-----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, Auw3Wr+BOQs41ITMt2QgRLa2KYaN+CJYQd3zDSYuEdlXfaqJK7CJbCfir6aPE7Ho O+KQnwSOyNxtKNL2z6uiCg== 0000071180-96-000009.txt : 19960327 0000071180-96-000009.hdr.sgml : 19960327 ACCESSION NUMBER: 0000071180-96-000009 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEVADA POWER CO CENTRAL INDEX KEY: 0000071180 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 880045330 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04698 FILM NUMBER: 96538306 BUSINESS ADDRESS: STREET 1: 6226 W SAHARA AVE CITY: LAS VEGAS STATE: NV ZIP: 89102 BUSINESS PHONE: 7023675000 MAIL ADDRESS: STREET 1: P O BOX 230 CITY: LAS VEGAS STATE: NV ZIP: 89151 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHERN NEVADA POWER CO DATE OF NAME CHANGE: 19701113 10-K405 1 1995 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file number 1-4698 NEVADA POWER COMPANY (Exact name of registrant as specified in its charter) Nevada 88-0045330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6226 West Sahara Avenue 89102 Las Vegas, Nevada (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (702) 367-5000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered -------------------------- ----------------------- Common Stock, $1 Par Value New York Stock Exchange Pacific Stock Exchange Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Cumulative Preferred Stock, $20 Par Value, 5.40% Series (Title of class) Cumulative Preferred Stock, $20 Par Value, 5.20% Series (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- 47,453,382 shares of Common Stock were outstanding as of March 20, 1996. The aggregate market value of Common Stock, which is the only voting stock, held by non-affiliates as of March 20, 1996, was $1,032,111,059. (Computed by reference to the closing price on March 20, 1996, as reported by the Wall Street Journal as New York Stock Exchange Composite Transactions.) DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1995 are incorporated by reference into Parts II and IV hereof. (2) Portions of the Registrant's definitive Proxy Statement dated March 13, 1996 for the Company's annual meeting of shareholders on May 10, 1996, are incorporated by reference into Part III hereof. TABLE OF CONTENTS Page ---- PART I Item 1. Business ...................................... 1 Item 2. Properties .................................... 7 Item 3. Legal Proceedings ............................. 8 Item 4. Submission of Matters to a Vote of Security Holders........................................ 9 Supplemental Item. Executive Officers of Registrant .............. 9 PART II Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters ............... 10 Item 6. Selected Financial Data ....................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation... 10 Item 8. Financial Statements and Supplementary Data ... 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........ 11 PART III Item 10. Directors and Executive Officers of the Registrant .................................... 11 Item 11. Executive Compensation ........................ 11 Item 12. Security Ownership of Certain Beneficial Owners and Management ................................ 11 Item 13. Certain Relationships and Related Transactions. 11 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K ........................... 12 SIGNATURES ............................................. 23 PART I ITEM 1. BUSINESS THE COMPANY Nevada Power Company (Company), incorporated in 1929 under the laws of Nevada, is an operating public utility engaged in the electric utility business in the City of Las Vegas and vicinity in southern Nevada. Most of the Company's operations are conducted in Clark County, Nevada (with an estimated service area population of 1,142,000 at December 31, 1995) where the Company furnishes electric service in the communities of Las Vegas, North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas and to Nellis Air Force Base (a permanent military installation northeast of Las Vegas and the USAF Tactical Fighter Weapons Center). Electric service is also supplied to the Department of Energy at Mercury and Jackass Flats in Nye County, where the Nevada Test Site is located. SOURCES OF ELECTRIC ENERGY SUPPLY The electric energy obtained from the Company's own generating facilities will be produced at the following plants: Number Net Capacity Plant of Units (Megawatts) ----- -------- ------------ Coal Fuel: Reid Gardner (Steam).............. 3 330 Reid Gardner Unit No. 4 (Steam)... 1 275(1) Mohave (Steam).................... 2 196(2) Navajo (Steam).................... 3 255(3) Natural Gas and Oil Fuel: Clark (Steam)..................... 3 181 Clark (Gas Turbine)............... 1 50 Clark (Combined Cycle)............ 2 466 Sunrise (Steam)................... 1 80 Sunrise (Gas Turbine)............. 1 69 Harry Allen (Gas Turbine)......... 1 72 ----- 1,974 ===== ----------------- (1) This represents 25 megawatts of base load capacity, 235 megawatts of peaking capacity and 15 megawatts (MW) upgrade capacity accomplished in 1990. Reid Gardner Unit No. 4, placed in service July 25, 1983, is a coal-fired unit which is owned 32.2% by the Company and 67.8% by the Department of Water Resources of the State of California. The Company is entitled to use 100% of the unit's capacity for 1,500 hours each year except the Company has agreed to reduce its allocation of peaking capacity by 20 MW from 1993 through 1997. The Company is entitled to 9.6% of the first 260 megawatts of capacity and associated energy and is entitled to all the 15 megawatt upgrade. Beginning in 1998, the Company has options for the use of increasing amounts of energy from the unit so that the Company may be entitled to use all of the unit's output 15 years from that date. The 2000 option for 10.17 MW was not exercised by the Company and has expired. (2) This represents the Company's 14% undivided interest in the Mohave Generating Station as tenant in common without right of partition with three other non-affiliated utilities, less operating restrictions. (3) This represents the Company's 11.3% undivided interest in the Navajo Generating Station as tenant in common without right of partition with five other non-affiliated utilities. 1 The Company purchases Hoover Dam power pursuant to a contract with the State of Nevada which became effective June 1, 1987 and will continue through September 30, 2017. The Company's allocation of capacity is 235 MW. The peak electric demand experienced by the Company was 3,066 megawatts on July 28, 1995. This demand plus a reserve margin was served by a combination of Company owned generation, and firm and short-term power purchases. For 1996, the Company has contracts to purchase power from an independent power producer (IPP) and four qualifying facilities (QF) (also known as cogenerators) as follows: Contract Term Net Capacity -------------------- From To (Megawatts) -------- -------- ------------ Independent Power Producer: --------------------------- Nevada Sun-Peak Limited Partnership ............. 06/08/91 05/31/16 210 Qualifying Facilities: ---------------------- Saguaro Power Company .... 10/17/91 04/30/22 90 Nevada Cogeneration Associates #1 ........... 06/18/92 04/30/23 85 Nevada Cogeneration Associates #2 ........... 02/01/93 04/30/23 85 Las Vegas Cogeneration Limited Partnership ..... 06/01/94 05/31/24 45 --- 515 === The Company has total generating capacity of 2,724 megawatts, including 235 megawatts of Hoover Dam power, 210 megawatts of IPP power and 305 megawatts of QF power. This along with agreements with other suppliers to purchase 675 megawatts of firm capacity and associated energy, for the summer of 1996, will not be sufficient to meet the 1996 anticipated peak load demand and reserve margin needs. Accordingly, the Company is utilizing a competitive bidding process to obtain resources from other suppliers for additional firm capacity and associated energy to meet the projected peak needs for 1996. FUEL SUPPLIES The fuels used to provide energy for the Company's generating facilities are coal, natural gas and oil. Its other sources of electricity are hydroelectric (Hoover Dam) and purchased power. The Company's primary fuel source for generation is coal. The following table shows the actual sources of fuel for generation for 1995 and anticipated sources of fuel for generation in 1996 and 1997. 1995 1996 1997 ---- ---- ---- Coal........................ 77% 72% 67% Natural Gas................. 23 28 33 --- --- --- 100% 100% 100% === === === The Company's average delivered cost per ton of coal burned was as follows: 1993 - $34.43; 1994 - $32.96; 1995 - $30.37. Coal for both the Mohave and Navajo Stations is obtained from surface mining operations conducted by Peabody Coal Company (Peabody) on portions of the Black Mesa in Arizona within the Navajo and Hopi Indian reservations. The supply contracts with Peabody extend to December 31, 2005 for Mohave and to June 1, 2011 for Navajo, each contract having an option to extend for an additional 15 years. 2 Partial requirements for coal at the Reid Gardner Generating Station are presently under contract through the year 2007. Although the Company can not predict how the coal market may fluctuate in the future, the Company anticipates no major difficulties in purchasing the remainder of its coal requirements based upon current coal market conditions in the Western United States. All coal for Reid Gardner presently comes from underground mines in Utah and Colorado. The Company's natural gas supply is subject to curtailment due to limited pipeline capacity, until May, 1997, when a pipeline expansion project with Southwest Gas Corporation is completed. All the Company's plants using natural gas also have the capability of burning oil on a sustained basis. CONSTRUCTION AND FINANCING PROGRAMS The Company carries on a continuing program to extend and enlarge its facilities to meet current and future loads on its system. Gross plant additions and retirements for the five years ended December 31, 1995 amounted to $966,646,000 and $63,830,000, respectively. Excluding Allowance for Funds Used During Construction, the Company's actual construction expenditures for 1995 were $176 million, and currently estimated construction expenditures for 1996 and 1997 are $186 million and $195 million, respectively. The Company's construction program and estimated expenditures are subject to continuing review and are revised from time to time due to various factors, including the rate of load growth, escalation of construction costs, availability of fuel types, changes in environmental regulations, adequacy of rate relief and the Company's ability to raise necessary capital. To meet capital expenditure requirements through 1997, the Company will utilize internally generated cash, the proceeds from industrial development revenue bonds (IDBs), first mortgage bonds (FMBs), preferred securities and common stock issues through public offerings and the Stock Purchase and Dividend Reinvestment Plan (SPP). The Company has the option of issuing new shares or using open market purchases of its common stock to meet the requirements of the SPP. The Company issued 1,577,977 shares of its common stock in 1995 under the SPP. At the end of 1995, common equity represented 47.6% of total capitalization. On May 19, 1995, the Company sold $85 million 7.06% Series AA FMBs due 2000 through a public offering. Net proceeds from the sale of the bonds were used to repay approximately $70 million of indebtedness under the Company's bank revolving credit facility, which was incurred for the purposes of repaying the Company's $50 million 6.92% Series U FMBs due 1995 and funding a portion of the Company's construction program. The remaining net proceeds of the Series AA FMBs were used in connection with the Company's construction program and for general corporate purposes. On October 12, 1995, Clark County, Nevada issued $226.05 million in floating rate revenue bonds (Nevada Power Company Project) consisting of $76.75 million Series 1995A IDBs due 2030, $85 million Series 1995B refunding IDBs due 2030, $44 million Series 1995C refunding IDBs due 2030 and $20.3 million Series 1995D refunding pollution control revenue bonds (PCRBs) with $14 million due 2011 and $6.3 million due 2023. Net proceeds from the sale of the Series 1995A IDBs were placed on deposit with a trustee and will be used to finance the construction of certain facilities which qualify for tax-exempt financing. At December 31, 1995, $77.5 million remained on deposit with the trustee. Net proceeds from the sale of the refunding bonds were used for the redemption of the $44 million floating rate IDBs due 2015, $25 million floating rate IDBs due 2018, $60 million floating rate IDBs due 2019, $14 million 6 3/8% PCRBs due 2004 and $6.3 million 6 3/4% Series O FMBs due 2007 along with the related PCRBs during the last four months of 1995. In addition, on October 12, 1995, Coconino County, Arizona issued $13 million Series 1995E floating rate 3 refunding PCRBs (Nevada Power Company Project) due 2022 to redeem the $13 million 7 1/8% Series N FMBs due 2006 along with the related PCRBs in November 1995. The Indenture under which the Company's first mortgage bonds are issued provides that no additional bonds may be issued unless earnings as defined equal at least two and one-half times the interest requirements on all bonds to be outstanding after the new issue. Based on its earnings through December 31, 1995 and assuming an 8 percent interest rate on new bonds, the Company would be able to issue approximately $434 million of additional first mortgage bonds. The Company's ability to issue additional debt is also limited by the need to maintain a reasonable ratio of debt to equity. The Company's ability to sell additional preferred stock is limited by the necessity to meet required dividend coverages. At December 31, 1995, the applicable dividend coverage test would permit the issuance of $371 million of additional preferred stock at a dividend rate of 8 percent. RESOURCE PLANNING The Company's rate of customer growth, especially in recent years, has been among the highest in the nation. The annual customer growth rate was 6.0 percent, 6.0 percent, and 5.4 percent in 1995, 1994 and 1993, respectively. The peak demand for electricity by the Company's customers increased from 2,920 megawatts in 1994 to 3,066 megawatts in 1995. The Company's 1995 energy sales reached 12,109,355 megawatthours, an increase of 1.4 percent over 1994. Pursuant to Nevada law, every three years the Company files with the Public Service Commission of Nevada (PSC) a forecast of electricity demands for the next 20 years and the Company's plans to meet those demands. Among the major items in the Company's 1994 Resource Plan, as refiled and amended, which were approved by the PSC in 1994 and 1995 are the following: (1) the Company will continue to pursue a strategy of relying upon short- term power purchases to meet the forecasted increases in load; (2) the Company will maintain sufficient flexibility to implement an efficient cost-effective resource acquisition process where appropriate, noting that the competitive solicitation process remains the preferred method for comparing resource options; (3) the Company will proceed with the installation of the initial 230 kV circuit and associated substation and communication facilities on the previously approved Arden-Northwest 230 kV Transmission Line; (4) the Company will proceed with the rerouting of a portion of the #2 Arden-McCullough 230 kV Transmission Line; (5) the Company will proceed with limited resource planning approval to seek the necessary UEPA and other permitting approvals, and to acquire necessary sites and rights-of-way for two 230 kV switching stations; (6) the Company will proceed with a Renewable Energy Program for the Company to utilize all appropriate incentives, resources, and expertise to foster the development of economically competitive renewable energy systems with the intent to provide Southern Nevada customers with 20 megawatts of solar-generated electricity by the year 2002. The Company will file a status report along with any significant modifications to the Resource Plan by April 1, 1996 regarding the outcome of three energy service company contracts and the results of transmission studies currently being performed. 4 REGULATION AND RATES The Company is subject to regulation by the PSC which has regulatory powers with respect to rates, facilities, services, reports, issuance of securities and other matters. Following is a summary of the rate increases and decreases that have been granted the Company during the past three years. Amount in Effective Millions Date Nature of Increase (Decrease) of Dollars ------------- ----------------------------- ---------- June 28, 1993 Energy and resource plan net rate increase 42.1 February 1, 1994 Energy rate increase 23.6 October 1, 1994 General rate decrease (6.3) October 1, 1995 Energy rate decrease (20.1) December 1, 1995 Energy and resource plan net rate decrease (17.6) All amounts are on an annual basis. On July 17, 1995, the Company filed a request with the PSC to decrease energy rates by $20.1 million under the state's deferred energy accounting procedures. On September 28, 1995, the PSC approved the rate decrease which took effect October 1, 1995. Residential rates were reduced by $1.9 million and other customers received the remaining $18.2 million reduction. On November 27, 1995, the PSC granted an additional deferred energy rate decrease of approximately $17.1 million and a resource plan cost recovery decrease of $500,000 which took effect December 1, 1995 and resulted in a $7.6 million reduction in residential rates with the remaining $10 million reduction going to other customer classes. The new energy rates will more closely reflect the cost of providing service to each of the customer classes. Hearings on the last phase of the 1995 deferred energy case began on March 11, 1996 and will consider the prudency of the Company's fuel and purchased power expenditures during the period June 1993 to May 1995, a buyout of a coal supply agreement and a credit to customers related to use of coal reserves in an unregulated subsidiary company. The PSC Staff and Consumer Advocate Office have filed testimony seeking disallowance from recovery and credit to the Company's customers of approximately $19 million. The Company believes its expenditures and use of coal reserves are prudent and reasonable and will vigorously defend against the proposed disallowances. As permitted by state statute, the Company defers differences between the current cost of fuel and purchased power, and base energy costs as defined. Under regulations adopted by the PSC, the balance in the deferred energy account at the end of twelve months should be cleared, over a subsequent period. Recovery of increased costs is permitted to the extent that the Company has not realized its authorized overall rate of return. If the Company has exceeded the authorized rate of return, the portion of deferred energy costs represented in such excess is transferred to the next deferred energy recovery period. The energy costs deferred are included as a current item in determining taxable income for federal income tax purposes. However, for financial statement purposes, the federal income tax effect is deferred and amortized to income as the deferred energy account is cleared. PSC regulations allow the fuel base portion of the Company's general rates to be changed at the time of a hearing to clear the balance in the deferred energy account. This permits the recovery of fuel expenses on a deferred basis, but, recovery will have no effect on the Company's earnings. The Company is allowed to recover on an annual basis the costs of developing its 20-year resource plan. Also, by an order of the PSC in June 1988, the Company is allowed to capitalize certain costs associated with Commission approved conservation programs. 5 ENVIRONMENTAL MATTERS The Company is subject to regulation by federal, state and local authorities with regard to air and water quality control and other environmental matters. Environmental expenditures made by the Company are currently being recovered through customer rates. Management believes environmental expenditures will increase over time and the increased costs will also be recovered as necessary utility expenses. The following is a discussion of pending environmental matters: The Federal Clean Air Act Amendments of 1990 (Amendments) include provisions for reduction of emissions of oxides of nitrogen by establishing new emission limits for coal-fired generating units. This will require the installation of additional pollution-control technology at some of the Reid Gardner Station generating units before 2000 at an estimated cost to the Company of no more than $6 million. The Amendments also mandated creation of the Grand Canyon Visibility Transport Commission to work toward the goal of visibility improvement in the Grand Canyon and other national parks of the Colorado Plateau. The Commission is expected to make recommendations to the U.S. Environmental Protection Agency (EPA) by May 1996, regarding ways to improve visibility. A variety of actions could be considered including imposition of more pollution controls or emissions limitations upon large sources of pollution in the West and Southwest. The potential affect on the Company cannot be determined at this time. Related to visibility, the United States Congress authorized the EPA to study the potential impact of the Mohave Generating Station (Mohave) on visibility in the Grand Canyon area. Results of this study are expected in 1996. The cost of any required improvements cannot be determined at this time. The Nevada Division of Environmental Protections (NDEP) had imposed more stringent interim stack opacity limits for Mohave. In December, at the recommendation of NDEP, the Nevada Environmental Commission elected to retain the interim limit as a permanent rule. Compliance with the interim rule has been maintained since a limit more stringent than the interim standard has not been imposed. As such, the owners of Mohave, including Nevada Power at 14%, will not be required to fund any additional improvements related to opacity. In 1991, the EPA published an order requiring the Navajo Generating Station (Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions beginning in 1997. As an 11.3 percent owner of Navajo, the Company will be required to fund an estimated $56.5 million for installation of the scrubbers. In 1992, the Company received resource planning approval from the PSC for its share of the cost of the scrubbers. The scrubbers are currently under construction. COMPETITION Restructuring of the electric utility industry is accelerating with the enactment of the National Energy Policy Act of 1992 (Act). Restructuring will lead to further competition in the industry as generators of power obtain greater access to transmission facilities linking them to potential new wholesale customers. Most observers believe the electric utility beneficiaries of the Act will be twofold: those who can provide low cost generation for sale and those who have strategically located transmission highways that can transmit low cost power from one area to another. Within the region the Company's residential rates are competitive. However, even though the bulk of the 1995 energy rate decreases was allocated to large customers, large industrial customer rates will require further adjustment to remain competitive in the changing environment. In January 1996, Mirage Resorts, owner of The Mirage and Treasure Island hotels, received approval from the Clark County, Nevada Commission for a zone 6 variance to build a 27 megawatt cogeneration plant to supply power to its properties. The above event and the decision by the U.S. Department of Energy in November 1995 to choose Valley Electric Association, a non-generating utility supplier, as the primary electric power provider for the Nevada Test Site (NTS) indicate the need for the Company to be able to offer more competitive prices as an incentive for large customers to retain the Company as their primary electric service provider. The Company will continue to be the primary electric power provider for the NTS pending legal appeal. In recognition of the changing regional competitive environment, the Company is focusing on the costs of serving various classes of customers and the appropriate rates to be charged based on those costs of service. The Company has continued to seek any rate adjustments through the PSC necessary to maintain a competitive position. An opportunity exists given the Company's strategic location in the center of a region of price diversity. As generators arrange for sales of electricity to customers in other areas, much of the power may need to be transmitted through the Company's service territory. The Company would have an opportunity to charge generators for the transmission of energy through its system. The Company is studying the feasibility of constructing additional cost-effective transmission facilities to maximize the advantage of its strategic location. In September 1995 the PSC opened a docket to examine electric industry restructuring issues. The PSC is soliciting opinions and analyses concerning the potential implications of competition for various products and services within the electric industry. The new docket is intended to supplement the subcommittee established by the Nevada Legislature during the 1995 legislative session to study the effects of competition in the generation, sale and transmission of electric energy. The legislative subcommittee is expected to make a recommendation to the Nevada Legislature in August of 1996 so the recommendation can be reviewed before the start of the 1997 legislative session. The PSC expects to issue a final report based on the information obtained in the new docket in June of 1996. Both the report and the information gathered in the new docket will be shared with the legislative subcommittee. EMPLOYEES The Company had 1,761 employees at December 31, 1995. ITEM 2. PROPERTIES The Company's generating facilities are described under "Item 1. Business, Sources of Electric Energy Supply". The Company shares ownership in a 59-mile, 500 kilovolt line and two 15- mile, 230 kilovolt lines that transmit power from the Mohave Generating Station near Davis Dam on the Colorado River via Eldorado Substation to Mead Substation located near Boulder City, Nevada. The Company has 32 miles of 230 kilovolt line from Mead Substation to Las Vegas. This line, together with two Company- owned 230 kilovolt lines presently connected to the Bureau of Reclamation lines between Mead Substation and Henderson, Nevada, transmit the Mohave Generating Station power to the Las Vegas area. A 25-mile, 230 kilovolt line between the Mead Substation and the Company's Winterwood Substation was energized in 1988. This line brings the additional Hoover energy to the Las Vegas Area and increases the Company's interconnected transmission capabilities. The Company shares ownership in 76 miles of 500 kilovolt transmission line from the Navajo Generating Station to the Moenkopi Switchyard in Coconino County, Arizona (the Southern Transmission System) and 274 miles of 500 kilovolt transmission line from the Navajo Generating Station to the McCullough Substation in Clark County, Nevada (the Western Transmission System). Power is transmitted from the McCullough Substation to the Las Vegas area via three 230 kilovolt lines of 23 miles, 25 miles and 32 miles in length, respectively. The 25-mile line was energized in May 1992. Two 230 kilovolt lines transmit power from the Reid Gardner Station located near Glendale, Nevada. One is a 39 mile line to the Pecos Substation and 7 the other a 25 mile line to the Harry Allen Substation. In 1994, 20 miles of a 230 kilovolt line from the Harry Allen Substation to the Pecos Substation was energized. One 39-mile, 230 kilovolt line transmits power from the Reid Gardner Station located near Glendale, Nevada to the Pecos Substation near North Las Vegas. A 7 mile, 230 kilovolt line between Westside and Decatur Substations, both located in Las Vegas, was energized in 1991. In addition to the above, the Company has 279 miles of 138 kilovolt and 484 miles of 69 kilovolt transmission lines in service. In 1990 the Company added a new transmission interconnection consisting of a 345 kilovolt line from Harry Allen Substation in Southern Nevada to the Nevada-Utah border where it connects with a PacifiCorp line to Red Butte Substation in Southern Utah near the City of St. George and a 230 kilovolt line from Harry Allen Substation to Westside Substation which is located in Las Vegas. The Company owns the 50-mile, 230 kilovolt line and the 69 miles of the 345 kilovolt line from Harry Allen Substation to the Nevada-Utah border; PacifiCorp owns the portion of the 345 kilovolt line from the Nevada-Utah border to Red Butte Substation. At December 31, 1995, the Company owned 105 transmission and distribution substations with a total installed transformer capacity of 10,020,533 kilovolt- amperes. In addition it co-owns with others the above mentioned Eldorado Substation with installed transformer capacity of 1,000,000 kilovolt-amperes, the McCullough Substation with installed transformer capacity of 1,250,000 kilovolt-amperes and the Reid Gardner Unit No. 4 Substation with installed capacity of 318,000 kilovolt-amperes. At Harry Allen Substation, the Company has a 336,000 kilovolt-ampere transformer and two 336,000 kilovolt-ampere 345 kilovolt phase shifting transformers which are used for necessary voltage transformations and to control flows on the interconnection. As of December 31, 1995, there were approximately 3,093 miles of pole line together with approximately 6,908 cable miles of underground in the Company's distribution system with a total installed distribution transformer capacity of 6,021,342 kilovolt-amperes. ITEM 3. LEGAL PROCEEDINGS Saguaro Power Company (Saguaro), a cogeneration power producer, and the Company are parties to a 30-year power purchase contract (Contract) wherein the Company agreed to purchase power from Saguaro's plant near Henderson, Nevada. On July 22, 1995, Saguaro filed a lawsuit in District Court, Clark County, Nevada, seeking damages and injunctive relief as a result of being curtailed in its power deliveries during periods of low load conditions on the Company's system. The lawsuit alleges that the Company refused to accept and pay for approximately $2 million of electric energy and capacity, and that the Company should reimburse Saguaro for $2 million related to the construction of the interconnection line. Saguaro also alleges that the Company has refused to pay Saguaro for excess capacity. Lastly, Saguaro alleges that the Company has committed fraud and anticipatory breach of the Contract and requests punitive damages of $75 million. The Company believes its actions are consistent with the Contract, federal and state regulations, and state administrative directives, and will vigorously defend against these claims. Further, the Company contends it has paid Saguaro all amounts due it under the terms of the Contract. On September 1, 1995, Las Vegas Cogeneration Limited Partnership filed a similar lawsuit to that of Saguaro; it seeks curtailment damages of less than $200,000. On July 24, 1995, Nevada Cogeneration Associates #1 (NCA 1) and Nevada Cogeneration Associates #2 (NCA 2), also cogeneration power producers, made a request for arbitration of their current contracts relative to the same issues of low load condition curtailments and energy and capacity payments. They alleged under payments by the Company of approximately $2.6 million. 8 The Nevada District Court has recently denied the Company's request that the issues regarding low load conditions and the lawsuits for curtailment damages be heard before the PSC. The Nevada District Court ordered all the parties to arbitrate the above issues with the exception of Saguaro's claim concerning the interconnection line. The Company has appealed these decisions. Arbitration with NCA 1 and NCA 2 proceeded as ordered and in January 1996, the arbitrator entered an order denying most of NCA's claims. The order does permit some damages based on the definition of a low load condition being at a different megawatt level than either party had asserted. The Company estimates the damages to be approximately $1 million. The Company is involved in litigation arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, based upon advice of counsel, believes that the final outcome will not have a material adverse effect on the Company's financial position and results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise. SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT The Company's executive officers are as follows: Age as of Name December 31, 1995 Position ---- ----------------- -------- Charles A. Lenzie 58 Chairman of the Board and Chief Executive Officer David G. Barneby 50 Vice President, Power Delivery Cynthia K. Gilliam 47 Vice President, Retail Customer Operations Richard L. Hinckley 40 Vice President, Secretary and General Counsel Steven W. Rigazio 41 Vice President, Finance and Planning, Treasurer, Chief Financial Officer Gloria T. Banks Weddle 46 Vice President, Corporate Services Each of the executive officers has been actively engaged in the business of the Company for more than five years. Charles A. Lenzie was elected Chairman of the Board and Chief Executive Officer on May 1, 1989. Prior to that time he was President of the Company. Due to the resignation of James C. Holcombe as President and Chief Operating Officer on August 1, 1995, Mr. Lenzie was appointed President of the Company effective August 10, 1995. David G. Barneby was elected Vice President, Power Delivery effective October 14, 1993. He joined the Company in 1965 as a Student Engineer and was made a Junior Engineer in 1967. He was promoted to Superintendent of the Reid Gardner Generating Station in 1976; Project Manager - Reid Gardner Unit 4 in 1979 and in 1985 appointed Manager - Generation Engineering and Construction. He was elected Vice President - Generation in 1989. His title was changed to Vice President - Power Supply later that year. Cynthia K. Gilliam was elected Vice President, Retail Customer Operations effective October 14, 1993. She joined the Company in 1974 as a Rate Analyst and was promoted to Rates Administrator in 1979 and to Manager of Financial Planning in 1983. In 1987, she 9 was appointed Manager of Human Resource Planning. She was elected Vice President - Personnel in 1988 and her title was changed to Vice President - Human Resources in 1989. In 1992, she was elected Vice President - Customer Service. Richard L. Hinckley was elected Vice President, Secretary and General Counsel on May 15, 1991. He joined the Company as Staff Counsel in 1985 and was promoted to Assistant Secretary and Chief Counsel in 1989. Prior to joining the Company, he served as Staff Attorney with the Nevada Public Service Commission and as Assistant Attorney General in Utah. Steven W. Rigazio was elected Vice President, Finance and Planning, Treasurer, Chief Financial Officer effective October 14, 1993. He joined the Company in 1984 as a Rates Administrator and was promoted to Supervisor of Rates and Regulations in 1985, Manager of Rates and Regulatory Affairs in 1986, Director of System Planning in 1990, Vice President - Planning in 1991 and Vice President and Treasurer, Chief Financial Officer in 1992. Gloria T. Banks Weddle was named Vice President, Corporate Services effective January 1, 1996. She first joined the Company in 1973, was promoted to Manager of Compensation and Benefits in 1988 and Director of Human Resources in 1991. She was elected Vice President - Human Resources in 1992. On October 14, 1993, she was elected Vice President, Human Resources and Corporate Services. Her title was changed to Vice President - Corporate Services in 1996. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Information with respect to the principal market for the Company's common stock, securities exchange, shareholders of record, quarterly high and low sales prices and quarterly dividend payments for 1995 and 1994 are hereby incorporated by reference from page 44 of the Company's Annual Report to Shareholders for the year ended December 31, 1995, which is filed herewith as Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA The information required by Item 6 is hereby incorporated by reference from page 45 of the Company's Annual Report to Shareholders for the year ended December 31, 1995, which is filed herewith as Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The information required by Item 7 is hereby incorporated by reference from pages 24 to 27 of the Company's Annual Report to Shareholders for the year ended December 31, 1995, which are filed herewith as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's financial statements for the years ended December 31, 1995, 1994 and 1993 together with the auditors' report thereon required by Item 8 are incorporated by reference from the following pages of the Company's Annual Report to Shareholders for the year ended December 31, 1995, which are filed herewith as Exhibit 13. 10 Annual Report Page ------ Statements of Income for the Years Ended December 31, 1995, 1994 and 1993...................... 28 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993...................... 29 Balance Sheets - December 31, 1995 and 1994............ 30-31 Schedules of Capitalization - December 31, 1995 and 1994............................ 32 Schedules of Long-Term Debt - December 31, 1995 and 1994............................ 33 Statements of Retained Earnings for the Years Ended December 31, 1995, 1994 and 1993................ 34 Notes to Financial Statements.......................... 35-42 Independent Auditors' Report........................... 43 Report of Management................................... 43 See Note 11 of Notes to Financial Statements in the Company's Annual Report to Shareholders for the unaudited selected quarterly financial data required to be presented in this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There has been no Report on Form 8-K filed within the twenty-four months prior to the date of the most recent financial statements, December 31, 1995, reporting a change of accountants. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by Item 10 with respect to the Company's executive officers is set forth in Part I, Item 4., under the preceding heading "Supplemental Item. Executive Officers of Registrant". The other information required by Item 10 is hereby incorporated by reference from the Company's definitive Proxy Statement dated March 13, 1996 and heretofore filed with the Securities and Exchange Commission (SEC). (See the heading therein "Election of Directors".) ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is hereby incorporated by reference from the Company's definitive Proxy Statement dated March 13, 1996 and heretofore filed with the SEC. (See the heading therein "Executive Compensation".) ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is hereby incorporated by reference from the Company's definitive Proxy Statement dated March 13, 1996 and heretofore filed with the SEC. (See the heading therein "Security Ownership of Management".) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Management of the Company has no knowledge of any transaction, relationship or indebtedness which is required to be disclosed by Item 13. 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The Company's financial statements for the years ended December 31, 1995, 1994 and 1993 together with the auditors' report appearing on pages 28 to 43 of Nevada Power Company's 1995 Annual Report to Shareholders are incorporated herein by reference and filed as Exhibit 13. FINANCIAL STATEMENT SCHEDULE FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 PAGE - -------------------------------------------- ---- Independent Auditors' Consent and Report on Schedule.............. 21 Schedule VIII - Valuation and Qualifying Accounts................. 22 All other schedules are omitted because they are not applicable, not required, or because the information is included in the financial statements or notes thereto. EXHIBITS FILED DESCRIPTION - -------- ----------- 3.4 Restated Bylaws, as amended March 9, 1995 4.2 Twenty-Sixth Supplemental Indenture dated May 1, 1995 13 Pages 24 to 45 of Nevada Power Company's Annual Report to Shareholders for the Year Ended December 31, 1995 (incorporated by reference in Parts II and IV hereof) 10.75 Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995A) 10.76 Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995B) 10.77 Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995C) 10.78 Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995D) 10.79 Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated October 1, 1995 (Series 1995E) 10.80 Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Societe Generale, Los Angeles Branch 10.81 Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Barclays Bank PLC, New York Branch 23 Independent Auditors' Consent and Report on Schedule 27 Financial Data Schedule - December 31, 1995 12 In addition to those Exhibits shown above, the Company hereby incorporates the following Exhibits pursuant to Exchange Act Rule 12B-32 and Regulation #201.24 by reference to the filings set forth below: EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 3.1 Restated Articles of Incorporation 3.8 to Form 10-K 1-4698 filed June 10, 1988 Year 1988 3.2 Amendment to Restated Articles of 4.7 to Form S-8 33-32372 Incorporation filed May 23, 1989 3.3 Amendment to Restated Articles of 4.8 to Form S-3 33-55698 Incorporation filed June 8, 1992 4.1 Certificate of Designation of Cumulative Preferred Stock as follows: 5.40% Series 2.1 to Form S-1 2-16968 5.20% Series 2.1 to Form S-1 2-20618 4.70% Series 3.2 to Form 8-K 1-4698 July 1965 8% Series 2.1 to Form S-7 2-44513 8.70% Series 2.1 to Form S-7 2-49622 11.50% Series 2.1 to Form S-7 2-52238 9.75% Series 2.1 to Form S-7 2-56788 Auction Series A 4.6 to Form S-3 33-15554 Auction Series A as amended November 14, 1991 4.9 to Form S-3 33-44460 Auction Series A as amended December 12, 1991 4.1 to Form 10-K 1-4698 Year 1992 9.90% Series 4.1 to Form 10-K 1-4698 Year 1992 4.2 Indenture of Mortgage and Deed of 4.2 to Form S-1 2-10932 Trust Providing for First Mortgage Bonds, dated October 1, 1953 and Twenty-Five Supplemental Indentures as follows: First Supplemental Indenture, 4.2 to Form S-1 2-11440 dated August 1, 1954 Second Supplemental Indenture, 4.9 to Form S-1 2-12566 dated September 1, 1956 Third Supplemental Indenture, 4.13 to Form S-1 2-14949 dated May 1, 1959 Fourth Supplemental Indenture, 4.5 to Form S-1 2-16968 dated October 1, 1960 Fifth Supplemental Indenture, 4.6 to Form S-16 2-74929 dated December 1, 1961 Sixth Supplemental Indenture, 4.6A to Form S-1 2-21689 dated October 1, 1963 Seventh Supplemental Indenture, 4.6B to Form S-1 2-22560 dated August 1, 1964 Eighth Supplemental Indenture, 4.6C to Form S-9 2-28348 dated April 1, 1968 Ninth Supplemental Indenture, 4.6D to Form S-1 2-34588 dated October 1, 1969 Tenth Supplemental Indenture, 4.6E to Form S-7 2-38314 dated October 1, 1970 Eleventh Supplemental Indenture, 2.12 to Form S-7 2-45728 dated November 1, 1972 13 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- Twelfth Supplemental Indenture, 2.13 to Form S-7 2-52350 dated December 1, 1974 Thirteenth Supplemental 4.14 to Form S-16 2-74929 Indenture, dated October 1, 1976 Fourteenth Supplemental 4.15 to Form S-16 2-74929 Indenture, dated May 1, 1977 Fifteenth Supplemental 4.16 to Form S-16 2-74929 Indenture dated September 1, 1978 Sixteenth Supplemental Indenture, 4.17 to Form S-16 2-74929 dated December 1, 1981 Seventeenth Supplemental 4.2 to Form 10-K 1-4698 Indenture, dated August 1, 1982 Year 1982 Eighteenth Supplemental Indenture, 4.6 to Form S-3 33-9537 dated November 1, 1986 Nineteenth Supplemental Indenture, 4.2 to Form 10-K 1-4698 dated October 1, 1989 Year 1989 Twentieth Supplemental Indenture, 4.21 to Form S-3 33-53034 dated May 1, 1992 Twenty-First Supplemental 4.22 to Form S-3 33-53034 Indenture, dated June 1, 1992 Twenty-Second Supplemental 4.23 to Form S-3 33-53034 Indenture, dated June 1, 1992 Twenty-Third Supplemental 4.23 to Form S-3 33-53034 Indenture, dated October 1, 1992 Twenty-Fourth Supplemental 4.23 to Form S-3 33-53034 Indenture, dated October 1, 1992 Twenty-Fifth Supplemental 4.23 to Form S-3 33-53034 Indenture, dated January 1, 1993 4.3 Instrument of Further Assurance 4.8 to Form S-1 2-12566 dated April 1, 1956 to Indenture of Mortgage and Deed of Trust dated October 1, 1953 4.4 Rights Agreement dated October 15, 4.1 to Form 8-A 1-4698 1990 between Manufacturers Hanover Year 1990 Trust Company and Nevada Power Company 10.1 Contract for Sale of Electrical 13.9A to Form S-1 2-10932 Energy between State of Nevada and the Company, dated October 10, 1941 10.2 Amendment dated June 30, 1953 to 13.9A to Form S-1 2-10932 Exhibit 10.1 10.3 Contract for Sale of Electrical 13.10 to Form S-1 2-10932 Energy between State of Nevada and the Company, dated June 1, 1951 10.4 Agreement dated November 10, 1948 13.18 to Form S-1 2-12697 between the Company and Lincoln County Power District No. 1 and Overton Power District No. 5 10.5 Agreement dated October 21, 1949 13.19 to Form S-9 2-12697 between the Company and Lincoln County Power District No. 1 and Overton Power District No. 5 14 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.6 Mohave Project Plant Site 13.27 to Form S-9 2-28348 Conveyance and Co-tenancy Agreement dated May 29, 1967 between the Company and Salt River Project Agricultural Improvement and Power District Southern California Edison Company 10.7 Eldorado System Conveyance and 13.30 to Form S-9 2-28348 Co-tenancy Agreement dated December 20, 1967 between the Company and Salt River Project Agricultural Improvement and Power District and Southern California Edison Company 10.8 Mohave Operating Agreement dated 13.26F to Form S-1 2-38314 July 6, 1970 between the Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company and Department of Water and Power of the City of Los Angeles 10.9 Navajo Project Participation 13.27A to Form S-1 2-38314 Agreement dated September 30, 1969 between the Company, the United States of America, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District and Tucson Gas & Electric Company 10.10 Navajo Project Coal Supply 13.27B to Form S-1 2-38314 Agreement dated June 1, 1970 between the Company, the United States of America, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural District, Tucson Gas & Electric Company and the Peabody Coal Company 10.11 Contract dated January 1, 1968 13.32 to Form S-1 2-34588 between the Company and United States Bureau of Reclamation for interconnections at Mead Station 10.12 Note Agreement dated December 11, 5.35 to Form S-7 2-49622 1973 relating to $25,000,000 8-1/2% Promissory Notes due 1998 15 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.13 Reclaimed Wastewater Purchase 5.36 to Form S-7 2-52238 Agreement dated June 21, 1974 among City of Las Vegas, Nevada, Clark County Sanitation District No. 1, County of Clark, Nevada and Nevada Power Company 10.14 Equipment Lease dated as of 5.37 to Form 8-K 1-4698 March 1, 1974 between Nevada Power April 1974 Company, Lessor, and Clark County, Nevada, Lessee 10.15 Sublease Agreement dated as of 5.38 to Form 8-K 1-4698 March 1, 1974 between Clark April 1974 County, Nevada, Sublessor, and Nevada Power Company, Sublessee 10.16 Guaranty Agreement dated as of 5.39 to Form 8-K 1-4698 March 1, 1974 between Nevada April 1974 Power Company and Commerce Union Bank as Trustee 10.17 Navajo Project Co-tenancy 5.31 to Form 8-K 1-4698 Agreement dated March 23, 1976 April 1974 between the Company, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District, Tucson Gas & Electric Company and the United States of America 10.18 Amended Mohave Project Coal Supply 5.35 to Form S-7 2-56356 Agreement dated May 26, 1976 between the Company and Southern California Edison Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District and the Peabody Coal Company 10.19 Amended Mohave Project Coal Slurry 5.36 to Form S-7 2-56356 Pipeline Agreement dated May 26, 1976 between Peabody Coal Company and Black Mesa Pipeline, Inc. (Exhibit B to Exhibit 10.18) 10.20 Coal Supply Agreement dated October 5.38 to Form S-7 2-56356 15, 1975 between the Company and United States Fuel Company 10.21 Amendment dated November 19, 1976 5.30 to Form S-7 2-62105 to Exhibit 10.20 10.22 Participation Agreement Reid 5.34 to Form S-7 2-65097 Gardner Unit No. 4 dated July 11, 1979 between the Company and California Department of Water Resources 16 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.23 Coal Supply Agreement dated 5.37 to Form S-7 2-62509 March 1, 1980 between the Company and Beaver Creek Coal Company 10.24 Coal Supply Agreement dated 5.38 to Form S-7 2-62509 March 1, 1980 between the Company and Trail Mountain Coal Company 10.25 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698 December 8, 1980 between the Year 1981 Company and Plateau Mining Company 10.26 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698 August 31, 1982 between Year 1982 the Company and CO-OP Mining Company 10.27 Coal Supply Agreement dated 10.27 to Form 10-K 1-4698 September 8, 1982 between the Year 1982 Company and Getty Mining Company 10.28 Coal Supply Agreement dated 10.28 to Form 10-K 1-4698 September 8, 1982 between the Year 1982 Company and Tower Resources, Inc. 10.29 Coal Supply Agreement dated 10.29 to Form 10-K 1-4698 September 22, 1982 between the Year 1982 Company and Beaver Creek Coal Company 10.30 Memorandum of Understanding 10.30 to Form 10-K 1-4698 Concerning Interconnection Year 1983 between Utah Power & Light Company and Nevada Power Company dated February 2, 1984 10.31 Sublease Agreement between Powveg 10.31 to Form 10-K 1-4698 Leasing Corp., as Lessor and Year 1983 Nevada Power Company as Lessee, dated January 11, 1984 for lease of administrative headquarters 10.32 Participation Agreement between 10.32 to Form 10-K 1-4698 Utah Power & Light Company and Year 1985 the Company dated December 19, 1985 10.33 Sale and Purchase Agreement dated 10.33 to Form 10-K 1-4698 as of December 23, 1985 by and Year 1985 between Nevada Power Company and CP National Corporation 10.34 Restated Coal Sales Agreement as 10.34 to Form 10-K 1-4698 of July 1, 1985 by and between Year 1985 Nevada Power Company and Trail Mountain Coal Company 10.35 Summary of Supplemental Executive 10.35 to Form 10-K 1-4698 Retirement Plan as approved Year 1985 November 14, 1985 17 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.36 Financing Agreement dated as of 10.36 to Form 10-K 1-4698 February 1, 1983 between Clark Year 1985 County, Nevada and Nevada Power Company 10.37 Financing Agreement between Clark 10.37 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1985 Company dated as of December 1, 1985 10.38 Reimbursement Agreement dated 10.38 to Form 10-K 1-4698 as of December 1, 1985 between Year 1986 The Fuji Bank, Limited and Nevada Power Company 10.39 Contract for Sale of Electrical 10.39 to Form 10-K 1-4698 Energy between the State of Year 1987 Nevada and the Company, dated July 8, 1987 10.40 Power Sales Agreement between 10.40 to Form 10-K 1-4698 Utah Power & Light Company and Year 1987 the Company, dated August 17, 1987 10.41 Transmission Facilities Agreement 10.41 to Form 10-K 1-4698 between Utah Power & Light Year 1987 Company and the Company, dated August 17, 1987 10.42 Financing Agreement between Clark 10.42 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1988 Company dated as of November 1, 1988 10.43 Reimbursement Agreement dated 10.43 to Form 10-K 1-4698 as of November 1, 1988 between Year 1988 The Fuji Bank, Limited and Nevada Power Company 10.44 Power Purchase Contract dated 10.45 to Form 10-K 1-4698 February 15, 1990 between Year 1989 Mission Energy Company and Nevada Power Company 10.45 Contact for Long-Term Power 10.46 to Form 10-K 1-4698 Purchases from Qualifying Year 1989 Facilities dated May 1, 1989 between Oxford Energy of Nevada and Nevada Power Company 10.46 Contract A for Long-Term Power 10.47 to Form 10-K 1-4698 Purchases from Qualifying Year 1989 Facilities dated May 2, 1989 between Bonneville Nevada Corporation and Nevada Power Company 10.47 Contract for Long-Term Power 10.48 to Form 10-K 1-4698 Purchases from Qualifying Year 1989 Facilities dated April 10, 1989 between Magna Energy Systems, Eastern Sierra Energy Company and Nevada Power Company 18 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.48 Contract B for Long-Term Power 10.49 to Form 10-K 1-4698 Purchases from a Qualifying Year 1989 Facility dated October 27, 1989 between Bonneville Nevada Corporation and Nevada Power Company 10.49 Contract for Long-Term Power 10.50 to Form 10-K 1-4698 Purchases from Qualified Year 1989 Facilities dated February 12, 1990 between Las Vegas Co-generation, Inc. and Nevada Power Company 10.50 Agreement for Transmission 10.51 to Form 10-K 1-4698 Service dated March 29, 1989 Year 1989 between Overton Power District No. 5 , Lincoln County Power District No. 1 and Nevada Power Company 10.51 Contract dated June 30, 1988 10.52 to Form 10-K 1-4698 between United States Department Year 1989 of Energy Western Area Power Administration and Nevada Power Company 10.52 Executive Performance Incentive 10.53 to Form 10-K 1-4698 Plan dated as of January 1, 1989 Year 1989 10.53 Severance Allowance Plan 10.54 to Form 10-K 1-4698 adopted September 14, 1989 Year 1989 10.54 Power Purchase Contract dated 10.55 to Form 10-K 1-4698 July 5, 1990 between Year 1990 Mission Energy Company and Nevada Power Company 10.55 Contract B for Long-Term Power 10.56 to Form 10-K 1-4698 Purchases from a Qualifying Year 1990 Facility dated May 24, 1990 between Bonneville Nevada Corporation and Nevada Power Company 10.56 Amendment dated June 15, 1989 to 10.57 to Form 10-K 1-4698 Exhibit 10.45 Year 1990 10.57 Amendment dated August 23, 1989 10.58 to Form 10-K 1-4698 to Exhibit 10.45 Year 1990 10.58 Amendment dated April 23, 1990 10.59 to Form 10-K 1-4698 to Exhibit 10.45 Year 1990 10.59 Exhibit H dated August 13, 1990 10.60 to Form 10-K 1-4698 to Exhibit 10.45 Year 1990 10.60 Western Systems Power Pool 10.61 to Form 10-K 1-4698 Agreement (Agreement) dated Year 1990 January 2, 1991 between thirty-nine other Western Systems Power Pool members as listed on pages 1 and 2 of the Agreement and Nevada Power Company 10.61 Financing Agreement between Clark 10.62 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1990 Company dated June 1, 1990 19 EXHIBIT ORIGINALLY FILED NO. DESCRIPTION AS EXHIBIT FILE NO. - ------- ----------- ---------------- -------- 10.62 Restated Power Sales Agreement 10.63 to Form 10-K 1-4698 dated March 25, 1991 between Year 1991 Pacificorp and Nevada Power Company 10.63 Amendment dated July 17, 1990 to 10.64 to Form 10-K 1-4698 Exhibit 10.54 Year 1991 10.64 Financing Agreement between Clark 10.65 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1992 Company dated June 1, 1992 (Series 1992A) 10.65 Financing Agreement between Clark 10.66 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1992 Company dated June 1, 1992 (Series 1992B) 10.66 Financing Agreement between Clark 10.67 to Form 10-K 1-4698 County, Nevada and Nevada Power Year 1992 Company dated October 1, 1992 10.67 Power Sales Agreement dated 10.68 to Form 10-K 1-4698 October 19, 1992 between the Year 1992 Department of Water and Power of the City of Los Angeles and Nevada Power Company 10.68 Long-Term Incentive Plan dated 10.69 to Form 10-K 1-4698 as of January 1, 1993 Year 1993 10.69 Contract for Long-Term Power 10.70 to Form 10-K 1-4698 Purchases from Qualifying Year 1993 Facilities dated May 27, 1992 between Las Vegas Co-generation, Inc. and Nevada Power Company Replaces Exhibit 10.49 10.70 Settlement Agreement and Promissory 10.71 to Form 10-K 1-4698 Note between Mountain Coal Company Year 1993 and Atlantic Richfield Company and Nevada Power Company dated March 9, 1994 10.71 401(k) Savings Plan, as amended 99.1 to Form S-8 33-50809 and restated January 1, 1990 10.72 Amendment dated January 1, 1991 99.2 to Form S-8 33-50809 to Exhibit 10.71 10.73 Letter of Credit and Reimbursement 10.72 to Form 10-K 1-4698 Agreement dated as of April 12, Year 1994 1994 between Nevada Power Company and Societe Generale, Los Angeles Branch and Amendment No. 1 thereto dated as of May 3, 1994 10.74 Loan Agreement dated as of November 10.73 to Form 10-K 1-4698 21, 1994 between Nevada Power Year 1994 Company, certain banks, and First Interstate Bank of Nevada, N.A. as the Administrative Agent REPORTS ON FORM 8-K The Company filed no current report on Form 8-K during the quarter ended December 31, 1995. 20 INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE Nevada Power Company We consent to the incorporation by reference in Registration Statement No. 33-62691 on Form S-3 and in Registration Statement No. 33-61365 on Form S-8 of Nevada Power Company of our report dated February 14, 1996 incorporated by reference in this Annual Report on Form 10-K of Nevada Power Company for the year ended December 31, 1995. Our audits of the financial statements referred to in our aforementioned report also included the financial statement schedule of Nevada Power Company, listed in Item 14. This financial statement schedule is the responsibility of Nevada Power Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Las Vegas, Nevada March 22, 1996 21 NEVADA POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF DOLLARS) RESERVE FOR DOUBTFUL ACCOUNTS ----------- BALANCE AT DECEMBER 31, 1992............................. $ 803 Provision charged to income............................. 3,161 Amounts written off, less recoveries.................... (2,839) ------- BALANCE AT DECEMBER 31, 1993............................. $ 1,125 Provision charged to income............................. 4,302 Amounts written off, less recoveries.................... (4,032) ------- BALANCE AT DECEMBER 31, 1994............................. $ 1,395 Provision charged to income............................. 3,590 Amounts written off, less recoveries.................... (3,658) ------- BALANCE AT DECEMBER 31, 1995............................. $ 1,327 ======= 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEVADA POWER COMPANY -------------------------------------- (Registrant) March 25, 1996 By CHARLES A. LENZIE -------------------------------------- Charles A. Lenzie Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 25, 1996 By CHARLES A. LENZIE -------------------------------------- Charles A. Lenzie, Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) March 25, 1996 By STEVEN W. RIGAZIO -------------------------------------- Steven W. Rigazio, Vice President, Finance and Planning, Treasurer, Chief Financial Officer (Principal Financial and Principal Accounting Officer) March 25, 1996 By MARY LEE COLEMAN -------------------------------------- Mary Lee Coleman, Director March 25, 1996 By FRED D. GIBSON JR. -------------------------------------- Fred D. Gibson Jr., Director March 25, 1996 By JOHN L. GOOLSBY -------------------------------------- John L. Goolsby, Director March 25, 1996 By JERRY E. HERBST -------------------------------------- Jerry E. Herbst, Director March 25, 1996 By JOHN F. O'REILLY -------------------------------------- John F. O'Reilly, Director March 25, 1996 By CONRAD L. RYAN -------------------------------------- Conrad L. Ryan, Director March 25, 1996 By FRANK E. SCOTT -------------------------------------- Frank E. Scott, Director March 25, 1996 By ARTHUR M. SMITH -------------------------------------- Arthur M. Smith, Director March 25, 1996 By JELINDO A. TIBERTI -------------------------------------- Jelindo A. Tiberti, Director 23 EX-3.4 2 RESTATED BYLAWS AS OF 3/9/95 As Amended March 9, 1995 RESTATED BY-LAWS OF NEVADA POWER COMPANY ARTICLE I MEETING OF STOCKHOLDERS SECTION 1. The annual meeting of the stockholders of the Company shall be held on such date and at such time and place as the Board of Directors shall from year to year designate for the purpose of electing Directors of the Company to serve during the ensuing year and for the transaction of such other business as may be brought before the meeting. At least ten days' written notice specifying the time and place, when and where the annual meeting shall be convened, shall be mailed in a United States Post Office box addressed to each of the stockholders of record at the time of issuing the notice at his or her or its address last known, as the same appears on the books of the Company. Nevertheless, a failure to give such notice or irregularity in such notice shall not affect the validity of any annual meeting or of any proceedings had at such meeting and in such event, these By-Laws shall be, and shall be deemed to be, sufficient notice of such meeting without requirement of further notice. SECTION 2. All business lawful to be transacted by the stockholders of the Company may be transacted at any special meeting or at any adjournment thereof. Only such business, however, shall be acted upon at a special meeting of the stockholders as shall have been referred to in the notice calling such meetings, but at any stockholders' meeting at which all of the outstanding Capital Stock of the Company is represented, either in person or by proxy, any lawful business may be transacted and such meeting shall be valid for all purposes. SECTION 3. At all stockholders' meetings, the holders of fifty- one percent (51%) in amount of the entire issued and outstanding Capital Stock of the Company shall constitute a quorum for all the purposes of such meetings. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend in person or by proxy, at the time and place fixed by these By-laws for any annual meeting, or fixed by a notice for a special meeting, a majority in interest of the stockholders present in person or by proxy may adjourn, from time to time, without notice other than by announcement at the meeting, until holders of the amount of stock requisite to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted as originally called. SECTION 4. At each meeting of the stockholders, every stockholder shall be entitled to vote in person or by his duly authorized proxy appointed by instrument in writing subscribed by such stockholder or his duly authorized attorney. Each stockholder shall have one vote for each share of stock standing registered in his or her or its name on the books of the corporation, not less than ten (10) days preceding the day of such meeting or on such other closing date as shall be set by the Board of Directors, such closing date to be not more than sixty (60) days preceding the date of any such stockholders' meeting, provided that if the closing date for any such meeting falls on a Saturday, Sunday or Holiday, the closing date shall be the next succeeding business day. At each meeting of the stockholders, a full, true and complete list, in alphabetical order, of all the stockholders entitled to vote at such meeting and indicating the number of shares held by each, certified by the Secretary or any Assistant Secretary or by the Transfer Agent of the Company, shall be furnished, which list shall be prepared at least ten (10) days before such meeting, and shall be open to the inspection of the stockholders, or their Agents or Proxies, at the principal office of the Company for ten (10) days prior to such meeting. Only the persons in whose names shares of stock are registered on the books of the Company on the closing date for such meeting, as evidenced by the list of stockholders so furnished, shall be entitled to vote at such meeting. Proxies and Powers of Attorney to vote must be filed with the Secretary of the Company before an election or a meeting. SECTION 5. At each meeting of the stockholders, the polls shall be opened and closed, the proxies and ballots issued, received and be taken in charge of for the purpose of the meeting, and all questions touching the qualifications of voters and the validity of proxies and the acceptance or rejection of votes, shall be decided by two inspectors. Such inspectors shall be appointed at the meeting by the presiding officer of the meeting. SECTION 6. At the stockholders' meetings, the regular order of business shall be as follows: 1. Reading and approval of the minutes of previous meeting or meetings -2- 2. Reports of the officers as the Board of Directors shall designate. 3. Reports of Committees. 4. Election of Directors. 5. Unfinished business. 6. New business. 7. Adjournment. SECTION 7. Stockholder action may be taken only at a meeting of stockholders; and shall not be taken by written consent without a meeting. ARTICLE II DIRECTORS AND THEIR MEETINGS SECTION 1. The Directors by a majority vote thereof may provide for the appointment of a Director or Directors Emeritus whose position shall be honorary from time to time as they determine. SECTION 2. Meetings of the Directors may be held at the principal office of the Company in the City of Las Vegas, State of Nevada, or at any other place within or without the State of Nevada, or at such other place or places as the Board of Directors may from time to time determine. SECTION 3. Without notice of call, the Board of Directors shall hold its first Annual Meeting for the year immediately after the Annual Meeting of the Stockholders or immediately after the election of Directors at such Annual Meeting. Regular meetings of the Board of Directors shall be held on the second Thursday of each month at 9:00 o'clock in the morning. Notice of such regular meetings shall be mailed to each director by the Secretary at least three days previous to the day fixed for such meetings, but no regular meeting shall be held void or invalid if such notice is not given provided the meeting is held at the time and place fixed by these By-Laws. Special meetings of the Board of Directors may be held on the call of the Chairman of the Board, Chief Executive Officer or Secretary on at least three days notice by mail to directors resident in the State of Nevada, and on at least five days notice by mail, or three days notice by telegraph or telecopy, to directors not resident in said State. -3- Any meeting of the Board, no matter where held, at which all the members shall be present, even though without or of which notice shall have been waived by all absentees, provided a quorum shall be present, shall be valid for all purposes unless otherwise indicated in the notice calling the meeting or in the waiver of notice. Any and all business may be transacted at any meeting of the Board of Directors, either regular or special. Any action of a majority of the Board of Directors, although not at a regularly called meeting and the record thereof is assented to in writing, by all of the other members of the Board, shall always be as valid and effective in all respects as if passed by the board in regular meeting. A majority of the Directors in office shall constitute a quorum for the transaction of business, but if at any meeting of the Board there be less than a quorum present, a majority of those present may adjourn from time to time until a quorum shall be present and no notice of such adjournment shall be required. The Board of Directors may prescribe rules, not in conflict with these By-Laws, for the conduct of its business. SECTION 4. A Director need not be a stockholder of the corporation. SECTION 5. The Directors including any Director Emeritus shall be allowed and paid all reasonable fees and expenses incurred in attending any meeting of the Board or Committee meetings of the Board as established by the Board. SECTION 6. The Chief Executive Officer, on behalf of the Board of Directors, shall make a report to the stockholders at annual meetings of the stockholders of the condition of the Company and shall, upon request, furnish each of the stockholders with a true copy thereof. The President may also make a report. The Board of Directors in its discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such contract or act which, if approved or ratified by the vote of the holders of a majority of the Capital Stock of the Company represented in person or by proxy at such meeting provided that a lawful quorum of stockholders be there represented in person or by holders thereof, shall be binding upon the Company as if it had been approved or ratified by every stockholder of the Corporation. SECTION 7. The Board of Directors may, by resolution passed by a majority of the whole Board, designate an Executive committee. This Committee shall consist of six members of the Board of Directors of the Company, and the Chairman of the -4- Committee shall be designated as such by the Board of Directors. The Committee shall in the interim between the meetings of the Board, exercise all powers of that body in accordance with the general policy of the corporation and the direction of the Board of Directors. The Secretary of the Company shall be the Secretary of the Executive committee and shall attend its meetings and its meetings shall be held on the call of the Chairman of the Committee. All members of the Committee must be given reasonable notice of meetings either by mail or by personal communication, either over the telephone or otherwise. A majority of the members of the Committee shall constitute a quorum. The Committee shall keep due records of all meetings and actions of the Committee. Such records shall at all times be open to the inspection by any Director. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate an Audit Committee. This Committee shall consist of at least five outside members of the Board of Directors and the Committee shall designate a Chairman and Secretary of the Committee whose duties will be to keep the records of all meetings and action of their meetings. Such records shall at all times be open for inspection by the Board of Directors. The Audit Committee shall meet as required and notice thereof shall be given by the Secretary of the committee at least five days prior to the meeting whether by mail or personal communication. A majority of the members of the Committee shall constitute a quorum. The duties and responsibilities of the Audit Committee shall be to: 1. Consult with the internal auditors of the Company. 2. Recommend to the full Board of Directors a person or firm to be retained as the Company's independent auditors. 3. Consult with the independent auditors as to the Plan of the audit. 4. Review with the independent auditors the reports of their audit. 5. Consult with the independent auditors with regard to the adequacy of the Company's internal controls. 