-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jz+fymCJ1ClifcKRZWVJ+Jorr9kRZXGtH6zfZhtWFzVHlcNzbAxHi2V+eNXXsdxz 3AHiY80Y+KeQ/r5p4Vgo6A== 0001017062-02-000876.txt : 20020508 0001017062-02-000876.hdr.sgml : 20020508 ACCESSION NUMBER: 0001017062-02-000876 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20020508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN ELECTRIC INDUSTRIES INC CENTRAL INDEX KEY: 0000354707 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 990208097 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-87782 FILM NUMBER: 02637641 BUSINESS ADDRESS: STREET 1: 900 RICHARDS ST CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 8085435662 MAIL ADDRESS: STREET 1: 900 RICHARDS STREET CITY: HONOLULU STATE: HI ZIP: 96813 S-3 1 ds3.txt FORM S-3 As filed with the Securities and Exchange Commission on May 8, 2002. Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- HAWAIIAN ELECTRIC INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Hawaii 99-0208097 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 900 Richards Street, Honolulu, Hawaii 96813 (808) 543-5662 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------- ROBERT F. MOUGEOT Financial Vice President, Treasurer & Chief Financial Officer Hawaiian Electric Industries, Inc. 900 Richards Street, Honolulu, Hawaii 96813 (808) 543-5641 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------- Copies to: DAVID J. REBER, ESQ. JEFFREY J. DELANEY, ESQ. Goodsill Anderson Quinn & Stifel LLP Pillsbury Winthrop LLP 1099 Alakea Street One Battery Park Plaza Honolulu, HI 96813 New York, NY 10004 (808) 547-5600 (212) 858-1000 ---------------- Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement, as determined by market conditions. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering. [_] ______ If this Form is a post-effective amendment filed 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 delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------ Proposed Proposed Maximum Maximum Amount of Title of each Class of Amount to be Offering Price Aggregate Registration Securities to be Registered Registered Per Unit* Offering Price* Fee - ------------------------------------------------------------------------------------ Medium-Term Notes, Series D $300,000,000 100% $300,000,000 $27,600 - ------------------------------------------------------------------------------------
* Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933. ================================================================================ The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Preliminary Prospectus dated May 8, 2002 PROSPECTUS [LOGO] Hawaiian Electric Company $300,000,000 Hawaiian Electric Industries, Inc. Medium-Term Notes, Series D Due from 9 Months to 30 Years from Date of Issue ---------------- Hawaiian Electric Industries, Inc., or HEI, may offer from time to time up to $300,000,000 aggregate principal amount of its Medium-Term Notes, Series D, which we refer to in this prospectus as the "Notes". Each Note will be denominated in U.S. dollars and will include the following terms, unless different terms are described in the applicable pricing supplement: ... A stated maturity date from 9 months to 30 years . Interest at fixed or floating rates, or no interest at from date of issue all. The floating interest rate may be based on one ... Interest payments on fixed rate Notes on each or more of the following indices plus or minus a February 10 and August 10 spread and/or multiplied by a spread multiplier: ... Interest payments on floating rate Notes on a . CD rate monthly, quarterly, semiannual or annual basis . Commercial paper rate ... Minimum denominations of $1,000 and integral . Federal funds rate multiples of $1,000 . LIBOR ... Redemption and/or repayment provisions, whether . Prime rate mandatory, at HEI's option, at the option of the . Treasury rate holders or none at all . Such other interest basis or interest rate ... Book-entry (through The Depository Trust Company) formula as may be specified in the or certificated form applicable pricing supplement
HEI will specify final terms for each Note in the applicable pricing supplement, which may be different from the terms described in this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus or any pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense. HEI may sell the Notes to the Agents as principals for resale at varying or fixed offering prices or through the Agents as agents using their reasonable best efforts on HEI's behalf. Unless otherwise specified in the applicable pricing supplement, the price to the public for the Notes will be 100% of the principal amount. If HEI sells all of the Notes, HEI expects to receive proceeds of between $297,750,000 and $299,625,000 after paying the Agents' discounts and commissions of between $375,000 and $2,250,000 and before deducting expenses payable by HEI. HEI may also sell the Notes without the assistance of the Agents (whether acting as principal or as agent). The address of HEI's principal executive offices is 900 Richards Street, Honolulu, Hawaii 96813 and its telephone number is (808) 543-5662. ---------------- Merrill Lynch & Co. Goldman, Sachs & Co. Robert W. Baird & Co. Janney Montgomery Scott LLC U.S. Bancorp Piper Jaffray Inc. The date of this prospectus is , 2002. TABLE OF CONTENTS
Page ---- Forward-Looking Statements................................................ i The Company............................................................... 1 Ratio of Earnings to Fixed Charges........................................ 2 Use of Proceeds........................................................... 2 Where You Can Find More Information....................................... 2 Description of the Notes.................................................. 3 Certain United States Federal Income Tax Consequences..................... 25 Plan of Distribution...................................................... 30 Validity of Notes......................................................... 31 Experts................................................................... 31
You should rely only on the information contained or incorporated by reference in this prospectus and any pricing supplement. HEI has not, and the Agents have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. HEI is not, and the Agents are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, any pricing supplement or the documents incorporated by reference is accurate only as of the date of those documents. HEI's business, financial condition, results of operations and prospects may have changed since those dates. ---------------- FORWARD-LOOKING STATEMENTS This prospectus, which includes documents incorporated by reference, contains "forward-looking statements" as that term is defined in the private Securities Litigation Reform Act of 1995. The safe harbor provisions of the Exchange Act and the Securities Act apply to forward-looking statements made by HEI. Forward-looking statements, which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "expects", "anticipates", "intends", "plans", "believes", "predicts", "estimates" or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks and uncertainties about HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These factors include the risks and uncertainties identified in this prospectus and in the incorporated documents. Forward-looking statements are not guarantees of future performance and the actual results that HEI achieves may differ materially. In addition, forward-looking statements speak only as of the date of the document in which they are made and, except for its ongoing obligations to disclose material information under the federal securities laws, HEI assumes no obligation to update these statements. i THE COMPANY HEI was incorporated in 1981 under the laws of the State of Hawaii and is a holding company whose principal subsidiaries engage in the electric public utility and bank businesses in the State of Hawaii. HEI's predecessor, Hawaiian Electric Company, Inc., or HECO, was incorporated in 1891 under the laws of the Kingdom of Hawaii (now the State of Hawaii). As a result of a 1983 corporate reorganization, HECO became an HEI subsidiary and the common shareholders of HECO became common shareholders of HEI. By virtue of its ownership of utility subsidiaries, HEI is a holding company under the Public Utility Holding Company Act of 1935, but claims exemption from all provisions thereof except Section 9(a)(2). HEI's executive offices are located at 900 Richards Street, Honolulu, Hawaii 96813, and its telephone number is (808) 543-5662. HECO is a regulated electric public utility company engaged in the production, purchase, transmission, distribution and sale of electric energy on the island of Oahu, in the State of Hawaii. HECO's subsidiaries, Hawaii Electric Light Company, Inc., or HELCO, incorporated on December 5, 1894, and Maui Electric Company, Limited, or MECO, incorporated on April 28, 1921, are also regulated electric public utilities, and provide electric service on the islands of Hawaii, Maui, Lanai and Molokai in the State of Hawaii. HECO and its subsidiaries serve approximately 400,000 customers in a service area of approximately 5,766 square miles. HEI's other principal subsidiary is American Savings Bank, F.S.B., or ASB, with branches throughout the State of Hawaii. ASB, acquired in 1988, is a federally chartered savings bank with 71 branches as of March 31, 2002, providing a wide range of banking services to individual and corporate customers within Hawaii. As of December 31, 2001, ASB was the third largest financial institution in Hawaii based on total assets of $6.0 billion and deposits of $3.7 billion. In October 2001, the HEI Board of Directors adopted a formal plan to exit the international power business, which was reported as a discontinued operation in the third quarter of 2001. HEI is a legal entity separate and distinct from its various subsidiaries. As a holding company with no significant operations of its own, the principal sources of its funds are dividends or other distributions from its operating subsidiaries, borrowings and sales of equity. The ability of certain of HEI's subsidiaries to pay dividends or make other distributions to HEI is subject to contractual and regulatory restrictions, including the provisions of an agreement with the Hawaii Public Utilities Commission and the minimum capital and capital distribution regulations of the Office of Thrift Supervision, as well as restrictions and limitations set forth in debt instruments, preferred stock resolutions and guarantees. For additional information concerning HEI's and its subsidiaries' businesses and affairs, including their capital requirements and external financing plans, pending legal and regulatory proceedings, descriptions of certain laws and regulations to which those companies are subject, and possible restrictions on the ability of certain of HEI's subsidiaries to pay dividends or make other distributions to HEI, prospective purchasers should refer to the documents incorporated by reference that are listed under the caption "Where You Can Find More Information." 1 RATIO OF EARNINGS TO FIXED CHARGES The following tables set forth the ratio of earnings to fixed charges for HEI and its subsidiaries for the periods indicated.
Three Months Ended Years Ended December 31, March 31, 2002 ------------------------ ------------------ 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges, excluding interest on ASB deposits... 1.91 1.88 1.83 1.76 1.82 1.98 ==== ==== ==== ==== ==== ==== Ratio of Earnings to Fixed Charges, including interest on ASB deposits... 1.59 1.48 1.50 1.49 1.52 1.67 ==== ==== ==== ==== ==== ====
For purposes of calculating the ratio of earnings to fixed charges, "earnings" represent the sum of (i) pretax income from continuing operations (excluding undistributed net income or net loss from less-than-fifty-percent-owned persons) and (ii) fixed charges (excluding capitalized interest). "Fixed charges" are calculated both excluding and including interest on ASB's deposits during the applicable periods and represent the sum of (i) interest, whether capitalized or expensed, but excluding interest on nonrecourse debt from leveraged leases which is not included in interest expense in HEI's consolidated statements of income, (ii) amortization of debt expense and discount or premium related to any indebtedness, whether capitalized or expensed, (iii) the interest factor in rental expense, (iv) the preferred stock dividend requirements of HEI's subsidiaries, increased to an amount representing the pretax earnings required to cover such dividend requirements and (v) the preferred securities distribution requirements of trust subsidiaries. USE OF PROCEEDS HEI expects to use the net proceeds from the sale of the Notes to reduce its short-term debt, to repay other indebtedness (including refinancing previously issued Notes), to make investments in and loans to subsidiaries (principally to help finance their capital expenditure programs and their investments in subsidiaries and to retire debt) and for its working capital and general corporate purposes. The use of proceeds in connection with a particular issuance of Notes will be set forth in the applicable pricing supplement. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement on Form S-3 filed with the SEC under the Securities Act of 1933. The registration statement contains additional information and exhibits not included in this prospectus and refers to documents that are filed as exhibits to other SEC filings. HEI is subject to the informational requirements of the Securities Exchange Act of 1934 and, therefore, files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy the registration statement and any document that HEI files at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can call the SEC's toll-free telephone number at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies (such as HEI) that file documents with the SEC electronically. The documents can be found by searching the EDGAR Archives at the SEC's web site. HEI's SEC filings, and other information with respect to HEI, may also be obtained on the Internet at HEI's web site at http://www.hei.com. This information on HEI's website is not incorporated by reference in this prospectus. 2 The SEC allows HEI to "incorporate by reference" the information that it files with the SEC, which means that HEI can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. Later information that HEI files with the SEC will automatically update and supersede information in this prospectus or an earlier filed document. HEI has filed with the SEC (File No. 1-8503) and incorporates by reference the following documents: (1) HEI's Annual Report on Form 10-K for the year ended December 31, 2001; (2) HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002; (3) HEI's Current Reports on Form 8-K dated January 17, 2002, January 23, 2002, January 25, 2002, February 8, 2002, March 5, 2002, March 25, 2002, April 22, 2002 and May 1, 2002; and (4) all reports and other documents subsequently filed by HEI pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of the initial filing of the registration statement of which this prospectus is a part and the effectiveness of the registration statement, as well as between the date of this prospectus and the time that all the Notes are sold. You may request a free copy of any of these incorporated documents by writing or telephoning HEI at the following address or telephone number: Treasurer, Hawaiian Electric Industries, Inc., P.O. Box 730, Honolulu, Hawaii 96808-0730, telephone: (808) 543-5641. DESCRIPTION OF THE NOTES HEI will issue Notes under an Indenture, dated as of October 15, 1988, as supplemented by a Third Supplemental Indenture (collectively, the "Indenture"), between HEI and Citibank, N.A., as trustee (the "Trustee"). This prospectus briefly outlines some of the Indenture provisions. If you would like more information about the Indenture, you should review the Indenture as filed with the SEC. See "Where You Can Find More Information" on how to locate the Indenture and the supplements to the Indenture. You may also review the Indenture and its supplements at the Trustee's offices at 399 Park Avenue, New York, New York 10043. HEI provides information to you about the Notes in two separate documents. The first document is this prospectus, which provides general information concerning the Notes, some of which may not apply to a particular Note. The second document is a pricing supplement, which will provide final details about the terms of a specific Note and is filed with the SEC about the time the Note is sold. To the extent information in a pricing supplement about a specific Note you are purchasing differs from the information in this prospectus, you should rely on the specific information in the pricing supplement. This prospectus describes some, but not all, of the terms of the Notes, all of which may be varied by a pricing supplement. This prospectus includes summaries of the Notes and the Indenture. If the information in this prospectus differs from the information in the Notes or the Indenture, you should in all cases rely on the information in the Notes and the Indenture. General The Notes are a single series of securities under the Indenture, except as described below under "Defeasance". The Indenture does not limit the amount of additional debt securities that HEI may issue in the future under additional supplements to the Indenture. Each series of debt securities, and each specific Note or other debt security of a series, may differ as to its terms. The Notes and all other debt securities which HEI has issued or may issue in the future under the Indenture will be referred to herein as the "Securities." The Indenture contains certain limitations on the ability of HEI to incur secured indebtedness. See "Restriction on Liens" and "Restriction on Sale-Leaseback Transactions." The Indenture does not impose restrictions on the ability of HEI's subsidiaries to incur any indebtedness, including secured indebtedness. Some of HEI's subsidiaries are subject to debt instruments which impose limitations on their ability to incur indebtedness and to grant security interests. These limitations are applicable, however, only so long as the related indebtedness is outstanding and, in any event, are not enforceable by holders of the Notes. 3 Unless secured as described under "Restriction on Liens," the Notes will be unsecured obligations of HEI and will rank pari passu (that is, without priority and on the same creditor level in the event of a liquidation of HEI) with all other unsecured and unsubordinated indebtedness of HEI, including other Securities issued under the Indenture. As of March 31, 2002, the amount of HEI's total unsecured and unsubordinated indebtedness with which the Notes would have ranked pari passu was $453 million. The rights of HEI, and consequently its creditors, to participate in any distribution of the assets of any of its subsidiaries is subject to the prior claims of the creditors of such subsidiaries, except to the extent that claims of HEI in its capacity as a creditor are recognized. Accordingly, the Notes will be effectively subordinated to all obligations of such subsidiaries. As of March 31, 2002, $684 million of HEI's total consolidated indebtedness of $1.137 billion was indebtedness of such subsidiaries. The Notes are currently limited to up to $300,000,000 aggregate principal amount. Each Note will mature and be due and payable on the maturity date stated in the Note (the "Stated Maturity"), which will be from nine months to thirty years from the Original Issue Date. Each Note will also be due and payable (in whole or in part) on any earlier date on which the principal or an installment of principal of a Note becomes due and payable, whether by a declaration of acceleration, call for redemption at the option of HEI, repayment at the option of the holder or otherwise as agreed to by the purchaser and HEI and specified in the specific Note and applicable pricing supplement. The date upon which a Note is due and payable, whether the Stated Maturity or such earlier date, will be referred to as the "Maturity." Each Note will bear interest from the date of original issuance (the "Original Issue Date") at a fixed rate ("Fixed Rate Notes") or at a floating rate ("Floating Rate Notes") determined by reference to the Commercial Paper Rate, the Prime Rate, the London Interbank Offered Rate ("LIBOR"), the Treasury Rate, the Certificate of Deposit ("CD") Rate, the Federal Funds Rate or other interest rate basis, plus or minus a Spread and/or multiplied by a Spread Multiplier, if any, applicable to such Note. See "Interest Rate." HEI may also issue a Note ("Discount Notes") at a discount from the principal amount payable at its Stated Maturity and such Discount Note will bear no interest or will bear interest at a rate that is below market interest rates at the time of issuance. HEI may offer different interest rates at the same time depending upon, among other factors, the Stated Maturity of the Notes and the aggregate principal amount of Notes purchased in any single transaction. HEI may also offer Notes with different variable terms other than interest rates at the same time to different investors. HEI may change interest rates, interest rate formulas and other variable terms of the Notes from time to time, but no change will affect any Note already issued or as to which an offer to purchase has been accepted by HEI. HEI will make payments of principal, premium (if any) and interest with respect to the Notes in United States dollars. HEI will issue Notes in fully registered book-entry form (each, a "Book-Entry Note"), except in certain limited circumstances, in which case HEI will issue Notes in certificated form (each, a "Definitive Note"). See "Book-Entry Notes." HEI will issue Notes in denominations of $1,000 and integral multiples of $1,000. Book-Entry Notes may be transferred or exchanged only through a participating member of The Depository Trust Company (or such other depositary as is identified in an applicable pricing supplement) (the "Depositary"). See "Book-Entry Notes." Registration of transfers of Definitive Notes will be made at the Corporate Trust Office of the Trustee. HEI and the Trustee will not charge any service charge for any such registration of transfer or exchange of Definitive Notes. HEI may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange (other than exchanges not involving any transfer). HEI will make payments of principal, premium (if any) and interest on Book-Entry Notes through the Trustee to the Depositary. See "Book-Entry Notes." In the case of Definitive Notes, HEI will pay principal and premium (if any) at the Maturity of each Definitive Note in immediately available funds upon presentation and surrender of the Definitive Note at the Corporate Trust Office of the Trustee in the Borough of Manhattan, The City of New York, or at such other place as HEI is entitled to designate. In the case of a permitted repayment on 4 an Optional Repayment Date, HEI will make payment upon submission of a duly completed election form in accordance with the provisions described below. HEI will pay any interest due at the Maturity of a Definitive Note to the person to whom payment of the principal thereof and premium, if any, thereon shall be made. HEI will pay interest due on Definitive Notes other than at Maturity at the Corporate Trust Office of the Trustee or, at HEI's option, by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. A holder of $10,000,000 or more in aggregate principal amount of Definitive Notes having the same Interest Payment Dates will be entitled to receive interest payments (other than at Maturity) by wire transfer of immediately available funds if the Trustee has received appropriate wire transfer instructions from the holder not less than 15 calendar days prior to the applicable Interest Payment Date. Any such wire transfer instructions received by the Trustee shall be effective until revoked by the holder. Reference is made to the pricing supplement applicable to each Note for the following terms: . the principal amount and purchase price of such Note (the "Issue Price"), which may be expressed as a percentage of the principal amount at which such Note will be issued; . the Original Issue Date of such Note; . the Stated Maturity of such Note; . whether such Note is a Fixed Rate Note, a Floating Rate Note and/or a Discount Note; . if such Note is a Fixed Rate Note, the annual interest rate, if any; . if such Note is a Floating Rate Note, the Base Rate or Rates, the Initial Interest Rate, the Interest Determination Date or Dates, the Interest Reset Date or Dates, the Interest Payment Dates, the Index Maturity, the Maximum Interest Rate and/or Minimum Interest Rate, if any, and the Spread and/or Spread Multiplier, if any, and the Calculation Agent (if other than the Trustee), and any other terms relating to the particular method of calculating the interest rate for such Note; . if such Note is a Discount Note, the issue price and the annual interest rate, if any; . the date or dates from which any such interest shall accrue, if other than the Original Issue Date; . the terms for redemption, repayment or a sinking fund, if any; and . any other terms of such Note consistent with the provisions of the Indenture. Interest Rate General Each interest-bearing Note will bear interest from its Original Issue Date at the rate per annum, in the case of a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a Floating Rate Note, specified in the Note and in the applicable pricing supplement, until the principal thereof is paid or made available for payment. Interest payments on the Notes will be in an amount equal to the interest accrued from and including the immediately preceding Interest Payment Date (as defined below) in respect of which interest has been paid or duly made available for payment (or from and including the Original Issue Date, if no interest has been paid or duly made available for payment since that date) to but excluding the applicable Interest Payment Date or Maturity (each, an "Interest Period"). Interest will be payable in arrears to the holders of such Notes (which, in the case of Book-Entry Notes, will be a nominee of the Depositary) on the Regular Record Date (as defined below) for each Interest Payment Date and, in the case of interest payable at Maturity, to the person to whom principal shall be payable at Maturity. HEI will make the first payment of interest on any Note originally issued between a Regular Record Date and the related Interest Payment Date to the holder of the Note on the next Regular Record Date. The payment will be made on the Interest Payment Date following such next Regular Record Date. The "Regular 5 Record Date" with respect to any Note shall be the date (whether or not a Business Day) that is 15 calendar days prior to the related Interest Payment Date. However, any interest not punctually paid or duly provided for will no longer be payable to the holder of the Note on the Regular Record Date and instead will be paid either (a) to the holder of record on a special record date to be fixed by the Trustee in accordance with the Indenture or (b) in such other lawful manner that is selected by HEI and deemed practicable by the Trustee. Fixed Rate Notes HEI will pay interest on Fixed Rate Notes semiannually on February 10 and August 10 of each year (each, an "Interest Payment Date" with respect to Fixed Rate Notes), and at Maturity with respect to the principal then maturing. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-day months. If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on a day that is not a Business Day, the applicable payments may be made on the next Business Day. In such case, no interest will accrue on the amount so payable for such period of delay. Floating Rate Notes Each Floating Rate Note will bear interest at a rate determined by reference to one or more interest rate bases (each, a "Base Rate"), which may be adjusted by a Spread and/or Spread Multiplier (each as described below). The applicable pricing supplement will designate one or more of the following Base Rates as applicable to each Floating Rate Note: . the Commercial Paper Rate (such Note being a "Commercial Paper Rate Note"); . the Prime Rate (such Note being a "Prime Rate Note"); . LIBOR (such Note being a "LIBOR Note"); . the Treasury Rate (such Note being a "Treasury Rate Note"); . the CD Rate (such Note being a "CD Rate Note"); . the Federal Funds Rate (such Note being a "Federal Funds Rate Note"); or . such other Base Rate or interest rate formula as is set forth in such pricing supplement and in such Floating Rate Note. If the Base Rate for a Note is LIBOR, the applicable pricing supplement and Note will also specify the Designated LIBOR Page, as explained below. The interest rate on each Floating Rate Note will be calculated by reference to the specified Base Rate or Rates (a) plus or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis points (one one-hundredth of a percentage point) specified in the pricing supplement to be added to or subtracted from the Base Rate for such Note to calculate the interest rate for such Floating Rate Note. The "Spread Multiplier" is the percentage specified in the pricing supplement to be multiplied by the Base Rate (or by the Base Rate increased or decreased by the Spread) to calculate the interest rate for such Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the period to maturity of the instrument or obligation from which the Base Rate or Rates is calculated. The interest rate with respect to each Base Rate will be determined in accordance with the applicable provisions below. Except as set forth above or in an applicable pricing supplement, the interest rate in effect on each day shall be (a) if such day is an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding such Interest Reset Date, or (b) if such day is not an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date. 6 Interest Reset Dates. The rate of interest on each Floating Rate Note will be reset daily, weekly, monthly, quarterly, semiannually or annually (each, an "Interest Reset Date"), as specified in the applicable Note and pricing supplement. The Interest Reset Date will be as follows:
Type of Floating Rate Note Interest Reset Date - -------------------------------------------- ------------------------------------------- Notes which reset daily..................... Each Business Day Notes (other than Treasury Rate Notes) which reset weekly.............................. Wednesday of each week Treasury Rate Notes which reset weekly...... Tuesday of each week Notes which reset monthly................... Third Wednesday of each month Notes which reset quarterly................. Third Wednesday of January, April, July and October of each year Notes which reset semi-annually............. Third Wednesday of the two months of each year specified in the applicable Note and pricing supplement Notes which reset annually.................. Third Wednesday of the one month of each year specified in the applicable Note and pricing supplement
Notwithstanding the foregoing, the interest rate in effect from the Original Issue Date to the first Interest Reset Date with respect to a Floating Rate Note will be the Initial Interest Rate (as set forth in the applicable Note and pricing supplement). Any Interest Reset Date that does not fall on a Business Day will be postponed to the next Business Day. In the case of a LIBOR Note, however, if such next succeeding Business Day falls in the next calendar month, the Interest Reset Date will be the preceding Business Day. The term "Business Day" means any day other than a Saturday or Sunday or any other day on which banks in The City of New York are generally authorized or obligated by law or executive order to close and, with respect to LIBOR Notes, is also a London Business Day. As used herein, "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. Interest Payment Dates. Except as provided below or in an applicable pricing supplement, interest will be payable on the following dates ("Interest Payment Dates" with respect to Floating Rate Notes):
Type of Floating Rate Note Interest Payment Date - ------------------------------------------ ---------------------------------------------- Notes which reset daily, weekly or monthly Third Wednesday of each month or the third Wednesday of January, April, July and October of each year, as specified in the applicable Note and pricing supplement Notes which reset quarterly............... Third Wednesday of January, April, July and October of each year Notes which reset semi-annually........... Third Wednesday of the two months of each year specified in the applicable Note and pricing supplement Notes which reset annually................ Third Wednesday of the one month of each year specified in the applicable Note and pricing supplement All Notes................................. At Maturity with respect to the principal then maturing
7 If any Interest Payment Date other than the Maturity Date for any Floating Rate Note would otherwise be a day that is not a Business Day, such Interest Payment Date will be postponed to the next succeeding Business Day, and interest will continue to accrue in respect of the payment made on that next succeeding Business Day, except that in the case of a Floating Rate Note as to which LIBOR is an applicable Base Rate and that Business Day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a day that is not a Business Day, HEI will make the required payment of principal, premium, if any, and interest on the next succeeding Business Day, and no additional interest will accrue in respect of the payment made on that next succeeding Business Day. Interest Determination Dates. The Interest Determination Dates for Floating Rate Notes pertaining to an Interest Reset Date will be as follows:
Type of Floating Rate Note Interest Determination Date - -------------------------------- ---------------------------------------------- Commercial Paper Rate Note...... Second Business Day preceding such Interest Reset Date Prime Rate Note................. Business Day preceding such Interest Reset Date CD Rate Note.................... Second Business Day preceding such Interest Reset Date Federal Funds Rate Note......... Business Day preceding such Interest Reset Date LIBOR Note...................... Second London Business Day preceding such Interest Reset Date Treasury Rate Note.............. Day of the week in which such Interest Reset Date falls on which day Treasury bills would normally be auctioned by the U.S. Department of the Treasury, as described below Note with two or more Base Rates Most recent Business Day that is at least two Business Days prior to the applicable Interest Reset Date for such Floating Rate Note on which each Base Rate is determinable
Treasury bills are generally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If, as a result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Interest Determination Date for the Treasury Rate Note pertaining to the Interest Reset Date occurring in the next succeeding week. Each Base Rate will be determined as of the Interest Determination Date, and the applicable interest rate will take effect on the applicable Interest Reset Date. Maximum and Minimum Interest Rates. The pricing supplement applicable to a Floating Rate Note may provide that such Note has either or both of (a) a maximum limitation, or ceiling, on the rate of interest which may accrue during any Interest Period (a "Maximum Interest Rate"), and (b) a minimum limitation, or floor, on the rate of interest which may accrue during any Interest Period (a "Minimum Interest Rate"). In addition to any Maximum Interest Rate that may be applicable to any Floating Rate Note pursuant to the above 8 provisions, the interest rate on the Floating Rate Notes will in no event be higher than the maximum rate permitted by New York or Hawaii law, whichever is lower, as the same may be modified by United States law of general application. Floating Rate Determinations and Calculations Except as otherwise provided herein, all percentages resulting from any calculations on any Floating Rate Notes will be rounded to the nearest one hundred-thousandth of a percentage point (with five one-millionths of a percentage point being rounded up, e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on any Floating Rate Notes will be rounded to the nearest cent (with one half cent being rounded up). Accrued interest on a Floating Rate Note is calculated by multiplying the principal amount of such Floating Rate Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest factors calculated for each day in the applicable Interest Period. The interest factor (expressed as a decimal) for each such day is computed by dividing the interest rate (expressed as a decimal) applicable to such date by 360, in the case of Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by the actual number of days in the year, in the case of Treasury Rate Notes. The interest factor for Floating Rate Notes for which the interest rate is calculated with reference to two or more Base Rates will be calculated in each period in the same manner as if only the lowest, highest or average of the applicable Base Rate applied, as specified in the applicable Note and pricing supplement. The Trustee shall be the calculation agent (the "Calculation Agent") and shall calculate the interest rate on Floating Rate Notes on or before each Calculation Date. Upon the request of the holder of any Floating Rate Note, the Calculation Agent will provide the interest rate then in effect, and, if determined, the interest rate that will become effective on the next Interest Reset Date with respect to such Floating Rate Note. The Calculation Agent's determination of any interest rate will be final and binding in the absence of manifest error. The "Calculation Date," if applicable, pertaining to any Interest Determination Date will be the earlier of (i) the tenth calendar day after such Interest Determination Date, or, if such day is not a Business Day, the next succeeding Business Day and (ii) the Business Day preceding the applicable Interest Payment Date or Maturity, as the case may be. The Calculation Agent shall determine each Base Rate in accordance with the following provisions. To the extent a Base Rate is determined by reference to the offered rates or quotations of dealers, banks, trust companies, brokers or others selected by the Calculation Agent as described below, such parties may include the Calculation Agent, the Agents and/or their respective affiliates, as the case may be. Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear interest at the interest rates (calculated with reference to the Commercial Paper Rate and the Spread and/or Spread Multiplier, if any) specified in the Commercial Paper Rate Notes and in the applicable pricing supplement. The "Commercial Paper Rate," with respect to each Interest Reset Date, will be determined by the Calculation Agent on the Calculation Date and will be the Money Market Yield (as defined below) as of the Interest Determination Date next preceding such Interest Reset Date of the rate for commercial paper having the Index Maturity specified in the applicable Note and pricing supplement, as such rate shall be published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates", or any successor publication (such publication being hereinafter called "H.15(519)"), under the heading "Commercial Paper--Nonfinancial". In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Commercial Paper Rate with respect to such Interest Reset Date will be the Money Market Yield on the applicable Interest Determination Date of the rate for commercial paper of the Index Maturity specified in the applicable Note and pricing supplement as published in the daily update of H.15(519), available through the world-wide web site of the Board of Governors of the Federal 9 Reserve System at http://federalreserve.gov/releases/h15/update, or any successor site or publication (such site or publication being hereinafter called "H.15 Daily Update"), under the heading "Commercial Paper--Nonfinancial" (with an Index Maturity of one month or three months being deemed to be equivalent to an Index Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or H.15 Daily Update, then the Commercial Paper Rate will be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on the applicable Interest Determination Date of three leading dealers of commercial paper in The City of New York selected by the Calculation Agent, in its discretion, for commercial paper of the specified Index Maturity placed for an industrial issuer whose bond rating is "Aa," or the equivalent, from a nationally recognized statistical rating organization. If the dealers selected as aforesaid by the Calculation Agent are not quoting offered rates as described in the preceding sentence, the Commercial Paper Rate with respect to such Interest Reset Date will be the Commercial Paper Rate in effect under the Note on such Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: Money Market Yield = D x 360 x 100 ------------- 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the applicable Interest Reset Period. Prime Rate Notes. Prime Rate Notes will bear interest at the interest rates (calculated with reference to the Prime Rate and the Spread and/or Spread Multiplier, if any) specified in the Prime Rate Notes and in the applicable pricing supplement. The "Prime Rate," with respect to each Interest Reset Date, will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the Interest Determination Date next preceding such Interest Reset Date as published in H.15(519) under the heading "Bank Prime Loan". In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Prime Rate with respect to such Interest Reset Date will be the applicable rate as published in H.15 Daily Update under the heading "Bank Prime Loan." If by 3:00 P.M., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or H.15 Daily Update, then the Prime Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on such Interest Determination Date on the display designated as page "USPRIME1" on the Reuters Monitor Money Rates Service (or any successor service or such other page as may replace the USPRIME1 page on that service for the purpose of displaying prime rates or base lending rates of major United States banks) ("Reuters Screen USPRIME1 Page") as such bank's prime rate or base lending rate as of 11:00 A.M., New York City time, on such Interest Determination Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page as of 3:00 P.M., New York City time, on the applicable Interest Determination Date, the Prime Rate with respect to such Interest Reset Date will be the arithmetic mean of the prime rates or base lending rates (quoted on the basis of the actual number of days in the year divided by a 360-day year) as of the close of business on such Interest Determination Date as furnished in The City of New York by the major money center banks, if any, that have provided such quotations and by a reasonable number of substitute banks or trust companies to obtain four such prime rate quotations, provided such substitute banks or trust companies are organized and doing business under the laws of the United States, or any state thereof, each having total equity capital of at least $500 million and being subject to supervision or examination by federal or state authority, selected by the Calculation Agent to provide such rate or rates. If the banks or trust companies selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the Prime Rate with respect to such Interest Reset Date will be the Prime Rate in effect on such Interest Determination Date. 10 LIBOR Notes. Each LIBOR Note will bear interest at the interest rate (calculated with reference to LIBOR and the Spread and/or Spread Multiplier if any) as specified in the LIBOR Note and in the applicable pricing supplement. "LIBOR," with respect to each Interest Reset Date, will be determined by the Calculation Agent in accordance with the following provisions: . With respect to an Interest Determination Date, LIBOR will be either: (a) if "LIBOR Reuters" is specified in the applicable Note and pricing supplement, the arithmetic mean of the offered rates (unless the Designated LIBOR Page by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in U.S. dollars having the Index Maturity specified in such Note and pricing supplement, commencing on the applicable Interest Reset Date, that appear (or, if only a single rate is required as aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on such Interest Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable Note and pricing supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Note and pricing supplement as the method for calculating LIBOR, the rate for deposits in U.S. dollars having the Index Maturity specified in such Note and pricing supplement, commencing on such Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on such Interest Determination Date. If fewer than two such offered rates so appear, or if no such rate so appears where the Designated LIBOR Page provides only for a single rate, LIBOR on such Interest Determination Date will be determined in accordance with the provisions described in the following paragraph. . With respect to a Interest Determination Date on which fewer offered rates appear than are required in the preceding paragraph, the Calculation Agent will request the principal London offices of each of four major reference banks (which may include the Agents or their affiliates) in the London interbank market as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for the period of the Index Maturity specified in the applicable Note and pricing supplement, commencing on the applicable Interest Reset Date to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such Interest Determination Date and in a principal amount that is representative for a single transaction in U.S. dollars in such market at such time. If at least two such quotations are so provided, then LIBOR on such Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, then LIBOR on such Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., New York City time, on such Interest Determination Date by three major banks in The City of New York selected by the Calculation Agent for loans in U.S. dollars to leading European banks, having the Index Maturity specified in the applicable Note and pricing supplement and in a principal amount that is representative for a single transaction in U.S. dollars in such market at such time. If the banks so selected by the Calculation Agent are not quoting rates as described in the preceding sentence, LIBOR determined as of such Interest Determination Date will be LIBOR in effect under the Note on such Interest Determination Date. "Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the applicable pricing supplement, the display in the Reuter Monitor Money Rates Service (or any successor service) on the page specified in such pricing supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for U.S. dollars, or (b) if "LIBOR Telerate" is specified in the applicable pricing supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable pricing supplement as the method for calculating LIBOR, the display on Moneyline Telerate (or any successor service) on the page specified in such pricing supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for U.S. dollars. 