges:
Interest on long-term debt 101,267 105,550 102,909 89,898
Other interest charges 6,446 9,449 10,941 10,034
Preferred stock dividends of subsidiary trust - - 288 7,980
Interest on leases 1,211 1,088 375 268
--------- --------- -------- --------
Subtotal 108,924 116,087 114,513 108,180
--------- --------- -------- --------
Preferred stock dividends of subsidiary 10,551 8,059 10,401 6,488
Ratio of net income before income taxes to net income 1.4524 1.5229 1.6384 1.4690
--------- --------- -------- --------
Preferred stock dividend requirements before income tax 15,324 12,273 17,041 9,531
--------- --------- -------- --------
FIXED CHARGES $ 124,248 $ 128,360 $131,554 $117,711
--------- --------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 2.4 2.5 2.8 2.8
========= ========= ======== ========
MIDAMERICAN
FUNDING
---------------------------------------- ------------
NINE MONTHS
ENDED JAN. 1 - MAR. 12 -
SEPT. 30, MAR. 11, SEPT. 30,
1998 1998 1999 1999
---- ---- ---- ----
$ 127,154 $ 107,105 $ 16,789 $ 108,628
(720) (1,052) (343) (22)
--------- --------- -------- ---------
126,434 106,053 16,446 108,606
--------- --------- -------- ---------
76,926 70,172 21,377 77,348
80,908 61,617 14,814 65,174
12,682 9,073 3,145 5,486
4,952 3,714 836 2,337
7,980 5,985 1,995 3,990
212 162 38 98
--------- --------- -------- ---------
183,660 150,723 42,205 154,433
--------- --------- -------- ---------
310,094 256,776 58,651 263,039
--------- --------- -------- ---------
80,908 61,617 14,814 65,174
12,682 9,073 3,145 5,486
7,980 5,985 1,995 3,990
212 162 38 98
--------- --------- -------- ---------
101,782 76,837 19,992 74,748
--------- --------- -------- ---------
4,952 3,714 836 2,337
1.5823 1.6332 2.2129 1.6970
--------- --------- -------- ---------
7,836 6,066 1,850 3,966
--------- --------- -------- ---------
$ 109,618 $ 82,903 $ 21,842 $ 78,714
--------- --------- -------- ---------
2.8 3.1 2.7 3.3
========= ======== ======== ========
|
EXHIBIT 12.1
MIDAMERICAN FUNDING, LLC
COMPUTATION OF PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
PRO FORMA
----------------------------------------
MIDAMERICAN MHC
FUNDING (PREDECESSOR)
------------- -----------------
YEAR ENDED NINE MONTHS ENDED
DEC. 31, 1998 SEPT. 30, 1999
------------- -----------------
Income from continuing operations $ 76,099 $130,628
Pre-tax (gain) loss of less than 50% owned persons (720) (365)
--------- --------
75,379 130,263
--------- --------
Add (Deduct):
Total income taxes 64,685 98,598
Interest on long-term debt 122,395 88,034
Other interest charges 12,682 8,631
Preferred stock dividends of subsidiary 4,952 3,716
Preferred stock dividends of subsidiary trust 7,980 5,985
Interest on leases 212 136
--------- --------
212,906 205,100
--------- --------
EARNINGS AVAILABLE FOR FIXED CHARGES 288,285 335,363
--------- --------
Fixed Charges:
Interest on long-term debt 122,395 88,034
Other interest charges 12,682 8,631
Preferred stock dividends of subsidiary trust 7,980 5,985
Interest on leases 212 136
--------- --------
Subtotal 143,269 102,786
--------- --------
Preferred stock dividends of subsidiary 4,952 3,716
Ratio of net income before income taxes to net income 1.7981 1.7339
--------- --------
Preferred stock dividend requirements before income tax 8,904 6,443
--------- --------
FIXED CHARGES $ 152,173 $109,229
--------- --------
RATIO OF EARNINGS TO FIXED CHARGES 1.9 3.1
========= ========
|
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
MHC Inc., an Iowa corporation.