6. Perform any other duties or responsibilities assigned by the Board of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board, designate a Compensation Committee. This Committee shall consist of four or more outside members of the Board of Directors. The Committee shall designate a Chairman by a majority vote of the Committee members. This Committee shall be -5- primarily responsible for recommending and establishing salaries, salary rates or other compensation of Directors, the principal officers or other employees of the Company as approved and established by the full Board of Directors of the Company. This Committee shall keep the records of all meetings and actions of the Committee and all said records shall be open at all times for inspection by any Director. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate a Pension Committee. This Committee shall consist of five or more members of the Board of Directors. The Committee shall designate a Chairman by a majority vote of the Committee members. This Committee shall be primarily responsible for recommending and assisting management in discussion with the trustees of the pension fund, advising on investments and the handling of funds in the Nevada Power Company Retirement and Defined Pension Plan and all other benefit plans involving invested funds. This Committee shall keep the records of all meetings and actions of the Committee and all said records shall be open at all times for inspection by any Director. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate a Nominating Committee. This Committee shall consist of four or more members of the Board of Directors. The Committee shall designate a Chairman by a majority vote of the Committee members. This Committee shall be primarily responsible for recommending nominees for election to the Board of Directors. This Committee shall keep the records of all meetings and actions of the Committee and all said records shall be open at all times for inspection by any Director. The Board of Directors may, by resolution passed by a majority of the whole Board, designate any other committee. Such resolution shall designate the number of directors to sit on such committee and shall set forth in detail the responsibilities of such committee. Any recommendations or actions of any such committee shall be subject to approval of the full Board of Directors. SECTION 8. The Board of Directors is invested with the complete and unrestrained authority in the management of all the affairs of the Company and is authorized to exercise for such purpose as the General Agent of the Company, in its entire corporate authority. SECTION 9. The regular order of business at meetings of the Board of Directors shall be as follows: 1. Reading and approval of the minutes of any previous meeting or meetings -6- 2. Reports of officers and committees 3. Election of officers 4. Unfinished business 5. New Business 6. Adjournment ARTICLE III OFFICERS AND THEIR DUTIES SECTION 1. The officers of the Corporation shall be a chief executive officer, president, a vice president, a secretary and a treasurer. The Corporation may also have, at the discretion of the Board of Directors, a chairman of the board, one or more additional vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices, including those of president, secretary and treasurer. SECTION 2. Election. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen annually by the Board of Directors at its first meeting after the Annual Meeting of Stockholders and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or until his successors shall be elected and qualify. In the event a vacancy shall occur in any office appointed by the Board of Directors as specified in Section 5 of this Article, The Board of Directors may fill such vacancy at any regular or special meeting of the Board. SECTION 3. Subordinate Officers, Etc.. The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the By-Laws or as the Board of Directors may from time to time determine. SECTION 4. Removal and Resignation. Any officer may be removed, either with or without cause, by the Board of Directors at any regular or special meeting thereof, or except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary of the Corporation. Any such resignation shall take -7- effect at the date of the receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the By-Laws for regular appointments to such office. SECTION 6. Chairman of the Board. The Chairman of the Board, , shall, if present, preside at all meetings of the Board of Directors and stockholders. The Chairman shall exercise and perform such powers and duties as may be assigned to him by the Board of Directors or prescribed by the By-Laws. He shall have the responsibility of promoting the regular attendance and full contribution of all members of the Board and of focusing the work of the Board on those areas which are properly his responsibility. He shall also have the responsibility of maintaining a sound working relationship between the Board of Directors and the executive team. SECTION 7. Chief Executive Officer. The Chief Executive Officer shall be the chief executive of the corporation, and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders and Board of Directors in the absence of the Chairman of the board. He shall have the general powers and duties of management usually vested in the office of the Chief Executive Officer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws. SECTION 8. President. The President shall be the chief operating officer of the corporation, unless the Board of Directors shall otherwise designate, and shall, subject to the control of the Board of Directors and the Chief Executive Officer, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders and Board of Directors in the absence of the Chairman of the Board and Chief Executive Officer. He shall have the general powers and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors, the Chief Executive Officer, or the By-Laws. SECTION 9. Vice President. In the absence or disability of the Chief Executive Officer and President, the Vice Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the vice president designated by the Board of Directors, shall perform all the duties of the President, and when so acting, shall have all the powers of and be subject to all the -8- restrictions upon the President. One or more of the vice presidents may be designated senior vice president or executive vice president. The vice president so designated by the Board of Directors shall be considered the ranking vice resident of the corporation and during the absence of the President, shall perform all the duties of the President. During this period, other vice presidents shall report to him. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or by the By-Laws, or by the Chief Executive Officer. SECTION 10. Secretary. The Secretary shall keep or cause to be kept, at the principal office or such other place as the Board of Directors may order, a book of minutes of all meetings of directors and shareholders with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register or a duplicate share register showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the By-Laws or by law to be given, and he shall keep the seal of the corporation in safe custody, and shall keep written records and minutes of the meetings of the board, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the By-Laws. SECTION 11. Treasurer. The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital surplus and shares. Any surplus, including retained earnings, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all reasonable times be kept open to inspection by any Director. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the Chief Executive Officer, President and directors whenever they request it, an -9- account of all of his transactions as Treasurer, and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By- Law. ARTICLE IV CAPITAL STOCK SECTION 1. The Capital Stock of the company shall be issued in such manner and at such times and upon such conditions as shall be prescribed by the Board of Directors. SECTION 2. A certificate or certificates for shares of the Capital Stock of the company shall be issued to each shareholder when any such shares are fully paid up. All such certificates shall be signed by the President or a Vice President and the Secretary or an Assistant Secretary. Where any such certificate is registered manually by a Registrar, the signatures of a Transfer Agent and any such President, Vice president, Secretary or Assistant Secretary may be facsimiles, engraved, stamped or printed. All certificates shall be consecutively numbered and the name of the person owning the shares represented thereby, with the number of such shares and date of issue shall be entered on the Company's books. All certificates surrendered to the Company shall be canceled and no new certificates shall be issued until the former certificates for the same number of shares shall have been surrendered or cancelled. SECTION 3. No transfer of stock shall be valid as against the Company except on surrender and cancellation of the certificate therefor, accompanied by an Assignment or Transfer by the owner thereof, made either in person or under assignment, and a new certificate shall be issued therefor. Whenever any transfer shall be expressed as made for collateral security and not absolutely, the same shall be so expressed in the entry of said Transfer on the books of the Company. SECTION 4. The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the Capital Stock of the Company. The Board of Directors may appoint Transfer Agents and Registrars of Transfers and may require all Stock Certificates to -10- bear the signature of such Transfer Agents and of such Registrars of Transfers. SECTION 5. The Stock Transfer books shall be closed for all meetings of the stockholders thirty days prior to such meeting, (unless the Board of Directors sets a different closing date for any such stockholders' meeting in which event the Stock Transfer Books of the Company shall be closed for such meeting as of the date fixed by the Board of Directors but in no event shall such date be more than forty days preceding the date of such stockholders' meeting), and shall be closed for the payment of such dividends on such dates as from time to time may be fixed by the Board of Directors. SECTION 6. Any person or persons applying for a Certificate of Stock in lieu of one alleged to have been lost or destroyed shall make Affidavit or affirmation of fact, and shall deposit with the Company said Affidavit. Whereupon, after the deposit of said Affidavit and upon such person or persons giving Bond of Indemnity to the Company with surety to be approved by the Board of Directors in double the current value of the stock against any damage, loss or inconvenience to the Company, which may or can arise in consequence of a new or duplicate Certificate being issued in lieu of the one lost or missing, the Board of Directors may cause to be issued to such persons, a new certificate or a duplicate certificate of the one so lost or destroyed. The Board of Directors may in its discretion refuse to issue such new duplicate certificate save upon the order of some court having jurisdiction in such matter, anything herein contained to the contrary, notwithstanding. ARTICLE V OFFICES AND BOOKS SECTION 1. The principal office of the corporation in Nevada shall be at the Company offices at 6226 West Sahara Avenue in the City of Las Vegas, Clark County, Nevada, and the Company may have a principal office in any other state or territory or at any other location in the State of Nevada, as the Board of Directors may designate. SECTION 2. The stock ledger of the Company shall be kept at the office of a Transfer Agent and shall be open to inspection by all who are authorized to have the right to see the same. All other books of the Company shall be kept at such places as may be prescribed by the Board of Directors. The Company shall keep at its principal office in the County of Clark, State of Nevada, a statement setting out the name of the Transfer Agent and its complete post office address, -11- including street and number where the Company's stock ledger is kept. A copy of the By-Laws of the articles of Incorporation or any amendments or Restatements thereto of the Company shall be kept at its principal office in the State of Nevada, and shall be subject to the inspection of any of the stockholders. ARTICLE VI MISCELLANEOUS SECTION 1. The Board of Directors shall have power to reserve over and above the Capital Stock paid in, such amounts in its discretion as it may deem advisable to fix as a reserve fund, and may, from time to time, declare dividends from the accumulated profits of the Company in excess of the amounts so reserved, and pay the same to the stockholders of the Company and may also, if it deems the same advisable, declare stock dividends of the unissued Capital Stock of the Company. SECTION 2. The Board of Directors or the Executive Committee shall by resolution determine limits under which the Chief Executive Officer, President and/or other officers and employees are delegated authority to enter into agreements, contracts or obligations (other than checks in payment of indebtedness incurred by authority of the Board of Directors) involving the payment of moneys or the credit of the Company. SECTION 3. Unless otherwise ordered by the Board of Directors or the Executive Committee, all agreements and contracts shall be signed by the Chief Executive Officer, President and Secretary in the name and on behalf of the Company and shall have the corporate seal thereto attached. SECTION 4. All moneys of the corporation shall be deposited when and as received by the Treasurer in such bank or banks or other depository as may from time to time be designated by the Board of Directors, and such deposits shall be made in the name of the Company. SECTION 5. No note, acceptance, endorsement or other evidence of indebtedness shall be valid as against the Company unless the same shall be signed by the Chief Executive Officer, President or a Vice President and attested by the Secretary or an Assistant Secretary or signed by the Treasurer or an Assistant Treasurer, and countersigned by the President, Vice President or Secretary. However, the Chief Executive Officer, President and the Secretary or Assistant Secretary shall have the authority to designate the officers and/or employees who shall sign checks against any one or all of the accounts of the Company in its depository bank or banks, and they are further authorized to -12- designate the number of officers and/or employees who shall sign each check against said account or accounts. Any one of the officers and/or employees authorized to sign checks on behalf of the Company may endorse checks or drafts for deposit only, to the credit of the Company, in any one or all of its designated depositories. No check or order for money shall be signed in blank by officers and/or employees of the Company. SECTION 6. No loan or advance of money other than for reasonable travel and expense advances shall be made by the Company to any stockholder or officer therein, unless the Board of Directors shall otherwise authorize. SECTION 7. No director nor executive officer of the Company shall be entitled to any salary or compensation for any service performed for the company unless such salary or compensation shall be fixed by resolution of the Board of Directors. SECTION 8. The Company may take, acquire, hold, mortgage, sell or otherwise deal in stocks or bonds or securities of any other corporation if and as often as the Board of Directors shall so elect. SECTION 9. The Directors shall have power to authorize and cause to be executed, mortgages and liens without limit as to amount upon the property and franchises of this corporation, and pursuant to the affirmative vote, either in person or by proxy of the holders of a majority of the Capital Stock issued and outstanding, the Directors shall have authority to dispose in any manner of the whole property of this corporation. SECTION 10. The Company shall have a corporate seal, the design thereof being as follows: SECTION 11. The provisions of NRS 78.378 to 78.3793, inclusive, shall not apply to the Company. -13- ARTICLE VII AMENDMENT OF BY-LAWS SECTION 1. Amendments or changes of these By-Laws may be made at any regular or special meeting of the Board of Directors by a vote of not less than a majority of the entire Board, or at any regular or special meeting of shareholders of the Company. ARTICLE VIII INDEMNIFICATION SECTION 1. Indemnification. The Company shall, unless prohibited by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, including without limitation, any action, suit or proceeding brought by or in the right of the Company to procure a judgment in its favor (collectively, a "Proceeding") by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise, against all Expenses and Liabilities actually and reasonably incurred by him in connection with such Proceeding. The right to indemnification conferred in this Article VIII shall be presumed to have been relied upon by the directors, officers, employees and agents of the Company and shall be enforceable as a contract right and inure to the benefit of heirs, executors and administrators of such individuals. SECTION 2. Indemnification Contracts. The Board of Directors is authorized, on behalf of the Company, to enter into, deliver and perform agreements or other arrangements to provide any Indemnitee with specific rights of indemnification in addition to the rights provided hereunder to the fullest extent permitted by Nevada Law. Such agreements or arrangements may provide (I) that the Expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred and in advance of the final disposition of any such action, suit or proceeding provided that, if required by Nevada Law at the time of such advance, the officer or director provides an undertaking to repay such amounts if it is ultimately determined by a court of competent jurisdiction that such individual is not entitled to be indemnified against such expenses, (ii) that the Indemnitee shall be presumed to be entitled to indemnification under this Article VIII or such agreement or arrangement and the Company shall have the burden of proof to overcome that presumption, (iii) for procedures to be followed by the Company and the Indemnitee in making any determination of -14- entitlement to indemnification or for appeals therefrom and (iv) for insurance or such other Financial Arrangements described in Section 3 of this Article VIII, all as may be deemed appropriate by the Board of Directors at the time of execution of such agreement or arrangement. SECTION 3. Insurance and Financial Arrangements. The Company may, unless prohibited by Nevada Law, purchase and maintain insurance or make other financial arrangements ("Financial Arrangements") on behalf of any Indemnitee for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the Company has the authority to indemnify him against such liability and expenses. Such other Financial Arrangements may include (I) the creation of a trust fund, (ii) the establishment of a program of self-insurance, (iii) the securing of the Company's obligation of indemnification by granting a security interest or other lien on any assets of the Company, or (iv) the establishment of a letter of credit, guaranty or surety. SECTION 4. Definitions. For purposes of this Article: Expenses. The word "Expenses" shall be broadly construed and, without limitation, means (I) all direct and indirect costs incurred, paid or accrued, (ii) all attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, food and lodging expenses while traveling, duplicating costs, printing and binding costs, telephone charges, postage, delivery service, freight or other transportation fees and expenses, (iii) all other disbursements and out-of-pocket expenses, and (iv) amounts paid in settlement, to the extent permitted by Nevada Law; provided, however, that "Expenses" shall not include any judgments or fines or excise taxes or penalties imposed under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other excise taxes or penalties. Liabilities. "Liabilities" means liabilities of any type whatsoever, including, but not limited to, judgments or fines, ERISA or other excise taxes and penalties, and amounts paid in settlement. Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised Statutes as amended and in effect from time to time or any successor or other statutes of Nevada having similar import and effect. This Article. "This Article" means Paragraphs 1 through 5 of this Article VIII or any portion of them. SECTION 5. Amendment. Sections 1 through 5 of this Article VIII, including this Section 5, may only be amended by (I) a majority vote of the Continuing Directors (as such term is -15- defined in the Company's Restated Articles of Incorporation) or (ii) the affirmative vote of holders of 80% of the Company's outstanding Voting Stock; provided, however, no amendment or repeal of this Article VIII shall adversely affect any right of any Indemnitee existing at the time such amendment or repeal becomes effective. -16- EX-4.2 3 26TH SUPPLEMENTAL INDENTURE ============================================================================ NEVADA POWER COMPANY (Formerly Southern Nevada Power Co.) TO BANKERS TRUST COMPANY as Trustee ------------------ TWENTY-SIXTH SUPPLEMENTAL INDENTURE ------------------ Dated as of May 1, 1995 ============================================================================ 1 THIS TWENTY-SIXTH SUPPLEMENTAL INDENTURE dated as of May 1, 1995, made by and between NEVADA POWER COMPANY (formerly SOUTHERN NEVADA POWER CO.), a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), having its principal place of business at Las Vegas, Nevada, party of first part, and BANKERS TRUST COMPANY (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), a banking corporation duly organized and existing under and by virtue of the banking laws of the State of New York, having its principal place of business at 4 Albany Street, New York, New York, (hereinafter sometimes called the "Trustee"), party of the second part; WHEREAS, the Company has heretofore executed and delivered to the Trustee its Indenture of Mortgage and Deed of Trust ("Original Indenture") dated October 1, 1953, to secure the payment of the principal of and interest and premium, if any, on all bonds of the Company at any time outstanding thereunder; and, for the purpose of amending and supplementing and further confirming the lien of the Original Indenture, has heretofore executed and delivered the following Supplemental Indentures and Instrument of Further Assurance, each dated as hereinafter set forth: Instrument Date ---------- ---- First Supplemental Indenture August 1, 1954 Instrument of Further Assurance as of April 1, 1956 Second Supplemental Indenture September 1, 1956 Third Supplemental Indenture as of May 1, 1959 Fourth Supplemental Indenture as of October 1, 1960 Fifth Supplemental Indenture as of December 1, 1961 2 Sixth Supplemental Indenture as of October 1, 1963 Seventh Supplemental Indenture as of August 1, 1964 Eighth Supplemental Indenture as of April 1, 1968 Ninth Supplemental Indenture as of October 1, 1969 Tenth Supplemental Indenture as of October 1, 1970 Eleventh Supplemental Indenture as of November 1, 1972 Twelfth Supplemental Indenture as of December 1, 1974 Thirteenth Supplemental Indenture as of October 1, 1976 Fourteenth Supplemental Indenture as of May 1, 1977 Fifteenth Supplemental Indenture as of September 1, 1978 Sixteenth Supplemental Indenture as of December 1, 1981 Seventeenth Supplemental Indenture as of August 1, 1982 Eighteenth Supplemental Indenture as of November 1, 1986 Nineteenth Supplemental Indenture as of October 1, 1989; Twentieth Supplemental Indenture as of May 1, 1992 Twenty-First Supplemental Indenture as of June 1, 1992 Twenty-Second Supplemental Indenture as of June 1, 1992 Twenty-Third Supplemental Indenture as of October 1, 1992 Twenty-Fourth Supplemental Indenture as of October 1, 1992 Twenty-Fifth Supplemental Indenture as of January 1, 1993 the Original Indenture, as amended and supplemented by the instruments listed above and as to be supplemented by this Twenty-Sixth Supplemental Indenture and as it may from time to time be amended or supplemented pursuant to the provisions thereof, is hereinafter sometimes called the "Indenture"; WHEREAS, the Original Indenture, the Instrument of Further Assurance and the Supplemental Indentures listed in the foregoing paragraph were recorded 3 in Offices of the County Recorders of the States of Nevada, Arizona and Utah as set forth in Exhibit A attached hereto and incorporated herein by reference; WHEREAS, in addition to fifteen series of Bonds heretofore issued under the Indenture, all of which have been retired, there have heretofore been issued under the Indenture $15,000,000 principal amount of First Mortgage Bonds, 7 1/8% Series I Due 1998 of which $15,000,000 is now outstanding; $15,000,000 principal amount of First Mortgage Bonds, 7 5/8% Series L Due 2002 of which $15,000,000 is now outstanding; $13,000,000 principal amount of First Mortgage Bonds, 7 1/8% Series N Due 2006 of which $13,000,000 is now outstanding; $9,500,000 principal amount of First Mortgage Bonds, 6 3/4% Series O Due 2007 of which $6,300,000 is now outstanding; $730,000 principal amount of First Mortgage Bonds, 8 3/4% Series P Due 1995 of which $401,500 is now outstanding; $15,000,000 principal amount of First Mortgage Bonds, 7.80% Series T Due 2009 of which $15,000,000 is now outstanding; $105,000,000 principal amount of First Mortgage Bonds, 6.70% Series V due 2022 of which $105,000,000 is now outstanding; $39,500,000 principal amount of First Mortgage Bonds, 6.60% Series W due 2019 of which $39,500,000 is now outstanding; $78,000,000 principal amount of First Mortgage Bonds, 7.20% Series X Due 2022 of which $78,000,000 is now outstanding; $45,000,000 principal amount of First Mortgage Bonds, 6.93% Series Y Due 1999 of which $45,000,000 is now outstanding; and $45,000,000 principal amount of First Mortgage Bonds, 8.50% Series Z due 2023 of which $45,000,000 is now outstanding; WHEREAS, the Company in the exercise of the power and authority conferred upon and reserved to it under the provisions of the Indenture, and pursuant to a resolution duly adopted by its Board of Directors, has resolved and determined to create and issue a new series of Bonds to be designated "First 4 Mortgage Bonds, 7.06% Series AA Due 2000" (hereinafter sometimes referred to as "Bonds of Series AA") and to make, execute and deliver to the Trustee this Twenty-Sixth Supplemental Indenture, in the form hereof, as a further supplement to the Indenture; and WHEREAS, all conditions and requirements necessary to make this Twenty- Sixth Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, in consideration of the premises and of the sum of one dollar ($1), lawful money of the United States of America, duly paid by the Trustee to the Company, and of other good and valuable consideration, receipt whereof is hereby acknowledged, and for the purpose of securing the due and punctual payment of the principal of and interest on all Bonds issued and outstanding from time to time under the Indenture, including specifically, but without limitation, Bonds of Series AA to be issued pursuant to this Twenty-Sixth Supplemental Indenture, and to secure the performance and observation of each and every of the covenants and conditions contained in the Indenture, and without in any way limiting the generality or effect of the Indenture insofar as by any provision thereof any of the properties therein or hereinafter referred to are now subject, or are now intended to be subject to the lien and operation thereof, but to such extent confirming such lien and operation, the Company has executed and delivered this Twenty-Sixth Supplemental Indenture and has granted, bargained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm, unto Bankers Trust Company, as Trustee aforesaid, and to its successors in the trust hereby created, in trust upon the conditions, 5 terms and provisions of the Indenture, subject to the encumbrances and other matters permitted by the Indenture, all and singular the following premises, properties, interests and rights, all to the same extent and with the same force and effect as though owned by the Company at the date of execution of the Original Indenture and described in the same detail in the Granting Clauses of the Original Indenture, such premises, properties, interests and rights having been generally described and referred to in the Original Indenture; and to such ends the Company hereby supplements, as below set forth, the Granting Clauses of the Original Indenture: GRANTING CLAUSES All of the premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, now owned or hereafter acquired by the Company and wherever situate. Together with all and singular the tenements, hereditament and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders, tolls, rents, revenues, issues, income, products and profits thereof and all the estate, right, title, interest and claim whatsoever at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. Excepting and excluding, however, any and all property, premises and rights of the kinds or classes which by the terms of the Indenture are excepted and excluded from the lien and operation thereof, and therein sometimes referred to as "Excepted Property" (subject, however, to the Trustee's rights to possession 6 of Excepted Property in case of default, as set forth under "Excepted Property" in the Original Indenture). TO HAVE AND TO HOLD in trust with power of sale for the equal and proportionate benefit and security of all holders of all Bonds and the interest coupons appertaining thereto, now or hereafter issued under the Indenture, and for the enforcement and payment of Bonds and interest thereon when payable, and the performance of and compliance with the covenants and conditions of the Indenture, without any preference, distinction or priority as to lien or otherwise of any Bonds or coupons over any others thereof by reason of the difference in the time of the actual issue, sale or negotiation thereof, or by reason of the date of maturity thereof, or for any other reason whatsoever, except as otherwise expressly provided in the Indenture, so that each and every Bond shall have the same lien and so that the interest and principal of every Bond shall, subject to the terms thereof, be equally and proportionately secured by said lien, as if such Bond had been made, executed, delivered, sold and negotiated simultaneously with the execution and delivery of the Original Indenture. The Trustee executes this Twenty-Sixth Supplemental Indenture only on the condition that it shall have and enjoy with respect thereto all of the rights, privileges and immunities as set forth in the Indenture. The Company has agreed and covenanted and does hereby agree and covenant with the Trustee and its successors and assigns, and with the respective holders from time to time of the Bonds, or any thereof, as follows: 7 PART I ARTICLE I DESCRIPTION OF BONDS OF SERIES AA DUE 2000 1.01 The twenty-sixth series of Bonds to be executed, authenticated and delivered under and secured by the Indenture shall be the Bonds of Series AA. The Bonds of Series AA shall be designated as "First Mortgage Bonds, 7.06% Series AA Due 2000" of the Company. The Bonds of Series AA shall be executed, authenticated and delivered in accordance with the provisions of, and shall in all respects be subject to, all of the terms, conditions and covenants of the Indenture. All of the Bonds of Series AA shall be registered Bonds without coupons, shall be dated May 19, 1995, shall mature May 1, 2000 and shall bear interest at the rate of seven and six one hundredths percent (7.06%) per annum, payable semiannually in arrears on the first day of May and the first day of November in each year ("interest payment dates"). The principal of and premium, if any, and interest on all Bonds of Series AA shall be payable at the office of the Trustee in New York, New York. Interest on any Bond which is payable on any interest payment date will be paid to the person in whose name such Bond is registered at the close of business on the fifteenth day (whether or not a business day) next preceding such interest payment date. The Bonds of Series AA may be issued in the form of engraved bonds, or bonds printed or lithographed upon steel engraved borders, and may have such legends or endorsements printed, lithographed or engraved thereon as may, consistently with the Indenture, be approved by the Board of Directors. 1.02 The Bonds of Series AA shall be issued in denominations of One Thousand Dollars ($1,000) and any integral multiple of One Thousand Dollars 8 ($1,000) which may be executed by the Company and delivered to the Trustee for authentication and delivery. 