11 Treasury Rate Notes. Treasury Rate Notes will bear interest at the interest rates (calculated with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any) specified in the Treasury Rate Notes and in the applicable pricing supplement. The "Treasury Rate," with respect to each Interest Reset Date, will be determined by the Calculation Agent on the Calculation Date and will be the rate for the auction held on the Interest Determination Date (the "Auction") next preceding such Interest Reset Date of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in the applicable Note and pricing supplement as published under the heading "INVESTMENT RATE" on the display on Moneyline Telerate (or any successor service) on page 56 (or any other page as may replace that page on that service) or page 57 (or any other page as may replace that page on that service). In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury bills as published in H.15 Daily Update under the heading "U.S. Government Securities/Treasury Bills/Auction High." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield of the auction rate of the applicable Treasury bills as announced by the United States Department of the Treasury. In the event that the rate referred to in the preceding sentence is not so announced by the United States Department of the Treasury, or if the Auction is not held, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield of the rate for the applicable Treasury bills as published in H.15(519) under the heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the rate for the applicable Treasury Bills as published in H.15 Daily Update under the heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate will be calculated by the Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Interest Determination Date, of three primary United States government securities dealers selected by the Calculation Agent, in its discretion, for the issue of Treasury bills with a remaining maturity closest to the Index Maturity designated in the applicable Note and pricing supplement. If the dealers selected as aforesaid by the Calculation Agent are not quoting bid rates as described in the preceding sentence, the Treasury Rate with respect to such Interest Reset Date will be the Treasury Rate in effect under the Note on such Interest Determination Date. "Bond Equivalent Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: Bond Equivalent Yield = D x N x 100 ------------- 360 - (D x M) where "D" refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the case may be, and "M" refers to the actual number of days in the applicable Interest Reset Period. CD Rate Notes. CD Rate Notes will bear interest at the interest rates (calculated with reference to the CD Rate and the Spread and/or Spread Multiplier, if any) specified in the CD Rate Notes and in the applicable pricing supplement. The "CD Rate," with respect to each Interest Reset Date, will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the Interest Determination Date next preceding such Interest Reset Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in the applicable Note and pricing supplement as published in H.15(519) under the heading "CDs (secondary market)". 12 In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate with respect to such Interest Reset Date shall be the rate on such Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in the applicable Note and pricing supplement as published in H.15 Daily Update under the heading "CDs (secondary market)". If by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or H.15 Daily Update, the CD Rate with respect to such Interest Reset Date shall be calculated by the Calculation Agent and shall be the arithmetic mean of the secondary market offered rates, as of 10:00 A.M., New York City time, on such Interest Determination Date, of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable United States certificates of deposit of major United States money center banks with a remaining maturity closest to the Index Maturity specified in the applicable Note and pricing supplement in United States dollars. If the dealers selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the CD Rate with respect to such Interest Reset Date will be the CD Rate in effect under the Note on such Interest Determination Date. Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at the interest rates (calculated with reference to the Federal Funds Rate and the Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the applicable pricing supplement. The "Federal Funds Rate," with respect to each Interest Reset Date, will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the Interest Determination Date next preceding such Interest Reset Date for United States dollar federal funds as published in H.15(519) under the heading "Federal Funds (Effective)" and displayed on Moneyline Telerate (or any successor service) on page 120 (or any other page as may replace that page on that service). In the event that such rate does not appear on such page 120 or is not published prior to 3:00 P.M., New York City time, on the relevant Calculation Date, then the Federal Funds Rate with respect to such Interest Reset Date will be the rate on such Interest Determination Date as published in H.15 Daily Update under the heading "Federal Funds (Effective)". If by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or H.15 Daily Update, the Federal Funds Rate with respect to such Interest Reset Date shall be calculated by the Calculation Agent and shall be the arithmetic mean of the rates, as of 9:00 A.M., New York City time, on the applicable Interest Determination Date, for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of United States dollar federal funds transactions in The City of New York selected by the Calculation Agent. If the brokers selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the Federal Funds Rate with respect to such Interest Reset Date will be the Federal Funds Rate in effect under the Note on such Interest Determination Date. Book-Entry Notes Except as described below, the Notes will be issued as Book-Entry Notes and represented by one or more global securities (each, a "Global Security") that will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), or such other Depositary as is designated by HEI, and registered in the name of a nominee of the Depositary. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants ("Direct Participants") include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct 13 Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. The Agents are Direct Participants of the Depositary. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the SEC. Upon issuance, all Book-Entry Notes having the same issue price, issue date, maturity date, interest rate, redemption and repayment provisions, if any, and interest payment dates will be represented by one or more Global Securities and will be deposited with DTC or its custodian. So long as the Depositary or its nominee is the registered owner of a Global Security, the Depositary or its nominee, as the case may be, will be the sole holder of the Book-Entry Notes represented thereby for all purposes under the Indenture. Except as otherwise provided below, the beneficial owners of the Global Security or Securities representing Book-Entry Notes will not be entitled to receive physical delivery of Definitive Notes and will not be considered the holders thereof for any purpose under the Indenture, and no Global Security representing Book-Entry Notes shall be so exchangeable or transferable. Accordingly, each beneficial owner must rely on the procedures of the Depositary and, if such beneficial owner is not a Participant, on the procedures of the Participant through which such beneficial owner owns its interest in order to exercise any rights of a holder under such Global Security or the Indenture. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and laws may impair the ability to transfer beneficial interests in a Global Security representing Book-Entry Notes. Purchases of Book-Entry Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for such Book-Entry Notes on DTC's records. The ownership interest of each actual purchaser of each Book-Entry Note ("beneficial owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the beneficial owner entered into the transaction. Transfers of ownership interests in a Global Security representing Book-Entry Notes are to be accomplished by entries made on the books of Participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests of a Global Security representing Book-Entry Notes, except in the event that use of the book-entry system for such Book-Entry Notes is discontinued. To facilitate subsequent transfers, all Global Securities representing Book-Entry Notes which are deposited with, or on behalf of, the Depositary are registered in the name of the Depositary's nominee, Cede & Co. The deposit of Global Securities with, or on behalf of, the Depositary and their registration in the name of Cede & Co. will effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the Global Securities representing the Book-Entry Notes. DTC's records reflect only the identity of the Direct Participants to whose accounts such Book-Entry Notes are credited, which may or may not be the beneficial owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. If applicable, redemption notices will be sent to Cede & Co. as registered holder of the Book-Entry Notes. If less than all of the Notes within an issue are being redeemed, DTC will determine in accordance with its usual procedures the amount of the interest of each Direct Participant to be redeemed. Neither DTC nor Cede & Co. will itself consent or vote with respect to the Global Securities representing Book-Entry Notes. Under its usual procedures, DTC mails an omnibus proxy (the "Omnibus Proxy") to HEI as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Book-Entry Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). 14 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. So long as the Notes are Book-Entry Notes, principal, premium (if any) and interest payments on such Book-Entry Notes will be made by HEI in immediately available funds through the Trustee to DTC. DTC's practice is to credit Direct Participants' accounts on the date on which interest is payable in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such date. Payments by Participants to beneficial owners will be governed by standing instructions and customary practices as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC, the Agents or HEI, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium (if any) and interest to DTC is the responsibility of HEI and the Trustee. Disbursement of such payments to Direct Participants is the responsibility of DTC and disbursement of such payments to the beneficial owners is the responsibility of Direct and Indirect Participants. A beneficial owner shall give notice of its exercise of any option it may have to elect to have its Book-Entry Notes repaid by HEI, through its Participant, to the Trustee, and shall effect delivery of such Book-Entry Notes by causing the Direct Participant to transfer to the Trustee the Participant's interest in the Global Security or Securities representing such Book-Entry Notes on the Depositary's records. The requirement for physical delivery of Book-Entry Notes in connection with the exercise of a beneficial owner's option for repayment will be deemed satisfied when the ownership rights in the Global Security or Securities representing such Book-Entry Notes are transferred by Direct Participants to the Trustee on the Depositary's records. Each Global Security representing Book-Entry Notes will be exchangeable for Definitive Notes of like tenor and terms and of differing authorized denominations in a like aggregate principal amount, only if (i) the Depositary notifies HEI that it is unwilling or unable to continue as Depositary for the Global Securities or HEI becomes aware that the Depositary has ceased to be a clearing agency registered under the Exchange Act and, in either such case, HEI shall not have appointed a successor to the Depositary within 90 days thereafter, (ii) HEI, in its sole discretion, determines that the Global Securities will be exchangeable for Definitive Notes or (iii) an Event of Default will have occurred and be continuing with respect to the Notes under the Indenture. Upon any such exchange, the Definitive Notes will be registered in the names of the beneficial owners of the Global Security or Securities representing Book-Entry Notes, which names will be provided by the Depositary's relevant Participants (as identified by the Depositary) to the Trustee. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources (including DTC) that HEI believes to be accurate, but HEI assumes no responsibility for the accuracy thereof. HEI assumes no responsibility for the performance by DTC or its Participants of their respective obligations as described herein or under the rules and procedures governing their respective operations. Redemption at the Option of HEI The Notes will not be subject to any sinking fund. The Notes will be redeemable at the option of HEI prior to the Stated Maturity only if a Redemption Commencement Date and an Initial Redemption Percentage are specified in the applicable Note and pricing supplement. If so specified, the Notes will be subject to redemption at the option of HEI on any date on and after the applicable Redemption Commencement Date in whole or from time to time in part in increments of $1,000 or such other minimum denomination specified in such pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or such other minimum denomination), at the applicable Redemption Price (as defined below), together with unpaid interest accrued thereon to the date of redemption, on written notice given to the holders thereof not less than 30 nor more than 60 calendar days prior to the date of redemption and in accordance with the provisions of the 15 Indenture. "Redemption Price", with respect to a Note, means an amount equal to the Initial Redemption Percentage specified in the applicable Note and pricing supplement (as adjusted by the Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid principal amount to be redeemed. The Initial Redemption Percentage, if any, applicable to a Note shall decline at each anniversary of the Redemption Commencement Date by an amount equal to the Annual Redemption Percentage Reduction (if any) specified in the applicable Note and pricing supplement, until the Redemption Price is equal to 100% of the unpaid principal amount to be redeemed. If any Note is redeemed in part, a new Note of like tenor for the unredeemed portion and otherwise having the same terms as the partially redeemed Note will be issued in the name of the holder upon presentation and surrender of the partially redeemed Note. For a discussion of the redemption of Discount Notes, see "Discount Notes." Repayment at the Option of the Holder The Notes will be repayable by HEI at the option of the holders thereof prior to the Stated Maturity only if one or more Optional Repayment Dates are specified in the applicable Note and pricing supplement. If so specified, the Notes will be subject to repayment at the option of the holders thereof on any Optional Repayment Date in whole or from time to time in part in increments of $1,000 or such other minimum denomination as is specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or such minimum denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date of repayment. For any Note to be repaid, such Note must be received, together with the form entitled "Option to Elect Repayment" duly completed, by the Trustee at its office maintained for such purpose in the Borough of Manhattan in The City of New York, or in such other location as HEI selects in conformity with the Indenture, not less than 30 nor more than 60 calendar days prior to the date of repayment. If any Note is repaid in part, a new Note of like tenor for the unpaid portion and otherwise having the same terms as the partially repaid Note will be issued in the name of the holder upon presentation and surrender of the partially repaid Note. For a discussion of the repayment of Discount Notes, see "Discount Notes." Only the Depositary may exercise a repayment option in respect of Global Securities representing Book-Entry Notes. Accordingly, beneficial owners of Global Securities that desire to exercise their repayment option, if any, with respect to all or any portion of the Book-Entry Notes represented by such Global Securities, must instruct the Participant through which they own their interest to direct the Depositary to exercise the repayment option on their behalf by delivering the related Global Security and duly completed election form to the Trustee as aforesaid. In order to ensure that such Global Security and election form are received by the Trustee on a particular day, the applicable beneficial owner must so instruct the Participant through which it owns its interest before such Participant's deadline for accepting instructions for that day. Participants may have different deadlines for accepting instructions from their customers. Accordingly, a beneficial owner should consult the Participant through which it owns an interest in a Global Security for the Participant's deadline for receiving repayment instructions. In addition, at the time such instructions are given, each such beneficial owner shall cause the Participant through which it owns its interest to transfer such beneficial owner's interest in the Global Security or Securities representing the related Book-Entry Notes, on the Depositary's records, to the Trustee. The exercise of an option to elect repayment shall be irrevocable. See "Book-Entry Notes." If applicable, HEI will comply with the requirements of Section 14(e) of the Exchange Act and the rules promulgated thereunder, and any other securities laws or regulations, in connection with any such repayment. Discount Notes HEI may offer Discount Notes from time to time that have an Issue Price (as specified in the applicable pricing supplement) that is less than 100% of the principal amount thereof (i.e., par) by more than a percentage equal to the product of 0.25% and the number of full years to the Stated Maturity. Such Discount Notes will bear no interest or will bear interest at a rate that is below market rates at the time of issuance. The difference between 16 the Issue Price of a Discount Note and 100% of the principal amount of the Note is referred to as the "Discount." In the event of redemption, repayment or acceleration of maturity of a Discount Note, the amount payable to the holder of such Discount Note will be equal to the sum of (i) the Issue Price (increased by an accrual of Discount) and, in the event of any redemption of such Discount Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction, if applicable) and (ii) any unpaid interest accrued thereon to the date of such redemption, repayment or acceleration of maturity, as the case may be. For purposes of determining the amount of Discount that has accrued as of any date on which redemption, repayment or acceleration of maturity occurs for a Discount Note, such Discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates for the applicable Discount Note (with ratable accruals within a compounded period), a coupon rate equal to the initial coupon rate applicable to such Discount Note and an assumption that the maturity of such Discount Note will not be accelerated. If the period from the date of issue to the initial Interest Payment Date for a Discount Note (the "Initial Period") is shorter than the compounded period for such Discount Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period with the short period being treated as provided above. The accrual of the applicable Discount may differ from the accrual of original issue discount, certain Discount Notes may not be treated as having original issue discount, and Notes other than Discount Notes may be treated as issued with original issue discount, in each case for United States federal income tax purposes. See "Certain United States Federal Income Tax Consequences." Amortizing Notes HEI may from time to time offer Notes with the amount of principal thereof and interest thereon payable in installments over the term of such Notes ("Amortizing Notes"). Interest on each Amortizing Note will be computed on the basis of a 360-day year of twelve 30-day months. Payments with respect to Amortizing Notes will be applied first to interest due and payable thereon and then to the reduction of the unpaid principal amount thereof. Further information concerning additional terms and provisions of Amortizing Notes will be specified in the applicable pricing supplement, including a table setting forth a principal repayment schedule for such Amortizing Notes. Other Provisions; Addenda Any provisions of a Note, including but not limited to the specification and determination of one or more Base Rates, the calculation of the interest rate applicable to a Floating Rate Note, the Interest Payment Dates, the Stated Maturity and any redemption or repayment provisions, may be modified by the terms specified under "Other Provisions" in the Note or in an Addendum to the Note, if so specified in the Note (or any Addendum to the Note) and in the applicable pricing supplement. Restriction on Liens Except as described below, HEI will not create, incur, issue, assume, permit or suffer to exist any Indebtedness (as defined below) secured after the date of the Indenture by any security interest on any property of HEI (including, without limitation, property of HEI consisting of any share or shares of capital stock or indebtedness of any subsidiary of HEI), whether such property, shares or indebtedness are owned by HEI at the date of the Indenture or thereafter acquired, without effectively providing concurrently therewith that the Securities, including the Notes (together, at the option of HEI, with any other indebtedness ranking equally with the Securities and then existing or thereafter created), shall be secured equally and ratably with (or prior to) the Indebtedness so created, incurred, issued, assumed, permitted or suffered to exist. 17 The foregoing restrictions do not limit the ability of any subsidiary of HEI to incur, issue, assume, permit or suffer to exist any of its own indebtedness or to grant security interests on any of its properties. The foregoing restrictions also do not apply to: (1)security interests on any property acquired, constructed or improved by HEI or on any shares of capital stock or indebtedness of any subsidiary acquired by HEI after the date of the Indenture which security interests are created or assumed at the time of or within 270 days after the acquisition of, or the expenditure of the costs of construction or improvements of, and which secure the payment of all or any part of the purchase price of, such property, shares of capital stock or indebtedness, or which secure payment of all or any part of the cost of any such construction or improvements, provided that, in the case of any such acquisition, construction or improvement, such security interest does not apply to any property or shares of capital stock or indebtedness owned by HEI other than that acquired, constructed or improved except, in the case of any such construction or improvement, any real property on which the property is so constructed or the improvement is located; (2)security interests which exist on any property, shares of capital stock or indebtedness at the time of acquisition of such property, shares or indebtedness by HEI; (3)security interests which exist on any property of a corporation or other Person (as defined below) at the time such corporation is merged with or into or consolidated with HEI or at the time of a sale or transfer of the properties of such corporation or other Person as an entirety or substantially as an entirety to HEI; (4)security interests in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favor of any other country or political subdivision, (A) to secure partial progress, advance or other payments pursuant to any contract or statute, (B) to secure any indebtedness incurred or guaranteed for the purpose of financing or refinancing all or any part of the purchase price of any property, shares of capital stock or indebtedness subject to such security interests, or (C) to secure the cost of constructing or improving any property subject to such security interests (including, without limitation, security interests incurred in connection with pollution control, industrial revenue or similar financings); (5)security interests on any property arising in connection with any defeasance, covenant defeasance or in substance defeasance of any Indebtedness pursuant to express contractual provisions or generally accepted accounting principles; (6)security interests on any capital stock of any corporation which is registered in the name of HEI or otherwise owned by or held for the benefit of HEI which may constitute "margin stock" as such term is defined in Section 207.2(i) of Title 12 of the Code of Federal Regulations (or any successor provisions); and (7)any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any security interest referred to above in clauses (1)-(6), inclusive; provided, however, that the principal amount of Indebtedness secured thereby shall not exceed the original principal amount of Indebtedness and that such extension, renewal or replacement shall be limited to all or a part of the property (plus improvements and construction on such property), shares of capital stock or indebtedness which was subject to the security interest so extended, renewed or replaced. Notwithstanding the foregoing, HEI may, without equally and ratably securing the Securities, create, incur, issue, assume, permit or suffer to exist Indebtedness secured by any security interest not excepted by the foregoing clauses (1) through (7), inclusive, if the aggregate amount of such Indebtedness, together with all other Indebtedness of HEI existing at such time and secured by security interests not so excepted, does not exceed 10% of Consolidated Net Tangible Assets (as defined below). 18 "Indebtedness" means (1) any indebtedness, whether or not represented by bonds, debentures, notes or other securities, for the repayment of money borrowed, (2) all deferred indebtedness (including, without limitation, capitalized leases) for the payment of the purchase price of property or assets purchased, and (3) all guaranties, endorsements, assumptions or other contingent obligations in respect of, or to purchase or otherwise to acquire, indebtedness of the types described in clauses (1) and (2) above. "Consolidated Net Tangible Assets" means the total amount of assets appearing on the consolidated balance sheet of HEI and its subsidiaries less, without duplication: (a) all current liabilities (excluding any thereof which are by their terms extendable or renewable at the sole option of the obligor without requiring the consent of the obligee to a date more than 12 months after the date of determination); (b) all reserves for depreciation and other asset valuation reserves but excluding any reserves for deferred federal income taxes arising from accelerated amortization or otherwise; (c) all intangible assets such as goodwill, trademarks, trade names, patents and unamortized debt discount and expense carried as an asset on such balance sheet; and (d) all appropriate adjustments on account of minority interests of other persons holding common stock in any subsidiary. The Indenture states that Consolidated Net Tangible Assets are determined in accordance with generally accepted accounting principles and as of a date not more than 90 days prior to the happening of the event for which such determination is being made. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any governmental agency or political subdivision. Restriction on Sale-Leaseback Transactions HEI may not engage in any Sale-Leaseback Transaction unless the amount of Sale-Leaseback Debt resulting from such transaction plus the aggregate of all other Sale-Leaseback Debt then existing, does not exceed 5% of Consolidated Net Tangible Assets. However, if a Sale-Leaseback Transaction would result in the amount of Sale-Leaseback Debt exceeding the foregoing limitation, then such transaction is permitted, but only if the excess amount of Sale-Leaseback Debt, if treated as Indebtedness secured by a security interest for the purposes of the restrictions described under "Restriction on Liens", would be permissible under such restrictions, and provided further that the amount of such excess shall be treated as Indebtedness for such purpose and not as Sale-Leaseback Debt. "Sale-Leaseback Transaction" means any sale by HEI to any person (other than HEI or a subsidiary) after the date of the Indenture of any property owned by HEI, which sale occurs more than 270 days after the later of the acquisition, completion of construction or commencement of commercial operations of such property by HEI, if, as part of the same transaction or series of transactions, HEI leases as lessee for a period of three years or longer the same property or other substantially equivalent property which it intends to use for substantially the same purposes pursuant to a lease which contains an option or right to repurchase said property. "Sale-Leaseback Debt" means, as to any particular lease entered into in a Sale-Leaseback Transaction, at any date as of which the amount thereof is to be determined, the total net amount of rent (determined in accordance with generally accepted accounting principles) required to be paid under such lease during the remaining term thereof, discounted from the respective due dates thereof to such date at the rate per annum which would then be used to determine lease classification under generally accepted accounting principles. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges. The term "Sale-Leaseback Debt" excludes any part thereof representing any extension, renewal or replacements (or successive extensions, renewals or replacements) of Indebtedness secured by any security interest existing at the date of the Indenture, provided that the Sale-Leaseback Transaction resulting in such Sale-Leaseback Debt is limited to all or a part of the property (plus improvements and construction on such property) which was subject to the security interest securing the Indebtedness so extended, renewed or replaced. 19 Restriction on Dispositions of HECO Shares HEI currently holds 100% of the outstanding common stock of HECO. HEI will not sell, transfer or otherwise dispose of, and will not permit HECO to issue, sell, transfer or otherwise dispose of, any shares of capital stock of any class or classes of HECO ordinarily having voting power for the election of HECO's board of directors. This covenant will not restrict the issuance, sale, transfer or other disposition of HECO's voting shares to HEI or to any of HEI's direct or indirect wholly-owned subsidiaries. The covenant also will not restrict (i) sales or transfers by HECO of preferred stock or other classes of capital stock of HECO which do not ordinarily have voting power in the election of HECO's Board of Directors or of the capital stock of its subsidiaries, (ii) consolidations of HECO or mergers of HECO with or into HEI or any of its direct or indirect wholly-owned subsidiaries, or (iii) consolidations or mergers of HECO with or into any other corporation if the corporation formed by such consolidation or merger is a direct or indirect wholly-owned subsidiary of HEI. Consolidations, Mergers, Conveyances, Transfers or Leases HEI will not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person or permit any Person to consolidate with or merge into HEI or convey, transfer or lease its properties and assets substantially as an entirety to HEI unless certain conditions are met, including the conditions that: . the corporation formed by such consolidation or into which HEI is merged, or the Person which acquires by conveyance or transfer or which leases the property and assets of HEI substantially as an entirety, is a Person organized and existing in corporate form under the laws of the United States of America, any State thereof or the District of Columbia, and such Person expressly assumes, by supplemental indenture, the due and punctual payment of the principal of (and premium, if any) and interest (if any) on all the Securities and the performance of all of the covenants of HEI under the Indenture; . immediately after giving effect to such transaction no Event of Default, and no event which after notice and lapse of time would become an Event of Default, has occurred and is continuing; and . HEI has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, as provided in the Indenture. Absence of Restrictions on Certain Transactions Other than the restrictions on liens, sale and leaseback transactions and consolidations, mergers, conveyances, transfers and leases described above, the Indenture and the Notes do not contain any covenants or other provisions designed to afford holders of the Notes protection in the event of a highly leveraged transaction involving HEI or in the event of a recapitalization, merger or other transaction (leveraged or otherwise) involving HEI, its affiliates or its management. Events of Default Each of the following is an Event of Default under the Indenture with respect to any series of Securities outstanding thereunder, including the Notes as a series of Securities: . failure to pay any interest on any Security of such series when due and payable and continuation of such failure for 30 days; . failure to pay any principal of (or premium, if any, on) any Security of such series when due and payable and continuance of such failure for a period of three Business Days; . failure to deposit any sinking fund payment, when and as due by the terms of a Security of that series, and continuance of such failure for a period of three Business Days; 20 . failure to perform or the breach of any covenant or warranty of HEI made in or pursuant to the Indenture (other than a covenant or warranty of HEI made in or pursuant to the Indenture solely for the benefit of one or more series of Securities other than such series), continued for 60 days after written notice to HEI by the Trustee, or to HEI and the Trustee by the holders of at least 10% in principal amount of the Securities of such series outstanding under the Indenture as provided in the Indenture; . failure to pay when due and payable after the expiration of any applicable grace period, any portion of the principal of indebtedness of HEI pursuant to a bond, debenture, note or other evidence of indebtedness in excess of $5,000,000 (including a default with respect to Securities of any series other than that series), or acceleration of such indebtedness for other default thereunder, without such Indebtedness having been discharged, or such acceleration having been rescinded or annulled, within 10 days after written notice to HEI by the Trustee or to HEI and the Trustee by the holders of at least 10% in principal amount of the Securities of such series outstanding under the Indenture (provided that this Event of Default shall be inapplicable if and so long as HEI is contesting in good faith such payment obligation or such acceleration and HEI has received the written opinion of counsel that it has a meritorious position with respect thereto); . certain events of bankruptcy, insolvency or reorganization; and . any other Event of Default specified with respect to Securities of such series. An Event of Default with respect to any other series of Securities issued under the Indenture will not necessarily constitute an Event of Default with respect to the Notes. The Trustee must, within 90 days after a default occurs with respect to a series of Securities, transmit by mail to all holders of such series notice of such default, unless it has been cured or waived (default is defined to include the events specified above without the grace periods or notice). The Trustee may withhold notice of a default, except a default in the payment of principal, premium, if any, or interest, if and so long as the Trustee determines in good faith (through its board, executive committee, trust committee or certain officers specified in the Indenture) that the withholding of such notice is in the interest of such holders. In the case of any default or breach of any covenant or warranty, except for a default or breach that is specifically addressed in the Indenture, no notice of such default or breach shall be given to holders for at least 30 days after the occurrence of such default or breach. If an Event of Default with respect to any series of outstanding Securities, issued under the Indenture (including the Notes) shall occur and be continuing, then either the Trustee or the holders of not less than 25% in principal amount of the outstanding Securities of such series may declare the principal amount (or if any of the Securities of such series are Discount Notes or similar securities, such portion of the principal amount as may be specified thereon) of all of the Securities of such series to be due and payable immediately; provided, however, that at any time after a declaration of acceleration of the Securities of any series and before a judgment or decree for payment has been obtained, the holders of a majority in principal amount of the outstanding Securities of such series may, under certain circumstances, rescind and annul such acceleration and its consequences if all Events of Default with respect to the Securities of such series, other than the nonpayment of the principal of the Securities of such series which has become due solely by such declaration of acceleration, have been cured or waived as provided in the Indenture. Any money collected by the Trustee pursuant to the exercise of its rights upon an Event of Default shall be applied first to amounts owing to the Trustee under the Indenture. No holder of any Security of any series will have any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or trustee or for any remedy thereunder, unless such holder shall have previously given to the Trustee written notice of a continuing Event of Default and the holders of at least 25% in aggregate principal amount of the outstanding Securities of such series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Securities 21 of such series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a Security for enforcement of payment of the principal of and premium, if any, or interest on such Security on or after the respective due dates expressed in such Security. For purposes of the preceding two paragraphs a series of Securities will not deemed to be outstanding if HEI takes certain steps to discharge its obligations relating to that series. See "Defeasance". HEI will be required to furnish to the Trustee annually a statement as to the performance by HEI of certain of its obligations under the Indenture and as to any default in such performance. Defeasance Defeasance and Discharge Subject to election by HEI, which election HEI has made with respect to the Notes, the Indenture provides that HEI will be discharged from any and all obligations in respect of a series of Securities (except for certain obligations to register the transfer or exchange of Securities of such series, to replace stolen, lost or mutilated Securities, to maintain paying agencies and to hold monies for payment in trust) upon the deposit with the Trustee or any other trustee, in trust, of money and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and each installment of interest on such Securities at least one day prior to the dates on which such payments are due in accordance with the terms of the Indenture and such Securities. Such a trust may only be established if, among other things required by the Indenture, HEI delivers to the Trustee an opinion of counsel to the effect that HEI has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in applicable federal income tax laws and regulations (including a change in the official interpretation by the Internal Revenue Service) to the effect that holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. Defeasance of Certain Covenants and Certain Events of Default Subject to election by HEI, which election HEI has made with respect to the Notes, the Indenture provides that with respect to a series of the Securities HEI may omit to comply with certain restrictive covenants, including those described under "Restrictions on Liens" and "Restriction on Sale-Leaseback Transactions" above, and the Event of Default described in the fourth bullet point under "Events of Default" above, shall be inapplicable to Securities of such series, upon the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and each installment of interest on such Securities at least one day prior to the date on which such payments are due in accordance with the terms of the Indenture and such Securities. The obligations of HEI under the Indenture and such Securities other than with respect to the covenants referred to above and the Events of Default other than the Event of Default referred to above shall remain in full force and effect. Such a trust may only be established if, among other things required by the Indenture, HEI has delivered to the Trustee an opinion of counsel to the effect that the holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. 22 Designation of a Portion of a Series as a New Series It is contemplated that a single series of the Securities, such as the Notes, will be created which would include Securities with sufficiently different terms that some of them (e.g., fixed rate Securities), but not others of them (e.g., floating rate Securities), would readily be the subject of defeasance and discharge or covenant defeasance, as described below. In order to facilitate such defeasance or covenant defeasance, HEI acting by board resolution of its Board of Directors shall have the right, at any time or from time to time, unilaterally to designate a portion of the Securities of any series, which is to be the subject of such defeasance or covenant defeasance, as a separate series under the Indenture, with the remainder to be unaffected as to series designation by such action, and to assign a new series designation thereto to distinguish the Securities of such new series from all other Securities. Thereafter, the Securities included in such new series, on the one hand, and the remainder of such Securities, on the other hand, shall be of different series for all purposes under the Indenture, and provisions in the Indenture or in any Security which apply to each series separately or otherwise depend upon or relate to series designation, shall give effect to such action by HEI, but the provisions of the Indenture and of any Security shall otherwise be unaffected thereby. Covenant Defeasance and Certain Other Events of Default In the event that HEI exercises its option to omit compliance with certain covenants of the Indenture with respect to the Notes as described above and the Notes are declared due and payable prior to the Stated Maturity because of the occurrence of any then-applicable Event of Default, the amount of money and U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Notes at their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, HEI shall remain liable for such payments. Modification of Indenture and Waiver Without the consent of any holders of Securities, HEI and the Trustee may enter into one or more supplemental indentures for certain purposes enumerated in the Indenture, such as to evidence succession to HEI of another corporation, to cure ambiguities in the Indenture or to make any other provisions that shall not adversely affect the interests of the holders of Securities of any series in any material respect. The consent of the holders of not less than 66 2/3 % in principal amount of the Securities of each series affected by a supplemental indenture is required for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture pursuant to such supplemental indenture. No such supplemental indenture will, however, without the consent of the holders of each outstanding Security under the Indenture of each such series directly affected thereby: . change the Stated Maturity of, or any installment of, principal of or interest on, any Security, or reduce the principal thereof or the rate of interest thereon or redemption premium payable thereon, or shorten the time period during which such Security may not be redeemed at the option of HEI, or reduce the amount of principal of a Discount Note that would be due and payable upon a declaration of acceleration of the Stated Maturity, or otherwise modify the terms of payment of or the place of payment for the principal thereof or interest or redemption premium thereon; . reduce the percentage of principal amount of the outstanding Securities of such series required to consent to any supplemental indenture or to any waiver provided for in the Indenture; . change any obligation of HEI to maintain an office or agency at the place or places where the principal of and premium, if any, and interest, if any, on the Securities of such series are payable; or . modify certain of the provisions in the Indenture relating to supplemental indentures, waivers of certain covenants and waivers of past defaults. 