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement of MidAmerican Funding, LLC on form S-4 of our report dated January 22, 1999, except with the respect to paragraph three in Note 10 and the related information, as to which the date is October 7, 1999, relating to the financial statements of MHC Inc. (formerly MidAmerican Energy Holdings Company) which appear in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
-------------------------------------
PricewaterhouseCoopers LLP
Kansas City, FMissouri
November 8, 1999
|
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)
---------------
|
MidAmerican Funding, LLC
(Exact name of obligor as specified in its charter)
Delaware 47-0819200
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
666 Grand Avenue
Des Moines, Iowa 50303
(Address of principal executive offices) (Zip code)
---------------
|
5.85% Senior Secured Exchange Notes due 2001 6.339% Senior Secured Exchange Notes due 2009 6.927% Senior Secured Exchange Bonds due 2029
(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,
New York N.Y. 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 4th day of November, 1999.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA ------------------------------------------- Name: MARY LAGUMINA Title: ASSISTANT VICE PRESIDENT |
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 June 30, 1999, 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.. $5,597,807
Interest-bearing balances........................... 4,075,775
Securities:
Held-to-maturity securities......................... 785,167
Available-for-sale securities....................... 4,159,891
Federal funds sold and Securities purchased under
agreements to resell................................ 2,476,963
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................................ 38,028,772
LESS: Allowance for loan and
lease losses...................................... 568,617
LESS: Allocated transfer risk
reserve........................................... 16,352
Loans and leases, net of unearned income,
allowance, and reserve............................ 37,443,803
Trading Assets......................................... 1,563,671
Premises and fixed assets (including capitalized
leases)............................................. 683,587
Other real estate owned................................ 10,995
Investments in unconsolidated subsidiaries and
associated companies................................ 184,661
Customers' liability to this bank on acceptances
outstanding......................................... 812,015
Intangible assets...................................... 1,135,572
Other assets........................................... 5,607,019
-----------
Total assets........................................... $64,536,926
===========
|
LIABILITIES
Deposits:
In domestic offices................................. $26,488,980
Noninterest-bearing................................. 10,626,811
Interest-bearing.................................... 15,862,169
In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................ 20,655,414
Noninterest-bearing................................. 156,471
Interest-bearing.................................... 20,498,943
Federal funds purchased and Securities sold under
agreements to repurchase............................ 3,729,439
Demand notes issued to the U.S.Treasury................ 257,860
Trading liabilities.................................... 1,987,450
Other borrowed money:
With remaining maturity of one year or less......... 496,235
With remaining maturity of more than one year
through three years............................... 465
With remaining maturity of more than three years.... 31,080
Bank's liability on acceptances executed and
outstanding......................................... 822,455
Subordinated notes and debentures...................... 1,308,000
Other liabilities...................................... 2,846,649
-----------
Total liabilities...................................... 58,624,027
===========
EQUITY CAPITAL
Common stock........................................... 1,135,284
Surplus................................................ 815,314
Undivided profits and capital reserves................. 4,001,767
Net unrealized holding gains (losses) on
available-for-sale securities....................... (7,956)
Cumulative foreign currency translation adjustments....
(31,510)
-----------
Total equity capital................................... 5,912,899
-----------
Total liabilities and equity capital................... $64,536,926
===========
|
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
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. Reyni |
Alan R. Griffith | Directors
Gerald L. Hassell |
---
|
| ARTICLE UT |
| This schedule contains summary financial information extracted from the Consolidated Statement of Income and the Consolidated Statement of Cash Flows for the period March 12, 1999 through September 30, 1999 and the Consolidated Balance Sheet as of September 30, 1999 and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | Other | |
| FISCAL YEAR END | DEC 31 1999 | |
| PERIOD START | MAR 12 1999 | |
| PERIOD END | SEP 30 1999 | |
| BOOK VALUE | Per Book | |
| TOTAL NET UTILITY PLANT | 2,478,418 | |
| OTHER PROPERTY AND INVEST | 639,815 | |
| TOTAL CURRENT ASSETS | 286,582 | |
| TOTAL DEFERRED CHARGES | 1,757,078 | |
| OTHER ASSETS | 102,677 | |
| TOTAL ASSETS | 5,264,570 | |
| COMMON | 1,727,651 | |
| CAPITAL SURPLUS PAID IN | 155,533 | |
| RETAINED EARNINGS | 119,886 | |
| TOTAL COMMON STOCKHOLDERS EQ | 1,836,163 | |
| PREFERRED MANDATORY | 151,598 | |
| PREFERRED | 31,759 | |
| LONG TERM DEBT NET | 1,532,425 | |
| SHORT TERM NOTES | 0 | |
| LONG TERM NOTES PAYABLE | 0 | |
| COMMERCIAL PAPER OBLIGATIONS | 89,115 | |
| LONG TERM DEBT CURRENT PORT | 215,635 | |
| PREFERRED STOCK CURRENT | 0 | |
| CAPITAL LEASE OBLIGATIONS | 0 | |
| LEASES CURRENT | 0 | |
| OTHER ITEMS CAPITAL AND LIAB | 1,407,875 | |
| TOT CAPITALIZATION AND LIAB | 5,264,570 | |
| GROSS OPERATING REVENUE | 961,885 | |
| INCOME TAX EXPENSE | 77,348 | 1 |
| OTHER OPERATING EXPENSES | 795,022 | |