1.03 The Bonds of Series AA and the Trustee's Certificate of Authentication shall be substantially in the following forms, respectively: [FORM OF FACE OF BOND OF SERIES AA] NEVADA POWER COMPANY No. R......................... $......................... FIRST MORTGAGE BOND, 7.06% SERIES AA DUE 2000 Due May 1, 2000 For value received, NEVADA POWER COMPANY, a corporation organized and existing under the laws of the State of Nevada (hereinafter called the "Company"), hereby promises to pay to......................... or registered assigns, on May 1, 2000, the sum of......................... Dollars, or so much thereof as shall not be noted by endorsement hereon by the holder as paid, in coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, and to pay to the registered holder hereof interest thereon from the date hereof, at the rate of seven and six one hundredths percent (7.06%) per annum, in like coin or currency, payable semiannually in arrears on the first day of May and the first day of November in each year ("interest payment dates") until the principal hereof shall have become due and payable, and thereafter, if default be made in the payment of such interest or principal at the same rate of interest per annum, until the principal thereof shall be paid. The principal of and premium, if any, and interest on this Bond are payable at the office of the Trustee in New York, New York. Interest on this Bond which is payable on any interest payment date will be paid to the 9 person in whose name this Bond is registered at the close of business on the fifteenth day (whether or not a business day) next preceding such interest payment date. Additional provisions of this Bond are contained on the reverse hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place. This Bond shall not be valid or become obligatory for any purpose until the certificate endorsed hereon shall be signed by the Trustee under the Indenture. IN WITNESS WHEREOF, NEVADA POWER COMPANY has caused these presents to be signed in its name by its President or a Vice President and its corporate seal (or a facsimile thereof) to be affixed hereto and attested by its Secretary. Dated: NEVADA POWER COMPANY Attest: By: --------------------------- Vice President - -------------------------- Secretary 10 [FORM OF REVERSE OF BOND OF SERIES AA] This Bond is one of an issue of Bonds of the Company issuable in series, and is one of the Bonds of the series named in the caption hereof (the Bonds of said series being hereinafter called "Bonds of Series AA"), all Bonds of all series issued and to be issued under, and equally and ratably secured (except insofar as any Sinking Fund or analogous fund may afford additional security for the Bonds of any particular series) by an Indenture of Mortgage and Deed of Trust dated October 1, 1953 as amended and supplemented by the following Supplemental Indentures and Instrument of Further Assurance, each dated as hereinafter set forth: Instrument Date ---------- ---- First Supplemental Indenture August 1, 1954 Instrument of Further Assurance as of April 1, 1956 Second Supplemental Indenture September 1, 1956 Third Supplemental Indenture as of May 1, 1959 Fourth Supplemental Indenture as of October 1, 1960 Fifth Supplemental Indenture as of December 1, 1961 Sixth Supplemental Indenture as of October 1, 1963 Seventh Supplemental Indenture as of August 1, 1964 Eighth Supplemental Indenture as of April 1, 1968 Ninth Supplemental Indenture as of October 1, 1969 Tenth Supplemental Indenture as of October 1, 1970 Eleventh Supplemental Indenture as of November 1, 1972 Twelfth Supplemental Indenture as of December 1, 1974 Thirteenth Supplemental Indenture as of October 1, 1976 Fourteenth Supplemental Indenture as of May 1, 1977 Fifteenth Supplemental Indenture as of September 1, 1978 11 Sixteenth Supplemental Indenture as of December 1, 1981 Seventeenth Supplemental Indenture as of August 1, 1982 Eighteenth Supplemental Indenture as of November 1, 1986 Nineteenth Supplemental Indenture as of October 1, 1989 Twentieth Supplemental Indenture as of May 1, 1992 Twenty-First Supplemental Indenture as of June 1, 1992 Twenty-Second Supplemental Indenture as of June 1, 1992 Twenty-Third Supplemental Indenture as of October 1, 1992 Twenty-Fourth Supplemental Indenture as of October 1, 1992 Twenty-Fifth Supplemental Indenture as of January 1, 1993 Twenty-Sixth Supplemental Indenture as of May 1, 1995 (which Indenture of Mortgage and Deed of Trust as so amended and supplemented is hereinafter in this Bond called the "Indenture"), executed by the Company to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada) ("Trustee"), as Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the properties mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the Bonds are and are to be secured and the rights, duties and immunities thereunder of the holders or registered owners thereof, of the Company, and of the Trustee. As provided in the Indenture, said Bonds may be issued in series, for various principal sums, may bear different dates and mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided or permitted. The Bonds of Series AA are described in said Twenty-Sixth Supplemental Indenture dated as of May 1, 1995 ("Twenty-Sixth Supplemental Indenture") executed by the Company to Bankers Trust Company, as Trustee, and are issuable as registered bonds without coupons in denominations of $1,000 and any integral multiple thereof. 12 The Bonds of Series AA are not subject to redemption prior to maturity, whether to satisfy any sinking fund or renewal and replacement obligation under the Indenture or otherwise, except that if all or substantially all of the property of the Company subject to the lien of the Indenture shall be taken by the exercise of the power of eminent domain or shall be sold by the Company and released under the provisions of Article XI of the Indenture, the Company shall call for redemption and redeem all of the Bonds of Series AA then outstanding for 100% of the principal amount thereof, together with accrued interest thereon, to the date of redemption. To the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of Bonds of Series AA may be changed and modified with the consent of the Company and upon the written consent of the holders of at least sixty-six and two-thirds percent (66 2/3%) in principal amount of each series of the Bonds then outstanding and entitled to consent, provided that no such change shall be made (a) which would without the consent of the holders of all Bonds then outstanding and affected thereby (i) reduce the principal of, or premium, sinking fund, or rate of interest payable on, the Bonds, (ii) postpone the maturity date fixed for the payment of the principal of, sinking fund upon, or any installment of interest on, the Bonds, (iii) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Indenture, or (iv) reduce the percentage of the principal amount of Bonds the consent of the holders of which is required for the authorization of any such change or modification, or (b) which would modify, without the written consent o f the Trustee, the rights, duties or immunities of the Trustee. In case an event of default as defined in the Indenture shall occur and be continuing, the principal of all the Bonds outstanding may be declared and may become due and payable in the manner and with the effect provided in the Indenture. 13 The Bonds of Series AA are interchangeable as to denominations in the manner and upon the conditions prescribed in the Indenture. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in any indenture supplemental thereto, or in any Bond or coupon thereby secured, or because of any indebtedness thereby secured, shall be had against any incorporator, or against any past, present or future stockholder, officer, or director, as such, of the Company or any successor corporation, either directly or through the Company or of any successor corporation under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that the Indenture, any indenture supplemental thereto and the obligations thereby secured, are solely corporate obligations, and that no personal liability whatever shall attach to, or be incurred by, such incorporators, stockholders, officers or directors, as such, of the Company or of any successor corporation, or any of them, because of the incurring of the indebtedness thereby authorized, or under or by reason of any of the obligations, covenants or agreements contained in the Indenture or in any indenture supplemental thereto or in any of the Bonds or coupons thereby secured, or implied therefrom. Upon any partial redemption of this Bond, at the option of the registered holder hereof, this Bond may be either (i) surrendered to the Trustee in exchange for one or more new registered Bonds of Series AA, of authorized denominations, registered in the name of such holder, in an aggregate principal amount equal to the principal amount remaining unpaid upon this Bond, or (ii) submitted to the Trustee for notation hereon of the payment of the portion of the principal hereof paid upon such partial redemption. This Bond is transferable by the registered holder hereof in person or by the attorney of such holder, duly authorized in writing, on the registry books to 14 be kept for the purpose at the New York, New York office of the Trustee, Registrar for the Bonds, upon surrender of this Bond accompanied by a written instrument of transfer in form approved by the Company, duly executed by the registered holder in person or by such attorney, and upon cancellation hereof one or more new registered Bonds of Series AA for the same aggregate principal amount, will be issued to the transferee in exchange herefor, as provided in the Indenture. The Company, the Trustee and any paying agent may deem and treat the person in whose name this Bond is registered on such books as the absolute owner and holder thereof (whether or not this Bond shall be overdue and notwithstanding any notation of ownership or writing thereon which may have been made by anyone other than the Company or the Trustee) for the purpose of receiving payment hereof, and on account hereof and for all other purposes and neither the Company, the Trustee nor any paying agent shall be affected by any notice to the contrary. [Trustee's Certificate to be endorsed on bonds] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds, of the series designated therein, described in the within-mentioned Indenture. BANKERS TRUST COMPANY, Trustee By: ----------------------- Authorized Officer 15 ARTICLE II AUTHORIZED PRINCIPAL AMOUNT 2.01 Bonds of Series AA may be executed by the Company and authenticated and delivered by the Trustee at any time and from time to time, in the manner and amount permitted by the Indenture; provided, however, that no Bonds of Series AA in excess of Eighty-Five Million Dollars ($85,000,000) principal amount (other than Bonds of Series AA which may be so executed, authorized and delivered in lieu of other Bonds of Series AA as authenticated under Article II or 10.01 of the Original Indenture) shall be executed by the Company, authenticated or delivered by the Trustee or secured by the Indenture, except in such additional principal amounts as may be authorized by a supplemental indenture or indentures which the Company and the Trustee are hereby authorized to execute and deliver for that purpose. ARTICLE III REDEMPTION 3.01 The Bonds of Series AA shall not be redeemable prior to maturity, whether to satisfy any sinking fund or renewal and replacement obligation under the Indenture or otherwise, except as provided in Section 11.07 of the Original Indenture. The redemption price of any Bonds of Series AA which are to be redeemed pursuant to 11.07 of the Original Indenture shall be the principal amount thereof plus accrued interest to the date fixed for redemption. 16 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01 The Company represents and warrants that, as of the date of execution of this Twenty-Sixth Supplemental Indenture, it has good and marketable title in fee simple to all the real properties described in the Granting Clauses of the Original Indenture, the First Supplemental Indenture, the Instrument of Further Assurance, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-Second Supplemental Indenture, the Twenty- Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture, the Twenty-Fifth Supplemental Indenture and this Twenty-Sixth Supplemental Indenture (except any property heretofore released from the lien of the Indenture in accordance with the terms thereof), free and clear of any liens and encumbrances except Permitted Encumbrances and those, if any, referred to in said Granting Clauses, and that it has good and marketable title and is lawfully possessed of all other properties described in said Granting Clauses (except any properties therein described as to be acquired by the Company after the date of this Twenty-Sixth Supplemental Indenture and except any property heretofore released from the lien of the Indenture in accordance with the terms thereof), and 17 the Indenture constitutes a direct and valid first mortgage lien on all such properties, subject only to Permitted Encumbrances and those, if any, referred to in said Granting Clauses. The Company represents and warrants that it has and covenants that it will continue to have, subject to the provisions of the Indenture, good right, full power and lawful authority to grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm to the Trustee all properties of every kind and nature described or referred to in said Granting Clauses (except any properties therein described as to be acquired by the Company after the date of this Twenty-Sixth Supplemental Indenture) which by the provisions of the Indenture are intended to be subject to the lien of the Indenture and that it will defend the title to such property and every part thereof to the Trustee forever, for the benefit of the holders of the Bonds, against the claims and demands of all persons whomsoever. ARTICLE V RENEWAL AND REPLACEMENT FUND 5.01 Notwithstanding anything to the contrary contained elsewhere in the Indenture, cash deposited with the Trustee pursuant to 9.06 of the Original Indenture (a) shall not be used to redeem Bonds of Series AA prior to maturity, and (b) shall be retained by the Trustee and, unless withdrawn pursuant to the provisions of 9.06 of the Original Indenture, shall be applied by the Trustee to the payment of principal and accrued interest on the Bonds of Series AA at maturity. 18 PART II MISCELLANEOUS PROVISIONS Except insofar as herein otherwise expressly provided, all of the definitions, provisions, terms and conditions of the Indenture shall be deemed to be incorporated in, and made a part of, this Twenty-Sixth Supplemental Indenture; and the Original Indenture as amended and supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-Second Supplemental Indenture, the Twenty-Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture and the Twenty-Fifth Supplemental Indenture and is in all respects ratified and confirmed and supplemented by this Twenty-Sixth Supplemental Indenture; and the Original Indenture as amended and supplemented shall be read, taken and construed as one and the same instrument. All covenants, promises, agreements, undertakings and provisions of the Indenture which exist for the benefit of, or while or so long as 1983 Series Bonds, Series B Bonds, Series C Bonds, Series D Bonds, Series E Bonds, Series F Bonds, Series G Bonds, Series H Bonds, Series I Bonds, Series J Bonds, Series K Bonds, Series L Bonds, Series M Bonds, Series N Bonds, Series O Bonds, Series P Bonds, Series Q, Series R, Series S, Series T Bonds, Series V Bonds, Series W Bonds, Series X Bonds, Series Y Bonds and Series Z Bonds are 19 outstanding, are hereby expressed to exist also for the benefit of Bonds of Series AA and for that purpose shall be observed, performed and complied with by the Company so long as any Bonds of Series AA shall be outstanding. This Twenty-Sixth Supplemental Indenture shall be effective as of the date first hereinabove set forth, and may be executed simultaneously or from time to time in several counterparts, and each counterpart shall constitute an original instrument, and it shall not be necessary in making proof of this Twenty-Sixth Supplemental Indenture or of any counterpart thereof to produce or account for any of the other counterparts. 20 IN WITNESS WHEREOF, said Nevada Power Company has caused this Twenty- Sixth Supplemental Indenture to be executed on its behalf by its Vice President and its corporate seal to be hereto affixed, and the said seal and this Twenty-Sixth Supplemental Indenture to be attested by its Secretary; and said Bankers Trust Company in evidence of its acceptance of the trust hereby created has caused this Twenty-Sixth Supplemental Indenture to be executed on its behalf by its Assistant Vice President and its corporate seal to be hereto affixed and said seal and this Twenty-Sixth Supplemental Indenture to be attested by its Assistant Treasurer, all as of the 1st day of May, 1995. NEVADA POWER COMPANY By: ---------------------- [S E A L] ATTEST: - ---------------------------- BANKERS TRUST COMPANY, as Trustee By: JAMES MCDONOUGH ----------------------- Assistant Vice President [S E A L] ATTEST: SCOTT THIEL - -------------------------- Assistant Treasurer 20 IN WITNESS WHEREOF, said Nevada Power Company has caused this Twenty- Sixth Supplemental Indenture to be executed on its behalf by its Vice President and its corporate seal to be hereto affixed, and the said seal and this Twenty-Sixth Supplemental Indenture to be attested by its Secretary; and said Bankers Trust Company in evidence of its acceptance of the trust hereby created has caused this Twenty-Sixth Supplemental Indenture to be executed on its behalf by its Assistant Vice President and its corporate seal to be hereto affixed and said seal and this Twenty-Sixth Supplemental Indenture to be attested by its Assistant Treasurer, all as of the 1st day of May, 1995. NEVADA POWER COMPANY By: STEVEN W. RIGAZIO --------------------- [S E A L] ATTEST: RICHARD L. HINCKLEY - ---------------------------- BANKERS TRUST COMPANY, as Trustee By: ----------------------- Assistant Vice President [S E A L] ATTEST: - -------------------------- Assistant Treasurer 21 STATE OF NEVADA ) )ss. COUNTY OF CLARK ) On this 15th day of May, 1995, personally appeared before me, a Notary Public in and for said County and State, Steven W. Rigazio and Richard L. Hinckley, known to me to be the Vice President, Finance and Planning, Treasurer and Chief Financial Officer and Vice President, Secretary and General Counsel, respectively of Nevada Power Company, one of the corporations that executed the foregoing instrument, and upon oath did each depose that he is the officer of said corporation as above designated; that he is acquainted with the seal of said corporation and that the seal affixed to said instrument is the corporate seal of said corporation; that the signatures to said instrument were made by officers of said corporation as indicated after said signatures, and that the said corporation executed the said instrument freely and voluntarily and for the uses and purposes therein mentioned. ELVIRA T. COZZENS [Notarial Seal] ------------------------------- Notary Public 22 STATE OF NEW YORK ) )ss. COUNTY OF NEW YORK ) On this day of May, 1995, before me personally came JAMES C. ---- McDONOUGH, to me known, who, being by me duly sworn, did depose and say that he resides at 1250 North Avenue, New Rochelle, New York 10804; that he is an Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the above 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 order of the Board of Directors of said corporation, and that he signed his name thereto by like order. [Notarial seal] ------------------------- 23 STATE OF NEW YORK ) )ss. COUNTY OF NEW YORK ) On this 15 day of May, 1995, before me personally came JAMES C. -- McDONOUGH, to me known, who, being by me duly sworn, did depose and say that he resides at 1250 North Avenue, New Rochelle, New York 10804; that he is an Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the above 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 order of the Board of Directors of said corporation, and that he signed his name thereto by like order. [Notarial seal] Carol Allen ------------------------- EXHIBIT A The Original Indenture, First Supplemental Indenture, an Instrument of Further Assurance, Second Supplemental Indenture, Third Supplemental Indenture, Fourth Supplemental Indenture, Fifth Supplemental Indenture, Sixth Supplemental Indenture, Seventh Supplemental Indenture, Eighth Supplemental Indenture, Ninth Supplemental Indenture, Tenth Supplemental Indenture, Eleventh Supplemental Indenture, Twelfth Supplemental Indenture, Thirteenth Supplemental Indenture, Fourteenth Supplemental Indenture, Fifteenth Supplemental Indenture, Sixteenth Supplemental Indenture, Seventeenth Supplemental Indenture, Eighteenth Supplemental Indenture, Nineteenth Supplemental Indenture, Twentieth Supplemental Indenture, Twenty- First Supplemental Indenture, Twenty-Second Supplemental Indenture, Twenty- Third Supplemental Indenture, Twenty-Fourth Supplemental Indenture and Twenty-Fifth Supplemental Indenture were recorded in Offices of the County Recorders of the States of Nevada, Arizona and Utah as follows: NEVADA CLARK COUNTY NEVADA, CLARK COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Nov. 6, 1953 417,677 Trust Deeds First Supplemental Indenture Sept. 23, 1954 20,904 Official Records Instrument of Further Assurance Apr. 19, 1956 75,779 Official Records Second Supplemental Indenture Sept. 19, 1956 89,423 Official Records Third Supplemental Indenture May 15, 1959 160,878 Official Records Fourth Supplemental Indenture Oct. 28, 1960 215,907 Official Records Fifth Supplemental Indenture Dec. 4, 1961 267,362 Official Records Sixth Supplemental Indenture Oct. 18, 1963 391,466 Official Records Seventh Supplemental Indenture Aug. 7, 1964 451,010 Official Records Eighth Supplemental Indenture May 10, 1968 700,126 Official Records Ninth Supplemental Indenture Oct. 16, 1969 791,246 Official Records Tenth Supplemental Indenture Oct. 2, 1970 53,871 Official Records Eleventh Supplemental Indenture Oct. 27, 1972 233,640 Official Records Twelfth Supplemental Indenture Dec. 6, 1974 438,246 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 629,589 Official Records Fourteenth Supplemental Indenture May 4, 1977 693,961 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 898,343 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 1,453,990 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 1,569,991 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 00622 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 00576 Official Records Twentieth Supplemental Indenture April 30, 1992 01212 Official Records Twenty-First Supplemental Indenture June 19, 1992 01239 Official Records Twenty-Second Supplemental Indenture June 19, 1992 01240 Official Records Twenty-Third Supplemental Indenture October 26, 1992 00858 Official Records Twenty-Fourth Supplemental Indenture November 2, 1992 00901 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 00710 Official Records
A-2 NEVADA NYE COUNTY NEVADA, NYE COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Sept. 19, 1956 24,334 Trust Deeds First Supplemental Indenture Sept. 19, 1956 24,335 Official Records Instrument of Further Assurance Sept. 19, 1956 24,336 Official Records Second Supplemental Indenture Sept. 19, 1956 24,337 Official Records Third Supplemental Indenture May 15, 1959 31,466 Official Records Fourth Supplemental Indenture Oct. 28, 1960 37,060 Official Records Fifth Supplemental Indenture Dec. 5, 1961 39,876 Official Records Sixth Supplemental Indenture Oct. 18, 1963 46,249 Official Records Seventh Supplemental Indenture Aug. 7, 1964 48,660 Official Records Eighth Supplemental Indenture May 10, 1968 05,910 Official Records Ninth Supplemental Indenture Oct. 17, 1969 15,192 Official Records Tenth Supplemental Indenture Oct. 5, 1970 20,294 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 35,265 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 45,632 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 55,802 Official Records Fourteenth Supplemental Indenture May 4, 1977 58,169 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 70,767 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 54,601 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 65,354 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 171,431 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 245632 Official Records Twentieth Supplemental Indenture April 30, 1992 307547 Official Records Twenty-First Supplemental Indenture June 19, 1992 310469 Official Records Twenty-Second Supplemental Indenture June 19, 1992 310470 Official Records Twenty-Third Supplemental Indenture October 26, 1992 320357 Official Records Twenty-Fourth Supplemental Indenture November 2, 1992 320802 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 324817 Official Records
A-3 NEVADA LINCOLN COUNTY NEVADA, LINCOLN COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Sept. 1, 1972 52,162 Official Records First Supplemental Indenture Sept. 1, 1972 52,163 Official Records Instrument of Further Assurance Sept. 1, 1972 52,164 Official Records Second Supplemental Indenture Sept. 1, 1972 52,165 Official Records Third Supplemental Indenture Sept. 1, 1972 52,166 Official Records Fourth Supplemental Indenture Sept. 1, 1972 52,167 Official Records Fifth Supplemental Indenture Sept. 1, 1972 52,168 Official Records Sixth Supplemental Indenture Sept. 1, 1972 52,169 Official Records Seventh Supplemental Indenture Sept. 1, 1972 52,170 Official Records Eighth Supplemental Indenture Sept. 1, 1972 52,171 Official Records Ninth Supplemental Indenture Sept. 1, 1972 52,172 Official Records Tenth Supplemental Indenture Sept. 1, 1972 52,173 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 52,330 Official Records Twelfth Supplemental Indenture Dec. 6, 1974 55,557 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 58,659 Official Records Fourteenth Supplemental Indenture May 4, 1977 59,627 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 62,731 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 74,010 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 75,970 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 85,911 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 92444 Official Records Twentieth Supplemental Indenture April 30, 1992 98382 Official Records Twenty-First Supplemental Indenture June 19, 1992 98558 Official Records Twenty-Second Supplemental Indenture June 19, 1992 98559 Official Records Twenty-Third Supplemental Indenture October 26, 1992 99552 Official Records Twenty-Fourth Supplemental Indenture November 2, 1992 99062 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 99782 Official Records
A-4 ARIZONA NAVAJO COUNTY ARIZONA, NAVAJO COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Oct. 5, 1970 330 Official Records First Supplemental Indenture Oct. 5, 1970 330 Official Records Instrument of Further Assurance Oct. 5, 1970 330 Official Records Second Supplemental Indenture Oct. 5, 1970 330 Official Records Third Supplemental Indenture Oct. 5, 1970 330 Official Records Fourth Supplemental Indenture Oct. 5, 1970 330 Official Records Fifth Supplemental Indenture Oct. 5, 1970 330 Official Records Sixth Supplemental Indenture Oct. 5, 1970 330 Official Records Seventh Supplemental Indenture Oct. 5, 1970 330 Official Records Eighth Supplemental Indenture Oct. 5, 1970 330 Official Records Ninth Supplemental Indenture Oct. 5, 1970 330 Official Records Tenth Supplemental Indenture Oct. 5, 1970 330 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 376 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 426 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 473 Official Records Fourteenth Supplemental Indenture May 4, 1977 486 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 531 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 647 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 691 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 846 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 970 Official Records Twentieth Supplemental Indenture April 30, 1992 1076 Official Records Twenty-First Supplemental Indenture June 19, 1992 1083 Official Records Twenty-Second Supplemental Indenture June 19, 1992 1083 Official Records Twenty-Third Supplemental Indenture October 26, 1992 1103 Official Records Twenty-Fourth Supplemental Indenture October 30, 1992 1104 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 1112 Official Records
A-5 ARIZONA COCONINO COUNTY ARIZONA, COCONINO COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Oct. 1, 1970 370 Official Records First Supplemental Indenture Oct. 1, 1970 370 Official Records Instrument of Further Assurance Oct. 1, 1970 370 Official Records Second Supplemental Indenture Oct. 1, 1970 370 Official Records Third Supplemental Indenture Oct. 1, 1970 370 Official Records Fourth Supplemental Indenture Oct. 1, 1970 370 Official Records Fifth Supplemental Indenture Oct. 1, 1970 370 Official Records Sixth Supplemental Indenture Oct. 1, 1970 370 Official Records Seventh Supplemental Indenture Oct. 1, 1970 370 Official Records Eighth Supplemental Indenture Oct. 1, 1970 370 Official Records Ninth Supplemental Indenture Oct. 1, 1970 370 Official Records Tenth Supplemental Indenture Oct. 5, 1970 370 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 445 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 528 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 606 Official Records Fourteenth Supplemental Indenture May 4, 1977 628 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 697 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 862 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 896 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 1125 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 1304 Official Records Twentieth Supplemental Indenture April 30, 1992 1471 Official Records Twenty-First Supplemental Indenture June 19, 1992 1483 Official Records Twenty-Second Supplemental Indenture June 19, 1992 1483 Official Records Twenty-Third Supplemental Indenture October 26, 1992 1515 Official Records Twenty-Fourth Supplemental Indenture October 30, 1992 1517 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 1535 Official Records
A-6 ARIZONA MOHAVE COUNTY ARIZONA, MOHAVE COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Aug. 28, 1972 50 Official Records First Supplemental Indenture Aug. 28, 1972 50 Official Records Instrument of Further Assurance Aug. 28, 1972 50 Official Records Second Supplemental Indenture Aug. 28, 1972 50 Official Records Third Supplemental Indenture Aug. 28, 1972 50 Official Records Fourth Supplemental Indenture Aug. 28, 1972 50 Official Records Fifth Supplemental Indenture Aug. 28, 1972 50 Official Records Sixth Supplemental Indenture Aug. 28, 1972 50 Official Records Seventh Supplemental Indenture Aug. 28, 1972 51 Official Records Eighth Supplemental Indenture Aug. 28, 1972 51 Official Records Ninth Supplemental Indenture Aug. 28, 1972 51 Official Records Tenth Supplemental Indenture Aug. 28, 1972 51 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 67 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 250 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 355 Official Records Fourteenth Supplemental Indenture May 4, 1977 390 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 489 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 765 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 865 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 1264 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 1612 Official Records Twentieth Supplemental Indenture April 30, 1992 92-12800 Official Records Twenty-First Supplemental Indenture June 19, 1992 92-33181 Official Records Twenty-Second Supplemental Indenture June 19, 1992 92-33182 Official Records Twenty-Third Supplemental Indenture October 26, 1992 92-58584 Official Records Twenty-Fourth Supplemental Indenture October 30, 1992 92-59727 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 2160 Official Records
A-7 UTAH KANE COUNTY UTAH, KANE COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Sept. 12, 1972 35 Official Records First Supplemental Indenture Sept. 12, 1972 35 Official Records Instrument of Further Assurance Sept. 12, 1972 35 Official Records Second Supplemental Indenture Sept. 12, 1972 35 Official Records Third Supplemental Indenture Sept. 12, 1972 35 Official Records Fourth Supplemental Indenture Sept. 12, 1972 35 Official Records Fifth Supplemental Indenture Sept. 12, 1972 35 Official Records Sixth Supplemental Indenture Sept. 12, 1972 35 Official Records Seventh Supplemental Indenture Sept. 12, 1972 35 Official Records Eighth Supplemental Indenture Sept. 12, 1972 35 Official Records Ninth Supplemental Indenture Sept. 12, 1972 35 Official Records Tenth Supplemental Indenture Sept. 12, 1972 35 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 35 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 44 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 53 Official Records Fourteenth Supplemental Indenture May 4, 1977 55 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 59 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 71 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 074 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 093 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 0106 Official Records Twentieth Supplemental Indenture April 30, 1992 72900 Official Records Twenty-First Supplemental Indenture June 19, 1992 73283 Official Records Twenty-Second Supplemental Indenture June 19, 1992 73284 Official Records Twenty-Third Supplemental Indenture October 26, 1992 74584 Official Records Twenty-Fourth Supplemental Indenture October 30, 1992 74641 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 75203 Official Records
A-8 UTAH WASHINGTON COUNTY UTAH, WASHINGTON COUNTY
RECORDED DOC. NO. RECORDS -------- -------- ------- Original Indenture Sept. 22, 1972 124 Official Records First Supplemental Indenture Sept. 22, 1972 124 Official Records Instrument of Further Assurance Sept. 22, 1972 124 Official Records Second Supplemental Indenture Sept. 22, 1972 124 Official Records Third Supplemental Indenture Sept. 22, 1972 124 Official Records Fourth Supplemental Indenture Sept. 22, 1972 124 Official Records Fifth Supplemental Indenture Sept. 22, 1972 124 Official Records Sixth Supplemental Indenture Sept. 22, 1972 124 Official Records Seventh Supplemental Indenture Sept. 22, 1972 124 Official Records Eighth Supplemental Indenture Sept. 22, 1972 124 Official Records Ninth Supplemental Indenture Sept. 22, 1972 124 Official Records Tenth Supplemental Indenture Sept. 22, 1972 124 Official Records Eleventh Supplemental Indenture Oct. 30, 1972 127 Official Records Twelfth Supplemental Indenture Dec. 9, 1974 163 Official Records Thirteenth Supplemental Indenture Oct. 19, 1976 204 Official Records Fourteenth Supplemental Indenture May 4, 1977 218 Official Records Fifteenth Supplemental Indenture Sept. 5, 1978 239 Official Records Sixteenth Supplemental Indenture Dec. 4, 1981 302 Official Records Seventeenth Supplemental Indenture Aug. 19, 1982 313 Official Records Eighteenth Supplemental Indenture Nov. 13, 1986 431 Official Records Nineteenth Supplemental Indenture Oct. 12, 1989 537 Official Records Twentieth Supplemental Indenture April 30, 1992 405624 Official Records Twenty-First Supplemental Indenture June 19, 1992 409301 Official Records Twenty-Second Supplemental Indenture June 19, 1992 409302 Official Records Twenty-Third Supplemental Indenture October 26, 1992 417975 Official Records Twenty-Fourth Supplemental Indenture October 30, 1992 418495 Official Records Twenty-Fifth Supplemental Indenture January 11, 1993 423543 Official Records