23 A supplemental indenture which changes or eliminates any covenant or other provision of the 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 the Indenture of the holders of any other Securities. The holders of 66 2/3 % in aggregate principal amount of the outstanding Securities of a series may waive compliance by HEI with the provisions of the Indenture restricting liens and sale-leaseback transactions insofar as they relate to the Securities of such series. The holders of a majority in aggregate principal amount of the outstanding Securities of a series may waive any past default under the Indenture, except a default in the payment of principal, premium, if any, or interest or in respect of any covenant or provision of the Indenture referred to in the second preceding paragraph above. Regarding the Trustee HEI and its affiliates may, from time to time, enter into commercial banking and other transactions with the Trustee in the ordinary course of business. Listing The Notes will not be listed on any national or regional securities exchange. Governing Law The Indenture and the Notes will be governed by the laws of the State of New York. 24 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES General The following summary describes certain United States federal income tax consequences of the purchase, ownership and disposition of Notes. Except where noted, it deals only with Notes held as capital assets by holders that are United States Persons ("U.S. Holders") and that purchased Notes at their original issuance, and assumes that the holder is the beneficial owner of the Note. For this purpose, "United States Person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust the administration of which is subject to the primary jurisdiction of a court within the United States and with respect to which one or more United States persons have authority to control all substantial decisions. This summary does not deal with special situations, such as those of dealers in securities, financial institutions, insurance companies, individual retirement or other tax-deferred accounts, tax exempt organizations, persons who hold Notes as a hedge against currency risk, persons who have otherwise hedged the risk of ownership of a Note or persons who hold Notes as part of a straddle with other investments or whose "functional currency" is not the U.S. dollar. Finally, it does not purport to cover any foreign, state or local tax consequences associated with the purchase, ownership or disposition of Notes or all of the possible United States federal income tax consequences of the purchase, ownership or disposition of Notes. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), including the regulations, rulings and judicial decisions thereunder as of the date hereof. Such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. There is no assurance that the Internal Revenue Service ("IRS") will not take a contrary view. Payments of Interest Interest on a Note will generally be taxable to a U.S. Holder as ordinary interest income from domestic sources at the time it is paid or accrued in accordance with the holder's method of accounting for United States federal income tax purposes. However, different rules apply with respect to Original Issue Discount Notes (as defined below). Original Issue Discount An "Original Issue Discount Note" is a Note whose stated redemption price at maturity (i.e., the sum of its principal amount plus all other payments to be made on the Note other than "qualified stated interest") exceeds its issue price (i.e., the first price at which a substantial amount of the Notes in the issuance is sold, excluding sales to bond houses, brokers and others acting as underwriters, placement agents or wholesalers) by more than 0.25 percent of the stated redemption price at maturity multiplied by the number of complete years to maturity. The term "Original Issue Discount Note" does not necessarily include all Notes identified as Discount Notes, and may include Notes that are not otherwise Discount Notes but that have been issued with original issue discount ("OID") for United Sates federal income tax purposes. "Qualified stated interest" is stated interest that is unconditionally payable in cash or in property (other than debt instruments of the issuer) at least annually at a single fixed rate, provided that the rate appropriately takes into account the length of intervals between payments, or at certain variable rates of interest or certain combinations thereof. U.S. Holders of Original Issue Discount Notes with maturities of more than one year will be required to include OID in gross income as interest income before receiving cash to which such interest income is attributable. The amount of OID annually includible in income by a U.S. Holder is the sum of the daily portions of OID with respect to each Original Issue Discount Note held by such U.S. Holder for each day during the taxable year or portion of a taxable year that the U.S. Holder holds such Original Issue Discount Note. The daily 25 portion is determined by allocating to each day of any accrual period a pro rata portion of an amount equal to the "adjusted issue price" of the Original Issue Discount Note at the beginning of the accrual period multiplied by the yield to maturity of the Original Issue Discount Note less the amount, if any, of qualified stated interest allocable to the accrual period. The "accrual period" for an Original Issue Discount Note may be of any length and may vary in length over the term of the Original Issue Discount Note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on either the first or final day of an accrual period. The "adjusted issue price" is the issue price of the Original Issue Discount Note increased by the accrued OID for all prior accrual periods (and decreased by the amount of all payments previously made on the Original Issue Discount Note, other than qualified stated interest payments). Sections 1271 through 1275 of the Code and the regulations thereunder (the "OID Regulations") provide detailed rules for computing OID. Under the OID Regulations, a Floating Rate Note will qualify as a "variable rate debt instrument" if (a) its issue price does not exceed the total noncontingent principal payments due under the Floating Rate Note by more than a specified de minimis amount, (b) it does not provide for any principal payments that are contingent, and (c) it provides for stated interest, paid or compounded at least annually, at current values of (i) one or more qualified floating rates, (ii) a single fixed rate and one or more qualified floating rates, (iii) a single objective rate, or (iv) a single fixed rate and a single objective rate that is a qualified inverse floating rate. Any qualified floating rate or objective rate must be set at current value. The meanings of the terms "qualified floating rates," "single objective rate," "qualified inverse floating rate," "current value" and other terms are contained in the OID Regulations. If a Floating Rate Note that provides for stated interest at a single qualified floating rate (or a single objective rate) throughout the term thereof qualifies as a "variable rate debt instrument" under the OID Regulations, then any stated interest on such Note which is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually during the term of the Note will constitute qualified stated interest and will be taxed accordingly. Thus, such a Floating Rate will generally not be treated as having been issued with OID unless the Floating Rate Note is issued at a "true" discount (i.e., at a price below the Note's stated principal amount) in excess of a specified de minimis amount. OID on such a Floating Rate Note arising from "true" discount is allocated to an accrual period using the constant yield method described above by assuming that the variable rate is a fixed rate equal to, in the case of a qualified floating rate or qualified inverse floating rate, the value as of the issue date of the qualified floating rate or qualified inverse floating rate. In general, any other Floating Rate Note that qualifies as a "variable rate debt instrument" will be converted into an "equivalent" fixed rate debt instrument for purposes of determining the amount and accrual of OID and qualified stated interest on the Floating Rate Note. The OID Regulations generally require that such a Floating Rate Note be converted into an "equivalent" fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Floating Rate Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Floating Rate Note's issue date. Once the Floating Rate Note is converted into an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the amount of OID and qualified stated interest, if any, are determined for the "equivalent" fixed rate debt instrument by applying the general OID rules to the "equivalent" fixed rate debt instrument. A U.S. Holder of the Floating Rate Note will account for such OID and qualified stated interest as if the U.S. Holder held the "equivalent" fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or OID assumed to have been accrued or paid with respect to the "equivalent" fixed rate debt instrument in the event that such amounts differ from the actual amount of interest accrued or paid on the Floating Rate Note during the accrual period. If a Floating Rate Note does not qualify as a "variable rate debt instrument" under the OID Regulations, then the Floating Rate Note would be treated as a contingent payment debt obligation (a "CP Note"). 26 U.S. Holders of CP Notes would be required to take amounts treated as interest into income, under the noncontingent bond method, as described in the OID Regulations, whether or not any payment thereon is fixed or determinable in the taxable year. HEI would be required to determine the "comparable yield" for the CP Note, which is the yield at which HEI would issue a fixed rate instrument with similar terms and conditions, such as the level of subordination. In no event may this yield be less than the applicable federal rate, which is periodically published in IRS revenue rulings. In addition, HEI would be required to construct a projected payment schedule, including the amount of all noncontingent payments and each contingent payment. These scheduled payments must produce the comparable yield for the CP Note. A U.S. Holder will be required to use this projected payment schedule to determine its interest (all of which is accrued as OID, as described above) and adjustments thereto with respect to a CP Note, unless it determines its own schedule and explicitly discloses that fact to the IRS. In such an event, HEI would provide the projected payment schedule for any CP Note with the relevant pricing supplement. If the amount of a contingent payment on a CP Note is more than the projected amount of the contingent payment, as reflected in the projected payment schedule, the excess constitutes a positive adjustment, generally on the date of payment. If the amount of the contingent payment is less than the projected amount thereof, the difference is a negative adjustment. The amount by which the positive adjustments on a CP Note in a taxable year exceeds the negative adjustments in that year constitutes a net positive adjustment, which is treated as additional interest for the taxable year. The amount by which negative adjustments on a CP Note in a taxable year exceed the positive adjustments in that year constitutes a net negative adjustment. A U.S. Holder's net negative adjustment for a taxable year first reduces the U.S. Holders' amount otherwise includible as interest on the CP Note for the taxable year. Second, to the extent the negative adjustment exceeds the U.S. Holder's amount of interest for the taxable year, the excess constitutes an ordinary loss, limited to the amount of interest on the CP Note included by the U.S. Holder in prior taxable years reduced by any amount of net negative adjustments from prior taxable years which were previously treated as ordinary losses. Third, any remainder of net negative adjustments is a carryforward to the extent of the U.S. Holder's interest on the CP Note in subsequent taxable years or, if the U.S. Holder has a negative adjustment carryforward in the year of retirement, sale or disposition, it reduces the amount realized on such retirement, sale or disposition. In general, any gain recognized by a U.S. Holder on the sale, exchange or retirement of a CP Note will be treated as ordinary income and all or a portion of any loss recognized will be treated as ordinary loss. Short-Term Notes In the case of Original Issue Discount Notes having a term of one year or less ("Short-Term Notes"), all payments (including stated interest) are included in the stated redemption price at maturity. The excess of the stated redemption price at maturity over the issue price of a Short-Term Note generally constitutes OID. In general, individuals and certain other cash-method U.S. Holders of Short-Term Notes are not required to include OID in income as it accrues unless they elect to do so. However, accrual-method taxpayers and certain other holders are required to include OID in income. Unless such holder makes an election to accrue OID according to a constant yield method based on daily compounding, it must be included on a straight-line basis. In the case of a U.S. Holder who is not required (and does not elect) to include OID in income currently, any gain realized on the sale, exchange or retirement of a Short-Term Note will be ordinary income to the extent of the OID accrued through the date of sale, exchange or retirement. In addition, U.S. Holders who do not elect to currently include OID may be required to defer deductions for a portion of the interest expense on any indebtedness incurred or continued to purchase or carry the Short-Term Notes in an amount not exceeding the deferred interest income, until such deferred interest income is recognized. 27 In addition, U.S. Holders may elect to determine the amount of discount, referred to as acquisition discount, to be included in gross income by using their tax basis instead of the issue price. If such an election is made, it applies to all obligations acquired in or after the first taxable year to which the election applies, which election may be revoked only with the consent of the IRS. This acquisition discount constitutes ordinary income and not capital gain. Market Discount If a U.S. Holder purchases a Note, other than an Original Issue Discount Note, for an amount that is less than its stated redemption price at maturity or, in the case of an Original Issue Discount Note, for an amount that is less than its adjusted issue price, such U.S. Holder will be treated as having purchased such Note at a "market discount," unless such market discount is less than a specified de minimis amount. Under the market discount rules, a U.S. Holder will be required to treat any partial principal payment (or, in the case of an Original Issue Discount Note, any payment that does not constitute qualified stated interest) on, or any gain realized on the sale, exchange, retirement or other disposition of, a Note as ordinary income to the extent of the lesser of (i) the amount of such payment or realized gain or (ii) the market discount which has not previously been included in income and is treated as having accrued on such Note at the time of such payment or disposition. Market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Note, unless the U.S. Holder elects to accrue market discount under a constant yield method. A U.S. Holder may be required to defer the deduction of all or a portion of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a Note with market discount until the maturity of the Note or certain earlier dispositions. A U.S. Holder may elect to include market discount in income currently as it accrues (either ratably or under a constant yield method), in which case the rules described above regarding the treatment as ordinary income of gain upon the disposition of the Note and upon the receipt of certain cash payments and regarding the deferral of interest deductions will not apply. Generally, such currently included market discount is treated as ordinary interest for United States federal income tax purposes. Such an election will apply to all debt instruments acquired by the U.S. Holder on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS. Amortizable Bond Premium A U.S. Holder who purchases a Note for an amount in excess of the sum of all amounts, other than qualified stated interest, payable on the Note after the purchase date will be considered to have purchased the Note at a "premium" and, in the case of an Original Issue Discount Note, will not be required to include any OID in income. A U.S. Holder generally may elect to amortize the premium over the remaining term of the Note under a constant yield method. For any Floating Rate Note that is a "variable rate debt instrument" under the OID Regulations, that method is implemented by constructing an "equivalent fixed rate instrument," as provided in the OID Regulations. The amount amortized in any year reduces both the U.S. Holder's adjusted basis in the Note and interest income from the Note. Any excess bond premium allocable to an accrual period is deductible by the holder for that accrual period. The amount deductible, however, is limited by the amount of the holder's prior income inclusions on the instrument, and any excess is carried forward to the next accrual period. In addition, in the case of instruments that have alternative payment schedules that are predicated on the unilateral exercise of an option by the issuer or the holder, the amount of bond premium that is amortizable in an accrual period is calculated by assuming that both the issuer and the holder will exercise or not exercise options in a manner that maximizes the holder's yield. Thus, a holder may be required to amortize bond premium by reference to the Stated Maturity, even if it appears likely that the Note will be called. The final regulations also contain rules applicable if such contingency occurs or fails to occur contrary to the assumption utilized. 28 U.S. Holders not making an election to amortize bond premium are not required to reduce the adjusted basis of their Notes and consequently may recognize less gain or more loss upon their disposition. The election to amortize premium, once made, applies to all debt instruments held or subsequently acquired by the electing U.S. Holder on or after the first day of the taxable year to which the election applies and may not be revoked without the consent of the IRS. Holders should consult with their own tax advisors about this election. Election to Treat All Interest as OID Subject to certain limitations, U.S. Holders may elect to treat all interest and discount on Notes as OID and calculate the amount includible in gross income under the constant yield method described above. For purposes of this election, interest includes stated interest, OID, de minimis OID, market discount, acquisition discount and other unstated interest, as adjusted by any amortizable bond premium. If a U.S. Holder makes this election for a Note with amortizable bond premium, the election is treated also as an election under the amortizable bond premium provisions, described above, and the electing U.S. Holder will be required to amortize bond premium currently for all of the U.S. Holder's other debt instruments with amortizable bond premium. The election is to be made for the taxable year in which the U.S. Holder acquired the Note, and may not be revoked without the consent of the IRS. Sale, Exchange and Retirement of Notes A U.S. Holder's tax basis of a Note will, in general, be the U.S. Holder's cost thereof, increased by OID previously included in income of the U.S. Holder but reduced by any amortizable bond premium to the extent amortized and any payments, other than qualified stated interest, while held by the U.S. Holder. Upon the sale, exchange, retirement or other taxable disposition of a Note, gain or loss will be recognized equal to the difference between (i) the amount of cash and fair market value of property received (excluding an amount attributable to accrued and unpaid stated interest not previously included in income, which will be taxed as ordinary income) and (ii) the U.S. Holder's tax basis in the Note. Except as described above with respect to Short-Term Notes and the OID, market discount and amortizable bond premium rules, the gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Note was held for more than one year. Net capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income, and the deductibility of capital losses of U.S. Holders is subject to limitations. Backup Withholding and Information Reporting In general, information reporting requirements will apply to certain payments of principal, interest, OID and premium on Notes and the proceeds of a sale of a Note made to U.S. Holders other than certain exempt recipients (such as corporations). A 30 percent backup withholding tax (subject to phased-in rate reductions) will apply to such payments if the holder fails to provide its taxpayer identification number or certification of its exempt status or fails to report in full dividend and interest income. The amount of accrued OID on Original Issue Discount Notes held of record by persons other than corporations and other exempt holders will be reported to the extent required by applicable law. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder's federal income tax liability provided the required information is furnished to the IRS. 29 PLAN OF DISTRIBUTION The Notes are being offered on a continuing basis for sale by HEI, to or through the Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Robert W. Baird & Co. Incorporated, Janney Montgomery Scott LLC, U.S. Bancorp Piper Jaffray Inc. or one or more other Agents appointed from time to time by HEI pursuant to the terms of the Distribution Agreement relating to the offering of the Notes. The Agents, individually or in a syndicate, may purchase Notes, as principal, from HEI from time to time for resale to investors and other purchasers at varying prices relating to prevailing market prices at the time of resale as determined by the applicable Agent, or, if so specified in the applicable pricing supplement, for resale at a fixed offering price. If agreed to by HEI and the applicable Agent, such Agent may utilize its reasonable efforts on an agency basis to solicit offers to purchase the Notes at 100% of the principal amount thereof, unless the applicable pricing supplement states otherwise. HEI will pay a commission to each such Agent, ranging from .125 % to .750% of the principal amount of a Note, depending upon its Stated Maturity, sold through such Agent, as agent. The following table describes the potential proceeds HEI will receive if it sells all of the Notes but does not include expenses payable by HEI, which are estimated to be $200,000:
Price to Public Agents' Commissions and Discounts Proceeds to HEI --------------- --------------------------------- ---------------------------- Per Note... 100% .125% to .750% 99.250% to 99.875% Total...... $300,000,000 $375,000 to $2,250,000 $297,750,000 to $299,625,000
HEI may also sell the Notes directly to purchasers in those jurisdictions in which it is permitted to do so. No commission or discount will be payable by HEI on Notes sold directly by HEI. Any Note sold to an Agent as principal will be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage of the principal amount equal to the commission applicable to an agency sale of a Note of identical maturity. An Agent may sell Notes it has purchased from HEI as principal to certain dealers less a concession equal to all or any portion of the discount it received in connection with such purchase. Such Agent may allow, and such dealers may reallow, any portion of the discount received in connection with such purchase. After the initial offering of Notes, the offering price (in the case of Notes to be resold on a fixed offering price basis), the concession and the reallowance may be changed. HEI reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject orders in whole or in part (whether placed directly with HEI or through an Agent). Each Agent will have the right, in its discretion, reasonably exercised, to reject in whole or in part any offer to purchase Notes received by it on an agency basis. Payment of the purchase price of the Notes will be required to be made in immediately available funds in New York City on the date of settlement. No Note will have an established trading market when issued. The Notes will not be listed on any securities exchange. Each of the Agents may from time to time purchase and sell Notes in the secondary market, but no Agent is obligated to do so, and there can be no assurance that there will be a secondary market for the Notes or liquidity in the secondary market if one develops. From time to time, each of the Agents may make a market in the Notes, but no Agent is obligated to do so and the Agents may discontinue any such market-making activity at any time. In connection with an offering of Notes purchased by one or more Agents as principal on a fixed price basis, each such Agent will be permitted to engage in certain transactions that stabilize the price of such Notes. Such transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of such Notes. If an Agent creates a short position in such Notes (i.e., if it sells Notes in an aggregate principal amount exceeding that set forth in the applicable pricing supplement), such Agent may reduce that short position by purchasing Notes in the open market. 30 In general, purchases of Notes for the purpose of stabilization or to reduce a short position could cause the price of Notes to be higher than it might be in the absence of such purchases. Neither HEI nor any of the Agents makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither HEI nor any of the Agents makes any representation that the Agents will engage in any such transactions or that such transactions once commenced will not be discontinued without notice. Each Agent may be deemed to be an "underwriter" within the meaning of the Securities Act. HEI has agreed to indemnify the Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Agents may be required to make in respect thereof. HEI has agreed to reimburse each of the Agents for certain other expenses. The Agents from time to time provide investment banking services to HEI and may from time to time engage in transactions with and perform other services for HEI in the ordinary course of business. VALIDITY OF NOTES The validity of the Notes will be passed upon for HEI by Goodsill Anderson Quinn & Stifel LLP, Honolulu, Hawaii, and for the Agents by Pillsbury Winthrop LLP, New York, New York. The opinions of counsel will be delivered at the commencement date for HEI's Series D medium-term note program (and under certain circumstances at intervals thereafter) and will assume that each future issuance of the Notes complies with the Indenture and laws, agreements and instruments then binding on HEI. Goodsill Anderson Quinn & Stifel LLP will rely as to all matters of New York law upon the opinion of Pillsbury Winthrop LLP, and Pillsbury Winthrop LLP will rely as to all matters of Hawaii law upon the opinion of Goodsill Anderson Quinn & Stifel LLP. EXPERTS The consolidated financial statements and schedules of HEI and subsidiaries as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The audit reports covering the December 31, 2001 consolidated financial statements and schedules refer to a change to the accounting method for derivative instruments and hedging activities. 31 ================================================================================ $300,000,000 [LOGO] Hawaiian Electric Company Hawaiian Electric Industries, Inc. Medium-Term Notes, Series D --------------- PROSPECTUS --------------- Merrill Lynch & Co. Goldman, Sachs & Co. Robert W. Baird & Co. Janney Montgomery Scott LLC U.S. Bancorp Piper Jaffray Inc. May , 2002 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. Other Expenses of Issuance and Distribution* Securities and Exchange Commission registration fee. $ 27,600 Legal fees and expenses............................. $100,000 Printing and engraving expenses..................... $ 20,000 Accounting fees and expenses........................ $ 40,000 Trustee fees and expenses........................... $ 3,000** Blue Sky fees and expenses.......................... $ 3,500 Other............................................... $ 5,900 -------- Total........................................... $200,000
- -------- * All amounts other than the SEC registration fee are estimated. ** Does not include annual service fee. ITEM 15. Indemnification of Directors and Officers The Restated Articles of Incorporation of HEI provide that HEI will indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding to which such person is a party or is threatened to be made a party by reason of being or having been a director, officer, employee or agent of HEI, provided that such person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of HEI, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. With respect to an action brought by or in the right of HEI in which such person is adjudged to be liable for negligence or misconduct in the performance of that person's duty to HEI, indemnification may be made only to the extent deemed fair and reasonable in view of all the circumstances of the case by the court in which the action was brought or any other court having jurisdiction. The indemnification provisions in the Restated Articles of Incorporation were authorized at the time of their adoption by the applicable provisions of the Hawaii Revised Statutes, and substantially similar authorizing provisions are currently set forth in Section 414-242 of the Hawaii Revised Statutes. At HEI's annual meeting of stockholders held on April 18, 1989, the stockholders adopted a proposal authorizing HEI to enter into written indemnity agreements with its officers and directors. Pursuant to such authority, HEI has entered into agreements of indemnity with certain of its officers and directors. The agreements provide for mandatory indemnification of officers and directors to the fullest extent authorized or permitted by law, which could among other things protect officers and directors from certain liabilities under the Securities Act of 1933. Indemnification under the agreements may be provided without a prior determination that an officer or director acted in good faith or in the best interests of HEI, and without prior court approval of indemnification of an officer or director adjudicated liable in a shareholder's derivative action. The agreements provide for indemnification against expenses (including attorneys' fees), judgments, fines and settlement amounts in connection with any action by or in the right of HEI. Under a directors' and officers' liability insurance policy, directors and officers are insured against certain liabilities, including certain liabilities under the Securities Act of 1933. Reference is made to Section 7 of the Distribution Agreement, which indemnifies HEI's directors and officers against certain liabilities, including certain liabilities under the Securities Act of 1933. ITEM 16. Exhibits The exhibits designated by an asterisk (*) are filed herein. The exhibits not so designated are incorporated by reference to the indicated filing. *1 Form of Distribution Agreement between HEI and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Robert W. Baird & Co. Incorporated, Janney Montgomery Scott LLC and U.S. Bancorp Piper Jaffray Inc., as Agents 4(a) Indenture, dated as of October 15, 1988, between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4(a) to Registration Statement on Form S-3, Registration No. 33-58820) 4(b) First Supplemental Indenture dated as of June 1, 1993 between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4(a) to HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-8503) 4(c) Second Supplemental Indenture dated as of April 1, 1999 between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4.1 to HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, File No. 1-8503) *4(d) Form of Third Supplemental Indenture between HEI and Citibank, N.A., as Trustee *4(e) Form of Fixed Rate Note for issuance by HEI (included in Exhibit 4(d)) *4(f) Form of Floating Rate Note for issuance by HEI (included in Exhibit 4(d)) *5(a) Opinion of Goodsill Anderson Quinn & Stifel LLP (including consent) *5(b) Opinion of Pillsbury Winthrop LLP (including consent) 12.1 Computation of Ratio of Earnings to Fixed Charges (previously filed as Exhibit 12.1 to HEI's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-8503) 12.2 Computation of Ratio of Earnings to Fixed Charges (previously filed as Exhibit 12.1 to HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, File No. 1-8503) *23(a) Consent of KPMG LLP *23(b) Consent of Goodsill Anderson Quinn & Stifel LLP (included in Exhibit 5(a)) *23(c) Consent of Pillsbury Winthrop LLP (included in Exhibit 5(b)) *24 Power of Attorney *25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
ITEM 17. Undertakings HEI hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, unless the information required to be included in such post-effective amendment is contained in a periodic report filed by HEI pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and incorporated herein by reference; (b) 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, II-2 represent a fundamental change in the information set forth in the registration statement, unless the information required to be included in such post-effective amendment is contained in a periodic report filed with or furnished by HEI pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and incorporated herein by reference. 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 the high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (c) 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 of 1933, 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 post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. HEI hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of HEI's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of HEI pursuant to the provisions described under Item 15 above, or otherwise, HEI 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 HEI of expenses incurred or paid by a director, officer or controlling person of HEI 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, HEI will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and County of Honolulu, State of Hawaii, on the 8th day of May, 2002. HAWAIIAN ELECTRIC INDUSTRIES, INC. By /s/ ROBERT F. MOUGEOT ----------------------------- Robert F. Mougeot Financial Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signatures Title Date ---------- ----- ---- ROBERT F. CLARKE* Chairman, President, Chief May 8, 2002 __________________ Executive Officer and Director Robert F. Clarke ROBERT F. MOUGEOT* Financial Vice President, Treasurer May 8, 2002 __________________ and Chief Financial Officer Robert F. Mougeot CURTIS Y. HARADA* Controller and Principal Accounting May 8, 2002 __________________ Officer Curtis Y. Harada DON E. CARROLL* Director May 8, 2002 __________________ Don E. Carroll CONSTANCE H. LAU* Director May 8, 2002 __________________ Constance H. Lau VICTOR HAO LI* Director May 8, 2002 __________________ Victor Hao Li T. MICHAEL MAY* Director May 8, 2002 __________________ T. Michael May BILL D. MILLS* Director May 8, 2002 __________________ Bill D. Mills A. MAURICE MYERS* Director May 8, 2002 __________________ A. Maurice Myers DIANE J. PLOTTS* Director May 8, 2002 __________________ Diane J. Plotts JAMES K. SCOTT* Director May 8, 2002 __________________ James K. Scott OSWALD K. STENDER* Director May 8, 2002 _________________________________________________ Oswald K. Stender KELVIN H. TAKETA* Director May 8, 2002 _________________________________________________ Kelvin H. Taketa JEFFREY N. WATANABE* Director May 8, 2002 _________________________________________________ Jeffrey N. Watanabe *By /s/ ROBERT F. MOUGEOT* Director May 8, 2002 _________________________________________________ Robert F. Mougeot For himself and as Attorney-in-Fact for the above mentioned officers and directors EXHIBIT INDEX
Exhibit No. Description - ------- -------------------------------------------------------------------------------------------- *1 Form of Distribution Agreement between HEI and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Robert W. Baird & Co. Incorporated, Janney Montgomery Scott LLC and U.S. Bancorp Piper Jaffray Inc., as Agents 4(a) Indenture, dated as of October 15, 1988, between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4(a) to Registration Statement on Form S-3, Regis. No. 33-58820) 4(b) First Supplemental Indenture dated as of June 1, 1993 between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4(a) to HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-8503) 4(c) Second Supplemental Indenture dated as of April 1, 1999 between HEI and Citibank, N.A., as Trustee (previously filed as Exhibit 4.1 to HEI's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, File No. 1-8503) *4(d) Form of Third Supplemental Indenture between HEI and Citibank, N.A., as Trustee *4(e) Form of Fixed Rate Note for issuance by HEI (included in Exhibit 4(d)) *4(f) Form of Floating Rate Note for issuance by HEI (included in Exhibit 4(d)) *5(a) Opinion of Goodsill Anderson Quinn & Stifel LLP (including consent) *5(b) Opinion of Pillsbury Winthrop LLP (including consent) 12.1 Computation of Ratio of Earnings to Fixed Charges (previously filed as Exhibit 12.1 to HEI's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-8503) Computation of Ratio of Earnings to Fixed Charges (previously filed as Exhibit 12.1 to HEI's 12.2 Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, File No. 1-8503) *23(a) Consent of KPMG LLP *23(b) Consent of Goodsill Anderson Quinn & Stifel LLP (included in Exhibit 5(a)) *23(c) Consent of Pillsbury Winthrop LLP (included in Exhibit 5(b)) *24 Power of Attorney *25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