| TOTAL OPERATING EXPENSES | 795,022 | |
| OPERATING INCOME LOSS | 166,863 | |
| OTHER INCOME NET | 95,418 | |
| INCOME BEFORE INTEREST EXPEN | 71,445 | |
| TOTAL INTEREST EXPENSE | 76,305 | |
| NET INCOME | 119,886 | |
| PREFERRED STOCK DIVIDENDS | 6,327 | 2 |
| EARNINGS AVAILABLE FOR COMM | 119,886 | |
| COMMON STOCK DIVIDENDS | 0 | |
| TOTAL INTEREST ON BONDS | 65,174 | |
| CASH FLOW OPERATIONS | 47,511 | |
| EPS BASIC | 0 | |
| EPS DILUTED | 0 |
| 1 | This includes all Income Taxes and is not part of operating expenses in this schedule or on the statement of income, but is deducted before net income. |
| 2 | Preferred stock dividends are included in fixed charges on this schedule and in the statement of income. They are shown for this tag as a memo. |
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER
5.85% SENIOR SECURED NOTES DUE 2001
6.339% SENIOR SECURED NOTES DUE 2009 AND
6.927% SENIOR SECURED BONDS DUE 2029
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
MIDAMERICAN FUNDING, LLC
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED [____________], 1999
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
DELIVER TO:
By Registered or Certified Mail By Hand Delivery:
or Overnight Delivery:
The Bank of New York
The Bank of New York 101 Barclay Street
101 Barclay Street New York, New York 10286
New York, New York 10286 Attention: [____________]
Attention: [____________]
|
By Facsimile (for Eligible Institutions Only):
([___]) [_______]
For Information or Confirmation by Telephone:
([___]) [_______]
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 LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
IF YOU WISH TO EXCHANGE 5.85% SENIOR SECURED NOTES DUE 2001 (THE "2001 INITIAL SECURITIES"), 6.339% SENIOR SECURED NOTES DUE 2009 (THE "2009 INITIAL SECURITIES") OR 6.927% SENIOR SECURED BONDS DUE 2029 (THE "2029 INITIAL SECURITIES" AND, COLLECTIVELY WITH THE 2001 INITIAL SECURITIES AND THE 2009 INITIAL SECURITIES, THE "INITIAL SECURITIES") FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF, IN THE CASE OF THE 2001 INITIAL SECURITIES, 5.85% SENIOR SECURED EXCHANGE NOTES DUE 2001 (THE "2001 EXCHANGE SECURITIES"), IN THE CASE OF THE 2009 INITIAL SECURITIES, 6.339% SENIOR SECURED EXCHANGE NOTES DUE 2009 (THE "2009 EXCHANGE SECURITIES"), AND, IN THE CASE OF THE 2029 INITIAL SECURITIES, 6.927% SENIOR SECURED EXCHANGE BONDS DUE 2020 (THE "2029 EXCHANGE SECURITIES" AND, COLLECTIVELY WITH THE 2001 EXCHANGE SECURITIES AND THE 2009 EXCHANGE SECURITIES, THE "EXCHANGE SECURITIES") PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY
TENDER (AND NOT WITHDRAW) INITIAL SECURITIES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BEFORE
COMPLETING THIS LETTER OF TRANSMITTAL
This Letter of Transmittal is to be completed by holders of Initial Securities either if Initial Securities are to be forwarded herewith or if tenders of Initial Securities 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 pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" in the Prospectus (as defined).
Holders of Initial Securities whose certificates for such Initial Securities 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 or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Initial Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus.
DESCRIPTION OF TENDERED INITIAL SECURITIES
FOR 5.85% SENIOR SECURED NOTES DUE 2001
------------------------------------------------------------------------------- ------------------ -------------------
AGGREGATE
NAMES(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) CERTIFICATE PRINCIPAL AMOUNT
AS IT APPEARS ON THE 5.85% SENIOR SECURED NOTES DUE 2001 NUMBER(S) OF INITIAL
(PLEASE FILL IN, IF BLANK) OF INITIAL SECURITIES
SECURITIES TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
TOTAL PRINCIPAL
AMOUNT OF
INITIAL
SECURITIES
TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
|
FOR 6.339% SENIOR SECURED NOTES DUE 2009
------------------------------------------------------------------------------- ------------------ -------------------
AGGREGATE
NAMES(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) CERTIFICATE PRINCIPAL AMOUNT
AS IT APPEARS ON THE 6.339% SENIOR SECURED NOTES DUE 2009 NUMBER(S) OF INITIAL
(PLEASE FILL IN, IF BLANK) OF INITIAL SECURITIES
SECURITIES TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
TOTAL PRINCIPAL
AMOUNT OF
INITIAL
SECURITIES
TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
|
FOR 6.927% SENIOR SECURED BONDS DUE 2029
------------------------------------------------------------------------------- ------------------ -------------------
AGGREGATE
NAMES(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) CERTIFICATE PRINCIPAL AMOUNT
AS IT APPEARS ON THE 5.85% SENIOR SECURED NOTES DUE 2001 NUMBER(S) OF INITIAL
(PLEASE FILL IN, IF BLANK) OF INITIAL SECURITIES
SECURITIES TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
------------------ -------------------
TOTAL PRINCIPAL
AMOUNT OF
INITIAL
SECURITIES
TENDERED
------------------------------------------------------------------------------- ------------------ -------------------
|
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED INITIAL SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
[ ] CHECK HERE AND ENCLOSE A COPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED INITIAL SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
If Guaranteed Delivery is to be made By Book-Entry Transfer:
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED INITIAL SECURITIES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER
FACILITY ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE INITIAL SECURITIES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
LADIES AND GENTLEMEN:
1. The undersigned hereby tenders to MidAmerican Funding, LLC ("MidAmerican Funding") the Initial Securities described above pursuant to MidAmerican Funding's offer of $1,000 principal amount of Exchange Securities in exchange for each $1,000 principal amount of Initial Securities upon the terms and subject to the conditions contained in the Prospectus dated [_________], 1999 (the "Prospectus"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Exchange Offer").