The foregoing document was recorded as follows: RECORDED DOC. NO. RECORDS -------- -------- ------- Clark County, Nevada May 18, 1995 00625 Official Records Nye County, Nevada May 18, 1995 372538 Official Records Lincoln County, Nevada May 18, 1995 103516 Official Records Navajo County, Arizona May 18, 1995 1995/7363 Official Records Coconino County, Arizona May 18, 1995 1769 Official Records Mohave County, Arizona May 18, 1995 2568 Official Records Kane County, Utah May 18, 1995 83330 Official Records Washington County, Utah May 18, 1995 500264 Official Records EX-13 4 FINANCIAL SECTION - 1995 ANNUAL REPORT NEVADA POWER COMPANY 1995 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES RESOURCE DEVELOPMENT AND CONSTRUCTION PROGRAMS Pursuant to Nevada law, every three years Nevada Power Company (Company) files with the Public Service Commission of Nevada (PSC) a forecast of electricity demands for the next 20 years and the Company's plans to meet those demands. Among the major items in the Company's 1994 Resource Plan, as refiled and amended, which were approved by the PSC in 1994 and 1995 are the following: (1) the Company will continue to pursue a strategy of relying upon short-term power purchases to meet the forecasted increases in load; (2) the Company will maintain sufficient flexibility to implement an efficient cost-effective resource acquisition process where appropriate, noting that the competitive solicitation process remains the preferred method for comparing resource options; (3) the Company will proceed with the installation of the initial 230 kV circuit and associated substation and communication facilities on the previously approved Arden-Northwest 230 kV Transmission Line; (4) the Company will proceed with the rerouting of a portion of the #2 Arden-McCullough 230 kV Transmission Line; (5) the Company will proceed with limited resource planning approval to seek the necessary UEPA and other permitting approvals, and to acquire necessary sites and rights-of-way for two 230 kV switching stations; (6) the Company will proceed with a Renewable Energy Program for the Company to utilize all appropriate incentives, resources, and expertise to foster the development of economically competitive renewable energy systems with the intent to provide Southern Nevada customers with 20 megawatts of solar-generated electricity by the year 2002. The Company will file a status report along with any significant modifications to the Resource Plan by April 1, 1996 regarding the outcome of three energy service company contracts and the results of transmission studies currently being performed. Budgeted construction expenditures for 1996 and 1997 are $186 million and $195 million, respectively, excluding allowance for funds used during construction. For the next five years customer growth is estimated to average 5.5 percent per year while demand for electricity is estimated to increase by an average of 6.0 percent per year. FINANCIAL STRATEGIES The Company's customer growth averaged over 5.8 percent annually during the three years ended December 31, 1995. To meet the growth forecasted for the Company's service territory for the mid to late 1990s, the Company will continue to rely upon the financial markets to provide a substantial portion of the funds to build necessary Company-owned facilities. The Company is committed to maintaining shareholder value throughout this period of continuing rapid growth. To achieve this goal the Company will: - - pursue a balanced financing approach utilizing low cost tax-exempt financing when possible; - - maintain ongoing cost containment efforts; and - - seek legislative and regulatory support when necessary. COST CONTAINMENT - The Company will continue to review all planned construction and operating expenditures in an effort to reduce the level of external financing required during this period of rapid growth. Management is constantly reviewing expenditures in light of its commitment to provide shareholders with returns that deliver long-term shareholder value, deliver quality service to customers and provide a reliable supply of electricity at competitive prices. CAPITALIZATION To meet capital expenditure requirements through 1997, the Company will utilize internally generated cash, the proceeds from industrial development revenue bonds (IDBs), first mortgage bonds (FMBs), preferred securities and common stock issues through public offerings and the Stock Purchase and Dividend Reinvestment Plan (SPP). NEW FINANCING CAPACITY - Under the tests required by the Company's FMBs and the terms of its preferred stock issues, as of December 31, 1995, the Company could issue up to $434 million of additional FMBs at an assumed interest rate of 8.0 percent and up to $371 million of additional preferred stock at an assumed dividend of 8.0 percent. In February 1996, the Company filed an application with the PSC seeking approval to issue and sell up to 4 million shares of common stock, up to 3 million additional shares of common stock if participation in the SPP declines, up to $80 million of new taxable debt, up to $45 million of preferred stock for the purpose of refinancing existing preferred stock and up to $80 million of new tax-advantaged preferred securities as an alternative to an equal amount of new taxable debt with which such authorization to expire on December 31, 1997. Approval is also being sought for the extension of authorization to issue up to $150 million of unsecured promissory notes through December 31, 1999. In February 1996, the Company filed an application with the PSC for approval to issue up to $100 million of IDBs. On September 11, 1995, the PSC gave the Company authorization to issue an additional 4 million shares of common stock under the SPP. 24 NEVADA POWER COMPANY 1995 ANNUAL REPORT EARNINGS TO INTEREST AND PREFERRED DIVIDENDS COVERAGE - For the year 1995, the ratio of earnings to interest charges was 2.84 times compared to 3.11 times in 1994. The ratio of earnings to interest charges plus preferred dividends was 2.60 times in 1995 compared to 2.82 times in 1994. COMMON EQUITY - The Company has the option to issue new common shares or purchase shares on the open market to satisfy the needs of the SPP. During 1995, the Company issued $32.4 million of common stock under the SPP. (See Note 5 of "Notes to Financial Statements.") At year end, common equity represented 47.6 percent of total capitalization. SHORT-TERM DEBT - The Company has PSC approval for authority to issue short- term unsecured promissory notes not to exceed $150 million with such authorization to expire on December 31, 1997 and has a committed bank line for $125 million which expires on November 21, 1997. The short-term financing is expected to be utilized to fund some of the Company's construction expenditures until long-term financing is secured. At December 31, 1995, the Company had no balance outstanding on this line. LONG-TERM DEBT - On May 19, 1995, the Company sold $85 million 7.06% Series AA FMBs due 2000 through a public offering. Net proceeds from the sale of the bonds were used to repay approximately $70 million of indebtedness under the Company's bank revolving credit facility, which was incurred for the purposes of repaying the Company's $50 million 6.92% Series U FMBs due 1995 and funding the Company's construction program. The remaining net proceeds of the Series AA FMBs were used in connection with the Company's construction program and for general corporate purposes. On October 12, 1995, Clark County, Nevada issued $226.05 million in floating rate revenue bonds (Nevada Power Company Project) consisting of $76.75 million Series 1995A IDBs due 2030, $85 million Series 1995B refunding IDBs due 2030, $44 million Series 1995C refunding IDBs due 2030 and $20.3 million Series 1995D refunding pollution control revenue bonds (PCRBs) with $14 million due 2011 and $6.3 million due 2023. Net proceeds from the sale of the Series 1995A IDBs were placed on deposit with a trustee and will be used to finance the construction of certain facilities which qualify for tax-exempt financing. At December 31, 1995, $77.5 million remained on deposit with the trustee. Net proceeds from the sale of the refunding bonds were used for the redemption of the $44 million floating rate IDBs due 2015, $25 million floating rate IDBs due 2018, $60 million floating rate IDBs due 2019, $14 million 6 3/8% PCRBs due 2004 and $6.3 million 6 3/4% Series O FMBs due 2007 along with the related PCRBs during the last four months of 1995. In addition, on October 12, 1995, Coconino County, Arizona issued $13 million Series 1995E floating rate refunding PCRBs (Nevada Power Company Project) due 2022 to redeem the $13 million 7 1/8% Series N FMBs due 2006 along with the related PCRBs in November 1995. A discussion of long-term debt maturities, including sinking fund requirements, is contained in Note 6 of "Notes to Financial Statements." REGULATION The PSC allows recovery of costs on an historical basis in setting rates charged to customers for electrical service. Environmental expenditures made by the Company are currently being recovered through customer rates. Management believes environmental expenditures will increase over time and the increased costs will also be recovered as necessary utility expenses. A discussion of pending environmental matters is contained in Note 8 of "Notes to Financial Statements." PENDING RATE MATTERS - In March 1996, a hearing is set for the last phase of the 1995 deferred energy case. The PSC Staff and Consumer Advocate Office have filed testimony seeking the disallowance from recovery, and credit to the Company's customers of approximately $19 million for various fuel and purchased power issues. The Company believes its expenditures are prudent and reasonable and will vigorously defend against the proposed disallowances. (See Note 8 of "Notes to Financial Statements.") CONCLUDED RATE MATTERS - On July 17, 1995, the Company filed a request with the PSC to decrease energy rates by $20.1 million due to lower fuel costs under the state's deferred energy accounting procedures. On September 28, 1995, the PSC approved the rate decrease which took effect October 1, 1995. Residential rates were reduced by $1.9 million, and other customers received the remaining $18.2 million. On November 27, 1995, the PSC granted an additional deferred energy rate decrease of approximately $17.1 million and a resource plan cost recovery decrease of $500,000 which took effect December 1, 1995 and resulted in a $7.6 million reduction in residential rates with the remaining $10 million going to other customer classes. The new energy rates will more closely reflect the cost of providing service to each of the customer classes. The table below summarizes the rate adjustments that have been granted to the Company during the past three years. SUMMARY OF RATE ADJUSTMENTS 1993 THROUGH 1995 Effective Date Nature of Increase (Decrease) Amount (In millions) - ------------------------------------------------------------------------- June 28, 1993 Energy and resource plan net rate increase $ 42.1 February 1, 1994 Energy rate increase 23.6 October 1, 1994 General rate decrease (6.3) October 1, 1995 Energy rate decrease (20.1) December 1, 1995 Energy and resource plan (17.6) net rate decrease 25 NEVADA POWER COMPANY 1995 ANNUAL REPORT INDUSTRY RESTRUCTURING Restructuring of the electric utility industry is accelerating with the enactment of the National Energy Policy Act of 1992 (Act). Restructuring will lead to further competition in the industry as generators of power obtain greater access to transmission facilities linking them to potential new wholesale customers. Most observers believe the electric utility beneficiaries of the Act will be twofold: those who can provide low cost generation for sale and those who have strategically located transmission highways that can transmit low cost power from one area to another. Within the region the Company's residential rates are competitive. However, even though the bulk of the 1995 energy rate decreases was allocated to large customers, large industrial customer rates will require further adjustment to remain competitive in the changing environment. In January 1996, Mirage Resorts, owner of The Mirage and Treasure Island hotels, received approval from the Clark County, Nevada Commission for a zone variance to build a 27 megawatt cogeneration plant to supply power to its properties. The above event and the decision by the U. S. Department of Energy in November 1995 to choose Valley Electric Association, a non-generating utility supplier, as the primary electric power provider for the Nevada Test Site (NTS) indicate the need for the Company to be able to offer more competitive prices as an incentive for large customers to retain the Company as their primary electric service provider. The Company will continue to be the primary electric power provider for the NTS pending legal appeal. In recognition of the changing regional competitive environment, the Company is focusing on the costs of serving various classes of customers and the appropriate rates to be charged based on those costs of service. The Company will continue to seek any rate adjustments through the PSC necessary to maintain a competitive position. An opportunity exists given the Company's strategic location in the center of a region of price diversity. As generators arrange for sales of electricity to customers in other areas, much of the power may need to be transmitted through the Company's service territory. The Company would have an opportunity to charge generators for the transmission of energy through its system. The Company is studying the feasibility of constructing additional cost-effective transmission facilities to maximize the advantage of its strategic location. In September 1995 the PSC opened a docket to examine electric industry restructuring issues. The PSC is soliciting opinions and analyses concerning the potential implications of competition for various products and services within the electric industry. The new docket is intended to supplement the subcommittee established by the Nevada Legislature during the 1995 legislative session to study the effects of competition in the generation, sale and transmission of electric energy. The legislative subcommittee is expected to make a recommendation to the Nevada Legislature in August of 1996 so the recommendation can be reviewed before the start of the 1997 legislative session. The PSC expects to issue a final report based on the information obtained in the new docket in June of 1996. Both the report and the information gathered in the new docket will be shared with the legislative subcommittee. OTHER During 1995, Saguaro Power Company, a cogeneration power producer, filed a lawsuit seeking punitive damages of $75 million as a result of being curtailed in its power deliveries under a contract with the Company during periods of low load conditions on the Company's system, and alleging the Company refused to accept and pay for approximately $2 million of electric energy and that the Company should reimburse them for $2 million in construction costs. Management cannot predict the final outcome of these matters at this time or the resulting impact on the Company's financial position, liquidity and results of operations. (See Note 8 of "Notes to Financial Statements.") RESULTS OF OPERATIONS GENERAL In 1995, earnings decreased, as compared to 1994, due to milder weather and the 1994 recording of the settlement of the replacement power case from the 1985 Mohave Generating Station accident. In 1994, earnings increased, as compared to 1993, due primarily to higher revenues resulting from an increase in kilowatthour sales and settlement of the replacement power case from the 1985 Mohave Generating Station accident. Average shares of common stock outstanding for 1995 increased by 3.5 million shares compared to 1994, as a result of a public offering of 2 million shares in November of 1994 as well as the sale of shares through the SPP. Average shares of common stock outstanding for 1994 increased by 3.3 million shares compared to 1993, as a result of public offerings of 2 million shares in November of 1994 and 2.7 million shares in June of 1993 as well as the sale of shares through the SPP. REVENUES Revenues during 1995, 1994 and 1993 were $750 million, $764 million and $652 million, respectively. The 1.9 percent decrease in 1995, as compared to 1994, was a result of milder weather, energy rate decreases effective October 1 and December 1, 1995, and a general rate decrease effective October 1, 1994. The 17.2 percent increase in 1994, as compared to 1993, was a result of a 7.1 percent increase in kilowatthour sales and an increase in energy rates effective February 1994 and June 1993. Higher revenues also resulted from recording unbilled revenues for the recovery of energy costs in the amount of $11.6 million, 26 NEVADA POWER COMPANY 1995 ANNUAL REPORT with an offsetting increase in the deferred energy cost adjustment and accordingly no impact on the Company's earnings, as required by the stipulation approved by the PSC on July 6, 1994. INCREASE (DECREASE) IN REVENUE FROM PRIOR YEAR Nature of Increase (Decrease) (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Kilowatthour sales $ (5.5) $73.5 $28.2 General rate changes (5.2) (1.4) 12.3 Deferred energy adjustments (3.9) 8.7 (13.3) Fuel cost base rate changes .1 33.3 22.4 Resource plan cost changes and other .3 (1.7) 1.3 - ------------------------------------------------------------------------- Total increase (decrease) $(14.2) $112.4 $50.9 - -----------------------------------------------========================== FUEL AND PURCHASED POWER Fuel expense decreased $2.5 million in 1995, as compared with 1994, primarily due to lower average fuel rates. In 1995, as compared to 1994, purchased power expense decreased 10.4 percent due to reduced power purchases. Fuel expense increased $7.3 million in 1994, as compared with 1993, primarily due to increased generation at the Clark Station. In 1994, as compared to 1993, purchased power expense increased 6.1 percent due to increased purchases from qualifying facilities. Effective October 1 and December 1, 1995, the PSC granted the Company decreases of $20.1 million and $17.1 million, respectively, in energy rates. Effective February 1, 1994 and June 28, 1993, the PSC granted the Company increases of $23.6 million and $44.2 million, respectively, in the energy portion of customer rates. In 1995, the Company deferred $19.8 million of decreased energy costs for refund in a later period and collected $22.9 million of energy cost increases which had been previously deferred. During 1994 and 1993, the Company deferred $16.8 million and $48.5 million, respectively, of increased energy costs for collection in a later period and collected $44.7 million and $17 million, respectively, of energy cost increases which had previously been deferred. Recovery of fuel expenses is administered under the state's deferred energy cost accounting procedures. (See Note 1 of "Notes to Financial Statements.") Under the deferred energy procedure, changes in the costs of fuel and purchased power are reflected in customer rates through annual rate adjustments and do not affect earnings. The following tables summarize kilowatthour data. 1995 1994 1993 - ------------------------------------------------------------------------ SOURCE OF KILOWATTHOURS SOLD Company generation 56% 51% 49% Hoover Dam hydroelectric 4 4 4 Purchased power 40 45 47 - -------------------------------------------------------------------- 100% 100% 100% - -------------------------------------=============================== 1995 1994 1993 - ------------------------------------------------------------------------ COMPANY GENERATED KILOWATTHOURS BY FUEL SOURCE Coal 77% 85% 93% Natural Gas 23 15 7 Oil - - - - -------------------------------------------------------------------- 100% 100% 100% - -------------------------------------=============================== FUEL COSTS PER KILOWATTHOUR Coal 1.44 cents 1.55 cents 1.61 cents Natural Gas 1.51 2.01 2.98 Oil 6.87 4.89 4.21 OTHER OPERATING EXPENSES AND TAXES Other operations expense increased $14.0 million in 1994, as compared with 1993, primarily due to an increase in employee benefit costs and the provision for uncollectible accounts. Employee benefit costs were higher primarily due to increased amounts for pensions, postretirement benefits other than pensions and amortization of reorganization, early retirement and severance costs. The level of maintenance and repair expenses depends primarily upon the scheduling, magnitude and number of unit overhauls at the Company's generating stations. During 1995 these expenses decreased by $5.2 million due primarily to lower maintenance costs at the Mohave, Navajo and Reid Gardner 4 Generating Stations. Depreciation expense increased $4.9 million in 1995 and $6.1 million in 1994 because of a growing electric plant asset base. OTHER INCOME AND EXPENSES Other miscellaneous, net includes a gain of $2.3 million net of tax in 1995 for the sale by Nevada Electric Investment Company, the Company's unregulated subsidiary, of certain coal mining assets. Other miscellaneous, net includes income of $4.2 million net of tax in 1994 for the resolution of the Mohave accident replacement power case. Other miscellaneous, net includes a charge of $3.2 million net of tax in 1993 for a write-off of costs related to engineering and environmental studies for the canceled coal-fired White Pine Power Project. A rate decision by the PSC on January 24, 1994, resulted in a write-off of $2 million net of tax in 1993 for previously deferred energy costs. INTEREST DEDUCTIONS Interest on long-term debt in 1995 increased $3.1 million as compared to 1994 due primarily to interest expense for the 7.06% Series AA FMBs issued in May 1995 and higher interest rates on the Company's floating rate IDBs. 27 NEVADA POWER COMPANY 1995 ANNUAL REPORT STATEMENTS OF INCOME For the Years Ended December 31, (In thousands, except per share amounts) 1995 1994 1993 - -------------------------------------------------------------------------- ELECTRIC REVENUES (Note 1) $749,981 $764,158 $651,772 - -------------------------------------------------------------------------- OPERATING EXPENSES AND TAXES: Fuel 103,582 106,040 98,701 Purchased and interchanged power 230,694 257,517 242,803 Deferred energy cost adjustments, net (Note 1) 42,658 27,849 (31,490) - -------------------------------------------------------------------------- Net energy costs 376,934 391,406 310,014 Other production operations 17,813 17,128 17,715 Other operations 95,458 96,251 82,300 Maintenance and repairs 33,598 38,765 35,379 Provision for depreciation (Note 1) 55,302 50,357 44,216 General taxes (Note 2) 18,946 17,051 16,401 Federal income taxes (Notes 1 and 2) 34,372 39,403 37,278 - -------------------------------------------------------------------------- 632,423 650,361 543,303 - -------------------------------------------------------------------------- OPERATING INCOME 117,558 113,797 108,469 - -------------------------------------------------------------------------- OTHER INCOME (EXPENSES): Allowance for other funds used during construction (Note 1) 5,353 6,771 9,880 Other miscellaneous, net 996 4,317 (5,496) - -------------------------------------------------------------------------- 6,349 11,088 4,384 - -------------------------------------------------------------------------- INCOME BEFORE INTEREST DEDUCTIONS 123,907 124,885 112,853 - -------------------------------------------------------------------------- INTEREST DEDUCTIONS: Interest on long-term debt 47,745 44,625 43,173 Other interest 1,566 2,572 1,931 Allowance for borrowed funds used during construction (Note 1) (2,375) (4,182) (5,799) - -------------------------------------------------------------------------- 46,936 43,015 39,305 - -------------------------------------------------------------------------- NET INCOME 76,971 81,870 73,548 DIVIDEND REQUIREMENTS ON PREFERRED STOCK 3,966 3,976 3,986 - -------------------------------------------------------------------------- EARNINGS AVAILABLE FOR COMMON STOCK $ 73,005 $ 77,894 $ 69,562 - -----------------------------------------================================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 46,288 42,784 39,482 - -----------------------------------------================================= EARNINGS PER AVERAGE COMMON SHARE $ 1.58 $ 1.82 $ 1.76 - -----------------------------------------================================= See Notes to Financial Statements. 28 NEVADA POWER COMPANY 1995 ANNUAL REPORT STATEMENTS OF CASH FLOWS For the Years Ended December 31, (In thousands) 1995 1994 1993 - -------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 76,971 $ 81,870 $ 73,548 Adjustments to reconcile net income to net cash provided - Depreciation and amortization 66,950 65,064 55,139 Deferred income taxes and investment tax credits (15,975) 5,474 16,504 Allowance for other funds used during construction (5,353) (6,771) (9,880) Changes in - Receivables 5,099 (21,516) (4,591) Fuel stock and materials and supplies (2,053) 2,689 5,490 Accounts payable and other current liabilities (1,526) 1,485 27,290 Deferred energy costs 42,624 23,980 (37,766) Accrued taxes and interest 16,784 3,801 1,868 Other assets and liabilities 2,398 (11,806) 3,343 - -------------------------------------------------------------------------- Net cash provided by operating activities 185,919 144,270 130,945 - -------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures and gross additions (178,770) (183,856) (163,257) Investment in subsidiaries and other 13,555 (303) (2,828) Salvage net of removal cost 4,387 (190) 227 - -------------------------------------------------------------------------- Net cash used in investing activities (160,828) (184,349) (165,858) - -------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of capital stock 33,339 75,818 107,329 Issuance of long-term debt 324,050 - 45,000 Change in funds held in trust (70,309) 51,894 6,234 Coal contract buy-out - (15,440) - Retirement of preferred stock and long-term debt (219,551) (7,441) (59,405) Cash dividends (77,699) (71,688) (66,883) Other financing activities 10,463 6,914 2,623 - -------------------------------------------------------------------------- Net cash provided by financing activities 293 40,057 34,898 - -------------------------------------------------------------------------- CASH AND TEMPORARY CASH INVESTMENTS (Note 1): Net increase (decrease) during the year 25,384 (22) (15) Beginning of year 123 145 160 - -------------------------------------------------------------------------- End of year $ 25,507 $ 123 $ 145 - -----------------------------------------================================= CASH PAID DURING THE YEAR FOR: Interest, net of amounts capitalized $ 56,644 $ 52,074 $ 50,677 - -----------------------------------------================================= Income taxes $ 32,885 $ 32,500 $ 18,001 - -----------------------------------------================================= See Notes to Financial Statements. 29 NEVADA POWER COMPANY 1995 ANNUAL REPORT BALANCE SHEETS December 31, (In thousands) 1995 1994 - -------------------------------------------------------------------------- ASSETS Electrical Plant, at Original Cost (Notes 1, 8 and 10): Production $ 845,142 $ 765,339 Transmission 300,690 286,679 Distribution 763,103 678,260 General 127,840 101,122 - -------------------------------------------------------------------------- 2,036,775 1,831,400 Less accumulated depreciation 546,803 495,691 - -------------------------------------------------------------------------- Net plant in service 1,489,972 1,335,709 Construction work in progress 129,255 159,167 Property under capital leases 79,562 85,408 Plant held for future use 2,331 3,719 - -------------------------------------------------------------------------- 1,701,120 1,584,003 - -------------------------------------------------------------------------- Investments (Note 1) 9,989 21,602 - -------------------------------------------------------------------------- Current Assets: Cash and temporary cash investments 25,507 123 Customer receivables - Billed 44,296 46,620 Unbilled (Note 1) 22,110 25,153 Reserve for doubtful accounts (1,327) (1,395) Other receivables 6,321 6,033 Fuel stock, at average cost 10,281 11,434 Materials and supplies, at average cost 28,429 25,223 Deferred energy costs (Note 1) (18,844) 25,714 Prepayments 8,144 9,657 - -------------------------------------------------------------------------- 124,917 148,562 - -------------------------------------------------------------------------- Deferred Charges: Debt expense, being amortized 28,373 27,316 Other (Note 9) 183,212 125,906 - -------------------------------------------------------------------------- 211,585 153,222 - -------------------------------------------------------------------------- $2,047,611 $1,907,389 - ----------------------------------------------------====================== See Notes to Financial Statements. 30 NEVADA POWER COMPANY 1995 ANNUAL REPORT December 31, (In thousands) 1995 1994 - -------------------------------------------------------------------------- CAPITALIZATION AND LIABILITIES Capitalization (See Schedules of Capitalization and Long-Term Debt): Common shareholders' equity $ 764,361 $ 731,749 Redeemable cumulative preferred stock 38,000 38,000 Cumulative preferred stock with mandatory sinking funds 3,863 4,064 Long-term debt 799,999 712,571 - -------------------------------------------------------------------------- 1,606,223 1,486,384 - -------------------------------------------------------------------------- Current Liabilities: Current maturities and sinking fund requirements (See Schedules of Capitalization and Long-Term Debt) 5,809 57,551 Accounts payable 64,518 66,467 Accrued taxes 19,457 2,493 Accrued interest 6,059 6,239 Customers' service deposits 12,964 12,954 Deferred taxes on deferred energy costs (6,595) 9,000 Other 21,641 22,809 - -------------------------------------------------------------------------- 123,853 177,513 - -------------------------------------------------------------------------- Commitments and Contingencies (Note 8) Deferred Credits and Other Liabilities: Deferred investment tax credits (Note 1) 32,464 33,924 Deferred taxes on income (Note 2) 215,315 135,152 Customers' advances for construction 44,903 34,896 Other (Note 9) 24,853 39,520 - -------------------------------------------------------------------------- 317,535 243,492 - -------------------------------------------------------------------------- $2,047,611 $1,907,389 - ----------------------------------------------------====================== See Notes to Financial Statements. 31 NEVADA POWER COMPANY 1995 ANNUAL REPORT SCHEDULES OF CAPITALIZATION December 31, (Dollars in thousands) 1995 1994 - ------------------------------------------------------------------------------ COMMON SHAREHOLDERS' EQUITY (Note 5): Common stock, $1 par value, authorized 70,000,000 shares; issued and outstanding 47,038,193 and 45,382,370 shares at December 31, 1995 and 1994; stated at $ 50,243 $ 48,587 Premium on capital stock 600,238 568,315 Unamortized capital stock expense (4,980) (4,753) Retained earnings 118,860 119,600 - ------------------------------------------------------------------------------ Total common shareholders' equity 764,361 47.6% 731,749 49.2% - ------------------------------------------------------------------------------ REDEEMABLE CUMULATIVE PREFERRED STOCK (Notes 5 and 7): $20 par value, authorized 4,500,000 shares for all series; Outstanding at December 31, 1995 and 1994: 9.90% Series, 1,900,000 shares 38,000 38,000 - ------------------------------------------------------------------------------ Total 38,000 2.4 38,000 2.6 - ------------------------------------------------------------------------------ CUMULATIVE PREFERRED STOCK WITH MANDATORY SINKING FUNDS (Note 5): Outstanding at December 31, 1995 and 1994: 5.40% Series, 42,669 and 44,669 shares 853 894 5.20% Series, 40,507 and 42,507 shares 810 850 4.70% Series, 120,000 and 126,000 shares 2,400 2,520 - ------------------------------------------------------------------------------ 4,063 4,264 Current sinking fund requirement (200) (200) - ------------------------------------------------------------------------------ Total 3,863 .2 4,064 0.3 - ------------------------------------------------------------------------------ LONG-TERM DEBT (See Schedules of Long-Term Debt) 799,999 49.8 712,571 47.9 - ------------------------------------------------------------------------------ Total capitalization $1,606,223 100.0% $1,486,384 100.0% - -------------------------------------------=================================== 32 NEVADA POWER COMPANY 1995 ANNUAL REPORT SCHEDULES OF LONG-TERM DEBT December 31, (In thousands) 1995 1994 - ------------------------------------------------------------------------ LONG-TERM DEBT (Notes 6, 7 and 8): First mortgage bonds: 7 1/8% Series I due 1998 $ 15,000 $ 15,000 7 5/8% Series L due 2002 15,000 15,000 7 1/8% Series N due 2006 - 13,000 6 3/4% Series O due 2007 - 6,700 8 3/4% Series P due 1995 - 402 7.80% Series T due 2009 15,000 15,000 6.92% Series U due 1995 - 50,000 6.70% Series V due 2022 105,000 105,000 6.60% Series W due 2019 39,500 39,500 7.20% Series X due 2022 78,000 78,000 6.93% Series Y due 1999 45,000 45,000 8.50% Series Z due 2023 45,000 45,000 7.06% Series AA due 2000 85,000 - - ------------------------------------------------------------------------ 442,500 427,602 Industrial development revenue bonds: 7.80% due 2020 100,000 100,000 Floating rate - Series 1985 due 2015 - 44,000 Series 1988 due 2018 - 25,000 Series 1989A due 2019 - 60,000 Series 1995A due 2030 76,750 - Series 1995B due 2030 85,000 - Series 1995C due 2030 44,000 - Less funds held in trust (77,467) (7,158) Pollution control revenue bonds: 6 3/8% due 2004 - 15,000 Floating rate - Series 1995D due 2011 14,000 - Series 1995D due 2023 6,300 - Series 1995E due 2022 13,000 - Obligations under capital leases 101,533 105,522 - ------------------------------------------------------------------------ 805,616 769,966 Debt premium and discount, being amortized (8) (44) Current maturities and sinking fund requirements (5,609) (57,351) - ------------------------------------------------------------------------ Total long-term debt $799,999 $712,571 - ------------------------------------------------------================== 33 NEVADA POWER COMPANY 1995 ANNUAL REPORT STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, (In thousands) 1995 1994 1993 - ---------------------------------------------------------------------------- BALANCE AT BEGINNING OF YEAR $119,600 $109,359 $102,493 Add - Net Income 76,971 81,870 73,548 - ---------------------------------------------------------------------------- 196,571 191,229 176,041 - ---------------------------------------------------------------------------- Deduct: Dividends paid in cash: Cumulative preferred stock - 5.40%, 5.20% and 4.70% Series 204 214 224 9.90% Series (Note 5) 3,762 3,762 3,762 Common stock 73,745 67,653 62,696 - ---------------------------------------------------------------------------- 77,711 71,629 66,682 - ---------------------------------------------------------------------------- Balance at End of Year $118,860 $119,600 $109,359 - ----------------------------------------==================================== 34 NEVADA POWER COMPANY 1995 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For ratemaking and other purposes, the Company is subject to the jurisdiction of the PSC and the Federal Energy Regulatory Commission (FERC). The accounting records of the Company are maintained in accordance with the uniform system of accounts prescribed by the FERC and adopted by the PSC. ELECTRIC REVENUES - The Company bills its customers monthly on a cycle basis and recognizes the estimated amount of revenue applicable to kilowatthours of energy sold but not yet billed at the end of an accounting period. DEFERRED ENERGY COST ADJUSTMENTS - As permitted by state statute, the Company defers differences between the current cost of fuel plus net purchased power and base energy costs as defined. Any over or under recoveries are deferred in the balance sheet as a current asset or current liability. Under regulations adopted by the PSC, deferred energy rates are revised at least every 12 months to clear the accumulated deferred balance over a future period. ELECTRIC PLANT - The costs of betterments and additions to electric plant and replacements of retirement units of property are capitalized. Such costs include labor, payroll taxes, material, transportation, an allowance for funds used during construction and, where applicable, property taxes. Maintenance is charged with the cost of repairs and minor replacements. Accumulated depreciation is charged for the cost of plant retired, less net salvage. Depreciation has been provided for financial statement purposes on a straight-line basis at rates based upon the estimated useful lives of the various classes of plant. The provisions for depreciation during 1995, 1994 and 1993 were equivalent to an annual rate of approximately 2.9 percent of the average gross investment in depreciable plant. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - The allowance for funds used during construction (AFUDC) represents the estimated costs of borrowed and equity funds applicable to electric plant construction. The FERC has prescribed a specific computational method for determining the AFUDC rate. The PSC has authorized the AFUDC rate to be the lesser of the rate determined under the FERC computational method or the rate equivalent to the overall rate of return authorized by the PSC. The overall rate of return authorized by the PSC was 10.02 percent for the period January 1993 through June 1994 and 9.66 percent beginning July 1994. The Company's actual AFUDC rate averaged 9.66 percent, 9.73 percent and 9.88 percent for 1995, 1994 and 1993, respectively. RECENTLY ISSUED ACCOUNTING STANDARDS - In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (FAS 121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of which is effective for years beginning after December 15, 1995. FAS 121 established accounting standards requiring companies to evaluate long-lived assets for potential impairment recognition if evidence suggests a lack of recoverability. The Company has studied the provisions of FAS 121 and believes that application of the new standard will not have a material impact on the Company's results of operations or financial position. FEDERAL INCOME TAXES - Effective January 1, 1993, the Company adopted the provisions of FAS 109, Accounting for Income Taxes. FAS 109 requires recognition of deferred tax liabilities and assets for the future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The cumulative effect of the change in accounting for income taxes was not material to net income. In November 1991, the PSC issued an order which allows the Company to recover the previously flowed through tax benefits ratably over the estimated remaining book life of the plant. Calculated at current rates, approximately $36 million of income taxes will be allowed in future rates. Investment tax credits earned have been deferred and are being amortized to income ratably over the estimated service lives of the related property. CASH FLOW INFORMATION - Cash equivalents, which generally are convertible to cash at par on short notice and mature three months or less from the date of acquisition, are reported as temporary cash investments. The Company had no material noncash investing or financing transactions during 1995, 1994 or 1993. OTHER ACCOUNTING POLICIES - The Company uses the equity method of accounting to report immaterial investments in subsidiaries. Certain amounts in prior periods have been reclassified to conform to the financial statement presentation for December 31, 1995. 35 NEVADA POWER COMPANY 1995 ANNUAL REPORT 2. FEDERAL INCOME AND OTHER TAXES The total federal income tax expense as set forth in the accompanying Statements of Income results in an effective federal income tax rate different than the statutory federal income tax rate for the following reasons: For the Years Ended December 31, (In thousands) 1995 1994 1993 - ------------------------------------------------------------------------- Federal income tax at statutory rate $40,167 35.0% $44,305 35.0% $39,625 35.0% Adjustments: Investment tax credit amortization (1,460) (1.3) (1,460) (1.2) (1,303) (1.2) Other items (916) (.8) 1,871 1.5 1,344 1.2 - ------------------------------------------------------------------------- Total recorded federal income tax $37,791 32.9% $44,716 35.3% $39,666 35.0% - ----------------------------============================================= Federal income taxes included in: Operating expenses $34,372 $39,403 $37,278 Other income, net 3,419 5,313 2,388 - ------------------------------------------------------------------------- $37,791 $44,716 $39,666 - ----------------------------============================================= The current and deferred components of federal income taxes included in operating expenses are as follows: For the Years Ended December 31, (In thousands) 1995 1994 1993 - --------------------------------------------------------------------------- Current federal income taxes $50,367 $35,516 $20,680 - --------------------------------------------------------------------------- Deferred federal income taxes: Depreciation differences 8,323 13,134 8,899 Deferred energy costs (15,595) (11,574) 11,765 Contributions in aid of construction (4,510) (3,028) (1,732) Coal contract buyout (1,039) (1,039) (945) Other - net (1,714) 7,854 (86) - --------------------------------------------------------------------------- (14,535) 5,347 17,901 - --------------------------------------------------------------------------- Investment tax credit amortization (1,460) (1,460) (1,303) - --------------------------------------------------------------------------- Total $34,372 $39,403 $37,278 - --------------------------------------===================================== General taxes charged to operating expenses are as follows: For the Years Ended December 31, (In thousands) 1995 1994 1993 - --------------------------------------------------------------------------- Real estate and personal property $13,726 $11,853 $11,338 Payroll 4,815 4,968 4,748 Other 405 230 315 - --------------------------------------------------------------------------- Total $18,946 $17,051 $16,401 - --------------------------------------===================================== The Company adopted FAS 109, Accounting for Income Taxes, effective January 1, 1993. As a result, the Company's December 31, 1995 balance sheet contains a net regulatory asset of $83 million. (See Note 9 of "Notes to Financial Statements.") The regulatory asset for temporary differences related to liberalized depreciation will continue to be amortized using the average rate assumption method required by the Tax Reform Act of 1986. The regulatory liability for temporary differences caused by investment tax credits will be amortized ratably in the same fashion as the deferred investment tax credit under former Internal Revenue Code Section 46(f)(2). The net deferred federal income tax liability consists of deferred federal income tax liabilities less deferred federal income tax assets related to: December 31, (In thousands) 1995 1994 - ------------------------------------------------------------------------ DEFERRED FEDERAL INCOME TAX LIABILITIES: Temporary basis differences - plant $(101,256) $ (26,128) Investment tax credits (32,464) (33,924) Excess of tax depreciation over book depreciation (105,487) (96,640) Coal contract buyout (173) (1,212) Accrued taxes (2,654) (1,880) Deferred energy - (9,000) Demand-side program costs (3,440) (4,301) Debt reacquisition costs (2,906) (5,150) Other 776 159 - ------------------------------------------------------------------------ Total (247,604) (178,076) - ------------------------------------------------------------------------ DEFERRED FEDERAL INCOME TAX ASSETS: Unamortized investment tax credits 17,481 18,267 Refundable customer advances 15,160 11,700 Deferred energy 6,595 - Nonrefundable contributions in aid of construction 4,852 3,705 Capitalized expenses 418 985 Supplemental executive retirement plan 2,272 1,727 Other 1,017 506 - ------------------------------------------------------------------------ Total 47,795 36,890 - ------------------------------------------------------------------------ Net deferred tax liability $(199,809) $(141,186) - ----------------------------------------------========================== 36 NEVADA POWER COMPANY 1995 ANNUAL REPORT 3. EMPLOYEE BENEFITS DEFINED CONTRIBUTION RETIREMENT PLAN - The Company maintains an employee investment plan (401(k) Plan) which was established January 1, 1990, under Section 401(k) of the Internal Revenue Code. Employees who are at least 21 years old and who have completed one month of service may become "participants" in the 401(k) Plan. The Company matched 50 percent in 1995, 1994 and 1993 of any Management, Professional, Administrative and Technical participant's contributions to the 401(k) Plan not to exceed 3 percent of the participant's annual compensation. In the first two months of 1994 and all of 1993, the Company matched 25 percent of any union-represented participant's contributions to the 401(k) Plan not to exceed 1.5 percent of the participant's annual compensation. Effective March 1, 1994, the Company matched 50 percent of any union-represented participant's contributions to the 401(k) Plan not to exceed 3 percent of the participant's annual compensation. All Company contributions are invested in common stock of the Company. The amounts expensed for Company matching contributions to the 401(k) Plan were $1,533,000 for 1995, $1,276,000 for 1994 and $921,000 for 1993. DEFINED BENEFIT RETIREMENT PLAN - The Company has a non-contributory defined benefit retirement plan (PLAN) designed to meet the provisions of the Employee Retirement Income Security Act of 1974. All employees age 21 and over with one year of service and at least 1,000 hours worked are covered by the PLAN. Benefits under the PLAN are dependent upon each participant's salary for the highest consecutive 60 months of service and length of service. The Company also has a Supplemental Executive Retirement Plan (SERP) in addition to the regular PLAN. Participation is limited to such officers as the Board of Directors may select. Presently, 27 active or retired designated officers and employees participate in the SERP. The SERP will be funded as benefits are disbursed. The table below sets forth the funded status and amounts recognized in the Company's financial statements at December 31, 1995, 1994 and 1993 for both the PLAN and SERP. The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations for both the PLAN and SERP were 7.25 percent and 4.5 percent in 1995, 8.75 percent and 4.5 percent in 1994, and 7.25 percent and 4.5 percent in 1993, respectively. The expected rate of return on PLAN assets was 8.5 percent in 1995, 1994 and 1993. PLAN assets are primarily invested in listed stocks, fixed income securities and federal agencies securities. RECONCILIATION OF FUNDED STATUS PLAN SERP ------------------------ ----------------------- For the Years Ended December 31, (In thousands) 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $ 72,412 $ 54,713 $54,434 $ 5,038 $ 3,202 $ 3,854 Nonvested benefit obligation 4,702 5,235 3,875 838 2,106 514 - -------------------------------------------------------------------------- Accumulated benefit obligation $ 77,114 $ 59,948 $58,309 $ 5,876 $ 5,308 $ 4,368 - -------------------------================================================= Projected benefit obligation $103,973 $ 77,601 $80,575 $ 7,063 $6,253 $ 4,837 Plan assets at fair value 74,628 57,966 60,236 - - - - -------------------------------------------------------------------------- Plan assets less than projected benefit obligation (29,345) (19,635)(20,339) (7,063) (6,253) (4,837) Unrecognized net transition obligation amortized over approximately nine years - - - - - 129 Unrecognized prior service costs 7,147 7,792 5,577 594 692 412 Unrecognized net loss 16,000 3,763 8,949 2,492 1,895 1,267 - -------------------------------------------------------------------------- Pension asset (liability) $ (6,198) $(8,080)$(5,813)$(3,977)$(3,666)$(3,029) - -------------------------================================================= Net pension expense comprised the following: Service cost $ 3,351 $ 3,928 $ 3,284 $ 96 $ 175 $ 67 Interest cost on projected benefit obligation 6,947 6,576 5,243 502 498 297 Return on plan assets (14,049) 183 (5,371) - - - Net amortization and deferral 9,125 (4,433) 1,021 160 409 197 - -------------------------------------------------------------------------- Net periodic pension cost $ 5,374 $ 6,254 $ 4,177 $ 758 $ 1,082 $ 561 - -------------------------================================================= 37 NEVADA POWER COMPANY 1995 ANNUAL REPORT POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company adopted Statement of Financial Accounting Standards No. 106 (FAS 106), Employers' Accounting for Postretirement Benefits Other Than Pensions, effective January 1, 1993. The costs of these benefits have been expensed on a pay-as-you-go basis prior to the Company adopting FAS 106. In July 1992, the PSC authorized the Company to continue recognizing these benefit costs on a pay-as-you-go basis after adopting FAS 106 and to record any difference in costs resulting from the implementation of FAS 106 as a deferred asset. As a result of the stipulation approved by the PSC on July 6, 1994, the Company discontinued recognizing these benefit costs on a pay-as-you-go basis and began using the accrual method. The Company is amortizing the FAS 106 deferred asset at March 31, 1994 over a period of eight years. The Company has elected to amortize its transition obligation at January 1, 1993 over a period of 20 years. The Company provides postretirement medical, dental and vision benefits to employees who have retired or will retire and are eligible for an immediate pension benefit. The postretirement health care plan is contributory, and retirees' contributions can be adjusted annually for increases in the cost of providing the benefits. The postretirement health care plan is being funded in amounts not to exceed the lesser of amounts collected from customers through rates or amounts allowable under the Internal Revenue Code as amended from time to time. Net periodic postretirement benefit cost for the years ended December 31, 1995, 1994 and 1993 included the following components: (In thousands) 1995 1994 1993 - -------------------------------------------------------------------------------- Service cost $ 293 $ 617 $ 614 Interest cost on projected benefit obligation 1,881 1,837 1,881 Return on assets (303) - - Amortization of transition obligation 1,198 1,139 1,166 - -------------------------------------------------------------------------------- Net periodic postretirement benefit cost $3,069 $3,593 $3,661 - ----------------------------------------------------============================ A reconciliation of the funded status of the plan to the amounts recognized in the Balance Sheets as of December 31, 1995 and 1994 is as follows: (In thousands) 1995 1994 - ------------------------------------------------------------------------- Retirees $(21,936) $(14,512) Fully eligible active employees (108) (1,879) Other active employees (5,050) (5,642) - ------------------------------------------------------------------------- Accumulated postretirement benefit obligation (27,094) (22,033) Fair value of assets 4,884 - - ------------------------------------------------------------------------- Accumulated postretirement benefit obligation in excess of assets (22,210) (22,033) Unrecognized transition obligation 19,817 20,983 Unrecognized (gain) loss (1,281) (5,041) - ------------------------------------------------------------------------- Accrued postretirement benefit liability $ (3,674) $ (6,091) - --------------------------------------------------======================= The medical cost trend rate assumed for 1996 was 8.75 percent, grading down to 4.75 percent in 2001 and remaining at that level thereafter. The health care cost trend rate has a significant effect on the accumulated postretirement benefit obligation and net periodic cost. A one-percentage-point increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation at December 31, 1995 by $1.8 million and would increase the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for 1995 by $134,000. The weighted- average discount rate used in determining the accumulated postretirement benefit obligation at December 31, 1995 was 7.25 percent. The expected rate of return on assets was 8.5 percent in 1995. Assets are primarily invested in listed stocks, fixed income securities and federal agencies securities. 4. SHORT-TERM BORROWINGS The Company has a $125 million bank revolving credit facility which expires on November 21, 1997, and pays commitment fees based on both the unused amount of the facility and the Company's first mortgage bond ratings. Borrowing rates under the bank line are determined by both current market rates and the Company's first mortgage bond ratings. There were no short-term borrowings outstanding on the bank line at December 31, 1995 and 1994. 5. CAPITAL STOCK The changes in common stock shares for 1993, 1994 and 1995 are as follows: Shares - -------------------------------------------------------------------------- Outstanding, December 31, 1992 37,132,817 Issued through public offering 2,700,000 Issued under 401(k) Savings Plan 32,052 Issued under Stock Purchase and Dividend Reinvestment Plan 1,640,326 - -------------------------------------------------------------------------- Outstanding, December 31, 1993 41,505,195 Issued through public offering 2,000,000 Issued under 401(k) Savings Plan 52,055 Issued under Stock Purchase and Dividend Reinvestment Plan 1,825,120 - -------------------------------------------------------------------------- Outstanding, December 31, 1994 45,382,370 Issued under 401(k) Savings Plan 77,846 Issued under Stock Purchase and Dividend Reinvestment Plan 1,577,977 - -------------------------------------------------------------------------- Outstanding, December 31, 1995 47,038,193 - ----------------------------------------------------------------========== Premium on capital stock increased $31.9 million, $72 million and $103 million during 1995, 1994 and 1993, respectively, due to issuances of common stock. Cash dividends paid per share on common stock were $1.60 each year during 1995, 1994 and 1993. 38 NEVADA POWER COMPANY 1995 ANNUAL REPORT On April 30, 1992, the Company issued shares of Redeemable Cumulative Preferred Stock, 9.90% Series consisting of the previously issued shares of Auction Preferred Stock. The Company elected to establish a 10-year dividend period for this preferred stock, with mandatory redemption April 1, 2002. This preferred stock is redeemable at the option of the Company, as a whole or in part, on April 1, 1997. The dividend rate on the shares of Redeemable Cumulative Preferred Stock, 9.90% Series was determined at an auction held on April 23, 1992. Dividends on the shares are cumulative from April 30, 1992, and will be payable when, as and if declared, quarterly on January 1, April 1, July 1 and October 1 of each year commencing July 1, 1992. Under the provisions of the 4.70%, 5.20% and 5.40% series cumulative preferred stock with mandatory sinking funds, the Company is obligated to use its best efforts to purchase, each year, up to an aggregate of 6,000, 2,000 and 2,000 shares, respectively, at prices not in excess of $20.00 per share. The obligations are not cumulative. The 5.20% series and 5.40% series are presently redeemable at the option of the Company at $21.00 per share and the 4.70% series at $20.25 per share. In October 1990, the Company adopted a Stockholder Rights Plan and issued through dividend to its common shareholders one stock purchase right for each outstanding share of common stock. The rights expire in October 2000. The rights to purchase junior preference shares, common shares or shares of a successor corporation are not exercisable unless certain events occur and are intended to assure fair shareholder treatment in any takeover of the Company and to guard against abusive takeover tactics. 6. LONG-TERM DEBT None of the long-term debt is held by or for the account of the Company. The amounts of long-term debt maturities, including sinking fund requirements, are $5.6 million in 1996, $5.5 million in 1997, $19.6 million in 1998, $50.1 million in 1999 and $90.3 million in 2000, including $5.3 million, $5.2 million, $4.5 million, $4.9 million and $5.2 million for obligations under capital leases, respectively. Generally, electric plant is subject to the first mortgage lien. It is the Company's intention to meet the sinking fund requirements for its series I and L first mortgage bonds by pledging property additions in lieu of cash payments. The series T, V, W and X first mortgage bonds correspond with respect to their terms to two series of collateralized pollution control revenue bonds and two series of industrial development revenue bonds issued by Clark County, Nevada. The indentures under which the Company's first mortgage bonds were issued provide for an immaterial restriction as to distributions to shareholders at December 31, 1995. The industrial development revenue bonds and pollution control revenue bonds were issued by various municipal authorities and are guaranteed as to payment of principal and interest by the Company. 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Disclosure by the Company of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107 (FAS 107), Disclosures about Fair Value of Financial Instruments. At December 31, 1995 and 1994, the provisions of FAS 107 apply only to the Company's long-term debt and redeemable cumulative preferred stock. In accordance with FAS 107, the Company estimates the fair value of its redeemable cumulative preferred stock based on the per share closing price times the number of shares outstanding and its long-term debt based on quoted market prices for the same or similar issues or on current interest rates available to the Company for debt with similar terms and maturity. The book value and estimated fair value of the redeemable cumulative preferred stock were $38 million and $41.6 million at December 31, 1995 and $38 million and $40.3 million at December 31, 1994, respectively. The book value and estimated fair value of the Company's long-term debt, including current maturities and sinking fund requirements and excluding obligations under capital leases, were $704 million and $757 million at December 31, 1995, and $664 million and $664 million at December 31, 1994, respectively. The estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have an effect on the estimated fair value amounts. 8. COMMITMENTS AND CONTINGENCIES RATE MATTERS - The last phase of the 1995 deferred energy case is set for hearing in March 1996 to consider the prudency of the Company's fuel and purchased power expenditures during the period June 1993 to May 1995, a buyout of a coal supply agreement and a credit to customers related to use of coal reserves in an unregulated subsidiary company. The PSC Staff and Consumer Advocate Office have filed testimony seeking disallowance from recovery and credit to the Company's customers of approximately $19 million. The Company believes its expenditures and use of coal reserves are prudent and reasonable and will vigorously defend against the proposed disallowances. LEGAL MATTERS - Saguaro Power Company (Saguaro), a cogeneration power producer, and the Company are parties to a 30-year power purchase contract (Contract) wherein the Company agreed to purchase power from Saguaro's plant near Henderson, Nevada. On July 22, 1995, Saguaro filed a lawsuit in District Court, Clark County, Nevada, seeking damages and injunctive relief as a result of being curtailed in its power deliveries during periods of low load conditions on the Company's system. The lawsuit alleges that the Company refused to accept and pay for approximately $2 million of electric energy and capacity, and that the Company should reimburse Saguaro for $2 million 39 NEVADA POWER COMPANY 1995 ANNUAL REPORT related to the construction of the interconnection line. Saguaro also alleges that the Company has refused to pay Saguaro for excess capacity. Lastly, Saguaro alleges that the Company has committed fraud and anticipatory breach of the Contract and requests punitive damages of $75 million. The Company believes its actions are consistent with the Contract, federal and state regulations, and state administrative directives, and will vigorously defend against these claims. Further, the Company contends it has paid Saguaro all amounts due it under the terms of the Contract. On September 1, 1995, Las Vegas Cogeneration Limited Partnership filed a similar lawsuit to that of Saguaro; it contends its curtailment damages are less than $200,000. On July 24, 1995, Nevada Cogeneration Associates #1 (NCA 1) and Nevada Cogeneration Associates #2 (NCA 2), also cogeneration power producers, made a request for arbitration of their current contracts relative to the same issues of low load condition curtailments and energy and capacity payments. They alleged under payments by the Company of approximately $2.6 million. The Nevada District Court has recently denied the Company's request that the issues regarding low load conditions and the lawsuits for curtailment damages be heard before the PSC. The Nevada District Court ordered all the parties to arbitrate the above issues with the exception of Saguaro's claim concerning the interconnection line. The Company has appealed these decisions. Arbitration with NCA 1 and NCA 2 proceeded as ordered and in January 1996, the arbitrator entered an order denying most of NCA's claims. The order does permit some damages based on the definition of a low load condition being at a different megawatt level than either party had asserted. The Company estimates the damages to be approximately $1 million. The Company is involved in litigation arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, based upon advice of counsel, believes that the final outcome will not have a material adverse effect on the Company's financial position and results of operations. ENVIRONMENTAL MATTERS - The Federal Clean Air Act Amendments of 1990 (Amendments) include provisions for reduction of emissions of oxides of nitrogen by establishing new emission limits for coal-fired generating units. This will require the installation of additional pollution-control technology at some of the Reid Gardner Station generating units before 2000 at an estimated cost to the Company of no more than $6 million. The Amendments also mandated creation of the Grand Canyon Visibility Transport Commission to work toward the goal of visibility improvement in the Grand Canyon and other national parks of the Colorado Plateau. The Commission is expected to make recommendations to the U.S. Environmental Protection Agency (EPA) by May 1996, regarding ways to improve visibility. A variety of actions could be considered including imposition of more pollution controls or emissions limitations upon large sources of pollution in the West and Southwest. The potential affect on the Company cannot be determined at this time. Related to visibility, the United States Congress authorized the EPA to study the potential impact the Mohave Generating Station (Mohave) may have on visibility in the Grand Canyon area. Results of this study are expected in 1996. The cost of any improvements that may be required can not be determined at this time. The Nevada Division of Environmental Protection (NDEP) had imposed more stringent interim stack opacity limits for Mohave. In December, at the recommendation of NDEP, the Nevada Environmental Commission elected to retain the interim limit as a permanent rule. Compliance with the interim rule has been maintained and a limit more stringent than the interim standard will not be imposed. As such, the owners of Mohave, including Nevada Power at 14 percent, will not be required to fund any additional improvements related to opacity. In 1991, the EPA published an order requiring the Navajo Generating Station (Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions beginning in 1997. As an 11.3 percent owner of Navajo, the Company will be required to fund an estimated $56.5 million for installation of the scrubbers. In 1992, the Company received resource planning approval from the PSC for its share of the cost of the scrubbers. The scrubbers are currently under construction. LEASES - In 1984, the Company sold its administrative headquarters facility, less furniture and fixtures, for $27 million and entered into a 30-year capital lease of that facility with five-year renewal options beginning in year 31. The fixed rental obligation for the first 30 years is $5.1 million per year. Future cash rental payments as of December 31, 1995, are as follows: (In thousands) - -------------------------------------------------------------------------- 1996 $ 3,605 1997 3,604 1998 3,605 1999 4,880 2000 6,156 Thereafter 98,901 - -------------------------------------------------------------------------- $120,751 - ------------------------------------------------------------------======== The amount of imputed interest necessary to reduce the future cash rental payments to present value is $76.1 million as of December 31, 1995. Total interest expense on the lease obligation was $5.2 million and total amortization of the leased facility was $297,000 for the year ended December 31, 1995. The total accumulated amortization of the leased facility on December 31, 1995, was $9.7 million. At December 31, 1995, the Company has certain long-term 40 NEVADA POWER COMPANY 1995 ANNUAL REPORT noncancelable operating lease agreements for which the future minimum lease payments are immaterial. FUEL AND PURCHASED POWER OBLIGATIONS - The Company has eight long-term contracts for the purchase of electric energy and/or capacity. The contracts expire in years ranging from 1997 to 2016. Total payments under these contracts were $41.6 million, $45.4 million and $43.1 million in 1995, 1994 and 1993, respectively. The cost of power obtained under these contracts is included in purchased power expense in the Statements of Income. At December 31, 1995, the estimated future payments for capacity and energy that the Company is obligated to purchase under these contracts, subject in part to certain conditions, are as follows: Accounted for Accounted for as Long-Term as Long-Term (In thousands) Executory Contracts Capital Lease - ------------------------------------------------------------------------ 1996 $ 35,067 $ 13,432 1997 38,566 12,902 1998 38,153 12,373 1999 29,684 11,844 2000 10,882 11,315 Thereafter - 122,472 - ------------------------------------------------------------------------ Total minimum payment $152,352 184,338 - --------------------------------------======== Less amount representing estimated executory costs included in total minimum payment (92,272) - ------------------------------------------------------------------------ Net minimum payments 92,066 Less amount representing interest (35,229) - ------------------------------------------------------------------------ Present value of net minimum payments $ 56,837 - ----------------------------------------------------------------======== Total interest expense on the purchase power obligation accounted for as a capital lease was $5.6 million and total amortization was $5.2 million in 1995. Total accumulated amortization was $26.2 million as of December 31, 1995. The Company has contracted with various coal suppliers to provide coal to the Reid Gardner Generating Station. The contracts expire in years ranging from 1999 to 2007. Costs of approximately $25.0 million, $25.9 million and $31.3 million were incurred under the long-term coal contracts in 1995, 1994 and 1993, respectively. In addition, the Company has long-term transportation arrangements with railway companies to transport coal to the Reid Gardner Generating Station. The contracts expire in 1999 and 2000. Costs of approximately $19.2 million, $1.7 million and $2.2 million were incurred under the coal transportation contracts in 1995, 1994 and 1993, respectively. At December 31, 1995, the estimated future payments for purchase and transportation of coal that the Company is obligated to purchase under these contracts are as follows: (In thousands) Coal Transportation Coal Use - ---------------------------------------------------------------------- 1996 $ 15,207 $ 15,135 1997 15,511 16,374 1998 15,821 16,702 1999 16,138 17,035 2000 12,864 14,556 Thereafter - 101,924 - ---------------------------------------------------------------------- $ 75,541 $181,726 - ---------------------------------------------========---------======== CONSTRUCTION - Certain commitments have been incurred at December 31, 1995, in connection with the 1996 construction budget. Construction expenditures are estimated at $186 million, excluding AFUDC, for 1996. 9. OTHER DEFERRED CHARGES AND CREDITS OTHER DEFERRED CHARGES - At December 31, 1995, as a result of the Company adopting FAS 109 effective January 1, 1993, other deferred charges include a regulatory asset of $101.3 million and a deferred tax asset of $18.3 million. The regulatory asset represents future revenue to be received from customers due to the flow-through of tax benefits of temporary differences in prior years and the deferred tax asset is from temporary differences caused by investment tax credits. At December 31, 1995, organizational study, early retirement and severance costs of $6.0 million are included in other deferred charges and are being amortized over an eight-year period effective February 1994. These costs are a result of the completion of a comprehensive organizational study started in 1993. In March 1994, the Company bought out the remaining obligation under a coal purchase contract with Mountain Coal Co. At December 31, 1995, $15.3 million for the Company's portion of the buyout is included in other deferred charges. Management believes the cost of the buyout will be recovered through Nevada's deferred energy accounting procedures. Other deferred charges as of December 31, 1995, also include $19.9 million for deferred federal income taxes on customer advances for construction and $8.8 million for conservation programs. OTHER DEFERRED CREDITS - As of December 31, 1995, a credit of $2.4 million for generating station spare parts is included in other deferred credits. Effective January 1992, this credit is being amortized over a six-year period. Other deferred credits as of December 31, 1995, also include a regulatory liability of $18.3 million representing amounts to be refunded to customers in the future as a result of the Company adopting FAS 109. 41 NEVADA POWER COMPANY 1995 ANNUAL REPORT 10. INTERESTS IN JOINTLY OWNED ELECTRIC UTILITY FACILITIES At December 31, 1995, the Company owned the following undivided interests in jointly owned electric utility facilities: Company's Share of - --------------------------------------------------------------------------- Construction Percent Owned Plant Accumulated Net Plant Work In (In thousands) by Company In Service Depreciation In Service Progress - ------------------------------------------------------------------------------- FACILITY Navajo Project 11.3 $134,994 $ 66,897 $ 68,097 $ 24,252 Mohave Project 14.0 77,206 31,369 45,837 3,461 Reid Gardner Plant Unit No. 4 32.2 138,570 37,342 101,228 1,642 - ------------------------------------------------------------------------------- Total $350,770 $135,608 $215,162 $ 29,355 - --------------------------------=============================================== The amounts above for Navajo and Mohave include the Company's share of transmission systems and general plant equipment and, in the case of Navajo, the Company's share of the jointly owned railroad which delivers coal to the plant. Each participant provides its own financing for all of these jointly owned facilities. The Company's share of operating expenses for these facilities is included in the corresponding operating expenses in the Statements of Income. 