- -------- The exhibits designated by an asterisk (*) are filed herein. The exhibits not so designated are incorporated by reference to the indicated filing. EX-1 3 dex1.txt FORM OF DISTRIBUTION AGREEMENT Exhibit 1 --------- $300,000,000 HAWAIIAN ELECTRIC INDUSTRIES, INC. Medium-Term Notes, Series D DISTRIBUTION AGREEMENT ---------------------- _______________ ____, 2002 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 4 World Financial Center 15/th/ Floor New York, New York 10080 GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 ROBERT W. BAIRD & CO. INCORPORATED 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 JANNEY MONTGOMERY SCOTT LLC 1801 Market Street Philadelphia, Pennsylvania 19103 U.S. BANCORP PIPER JAFFRAY INC. 111 Southwest 5/th/ Avenue Portland, Oregon 97204 Ladies and Gentlemen: Hawaiian Electric Industries, Inc., a Hawaii corporation (the "Company"), proposes to issue and sell from time to time its Medium-Term Notes, Series D (the "Securities") in an aggregate amount of up to $300,000,000 and confirms its agreement with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Robert W. Baird & Co. Incorporated, Janney Montgomery Scott 1 LLC and U.S. Bancorp Piper Jaffray Inc. (individually, an "Agent" and, collectively, together with any others who are subsequently appointed as agents pursuant to Section 2(d) hereof, the "Agents") with respect to such issuance and sale as set forth in this Agreement. Subject to the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Securities directly on its own behalf as provided in Section 2(b) hereof and to appoint additional Agents as provided in Section 2(d) hereof, the Company hereby agrees that Securities shall be sold exclusively to or through the Agents. This Agreement provides for both the sale of Securities by the Company to the Agents as principal for resale to investors and other purchasers and for the sale of Securities by the Company directly to investors (as may from time to time be agreed to by the Company and the Agents), in which case the Agents shall act as agents of the Company in soliciting offers for the purchase of Securities, subject to the Company's right to solicit, sell and accept offers to purchase Securities directly on its own behalf as provided in Section 2(b) hereof. The Agents shall not have any obligation to purchase Securities from the Company as principal. Any such purchase of Securities as principal shall be made in accordance with Section 2(a) hereof. The Securities shall be issued under an indenture, dated as of October 15, 1988, between the Company and Citibank, N.A., as trustee (the "Trustee"), as previously supplemented, and as to be further supplemented by a Third Supplemental Indenture dated as of ___________ ____, 2002 (such indenture, as so supplemented, being hereinafter referred to as the "Indenture"). The Securities shall have the maturity dates (between nine months and thirty years from date of issue), interest rates, if any, redemption and repayment provisions and other terms as set forth in the Prospectus referred to below as it may be amended or supplemented from time to time. The Securities shall be issued, and the terms and rights thereof established, from time to time by the Company in accordance with the Indenture. 1. The Company represents and warrants to, and agrees with, each Agent that as of the date hereof, as of the date of each acceptance by the Company of an offer for the purchase of Securities (whether to such Agent as principal or through such Agent as agent), as of the date of each delivery of Securities (whether to such Agent as principal or through such Agent as agent) (the date of each such delivery to such Agent as principal is referred to herein as a "Time of Delivery"), and as of any time that the Registration Statement (as hereinafter defined) or the Prospectus (as hereinafter defined) shall be amended or supplemented (each of the times referenced above is referred to herein as a "Representation Date"), except as may be disclosed in the Prospectus (including any documents incorporated by reference therein and any supplements thereto) or otherwise in writing by the Company to the Agents on or before a Representation Date: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration No. 333-[ ]), which registration statement, as amended, has been declared effective by the Commission for the registration of $300,000,000 aggregate principal amount of Securities under the Securities Act of 1933, as amended (the "Act"), and the offering thereof from time to time pursuant to Rule 415 promulgated by the Commission under the Act. Such registration statement and the prospectus constituting a part of such registration statement, and any pricing supplement relating to a particular issuance of the Securities 2 (each, a "Pricing Supplement"), including all documents incorporated or deemed to be incorporated therein by reference pursuant to Item 12 of Form S-3 under the Act, in each case, as from time to time amended or supplemented, are referred to herein as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus is provided to the Agents by the Company for use in connection with the offering of the Securities that is not required to be filed by the Company pursuant to Rule 424(b) promulgated by the Commission under the Act, the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to an Agent for such use. As used in this Agreement, the terms "amendment" or "supplement" when applied to the Registration Statement or the Prospectus shall be deemed to include the filing by the Company with the Commission of any document under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date hereof that is or is deemed to be incorporated therein by reference. (b) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission under the Exchange Act, conformed and will conform in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of such documents contained or will contain at such time an untrue statement of a material fact or omitted or will omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. The Registration Statement, as of the Effective Date, conformed or will conform in all material respects to the requirements of the Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission promulgated thereunder and, as of the Effective Date, does not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as of its original issue date, as of the date of any filing of a Pricing Supplement thereto pursuant to Rule 424(b) promulgated by the Commission under the Act and as of the date of any other amendment or supplement thereto (each, an "Issue Date"), conforms or will conform in all material respects to the requirements of the Act and the Trust Indenture Act and the rules and regulations of the Commission promulgated thereunder and, as of such respective dates, does not and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation -------- ------- and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by any Agent expressly for use in the Prospectus (it being agreed that, for purposes of this subsection (c) and Section 7 hereof, the only information so furnished by any Agent as of the date hereof consists of the sixth, seventh and eighth paragraphs under "Plan of Distribution" therein). As used herein, with respect to the Registration Statement, the term "Effective Date" means, as of a specified time, the later of (i) the date that the Registration Statement or the most recent post-effective 3 amendment thereto was or is declared effective by the Commission under the Act and (ii) the date that the Company's Annual Report on Form 10-K for its most recently completed fiscal year is filed with the Commission under the Exchange Act. (d) Otherwise than as set forth in or contemplated by the Registration Statement and the Prospectus, neither the Company nor any Subsidiaries (as hereinafter defined) has sustained since the date of the most recent audited financial statements incorporated by reference in the Registration Statement and the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, which loss or interference would have a material adverse effect on the consolidated financial condition or consolidated results of operations of the Company and Subsidiaries taken as a whole; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock of the Company or any Significant Subsidiary (as hereinafter defined) (except for (i) issuances of capital stock of the Company pursuant to dividend reinvestment, stock purchase, stock option, director or employee benefit plans, (ii) issuances of capital stock by Hawaiian Electric Company, Inc. ("HECO") or its subsidiaries that have been approved by the Public Utilities Commission of the State of Hawaii or by any other Significant Subsidiary as disclosed in writing to the Agents and (iii) redemptions by HECO, Hawaii Electric Light Company, Inc. ("HELCO") and Maui Electric Company, Limited ("MECO") of their respective preferred stock in accordance with the terms thereof), or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, consolidated financial position, or consolidated results of operations of the Company and the Subsidiaries taken as a whole, otherwise than as set forth in or contemplated by the Registration Statement and the Prospectus. (e) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Hawaii, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus; the Company does not itself conduct any business or own or lease any property in any jurisdiction outside the State of Hawaii that would require it to qualify to do business as a foreign corporation and where the failure to be so qualified would subject the Company to any material liability or disability. Each Significant Subsidiary of the Company, other than American Savings Bank, F.S.B. ("ASB"), has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. As used in this Agreement, the term "Subsidiary" means each corporation, at least a majority of the outstanding voting stock of which is owned by the Company, by one or more Subsidiaries or by the Company and one or more Subsidiaries. Except for the Significant Subsidiaries and ASB Realty Corporation, no Subsidiary constitutes a "significant subsidiary" within the meaning of Rule 1-02(w) of Regulation S-X. Except as described in the Registration Statement and the Prospectus, there is no development relating to, or in connection with, the business of any Subsidiary (other than a Significant Subsidiary) that would reasonably be expected to have a material adverse effect on the consolidated financial 4 condition or consolidated results of operations of the Company and the Subsidiaries taken as a whole. (f) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and, other than awards of restricted stock under the Company's 1987 Stock Option and Incentive Plan (the "Stock Option Plan") that have not yet vested, are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company; all of the issued shares of capital stock of each Significant Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable; and all of such shares, other than shares of common stock of ASB Realty Corporation and other than shares of preferred stock (including the outstanding preferred stock of HECO and its subsidiaries) are owned directly or indirectly by the Company, free and clear of any liens, encumbrances or security interests, except as described in the Registration Statement and the Prospectus. (g) The Indenture has been duly authorized, executed and delivered by the Company and qualified under the Trust Indenture Act and constitutes a valid and binding instrument of the Company enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights and by general equitable principles (regardless of whether considered in a proceeding in equity or at law); the Securities have been duly authorized by the Company for issuance, offer and sale pursuant to this Agreement and, when duly executed, authenticated, issued and delivered pursuant to the provisions of this Agreement and the Indenture against payment of the consideration therefor, the Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights and by general equitable principles (regardless of whether considered in a proceeding in equity or at law); the Securities and the Indenture will conform in all material respects to all statements relating thereto contained in the Registration Statement and the Prospectus; and the Securities will be entitled to the benefits provided by the Indenture. (h) The issuance and sale of the Securities, the compliance by the Company with all of the provisions of the Securities, the Indenture, this Agreement, and the consummation of the transactions contemplated herein and therein do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the imposition of a lien or security interest under, any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any Significant Subsidiary is a party or by which the Company or any Significant Subsidiary is bound or to which any of the property or assets used in the conduct of the business of the Company or any Significant Subsidiary is subject, nor will such action result in any violation of the provisions of the articles of incorporation or the by-laws of the Company or any Significant Subsidiary or any statute or any order, rule or regulation of any court or governmental agency or body having 5 jurisdiction over the Company or any Significant Subsidiary or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required for the consummation by the Company of the transactions contemplated by this Agreement or the Indenture or in connection with the issuance and sale of the Securities hereunder, except such as have been, or will have been prior to the Commencement Date (as defined in Section 3 hereof), obtained under the Act, the Trust Indenture Act or otherwise and such consents, approvals, authorizations, orders, registrations or qualifications as may be required under state securities or blue sky laws, as the case may be. (i) Other than as set forth in or contemplated by the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened to which the Company or any Subsidiary is a party or to which any property of the Company or any Subsidiary is the subject that is reasonably expected to have a material adverse effect on the consolidated financial condition or consolidated results of operations of the Company and the Subsidiaries taken as a whole. (j) Immediately after any sale of Securities by the Company hereunder, the aggregate amount of Securities that has been issued and sold by the Company hereunder will not exceed the aggregate principal amount of Securities registered under the Registration Statement (in this regard, the Company acknowledges and agrees that the Agents shall have no responsibility for maintaining records with respect to the aggregate principal amount of Securities sold, or of otherwise monitoring the availability of Securities for sale, under the Registration Statement). (k) ASB has been duly formed and is validly existing as a federal savings bank duly chartered and in good standing under the laws of the United States; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there have not been any increases in total non-accruing loans or the provision for loan losses of ASB and its subsidiaries, which increase or increases, individually or in the aggregate, would have a material adverse effect on the consolidated financial condition or consolidated results of operations of the Company and the Subsidiaries taken as a whole. (l) The Company and each of HECO, HELCO, MECO, and (to the extent they are Subsidiaries of the Company at any time relevant hereunder), HEI Diversified Inc. and ASB (each, a "Significant Subsidiary") and their respective subsidiaries have all requisite power and authority, and possess all necessary authorizations, approvals, orders, licenses, franchises, certificates and permits of and from, and to the extent required by law are duly registered with, all governmental and regulatory officials, commissions, departments and bodies in, and are in compliance with all applicable laws, rules and regulations of or under, each jurisdiction in which any of them owns properties or assets or conducts any business as described in the Registration Statement and the Prospectus, where the failure to possess such authorization, approval, order, license, franchise, certificate or permit, or where the failure so to register or so to comply, would have a material adverse effect on the consolidated financial condition or consolidated results of 6 operations of the Company and the Subsidiaries taken as a whole; each such authorization, approval, order, license, franchise, certificate and permit is valid and in full force and effect, and there is no proceeding pending or, to the Company's knowledge, threatened that may lead to the revocation, termination, suspension or non-renewal of any such authorization, approval, order, license, franchise, certificate or permit; the Company and the Significant Subsidiaries have taken appropriate action to maintain in effect or renew each such authorization, approval, order, license, franchise, certificate or permit; the Company and the Significant Subsidiaries own, or possess adequate rights to use, all patents, trademarks, service marks and rights necessary for or material to the conduct of their respective business as described in the Registration Statement and the Prospectus; and the Company and the Significant Subsidiaries possess adequate easements, rights-of-way and other rights to use of land not owned by the Company and the Significant Subsidiaries, with such exceptions and defects as are described in the Registration Statement and the Prospectus or as do not materially interfere with the use made of such land by the Company and the Significant Subsidiaries or as do not have a material adverse effect on the consolidated financial condition or consolidated results of operations of the Company and the Subsidiaries taken as a whole. (m) The Company and HECO are holding companies within the meaning of the Public Utility Holding Company Act of 1935, as amended; however, by virtue of having filed an appropriate application under the provisions of Section 3(a) of such Act, the Company and HECO are exempt from all of the provisions of such Act, except Section 9(a)(2) thereof, and will remain so exempt, subject to future timely filing of annual exemption statements and such filings as are required by Section 33 of such Act with respect to interests of the Company or any of the Subsidiaries in any foreign utility company, unless and except insofar as the Commission finds such exemption detrimental to the public interest or the interest of investors or consumers. (n) Neither the Company nor HEI Investments, Inc. ("HEIII") is an "investment company", nor is either, nor upon issuance of the Securities will either become, "controlled" by an "investment company", in each case within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). (o) This Agreement has been duly authorized, executed and delivered by the Company. (p) The accountants who have audited the consolidated financial statements of the Company and the Subsidiaries that are incorporated by reference in the Registration Statement and the Prospectus are independent certified public accountants as required by the Act and the rules and regulations of the Commission promulgated thereunder. (q) The Medium-Term Note Program under which the Securities are issued (the "Program") is rated Baa2 by Moody's Investors Service, Inc., BBB by Standard & Poor's Ratings Service or such other rating as to which the Company has most recently notified the Agents pursuant to Section 4(a) hereof. 7 Any certificate signed by any officer of the Company and delivered to one or more Agents or to counsel for the Agents in connection with an offering of Securities to one or more Agents as principal or through an Agent as agent shall be deemed a representation and warranty by the Company to such Agent or Agents as to the matters covered thereby on the date of such certificate. 2. (a) If agreed to by an Agent and the Company, Securities shall be purchased by such Agent as principal. Such purchases shall be made in accordance with terms agreed upon by such Agent and the Company (which terms, unless otherwise agreed to, shall, to the extent applicable, include those terms specified in Annex I hereto and be agreed upon orally, with written confirmation prepared by such Agent and delivered to the Company). Any Agent's commitment to purchase Securities as principal shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Unless the context otherwise requires, references herein to "this Agreement" shall include the applicable agreement of one or more Agents to purchase Notes from the Company as principal. Each purchase of Securities by an Agent as principal, unless otherwise agreed, shall be at a discount from the principal amount of each such Security equivalent to the applicable commission set forth in Schedule A hereto. The Agents may engage the services of any broker or dealer in connection with the resale of the Securities purchased as principal and may allow all or any portion of the discount received from the Company in connection with such purchases to such brokers and dealers. At the time of each purchase of Securities from the Company by one or more Agents as principal, such Agent or Agents shall specify the requirements for the Stand-Off Agreement (as defined in Section 4(f) hereof), officer's certificate, opinions of counsel and comfort letter pursuant to Sections 4(f), 6(b), 6(c), 6(d) and 6(g) hereof. If the Company and two or more Agents enter into an agreement pursuant to which such Agents agree to purchase Securities from the Company as principal, severally and not jointly as set forth in such agreement, and one or more of such Agents fails at the Time of Delivery to purchase the Securities that it or they are obligated to purchase (the "Defaulted Securities"), then the nondefaulting Agents shall have the right, within 24 hours thereafter, to make arrangements for one of them or one or more other Agents or underwriters to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; provided, however, that if such arrangements have not been completed within such 24-hour period, then: (i) if the aggregate principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of Securities to be so purchased by all of such Agents at the Time of Delivery, the nondefaulting Agents shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective initial underwriting obligations bear to the underwriting obligations of all nondefaulting Agents; or (ii) if the aggregate principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of Securities to be so purchased by all of such Agents at the Time of Delivery, such agreement shall terminate without liability on the part of any nondefaulting Agent. 8 No action taken pursuant to this paragraph shall relieve any defaulting Agent from liability in respect of its default pursuant to this Section 2(a). In the event of any such default pursuant to this Section 2(a) that does not result in a termination of such agreement, each of the nondefaulting Agents and the Company shall have the right to postpone the Time of Delivery for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. (b) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, when agreed by the Company and an Agent, such Agent, as agent of the Company, upon receipt of instructions from the Company, shall use its reasonable efforts to solicit offers for the purchase of Securities upon the terms set forth in the Prospectus. Unless otherwise agreed upon by the Company and an Agent, all Securities sold through such Agent as agent shall be sold at 100% of their principal amount. The Company reserves the right to sell, and may solicit and accept offers to purchase, the Securities directly on its own behalf, and, in the case of any such sale not resulting from a solicitation made by any Agent, no commission shall be payable with respect to such sale. The Company reserves the right, in its sole discretion, to instruct the Agents to suspend at any time, for any period of time or permanently, the solicitation of offers to purchase the Securities. As soon as practicable, but in any event not later than one business day in New York City, after receipt of notice from the Company, the Agents shall suspend solicitation of offers for the purchase of Securities from the Company until such time as the Company has advised the Agents that such solicitation may be resumed. Each Agent, in soliciting offers for the purchase of Securities from the Company as agent and in performing the other obligations of an Agent hereunder, is acting solely as agent for the Company and not as principal. Such Agent will communicate to the Company, orally, each offer for the purchase of Securities solicited by it on an agency basis other than those offers rejected by such Agent. Such Agent shall have the right, in its discretion reasonably exercised, to reject any offer for the purchase of Securities, in whole or in part, and any such rejection shall not be deemed a breach of its agreement contained herein. The Company may accept or reject any offer for the purchase of Securities, in whole or in part. Each Agent shall make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Securities from the Company was solicited by it on an agency basis and has been accepted by the Company, but such Agent shall not have any liability to the Company in the event such purchase is not consummated for any reason. If the Company defaults on its obligation to deliver Securities to a purchaser whose offer has been solicited by such Agent on an agency basis and accepted by the Company, the Company shall (i) hold each Agent harmless against any loss, claim or damage arising from or as a result of such default by the Company and (ii) notwithstanding such default, pay to the Agent that solicited such offer any commission to which it would otherwise be entitled absent such default. The Company agrees to pay each Agent a commission (which may be in the form of a discount), at the time of settlement of any sale of a Security by the Company as a result of a solicitation made by such Agent, in an amount equal to the applicable percentage of the principal amount of such Security sold as set forth in Schedule A hereto. 9 (c) The purchase price, interest rate or formula, maturity date and other terms of the Securities (as applicable) specified in Annex I hereto shall be agreed upon by the Company and such Agent and set forth in the applicable Pricing Supplement to be prepared in connection with each sale of Securities. Except as may be otherwise provided in the applicable Pricing Supplement, the Securities shall be issued in denominations of $1,000 or any larger amount that is an integral multiple of $1,000. Procedural details relating to the issue and delivery of Securities, the solicitation of offers for the purchase of Securities and the payment in each case therefor shall be as set forth in the Administrative Procedures attached hereto as Annex II as they may be amended from time to time by written agreement between the Agents and the Company (the "Administrative Procedures"). Each Agent and the Company agree to perform their respective duties and obligations specifically provided to be performed by them in the Administrative Procedures. The Company will furnish to the Trustee a copy of the Administrative Procedures as from time to time in effect. (d) The Company may appoint additional agents in connection with the offering and sale of the Securities from time to time or in connection with a single offering and sale of the Securities, whether as agent or principal, provided that, in any such case, the Company gives the Agents at least five (5) days' prior notice of such appointment and any such additional agent enters into an agreement with the Company making such additional agent an Agent under this Agreement with respect to such offering and sale of the Securities from time to time or solely for the purpose of such single offering and sale of the Securities, as the case may be. 3. The documents required to be delivered pursuant to Section 6 hereof on the Commencement Date shall be delivered to the Agents at the offices of Pillsbury Winthrop LLP, in New York, New York at 10:00 a.m., New York time, or at such other place or time as the parties agree, on the date of this Agreement, which date and time of such delivery may be postponed by agreement between the Agents and the Company but in no event shall be later than the day prior to the date of any agreement by the Agents to purchase Securities, as principal, or on which solicitation of offers for the purchase of Securities is commenced by the Agents, as agents (such time and date being referred to herein as the "Commencement Date"). 4. The Company covenants and agrees with each Agent as follows: (a)(i) To make no amendment or supplement to the Registration Statement or the Prospectus after the date of an agreement by an Agent to purchase Securities as principal and prior to the related Time of Delivery that is reasonably disapproved by any Agent so purchasing as principal promptly after reasonable notice thereof; (ii) to prepare, with respect to any Securities to be sold through or to such Agent pursuant to this Agreement, a Pricing Supplement with respect to such Securities in a form previously approved by such Agent and to file such Pricing Supplement pursuant to Rule 424(b) promulgated by the Commission under the Act within the time period required thereby; (iii) to make no amendment or supplement to the Registration Statement or the Prospectus (other than any Pricing Supplement and any document filed under the Exchange Act (provided that the Company furnishes such documents to the Agents at or before the time they are filed with 10 the Commission and, in the case of Current Reports on Form 8-K, the Company notifies the Agents (or Agents' counsel) a reasonable time in advance of filing such documents with the Commission)) at any time prior to having afforded each Agent a reasonable opportunity to review and comment thereon; (iv) to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act for so long as the delivery of a prospectus is required under the Act or under the blue sky or securities laws of any jurisdiction in connection with the offering or sale of the Securities, and during such same period to advise such Agent, promptly after the Company receives notice thereof, of the time when any amendment to the Registration Statement has been filed or has become effective or any supplement to the Prospectus or any amended Prospectus (other than any Pricing Supplement that relates to Securities not purchased through or by such Agent) has been filed with the Commission, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any prospectus relating to the Securities, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, of any request by the Commission for the amendment or supplement of the Registration Statement or the Prospectus or for additional information or of any change in the rating assigned by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(s)(2) promulgated under the Act, to the Program or any debt securities (including the Securities) of the Company, or the public announcement by any such nationally recognized statistical rating organization that it has under surveillance or review, with possible negative implications, its rating of the Program or any such debt securities, or the withdrawal by any such nationally recognized statistical rating organization of its rating of the Program or any such debt securities; and (v) in the event of the issuance of any such stop order or of any such order preventing or suspending the use of any such prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; (b) Promptly from time to time to take such action as such Agent may reasonably request to cooperate with such Agent in the qualification of the Securities for offering and sale under the blue sky or securities laws of such jurisdictions within the United States of America and its territories as such Agent may request and to use its best efforts to comply with such laws so as to permit the continuance of sales and dealings therein for as long as may be necessary to complete the distribution or sale of the Securities; provided, however, that in connection therewith the Company -------- ------- shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish such Agent with copies of the Registration Statement and each amendment thereto, and with copies of the Prospectus and each amendment or supplement thereto other than any Pricing Supplement (except as provided in the Administrative Procedures), in the form in which it is filed with the Commission pursuant to the Act or Rule 424(b) promulgated by the Commission under the Act, both in such quantities as such Agent may reasonably request from time to time; and, if the delivery of a prospectus is required under the Act or under the blue sky or securities laws of any jurisdiction at any time in connection with the offering or sale of the Securities (including 11 Securities purchased from the Company by such Agent as principal) and if at such time any event has occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it is necessary during such same period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act, the Exchange Act or the Trust Indenture Act, to notify such Agent and request such Agent, in its capacity as agent of the Company, to suspend solicitations of offers to purchase Securities from the Company (and, if so notified, such Agent shall cease such solicitations as soon as practicable, but in any event not later than one business day later); and if the Company decides to amend or supplement the Registration Statement or the Prospectus as then amended or supplemented, to advise such Agent promptly by telephone (with confirmation in writing) and to prepare and cause to be filed promptly with the Commission an amendment or supplement to the Registration Statement or the Prospectus as then amended or supplemented that will correct such statement or omission or effect such compliance; provided, -------- however, that if during such same period such Agent continues to own ------- Securities purchased from the Company by such Agent as principal or such Agent is otherwise required to deliver a prospectus in respect of transactions in the Securities, the Company shall promptly prepare and file with the Commission such an amendment or supplement; (d) To make generally available to holders of the Securities as soon as practicable, but in any event not later than eighteen months after the effective date of the registration statement (as defined in Rule 158(c) promulgated by the Commission under the Act), an earning statement of the Company and the Subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission promulgated thereunder (including, the option of the Company to file periodic reports in order to make generally available such earning statement, to the extent that it is required to file such reports under Section 13 or Section 15(d) of the Exchange Act, pursuant to Rule 158 promulgated by the Commission under the Act); (e) So long as any Securities are outstanding, to furnish to such Agent (in paper or electronic format) copies of all publicly available reports or other communications (financial or other) furnished generally to stockholders and filed with the Commission pursuant to the Exchange Act, and deliver to such Agent (i) promptly after they are available, copies of any publicly available reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional publicly available information concerning the business and financial condition of the Company as such Agent may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its Subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (f) That, if specified by an Agent in connection with a purchase as principal, from the date of any agreement by such Agent to purchase Securities as 12 principal and continuing to and including the earlier of (i) the termination of the trading restrictions for the Securities purchased thereunder, as notified to the Company by such Agent and (ii) the related Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company that mature more than 9 months after such Time of Delivery and are substantially similar to the Securities, without the prior written consent of such Agent (each, a "Stand-Off Agreement"); (g) That each acceptance by the Company of an offer for the purchase of Securities and each delivery of Securities (including in each case any purchase by such Agent as principal) shall be deemed to be (i) an affirmation to such Agent that the representations and warranties of the Company contained in or made pursuant to this Agreement are true and correct as of the date of such acceptance or of such delivery, as the case may be, as though made at and as of each such date, except as may be disclosed in the Prospectus (including any documents incorporated by reference therein and any supplements thereto) or otherwise in writing by the Company to the Agents on or before said date of acceptance or date of delivery, as the case may be, and (ii) an undertaking that the Company will advise such Agent if any of such representations and warranties will not be true and correct as of the settlement date for the Securities relating to such acceptance or as of the date of such delivery relating to such sale, as the case may be, as though made at and as of each such date (except that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented relating to such Securities); (h) That reasonably in advance of each time that any of the Registration Statement or the Prospectus is amended or supplemented (other than by a Pricing Supplement or, unless reasonably requested by the Agents within 30 days of the filing thereof with the Commission, a Current Report on Form 8-K), including by means of an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q filed with the Commission under the Exchange Act and incorporated or deemed to be incorporated by reference into the Prospectus, except in either case during periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof (it being understood that the Company may not resume such solicitation until this provision is complied with) or except as an Agent otherwise elects, and each time the Company sells Securities to such Agent as principal pursuant to an agreement to purchase Securities as principal and such agreement specifies the delivery of an opinion or opinions by Pillsbury Winthrop LLP (or other counsel selected by the Agents), counsel to the Agents, as a condition to the purchase of Securities pursuant to such agreement, the Company shall as soon as practicable thereafter furnish to such counsel such papers and information as they may reasonably request to enable them to furnish to such Agent the opinion or opinions referred to in Section 6(b) hereof; (i) That each time the Registration Statement or the Prospectus is amended or supplemented (other than by a Pricing Supplement or, unless reasonably requested by the Agents within 30 days of the filing thereof with the Commission, a Current Report on Form 8-K), including by means of an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q filed with the Commission under the Exchange Act and incorporated or deemed to be incorporated by reference into the Prospectus, except in 13 either case during periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof (it being understood that the Company may not resume such solicitation until this provision is complied with) or except as an Agent otherwise elects, and each time the Company sells Securities to such Agent as principal pursuant to an agreement to purchase Securities as principal and such agreement specifies the delivery of an opinion under this Section 4(i) as a condition to the purchase of Securities pursuant to such agreement, the Company shall as soon as practicable thereafter furnish or cause to be furnished forthwith to such Agent a written opinion of Goodsill Anderson Quinn & Stifel LLP (or other counsel satisfactory to the Agents), counsel for the Company, dated the date of such amendment, supplement, incorporation or Time of Delivery relating to such sale, as the case may be, in form reasonably satisfactory to such Agent, to the effect that such Agent may rely on the opinion of such counsel referred to in Section 6(c) hereof that was last furnished to such Agent to the same extent as though it were dated the date of such letter authorizing reliance (except that the statements in such last opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such date) or, in lieu of such opinion, an opinion of the same tenor as the opinion of such counsel referred to in Section 6(c) hereof but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date; (j) That each time the Registration Statement or the Prospectus is amended or supplemented, including by means of an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed with the Commission under the Exchange Act and incorporated or deemed to be incorporated by reference into the Prospectus, in any case to set forth financial information included in or derived from the Company's consolidated financial statements or accounting records, except in either case during periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof (it being understood that the Company may not resume such solicitation until this provision is complied with) or except as an Agent otherwise elects (or, in the case of a Current Report on Form 8-K, if the Agent reasonably requests within 30 days of the filing thereof), and each time the Company sells Securities to such Agent as principal pursuant to an agreement to purchase Securities as principal and such agreement specifies the delivery of a letter under this Section 4(j) as a condition to the purchase of Securities pursuant to such agreement, the Company shall as soon as practicable thereafter cause the independent certified public accountants who have audited the financial statements of the Company and the Subsidiaries included or incorporated by reference in the Registration Statement forthwith to furnish to such Agent a letter, dated the date of such amendment, supplement, incorporation or Time of Delivery relating to such sale, as the case may be, in form reasonably satisfactory to such Agent, of the same tenor as the letter referred to in Section 6(d) hereof but modified to relate to the Registration Statement and the Prospectus as amended or supplemented to the date of such letter, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company, to the extent such financial statements and other information are available as of a date not more than five business days prior to the date of such letter; provided, however, that, -------- ------- with respect to any financial information or other matter, such letter may reconfirm as true and correct at such date as though made at and as of such date, rather 14 than repeat, statements with respect to such financial information or other matters made in the letter referred to in Section 6(d) hereof that was last furnished to such Agent; (k) That each time the Registration Statement or the Prospectus is amended or supplemented (other than by a Pricing Supplement or, unless reasonably requested by the Agents within 30 days of the filing thereof with the Commission, a Current Report on Form 8-K), including by means of an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q filed with the Commission under the Exchange Act and incorporated or deemed to be incorporated by reference into the Prospectus, except in either case during periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof (it being understood that the Company may not resume such solicitation until this provision is complied with) or except as an Agent otherwise elects, and each time the Company sells Securities to such Agent as principal and the applicable agreement to purchase Securities as principal specifies the delivery of a certificate under this Section 4(k) as a condition to the purchase of Securities pursuant to such agreement, the Company shall as soon as practicable thereafter furnish or cause to be furnished forthwith to such Agent a certificate, dated the date of such supplement, amendment, incorporation or Time of Delivery relating to such sale, as the case may be, in such form and executed by such officers of the Company as is reasonably satisfactory to such Agent, to the effect that the statements contained in the certificate referred to in Section 6(g) hereof that was last furnished to such Agent are true and correct at such date as though made at and as of such date (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such date) or, in lieu of such certificate, certificates of the same tenor as the certificates referred to in said Section 6(g) but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date; and (l) To offer to any person who has agreed to purchase Securities as the result of an offer to purchase solicited by such Agent the right to refuse to purchase and pay for such Securities if, on the related settlement date fixed pursuant to the Administrative Procedures, any condition set forth in Section 6(a), 6(e) or 6(f) hereof has not been satisfied (it being understood that the judgment of such person with respect to the impracticability or inadvisability of such purchase of Securities shall be substituted, for purposes of this Section 4(l), for the respective judgments referred to therein of an Agent with respect to certain matters referred to in such Sections 6(a), 6(e) and 6(f), and that such Agent shall have no duty or obligation whatsoever to exercise the judgment permitted under such Sections 6(a), 6(e) and 6(f) on behalf of any such person). 5. The Company covenants and agrees with each Agent that the Company shall pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the preparation, printing and filing of the Registration Statement, the Prospectus and any Pricing Supplements and all other amendments and supplements thereto and the mailing and delivering of copies thereof to such Agent; (ii) the reasonable fees, disbursements and expenses of counsel for the Agents in connection with the establishment of the Program, any opinions to be rendered by such counsel hereunder and ongoing services in connection with the transactions contemplated hereunder including advice and services in connection with purchases by the Agents or any Agent pursuant to Section 2(a) 15 hereof; (iii) the cost of printing, preparing by word processor or reproducing this Agreement, any other agreement to purchase Securities as principal, the Indenture, any blue sky survey and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iv) all expenses (not to exceed an aggregate of $3,500 for all sales hereunder) in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 4(b) hereof, including the fees and disbursements of counsel for the Agents in connection with such qualification and in connection with the blue sky survey; (v) any fees charged by securities rating services for rating the Securities; (vi) any filing fees incident to any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Securities; (vii) the cost of preparing the Securities; (viii) the fees and expenses of any Trustee and any agent of a Trustee and any transfer or paying agent of the Company and the fees and disbursements of counsel for any Trustee or such agent in connection with the Indenture and the Securities; (ix) any advertising expenses connected with the solicitation of offers to purchase and the sale of Securities so long as such advertising expenses have been approved in advance by the Company; (x) the Agents' reasonable out-of-pocket expenses incurred in connection with the transactions contemplated hereunder; (xi) the cost of providing any CUSIP or other identification numbers for the Securities; (xii) the fees and expenses of any depositary and any nominees thereof in connection with the Securities; and (xiii) all other costs and expenses incident to the performance of the Company's obligations hereunder that are not otherwise specifically provided for in this Section. Except as provided in this Section 5 and in Sections 7 and 2(b) hereof, each Agent shall pay all other expenses it incurs. 