2. The undersigned hereby represents and warrants that it has full authority to tender the Initial Securities described above. The undersigned will, upon request, execute and deliver any additional documents deemed by MidAmerican Funding to be necessary or desirable to complete the tender of Initial Securities.
3. The undersigned understands that the tender of the Initial Securities pursuant to all of the procedures set forth in the Prospectus will constitute an agreement between the undersigned and MidAmerican Funding as to the terms and conditions set forth in the Prospectus.
4. Unless the box under the heading "Special Registration Instructions" is checked, the undersigned hereby represents and warrants that:
(i) the Exchange Securities acquired pursuant to the Exchange Offer in exchange for Initial Securities are being obtained in the ordinary course of business of the undersigned and any beneficial owner(s) of such Initial Securities or interests therein, whether or not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or intends to engage in a distribution of such Exchange Securities;
(iii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Securities;
(iv) if the undersigned or such other person is a resident of the State of California, it falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations;
(v) if the undersigned or such other person is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985;
(vi) the undersigned acknowledges and agrees that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended, or is participating in the Exchange Offer for the purpose of distributing the Exchange Securities must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, in connection with a secondary resale transaction of the Exchange Securities or interests therein acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters;
(vii) the undersigned understands that a secondary resale transaction described in clause (vi) above and any resales of Exchange Securities or interests therein obtained by such holder in exchange for Initial Securities or interests therein originally acquired by such holder directly from MidAmerican Funding should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission; and
(viii) neither the holder nor any such other person is an "affiliate," as such term is defined under Rule 405 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), of MidAmerican Funding.
5. The undersigned may, if and only if unable to make all of the representations and warranties contained in Item 4 above, elect to have its Initial Securities registered in the shelf registration described in the Registration Rights Agreement, dated March 9, 1999, among Credit Suisse First Boston Corporation, Lehman Brothers Inc., Goldman Sachs & Co., Merrill Lynch & Co. and MidAmerican Funding, in the form filed as an exhibit to the registration statement of which the Prospectus is a part. Such election may be made by checking the box under "Special Registration Instructions" on page 9. By making such election, the undersigned agrees, jointly and severally, as a holder of transfer restricted securities participating in a shelf registration, to indemnify and hold harmless MidAmerican Funding, its directors and officers and each Person who controls MidAmerican Funding, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages and liabilities whatsoever (including, without limitation, the reasonable legal and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the shelf registration statement filed with respect to such Initial Securities or the related prospectus or in any amendment thereof or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with information relating to the undersigned furnished to MidAmerican Funding in writing by or on behalf of the undersigned expressly for use therein. Any such indemnification shall be governed by the terms and subject to the conditions set forth in the Registration Rights Agreement, including, without limitation, the provisions regarding notice, retention of counsel, contribution and payment of expenses set forth therein.
6. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities, however, by so acknowledging and delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a broker-dealer and Initial Securities held for its own account were not acquired as a result of market-making or other trading activities, such Initial Securities cannot be exchanged pursuant to the Exchange Offer.
7. Any obligation of the undersigned hereunder shall be binding upon the successors, assigns, executors, administrators, trustees in bankruptcy and legal and personal representatives of the undersigned.
8. Unless otherwise indicated herein under "Special Delivery Instructions," the certificates for the Exchange Securities will be issued in the name of the undersigned.
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 1 below)
To be completed ONLY IF the Exchange Securities are to be issued or sent to someone other than the undersigned or to the undersigned at an address other than that provided above.