6. The obligation of any Agent, as agent of the Company, at any time (each, a "Solicitation Time") to solicit offers to purchase Securities and the obligation of any Agent to purchase Securities as principal, pursuant to any agreement, shall in each case be subject, in such Agent's discretion, to the condition that all representations and warranties and other statements of the Company herein are true and correct at and as of the Commencement Date and any applicable date referred to in Section 4(k) hereof that is prior to such Solicitation Time or Time of Delivery, as the case may be, and at and as of such Solicitation Time or Time of Delivery, as the case may be, the condition that prior to such Solicitation Time or Time of Delivery, as the case may be, the Company shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions: (a) (i) With respect to any Securities sold at or prior to such Solicitation Time or Time of Delivery, as the case may be, the Prospectus as amended and supplemented (including the Pricing Supplement) with respect to such Securities shall have been filed with the Commission pursuant to Rule 424(b) promulgated by the Commission under the Act within the applicable time period prescribed for such filing by the rules and regulations promulgated by the Commission under the Act and in accordance with Section 4(a) hereof; (ii) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and (iii) all requests for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of such Agent; (b) Pillsbury Winthrop LLP, counsel to the Agents, or other counsel selected by the Agents and reasonably satisfactory to the Company, shall have furnished 16 to such Agent (i) such opinion or opinions, dated the Commencement Date, with respect to this Agreement, the validity of the Indenture and the Securities, the Registration Statement, the Prospectus as amended or supplemented, and other related matters as such Agent may reasonably request, and (ii) if and to the extent requested by such Agent, with respect to each applicable date referred to in Section 4(h) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, but excluding dates in periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof, an opinion or opinions, dated such applicable date, to the effect that such Agent may rely on the opinion or opinions that were last furnished to such Agent pursuant to this Section 6(b) to the same extent as though it or they were dated the date of such letter authorizing reliance (except that the statements in such last opinion or opinions shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such date) or, in any case, in lieu of such an opinion or opinions, an opinion or opinions of the same tenor as the opinion or opinions referred to in clause (i) but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date; and in each case such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Goodsill Anderson Quinn & Stifel LLP, counsel for the Company, or other counsel selected by the Company and reasonably satisfactory to the Agents, shall have furnished to such Agent their written opinions, dated the Commencement Date and each applicable date referred to in Section 4(i) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, but excluding dates in periods in which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof, in form and substance satisfactory to such Agent, to the effect that: (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Hawaii, with corporate power and authority to own its properties and conduct its business as described in the Prospectus as amended or supplemented; (ii) the Company has an authorized equity capitalization as set forth in the Prospectus as amended or supplemented and all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and, other than awards of restricted stock under the Stock Option Plan that have not yet vested, are fully paid and non-assessable; (iii) to such counsel's knowledge, the Company does not itself conduct any business or own or lease any property in any jurisdiction outside the State of Hawaii that would require it to qualify to do business as a foreign corporation and where the failure to be so qualified would subject the Company to any material liability or disability; (iv) each Significant Subsidiary, other than ASB, has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; ASB has been duly formed and is 17 duly chartered as a federal savings bank under the laws of the United States; all of the issued and outstanding shares of capital stock of each Significant Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable; and, to such counsel's knowledge, all of such shares, other than shares of preferred stock of HECO and its subsidiaries and shares of the common stock of ASB Realty Corporation, are owned directly or indirectly by the Company, free and clear of any perfected encumbrance or security interest or any other encumbrance, claim or equity, and with such exceptions as are described in the Prospectus as amended or supplemented or as are otherwise disclosed to the Agents; (v) the Company and HECO are holding companies within the meaning of the Public Utility Holding Company Act of 1935, as amended; however, by virtue of having filed an appropriate application under the provisions of Section 3(a) of such Act, the Company and HECO are exempt from all of the provisions of such Act except Section 9(a)(2) thereof, and will remain so exempt, subject to the future timely filings of annual exemption statements and such filings as are required by Section 33 of such Act with respect to interests of the Company or the Subsidiaries in any foreign utility company, unless and except insofar as the Commission finds such exemption detrimental to the public interest or the interest of investors or consumers; (vi) except as indicated in the Prospectus as amended or supplemented, to such counsel's knowledge, (a) neither the Company nor any Significant Subsidiary is engaged in, or threatened with, any litigation, and (b) there are no proceedings, or any proceedings threatened, with respect to the Company or any Significant Subsidiary or their property, that, in the case of either clause (a) or (b) above, such counsel (or other counsel as to litigation or proceedings that are not principally handled by their firm) has concluded is reasonably expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole (it being understood that, for purposes of this paragraph, "material" shall mean having a financial effect on the Company in excess of $15,000,000); (vii) this Agreement has been duly authorized, executed and delivered by the Company; (viii) the Securities have been duly authorized by the Company for issuance, offer and sale pursuant to the provisions of this Agreement and, when duly executed, authenticated, issued and delivered pursuant to the provisions of this Agreement and the Indenture against payment of the consideration therefor, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting enforcement of mortgagees' and other creditors' rights, by general equitable principles (regardless of whether considered in a proceeding in equity or at law) and by an implied covenant of reasonableness, 18 good faith and fair dealing and will be entitled to the benefits provided by the Indenture; and the Indenture and the Securities conform in all material respects to the descriptions thereof in the Prospectus as amended or supplemented; (ix) the Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights, by general equitable principles (regardless of whether considered in a proceeding in equity or at law) and by an implied covenant of reasonableness, good faith and fair dealing; and the Indenture has been duly qualified under the Trust Indenture Act; (x) the issuance and sale of the Securities, the compliance by the Company with all of the provisions of the Securities, the Indenture, this Agreement and the consummation of the transactions contemplated herein and therein will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company or any Significant Subsidiary is a party or by which the Company or any Significant Subsidiary is bound or to which any of the material property or assets of the Company or any Significant Subsidiary is subject, nor will such action result in any violation of the provisions of the charter or the by-laws of the Company or any statute, order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any Significant Subsidiary or any of their properties, except that such counsel need not express an opinion with respect to compliance with state securities or blue sky laws in connection with the solicitation by the Agents of offers for the purchase of Securities from the Company, with any resulting purchases of Securities and with any purchases of Securities by an Agent as principal, as the case may be, in each case in the manner contemplated hereby; (xi) no consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required for the solicitation of offers to purchase Securities, the issuance and sale of the Securities or the consummation by the Company of the other transactions contemplated by this Agreement or the Indenture, except such as have been obtained or made under the Act and the Trust Indenture Act or otherwise and such consent, approvals, authorizations, registrations, or qualifications as may be required under state securities or blue sky laws in connection with the solicitation by the Agents of offers for the purchase of Securities from the Company, with any resulting purchases of Securities and with any purchases of Securities by an Agent as principal, as the case may be, in each case in the manner contemplated hereby; 19 (xii) neither the Company nor HEIII is an "investment company", nor is either "controlled" by an "investment company", in each case within the meaning of the 1940 Act; (xiii) the documents incorporated by reference in the Prospectus as amended or supplemented, when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission promulgated thereunder; and nothing has come to the attention of such counsel that causes them to believe that any of such documents, when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when the documents were so filed, not misleading; and (xiv) the Registration Statement, as of the Effective Date, and the Prospectus, as of its Issue Date, complied and comply as to form in all material respects with the requirements of the Act and the Trust Indenture Act and the rules and regulations of the Commission promulgated thereunder; to such counsel's knowledge, the Registration Statement has been declared, and as of the date of such opinion is, effective under the Act and no proceedings for a stop order with respect thereto are threatened or pending under Section 8 of the Act; nothing has come to the attention of such counsel that causes them to believe that the Registration Statement, as of the Effective Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that, as of its Issue Date and as of the date of such opinion, the Prospectus (as most recently amended and supplemented), contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and they do not know of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus as amended or supplemented or required to be described in the Registration Statement or the Prospectus as amended or supplemented that are not filed or incorporated by reference or described as required. In rendering such opinion, (A) such counsel may state that it is expressing an opinion only as to the federal laws of the United States, the laws of the State of Hawaii and the laws of the State of New York, (B) such counsel may rely, as to matters involving the application of the laws of the State of New York, upon the opinion or opinions of counsel for the Agents, (C) such counsel may rely, as to matters of good standing and valid existence and as to matters of fact, upon certificates of government officials (provided that copies of such certificates will be furnished to counsel for the Agents), (D) such counsel may rely, as to matters of fact, upon certificates and representations of officers and employees of the Company (provided that copies of such certificates will be furnished to counsel for the Agents upon its reasonable request), (E) such counsel may rely, with respect to matters involving litigation or proceedings not principally handled by such counsel's firm, upon 20 opinions and information upon which such counsel has been permitted to rely by other counsel representing the Company in such litigation or proceedings (provided that copies of such opinions are delivered to counsel for the Agents, other than opinions of counsel who do not consent to such delivery if, in such case, the Company makes such counsel reasonably available to discuss such litigation or proceedings with counsel for the Agents), (F) such counsel may state that it has not been requested to, and does not, express any opinion with respect to the financial statements and notes thereto and the schedules and other financial data and information included or incorporated by reference in the Registration Statement and the Prospectus, (G) such counsel may state, with respect to the matters set forth in paragraphs (xiii) and (xiv) above, that they have not independently verified and assume no responsibility for the accuracy, completeness or fairness of the statements in the Registration Statement or the Prospectus or in any document incorporated by reference therein, except insofar as such statements relate to such counsel or as set forth in paragraph (viii) above, (H) such counsel may state that, whenever such opinion is qualified by the phrases "known to such counsel," "to our knowledge" or "nothing has come to our attention," or other phrases of similar import, such phrases are intended to mean the actual knowledge of information by the lawyers in such counsel's firm who have been principally involved in drafting the Prospectus and supervising the issuance, sale and delivery of the Securities and preparing the pertinent documents and the lawyers having significant responsibility for the client relationship with the Company and general transaction representation, but does not include other information that might be revealed if there were to be undertaken a canvass of all lawyers in such counsel's firm, a general search of all files or any other type of independent investigation (other than, with respect to the matters set forth in paragraph (vi) above, such review of internal litigation files or inquiries of other counsel as such counsel deems necessary), and (I) such counsel may include therein such other customary qualifications reasonably acceptable to the Agents and counsel for the Agents; (d) Not later than 10:00 A.M., New York City time, on the Commencement Date, and not later than 10:00 A.M., New York City time, on each applicable date referred to in Section 4(j) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, but excluding dates in periods during which the Company has suspended solicitation of offers pursuant to Section 2(b) hereof, the independent certified public accountants who have audited the financial statements of the Company and the Subsidiaries included or incorporated by reference in the Registration Statement shall have furnished to such Agent a letter, dated the Commencement Date or such applicable date, as the case may be, in form and substance satisfactory to such Agent, to the effect set forth in Annex III hereto; (e) (i) Neither the Company nor any Subsidiary shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus as amended or supplemented and (ii) since the respective dates as of which information is given in the Prospectus as amended or supplemented or since the date of any agreement of any Agent to purchase Securities as principal there shall not have been 21 any change in the capital stock of the Company or any Subsidiary (except for (i) issuances of capital stock of the Company pursuant to dividend reinvestment, stock purchase, stock option, director or employee benefit plans, (ii) issuances of capital stock by HECO or its subsidiaries that have been approved by the Public Utilities Commission of the State of Hawaii or by any other Significant Subsidiary disclosed in writing to the Agents and (iii) redemptions by HECO, HELCO and MECO of their respective preferred stock in accordance with the terms thereof), or any change, or any development involving a prospective change, in or affecting the general affairs, management, consolidated financial position or consolidated results of operations of the Company and the Subsidiaries taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of such Agent so material and adverse as to make it impracticable or inadvisable to proceed with the solicitation by such Agent of offers for the purchase of Securities from the Company or the purchase by such Agent of such Securities from the Company as principal, as the case may be; (f) There shall not have occurred (and be continuing in the case of occurrences under clause (i) and (ii) below) any of the following: (i) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States; (ii) a general moratorium on commercial banking activities in New York or Hawaii declared by either federal or New York or Hawaii State authorities; (iii) after an Agent has agreed to purchase Securities from the Company as principal, any material adverse change in the financial markets in the United States or in the international financial markets, any outbreak or escalation of hostilities or other calamity or crisis involving the United States or the declaration by the United States of a national emergency or war or any change or development involving a prospective change in national or international political, financial or economic conditions, if the effect of any such event specified in this clause (iii) in the judgment of such Agent makes it impracticable or inadvisable to proceed with the purchase of such Securities from the Company as principal; or (iv) after an Agent has agreed to purchase Securities from the Company as principal, any downgrading in the rating accorded the Program or the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) promulgated under the Act, or any public announcement by any such organization that it has under surveillance or review, with possible negative implications, its rating of the Program or any of the Company's debt securities; and (g) The Company shall have furnished or caused to be furnished to such Agent certificates of officers of the Company dated the Commencement Date and each applicable date referred to in Section 4(k) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, but excluding dates in periods during which the Company has suspended solicitation of offers pursuant to Section 2(b) 22 hereof, in such form and executed by such officers of the Company as are reasonably satisfactory to such Agent, as to the accuracy of the representations and warranties of the Company herein at and as of the Commencement Date or such applicable date, as the case may be, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Commencement Date or such applicable date, as the case may be, as to the matters set forth in subsection (a) of this Section 6, and as to such other matters as such Agent may reasonably request. 7. (a) The Company shall indemnify and hold harmless each Agent and each person, if any, who controls each Agent within the meaning of Section 15 of the Act and Section 20 of the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such Agent or such person may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Securities, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 7(d) hereof) any such settlement is effected with the written consent of the Company, and shall reimburse such Agent or such person for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall 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 an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Securities, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Agent expressly for use therein; and provided, further, that the Company shall not be -------- ------- required to reimburse any Agent or such person for fees and expenses of counsel other than one counsel for all Agents and one counsel for all Agents in each jurisdiction in which proceedings are or are threatened to be brought or of which matters of law are or may be at issue, unless and to the extent that there are actual or potential conflicts of interest between or among Agents or defenses available to one or more Agents that are not available to other Agents; and provided, further, that the indemnification contained in this Section 7(a) -------- ------- with respect to the Prospectus shall not inure to the benefit of any Agent (or to the benefit of any person controlling such Agent) on account of any such loss, claim, damage, liability or expense arising from the sale of the Securities, or arrangement thereof, by such Agent to any person if the Company has established that a copy of the most recent Prospectus (excluding documents incorporated by reference) has not been delivered or sent to such person within the time required by the Act and the rules and regulations of the Commission promulgated thereunder, provided that the Company has delivered such Prospectus to such Agent in requisite quantity on a timely basis to permit such delivery or sending. (b) Each Agent shall indemnify and hold harmless the Company, each of the directors and each of the officers of the Company who signed the Registration Statement, and each 23 person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which the Company, such directors, such officers or such persons may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Securities, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 7(d) hereof) any such settlement is effected with the written consent of such Agent, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, the Prospectus as amended or supplemented or any other prospectus relating to the Securities, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Agent expressly for use therein; and shall reimburse the Company, such directors, such officers or such persons for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under Section 7(a) or (b) hereof of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under Section 7(a) or (b) hereof, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party unless and only to the extent that such indemnifying party is prejudiced by such omission nor relieve it from any liability that it may have to any indemnified party otherwise than under Section 7(a) or (b) hereof. In case any such action is brought against any indemnified party and such indemnified party notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under Section 7(a) or (b) hereof for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 7 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf 24 of any indemnified party. (d) If at any time an indemnified party has requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 7(a) or Section 7(b) hereof, as the case may be, effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party has received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party has not reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and each Agent on the other from the offering of the Securities to which such loss, claim, damage or liability (or action in respect thereof) relates. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under Section 7(c) above and such indemnifying party was prejudiced by such omission, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and each Agent on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and each Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the sale of Securities (before deducting expenses) received by the Company bear to the total commissions or discounts received by such Agent in respect thereof. The relative fault shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading relates to information supplied by the Company on the one hand or by any Agent on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Agent agree that it would not be just and equitable if contribution pursuant to this Section 7(e) were determined by per capita allocation (even if all Agents were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to above in this Section 7(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 7(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(e), an Agent shall not be required to contribute any amount in excess of the amount by which the total public offering price at which the Securities purchased by or through it were sold exceeds the amount of any damages that such Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged 25 omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of each of the Agents under this Section 7(e) to contribute are several in proportion to the respective purchases made by or through it to which such loss, claim, damage or liability (or action in respect thereof) relates and are not joint. The obligations of the Company and the Agents under this Section 7 shall be in addition to any liability that the Company and the Agents may otherwise have. For purposes of this Section 7(e), each person, if any, who controls an Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as such agent, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. 8. The respective indemnities, agreements, representations, warranties and other statements by any Agent and the Company set forth in or made pursuant to this Agreement shall remain in full force and effect regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Agent or any controlling person of any Agent or the Company, or any officer or director or any controlling person of the Company, and shall survive each delivery of and payment for any of the Securities. 9. The provisions of the Agreement relating to the solicitation of offers for the purchase of Securities from the Company may be suspended or terminated at any time by the Company as to any Agent or by any Agent as to such Agent upon the giving of written notice of such suspension or termination to such Agent or the Company, as the case may be. In the event of such suspension or termination with respect to any Agent, (a) this Agreement shall remain in full force and effect with respect to any Agent as to which such suspension or termination has not occurred, (b) this Agreement shall remain in full force and effect with respect to the rights and obligations of any party that have previously accrued or that relate to Securities that have already been issued or agreed to be issued or are the subject of a pending offer at the time of such suspension or termination and (c) in any event, this Agreement shall remain in full force and effect insofar as the third and fourth paragraphs of Section 2(b), Section 4(d), Section 4(e), Section 5, Section 7 and Section 8 hereof are concerned. 10. Except as otherwise specifically provided herein or in the Administrative Procedures, all statements, requests, notices and advices hereunder shall be in writing, or by telephone if promptly confirmed in writing, and if to Merrill Lynch, Pierce, Fenner & Smith Incorporated shall be sufficient in all respects when delivered or sent by facsimile transmission or registered mail to Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, 15th Floor, New York, New York 10080, Facsimile Transmission No. (212) 449-2234, Attention: MTN Product Management, and if to Goldman, Sachs & Co. shall be sufficient in all respects when delivered or sent by facsimile transmission or registered mail to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Facsimile Transmission No. (212) 357-8680, Attention: Credit Department; [Add contact information for other Agents] and if to the Company shall be sufficient in all respects when delivered or sent by facsimile transmission or registered mail to 900 Richards Street, Honolulu, Hawaii 96813, Facsimile Transmission No. (808) 543-7966, Attention: Treasurer. 26 11. This Agreement shall be binding upon, and inure solely to the benefit of, each Agent and the Company, and to the extent provided in Section 7 and Section 8 hereof, the officers and directors of the Company and any person who controls any Agent or the Company, and their respective personal representatives, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities through or from any Agent hereunder shall be deemed a successor or assign by reason of such purchase. 12. Time shall be of the essence of this Agreement. As used herein, except as otherwise noted the term "business day" shall mean any day when the office of the Commission in Washington, D.C. is normally open for business. 13. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York. 14. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be an original, but all of such respective counterparts shall together constitute one and the same instrument. 27 If the foregoing is in accordance with the Agents' understanding, please sign and return to the Company all counterparts hereof, whereupon this letter and the acceptance by each of you thereof shall constitute a binding agreement between the Company and each of you in accordance with its terms. Very truly yours, HAWAIIAN ELECTRIC INDUSTRIES, INC. By: _______________________________ Title: By: _______________________________ Title: Accepted in New York, New York, as of the date hereof: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: ___________________________ Title: _______________________________ (GOLDMAN, SACHS & CO.) ROBERT W. BAIRD & CO. INCORPORATED By: ___________________________ Title: 28 JANNEY MONTGOMERY SCOTT LLC By: ___________________________ Title: U.S. BANCORP PIPER JAFFRAY INC. By: ___________________________ Title: 29 SCHEDULE A As compensation for the services of the Agents hereunder, the Company shall pay the applicable Agent, on a discount basis, a commission for the sale of each Security equal to the principal amount of such Security multiplied by the appropriate percentage set forth below: ================================================================================ MATURITY RANGES PERCENT OF PRINCIPAL AMOUNT ================================================================================ From 9 months to less than 1 year .125% - -------------------------------------------------------------------------------- From 1 year to less than 18 months .150 - -------------------------------------------------------------------------------- From 18 months to less than 2 years .200 - -------------------------------------------------------------------------------- From 2 years to less than 3 years .250 - -------------------------------------------------------------------------------- From 3 years to less than 4 years .350 - -------------------------------------------------------------------------------- From 4 years to less than 5 years .450 - -------------------------------------------------------------------------------- From 5 years to less than 6 years .500 - -------------------------------------------------------------------------------- From 6 years to less than 7 years .550 - -------------------------------------------------------------------------------- From 7 years to less than 10 years .600 - -------------------------------------------------------------------------------- From 10 years to less than 15 years .625 - -------------------------------------------------------------------------------- From 15 years to less than 20 years .700 - -------------------------------------------------------------------------------- From 20 years to 30 years .750 ================================================================================ 30 ANNEX I The following terms, to the extent applicable, shall be agreed to by the applicable Agent and the Company in connection with each sale of Securities: Name of Agent: _____________________ Acting as principal Acting as agent for the Company Principal Amount: $______________________ Price to Public: ___% of the principal amount, plus accrued interest, if any, from ______ Commission (or Discount): ___% of the principal amount Purchase Price: ____%, plus accrued interest, if any, from _________ Interest Rate: If Fixed Rate Note: Interest Rate: Interest Payment Date(s): If Floating Rate Note: Base Rate: If LIBOR: LIBOR Reuters Page: LIBOR Telerate Page: Initial Interest Rate: Spread or Spread Multiplier, if any: Initial Interest Reset Date: Interest Reset Date(s): Interest Payment Date(s): Interest Determination Date(s): Index Maturity: Maximum Interest Rate, if any: Minimum Interest Rate, if any: Interest Reset Period: Interest Payment Period: Calculation Agent: If Discount Note, terms: If Redeemable: Redemption Commencement Date: Initial Redemption Percentage: Annual Redemption Percentage Reduction: If Repayable: Optional Repayment Date(s): Repayment Provisions, if any: 31 Original Issue Date: Stated Maturity Date: Settlement Date and Time: Additional Terms: Also, in connection with the purchase of Securities by one or more Agents as principal, agreement as to whether the following will be required: Officer's Certificate pursuant to Section 6(g) of the Distribution Agreement. Legal Opinions pursuant to Sections 6(b) and (c) of the Distribution Agreement. Comfort Letter pursuant to Section 6(d) of the Distribution Agreement. Stand-Off Agreement pursuant to Section 4(f) of the Distribution Agreement. 32 ANNEX II HAWAIIAN ELECTRIC INDUSTRIES, INC. ADMINISTRATIVE PROCEDURES for Fixed Rate and Floating Rate Medium-Term Notes, Series D Due From Nine Months to 30 Years From Date of Issue (Dated as of ____________ ____, 2002) Medium-Term Notes, Series D Due From Nine Months to 30 Years From Date of Issue (the "Notes") are to be offered on a continuous basis by Hawaiian Electric Industries, Inc., a Hawaii corporation (the "Company"), to or through Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Janney Montgomery Scott LLC, Robert W. Baird & Co. Incorporated, U.S. Bancorp Piper Jaffray Inc. and any other agent or agents appointed by the Company from time to time (each, an "Agent" and, collectively, the "Agents"), pursuant to a Distribution Agreement, dated ____________ ____, 2002 (the "Distribution Agreement"), by and among the Company and the Agents. The Distribution Agreement provides both for the sale of Notes by the Company to one or more of the Agents as principal for resale to investors and other purchasers and for the sale of Notes by the Company directly to investors (as may from time to time be agreed to by the Company and the related Agent or Agents), in which case each such Agent will act as an agent of the Company in soliciting purchases of Notes. If agreed upon by the related Agent or Agents and the Company, Notes shall be purchased by such Agent or Agents as principal. Such purchases will be made in accordance with terms agreed upon by the related Agent or Agents and the Company (which terms, unless otherwise agreed to, shall, to the extent applicable, include those terms specified in Annex I to the Distribution Agreement, and be agreed upon orally, with written confirmation prepared by such Agent or Agents and mailed or sent by facsimile transmission to the Company). If agreed upon by any Agent or Agents and the Company, the Agent or Agents, acting solely as agent or agents for the Company, and not as principal, will use reasonable efforts to solicit offers to purchase the Notes. Only those provisions in these Administrative Procedures that are applicable to the particular role to be performed by the related Agent or Agents shall apply to the offer and sale of the relevant Notes. The Notes will be issued under an Indenture, dated as of October 15, 1998, as amended, supplemented or modified from time to time, including by a Third Supplemental Indenture thereto dated as of ____________ ____, 2002 relating to the Notes (collectively, the "Indenture"), between the Company and Citibank, N.A., as trustee (the "Trustee"). The Company has filed a Registration Statement (as defined in the Distribution Agreement) with the Securities and Exchange Commission (the "Commission") registering the Notes. A pricing supplement to the Prospectus (as defined in the Distribution Agreement) setting forth the purchase price, interest rate or formula, maturity date and other terms of any Notes (as applicable) is herein referred to as a "Pricing Supplement." The Notes will either be issued (a) in book-entry form (each, a "Book-Entry Note") and 1 represented by one or more fully registered Notes without coupons (each, a "Global Note") delivered to the Trustee, as agent for The Depository Trust Company, New York, New York ("DTC"), and recorded in the book-entry system maintained by DTC, or (b) in certificated form (each, a "Certificated Note") delivered to the investor or other purchaser thereof or a person designated by such investor or other purchaser. Except in the limited circumstances described in the Prospectus or a Pricing Supplement, owners of beneficial interests in Book-Entry Notes will not be entitled to physical delivery of Certificated Notes equal in principal amount to their respective beneficial interests. General procedures relating to the issuance of all Notes are set forth in Part I hereof. Book-Entry Notes will be issued in accordance with the procedures set forth in Part II hereof and Certificated Notes will be issued in accordance with the procedures set forth in Part III hereof. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Prospectus, the Indenture or the Notes, as the case may be. PART I: PROCEDURES OF GENERAL APPLICABILITY Date of Issuance/Authentication: Each Note will be dated as of the date of its authentication by the Trustee. Each Note shall also bear an original issue date (the "Original Issue Date"). The Original Issue Date shall remain the same for all Notes subsequently issued upon transfer, exchange or substitution of an original Note regardless of their dates of authentication. Maturities: Each Note will mature on a date selected by the purchaser and agreed to by the Company that is not less than nine months nor more than thirty years from its Original Issue Date (the "Stated Maturity Date"). Currency/Denominations: Unless otherwise provided in the applicable Pricing Supplement, Notes will be denominated in, and payments of principal, premium, if any, and interest, if any, in respect thereof will be made in, U.S. dollars and the Notes will be issued in denominations of $1,000 and integral multiples thereof. Registration: The Notes will be issued only in fully registered form. Base Rates Applicable to Floating Rate Notes: Unless otherwise provided in the applicable 2 Pricing Supplement, Floating Rate Notes will bear interest at a rate or rates determined by reference to the CD Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR, the Prime Rate, the Treasury Rate, or such other interest rate basis or formula as may be set forth in the applicable Pricing Supplement, or by reference to two or more such rates, as adjusted by the Spread and/or Spread Multiplier, if any, applicable to such Floating Rate Notes. Redemption/Repayment: The Notes will be subject to redemption by the Company on and after their respective Redemption Commencement Dates, if any. Redemption Commencement Dates, if any, will be fixed at the time of sale and set forth in the applicable Pricing Supplement and in the applicable Note. If no Redemption Commencement Dates are indicated with respect to a Note, such Note will not be redeemable at the option of the Company prior to its Stated Maturity Date. The Notes will be subject to repayment at the option of the Holders thereof in accordance with the terms of the Notes on their respective Optional Repayment Dates, if any. Optional Repayment Dates, if any, will be fixed at the time of sale and set forth in the applicable Pricing Supplement and in the applicable Note. If no Optional Repayment Dates are indicated with respect to a Note, such Note will not be repayable at the option of the Holder prior to its Stated Maturity Date. Calculation of Interest: In the case of Fixed Rate Notes, interest (including payments for partial periods) will be calculated and paid on the basis of a 360-day year of twelve 30-day months. The interest rate on each Floating Rate Note will be calculated by reference to the specified Base Rate or Rates plus or minus the 3 applicable Spread, if any, and/or multiplied by the applicable Spread Multiplier, if any. Unless otherwise provided in the applicable Pricing Supplement, accrued interest on each Floating Rate Note will be calculated by multiplying its principal amount by an accrued interest factor. Such accrued interest factor is computed by adding the interest factors calculated for each day in the period for which accrued interest is being calculated. Unless otherwise provided in the applicable Pricing Supplement, the interest factor for each such day is computed by dividing the interest rate applicable to such day by 360 if the CD Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR or Prime Rate is an applicable Base Rate, or by the actual number of days in the year if the Treasury Rate is an applicable Base Rate. The interest factor for Floating Rate Notes for which the interest rate is calculated with reference to two or more Base Rates will be calculated in each period in the same manner as if only the lowest, highest or average of the applicable Base Rates applied as specified in the applicable Pricing Supplement. Interest: General. Each Note will bear interest in ------- accordance with its terms. Unless otherwise provided in the applicable Pricing Supplement, interest on each Note will accrue from and including the Original Issue Date of such Note for the first interest period or from and including the most recent Interest Payment Date to which interest has been paid or duly made available for payment for all subsequent interest periods, to but excluding the applicable Interest Payment Date or the Stated Maturity Date, Redemption Date or Optional Repayment Date (each Stated Maturity Date, Redemption Date or Optional Repayment Date is referred to herein as a "Maturity"). Interest on Notes will be payable in arrears to the Holders of such Notes as of the Regular 4 Record Date for each Interest Payment Date and at Maturity to the Person to whom the principal of such Notes is payable. If an Interest Payment Date or the Maturity with respect to any Fixed Rate Note falls on a day that is not a Business Day, the required payment to be made on such day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day and no interest shall accrue on such payment for the period from and after such day to the next succeeding Business Day. If an Interest Payment Date (other than at Maturity) with respect to any Floating Rate Note would otherwise fall on a day that is not a Business Day, such Interest Payment Date will be postponed to the next succeeding Business Day, and interest shall continue to accrue, except that in the case of a LIBOR Note, if such next succeeding Business Day falls in the next succeeding calendar month, such Interest Payment Date will be the immediately preceding Business Day. If the Maturity of a Floating Rate Note falls on a day that is not a Business Day, the required payment need not be made on such day, but may be made on the next succeeding Business Day as if made on the date such payment was due, and no interest on such payment shall accrue for the period from and after such Maturity to the date of such payment on the next succeeding Business Day. Regular Record Dates. Unless otherwise -------------------- specified in an applicable Pricing Supplement, the Regular Record Date with respect to any Interest Payment Date for any Note shall be the date 15 calendar days (whether or not a Business Day) preceding such Interest Payment Date. Interest Payment Dates. Interest payments ---------------------- will be made at Maturity (with respect to the 5 principal then maturing) and on each Interest Payment Date commencing with the first Interest Payment Date following the Original Issue Date; provided, however, -------- ------- the first payment of interest on any Note originally issued between a Regular Record Date and an Interest Payment Date will occur on the Interest Payment Date following the next succeeding Regular Record Date. Fixed Rate Notes. Unless otherwise ---------------- provided in the applicable Pricing Supplement, interest payments on Fixed Rate Notes (other than Original Issue Discount Notes) will be made semiannually on February 10th and August 10th of each year and at Maturity with respect to the principal then maturing. Floating Rate Notes. Interest payments on ------------------- Floating Rate Notes will be made as specified in the Floating Rate Note. 6 Acceptance and Rejection of Offers If agreed upon by any Agent and the Company, then from Solicitations as Agents: such Agent acting solely as agent for the Company and not as principal will solicit purchases of the Notes. Each Agent will communicate to the Company, orally or in writing, each reasonable offer to purchase Notes solicited by such Agent on an agency basis, other than those offers rejected by such Agent. Each Agent has the right, in its discretion reasonably exercised, to reject any proposed purchase of Notes, as a whole or in part, and any such rejection shall not be a breach of such Agent's agreement contained in the Distribution Agreement. The Company has the sole right to accept or reject any proposed purchase of Notes, in whole or in part, and any such rejection shall not be a breach of the Company's agreement contained in the Distribution Agreement. Each Agent has agreed to make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes has been solicited by such Agent and accepted by the Company. Preparation of Pricing Supplement: If any offer to purchase a Note is accepted by the Company, the Company will promptly prepare a Pricing Supplement reflecting the terms of such Note. Information to be included in the Pricing Supplement shall include: 1. the name of the Company; 2. the title of the Notes; 3. the date of the Pricing Supplement and the date of the Prospectus to which the Pricing Supplement relates; 4. the name of the Presenting Agent (as defined below);
7 5. whether such Notes are being sold to the Presenting Agent as principal or to an investor or other purchaser through the Presenting Agent acting as agent for the Company; 6. with respect to Notes sold to the Presenting Agent as principal, whether such Notes will be resold by the Presenting Agent to investors and other purchasers at (i) a fixed public offering price of a specified percentage of their principal amount or (ii) at varying prices related to prevailing market prices at the time of resale to be determined by the Presenting Agent; 7. with respect to Notes sold to an investor or other purchaser through the Presenting Agent acting as agent for the Company, whether such Notes will be sold at (i) 100% of their principal amount or (ii) a specified percentage of their principal amount; 8. the Presenting Agent's discount or commission; 9. net proceeds to the Company; 10. the information with respect to the terms of the Notes set forth below (whether or not the applicable Note is a Book-Entry Note) under "Procedures for Book-Entry Notes -Settlement Procedures," items (ii), (iii), (vii), (viii) and (ix); and 11. any other terms of the Notes material to investors or other purchasers of the Notes not otherwise specified in the Prospectus.
8 The Company shall use its reasonable best efforts to send such Pricing Supplement by electronic mail, telecopy or overnight express (for delivery by the close of business on the applicable trade date, but in no event later than noon, New York City time, on the Business Day next following the trade date) to the Agent that made or presented the offer to purchase the applicable Note (the "Presenting Agent") at the following address: If to Merrill Lynch, Pierce, Fenner & Smith Incorporated: Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 Corporate Place Piscataway, New Jersey 08854 Attn: Prospectus Operations/Nachman Kimerling Tel: (732) 885-2768 Telecopy: (732) 885-2774 E-Mail Address: mtnsuppl@nq2.us.ml.com also, for record keeping purposes, please send a copy to: Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center, 15/th/ Floor New York, New York 10080 Telecopy: (212) 449-0188 If to Goldman, Sachs & Co.: Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attn: Douglas Lipton Telecopy: (212) 422-9458 [Add other agents]
9 in all cases with a copy to: Pillsbury Winthrop LLP One Battery Park Plaza New York, New York 10004 Attention: Jeffrey J. Delaney, Esq. Telecopy: (212) 858-1500 E-Mail Address: jdelaney@pillsburywinthrop.com In each instance that a Pricing Supplement is prepared, the Presenting Agent will provide a copy of such Pricing Supplement to each investor or purchaser of the relevant Notes or its agent. Pursuant to Rule 434 ("Rule 434") of the Securities Act of 1933, as amended, the Pricing Supplement may be delivered separately from the Prospectus. Outdated Pricing Supplements (other than those retained for files) will be destroyed. Settlement: The receipt of immediately available funds by the Company in payment for a Note and the authentication and delivery of such Note shall, with respect to such Note, constitute "settlement." Offers accepted by the Company will be settled in three Business Days, or at such time as the purchaser, the applicable Agent and the Company shall agree, pursuant to the timetable for settlement set forth in Parts II and III hereof under "Settlement Procedures" with respect to Book-Entry Notes and Certificated Notes, respectively (each such date fixed for settlement is hereinafter referred to as a "Settlement Date"). If procedures A and B of the applicable Settlement Procedures with respect to a particular offer are not completed on or before the time set forth under the "Settlement Procedures Timetable," such offer shall not be settled until the Business Day following the completion of Settlement Procedures A and B or such later date as the purchaser and the Company shall agree.
10 In the event of a purchase of Notes by an Agent as principal, appropriate settlement details will be pursuant to the timetable for settlement set forth in Parts II and III hereof under "Settlement Procedures" with respect to Book-Entry Notes and Certificated Notes, respectively, or otherwise as agreed between the Agent and the Company. Procedure for Changing Rates or When a decision has been reached Other Variable Terms: to change the interest rate or any other variable term on any Notes being sold by the Company, the Company will promptly advise the Agents by facsimile transmission and such Agents will forthwith suspend solicitation of offers to purchase such Notes. The Agent or Agents will telephone the Company with recommendations as to the changed interest rates or other variable terms. At such time as the Company advises the Agents of the new interest rates or other variable terms, such Agents may resume solicitation of offers to purchase such Notes. Until such time only "indications of interest" may be recorded. Immediately after acceptance by the Company of an offer to purchase Notes at a new interest rate or new variable term, the Company, the Presenting Agent and the Trustee shall follow the procedures set forth under the "Settlement Procedures." Suspension of Solicitation; Amendment or The Company may instruct the Agents Supplement: to suspend solicitation of offers to purchase Notes at any time. Each Agent receiving such instructions will forthwith suspend solicitation of offers to purchase Notes from the Company until such time as the Company has advised the Agents that solicitation of offers to purchase may be resumed. If the Company decides to amend or supplement the Registration Statement (including incorporating any documents by reference therein) or the Prospectus (other than to change interest rates or other variable terms with respect to the 11 offering of the Notes), it will promptly advise each Agent and will furnish each Agent and counsel to the Agents with copies of the proposed amendment or supplement (including any document proposed to be incorporated by reference therein but excluding any Pricing Supplements unless otherwise provided herein). One copy of such filed document, along with a copy of the cover letter sent to the Commission, will be delivered, mailed, telecopied or e-mailed to Merrill Lynch, Pierce, Fenner & Smith Incorporated at Transaction Management Group, 4 World Financial Center, 15/th/ Floor, New York, New York 10080, Telecopy: (212) 449-2234, E-Mail Address: sprimrose@exchange.ml.com and to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Telecopy: (212) 422-9458, Attention: Douglas Lipton [add other Agents]. For record keeping purposes, one copy of each such amendment or supplement shall also be delivered, mailed, telecopied or e-mailed to Pillsbury Winthrop LLP, One Battery Park Plaza, New York, New York 10004, Attention: Jeffrey J. Delaney, Esq., Telecopy: (212) 858-1500, E-Mail Address: jdelaney@pillsburywinthrop.com. In the event that at the time the solicitation of offers to purchase Notes from the Company is suspended (other than to change interest rates or other variable terms) there are any offers to purchase Notes that have been accepted by the Company that have not been settled, the Company will promptly advise the Agents and the Trustee whether such offers may be settled and whether copies of the Prospectus as theretofore amended and/or supplemented as in effect at the time of the suspension may be delivered in connection with the settlement of such offers. The Company will have the sole responsibility for such decision and for any arrangements that may be made in the event that the Company determines that such offers may not be settled or that copies of such 12 Prospectus may not be so delivered. Delivery of Prospectus and Applicable A copy of the most recent Prospectus Pricing Supplement: and the applicable Pricing Supplement, which pursuant to Rule 434 may be delivered separately from the Prospectus, must accompany or precede the earlier of (a) the written confirmation of a sale sent to an investor or other purchaser or his agent and (b) the delivery of Notes to an investor or other purchaser or his agent. Authenticity of Signatures: The Agents will have no obligation or liability to the Company or the Trustee in respect of the authenticity of the signature of any officer, employee or agent of the Company or the Trustee on any Note. Documents Incorporated by Reference: The Company shall supply the Agents with an adequate supply of all documents incorporated by reference in the Registration Statement and the Prospectus. Business Day: "Business Day" means, unless otherwise specified in the applicable Pricing Supplement, any day other than a Saturday or Sunday, or any other day on which banks in The City of New York (and, with respect to LIBOR Notes, is also a London Business Day), are generally required or authorized by law or executive order to close. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. PART II: PROCEDURES FOR BOOK-ENTRY NOTES In connection with the qualification of Book-Entry Notes for eligibility in the book-entry system maintained by DTC, the Trustee will perform the custodial, document control and administrative functions described below, in accordance with its respective obligations under a Letter of Representations from the Company and the Trustee to DTC, dated _____________ ____, 2002, and a Medium-Term Note Certificate Agreement, dated June 11, 1993, between the Trustee and DTC (the "Certificate Agreement"), and its obligations as a participant in DTC, including DTC's Same-Day Funds Settlement System ("SDFS"). 13 Issuance: All Fixed Rate Notes issued as Book- Entry Notes having the same Original Issue Date, interest rate, Stated Maturity Date and redemption and/or repayment terms (collectively, the "Fixed Rate Terms") will be represented initially by a single Global Note and all Floating Rate Notes issued as Book-Entry Notes having the same Original Issue Date, Base Rate (which may be the Commercial Paper Rate, the Treasury Rate, LIBOR, the CD Rate, the Federal Funds Rate, the Prime Rate or any other rate set forth in the applicable Pricing Supplement by the Company), Initial Interest Rate, Index Maturity, Spread or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum Interest Rate, if any, Stated Maturity Date, redemption and/or repayment terms, if any, Initial Interest Reset Date, Interest Reset Date(s) and Interest Determination Date(s) (collectively, the "Floating Rate Terms") will be represented initially by a single Global Note. For other variable terms with respect to the Fixed Rate Notes and Floating Rate Notes, see the Prospectus and the applicable Pricing Supplement. Identification: The Company has arranged with the CUSIP Service Bureau of Standard & Poor's (the "CUSIP Service Bureau") for the reservation of one series of CUSIP numbers, which series consists of approximately 900 CUSIP numbers which have been reserved for and relating to Book-Entry Notes and the Company has delivered to the Trustee and DTC such list of such CUSIP numbers. The Company will assign CUSIP numbers to Book-Entry Notes as described below under Settlement Procedure B. DTC will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the Company has assigned to Book-Entry Notes. The Trustee will notify the Company at any 14 time when fewer than 100 of the reserved CUSIP numbers remain unassigned to Book-Entry Notes, and, if it deems necessary, the Company will reserve additional CUSIP numbers for assignment to Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the Company will deliver a list of such additional numbers to the Trustee and DTC. Registration: Each Global Note will be registered in the name of Cede & Co., as nominee for DTC, on the register maintained by the Trustee under the Indenture. The beneficial owner of a Book-Entry Note (i.e., an owner of a --- beneficial interest in a Global Note) (or one or more indirect participants in DTC designated by such owner) will designate one or more participants in DTC (with respect to such Book-Entry Note, the "Participants") to act as agent for such beneficial owner in connection with the book-entry system maintained by DTC, and DTC will record in book-entry form, in accordance with instructions provided by such Participants, a credit balance with respect to such Book-Entry Note in the account of such Participants. The ownership interest of such beneficial owner in such Book-Entry Note will be recorded through the records of such Participants or through the separate records of such Participants and one or more indirect participants in DTC. Transfers: Transfers of beneficial interests in a Global Note will be accomplished by book entries made by DTC and, in turn, by Participants (and in certain cases, one or more indirect participants in DTC) acting on behalf of beneficial transferors and transferees of such Global Note. Exchanges: The Trustee may deliver to DTC and the CUSIP Service Bureau at any time a written notice specifying (a) the CUSIP numbers of
15 two or more Global Notes outstanding on such date that represent Book-Entry Notes having the same Fixed Rate Terms or Floating Rate Terms, as the case may be (but not the same Original Issue Dates), and for which interest has been paid to the same date; (b) a date, occurring at least 30 days after such written notice is delivered and at least 30 days before the next Interest Payment Date for the related Book-Entry Notes, on which such Global Notes shall be exchanged for a single replacement Global Note; and (c) a new CUSIP number, obtained from the Company, to be assigned to such replacement Global Note. Upon receipt of such a notice, DTC will send to its Participants (including the Trustee) a written notice to the effect that such exchange will occur on such date. Prior to the specified exchange date, the Trustee will deliver to the CUSIP Service Bureau written notice setting forth such exchange date and the new CUSIP number and stating that, as of such exchange date, the CUSIP numbers of the Global Notes to be exchanged will no longer be valid. On the specified exchange date, the Trustee will exchange such Global Notes for a single Global Note bearing the new CUSIP number and the CUSIP numbers of the exchanged Global Notes will, in accordance with CUSIP Service Bureau procedures, be cancelled and not immediately reassigned. Denominations: Book-Entry Notes will be issued in denominations of $1,000 and integral multiples in excess thereof of $1,000 unless otherwise set forth in the applicable Prospectus Supplement. Payments of Principal, Premium, Payments of Interest Only. Promptly after if any, and Interest: ---------------------------------- each Regular Record Date, the Trustee will deliver to the Company and DTC a written notice specifying by CUSIP number the amount of interest to be paid on each Book-Entry Note on the following Interest Payment
16 Date (other than an Interest Payment Date coinciding with Maturity) and the total of such amounts. DTC will confirm the amount payable on each Book-Entry Note on such Interest Payment Date by reference to the daily bond reports published by Standard & Poor's. On such Interest Payment Date, the Company will pay to the Trustee in immediately available funds, and the Trustee in turn will pay to DTC, such total amount of interest due (other than at Maturity), at the times and in the manner set forth below under "Manner of Payment." Notice of Interest Rates. Promptly after each ------------------------ Interest Determination Date for Floating Rate Notes issued as Book-Entry Notes, the Calculation Agent will notify each of Moody's Investors Service, Inc. and Standard & Poor's of the interest rates determined as of such Interest Determination Date. Payments at Maturity. On or about the first -------------------- Business Day of each month, the Trustee will deliver to the Company and DTC a written list of principal, interest and premium, if any, to be paid on each Book-Entry Note maturing or otherwise becoming due in the following month. The Trustee, the Company and DTC will confirm the amounts of such principal, premium and interest payments with respect to a Book-Entry Note on or about the fifth Business Day preceding the Maturity of such Book-Entry Note. At such Maturity, the Company will pay to the Trustee in immediately available funds, and the Trustee in turn will pay to DTC, the principal amount of such Note, together with interest and premium, if any, due at such Maturity, at the times and in the manner set forth below under "Manner of Payment." Promptly after payment to DTC of the principal, interest and premium, if any, due at the Maturity of such Book-Entry Note, the Trustee will cancel the Global Note representing such Book-Entry Note and deliver
17 it to the Company with an appropriate debit advice. On the first Business Day of each month, the Trustee will deliver to the Company a written statement indicating the total principal amount of outstanding Book-Entry Notes as of the immediately preceding Business Day. Manner of Payment. The total amount of any ----------------- principal, premium, if any, and interest due on Book-Entry Notes on any Interest Payment Date or at Maturity shall be paid by the Company to the Trustee in funds available for use by the Trustee no later than noon, New York City time, on such date. The Company will make such payment on such Book-Entry Notes by instructing the Trustee to withdraw funds from an account maintained by the Company at the Trustee or by making such payment to an account specified by the Trustee. The Company will confirm such instructions in writing to the Trustee. As soon as possible thereafter, the Trustee will pay by separate wire transfer (using Fedwire message entry instructions in a form previously specified by DTC) to an account at the Federal Reserve Bank of New York previously specified by DTC, in funds available for immediate use by DTC, each payment of interest, principal and premium, if any, due on a Book-Entry Note on such date. Thereafter on such date, DTC will pay, in accordance with its SDFS operating procedures then in effect, such amounts in funds available for immediate use to the respective Participants in whose names such Book-Entry Notes are recorded in the book-entry system maintained by DTC. Neither the Company nor the Trustee shall have any responsibility or liability for the payment by DTC of the principal of, premium, if any, or interest on, the Book-Entry Notes to such Participants. Withholding Taxes. The amount of any taxes ----------------- required under applicable law to be withheld
18 from any interest payment on a Book-Entry Note will be determined and withheld by the Participant, indirect participant in DTC or other Person responsible for forwarding payments and materials directly to the beneficial owner of such Book-Entry Note. Settlement Procedures: Settlement Procedures with regard to each Book-Entry Note sold by an Agent, as agent of the Company, or purchased by an Agent, as principal, will be as follows: A. The Presenting Agent will advise the Company by telephone, confirmed by facsimile, of the following settlement information: 1. Taxpayer identification number of the purchaser. 2. Principal amount. 3. Fixed Rate Notes: (a) interest rate; (b) interest payment dates; and (c) whether such Fixed Rate Note is being issued as a Discount Note and, if so, the terms thereof. Floating Rate Notes: (a) base rate; (b) initial interest rate; (c) spread or spread multiplier, if any; (d) interest rate reset dates; (e) interest rate reset period; (f) interest payment dates;
19 (g) interest payment period; (h) index maturity; (i) calculation agent; (j) maximum interest rate, if any; (k) minimum interest rate, if any; (l) calculation date; (m) interest determination dates; and (n) whether such Floating Rate Note is being issued as a Discount Note and, if so, the terms thereof. 4. Price to public of such Book-Entry Note (or whether such Note is being offered at varying prices relating to prevailing market prices at time of resale as determined by the Presenting Agent). 5. Trade Date. 6. Settlement Date (Original Issue Date). 7. Stated Maturity Date. 8. Redemption provisions, if any, including: Redemption Commencement Date, Initial Redemption Percentage and Annual Redemption Percentage Reduction. 9. Optional Repayment Date(s) and repayment provisions, if any. 10. Net proceeds to the Company. 11. Presenting Agent's discount or commission (determined in accordance with Schedule A to the Distribution Agreement). 20 12. Name of Presenting Agent (and whether such Note is being sold to the Presenting Agent as principal or to an investor or other purchaser through the Presenting Agent acting as agent for the Company). 13. Such other information specified with respect to such Note (whether by Addendum or otherwise). B. The Company will assign a CUSIP number to the Global Note representing such Book-Entry Note and then advise the Trustee by facsimile transmission or other electronic transmission of the above settlement information received from the Presenting Agent, such CUSIP number and the name of the Presenting Agent. C. The Trustee will communicate to DTC and the Presenting Agent through DTC's Participant Terminal System, a pending deposit message specifying the following settlement information: 1. The information set forth in Settlement Procedure A. 2. Identification numbers of the participant accounts maintained by DTC on behalf of the Trustee and the Presenting Agent. 3. Identification of the Global Note as a Fixed Rate Note or Floating Rate Note. 4. Initial Interest Payment Date for such Global Note, number of days by which such date succeeds the related record date for DTC purposes (or, in the case of Floating Rate Notes which reset daily or weekly, the date five calendar days preceding the Interest Payment Date) and, if then calculable, the 21 amount of interest payable on such Interest Payment Date (which amount shall have been confirmed by the Trustee). 5. CUSIP number of the Global Note representing such Book-Entry Note. 6. Whether such Global Note represents any other Book-Entry Notes. 7. The Company or the Trustee will advise the Presenting Agent by telephone of the CUSIP number of the Global Note representing such Book-Entry Note. DTC will arrange for each pending deposit message described above to be transmitted to Standard & Poor's, which will use the information in the message to include certain terms of the related Book-Entry Note in the appropriate daily bond report published by Standard & Poor's. D. The Company will complete and deliver to the Trustee a Global Note representing such Book-Entry Note in a form that has been approved by authorized officers of the Company pursuant to the Indenture, the Agents and the Trustee. E. The Trustee will authenticate the Global Note representing such Book-Entry Note. F. DTC will credit such Book-Entry Note to the participant account of the Trustee maintained by DTC. G. The Trustee will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC (i) to debit such Book-Entry Note to the Trustee's participant account and credit such Book-Entry Note to the participant account of the Presenting Agent maintained by DTC 22 and (ii) to debit the settlement account of the Presenting Agent and credit the settlement account of the Trustee maintained by DTC, in an amount equal to the price of such Book-Entry Note less such Presenting Agent's discount or commission. Any entry of such a deliver order shall be deemed to constitute a representation and warranty by the Trustee to DTC that (i) the Global Note representing such Book-Entry Note has been issued and authenticated and (ii) the Trustee is holding such Global Note pursuant to the Certificate Agreement. H. In the case of Book-Entry Notes sold through the Presenting Agent, as agent, the Presenting Agent will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC (i) to debit such Book-Entry Note to the Presenting Agent's participant account and credit such Book-Entry Note to the participant account of the Participants maintained by DTC and (ii) to debit the settlement accounts of such Participants and credit the settlement account of the Presenting Agent maintained by DTC in an amount equal to the initial public offering price of such Book-Entry Note. I. Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures G and H will be settled in accordance with SDFS operating procedures in effect on the Settlement Date. J. Upon receipt of such funds, the Trustee will credit to an account of the Company maintained at the Trustee or pay to an account otherwise specified by the Company funds available for immediate use in the amount transferred to the Trustee in accordance with Settlement 23 Procedure G. K. The Trustee will send a copy of the Global Note by first class mail to the Company together with a statement setting forth the total principal amount of Notes of each series that have been issued under the Indenture (whether or not Outstanding) as of the related Settlement Date, the principal amount of Notes Outstanding as of the related Settlement Date after giving effect to such transaction and all other offers to purchase Notes of which the Company has advised the Trustee but that have not yet been settled. L. In the case of Book-Entry Notes sold through the Presenting Agent, as agent, the Presenting Agent will confirm the purchase of such Book-Entry Note to the investor or other purchaser either by transmitting to the Participant with respect to such Book-Entry Note a confirmation order through DTC's Participant Terminal System or by mailing a written confirmation to such investor or other purchaser. Settlement Procedures Timetable: For offers to purchase Book-Entry Notes accepted by the Company, Settlement Procedures "A" through "L" set forth above shall be completed as soon as possible but not later than the respective times (New York City time) set forth below: Settlement Procedure Time ---------- ---- A 11:00 a.m. on the trade date or within one hour following the trade B 12:00 noon on the trade date or within one hour following the trade C No later than the close of 24 business on the trade date D 3:00 p.m. on the Business Day before the Settlement Date E 9:00 a.m. on Settlement Date F 10:00 a.m. on Settlement Date G-H No later than 2:00 p.m. on Settlement Date I 4:00 p.m. on Settlement Date J-L 5:00 p.m. on Settlement Date If a sale is to be settled more than one Business Day after the trade date, Settlement Procedures A, B, and C may, if necessary, be completed at any time prior to the specified times on the first Business Day after such trade date. In connection with a sale that is to be settled more than one Business Day after the trade date, if the Initial Interest Rate for a Floating Rate Note is not known at the time that Settlement Procedure A is completed, Settlement Procedures B and C shall be completed as soon as such rates have been determined, but no later than noon and 2:00 p.m., New York City time, respectively, on the second Business Day before the Settlement Date. Settlement Procedure I is subject to extension in accordance with any extension of Fedwire closing deadlines and in the other events specified in the SDFS operating procedures in effect on the Settlement Date. If settlement of a Book-Entry Note is rescheduled or cancelled, the Trustee will deliver to DTC, through DTC's Participant Terminal System, a cancellation message to such effect by no later than 5:00 p.m., New York City time, on the Business Day immediately preceding the scheduled Settlement Date. 25 Failure to Settle: If the Trustee fails to enter an SDFS deliver order with respect to a Book-Entry Note pursuant to Settlement Procedure G, the Trustee may deliver to DTC, through DTC's Participant Terminal System, as soon as practicable a withdrawal message instructing DTC to debit such Book-Entry Note to the participant account of the Trustee maintained at DTC. DTC will process the withdrawal message, provided that such participant account contains a principal amount of the Global Note representing such Book-Entry Note that is at least equal to the principal amount to be debited. If withdrawal messages are processed with respect to all the Book-Entry Notes represented by a Global Note, the Trustee will mark such Global Note "cancelled", make appropriate entries in its records and send such cancelled Global Note to the Company. The CUSIP number assigned to such Global Note shall, in accordance with CUSIP Service Bureau procedures, be cancelled and not immediately reassigned. If withdrawal messages are processed with respect to a portion of the Book-Entry Notes represented by a Global Note, the Trustee will exchange such Global Note for two Global Notes, one of which shall represent the Book-Entry Notes for which withdrawal messages are processed and shall be cancelled immediately after issuance, and the other of which shall represent the other Book-Entry Notes previously represented by the surrendered Global Note and shall bear the CUSIP number of the surrendered Global Note. In the case of any Book-Entry Note sold through the Presenting Agent, as agent, if the purchase price for any Book-Entry Note is not timely paid to the Participants with respect to such Book-Entry Note by the beneficial purchaser thereof (or a person, including an indirect participant in DTC, acting on behalf of such purchaser), such Participants and, in turn, the related Presenting Agent may enter SDFS 26 deliver orders through DTC's Participant Terminal System reversing the orders entered pursuant to Settlement Procedures G and H, respectively. Thereafter, the Trustee will deliver the withdrawal message and take the related actions described in the preceding paragraph. If such failure has occurred for any reason other than default by the applicable Presenting Agent to perform its obligations hereunder or under the Distribution Agreement, the Company will reimburse such Presenting Agent on an equitable basis for its loss of the use of funds during the period when the funds were credited to the account of the Company. Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Note, DTC may take any actions in accordance with its SDFS operating procedures then in effect. In the event of a failure to settle with respect to a Book-Entry Note that was to have been represented by a Global Note also representing other Book-Entry Notes, the Trustee will provide, in accordance with Settlement Procedures D and E, for the authentication and issuance of a Global Note representing such remaining Book-Entry Notes and will make appropriate entries in its records. PART III: PROCEDURES FOR CERTIFICATED NOTES Denominations: Certificated Notes will be issued in denominations of $1,000 and integral multiples of $1,000 in excess thereof unless otherwise indicated in the applicable Pricing Supplement. Payments of Principal, Premium, Upon presentment and delivery of the if any, and Interest: Certificated Note, the Trustee upon receipt of immediately available funds from the Company will pay the principal amount of each Certificated Note at Maturity and premium, if any, and the final installment of 27 interest in immediately available funds. All interest payments on a Certificated Note, other than interest due at Maturity, will be made at the Corporate Trust Office; provided, however, that such payment of interest may be made, at the option of the Company by check to the address of the person entitled thereto as such address shall appear in the Security Register. Notwithstanding the foregoing, holders of ten million dollars or more in aggregate principal amount of Certificated Notes having the same Interest Payment Dates shall, at the option of the Company, be entitled to receive payments of interest (other than at Maturity) by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee not less than 15 days prior to the applicable Interest Payment Date (any such wire transfer instructions received by the Trustee shall remain in effect until revoked by such Holder). The Trustee will provide monthly to the Company a list of the principal, premium, if any, and interest to be paid on Certificated Notes maturing in the next succeeding month. The Trustee will be responsible for withholding taxes on interest paid as required by applicable law, but shall be relieved from any such responsibility if it acts in good faith and in reliance upon an opinion of counsel. Certificated Notes presented to the Trustee at Maturity for payment will be cancelled by the Trustee. All cancelled Certificated Notes held by the Trustee shall be destroyed, and the Trustee shall furnish to the Company a certificate with respect to such destruction. Settlement Procedures: Settlement Procedures with regard to each Certificated Note purchased by an Agent, as principal, or through an Agent, as agent, shall be as follows: A. The Presenting Agent will advise the 28 Company by telephone, confirmed by facsimile, of the following settlement information with regard to each Certificated Note: 1. Exact name in which the Certificated Note(s) is (are) to be registered (the "Registered Owner"). 2. Exact address or addresses of the Registered Owner for delivery, notices and payments of principal, premium, if any, and interest. 3. Taxpayer identification number of the Registered Owner. 4. Principal amount. 5. Authorized denomination. 6. Fixed Rate Notes: (a) interest rate; (b) interest payment dates; and (c) whether such Fixed Rate Note is being issued as a Discount Note and, if so, the terms thereof. Floating Rate Notes: (a) base rate; (b) initial interest rate; (c) spread or spread multiplier, if any; (d) interest rate reset dates; (e) interest rate reset period; (f) interest payment dates; (g) interest payment period; 29 (h) index maturity; (i) calculation agent; (j) maximum interest rate, if any; (k) minimum interest rate, if any; (l) calculation date; (m) interest determination dates; and (n) whether such Floating Rate Note is being issued as a Discount Note and, if so, the terms thereof. 7. Price to public of such Certificated Note (or whether such Note is being offered at varying prices relating to prevailing market prices at time of resale as determined by the Presenting Agent). 8. Trade Date. 9. Settlement Date (Original Issue Date). 10. Stated Maturity Date. 11. Net proceeds to the Company. 12. Presenting Agent's discount or commission (determined in accordance with Schedule A to the Distribution Agreement). 13. Redemption provisions, if any, including: Redemption Commencement Date, Initial Redemption Percentage and Annual Redemption Percentage Reduction. 14. Optional Repayment Date(s) and repayment provisions, if any. 15. Name of Presenting Agent (and 30 whether such Note is being sold to the Presenting Agent as principal or to an investor or other purchaser through the Presenting Agent acting as agent for the Company). 16. Such other information specified with respect to such Note (whether by Addendum or otherwise). B. After receiving such settlement information from the Presenting Agent, the Company will advise the Trustee of the above settlement information by facsimile transmission confirmed by telephone. The Company will cause the Trustee to issue, authenticate and deliver the Certificated Notes. C. The Trustee will complete the preprinted 4-ply Certificated Note packet containing the following documents in forms approved by the Company, the Presenting Agent and the Trustee consistent with the Indenture, and will make three copies thereof (herein called "Stub 1," "Stub 2" and "Stub 3"): 1. Certificated Note with the Presenting Agent's confirmation, if traded on a principal basis, or the Presenting Agent's customer confirmation, if traded on an agency basis. 2. Stub 1 - for Trustee. 3. Stub 2 - for Presenting Agent. 4. Stub 3 - for the Company. D. With respect to each trade, the Trustee will deliver the Certificated Notes and Stub 2 thereof to the Presenting Agent at the following applicable address: If to Merrill Lynch, Pierce, Fenner & Smith Incorporated to Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill 31 Lynch Money Markets Clearance, 55 Water Street, 3/rd/ Floor - Plaza Level, DTC New York Window, New York, New York 10041, Attention: Mona Noel, tel. no. (212) 855-2403, fax no. (212) 855-2457, and if to Goldman, Sachs & Co. to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Michael Mosely, 6th Floor. The Trustee will keep Stub 1. The Presenting Agent will acknowledge receipt of the Certificated Note through a broker's receipt and will keep Stub 2. Delivery of the Certificated Note will be made only against such acknowledgment of receipt. Upon determination that the Certificated Note has been authorized, delivered and completed as aforementioned, the Presenting Agent will wire the net proceeds of the Certificated Note after deduction of its applicable discount or commission to the Company pursuant to standard wire instructions given by the Company. E. In the case of Certificated Notes sold through the Presenting Agent, as agent, the Presenting Agent will deliver the Certificated Note (with confirmations), as well as a copy of the Prospectus and the applicable Pricing Supplement or Supplements received from the Trustee to the purchaser against payment in immediately available funds. F. The Trustee will send Stub 3 to the Company. Settlement Procedures Timetable: For offers to purchase Certificated Notes accepted by the Company, Settlement Procedures "A" through "F" set forth above shall be completed as soon as possible following the trade but not later than the respective times (New York City time) set forth below: 32 Settlement Procedure Time --------- ---- A 11:00 a.m. on the trade date or within one hour following the trade B 12:00 noon on the trade date or within one hour following the trade C-D 2:15 p.m. on Settlement Date E 3:00 p.m. on Settlement Date F 5:00 p.m. on Settlement Date Failure to Settle: In the case of Certificated Notes sold through the Presenting Agent, as agent, in the event that a purchaser of a Certificated Note from the Company either fails to accept delivery of or make payment for a Certificated Note on the Settlement Date, the Presenting Agent will forthwith notify the Trustee and the Company by telephone, confirmed in writing, and return such Certificated Note and related stub to the Trustee. The Trustee, upon receipt of the Certificated Note and related stub from the Presenting Agent, will immediately advise the Company and the Company will promptly arrange to credit the account of the Presenting Agent in an amount of immediately available funds equal to the amount previously paid by such Presenting Agent in settlement for such Certificated Note. Such credits will be made on the Settlement Date if possible, and in any event not later than the Business Day following the Settlement Date; provided that the Company has received notice on the same day. If such failure has occurred for any reason other than failure by such Presenting Agent to 33 perform its obligations hereunder or under the Distribution Agreement, the Company will reimburse such Presenting Agent on an equitable basis for its loss of the use of funds during the period when the funds were credited to the account of the Company. Immediately upon receipt of the Certificated Note in respect of which the failure occurred, the Trustee will cancel and destroy the Certificated Note (and related stubs), make appropriate entries in its records to reflect the fact that the Certificated Note was never issued, and accordingly notify in writing the Company. 34 ANNEX III Accountants' Letter ------------------- Pursuant to Section 4(j) and Section 6(d), as the case may be, of the Distribution Agreement, the Company's independent certified public accountants shall furnish letters to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder. (ii) In their opinion, the consolidated financial statements and financial statement schedules audited by them and incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations thereunder. (iii) On the basis of limited procedures, not constituting an audit in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included or incorporated by reference in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act as it applies to Form 10-Q and the related published rules and regulations thereunder or that any material modifications should be made for them to be in conformity with generally accepted accounting principles; (B) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; 1 (C) as of the date of the latest available financial statements of the Company and at a subsequent date not more than five business days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock under the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Ownership Plan, Retirement Savings Plan, Stock Option and Incentive Plans or other similar plans, and the incurrence of capital stock issuance expenses) of the Company or in the preferred stock or other securities of the Company's subsidiaries, or any increase in the consolidated long-term debt of the Company and its subsidiaries or any decreases in consolidated net assets of the Company and its subsidiaries or other items specified by the Agents, or any increases in any items specified by the Agents, in each case as compared with the amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases that the Prospectus discloses have occurred or may occur or that are described in such letter; and (D) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus ending as of the date of the latest available financial statements of the Company and at a subsequent date referred to in clause (C) there were any decreases in consolidated revenues or operating profit or basic per share amounts of consolidated net income of the Company or other items specified by the Agents, or any increases in any items specified by the Agents, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Agents, except in each case for increases or decreases that the Prospectus discloses have occurred or may occur or that are described in such letter; (v) In addition to the audit referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (iv) above, they have carried out certain specified procedures, not constituting an audit in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Agents that are derived from the general accounting records of the Company and its subsidiaries, that appear in the Prospectus (excluding documents incorporated by reference), or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Agents or in documents incorporated by reference in the Prospectus specified by the Agents, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. All references in this Annex III to the Prospectus shall be deemed to refer to the Prospectus (including the documents incorporated by reference therein) as defined in the Distribution Agreement as of the Commencement Date referred to in Section 6(d) thereof and to the Prospectus as amended or supplemented (including the documents incorporated by reference therein) as of the date of the amendment, supplement, incorporation or the Time of Delivery relating to an agreement to purchase Securities as principal requiring the delivery of such letter under Section 4(j) thereof. 2 EX-4.(D) 4 dex4d.txt FORM OF THIRD SUPPLEMENTAL INDENTURE EXHIBIT 4(d) ================================================================================ HAWAIIAN ELECTRIC INDUSTRIES, INC. TO CITIBANK, N.A. Trustee _______________ THIRD SUPPLEMENTAL INDENTURE Dated as of ____________, 2002 to INDENTURE Dated as of October 15, 1988 ______________ ================================================================================ TABLE OF CONTENTS
Page ---- RECITALS ................................................................. 1 ARTICLE ONE DEFINITIONS Section 1.01 Terms from the Indenture .................................. 2 Section 1.02 Definitions of New Terms .................................. 2 ARTICLE TWO CREATION OF SERIES D NOTES Section 2.01 Creation of the Series D Notes ............................ 3 Section 2.02 Particulars of the Series D Notes ......................... 3 ARTICLE THREE ADDITIONAL COVENANT Section 3.01 Additional Covenant for Series D Notes .................... 7 Restrictions On Sales of HECO ............................. 7 ARTICLE FOUR MISCELLANEOUS Section 4.01 Counterparts .............................................. 7 Section 4.02 Other Sections of Indenture not Affected .................. 7 Section 4.03 Severability .............................................. 7 Section 4.04 Administrative Procedures ................................. 7