Mail [ ] Issue [ ] (check appropriate boxes) certificates to:
SPECIAL REGISTRATION INSTRUCTIONS
(See Item 5 above)
To be completed ONLY IF (i) the undersigned satisfies the conditions set forth in Item 5 above, (ii) the undersigned elects to register its Initial Securities in the shelf registration described in the Exchange and Registration Rights Agreement and (iii) the undersigned agrees to indemnify certain entities and individuals as set forth in the Exchange and Registration Rights Agreement and summarized in Item 5 above.
SIGNATURE
To be completed by all exchanging holders. Must be signed by registered holder exactly as name appears on the Initial Securities. If signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.
Area Code and Telephone
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 1 BELOW)
Certain Signatures Must be Guaranteed by an Eligible Institution
(INCLUDING AREA CODE) OF FIRM)
PLEASE READ THE FOLLOWING INSTRUCTIONS,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must be guaranteed by an eligible guarantor institution that is a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or by an "eligible guarantor institution" within the meaning of Rule l7Ad-15 promulgated under the Exchange Act (an "Eligible Institution") unless the box entitled "Special Registration Instructions" or "Special Delivery Instructions" above has not been completed or the Initial Securities described above are tendered for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND INITIAL SECURITIES. The Initial Securities, together with a properly completed and duly executed Letter of Transmittal (or copy thereof), should be mailed or delivered to the Exchange Agent at the address set forth above.
THE METHOD OF DELIVERY OF INITIAL SECURITIES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR INITIAL SECURITIES SHOULD BE SENT TO MIDAMERICAN FUNDING. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by a person other than a registered holder of any Initial Securities, such Initial Securities must be endorsed or accompanied by appropriate bond powers, signed by such registered holder exactly as such registered holder's name appears on such Initial Securities.
If this Letter of Transmittal or any Initial Securities 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, unless waived by MidAmerican Funding, proper evidence satisfactory to MidAmerican Funding of its authority to so act must be submitted with this Letter of Transmittal.
4. MISCELLANEOUS. All questions as to the validity, form, eligibility (including time of receipt), acceptance, and withdrawal of tendered Initial Securities will be determined by MidAmerican Funding in its sole discretion, which determination will be final and binding on all parties. The Registrant reserves the absolute right to reject any or all Initial Securities not properly tendered or any Initial Securities MidAmerican Funding's acceptance of which would, in the opinion of counsel for MidAmerican Funding, be unlawful. The Registrant also reserves the right to waive any defects, irregularities, or conditions of tender as to particular Initial Securities. The Registrant's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and binding. Unless waived, any defects or irregularities in connection with tenders of Initial Securities must be cured within such time as MidAmerican Funding shall determine. Neither MidAmerican Funding, the Exchange Agent, nor any other person shall be under any duty to give notification of defects in such tenders or shall incur any liability for failure to give such notification. Tenders of Initial Securities will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Initial Securities received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holder thereof as soon as practicable following the Expiration Date.
EXHIBIT 99.2
LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS
REGARDING THE OFFER TO EXCHANGE
(1) 5.85% SENIOR SECURED EXCHANGE NOTES DUE 2001 FOR ANY AND ALL OUTSTANDING 5.85% SENIOR SECURED NOTES DUE 2001, (2) 6.339% SENIOR SECURED EXCHANGE NOTES DUE 2009 FOR ANY AND ALL OUTSTANDING 6.339% SENIOR SECURED NOTES DUE 2009 AND (3) 6.927% SENIOR SECURED EXCHANGE BONDS DUE 2029 FOR ANY AND ALL OUTSTANDING 6.927% SENIOR SECURED BONDS DUE 2029
OF
MIDAMERICAN FUNDING, LLC
TO REGISTERED HOLDERS AND THE DEPOSITORY TRUST COMPANY PARTICIPANTS:
We are enclosing herewith the materials listed below relating to the offer by MidAmerican Funding, LLC ("MidAmerican Funding") to exchange $1000 principal amount of its 5.85% Senior Secured Exchange Notes due 2001 (the "2001 Exchange Securities"), $1000 principal amount of its 6.339% Senior Secured Exchange Notes due 2009 (the "2009 Exchange Securities") and $1000 principal amount of its 6.927% Senior Secured Exchange Bonds due 2029 (the "2029 Exchange Securities" and, collectively with the 2001 Exchange Securities and the 2009 Exchange Securities, the "Exchange Securities"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for, in the case of the 2001 Exchange Securities, each $1000 principal amount of its outstanding 5.85% Senior Secured Notes due 2001 (the "2001 Initial Securities"), in the case of the 2009 Exchange Securities, each $1000 principal amount of its outstanding 6.339% Senior Secured Notes due 2009 (the "2009 Initial Securities"), and, in the case of the 2029 Exchange Securities, each $1000 principal amount of its outstanding 6.927% Senior Secured Bonds due 2029 (the "2029 Initial Securities" and, collectively with the 2001 Initial Securities and the 2009 Initial Securities, the "Initial Securities"), respectively, of which a total of $700,000,000 in aggregate principal amount was issued on March 11, 1999 and is outstanding as of the date hereof, upon the terms and subject to the conditions set forth in MidAmerican Funding's Prospectus, dated [___________], 1999, and the related Letter of Transmittal (which together constitute the "Exchange Offer").
Enclosed are copies of the following documents:
1. Prospectus dated [____________], 1999;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder or DTC Participant from Beneficial Owner; and
5. Letter which may be sent to your clients for whose account you hold definitive registered bonds or book-entry interests representing Initial Securities in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client's instruction with regard to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of Initial Securities being tendered.
To participate in the Exchange Offer, a beneficial holder must either
(1) cause to be delivered to The Bank of New York (the "Exchange Agent"), at the
address set forth in the Letter of Transmittal, definitive registered bonds
representing Initial Securities in proper form for transfer together with a
properly executed Letter of Transmittal or (2) cause a DTC participant to tender
such holder's Initial Securities to the Exchange Agent's account maintained at
the Depository Trust Company ("DTC") for the benefit of the Exchange Agent
through DTC's Automated Tender Offer Program ("ATOP"), including transmission of
a computer-generated message that acknowledges and agrees to be bound by the
terms of the Letter of Transmittal. By complying with DTC's ATOP procedures with
respect to the Exchange Offer, the DTC participant confirms on behalf of itself
and the beneficial owners of tendered Initial Securities all provisions of the
Letter of Transmittal applicable to it and such beneficial owners as fully as if
it completed, executed and returned the Letter of Transmittal to the Exchange
Agent.
Pursuant to the Letter of Transmittal, each holder of Initial Securities will represent to MidAmerican Funding that: (i) the Exchange Securities or book-entry interests therein to be acquired by such holder and any beneficial owner(s) of the Initial Securities or interests therein ("Beneficial Owner(s)") in connection with the Exchange Offer are being acquired by such holder and any Beneficial Owner(s) in the ordinary course of business of the holder and any Beneficial Owner(s), (ii) the holder and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Securities, (iii) if the holder or Beneficial Owner is a resident of the State of California, it falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if the holder or Beneficial Owner is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v) the holder and each Beneficial Owner acknowledge and agree that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or is participating in the Exchange Offer for the purpose of distributing the Exchange Securities must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Securities or interests therein acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (vi) the holder and each Beneficial Owner understand that a secondary resale transaction described in clause (v) above and any resales of Exchange Securities or interests therein obtained by such holder in exchange for Initial Securities or interests therein originally acquired by such holder directly from MidAmerican Funding should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (vii) neither the holder nor any Beneficial Owner(s) is an "affiliate," as defined in Rule 405 under the Securities Act, of MidAmerican Funding. Upon a request by MidAmerican Funding, a holder or Beneficial Owner will deliver to MidAmerican Funding a legal opinion confirming its representation made in clause (vii) above. If the tendering holder of Initial Securities is (1) a broker-dealer (whether or not it is also an "affiliate") or (2) a Beneficial Owner(s) that will receive Exchange Securities pursuant to the Exchange Offer, the tendering holder will represent on behalf of itself and, if
such Initial Securities are being held on behalf of Beneficial Owner(s), on behalf of such Beneficial Owner(s) that the Initial Securities to be exchanged for the Exchange Securities were acquired as a result of market-making activities or other trading activities, and acknowledge on its own behalf and, if such Initial Securities are held on behalf of Beneficial Owner(s), on behalf of such Beneficial Owner(s) that it or they will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, such tendering holder will not be deemed to admit that it or any Beneficial Owner is an "underwriter" within the meaning of the Securities Act.
The enclosed "Instruction to Registered Holder or DTC Participant from Beneficial Owner" form contains an authorization by the beneficial owners of Initial Securities for you to make the foregoing representations.
The Registrant will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Initial Securities pursuant to the Exchange Offer. The Registrant will pay or cause to be paid any transfer taxes payable on the transfer of Initial Securities to them, except as otherwise provided in the section "The Exchange Offer--Fees and Expenses" of the enclosed Prospectus.
Additional copies of the enclosed materials may be obtained from the Exchange Agent.