EXHIBIT A FORM OF SERIES D NOTE--FIXED RATE EXHIBIT B FORM OF SERIES D NOTE--FLOATING RATE THIRD SUPPLEMENTAL INDENTURE, dated as of ____________, 2002, between Hawaiian Electric Industries, Inc., a corporation duly organized and existing under the laws of the State of Hawaii (herein called the "Company"), having its principal office at 900 Richards Street, Honolulu, Hawaii 96813, and Citibank, N.A., a national banking association duly organized and existing under the laws of the United States, as Trustee (herein called the "Trustee"), having its principal corporate trust office at 111 Wall Street, New York, New York 10043. RECITALS OF THE COMPANY WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture dated October 15, 1988 (herein called the "Original Indenture"), to provide for the issuance from time to time of its unsecured debt, notes or other evidences of indebtedness (in the Original Indenture and herein called the "Securities"), to be issued in one or more series as in the Original Indenture provided; and WHEREAS, the Original Indenture, as the same hereby is or from time to time in the future may be amended or supplemented by indentures supplemental thereto, is hereinafter referred to as the "Indenture"; and WHEREAS, under the Indenture, $60,000,000 aggregate principal amount of the Company's Medium-Term Notes, Series A ("Series A Notes"), $244,000,000 aggregate principal amount of the Company's Medium-Term Notes, Series B ("Series B Notes"), and $300,000,000 aggregate principal amount of the Company's Medium-Term Notes, Series C ("Series C Notes"), have been executed, authenticated, delivered and issued by the Company; and WHEREAS, Section 901 of the Indenture provides that without the consent of any Holders under the Indenture, the Company and the Trustee may enter into an indenture supplemental to the Indenture for, among other things, the purpose of establishing the form or terms of the Securities of any series as contemplated in Sections 201 and 301 of the Indenture, including, without limitation, adding to the covenants of the Company for the benefit of the Holders of all Securities under the Indenture; and WHEREAS, the Company by action duly taken has authorized the issuance of a series of Securities to be designated as "Medium-Term Notes, Series D" (the "Series D Notes"), which series is limited in aggregate principal amount to $300,000,000 and is subject to such provisions as are set forth in this Third Supplemental Indenture to the Indenture; and WHEREAS, the Company, in the exercise of the powers and authority conferred upon and reserved to it under Section 901 of the Indenture and pursuant to appropriate action of its Board of Directors or committees thereof, has fully resolved and determined to make, execute and deliver to the Trustee a Third Supplemental Indenture in the form hereof for the purposes herein provided; and WHEREAS, all conditions have been complied with, all actions have been taken and all things have been done which are necessary to make the Series D Notes, when executed by the Company and authenticated by or on behalf of the Trustee, and when delivered as herein and in the Indenture provided, the valid obligations of the Company and to make this Third Supplemental Indenture a valid and binding supplemental indenture. NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Series D Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Series D Notes, as follows: ARTICLE ONE DEFINITIONS Section 1.01 Terms from the Indenture. For all purposes of this Third ------------------------ Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) terms used herein in capitalized form and defined in the Original Indenture shall have the meanings specified in the Original Indenture; (2) the words "herein," "hereof" and "hereto" and other words of similar import used in this Third Supplemental Indenture refer to this Third Supplemental Indenture as a whole and not to any particular section or other subdivision of this Third Supplemental Indenture. Except as otherwise expressly provided or unless the context otherwise requires, "Third Supplemental Indenture" means this instrument as originally executed or, if amended or supplemented pursuant to the applicable provisions of the Indenture, as so amended or supplemented. Section 1.02 Definitions of New Terms. The following terms used herein ------------------------ shall have the following meanings in this Third Supplemental Indenture: "Capital Stock" means, with respect to any Person, any and all corporate stock, shares, interests, participations or other equivalents (however designated) of corporate stock of such Person. "HECO" shall mean Hawaiian Electric Company, Inc., a corporation duly organized under the laws of the Kingdom of Hawaii and duly existing under the laws of the State of Hawaii, and any surviving, resulting or transferee corporation. "Voting Shares" means the shares of Capital Stock of any Person of any class or classes ordinarily having voting power for the election of directors of such Person. 2 "Wholly-Owned Subsidiary" means a Person 100% of whose Voting Shares are at the time owned by the Company directly or indirectly through other Wholly-Owned Subsidiaries. ARTICLE TWO CREATION OF SERIES D NOTES Section 2.01 Creation of the Series D Notes. There is hereby created a ------------------------------ new series of Securities to be issued under the Indenture and this Third Supplemental Indenture designated as "Medium-Term Notes, Series D" (the "Series D Notes"). The Series D Notes shall constitute a single series of Securities under the Indenture and shall be in the forms of Fixed Rate Note or Floating Rate Note attached hereto as Exhibit A and Exhibit B, respectively. Section 2.02 Particulars of the Series D Notes. In accordance with --------------------------------- Section 301 of the Indenture, the Series D Notes shall have the following terms (the numbered clauses set forth below corresponding to the numbered subsections of said Section 301): 1. The title of the Securities of the series is "Medium-Term Notes, Series D". 2. The limit upon the aggregate principal amount of the Series D Notes which may be authenticated and delivered under the Indenture (except for Series D Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Series D Notes pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture) is $300,000,000. Subject to the foregoing, the aggregate principal amount of the Series D Notes to be issued and sold from time to time shall be as agreed to by an Agent and the Company as described in the Distribution Agreement, dated ____________, 2002, among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Robert W. Baird & Co. Incorporated, Janney Montgomery Scott LLC and U.S. Bancorp Piper Jaffray Inc. (the "2002 Distribution Agreement"). The Company will notify the Trustee of such aggregate principal amount, as well as the other terms and provisions thereof, in accordance with the Administrative Procedures (the "Administrative Procedures") attached as Annex II to the 2002 Distribution Agreement. 3. Interest payments in respect of Series D Notes will be in an amount equal to the interest accrued from and including the immediately preceding Interest Payment Date in respect of which interest has been paid or duly made available for payment (or from and including the Original Issue Date (as defined herein), if no interest has been paid or duly made available for payment) to but excluding the applicable Interest Payment Date or Maturity, as the case may be. Interest shall be payable with respect to a Series D Note to the Person in whose name such Series D Note is registered at the close of business on the Regular Record Date for each Interest Payment Date, provided, however, that interest payable at Maturity will be payable to the person to whom principal shall be payable. The first payment of interest on any Series D Note originally issued between a Regular Record Date and the related Interest Payment Date will 3 be made on the Interest Payment Date immediately following the next succeeding Regular Record Date to the Holder on such next succeeding Regular Record Date. 4. The date on which the principal of each of the Series D Notes is payable shall be any Business Day from nine months to thirty years from the date of issuance agreed to and established on behalf of the Company by any two of the President, Financial Vice President, Treasurer or Controller (the "Authorized Officers") from time to time pursuant to the 2002 Distribution Agreement and the Administrative Procedures and shall be set forth in a related pricing supplement (each, a "Pricing Supplement") to the Prospectus dated ____________, 2002 (the "Prospectus") relating to the Series D Notes and in the Series D Notes. 5. Each of the Series D Notes shall bear interest either at a fixed rate, in which event the attached form of Fixed Rate Note shall be utilized, or at a floating rate, in which event the attached form of Floating Rate Note shall be utilized. Unless otherwise specified in the applicable Floating Rate Note, the floating rate of interest may be calculated by reference to the Commercial Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate or the Federal Funds Rate, as set forth in the attached form of Floating Rate Note (each, a "Base Rate"), plus or minus a "Spread" and/or multiplied by a Spread Multiplier, in each case as and to the extent set forth in the applicable Floating Rate Note and Pricing Supplement. The rate (fixed or floating) at which each of the Series D Notes shall bear interest shall be determined and established by any two Authorized Officers of the Company from time to time pursuant to the Administrative Procedures and shall be set forth in a Pricing Supplement to the Prospectus and in the applicable Series D Notes. Such rate shall also be the rate at which interest shall accrue on any overdue principal and premium and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. Each interest-bearing Series D Note will bear interest from the date of issuance of such Series D Note (the "Original Issue Date") at the rate per annum, in the case of a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a Floating Rate Note, in each case as set forth in such Series D Note and the applicable Pricing Supplement, until the principal thereof is paid or made available for payment. Unless otherwise indicated in the applicable Series D Note and Pricing Supplement, the "Regular Record Date" with respect to any Fixed Rate Note and any Floating Rate Note shall be the date (whether or not a Business Day) 15 calendar days prior to the related Interest Payment Date. Except as otherwise set forth in the Prospectus for the Series D Notes, the applicable Pricing Supplement or the applicable Series D Note, interest on the Series D Notes shall be payable, in the case of Fixed Rate Notes, semi-annually on February 10 and August 10 in each year; in the case of Floating Rate Notes which reset daily, weekly, or monthly, on the third Wednesday of each month or on the third Wednesday of January, April, July and October of each year (as specified in the applicable Pricing Supplement and in such Floating Rate Note); in the case of Floating Rate Notes which reset quarterly, on the third Wednesday of January, April, July and October of each year; in the case of Floating Rate Notes which reset semi-annually, on the third Wednesday of the two months of each year specified in the applicable Pricing Supplement and in such Floating Rate Note; and in the case of Floating Rate Notes which reset annually, on the third Wednesday of the month of each year specified in the applicable Pricing Supplement and in such Floating Rate Note (each, an "Interest Payment Date"); and in each case, at Maturity with respect to the principal then maturing. If any Interest 4 Payment Date or the Maturity of a Fixed Rate Note falls on a day that is not a Business Day, the related payment of principal, premium, if any, and/or interest need not be made on such day, but may be made on the next succeeding Business Day as if made on the date such payment was due, and no additional interest will accrue in respect of the payment made on that next succeeding Business Day. If any Interest Payment Date other than the Maturity Date for any Floating Rate Note would otherwise be a day that is not a Business Day, such Interest Payment Date will be postponed to the next succeeding Business Day, and interest will continue to accrue in respect of the payment made on that next succeeding Business Day, except that in the case of a Floating Rate Note as to which LIBOR is an applicable Base Rate and that Business Day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a day that is not a Business Day, the Company will make the required payment of Principal, premium, if any, and interest on the next succeeding Business Day, and no additional interest will accrue in respect of the payment made on that next succeeding Business Day. As used herein, "Business Day" means any day other than a Saturday or Sunday or any other day on which banks in The City of New York are generally authorized or obligated by law or executive order to close, and with respect to Floating Rate Notes as to which LIBOR is an applicable Base Rate, is also a London Business Day. As used herein, "London Business Day" means any day on which dealings in deposits in United States dollars are transacted in the London interbank market. 6. The place or places where the principal of (and premium, if any) and interest on Series D Notes, if issued in certificated form, shall be payable and where the Series D Notes, if issued in certificated form, are to be surrendered for registration of transfer or exchange, shall be at the offices and agencies of the Company maintained for that purpose in the Borough of Manhattan in The City of New York, which shall be the Corporate Trust Office of the Trustee, or at such other location selected by the Company, agreed to by the Trustee and consistent with the Indenture (a "Place of Payment"). Payments of the principal (and premium, if any) and interest due with respect to Series D Notes issued in book-entry form will be made by the Company through the Trustee to The Depository Trust Company, or other depositary selected by the Company, consistent with procedures agreed to by the Company and such depositary. Payments of the principal (and premium, if any) and interest due at Maturity with respect to any Series D Note, if issued in certificated form, will be made in immediately available funds upon presentation and surrender of such Series D Note (and, in the case of any repayment on an Optional Repayment Date, upon submission of a duly completed election form in accordance with the provisions described below) at the Corporate Trust Office or other Place of Payment, provided, however, that such Series D Note is presented to the Trustee or other - -------- ------- Paying Agent in time for the Trustee or other Paying Agent to make such payments in such funds in accordance with its normal procedures. Payments of interest other than at Maturity with respect to such Series D Note will be made at the Corporate Trust Office; provided, however, that the payment of such interest may -------- ------- be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Notwithstanding the foregoing, a Holder of $10,000,000 or more in aggregate principal amount of such Series D Notes, if issued in certificated form, having the same Interest Payment Dates will be entitled to receive interest payments (other than at Maturity) by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee not 5 less than 15 calendar days prior to the applicable Interest Payment Date. Any such wire transfer instructions received by the Trustee shall remain in effect until revoked by such Holder. 7. The Series D Notes are not redeemable by the Company prior to Maturity unless otherwise specified pursuant to the Administrative Procedures and set forth in the related Pricing Supplement to the Prospectus, and unless a Redemption Commencement Date and an Initial Redemption Percentage are specified in the Series D Notes. Such redemption of any Series D Note may be made in whole or in part at the discretion of the Company, upon not less than 30 nor more than 60 calendar days' notice, provided that if such redemption could result in a Series D Note remaining Outstanding in a denomination of less than the applicable minimum denomination, such Series D Note shall be redeemed in whole. The Series D Notes, if provided for in an applicable Pricing Supplement and in the Series D Notes, will be subject to repayment at the option of the Holders thereof, on not less than 30 nor more than 60 calendar days' notice, in accordance with the terms of such Series D Notes on their respective optional repayment date, if any, as agreed upon by the Company and the purchasers thereof at the time of sale (each, an "Optional Repayment Date"). If no Optional Repayment Date is indicated with respect to a Series D Note, such Note will not be repayable at the option of the Holder thereof prior to its Stated Maturity. 8. Unless otherwise specified pursuant to the Administrative Procedures and set forth in the related Pricing Supplement to the Prospectus, there is no obligation of the Company to redeem or purchase the Series D Notes pursuant to any sinking fund or analogous provision, or at the option of a Holder thereof. 9. The Series D Notes will be denominated in, and payments of principal, premium, if any, and interest, if any, in respect thereof will be made in, United States dollars. Each Series D Note will be issued in fully registered book-entry form or certificated form and the denominations in which the Series D Notes shall be issuable are $1,000 and any amount in excess thereof which is an integral multiple of $1,000. 10. No covenants, agreements or warranties, other than those set forth in the Original Indenture and this Third Supplemental Indenture, shall apply to the Series D Notes. 11. Section 403 of the Indenture shall apply to the Series D Notes. 12. Section 1101 of the Indenture shall apply to the Series D Notes. 13. Upon declaration of acceleration of the Maturity of the Series D Notes pursuant to Section 502 of the Indenture, the entire principal amount of the Series D Notes (other than Discount Notes) shall be payable. 6 ARTICLE THREE ADDITIONAL COVENANT Section 3.01 Additional Covenant for Series D Notes. Subject to -------------------------------------- Section 1010 of the Indenture, the following covenant shall be an additional covenant so long as any Series D Notes are Outstanding: Restrictions On Sales of HECO. The Company will not sell, ----------------------------- transfer or otherwise dispose of, or permit HECO to issue, sell, transfer or otherwise dispose of, other than to the Company or to a Wholly-Owned Subsidiary, Voting Shares of HECO; provided, however, that this covenant shall not restrict -------- ------- consolidations of HECO with or mergers of HECO with or into (i) the Company or any Wholly-Owned Subsidiary or (ii) any other corporation if the corporation formed by such consolidation or merger shall be a Wholly-Owned Subsidiary of the Company. ARTICLE FOUR MISCELLANEOUS Section 4.01 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. Section 4.02 Other Sections of Indenture not Affected. All ---------------------------------------- Articles, Sections and portions of Sections of the Original Indenture other than those supplemented and amended as provided above are hereby ratified, confirmed and continued in full force and effect in their entirety and are not hereby supplemented or amended in any way. Section 4.03 Severability. If any provisions of this Third ------------ Supplemental Indenture shall be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provisions in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. Section 4.04 Administrative Procedures. The Trustee shall comply ------------------------- with the Administrative Procedures, as they may be amended from time to time in accordance with the 2002 Distribution Agreement. 7 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date and year first above written. HAWAIIAN ELECTRIC INDUSTRIES, INC. [CORPORATE SEAL] By: __________________________________ Name: Robert F. Mougeot Attest: Title: Financial Vice President, Treasurer and Chief Financial Officer ________________________ By: __________________________________ Name: Curtis Y. Harada Title: Controller and Principal Accounting Officer CITIBANK, N.A., as Trustee [CORPORATE SEAL] By: __________________________________ Attest: Name: Patrick De Felice Title: Vice President ________________________ 8 STATE OF HAWAII ) ) ss.: CITY & COUNTY OF HONOLULU ) On the ____ day of ____________, 2002, before me personally came Robert F. Mougeot and Curtis Y. Harada, to me known, who, being by me duly sworn, do depose and say that they are the Financial Vice President, Treasurer and Chief Financial Officer, and Controller and Principal Accounting Officer of Hawaiian Electric Industries, Inc., one of the corporations described in and which executed the foregoing instrument; that they know the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that they signed by their name thereto by like authority. Molly M. Egged _________________________________ Notary Public, State of Hawaii My commission expires: ________ STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ___ day of ___________, 2002, before me personally came Patrick De Felice, to me known, who, being by me duly sworn, did depose and say that he is Vice President of Citibank, N.A., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ------------------------------------ Notary Public, State of New York [Name] Notary Public, State of New York No. __________ Qualified in New York County Commission Expires _______ Exhibit A --------- FORM OF FIXED RATE NOTE (Except as otherwise indicated, the bracketed language applies only to Notes held in book-entry form through DTC) [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY (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. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] HAWAIIAN ELECTRIC INDUSTRIES, INC. MEDIUM-TERM NOTE, SERIES D (Fixed Rate) CUSIP No. Principal Amount: $ FXR No. Stated Maturity Date: Original Issue Date: Redemption Commencement Date: Interest Rate: Initial Redemption Percentage: Interest Payment Date(s): Annual Redemption Percentage Reduction: [ ] Check if a Discount Note Other Provisions: Issue Price: Addendum Attached: [ ] Yes [ ] No Optional Repayment Date(s): HAWAIIAN ELECTRIC INDUSTRIES, INC., a corporation duly organized and existing under the laws of Hawaii (hereinafter called "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of DOLLARS on the Stated Maturity Date specified above (except to the extent redeemed or repaid prior to the Stated Maturity Date), and to pay interest thereon from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, periodically on the Interest Payment Date or Dates specified above, commencing with the first such Interest Payment Date next succeeding the Original Issue Date specified above, and on the Stated Maturity Date (or any Redemption Date or any Optional Repayment Date with respect to which such option has been exercised, each such Stated Maturity Date, Redemption Date and Optional Repayment Date being hereinafter referred to as a "Maturity" with respect to the principal repayable on such date), at the Interest Rate per annum set forth above, until the principal hereof is paid or made available for payment, and at the Interest Rate per annum set forth above on any overdue premium and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest; provided, however, that if such Original Issue Date is -------- ------- after the Regular Record Date and before the Interest Payment Date immediately following such Regular Record Date, interest payments will commence on the second Interest Payment Date following the Original Issue Date to the Holder of this Note on the Regular Record Date with respect to such second Interest Payment Date. Interest on this Note will be computed on the basis of a 360-day year of twelve 30-day months. Notwithstanding the foregoing, if an Addendum is attached hereto or "Other Provisions" apply to this Note as specified above, this Note will be subject to the terms set forth in such Addendum or such "Other Provisions." Interest on this Note will accrue from and including the immediately preceding Interest Payment Date in respect of which interest has been paid or duly made available for payment (or from and including the Original Issue Date if no interest has been paid or duly made available for payment) to, but excluding, the applicable Interest Payment Date or Maturity, as the case may be. If any Interest Payment Date or the Maturity of this Note falls on a day that is not a Business Day, the related payment of principal, premium, if any, and/or interest need not be made on such day, but may be made on the next succeeding Business Day as if made on the date such payment was due, and no additional interest will accrue in respect of the payment made on that next succeeding Business Day. The interest so payable, and punctually paid or duly made available for payment, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for each Interest Payment Date, which date (whether or not a Business Day), shall be 15 calendar days next preceding each such Interest 2 Payment Date; provided, however, that interest payable at Maturity will be payable to the Person to whom the principal hereof will be payable. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) 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 Notes not less than 10 calendar 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 Notes 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. As used herein, "Business Day" means any day other than a Saturday or Sunday or any other day on which banks in The City of New York are generally authorized or obligated by law or executive order to close. This Note is one of a duly authorized issue of securities of the Company (herein called the "Securities", and the series thereof to which this Note belongs being herein called the "Notes"), issued and to be issued in one or more series under an Indenture dated as of October 15, 1988, as supplemented by a Third Supplemental Indenture, dated as of ___________, 2002 (as so supplemented, hereinafter called the "Indenture"), between the Company and Citibank, N.A., as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), 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 Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated above. The Notes of this series may be issued from time to time at varying maturities (between nine months and thirty years from the Original Issue Date specified above) and interest rates and in an aggregate principal amount up to $300,000,000. Payments of the principal (and premium, if any) and interest due with respect to this Note, if issued in book-entry form, will be made by the Company through the Trustee to The Depository Trust Company, or other depositary selected by the Company, consistent with procedures agreed to by the Company and such depositary. Payments of the principal (and premium, if any) and interest due at Maturity with respect to this Note, if issued in certificated form, will be made in immediately available funds upon presentation and surrender of such Note (and, in the case of any repayment on an Optional Repayment Date, upon submission of a duly completed election form in accordance with the provisions described herein) at the Corporate Trust Office or the Trustee or other Paying Agent, provided, however, that this Note is presented to the Trustee or other -------- ------- Paying Agent in time for the Trustee or other Paying Agent to make such payments in such funds in accordance with its normal procedures. Payments of interest other than at Maturity with respect to this Note, if issued in certificated form, will be made at the Corporate Trust Office; provided, however, that the -------- ------- payment of such interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Notwithstanding the foregoing, a Holder of $10,000,000 or more in aggregate principal amount of Notes issued in certificated form and having the same Interest Payment Dates will be entitled to receive interest payments (other than at Maturity) by wire transfer of immediately available funds if appropriate wire transfer 3 instructions have been received in writing by the Trustee not less than 15 calendar days prior to the applicable Interest Payment Date (any such wire transfer instructions received by the Trustee to remain in effect until revoked in writing by such Holder). This Note will not be subject to any sinking fund and, unless otherwise specified in this Note in accordance with the provisions of the following two paragraphs, will not be redeemable or repayable prior to the Stated Maturity Date. If a Redemption Commencement Date and an Initial Redemption Percentage are specified in this Note, this Note will be subject to redemption at the option of the Company prior to the Stated Maturity Date on any date on or after the Redemption Commencement Date specified in this Note, in whole or from time to time in part in increments of $1,000 or the minimum authorized denomination (provided that any remaining principal amount hereof will be at least $1,000 or such minimum authorized denomination), at the Redemption Price together with unpaid interest accrued thereon to the date fixed for redemption (each, a "Redemption Date"), on notice given no less than 30 nor more than 60 calendar days prior to the Redemption Date and in accordance with the provisions of the Indenture. The "Redemption Price" will initially be the Initial Redemption Percentage specified in this Note (as adjusted by the Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid principal amount of this Note to be redeemed. The Initial Redemption Percentage will decline at each anniversary of the Redemption Commencement Date by the Annual Redemption Percentage Reduction, if any, specified in this Note until the Redemption Price is equal to 100% of the unpaid principal amount to be redeemed. In the event of redemption of this Note in part only, a new Note of like tenor for the unredeemed portion hereof and otherwise having the same terms as this Note will be issued in the name of the Holder hereof upon the presentation and surrender hereof. If one or more Optional Repayment Dates are specified in this Note, this Note will be subject to repayment by the Company at the option of the Holder hereof prior to the Stated Maturity Date on the Optional Repayment Date(s) specified in this Note, in whole or in part in increments of $1,000 or the minimum authorized denomination (provided that any remaining principal amount hereof will be at least $1,000 or such minimum authorized denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date fixed for repayment (each, a "Repayment Date"). For this Note to be repaid, this Note must be received, together with the form hereon entitled "Option to Elect Repayment" duly completed, by the Trustee at its corporate trust office not less than 30 nor more than 60 calendar days prior to the Repayment Date. Exercise of such repayment option by the Holder hereof will be irrevocable. In the event of repayment of this Note in part only, a new Note of like tenor for the unrepaid portion hereof and otherwise having the same terms as this Note will be issued in the name of the Holder hereof upon the presentation and surrender hereof. If this Note is a Discount Note as specified herein, the amount payable to the Holder of this Note in the event of redemption, repayment or acceleration of maturity of this Note will be equal to the sum of (i) the Issue Price specified in this Note (increased by any accruals of the Discount) and, in the event of any redemption of this Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption 4 Percentage Reduction, if applicable) and (ii) any unpaid interest on this Note accrued from the Original Issue Date to the Redemption Date, Optional Repayment Date or date of acceleration of maturity, as the case may be. The difference between the Issue Price and 100% of the principal amount of this Note, if a Discount Note, is referred to herein as the "Discount." For purposes of determining the amount of Discount that has accrued as of any Redemption Date, Optional Repayment Date or date of acceleration of maturity of this Note, such Discount will be accrued so as to cause the yield on the Note to be constant. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period, corresponds to the shortest period between Interest Payment Dates (with ratable accruals within a compounding period), a coupon rate equal to the initial interest rate applicable to this Note and an assumption that the maturity of this Note will not be accelerated. If the period from the Original Issue Date to the initial Interest Payment Date (the "Initial Period") is shorter than the compounding period for this Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period, with the short period being treated as provided in the preceding sentence. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of this Note and (b) certain restrictive covenants, in each case upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Note. If an Event of Default with respect to Notes of this series shall occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the right of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66-2/3% in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of 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 Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note 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 on this Note at the times, places and rate, and in the coin or currency, herein prescribed. 5 As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of this Note is registrable in the Security Register upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Note are payable duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series of like tenor, of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. Unless otherwise set forth above, the Notes of this series are issuable only in registered form, without coupons, in minimum denominations of $1,000 and any amount in excess thereof that is an integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein and herein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note 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 Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. This Note will for all purposes be governed by, and construed in accordance with, the laws of the State of New York. 6 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: HAWAIIAN ELECTRIC INDUSTRIES, INC. [CORPORATE SEAL] By: ________________________________ Name: Title: By: ________________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within mentioned Indenture. CITIBANK, N.A., as Trustee By: ________________________________ Authorized Officer 7 OPTION TO ELECT REPAYMENT (For use only if Holder has option to elect repayment) The undersigned hereby irrevocably request(s) and instruct(s) the Company to repay this Note (or portion hereof specified below) pursuant to its terms at a price equal to 100% of the principal amount to be repaid together with unpaid accrued interest to the Optional Repayment Date, to the undersigned, at _____________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Note to be repaid, the Trustee must receive at the Corporate Trust Office, ____________________________, New York, New York __________, or at such other place or places of which the Company shall from time to time notify the Holder of this Note, not less than 30 nor more than 60 calendar days prior to an Optional Repayment Date, if any, specified in this Note, this Note with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Note is to be repaid, specify the portion hereof (which shall be in increments of $1,000) which the Holder elects to have repaid and specify the denomination or denominations (which shall be $1,000 or an integral multiple of $1,000 in excess of $1,000) of the Notes to be issued to the Holder for the portion of this Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid). ________________________________________ Principal Amount to be Repaid: $________________ NOTICE: The signature(s) on this Option to Elect Repayment must correspond with Denomination(s) of Note(s) To Be the name as specified in this Note in Issued for Portion of Note Not Repaid every particular, without alteration or (if applicable): $______________ enlargement or any change whatsoever. Date: _________________________ ABBREVIATIONS The following abbreviations, when used in the inscription specified in this instrument, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM -- as tenants in common UNIF GIFT MIN ACT --....................Custodian...................... (Minor) Under Uniform Gifts to Minors Act ................................. (State) TEN ENT-- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list. _____________________________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfers unto Please Insert Social Security or Other Identifying Number of-Assignee: _____________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ the within Note and all rights hereunder, hereby irrevocably constituting and appointing ____________________________________________________________________ attorney to transfer said Note on the books of the Company, with full power of substitution in the premises. Dated: _______________________________ ____________________________________ NOTICE: The signature to this assignment must correspond with the name as specified in the within instrument in every particular, without alteration or enlargement, or any change whatsoever. Exhibit B --------- FORM OF FLOATING RATE NOTE (Except as otherwise indicated, the bracketed language applies only to Notes held in book-entry form through DTC) [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY (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. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] HAWAIIAN ELECTRIC INDUSTRIES, INC. MEDIUM-TERM NOTE, SERIES D (Floating Rate) CUSIP No.: Principal Amount: $ FLR No. Stated Maturity Date: Original Issue Date: Interest Payment Date(s): Base Rate(s): Interest Determination Date(s): Spread (indicate Plus or Minus): Interest Reset Date(s): Spread Multiplier: Initial Interest Reset Date: Initial Interest Rate: Maximum Interest Rate: In LIBOR: [_] LIBOR Reuters Minimum Interest Rate: [_] LIBOR Telerate [_] Check if a Discount Note Calculation Agent (if other Issue Price: than the Trustee): Index Maturity: Optional Repayment Date(s): Redemption Commencement Date: Other Provisions: Initial Redemption Percentage: Addendum Attached: [_] Yes [_] No Annual Redemption Percentage Reduction: HAWAIIAN ELECTRIC INDUSTRIES, INC. a corporation duly organized and existing under the laws of Hawaii (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of DOLLARS on the Stated Maturity Date specified above (except to the extent redeemed or repaid prior to the Stated Maturity Date), and to pay interest thereon from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, periodically on each Interest Payment Date, commencing with the first such Interest Payment Date next succeeding the Original Issue Date specified above, and on the Stated Maturity Date (or any Redemption Date or any Optional Repayment Date with respect to which such option has been exercised, each such Stated Maturity Date, Redemption Date and Optional Repayment Date being hereinafter referred to as a "Maturity" with respect to the principal repayable on such date), at the rate of interest to be determined in accordance with the following provisions (the "Floating Interest Rate"), until the principal hereof is paid or made available for payment, and at the Floating Interest Rate on any overdue premium and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest; provided, however, that if such Original Issue -------- ------- Date is after a Regular Record Date and before the Interest Payment Date immediately following such Regular Record Date, interest payments will commence on the second Interest Payment Date following the Original Issue Date to the Holder of this Note on the Regular Record Date with respect to such second Interest Payment Date. Notwithstanding the foregoing, if an Addendum is attached hereto or "Other Provisions" apply to this Note as specified above, this Note will be subject to the terms set forth in such Addendum or such "Other Provisions." Interest on this Note will accrue from and including the immediately preceding Interest Payment Date in respect of which interest has been paid or duly made available for 2 payment (or from and including the Original Issue Date if no interest has been paid or duly made available for payment) to, but excluding, the applicable Interest Payment Date or Maturity, as the case may be (the "Interest Period"). If any Interest Payment Date other than the Maturity Date of this Note would otherwise be a day that is not a Business Day, such Interest Payment Date will be postponed to the next succeeding Business Day, and interest will continue to accrue in respect of the payment made on that next succeeding Business Day, except that in the case of a Floating Rate Note as to which LIBOR is an applicable Base Rate and that Business Day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a day that is not a Business Day, the Company will make the required payment of Principal, premium, if any, and interest on the next succeeding Business Day, and no additional interest will accrue in respect of the payment made on that next succeeding Business Day. The interest so payable, and punctually paid or duly made available for payment, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for each Interest Payment Date, which date (whether or not a Business Day) shall be 15 calendar days next preceding such Interest Payment Date; provided, however, that interest payable at Maturity will be payable to the Person to whom the principal hereof will be payable. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) 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 Notes not less than 10 calendar 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 Notes 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. As used herein, "Business Day" means any day other than a Saturday or Sunday or any other day on which banks in The City of New York are generally authorized or obligated by law or executive order to close, and with respect to Notes as to which LIBOR is an applicable Base Rate, is also a London Business Day. As used herein, "London Business Day" means any day on which dealings in deposits in United States dollars are transacted in the London interbank market. This Note is one of a duly authorized issue of securities of the Company (herein called the "Securities", and the series thereof to which this Note belongs being herein called the "Notes"), issued and to be issued in one or more series under an Indenture dated as of October 15, 1988, as supplemented by a Third Supplemental Indenture dated as of ____________, 2002 (as so supplemented, herein called the "Indenture"), between the Company and Citibank, N.A., as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), 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 Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated above. The Notes of this series may be issued from time to time at varying maturities (from nine months to thirty years from the Original Issue Date specified above) and interest rates and in an aggregate principal amount up to $300,000,000. 3 Payments of the principal (and premium, if any) and interest due with respect to this Note, if issued in book-entry form, will be made by the Company through the Trustee to The Depository Trust Company, or other depositary selected by the Company, consistent with procedures agreed to by the Company and such depositary. Payments of the principal (and premium, if any) and interest due at Maturity with respect to this Note, if issued in certificated form, will be made in immediately available funds upon presentation and surrender of such Note (and, in the case of any repayment on an Optional Repayment Date, upon submission of a duly completed election form in accordance with the provisions described herein) at the Corporate Trust Office of the Trustee or other Place of Payment, provided, however, that this Note is presented to the Trustee or other -------- ------- Paying Agent in time for the Trustee or other Paying Agent to make such payments in such funds in accordance with its normal procedures. Payments of interest other than at Maturity with respect to this Note, if issued in certificated form, will be made at the Corporate Trust Office; provided, however, that the -------- ------- payment of such interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Notwithstanding the foregoing, a Holder of $10,000,000 or more in aggregate principal amount of Notes issued in certificated form and having the same Interest Payment Dates will be entitled to receive interest payments (other than at Maturity) by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee not less than 15 calendar days prior to the applicable Interest Payment Date (any such wire transfer instructions received by the Trustee to remain in effect until revoked in writing by such Holder). This Note will not be subject to any sinking fund and, unless otherwise specified in this Note in accordance with the provisions of the following two paragraphs, will not be redeemable or repayable prior to the Stated Maturity Date. If a Redemption Commencement Date and an Initial Redemption Percentage are specified in this Note, this Note will be subject to redemption at the option of the Company prior to the Stated Maturity Date on any date on or after the Redemption Commencement Date specified in this Note, in whole or from time to time in part in increments of $1,000 or the minimum authorized denomination (provided that any remaining principal amount hereof will be at least $1,000 or such minimum authorized denomination), at the Redemption Price together with unpaid interest accrued thereon to the date fixed for redemption (each, a "Redemption Date"), on notice given no less than 30 nor more than 60 calendar days prior to the Redemption Date and in accordance with the provisions of the Indenture. The "Redemption Price" will initially be the Initial Redemption Percentage specified in this Note (as adjusted by the Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid principal amount of this Note to be redeemed. The Initial Redemption Percentage will decline at each anniversary of the Redemption Commencement Date by the Annual Redemption Percentage Reduction, if any, specified in this Note until the Redemption Price is equal to 100% of the unpaid principal amount to be redeemed. In the event of redemption of this Note in part only, a new Note of like tenor for the unredeemed portion hereof and otherwise having the same terms as this Note will be issued in the name of the Holder hereof upon the presentation and surrender hereof. If one or more Optional Repayment Dates are specified in this Note, this Note will be subject to repayment by the Company at the option of the Holder hereof prior to the 4 Stated Maturity Date on the Optional Repayment Date(s) specified in this Note, in whole or in part in increments of $1,000 or the minimum authorized denomination (provided that any remaining principal amount hereof will be at least $1,000 or such minimum authorized denomination), at a repayment price equal to 100% of the unpaid principal amount to be repaid, together with unpaid interest accrued thereon to the date fixed for repayment (each, a "Repayment Date"). For this Note to be repaid, this Note must be received, together with the form hereon entitled "Option to Elect Repayment" duly completed, by the Trustee at its corporate trust office not less than 30 nor more than 60 calendar days prior to the Repayment Date. Exercise of such repayment option by the Holder hereof will be irrevocable. In the event of repayment of this Note in part only, a new Note of like tenor for the unrepaid portion hereof and otherwise having the same terms as this Note will be issued in the name of the Holder hereof upon the presentation and surrender hereof. If this Note is a Discount Note as specified herein, the amount payable to the Holder of this Note in the event of redemption, repayment or acceleration of maturity of this Note will be equal to the sum of (i) the Issue Price specified in this Note (increased by any accruals of the Discount) and, in the event of any redemption of this Note (if applicable), multiplied by the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction, if applicable) and (ii) any unpaid interest on this Note accrued from the Original Issue Date to the Redemption Date, Optional Repayment Date or date of acceleration of maturity, as the case may be. The difference between the Issue Price and 100% of the principal amount of this Note, if a Discount Note, is referred to herein as the "Discount." For purposes of determining the amount of Discount that has accrued as of any Redemption Date, Optional Repayment Date or date of acceleration of maturity of this Note, such Discount will be accrued so as to cause the yield on the Note to be constant. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period, corresponds to the shortest period between Interest Payment Dates (with ratable accruals within a compounding period), a coupon rate equal to the initial interest rate applicable to this Note and an assumption that the maturity of this Note will not be accelerated. If the period from the Original Issue Date to the initial Interest Payment Date (the "Initial Period") is shorter than the compounding period for this Note, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then such period will be divided into a regular compounding period and a short period, with the short period being treated as provided in the preceding sentence. Unless otherwise indicated herein, this Note will bear interest at a rate determined by reference to an interest rate basis (the "Base Rate"), which may be adjusted by a Spread and/or Spread Multiplier. The applicable Base Rate may be: (a) the Commercial Paper Rate (if applicable, this Note being a "Commercial Paper Rate Note"), (b) the Prime Rate (if applicable, this Note being a "Prime Rate Note"), (c) LIBOR (if applicable, this Note being a "LIBOR Note"), (d) the Treasury Rate (if applicable, this Note being a "Treasury Rate Note"), (e) the CD Rate (if applicable, this Note being a "CD Rate Note"), (f) the Federal Funds Rate (if applicable, this Note being a "Federal Funds Rate Note") or (g) such other Base Rate or interest rate formula as is set forth herein. If the applicable Base Rate is LIBOR, this Note will also specify the Designated LIBOR Page, as such term is defined below. 5 Unless otherwise specified herein, the interest rate with respect to this Note will be calculated by reference to the specified Base Rate or Rates (a) plus or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any. The "Spread" is the number of basis points (one one-hundredth of a percentage point), if any, specified herein to be added to or subtracted from the Base Rate for this Note to calculate the interest rate for this Note, and the "Spread Multiplier" is the percentage, if any, specified herein to be multiplied by the Base Rate (or by the Base Rate increased or decreased by the Spread) to calculate the interest rate for this Note. The "Index Maturity" for this Note is the period to maturity of the instrument or obligation from which the Base Rate is calculated. Unless otherwise specified in this Note, the interest rate with respect to each Base Rate will be determined in accordance with the applicable provisions below. Except as set forth in this Note, the interest rate in effect on each day shall be (i) if such day is an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date. The rate of interest on this Note will be reset daily, weekly, monthly, quarterly, semi-annually or annually (each, an "Interest Reset Date"). The Interest Reset Date will be, in the case of Notes that reset daily, each Business Day; in the case of Notes (other than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes which reset weekly, the Tuesday of each week; in the case of Notes which reset monthly, the third Wednesday of each month; in the case of Notes which reset quarterly, the third Wednesday of January, April, July and October of each year; in the case of Notes which reset semi-annually, the third Wednesday of two months of each year as specified above; and in the case of Notes which reset annually, the third Wednesday of one month of each year as specified above; provided, however, that the interest rate in effect from the Original Issue Date - -------- ------- to the first Interest Reset Date with respect to a Note will be the Initial Interest Rate (as set forth in this Note). If any Interest Reset Date for this Note would otherwise be a day that is not a Business Day, such Interest Reset Date will be postponed to the next succeeding day that is a Business Day, except that in the case of a Note as to which LIBOR is an applicable Base Rate, if such Business Day falls in the next succeeding calendar month, such Interest Reset Date will be the immediately preceding Business Day. Except as provided below, interest will be payable in the case of Notes which reset: (i) daily, weekly or monthly, on the third Wednesday of each month or on the third Wednesday of January, April, July and October of each year, as specified above; (ii) quarterly, on the third Wednesday of January, April, July and October of each year; (iii) semiannually, on the third Wednesday of the two months of each year specified above; and (iv) annually, on the third Wednesday of the month of each year specified above (each, an "Interest Payment Date") and, in each case, at Maturity with respect to the principal repayable on such date. The Interest Determination Date pertaining to an Interest Reset Date for a Commercial Paper Rate Note (the "Commercial Paper Rate Interest Determination Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"), for a CD Rate Note (the "CD 6 Rate Interest Determination Date") and for a Federal Funds Rate Note (the "Federal Funds Rate Interest Determination Date") will be the second Business Day preceding such Interest Reset Date. The Interest Determination Date for a LIBOR Note (the "LIBOR Interest Determination Date") will be the second London Business Day preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date") will be the day of the week in which such Interest Reset Date falls on which day Treasury bills (as defined below) would normally be auctioned by the U.S. Department of the Treasury. Treasury bills are generally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If, as a result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Treasury Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. The Interest Determination Date pertaining to a Note the interest rate of which is determined by reference to two or more Base Rates will be the most recent Business Day that is at least two Business Days prior to the applicable Interest Reset Date for this Note on which each Base Rate is determinable. Each Base Rate will be determined as of the applicable Interest Determination Date, and the applicable interest rate will take effect on the applicable Interest Reset Date. Notwithstanding the other provisions herein, the daily Floating Interest Rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified in this Note and, in addition, the Floating Interest Rate shall in no event be higher than the maximum rate permitted by New York or Hawaii law, whichever is lower, as the same may be modified by United States law of general application. Except as otherwise provided herein, all percentages resulting from any calculations on this Note will be rounded to the nearest one hundred-thousandth of a percentage point (with five one-millionths of a percentage point being rounded up, e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on this Note will be rounded to the nearest cent (with one half cent being rounded up). Accrued interest is calculated by multiplying the principal amount of this Note by an accrued interest factor. The interest factor is computed by adding the interest factor calculated for each day in the Interest Period. The interest factor (expressed as a decimal) for each such day is computed by dividing the interest rate (expressed as a decimal) applicable to such date by 360, in the case of Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by the actual number of days in the year, in the case of Treasury Rate Notes. The interest factor for Notes for which the interest rate is determined by reference to two or more Base Rates will be calculated in each period in the same manner as if only the lowest, highest or average of the applicable Base Rate applied, as specified above or in the Addendum hereto. The Calculation Agent (which shall be the Trustee unless otherwise specified above) shall calculate the Floating Interest Rate on this Note on or before each Calculation Date and, upon request, provide to Holders the Floating Interest Rate then in effect and, if calculated, 7 to become in effect. The Calculation Agent's determination of any Floating Interest Rate will be final and binding in the absence of manifest error. The Calculation Date, if applicable, pertaining to any Interest Determination Date will be the earlier of (i) the tenth calendar day after such Interest Determination Date, or, if such day is not a Business Day, the next succeeding Business Day and (ii) the Business Day preceding the applicable Interest Payment Date or Maturity, as the case may be. Unless otherwise provided in this Note, the Calculation Agent shall determine each Base Rate in accordance with the following provisions: Determination of Commercial Paper Rate The "Commercial Paper Rate" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date and will be the Money Market Yield (as defined below) as of the Commercial Paper Rate Interest Determination Date next preceding such Interest Reset Date of the rate for commercial paper having the Index Maturity specified above, as such rate shall be published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or any successor publication (such publication being hereinafter called "H.15(519)"), under the heading "Commercial Paper-Nonfinancial". In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Commercial Paper Rate with respect to such Interest Reset Date will be the Money Market Yield on the applicable Commercial Paper Rate Interest Determination Date of the rate for commercial paper of the Index Maturity specified in this Note as published in the daily update of H.15(519), available through the world-wide web site of the Board of Governors of the Federal Reserve System at http://federalreserve.gov/releases/h15/update, or any successor site or publication (such site or publication being hereinafter called "H.15 Daily Update"), under the heading "Commercial Paper-Nonfinancial" (with an Index Maturity of one month or three months being deemed to be an equivalent to an Index Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or H.15 Daily Update, then the Commercial Paper Rate will be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on the applicable Commercial Paper Rate Interest Determination Date of three leading dealers of commercial paper in The City of New York selected by the Calculation Agent, in its discretion, for commercial paper of the specified Index Maturity placed for an industrial issuer whose bond rating is "Aa," or the equivalent, from a nationally recognized statistical rating organization. If the dealers selected as aforesaid by the Calculation Agent are not quoting offered rates as described in the preceding sentence, the Commercial Paper Rate with respect to such Interest Reset Date will be the Commercial Paper Rate in effect on such Interest Determination Date. 8 "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: Money Market Yield = D x 360 x 100 ------------- 360-(D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal and "M" refers to the actual number of days in the applicable Interest Reset Period. Determination of Prime Rate The "Prime Rate" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the Prime Rate Interest Determination Date next preceding such Interest Reset Date as published in H. 15(519) under the heading "Bank Prime Loan". In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Prime Rate with respect to such Interest Reset Date will be the applicable rate as published in H.15 Daily Update under the heading "Bank Prime Loan." If by 3:00 P.M., New York City time, on such Calculation Date such rate is not yet published in either H.15(519) or H.15 Daily Update, then the Prime Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates of interest publicly announced by each bank that appears on such Prime Rate Interest Determination Date on the display designated as page "USPRIME1" on the Reuters Monitor Money Rates Service (or any successor service or such other page as may replace the USPRIME1 page on that service for the purpose of displaying prime rates or base lending rates of major United States banks) ("Reuters Screen USPRIME1 Page") as such bank's prime rate or base lending rate as of 11:00 A.M., New York City time, on such Prime Rate Interest Determination Date. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page as of 3:00 P.M., New York City time, on the applicable Prime Rate Interest Determination Date, the Prime Rate with respect to such Interest Reset Date will be the arithmetic mean of the prime rates or base lending rates (quoted on the basis of the actual number of days in the year divided by a 360-day year) as of the close of business on such Prime Rate Interest Determination Date as furnished in The City of New York by the major money center banks, if any, that have provided such quotations and by a reasonable number of substitute banks or trust companies to obtain four such prime rate quotations, provided such substitute banks or trust companies are organized and doing business under the laws of the United States, or any state thereof, each having total equity capital of at least $500 million and being subject to supervision or examination by federal or state authority, selected by the Calculation Agent to provide such rate or rates. If the banks or trust companies selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the Prime Rate with respect to such Interest Reset Date will be the Prime Rate in effect on such Prime Rate Interest Determination Date. Determination of LIBOR "LIBOR" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date in accordance with the following provisions: 9 (i) With respect to a LIBOR Interest Determination Date, LIBOR will be either: (a) if "LIBOR Reuters" is specified in this Note, the arithmetic mean of the offered rates (unless the Designated LIBOR Page by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in U.S. dollars having the Index Maturity specified in this Note, commencing on the applicable Interest Reset Date, that appear (or, if only a single rate is required as aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate" is specified in this Note or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in this Note as the method for calculating LIBOR, the rate for deposits in U.S. dollars having the Index Maturity specified in this Note, commencing on such Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date. If fewer than two such offered rates so appear, or if no such rate so appears where the Designated LIBOR Page provides only for a single rate, LIBOR on such LIBOR Interest Determination Date will be determined in accordance with the provisions described in subparagraph (ii) below. (ii) With respect to a LIBOR Interest Determination Date on which fewer offered rates appear than are required in subparagraph (i) above, the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market selected by the Calculation Agent, in its discretion, to provide the Calculation Agent with its offered quotation for deposits in U.S. dollars for the period of the Index Maturity specified in this Note, commencing on the applicable Interest Reset Date to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date and in a principal amount that is representative for a single transaction in U.S. dollars in such market at such time. If at least two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, then LIBOR on such LIBOR Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., New York City time, on such LIBOR Interest Determination Date by three major banks in The City of New York selected by the Calculation Agent for loans in U.S. dollars to leading European banks, having the Index Maturity specified in this Note and in a principal amount that is representative for a single transaction in U.S. dollars in such market at such time. If the banks so selected by the Calculation Agent are not quoting rates as described in the preceding sentence, LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR in effect under the Note on such LIBOR Interest Determination Date. "Designated to LIBOR Page" means (a) if "LIBOR Reuters" is specified in this Note, the display in the Reuter Monitor Money Rates Service (or any successor service) on the page specified in this Note (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for U.S. dollars, or (b) if "LIBOR Telerate" is specified in this Note or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in this Note as the method for calculating LIBOR, the display on the Moneyline Telerate Service (or any successor service) on the page specified in this Note (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for U.S. dollars. Determination of Treasury Rate 10 The "Treasury Rate" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date and will be the rate for the auction held on the Treasury Rate Interest Determination Date (the "Auction") next preceding such Interest Reset Date of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in this Note as published under the heading "INVESTMENT RATE" on the display on the Moneyline Telerate Service (or any successor service) on page 56 (or any other page as may replace that page on that service) or page 57 (or any other page as may replace that page on that service). In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury bills as published in H.15 Daily Update under the heading "U.S. Government Securities/Treasury Bills/Auction High." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield of the auction rate of the applicable Treasury bills as announced by the United States Department of the Treasury. In the event that the rate referred to in the preceding sentence is not so announced by the United States Department of the Treasury, or if the Auction is not held, then the Treasury Rate with respect to such Interest Reset Date will be the Bond Equivalent Yield of the rate for the applicable Treasury bills as published in H.15(519) under the heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate with respect to such Interest Reset Date will be the rate for the applicable Treasury Bills as published in H.15 Daily Update under the heading "U.S. Government Securities/Treasury Bills/Secondary Market." In the event that the rate referred to in the preceding sentence is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the Treasury Rate will be calculated by the Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest Determination Date, of three primary United States government securities dealers selected by the Calculation Agent, in its discretion, for the issue of Treasury bills with a remaining maturity closest to the Index Maturity designated in this Note. If the dealers selected as aforesaid by the Calculation Agent are not quoting bid rates as described in the preceding sentence, the Treasury Rate with respect to such Interest Reset Date will be the Treasury Rate in effect under the Note on such Treasury Rate Interest Determination Date. "Bond Equivalent Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: Bond Equivalent Yield = D x N x 100 ----------- 360-(D x M) where "D" refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the case may be, and "M" refers to the actual number of days in the applicable Interest Reset Period. Determination of CD Rate 11 The "CD Rate" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the CD Rate Interest Determination Date next preceding such Interest Reset Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in this Note as published in H.15(519) under the heading "CDs (secondary market)". In the event that such rate is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate with respect to such Interest Reset Date shall be the rate on such CD Rate Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in this Note as published in H.15 Daily Update under the heading "CDs (secondary market)". If by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or H.15 Daily Update, the CD Rate with respect to such Interest Reset Date shall be calculated by the Calculation Agent and shall be the arithmetic mean of the secondary market offered rates, as of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date, of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable United States certificates of deposit of major United States money center banks with a remaining maturity closest to the Index Maturity specified in this Note in United States dollars. If the dealers selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the CD Rate with respect to such Interest Reset Date will be the CD Rate in effect under the Note on such CD Rate Interest Determination Date. Determination of Federal Funds Rate The "Federal Funds Rate" with respect to each Interest Reset Date will be determined by the Calculation Agent on the Calculation Date and will be the rate as of the Federal Funds Interest Determination Date next preceding such Interest Reset Date for United States dollar federal funds as published in H. 15(519) under the heading "Federal Funds (Effective)" and displayed on the Moneyline Telerate Service (or any successor service) on page 120 (or any other page as may replace that page on that service). In the event that such rate does not appear on such page 120 or is not published prior to 3:00 P.M., New York City time, on the relevant Calculation Date, then the Federal Funds Rate with respect to such Interest Reset Date will be the rate on such Federal Funds Interest Determination Date as published in H.15 Daily Update under the heading "Federal Funds (Effective)". If by 3:00 P.M., New York City time, on such Calculation Date such rate is not published in either H.15(519) or H.15 Daily Update, the Federal Funds Rate with respect to such Interest Reset Date shall be calculated by the Calculation Agent and shall be the arithmetic mean of the rates, as of 9:00 A.M., New York City time, on the applicable Federal Funds Interest Determination Date, for the last transaction in overnight United States federal funds arranged by three leading brokers of United States federal funds transactions in The City of New York selected by the Calculation Agent. If the brokers selected as aforesaid by the Calculation Agent are not quoting rates as described in the preceding sentence, the Federal Funds Rate with respect to such Interest Reset Date will be the Federal Funds Rate in effect under the Note on such Federal Funds Interest Determination Date. The Indenture contains provisions to defeasance at any time of (a) the entire indebtedness of this Note and (b) certain restrictive covenants, in each case upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Note. 12 If an Event of Default with respect to Notes of this series shall occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66-2/3% in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of 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 Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note 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 on this Note at the times, places and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of this Note is registrable in the Security Register upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Note are payable duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney, duly authorized in writing and thereupon one or more new notes 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. Unless otherwise set forth above, the Notes of this series are issuable only in registered form, without coupons, in minimum denominations of $1,000 and any amount in excess thereof that is an integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein and herein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name 13 this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. This Note will for all purposes be governed by, and construed in accordance with, the laws of the State of New York. 14 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: HAWAIIAN ELECTRIC INDUSTRIES, INC. [CORPORATE SEAL] By: _________________________________ Name: Title: By: _________________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. CITIBANK, N.A., as Trustee By: _________________________________ Authorized Officer 15 OPTION TO ELECT REPAYMENT (For use only if Holder has option to elect repayment) The undersigned hereby irrevocably request(s) and instruct(s) the Company to repay this Note (or portion hereof specified below) pursuant to its terms at a price equal to 100% of the principal amount to be repaid together with unpaid accrued interest to the Optional Repayment Date, to the undersigned, at _____________________________________________________________________________ ________________________________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Note to be repaid, the Trustee must receive at the Corporate Trust Office, ____________________________, New York, New York __________, or at such other place or places of which the Company shall from time to time notify the Holder of this Note, not less than 30 nor more than 60 calendar days prior to an Optional Repayment Date, if any, specified in this Note, with this "Option to Elect Repayment" form duly completed. If less than the entire principal amount of this Note is to be repaid, specify the portion hereof (which shall be in increments of $1,000) which the Holder elects to have repaid and specify the denomination or denominations (which shall be $1,000 or an integral multiple of $1,000 in excess of $1,000) of the Notes to be issued to the Holder for the portion of this Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid). ________________________________________ Principal Amount to be Repaid: $_________________ NOTICE: The signature(s) on this Option to Elect Repayment must correspond with Denomination(s) of Note(s) To Be the name as specified in this Note in Issued for Portion of Note Not Repaid every particular, without alteration or (if applicable): $_______________ enlargement or any change whatsoever. Date: ___________________________ ABBREVIATIONS The following abbreviations, when used in the inscription specified in this instrument, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .................. Custodian ..................... (Minor) Under Uniform Gifts to Minors Act ................................. (State) TEN ENT-- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list. ____________________________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfers unto Please Insert Social Security or Other Identifying Number of Assignee: ____________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ the within Note and all rights hereunder, hereby irrevocably constituting and appointing ___________________________________________________________ attorney to transfer said Note on the books of the Company, with full power of substitution in the premises. Dated: __________________ NOTICE: The signature to this assignment must correspond with the name as specified in the within instrument in every particular, without alteration or enlargement, or any change whatsoever. EX-5.(A) 5 dex5a.txt OPINION OF GOODSILL ANDERSON QUINN & STIFEL [LETTERHEAD OF GOODSILL ANDERSON QUINN & STIFEL] EXHIBIT 5(a) May 6, 2002 Hawaiian Electric Industries, Inc. 900 Richards Street Honolulu, Hawaii 96813 Ladies and Gentlemen: Hawaiian Electric Industries, Inc., a Hawaii corporation (the "Company"), has filed a registration statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), covering the registration of $300,000,000 principal amount of Medium-Term Notes, Series D (the "Notes"). Under the terms of the Indenture dated as of October 15, 1988, between the Company and Citibank, N.A., as trustee (the "Trustee"), as previously supplemented and to be further supplemented by a Third Supplemental Indenture between the Company and the Trustee, in substantially the form attached as an Exhibit to the Registration Statement (said Indenture, as so supplemented, hereinafter referred to as the "Indenture"), the Notes may be issued from time to time with the specific terms to be determined at the time of sale. In connection with the filing of the Registration Statement, we have examined the Registration Statement, the Indenture and such corporate and other records, certificates and documents and such matters of fact and law as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed. We are members of the bar of the State of Hawaii and, for purposes of this opinion, do not hold ourselves out as experts on the laws of any jurisdiction other than the laws of the State of Hawaii. In expressing the following opinions, we have relied, with your and its approval, as to all matters of New York law related to this opinion upon the opinion of even date herewith addressed to us of Pillsbury Winthrop LLP. Based on the foregoing, we advise you that in our opinion: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Hawaii. 2. When the Registration Statement has become effective under the Act and any necessary Pricing Supplement and amendments thereto have been filed, the Third Supplemental Indenture and any applicable amendments and supplements thereto and to the Indenture have been GOODSILL ANDERSON QUINN & STIFEL A LIMITED LIABILITY LAW PARTNERSHIP LLP Hawaiian Electric Industries, Inc. May 6, 2002 Page Two duly authorized, executed and delivered by the Company and the Trustee, the terms of the Notes and their issue and sale have been duly authorized and established in conformity with the Indenture, the Distribution Agreement relating to the Notes between the Company and the Agents named therein and the resolutions of the Board of Directors of the Company relating to the Notes so as not to violate any applicable law, regulation or order of any governmental body or agreement or instrument then binding on the Company, and the Notes have been duly executed and authenticated by the Trustee and the Company in accordance with the Indenture and have been issued and sold as contemplated in the Registration Statement (and in any Pricing Supplements and amendments thereto), the Notes will constitute valid and legally binding obligations of the Company, except as may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other similar laws relating to or affecting the enforcement of creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law) and subject to an implied covenant of reasonableness, good faith and fair dealing. We hereby consent to the filing of this opinion as Exhibit 5(a) to the Registration Statement, to the references to our firm under the caption "Validity of Notes" in the Registration Statement and to the reliance by Pillsbury Winthrop LLP on this opinion in connection with its opinion of even date herewith addressed to us insofar as such opinion relates to matters of Hawaii law. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ GOODSILL ANDERSON QUINN & STIFEL A Limited Liability Law Partnership LLP EX-5.(B) 6 dex5b.txt OPINION OF PILLSBURY WINTHROP EXHIBIT 5(b) [Letterhead of Pillsbury Winthrop LLP] May 6, 2002 Goodsill Anderson Quinn & Stifel 1999 Alakea Street Honolulu, Hawaii 96813 Ladies and Gentlemen: In connection with the registration under the Securities Act of 1933 (the "Act") of $300,000,000 principal amount of Medium-Term Notes, Series D (the "Notes") of Hawaiian Electric Industries, Inc., a Hawaii corporation (the "Company"), we have reviewed such corporate records, certificates and other documents and such questions of law as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such review, we advise you that, in our opinion, when (1) the Registration Statement on Form S-3 relating to the Notes (the "Registration Statement") has become effective under the Act, (2) the Third Supplemental Indenture to the Indenture between the Company and Citibank, N.A., as trustee, relating to the Notes has been duly authorized, executed and delivered, (3) the terms of the Notes and of their issue and sale have been duly authorized and established in conformity with such Indenture, the Distribution Agreement relating to the Notes between the Company and the Agents named therein and the resolutions of the Board of Directors of the Company relating to the Notes so as to not violate any applicable law, regulation or order of any governmental body or agreement or instrument then binding on the Company and (4) the Notes have been duly executed and authenticated in accordance with such Indenture and issued and sold as contemplated by the Registration Statement, the Notes will constitute valid and binding obligations of the Company, except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law) and subject to an implied covenant of reasonableness, good faith and fair dealing. We are members of the bar of the State of New York and, for purposes of this opinion, do not hold ourselves out as experts on the laws of any jurisdiction other than the law of the State of New York. We have relied upon your opinion of even date herewith addressed to the Company as to all matters of Hawaii law related to this opinion. May 6, 2002 Page 2 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to the reference to us under the caption "Validity of the Notes" in the Registration Statement and to the reference to this opinion in your opinion filed as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Pillsbury Winthrop LLP EX-23.(A) 7 dex23a.txt CONSENT OF KPMG EXHIBIT 23(a) Accountants' Consent The Board of Directors Hawaiian Electric Industries, Inc.: We consent to the incorporation by reference in the Registration Statement on Form S-3 of Hawaiian Electric Industries, Inc., registering $300,000,000 of Medium Term Notes, Series D, of our report dated January 23, 2002, relating to the consolidated balance sheets of Hawaiian Electric Industries, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2001, which report is incorporated by reference in the 2001 annual report on Form 10-K of Hawaiian Electronic Industries, Inc. We also consent to the incorporation by reference of our report dated January 23, 2002, relating to the financial statements schedules of Hawaiian Electric Industries, Inc. in the aforementioned 2001 annual report on Form 10-K, which report is included in said Form 10-K and to the reference to our firm under the heading "Experts" in the prospectus. Our reports refer to a change to the accounting method for derivative instruments and hedging activities. /s/ KPMG LLP Honolulu, Hawaii May 7, 2002 1 EX-24 8 dex24.txt POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL PEOPLE BY THESE PRESENTS that the undersigned, HAWAIIAN ELECTRIC INDUSTRIES, INC., a Hawaii corporation (the "Company"), and the officers and directors of said corporation whose names are signed hereto, hereby constitute and appoint ROBERT F. CLARKE, ROBERT F. MOUGEOT, CURTIS Y. HARADA, DAVID J. REBER and GREGORY R. KIM of Honolulu, Hawaii, and each of them, with full power of substitution in the premises (with full power to each of them to act alone), their true and lawful attorneys and agents, and in its and their name, place and stead, to do any and all acts and things and to execute any and all instruments and documents which said attorneys and agents or any of them may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, as amended (the "Securities Act"), and any rules, regulations or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the registration under said Act of up to $300,000,000 aggregate initial offering price of Medium-Term Notes, Series D pursuant to the Medium-Term Note Program, including specifically but without limiting the generality of the foregoing, power and authority to sign the name of the Company and the names of the undersigned officers and directors thereof, in the capacities indicated below, to the Registration Statement to be filed with the Commission in respect of the aforementioned securities, to any and all amendments (including pre-and post-effective amendments) and supplements to said Registration Statement (including specifically and without limiting the generality of the foregoing, any amendment or amendments increasing up to an aggregate of $300,000,000 initial offering price of Medium-Term Notes for which registration is being sought) and to any instruments or documents filed as a part of or in connection with said registration statement or amendments or supplements thereto, and each of the undersigned hereby ratifies and confirms all of the aforesaid that said attorneys and agents or any of them shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, Hawaiian Electric Industries, Inc. has caused this Power of Attorney to be executed in its name by its Chairman, President and Chief Executive Officer and by its Financial Vice President, Treasurer and Chief Financial Officer and attested by its Secretary, and the undersigned officers and directors of Hawaiian Electric Industries, Inc. have hereunto set their hands, as of the 19/th/ day of March, 2002. This Power of Attorney may be executed in any number of counterparts by the corporation and by any one or more of the officers and directors named below. ATTEST: HAWAIIAN ELECTRIC INDUSTRIES, INC. /s/ Peter C. Lewis By /s/ Robert F. Clarke - ---------------------------------- ----------------------------------- Peter C. Lewis Robert F. Clarke Vice President-Administration Chairman, President and Secretary and Chief Executive Officer By /s/ Robert F. Mougeot ----------------------------------- Robert F. Mougeot Financial Vice President, Treasurer and Chief Financial Officer /s/ Robert F. Clarke Chairman, President, - ---------------------------------- Robert F. Clarke Chief Executive Officer and Director /s/ Robert F. Mougeot Financial Vice President, Treasurer - ---------------------------------- Robert F. Mougeot and Chief Financial Officer /s/ Curtis Y. Harada Controller and Principal Accounting - ---------------------------------- Curtis Y. Harada Officer 2 /s/ Don E. Carroll Director - ---------------------------------- Don E. Carroll /s/ Constance H. Lau Director - ---------------------------------- Constance H. Lau /s/ Victor Hao Li Director - ---------------------------------- Victor Hao Li /s/ T. Michael May Director - ---------------------------------- T. Michael May /s/ Bill D. Mills Director - ---------------------------------- Bill D. Mills /s/ A. Maurice Mayers Director - ---------------------------------- A. Maurice Mayers /s/ Diane J. Plotts Director - ---------------------------------- Diane J. Plotts /s/ James K. Scott Director - ---------------------------------- James K. Scott /s/ Oswald K. Stender Director - ---------------------------------- Oswald K. Stender /s/ Kelvin H. Taketa Director - ---------------------------------- Kelvin H. Taketa /s/ Jeffrey N. Watanabe Director - ---------------------------------- Jeffrey N. Watanabe 3 EX-25 9 dex25.txt FORM T-1 STATEMENT OF ELIGIBILITY & QUALIFICATION EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________ FORM T-1 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) ____ ________________________ CITIBANK, N.A. (Exact name of trustee as specified in its charter) 13-5266470 (I.R.S. employer identification no.) 399 Park Avenue, New York, New York 10043 (Address of principal executive office) (Zip Code) _______________________ HAWAIIAN ELECTRIC INDUSTRIES, INC. (Exact name of obligor as specified in its charter) Hawaii 99-0208097 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 900 Richards Street Honolulu, Hawaii 96813 (Address of principal executive offices) (Zip Code) _________________________ DEBT SECURITIES (Title of the indenture securities) Item 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 ---- ------- Comptroller of the Currency Washington, D.C. Federal Reserve Bank of New York New York, NY 33 Liberty Street New York, NY Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as exhibits hereto. Exhibit 1 - Copy of Articles of Association of the Trustee, as now in effect. (Exhibit 1 to T-1 to Registration Statement No. 2-79983) Exhibit 2 - Copy of certificate of authority of the Trustee to commence business. (Exhibit 2 to T-1 to Registration Statement No. 2-29577). Exhibit 3 - Copy of authorization of the Trustee to exercise corporate trust powers. (Exhibit 3 to T-1 to Registration Statement No. 2-55519) Exhibit 4 - Copy of existing By-Laws of the Trustee. (Exhibit 4 to T-1 to Registration Statement No. 33-34988) Exhibit 5 - Not applicable. Exhibit 6 - The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939.(Exhibit 6 to T-1 to Registration Statement No. 33-19227.) Exhibit 7 - Copy of the latest Report of Condition of Citibank, N.A. (as of December 31, 2001 - attached) Exhibit 8 - Not applicable. Exhibit 9 - Not applicable. ____________________ SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, 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 12th day of April, 2002. CITIBANK, N.A. By /s/P. DeFelice -------------------------------- Vice President Charter No. 1461 Comptroller of the Currency Northeastern District REPORT OF CONDITION CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF Citibank, N.A. of New York in the State of New York, at the close of business on December 31, 2001, published in response to call made by Comptroller of the Currency, under Title 12, United States Code, Section 161. Charter Number 1461 Comptroller of the Currency Northeastern District.
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .......................... $ 11,056,000 Interest-bearing balances ................................................... 19,181,000 Held-to-maturity securities ................................................. 0 Available-for-sale securities ............................................... 47,054,000 Federal funds sold and securities purchased under agreements to resell ...... 14,935,000 Loans and lease financing receivables: Loans and leases held for sale ........................................ 4,354,000 Loans and Leases, net of unearned income .............................. 280,455,000 LESS: Allowance for loan and lease losses ................................... 5,446,000 ------------ Loans and leases, net of unearned income, allowance, and reserve ............ 275,009,000 Trading assets .............................................................. 36,633,000 Premises and fixed assets (including capitalized leases) .................... 3,920,000 Other real estate owned ..................................................... 179,000 Investments in unconsolidated subsidiaries and associated companies ......... 894,000 Customers' liability to this bank on acceptances outstanding ................ 1,314,000 Intangible assets: Goodwill ................................................. 5,068,000 Intangible assets: Other intangible assets .................................. 3,897,000 Other assets ................................................................ 28,849,000 ------------ TOTAL ASSETS ................................................................ $452,343,000 ============ LIABILITIES Deposits: In domestic offices ............................................... $ 98,899,000 Noninterest- bearing ........................................................ 19,024,000 Interest- bearing ........................................................... 79,875,000 In foreign offices, Edge and Agreement subsidiaries, and IBFs ............... 208,024,000 Noninterest- bearing ........................................................ 15,206,000 Interest- bearing ........................................................... 192,818,000
Federal funds purchased and securities sold under agreements to repurchase .................... 23,278,000 Demand notes issued to the U.S. Treasury ...................................................... 0 Trading liabilities ........................................................................... 20,306,000 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): SS ................................................................................ 26,349,000 Bank's liability on acceptances executed and outstanding ...................................... 1,314,000 Subordinated notes and debentures ............................................................. 10,700,000 Other liabilities ............................................................................. 25,634,000 ------------ TOTAL LIABILITIES ............................................................................. $414,504,000 ============ Minority interest in consolidated Subsidiaries ................................................ 216,000 EQUITY CAPITAL Perpetual preferred stock and related surplus ................................................. 350,000 Common stock .................................................................................. 751,000 Surplus ....................................................................................... 18,582,000 Retained Earnings ............................................................................. 19,227,000 Accumulated net gains (losses) on cash flow hedges ............................................ -1,287,000 Other equity capital components ............................................................... 0 ------------ TOTAL EQUITY CAPITAL .......................................................................... $ 37,623,000 ------------ TOTAL LIABILITIES AND EQUITY CAPITAL .......................................................... $452,343,000 ============
I, Grace B. Vogel, Vice President of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. GRACE B. VOGEL, VICE PRESIDENT We, the undersigned directors, attest to the correctness of this Report of Condition. We 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 and is true and correct. ALAN S. MACDONALD WILLIAM R. RHODES VICTOR J. MENEZES DIRECTORS -----END PRIVACY-ENHANCED MESSAGE-----