Very truly yours,
MidAmerican Funding, LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF MIDAMERICAN FUNDING OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON ITS BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER OR DTC PARTICIPANT
FROM BENEFICIAL OWNER
FOR
5.85% SENIOR SECURED NOTES DUE 2001,
6.339% SENIOR SECURED NOTES DUE 2009 AND/OR
6.927% SENIOR SECURED BONDS DUE 2029
OF
MIDAMERICAN FUNDING, LLC
The undersigned hereby acknowledges receipt of the Prospectus dated
[__________], 1999 (the "Prospectus"), of MidAmerican Funding, LLC ("MidAmerican
Funding"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal") that together constitute MidAmerican Funding's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings assigned to them in the Prospectus and the Letter of Transmittal.
This will instruct you as to the action to be taken by you relating to the Exchange Offer with respect to the 5.85% Senior Secured Notes due 2001 (the "2001 Initial Securities"), the 6.339% Senior Secured Notes due 2009 (the "2009 Initial Securities") and/or the 6.927% Senior Secured Bonds due 2029 (the "2029 Initial Securities" and, collectively with the 2001 Initial Securities and the 2009 Initial Securities, the "Initial Securities") held by you for the account of the undersigned.
The principal amount of the Initial Securities held by you for the account of the undersigned is (fill in amount):
$__________ principal amount of 2001 Initial Securities
$__________ principal amount of 2009 Initial Securities
$__________ principal amount of 2029 Initial Securities.
With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box):
[ ] To TENDER the following principal amount of Initial Securities held by you for the account of the undersigned (insert amount of Initial Securities to be tendered, if any):
$__________ principal amount of 2001 Initial Securities
$__________ principal amount of 2009 Initial Securities
$__________ principal amount of 2029 Initial Securities.
[ ] NOT to TENDER any Initial Securities held by you for the account of the undersigned.
If the undersigned instructs you to tender the Initial Securities held by you for the account of the undersigned, it is understood that you are authorized:
(a) to make, on behalf of the undersigned (and the
undersigned, by its signature below, hereby makes to you), the
representations and warranties contained in the Letter of Transmittal
that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations that (i) the
5.85% Senior Secured Exchange Notes due 2001, the 6.339% Senior Secured
Exchange Notes due 2009 and the 6.927% Senior Secured Exchange
Securities due 2029 (collectively, the "Exchange Securities") or
book-entry interests therein to be acquired by the undersigned in
connection with the Exchange Offer are being acquired by the
undersigned in the ordinary course of business of the undersigned, (ii)
the undersigned is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate,
in the distribution of the Exchange Securities, (iii) if the
undersigned is a resident of the State of California, it falls under
the self-executing institutional investor exemption set forth under
Section 25102(i) of the Corporate Securities Law of 1968 and Rules
260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv)
if the undersigned is a resident of the Commonwealth of Pennsylvania,
it falls under the self-executing institutional investor exemption set
forth under Sections 203(c), 102(d) and (k) of the Pennsylvania
Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky
Regulations and an interpretive opinion dated November 16, 1985, (v)
the undersigned acknowledges and agrees that any person who is a
broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is participating in the Exchange Offer
for the purpose of distributing the Exchange Securities must comply
with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended, in connection with a secondary
resale transaction of the Exchange Securities or interests therein
acquired by such person and cannot rely on the position of the staff of
the Commission set forth in certain no-action letters, (vi) the
undersigned understands that a secondary resale transaction described
in clause (v) above and any resales of Exchange Securities or interests
therein obtained by such holder in exchange for Initial Securities or
interests therein originally acquired by such holder directly from
MidAmerican Funding should be covered by an effective registration
statement containing the selling security holder information required
by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) the undersigned is not an "affiliate," as defined
in Rule 405 under the Securities Act, of MidAmerican Funding. Upon a
request by MidAmerican Funding, the undersigned will deliver to
MidAmerican Funding a legal opinion confirming its representation made
in clause (vii) above. If the undersigned is a broker-dealer (whether
or not it is also an "affiliate") that will receive Exchange Securities
for its own account pursuant to the Exchange Offer, the undersigned
represents that the Initial Securities to be exchanged for the Exchange
Securities were acquired by it as a result of market-making activities
or other trading activities, and acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of such Exchange Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned does not
and will not be deemed to admit that is an "underwriter" within the
meaning of the Securities Act;
(b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and
(c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Initial Securities.
EXHIBIT 99.4
LETTER TO CLIENTS
REGARDING THE OFFER TO EXCHANGE
(1) 5.85% SENIOR SECURED EXCHANGE NOTES DUE 2001 FOR ANY AND ALL OUTSTANDING 5.85% SENIOR SECURED NOTES DUE 2001, (2) 6.339% SENIOR SECURED EXCHANGE NOTES DUE 2009 FOR ANY AND ALL OUTSTANDING 6.339% SENIOR SECURED NOTES DUE 2009 AND (3) 6.927% SENIOR SECURED EXCHANGE BONDS DUE 2029 FOR ANY AND ALL OUTSTANDING 6.927% SENIOR SECURED BONDS DUE 2029
OF
MIDAMERICAN FUNDING, LLC
To Our Clients:
We are enclosing herewith a Prospectus, dated [___________],1999, of MidAmerican Funding, LLC ("MidAmerican Funding") and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by MidAmerican Funding to exchange $1000 principal amount of its 5.85% Senior Secured Exchange Notes due 2001 (the "2001 Exchange Securities"), $1000 principal amount of its 6.339% Senior Secured Exchange Notes due 2009 (the "2009 Exchange Securities") and $1000 principal amount of its 6.927% Senior Secured Exchange Bonds due 2029 (the "2029 Exchange Securities" and, collectively with the 2001 Exchange Securities and the 2009 Exchange Securities, the "Exchange Securities"), pursuant to an offering registered under the Securities Act of 1933, as amended, for, in the case of the 2001 Exchange Securities, each $1000 principal amount of its outstanding 5.85% Senior Secured Notes due 2001 (the "2001 Initial Securities"), in the case of the 2009 Exchange Securities, each $1000 principal amount of its outstanding 6.339% Senior Secured Notes due 2009 (the "2009 Initial Securities"), and, in the case of the 2029 Exchange Securities, each $1000 principal amount of its outstanding 6.927% Senior Secured Bonds due 2029 (the "2029 Initial Securities" and, collectively with the 2001 Initial Securities and the 2009 Initial Securities, the "Initial Securities"), respectively, of which a total of $700,000,000 in aggregate principal amount was issued on March 11, 1999 and is outstanding as of the date hereof, upon the terms and subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of Initial Securities being tendered.
We are the Registered Holder or DTC participant through which you hold an interest in the Initial Securities. A tender of such Initial Securities can be made only by us pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender your beneficial ownership of Initial Securities held by us for your account.
We request instructions as to whether you wish to tender any or all of your Initial Securities held by us for your account pursuant to the terms and subject to the conditions of the Exchange Offer. We also
request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal that are to be made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of Initial Securities must make certain representations and warranties that are set forth in the Letter of Transmittal and in the attached form that we have provided to you for your instructions regarding what action we should take in the Exchange Offer with respect to your interest in the Initial Securities.
EXHIBIT 99.5
NOTICE OF GUARANTEED DELIVERY
TO TENDER
5.85% Senior Secured Notes due 2001
6.339% Senior Secured Notes due 2009
6.927% Senior Secured Bonds due 2029
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
MIDAMERICAN FUNDING, LLC
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED [___________], 1999
As set forth in the Prospectus (as defined), this form or one substantially equivalent hereto must be used to accept the Exchange Offer (i) if certificates for the 5.85% Senior Secured Notes due 2001, the 6.339% Senior Secured Notes due 2009 and/or the 6.927% Senior Secured Securities due 2029 (collectively, the "Initial Securities") of MidAmerican Funding, LLC, are not immediately available, (ii) time will not permit a holder's Initial Securities or other required documents to reach The Bank of New York (the "Exchange Agent") on or prior to the Expiration Date (as defined) or (iii) the procedure for book-entry transfer cannot be completed on a timely basis. This form may be delivered by facsimile transmission, registered or certified mail, by hand or by overnight delivery service to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
DELIVER TO:
By Registered or Certified Mail: By Hand or Overnight Delivery:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attention: [____________] Attention: [____________]
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By Facsimile:
(Eligible Institutions Only)
([__]) [_______]
For Information or
Confirmation by Telephone:
([__]) [_______]
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 THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to MidAmerican Funding, LLC, upon the
terms and subject to the conditions set forth in the Prospectus dated
[__________], 1999 (as the same may be amended or supplemented from time to
time, the "Prospectus"), and the related Letter of Transmittal, receipt of which
is hereby acknowledged, the aggregate principal amount of Initial Securities set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures."
If Initial Securities will be tendered by book-entry transfer, provide the following information;
All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.
PLEASE SIGN HERE
X
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X
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Signature(s) or Owner(s) Date
or Authorized Signatory
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Must be signed by the holder(s) of the Initial Securities as their name(s) appear(s) on certificates for Initial Securities or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Signature Program or a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker or government securities 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 recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent, at one of its addresses set forth above, either the Initial Securities tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Initial Securities to the Exchange Agent's account at The Depositary Trust Company, pursuant to the procedures for book-entry transfer set forth in the Prospectus, within three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Initial Securities tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned.
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Name of Firm Authorized Signature
----------------------------------- -----------------------------------
Address Title
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Zip Code (Please Type or Print)
Area Code and Telephone
No.: Dated:
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NOTE: DO NOT SEND CERTIFICATES FOR INITIAL SECURITIES WITH THIS FORM.