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Earnings Earnings Available per for Average (In thousands, except Electric Operating Net Common Common per share amounts) Revenues Income Income Stock Share - ------------------------------------------------------------------------------- QUARTER 1995: First $145,184 $11,642 $ 4,554 $ 3,562 $0.08 Second 173,348 23,761 13,410 12,418 0.27 Third 280,135 64,261 53,059 52,068 1.12 Fourth 151,314 17,894 5,948 4,957 .11 1994: First $144,658 $12,196 $ 4,692 $ 3,697 $0.09 Second 195,788 28,161 23,193 22,199 0.53 Third 268,359 59,697 50,472 49,479 1.16 Fourth 155,353 13,743 3,513 2,519 0.06 The business of the Company is seasonal in nature and it is management's opinion that comparisons of earnings for the quarters do not give a true indication of overall trends and changes in the Company's operations. The second quarter of 1994 reflects other income of $4.2 million net of tax or 10 cents per average common share from the resolution of the PSC investigation of replacement power costs resulting from a 1985 accident at the Mohave Generating Station. 42 NEVADA POWER COMPANY 1995 ANNUAL REPORT Independent Auditors' Report To the Board of Directors and Shareholders of Nevada Power Company: We have audited the balance sheets of Nevada Power Company as of December 31, 1995 and 1994, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Las Vegas, Nevada February 14, 1996 REPORT OF MANAGEMENT The management of Nevada Power Company is responsible for the financial statements presented in this report. Management prepared the financial statements in conformity with generally accepted accounting principles applicable to public utilities which are consistent in all material respects with the accounting prescribed by the Public Service Commission of Nevada and the Federal Energy Regulatory Commission. In preparing the financial statements, management made informed judgments and estimates relating to events and transactions being reported. The Company has a system of internal accounting and financial controls and procedures in place to insure that the financial records reflect the transactions of the Company and that assets are safeguarded. This system is examined by management on a continuing basis for effectiveness and efficiency and is reviewed on a regular basis by an internal audit staff that reports directly to the Audit Committee of the Board of Directors. The financial statements have been audited by Deloitte & Touche LLP, independent auditors. The auditors provide an objective, independent review as to management's discharge of its responsibilities as they relate to the fairness of reported operating results and financial condition. Their audit includes procedures which provide them reasonable assurance that the financial statements are not misleading and includes a review of the Company's system of internal accounting and financial controls and a test of transactions. The Board of Directors has oversight responsibility for determining that management has fulfilled its obligation in the preparation of financial statements and the ongoing examination of the Company's system of internal accounting controls. The Audit Committee, which is composed solely of outside directors, meets regularly with management, Deloitte & Touche LLP and the internal audit staff to discuss accounting, auditing and financial reporting matters. The Audit Committee reviews the program of audit work performed by the internal audit staff. To insure auditor independence, both Deloitte & Touche LLP and the internal audit staff have complete and free access to the Audit Committee. 43 NEVADA POWER COMPANY 1995 ANNUAL REPORT STOCK PRICES ON NEW YORK STOCK EXCHANGE AND DIVIDENDS PER SHARE 1995 Quarters 1994 Quarters - ------------------------------------------------------------------------------ First Second Third Fourth First Second Third Fourth - ------------------------------------------------------------------------------ Common High $ 21 3/8 $ 21 1/4 $ 22 1/2 $ 22 7/8 $ 24 3/8 $ 22 1/4 $ 21 1/2 $ 20 7/8 Low 19 1/4 19 5/8 19 1/8 20 7/8 21 1/4 17 1/8 18 7/8 19 1/8 Dividend paid .40 .40 .40 .40 .40 .40 .40 .40 High and low common stock prices shown are as reported by the Wall Street Journal as New York Stock Exchange Composite Transactions. The common stock is also listed on the Pacific Stock Exchange. Holders of common stock are entitled to dividends as are declared by the Board of Directors, subject to the rights of the cumulative preferred stock and the preference stock of the Company to quarterly cumulative dividends as declared by the Board of Directors. The Company has paid quarterly dividends on its common stock since August 1954. See Note 6 of "Notes to Financial Statements" for restriction on the Company's ability to pay dividends. The Company had 50,896 shareholders of record of common stock at December 31, 1995. 44 NEVADA POWER COMPANY 1995 ANNUAL REPORT STATISTICAL SUMMARY 1995-1991 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------- SUMMARY OF OPERATIONS (In thousands, except per share amounts): Electric Revenues: Residential $ 319,373 $ 331,671 $ 267,941 $ 245,160 $ 216,784 Commercial and industrial 383,080 380,223 326,006 305,707 287,407 Other electric sales 38,700 43,732 48,504 42,011 34,459 Miscellaneous 8,828 8,532 9,321 8,037 7,761 - ----------------------------------------------------------------------------- 749,981 764,158 651,772 600,915 546,411 - ----------------------------------------------------------------------------- Net Income (a) 76,971 81,870 73,548 56,780 35,176 Dividend Requirements on Preferred Stock 3,966 3,976 3,986 4,262 2,880 Earnings Available for Common Stock(a)$ 73,005 $ 77,894 $ 69,562 $ 52,518 $ 32,296 Weighted Average Number of Common Shares Outstanding 46,288 42,784 39,482 35,652 30,855 Earnings Per Average Common Share(a)$ 1.58 $ 1.82 $ 1.76 $ 1.47 $ 1.05 Dividends Per Common Share $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 CAPITALIZATION (In thousands, except per share amounts): Long-Term Debt $ 799,999 $ 712,571 $ 716,589 $ 715,451 $ 578,540 Cumulative Preferred Stock 38,000 38,000 38,000 38,000 38,000 Cumulative Preferred Stock with Mandatory Sinking Funds 3,863 4,064 4,264 4,464 4,664 Common Shareholders' Equity 764,361 731,749 645,924 532,473 460,307 Book Value Per Common Share $ 16.25 $ 16.12 $ 15.56 $ 14.34 $ 13.96 RETURN ON COMMON SHAREHOLDERS' EQUITY 9.55% 10.64% 10.77% 9.86% 7.02% ELECTRIC PLANT INVESTMENT (In thousands): Gross $ 2,247,923 $ 2,079,694 $ 1,901,448 $ 1,739,633 $ 1,562,921 Depreciated 1,701,120 1,584,003 1,450,146 1,328,670 1,187,154 TOTAL ASSETS (In thousands) $ 2,047,611 $ 1,907,389 $ 1,809,337 $ 1,557,040 $ 1,410,022 CONSTRUCTION EXPENDITURES EXCLUDING AFUDC (In thousands) $ 176,395 $ 179,674 $ 157,458 $ 167,233 $ 145,271 OPERATING AND SALES DATA: Generating Capacity and Firm Purchases (Megawatts) 3,525 3,462 3,488 2,989 2,719 Peak Load (Megawatts) 3,066 2,920 2,681 2,501 2,373 Electric Sales (Megawatthours) 12,109,355 11,942,724 11,155,270 10,541,204 9,834,952 Number of Customers (Year-End) 454,166 428,286 403,875 383,036 366,325 Average Annual Kilowatthour Sales Per Residential Customer 12,367 13,605 13,008 13,343 13,213 NUMBER OF EMPLOYEES (Year-End) 1,761 1,759 1,741 1,734 1,689 (a) Amount for 1991 includes write-offs for deferred energy and environmental study costs. Amount for 1993 includes write-offs for deferred energy costs and preliminary study costs for a canceled coal-fired generating station project. Amount for 1994 includes other income from the resolution of a regulatory investigation of replacement power costs resulting from a 1985 generating station accident. 45 EX-10.75 5 SERIES 1995A FINANCING AGREEMENT Series A -------- ============================================================================ FINANCING AGREEMENT Dated as of October 1, 1995 By and Between CLARK COUNTY, NEVADA and NEVADA POWER COMPANY RELATING TO INDUSTRIAL DEVELOPMENT REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 1995A ============================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 3.1, 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of October 1, 1995, between the Issuer and United States Trust Company of New York, as Trustee. FINANCING AGREEMENT TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference) SECTION HEADING PAGE ARTICLE I DEFINITIONS ............................................. 1 ARTICLE II REPRESENTATIONS ......................................... 6 Section 2.1. Representations and Covenants by the Issuer ........... 6 Section 2.2. Representations by the Company ........................ 6 ARTICLE III COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS ........ 7 Section 3.1. Agreement to Complete the Acquisition, Construction and Equipping of the Project .......................... 7 Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds 8 Section 3.3. Disbursements from the Construction Fund .............. 8 Section 3.4. Establishment of Completion Date ...................... 9 Section 3.5. Investment of Moneys in the Bond Fund and Construction Fund .................................................. 11 Section 3.6. Tax Exempt Status of Bonds ............................ 12 Article IV LOAN AND PROVISIONS FOR REPAYMENT ....................... 12 Section 4.1. Loan of Bond Proceeds ................................. 12 Section 4.2. Loan Repayments and Other Amounts Payable ............. 12 Section 4.3. No Defense or Set-Off ................................. 15 Section 4.4. Payments Pledged and Assigned ......................... 15 Section 4.5. Letter of Credit and Alternate Credit Facility ........ 15 Section 4.6. Payment of the Bonds and Other Amounts ................ 16 Article V SPECIAL COVENANTS AND AGREEMENTS ........................ 17 Section 5.1. Company to Maintain Its Corporate Existence; Conditions under Which Exceptions Permitted ........... 17 Section 5.2. Annual Statement ...................................... 17 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc ......... 17 Section 5.4. Recordation and Other Instruments ..................... 18 Section 5.5. No Warranty by the Issuer ............................. 18 Section 5.6. Agreement as to Ownership and Use of the Project ...... 18 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods ................................. 18 -i- Section 5.8. Information Reporting, Etc. ........................... 18 Section 5.9. Limited Liability of Issuer ........................... 18 Section 5.10. Inspection of Project ................................. 19 Section 5.11. Purchases of Bonds by Company or Issuer Prohibited; Exceptions ............................................ 19 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES ........................... 19 Section 6.1. Events of Default Defined ............................. 19 Section 6.2. Remedies on Default ................................... 21 Section 6.3. No Remedy Exclusive ................................... 22 Section 6.4. Agreement to Pay Fees and Expenses of Counsel ......... 22 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers ................................... 22 ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS ...................................... 23 Section 7.1. Option to Prepay ...................................... 23 Section 7.2. Obligation to Prepay .................................. 23 Section 7.3. Notice of Prepayment .................................. 24 ARTICLE VIII MISCELLANEOUS ............................................ 24 Section 8.1. Notices ............................................... 24 Section 8.2. Assignments ........................................... 25 Section 8.3. Severability .......................................... 25 Section 8.4. Execution of Counterparts ............................. 25 Section 8.5. Amounts Remaining in Bond Fund ........................ 25 Section 8.6. Amendments, Changes and Modifications ................. 25 Section 8.7. Governing Law ......................................... 25 Section 8.8. Authorized Issuer and Company Representatives ......... 26 Section 8.9. Term of the Agreement ................................. 26 Section 8.10. Cancellation at Expiration of Term .................... 26 Section 8.11. References to Bank and Provider ....................... 26 Signatures .............................................................. 27 EXHIBIT A - Description of the Project -ii- Series A -------- THIS FINANCING AGREEMENT made and entered into as of October 1, 1995, by and between CLARK COUNTY, NEVADA, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and NEVADA POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), WITNESSETH: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement by and between the Issuer and the Company, as from time to time amended and supplemented. "Alternate Credit Facility" means any credit facility, including any instruments accompanying or relating to such Alternate Credit Facility delivered to the Trustee in connection therewith, provided in accordance with Section 4.5 of this Agreement. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chair. Such certificate may designate an alternate or alternates. "Bank" means Barclays Bank PLC, acting through its New York Branch, in its capacity as issuer of the Letter of Credit, its successors in such capacity, and its assigns. If an Alternate Credit Facility in the form of a letter of credit has been issued and delivered in accordance with Section 4.5 of this Agreement, "Bank" shall mean the Provider of such Alternate Credit Facility, if in the form of a letter of credit, in its capacity as issuer of such Alternate Credit Facility, its successors in such capacity, and its assigns. "Bank Agent" means Barclays Bank PLC, acting through its New York Branch, in its capacity as agent for the Bank Group, and its successors in such capacity; provided, however, if there is no party acting as agent under the Reimbursement Agreement, "Bank Agent" shall mean the Bank. "Bank Group" means the banks party to the Reimbursement Agreement, including the Bank. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means any one or more of the bonds authorized, authenticated and delivered under the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee, the Bank and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Business Day" means a day on which banks located in the city in which the Principal Office of the Trustee is located and in the city or cities in which any office at which any action must be instituted or taken in order to realize upon the Letter of Credit or an Alternate Credit Facility then in effect is or are located, are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. -2- "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. "Completion Date" means the date of completion of the acquisition and construction of the Project as that date shall be certified as provided in Section 3.4 hereof. "Construction Fund" means the fund created by Section 6.07 of the Indenture. "Construction Period" means the period between the beginning of construction and equipping of the Project or the date on which the Bonds are first delivered to the purchasers thereof, whichever is earlier, and the Completion Date. "Cost" or "Cost of the Project" means the items authorized to be paid from the Construction Fund pursuant to the provisions of paragraphs (a) to (j), inclusive, of Section 3.3 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Exempt Facilities" means facilities for the local furnishing of electric energy within the meaning of Section 142(a)(8) of the Code. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "First Mortgage Indenture" means that certain Indenture of Mortgage and Deed of Trust, dated as of October 1, 1953, from Southern Nevada Power Co. (now Nevada Power Company) to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), as trustee, as supplemented, modified or amended from time to time or at any time by supplemental indentures. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. -3- "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and United States Trust Company of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Letter of Credit" means the irrevocable direct-pay Letter of Credit issued by the Bank to the Trustee, including any extensions thereof, contemporaneously with the issuance of the Bonds, provided that upon the issuance and delivery of an Alternate Credit Facility in the form of a letter of credit in accordance with Section 4.5 of this Agreement, "Letter of Credit" shall mean such Alternate Credit Facility, if in the form of a letter of credit, instead of the letter of credit for which such Alternate Credit Facility has been substituted. "Moody's" means Moody's Investors Service, Inc. a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses, including fees of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Original Purchaser" means Goldman, Sachs & Co., Lehman Brothers, Inc., M.R. Beal & Company and Artemis Capital Group, Inc. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Project" means the facilities described in Exhibit A to this Agreement, as it may be amended and supplemented from time to time. "Project Certificate" means the Company's Project Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge -4- of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 6.21 of the Indenture. "Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among the Company, the Bank Agent, the Bank and the Bank Group, pursuant to which the initial Letter of Credit is issued, and any subsequent reimbursement agreement between the Company and a Bank pursuant to which a subsequent Letter of Credit is issued by the Bank and delivered to the Trustee, and in each case any and all modifications, amendments and supplements thereto. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.11 of the Indenture and any permitted successor thereto. "Revenues" means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of this Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, including all moneys drawn by the Trustee under the Letter of Credit to pay the principal of and premium, if any, and interest on the Bonds and all amounts realized by the Trustee from any Alternate Credit Facility to pay the principal of and premium, if any, and interest on the Bonds, all of which amounts are to be deposited in the Bond Fund, (ii) any portion of the net proceeds of the Bonds deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture and (iii) any amounts paid into the Bond Fund from the Construction Fund, including income on investments. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of the delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. -5- "Trustee" means United States Trust Company of New York, as trustee under the Indenture and any successor trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as successor Trustee thereunder, and any separate or co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes -6- such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchaser, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading, and the estimates and the assumptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and as of the date of issuance and delivery of the Bonds, are and will be reasonable and based on the best information available to the Company. ARTICLE III COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO COMPLETE THE ACQUISITION, CONSTRUCTION AND EQUIPPING OF THE PROJECT. The Company agrees that it will complete or cause to be completed the acquisition, construction and equipping of the Project with such reasonable dispatch as it shall deem prudent in the conduct of its affairs, and that the Project, while operated by the Company, as herein provided, will at all times be a "project" within the meaning of the Act and be Exempt Facilities. Exhibit A hereto may be amended or supplemented by the Company from time to time, to add to or remove from the Project any item or interest therein or to change the nature of all or any part of the facilities constituting the Project, provided that there shall be delivered by the Company to the Issuer and the Trustee in connection with any such amendment or supplement: (i) a certificate of the Authorized Company Representative describing the proposed changes and stating that they will not have the effect of disqualifying the Project as a "project" within the meaning of the Act or as Exempt Facilities; -7- (ii) a copy of the amendment or supplement to Exhibit A hereto and such other documents, certificates and showings as may be required by Counsel rendering the opinion in clause (iii) of this paragraph; and (iii) an opinion of Bond Counsel to the effect that such amendment complies with the requirements of this Section 3.1 and is in proper form for execution and delivery by the Issuer and that the exemption from federal income taxes of interest on the Bonds is not adversely affected by reason of such amendment and the changes in the Project contemplated thereby. SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In order to provide funds to lend to the Company to finance the Cost of the Project as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Original Purchaser thereof, its Bonds in the aggregate principal amount of $76,750,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by the Original Purchaser of the Bonds; and (2) in the Construction Fund, the balance of the proceeds (net of underwriting discount) from the sale of the Bonds. SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The Issuer will in the Indenture authorize and direct the Trustee to disburse the moneys in the Construction Fund to or on behalf of the Company, upon compliance with Section 6.07 of the Indenture, for the following purposes (but, subject to the provisions of Section 3.5 hereof, for no other purpose): (a) Payment to the Company of such amounts, if any, as shall be necessary to reimburse the Company in full for all advances and payments made by it at any time prior to or after the delivery of the Bonds for expenditures in connection with the preparation of plans and specifications for the Project (including any preliminary study or planning of the Project or any aspect thereof) and the acquisition, construction and equipping of the Project. (b) Payment of the initial or acceptance fees, if any, of the Trustee, the Application Fee, the Closing Fee and the Administrative Expenses of the Issuer, bond insurance premium, legal and accounting fees and expenses and printing and engraving costs incurred in connection with the authorization, sale and issuance of the Bonds and the preparation of this Agreement, the Indenture, the Tax Agreement, the Bonds and all other documents in connection with the authorization, sale and issuance of the Bonds. (c) Payment for labor, services, materials and supplies used or furnished in site improvement and in the construction and equipping of the Project and miscellaneous expenditures incidental to any of the foregoing items. -8- (d) Payment of the fees, if any, for architectural, engineering, legal, underwriting and supervisory services with respect to the Project. (e) Payment of the premiums on all insurance required to be taken out and maintained in connection with the Project during the Construction Period. (f) Payment of the taxes, assessments and other charges, if any, that may become payable during the Construction Period with respect to the Project. (g) Payment of expenses incurred in seeking to enforce any remedy against any contractor or subcontractor or any other third party in respect of any default under a contract relating to the Project. (h) Interest on the Bonds and Letter of Credit fees during the construction of the Project, but only to the extent provided by the Project Certificate. (i) Payment of interest on the Bonds during the construction of the Project, but only to the extent provided by the Project Certificate. (j) Payment of any other costs which constitute a part of the Cost of the Project in accordance with generally accepted applicable accounting principles, which are permitted by the Act and which will not adversely affect the exemption from federal income taxes of interest on any of the Bonds. The Company covenants and agrees that it will not take any action or authorize or permit, to the extent such action is within its control, any action to be taken which would cause the interest on the Bonds to become includable in the federal gross income of the Owners of the Bonds, provided that the Company shall not have violated this covenant if the interest on any of the Bonds becomes includable in the federal gross income of an Owner or a beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code. The Company further covenants and agrees to comply with all of the requirements and restrictions of the Project Certificate. SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE. Except as provided in the next succeeding paragraph, as soon as practicable after the completion of the acquisition and construction of the Project, and in any event not more than 90 days thereafter, the Company shall furnish to the Trustee a certificate signed by the Authorized Company Representative stating (i) that the acquisition and construction of the Project has been completed, (ii) the Completion Date, (iii) the Cost of the Project, (iv) the portion of the Cost of the Project which has then been paid, and (v) the portion of the Cost of the Project which has not yet been paid. A copy of such certificate shall be furnished to the Issuer. Such certificate may state that it is given without prejudice to any rights against third parties which exist at the date of such certificate or which may subsequently come into being. It is anticipated by the Issuer and the Company that all moneys deposited in the Construction Fund, including income from the investment thereof, will be disbursed to pay -9- part of the Cost of the Project prior to the delivery of such certificate, and the Issuer will provide in the Indenture that in such event the Construction Fund will automatically terminate and the filing of a certificate pursuant to the provisions of the next preceding paragraph need not be made. However, if any moneys should remain in the Construction Fund at the time such certificate is required to be delivered to the Trustee pursuant to the provisions of the next preceding paragraph, such moneys may be used, at the direction of the Authorized Company Representative, to the extent indicated, for one or more of the following purposes: (1) for the payment, in accordance with the provisions of this Agreement and the Project Certificate, of any Cost of the Project not then paid, as specified in the above-mentioned certificate; or (2) for transfer to the Bond Fund, but only if, and to the extent that, the Trustee and the Issuer have been furnished with an opinion of Bond Counsel to the effect that such transfer is lawful under applicable law and does not adversely affect the exemption from federal income taxes of interest on any of the Bonds. Any moneys (including investment proceeds) remaining in the Construction Fund on the date of the aforesaid certificate and not set aside for the payment of the Cost of the Project as specified in (1) above or transferred to the Bond Fund pursuant to (2) above shall on such date be placed by the Trustee in a separate escrow account and used to pay all or part of the redemption price of Bonds at the redemption date or dates selected by the Company (or to reimburse the Bank Group for the payment of such redemption price with a drawing under the Letter of Credit); provided that, until so used such moneys may also be used, at the direction of the Company, for one or more of the following purposes: (a) to pay all or part of the price of purchasing Bonds on tender, in the open market or at private sale, on or before such date or dates, for the purpose of cancellation; (b) to pay all or part of the principal of and interest on the Bonds coming due on or before such date or dates; (c) for the payment of the costs of any additional Exempt Facilities; (d) for transfer to the Rebate Fund; or (e) for any other purpose; provided that, no moneys on deposit in such escrow account may be used for any of the purposes specified in this paragraph (including the redemption of Bonds) unless and until the Trustee and the Issuer have been furnished with an opinion of Bond Counsel to the effect that such use is lawful under applicable law and does not adversely affect the exemption from federal income taxes of interest on any of the Bonds; and provided further that, until used for one or more of the foregoing purposes, moneys on deposit in such escrow account -10- may be invested in investments authorized by the first paragraph of Section 3.5 of this Agreement pursuant to the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative, but may not be invested to produce a yield on such moneys (computed from the Completion Date and taking into account any investment of moneys during the period from the Completion Date until such moneys were deposited in such escrow account) greater than the yield on the Bonds, all as such terms are used in and determined in accordance with Section 148(a) of the Code. SECTION 3.5. INVESTMENT OF MONEYS IN THE BOND FUND AND CONSTRUCTION FUND. Except as otherwise herein provided, any moneys held as a part of the Bond Fund or the Construction Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. -11- The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the Bond Fund or Construction Fund, as the case may be, and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys realized under the Letter of Credit or any Alternate Credit Facility or moneys held for the payment of Bonds pursuant to Sections 6.12 and 6.18 of the Indenture or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. In addition, the Company agrees that to the extent that any moneys in the Bond Fund represent moneys to be used to pay the premium portion of the redemption price of Bonds pursuant to Section 3.01(A)(3) of the Indenture, such moneys shall be invested only in Governmental Obligations maturing on or before the applicable redemption date or dates. SECTION 3.6. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to pay the Cost of the Project and the Company agrees to apply the gross proceeds of such loan to pay the Cost of the Project or as otherwise permitted in Section 3.4 hereof. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to pay the Cost of the Project or to refund all or any principal amount of the Bonds, or any combination thereof. SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, -12- until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or any Alternate Credit Facility; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or under any Alternate Credit Facility or to the extent moneys are available from the sources described in clauses (i) and (ii) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and -13- against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds (which may be paid from the proceeds of the Bonds to the extent permitted by the Project Certificate) and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $10,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (h) To the extent that the Letter of Credit is in effect and moneys on deposit in the Bond Fund constitute Available Moneys or have been deposited in separate, segregated accounts in the Bond Fund for the purpose of becoming Available Moneys, such moneys shall not be available for transfer and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy the requirements of the Tax Agreement (unless the Company fails to pay the amounts described below). In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(h) shall survive the termination of this Agreement. -14- SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. LETTER OF CREDIT AND ALTERNATE CREDIT FACILITY. (a) The Company shall arrange for a Letter of Credit or an Alternate Credit Facility to be in effect at all times with such terms and conditions as required under Sections 6.19 and 6.20 of the Indenture. Such Letter of Credit or Alternate Credit Facility must be delivered to the Trustee by the Company not later than 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms. (b) At any time the Company may, at its option, provide for the delivery to the Trustee of an Alternate Credit Facility. The Alternate Credit Facility (a) may consist, at the option of the Company, of (i) first mortgage bonds of the Company, (ii) a letter of credit, or (iii) such other security or credit support as the Company may elect to furnish and which is acceptable to the Issuer, in each case in an amount and having terms sufficient to support the payment of the principal of and interest on all Bonds then outstanding and, at the election of the Company, any of its other obligations under this Agreement, (b) shall have administrative provisions satisfactory to the Trustee, and (c) shall be for a stated term and shall not be terminable prior to the end of such term except by action of the Trustee at the direction of the Company upon the fulfillment of any requirements of such Alternate Credit Facility and compliance with the conditions set forth in Section 4.5(c) hereof. The Company shall have an option, at any time, and from time to time, upon notice given as provided in Section 4.5(c) hereof, to provide an Alternate Credit Facility in substitution for the Letter of Credit or another Alternate Credit Facility, but only in accordance with the provisions of this Section 4.5(b) and Section 4.5(c) hereof. (c) As a condition to the exercise by the Company of its option set forth in Section 4.5(b) hereof to deliver an Alternate Credit Facility, the Company shall provide to the Issuer, the Trustee and the Remarketing Agent, at least 20 days prior to the fifth Business -15- Day next preceding the effective date of such change, a notice specifying (i) that the Letter of Credit or the Alternate Credit Facility then in effect will be changed, (ii) the effective date of such change (which must be at least five Business Days prior to the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms), (iii) the form and substance of the Letter of Credit or the Alternate Credit Facility then in effect, and (iv) the form and substance of the Alternate Credit Facility to be in effect on the date specified in (ii) above. Such notice to the Trustee must be accompanied by the opinion of Bond Counsel required by Sections 6.19 and 6.20 of the Indenture and (i) a letter from Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the Bonds should then be rated by S&P, to the effect that the substitution of the proposed Alternate Credit Facility for the Letter of Credit or the Alternate Credit Facility then in effect will not by itself result in a reduction, suspension or withdrawal of its ratings of the Bonds which then prevail (except that such rating evidence shall not be required if the Bonds are subject to mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the Indenture), and (ii) the form of the substitute Alternate Credit Facility to be in place on the effective date of such change, together with any documentation and opinions referred to by Moody's or S&P in any such letter. (d) The Issuer and the Company agree that the Issuer will in the Indenture authorize and direct the Trustee to accept and agree to conditions and provisions of the Letter of Credit and any Alternate Credit Facility which may be provided in accordance with the provisions of this Section 4.5. SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof, (ii) amounts realized under the Letter of Credit or any Alternate Credit Facility and (iii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund or the Construction Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof, and the obligation to pay required by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to the extent of the corresponding payment made to the Trustee under the Letter of Credit or any Alternate Credit Facility. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof and amounts realized under the Letter of Credit or any Alternate Credit Facility equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the -16- Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) the acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; Etc. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when -17- due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee and, after payment in full of the Bonds as provided in the Indenture, the rights of the Bank Group provided in the Indenture, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE PERIODS. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture. SECTION 5.8. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not -18- impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement, the Letter of Credit and any Alternate Credit Facility. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED; EXCEPTIONS. At any time while the Letter of Credit is in effect, the Company shall not and shall not allow any Insider of the Company to purchase any Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b) hereof. At any time while the Letter of Credit is in effect, the Issuer shall not and shall not allow any Insider of the Issuer to purchase any Bonds except with Available Moneys. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: -19- (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.5(a) of this Agreement, including without limitation failure by the Company to provide the Trustee with a Letter of Credit or Alternate Credit Facility on or before 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire; or (d) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a), (b) and (c) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(h) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of Default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (e) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (f) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment -20- of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (g) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (h) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(d) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become -21- due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under the second paragraph of Section 3.1 hereof and under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without both -22- the consent of the Trustee and the Bank to such waiver. The Trustee and the Bank shall have the power to waive any default by the Company hereunder, except a default under the second paragraph of Section 3.1 hereof, or under Section 3.6, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer or the Bank shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. -23- SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 35 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. On the date fixed for redemption of the Bonds or portions thereof, there shall be deposited with the Trustee from drawings upon the Letter of Credit or payments by the Company or from amounts realized under any Alternate Credit Facility as required by Section 7.1 or 7.2, as appropriate, for payment into the Bond Fund. Any other provision of this Agreement or the Indenture to the contrary notwithstanding, any prepayment of moneys hereunder shall be made in such manner and at such time that any redemption of Bonds or portions thereof will be made with Available Moneys. ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: If to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89151, or to telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at 114 West 47th Street, New York, New York 10036-1532 or to telecopy number (212) 852-1625, Attention: Corporate Trust Administration; if to the Remarketing Agent, at 3 World Financial Center, Eighth Floor, 200 Vesey Street, New York, New York 10285, Attention: Short- Term Municipal Department, or to telecopy number (212) 528-0821; if to the Bank or the Bank Agent, at 75 Wall Street, New York, New York 10265, Attention: Trade Services Group, or to telecopy number (212) 412-5111. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Bank or to the Bank Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent, the Bank and the Bank Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. -24- SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other and the Bank or the Bank Agent, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under the second paragraph of Section 3.1 and under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent and the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee; provided, however, that if there remain reimbursement or other obligations of the Company under the Reimbursement Agreement, such moneys remaining in the Bond Fund shall, subject to Section 13.10(b) of the Indenture, be paid by the Trustee to the Bank Agent upon written direction of the Bank Agent to such extent. SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee and the Bank thereto is obtained. Subject to the written consent of the Trustee and the Bank, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee, the Bank or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. -25- SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that the Letter of Credit (and if at such time there shall be no Pledged Bonds) or any Alternate Credit Facility is not in effect and the Bank Group shall have been paid all amounts owed them under the Reimbursement Agreement (as evidenced by a written certificate of the Bank Agent delivered to the Trustee to such effect), all references herein to the Bank or the Bank Agent or the Bank Group or the Provider, as the case may be, shall be deemed ineffective. Any provisions hereof requiring the consent of the Bank or the Bank Agent or the Bank Group or the Provider shall be deemed ineffective if the Bank or the Provider is at any such time in default in its obligations under the Letter of Credit or the Alternate Credit Facility, as the case may be, to fund a drawing thereunder made in strict compliance with the terms of such Letter of Credit or Alternate Credit Facility. -26- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By YVONNE ATKINSON GATES ------------------------------------- Chair Board of County Commissioners (SEAL) Attest: LORETTA BOWMAN - ------------------------------------ County Clerk NEVADA POWER COMPANY By ------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: - ------------------------------------ Secretary -27- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By ------------------------------------- Chair Board of County Commissioners (SEAL) Attest: - ------------------------------------ County Clerk NEVADA POWER COMPANY By STEVEN W. RIGAZIO ------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: RICHARD L. HINCKLEY - ------------------------------------ Secretary -27- Series A -------- EXHIBIT A (Attached to Financing Agreement between Clark County, Nevada and Nevada Power Company, dated as of October 1, 1995). The Project consists of the following facilities, all as more particularly described in the Project Certificate and only to the extent provided in the Project Certificate: Additions and improvements to the Local Distribution System which consists of the low-voltage electric distribution facilities by which the Company furnishes electric energy to customers within its retail customer service area, together with additions and improvements to the Company's other plant, property and equipment for use in connection therewith for the same purpose, including but not limited to poles, conductors, transformers, circuit-breakers, meters, customer service connections, and related substations, switchyards, controls, communications equipment, and related land, land-rights, structures, improvements, equipment and other facilities necessary or useful for the operation, maintenance, control or protection of the following. EX-10.76 6 SERIES 1995B FINANCING AGREEMENT Series B -------- ============================================================================ FINANCING AGREEMENT Dated as of October 1, 1995 By and Between CLARK COUNTY, NEVADA and NEVADA POWER COMPANY RELATING TO INDUSTRIAL DEVELOPMENT REFUNDING REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 1995B ============================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of October 1, 1995, between the Issuer and United States Trust Company of New York, as Trustee. FINANCING AGREEMENT ------------------- TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference). SECTION HEADING PAGE ARTICLE I DEFINITIONS ............................................ 1 ARTICLE II REPRESENTATIONS ........................................ 6 Section 2.1. Representations and Covenants by the Issuer .......... 6 Section 2.2. Representations by the Company ....................... 7 ARTICLE III ISSUANCE OF THE BONDS .................................. 7 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds ............................................. 7 Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds ....................................... 8 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund .......................... 8 Section 3.4. Tax Exempt Status of Bonds ........................... 9 ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT ...................... 9 Section 4.1. Loan of Bond Proceeds ................................ 9 Section 4.2. Loan Repayments and Other Amounts Payable ............ 10 Section 4.3. No Defense or Set-Off ................................ 11 Section 4.4. Payments Pledged and Assigned ........................ 12 Section 4.5. Letter of Credit and Alternate Credit Facility ....... 12 Section 4.6. Payment of the Bonds and Other Amounts ............... 13 ARTICLE V SPECIAL COVENANTS AND AGREEMENTS ....................... 14 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted .......... 14 Section 5.2. Annual Statement ..................................... 14 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc. ....... 14 Section 5.4. Recordation and Other Instruments .................... 14 Section 5.5. No Warranty by the Issuer ............................ 15 Section 5.6. Agreement as to Ownership and Use of the Project ..... 15 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods ................................ 15 Section 5.8. Information Reporting, Etc. .......................... 15 Section 5.9. Limited Liability of Issuer .......................... 15 Section 5.10. Inspection of Project ................................ 16 -i- Section 5.11. Purchases of Bonds by Company or Issuer Prohibited; Exceptions ........................................... 16 Article VI EVENTS OF DEFAULT AND REMEDIES ......................... 16 Section 6.1. Events of Default Defined ............................ 16 Section 6.2. Remedies on Default .................................. 18 Section 6.3. No Remedy Exclusive .................................. 18 Section 6.4. Agreement to Pay Fees and Expenses of Counsel ........ 19 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers .................................. 19 Article VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS .................................... 20 Section 7.1. Option to Prepay ..................................... 20 Section 7.2. Obligation to Prepay ................................. 20 Section 7.3. Notice of Prepayment ................................. 20 Article VIII MISCELLANEOUS .......................................... 21 Section 8.1. Notices .............................................. 21 Section 8.2. Assignments .......................................... 21 Section 8.3. Severability ......................................... 21 Section 8.4. Execution of Counterparts ............................ 21 Section 8.5. Amounts Remaining in Bond Fund ....................... 21 Section 8.6. Amendments, Changes and Modifications ................ 22 Section 8.7. Governing Law 22 .................................... 22 Section 8.8. Authorized Issuer and Company Representatives ........ 22 Section 8.9. Term of the Agreement ................................ 22 Section 8.10. Cancellation at Expiration of Term ................... 22 Section 8.11. References to Bank and Provider ...................... 23 Signature ............................................................... 24 -ii- THIS FINANCING AGREEMENT made and entered into as of October 1, 1995, by and between CLARK COUNTY, NEVADA, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and NEVADA POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W I T N E S S E T H: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement by and between the Issuer and the Company, as from time to time amended and supplemented. "Alternate Credit Facility" means any credit facility, including any instruments accompanying or relating to such Alternate Credit Facility delivered to the Trustee in connection therewith, provided in accordance with Section 4.5 of this Agreement. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chair. Such certificate may designate an alternate or alternates. "Bank" means Societe Generale, acting through its Los Angeles Branch, in its capacity as issuer of the Letter of Credit, its successors in such capacity, and its assigns. If an Alternate Credit Facility in the form of a letter of credit has been issued and delivered in accordance with Section 4.5 of this Agreement, "Bank" shall mean the Provider of such Alternate Credit Facility, if in the form of a letter of credit, in its capacity as issuer of such Alternate Credit Facility, its successors in such capacity, and its assigns. "Bank Agent" means Societe Generale, acting through its Los Angeles Branch, in its capacity as agent for the Bank Group, and its successors in such capacity; provided, however, if there is no party acting as agent under the Reimbursement Agreement, "Bank Agent" shall mean the Bank. "Bank Group" means the banks party to the Reimbursement Agreement, including the Bank. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee, the Bank and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Business Day" means a day on which banks located in the city in which the Principal Office of the Trustee is located and in the city or cities in which any office at which any action must be instituted or taken in order to realize upon the Letter of Credit or an Alternate Credit Facility then in effect is or are located, are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law -2- before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "First Mortgage Indenture" means that certain Indenture of Mortgage and Deed of Trust, dated as of October 1, 1953, from Southern Nevada Power Co. (now Nevada Power Company) to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), as trustee, as supplemented, modified or amended from time to time or at any time by supplemental indentures. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and United States Trust Company of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Letter of Credit" means the irrevocable direct-pay Letter of Credit issued by the Bank to the Trustee, including any extensions thereof, contemporaneously with the issuance of the Bonds, provided that upon the issuance and delivery of an Alternate Credit Facility in the form of a letter of credit in accordance with Section 4.5 of this Agreement, "Letter of Credit" shall mean such Alternate Credit Facility, if in the form of a letter of credit, instead of the letter of credit for which such Alternate Credit Facility has been substituted. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized -3- securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Original Purchaser" means Goldman, Sachs & Co., Lehman Brothers, Inc., M. R. Beal & Company and Artemis Capital Group, Inc. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Bonds" means the Series 1988 Bonds and the Series 1989A Bonds. "Project" means the Series 1988 Project and the Series 1989A Project. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 6.16 of the Indenture. "Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among the Company, the Bank Agent, the Bank and the Bank Group, pursuant to which the initial Letter of Credit is issued, and any subsequent reimbursement agreement between the Company and a Bank pursuant to which a subsequent Letter of Credit is issued by the Bank and delivered to the Trustee, and in each case any and all modifications, amendments and supplements thereto. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.11 of the Indenture and any permitted successor thereto. "Revenues" means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of this Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, including all moneys drawn by the Trustee under the Letter of Credit to pay the principal of and premium, if any, and interest on the Bonds and all amounts realized by the Trustee from any Alternate Credit Facility to pay the principal of and premium, if any, and -4- interest on the Bonds, all of which amounts are to be deposited in the Bond Fund, and (ii) any portion of the net proceeds of the Bonds deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Series 1988 Agreement" means the Financing Agreement, dated as of November 1, 1988, between the Issuer and the Company relating to the Series 1988 Bonds. "Series 1988 Bonds" means the Issuer's Floating Rate Weekly Demand Industrial Development Revenue Bonds (Nevada Power Company Project) Series 1988, currently outstanding in the aggregate principal amount of $25,000,000. "Series 1988 Bond Fund" means the fund established pursuant to Section 602 of the Series 1988 Indenture. "Series 1988 Indenture" means the Indenture of Trust, dated as of November 1, 1988, between the Issuer and the Series 1988 Trustee, pursuant to which the Series 1988 Bonds were issued. "Series 1988 Project" means the "Project" as defined in the Series 1988 Agreement. "Series 1988 Trustee" means United States Trust Company of New York, as trustee under the Series 1988 Indenture. "Series 1989A Agreement" means the Financing Agreement, dated as of April 1, 1989, between the Issuer and the Company, relating to the Series 1989A Bonds. "Series 1989A Bonds" means the Issuer's Floating Rate Weekly Demand Industrial Development Revenue Bonds (Nevada Power Company Project) Series 1989A, currently outstanding in the aggregate principal amount of $60,000,000. "Series 1989A Bond Fund" means the fund established pursuant to Section 602 of the Series 1989A Indenture. "Series 1989A Indenture" means the Indenture of Trust, dated as of April 1, 1989, between the Issuer and Series 1989A Trustee, pursuant to which the Series 1989A Bonds were issued. "Series 1989A Project" means the "Project" as defined in the Series 1989A Agreement. -5- "Series 1989A Trustee" means United States Trust Company of New York, as trustee under the Series 1989A Indenture. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means United States Trust Company of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as Trustee thereunder, and any separate or co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State of Nevada. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. -6- (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchaser, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In order to provide funds to lend to the Company to refund the Prior Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Original Purchaser thereof, its Bonds in the aggregate principal amount of $85,000,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by the Original Purchaser of the Bonds; and (2) $85,000,000 of the proceeds from the sale of the Bonds in the Prior Bonds Redemption Fund to be remitted by the Trustee as follows: (a) $25,000,000 of the proceeds from the sale of the Bonds to the Series 1988 Trustee for deposit in the Series 1988 Bond Fund to be used to pay to the owners thereof the principal of the Series 1988 Bonds upon redemption thereof; and (b) -7- $60,000,000 of the proceeds from the sale of Bonds to the Series 1989A Trustee for deposit in the Series 1989A Bond Fund to be used to pay to the owners thereof the principal of the Series 1989A Bonds upon redemption thereof. SECTION 3.2. DEPOSIT OF ADDITIONAL FUNDS BY COMPANY; REDEMPTION OF PRIOR BONDS. The Company covenants that such additional amounts as may be required to redeem the Series 1988 Bonds and the Series 1989A Bonds will be deposited with the Series 1988 Trustee and the Series 1989A Trustee, as the case may be, pursuant to the Series 1988 Indenture and the Series 1989A Indenture, as the case may be, for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used, pro rata, to satisfy the obligations of the Company specified in this Section 3.2 in connection with the Series 1988 Bonds and the Series 1989A Bonds. The Company covenants that it will cause the Prior Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. SECTION 3.3. INVESTMENT OF MONEYS IN THE BOND FUND AND THE PRIOR BONDS REDEMPTION FUND. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; -8- (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys realized under the Letter of Credit or any Alternate Credit Facility or moneys held for the payment of Bonds pursuant to Sections 6.07 and 6.13 of the Indenture or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. In addition, the Company agrees that to the extent that any moneys in the Bond Fund represent moneys to be used to pay the premium portion of the redemption price of Bonds pursuant to Section 3.01(A)(3) of the Indenture such moneys shall be invested only in Governmental Obligations maturing on or before the applicable redemption date or dates. SECTION 3.4. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage Bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Prior Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Prior Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. -9- SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or any Alternate Credit Facility; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or under any Alternate Credit Facility or to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold -10- harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $10,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (h) To the extent that the Letter of Credit is in effect and moneys on deposit in the Bond Fund constitute Available Moneys or have been deposited in separate, segregated accounts in the Bond Fund for the purpose of becoming Available Moneys, such moneys shall not be available for transfer and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy the requirements of the Tax Agreement (unless the Company fails to pay the amounts described below). In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(h) shall survive the termination of this Agreement. SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set- -11- off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. LETTER OF CREDIT AND ALTERNATE CREDIT FACILITY. (a) The Company shall arrange for a Letter of Credit or an Alternate Credit Facility to be in effect at all times with such terms and conditions as required under Sections 6.14 and 6.15 of the Indenture. Such Letter of Credit or Alternate Credit Facility must be delivered to the Trustee by the Company not later than 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms. (b) At any time the Company may, at its option, provide for the delivery to the Trustee of an Alternate Credit Facility. The Alternate Credit Facility (a) may consist, at the option of the Company, of (i) first mortgage bonds of the Company, (ii) a letter of credit, or (iii) such other security or credit support as the Company may elect to furnish and which is acceptable to the Issuer, in each case in an amount and having terms sufficient to support the payment of the principal of and interest on all Bonds then outstanding and, at the election of the Company, any of its other obligations under this Agreement, (b) shall have administrative provisions satisfactory to the Trustee, and (c) shall be for a stated term and shall not be terminable prior to the end of such term except by action of the Trustee at the direction of the Company upon the fulfillment of any requirements of such Alternate Credit Facility and compliance with the conditions set forth in Section 4.5(c) hereof. The Company shall have an option, at any time, and from time to time, upon notice given as provided in Section 4.5(c) hereof, to provide an Alternate Credit Facility in substitution for the Letter of Credit or another Alternate Credit Facility, but only in accordance with the provisions of this Section 4.5(b) and Section 4.5(c) hereof. (c) As a condition to the exercise by the Company of its option set forth in Section 4.5(b) hereof to deliver an Alternate Credit Facility, the Company shall provide to the Issuer, the Trustee and the Remarketing Agent, at least 20 days prior to the fifth Business Day next preceding the effective date of such change, a notice specifying (i) that the Letter of Credit or the Alternate Credit Facility then in effect will be changed, (ii) the effective date of such change (which must be at least five Business Days prior to the date the then existing Letter of -12- Credit or Alternate Credit Facility is to expire by its terms), (iii) the form and substance of the Letter of Credit or the Alternate Credit Facility then in effect, and (iv) the form and substance of the Alternate Credit Facility to be in effect on the date specified in (ii) above. Such notice to the Trustee must be accompanied by the opinion of Bond Counsel required by Sections 6.14 and 6.15 of the Indenture and (i) a letter from Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the Bonds should then be rated by S&P, to the effect that the substitution of the proposed Alternate Credit Facility for the Letter of Credit or the Alternate Credit Facility then in effect will not by itself result in a reduction, suspension or withdrawal of its ratings of the Bonds which then prevail (except that such rating evidence shall not be required if the Bonds are subject to a mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the Indenture), and (ii) the form of the substitute Alternate Credit Facility to be in place on the effective date of such change, together with any documentation and opinions referred to by Moody's or S&P in any such letter. (d) The Issuer and the Company agree that the Issuer will in the Indenture authorize and direct the Trustee to accept and agree to conditions and provisions of the Letter of Credit and any Alternate Credit Facility which may be provided in accordance with the provisions of this Section 4.5. SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof, (ii) amounts realized under the Letter of Credit or any Alternate Credit Facility and (iii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof, and the obligation to pay required by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to the extent of the corresponding payment made to the Trustee under the Letter of Credit or any Alternate Credit Facility. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof and amounts realized under the Letter of Credit or any Alternate Credit Facility equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a -13- credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) The acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee and, after payment -14- in full of the Bonds as provided in the Indenture, the rights of the Bank Group provided in the Indenture, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE PERIODS. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture. SECTION 5.8. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and -15- premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement, the Letter of Credit and any Alternate Credit Facility. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED; EXCEPTIONS. At any time while the Letter of Credit is in effect, the Company shall not and shall not allow any Insider of the Company to purchase any Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b) hereof. At any time while the Letter of Credit is in effect, the Issuer shall not and shall not allow any Insider of the Issuer to purchase any Bonds except with Available Moneys. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.5(a) of this Agreement, including without limitation failure by the Company to provide the Trustee with a Letter of Credit or Alternate Credit Facility on or before 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire; or -16- (d) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a), (b) and (c) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(h) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (e) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (f) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (g) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or -17- (h) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(d) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other -18- remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without both the consent of the Trustee and the Bank to such waiver. The Trustee and the Bank shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer or the Bank shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. -19- ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 35 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. On the date fixed for redemption of the Bonds or portions thereof, there shall be deposited with the Trustee from drawings upon the Letter of Credit or payments by the Company or from amounts realized under any Alternate Credit Facility as required by Section 7.1 or 7.2, as appropriate, for payment into the Bond Fund. Any other provision of this Agreement or the Indenture to the contrary notwithstanding, any prepayment of moneys hereunder shall be made in such manner and at such time that any redemption of Bonds or portions thereof will be made with Available Moneys. -20- ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: if to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89151, or to telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at 114 West 47th Street, New York, New York 10036-1532 or to telecopy number (212) 852-1625 Attention: Corporate Trust Administration; if to the Remarketing Agent, at 85 Broad Street, 24th Floor, New York, New York 10004, Attention: Municipal Money Markets Desk, or to telecopy number (212) 346-4209; and if to the Bank or the Bank Agent, at 2029 Century Park East, Suite 2900, Los Angeles, California 90067, Attention: Minerva Arvisu, or to telecopy number (310) 203-0539. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Bank or to the Bank Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent, the Bank and the Bank Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other and the Bank or the Bank Agent, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent and the Issuer and (v) all other amounts required to be -21- paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee; provided, however, that if there remain reimbursement or other obligations of the Company under the Reimbursement Agreement, such moneys remaining in the Bond Fund shall, subject to Section 13.10(b) of the Indenture, be paid by the Trustee to the Bank Agent upon written direction of the Bank Agent to such extent. SECTION 8.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee and the Bank thereto is obtained. Subject to the written consent of the Trustee and the Bank, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee, the Bank or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. -22- SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that the Letter of Credit (and if at such time there shall be no Pledged Bonds) or any Alternate Credit Facility is not in effect and the Bank Group shall have been paid all amounts owed them under the Reimbursement Agreement (as evidenced by a written certificate of the Bank Agent delivered to the Trustee to such effect), all references herein to the Bank or the Bank Agent or the Bank Group or the Provider, as the case may be, shall be deemed ineffective. Any provisions hereof requiring the consent of the Bank or the Bank Agent or the Bank Group or the Provider shall be deemed ineffective if the Bank or the Provider is at any such time in default in its obligations under the Letter of Credit or the Alternate Credit Facility, as the case may be, to fund a drawing thereunder made in strict compliance with the terms of such Letter of Credit or Alternate Credit Facility. -23- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By YVONNE ATKINSON GATES -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: LORETTA BOWMAN - -------------------------------- County Clerk NEVADA POWER COMPANY By -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: - -------------------------------- Secretary -24- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: - -------------------------------- County Clerk NEVADA POWER COMPANY By STEVEN W. RIGAZIO -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: RICHARD L. HINCKLEY - -------------------------------- Secretary -24- EX-10.77 7 SERIES 1995C FINANCING AGREEMENT Series C -------- ============================================================================ FINANCING AGREEMENT Dated as of October 1, 1995 By and Between CLARK COUNTY, NEVADA and NEVADA POWER COMPANY RELATING TO INDUSTRIAL DEVELOPMENT REFUNDING REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 1995C ============================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of October 1, 1995, between the Issuer and United States Trust Company of New York, as Trustee. FINANCING AGREEMENT ------------------- TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference). SECTION HEADING PAGE ARTICLE I DEFINITIONS ............................................ 1 ARTICLE II REPRESENTATIONS ........................................ 6 Section 2.1. Representations and Covenants by the Issuer .......... 6 Section 2.2. Representations by the Company ....................... 6 ARTICLE III ISSUANCE OF THE BONDS .................................. 7 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds ............................................. 7 Section 3.2. Deposit of Additional Funds by Company; Redemption of Series 1985 Bonds ................................. 7 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund .......................... 8 Section 3.4. Tax Exempt Status of Bonds ........................... 9 ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT ...................... 9 Section 4.1. Loan of Bond Proceeds ................................ 9 Section 4.2. Loan Repayments and Other Amounts Payable ............ 9 Section 4.3. No Defense or Set-Off ................................ 11 Section 4.4. Payments Pledged and Assigned ........................ 12 Section 4.5. Letter of Credit and Alternate Credit Facility ....... 12 Section 4.6. Payment of the Bonds and Other Amounts ............... 13 ARTICLE V SPECIAL COVENANTS AND AGREEMENTS ....................... 14 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted .......... 14 Section 5.2. Annual Statement ..................................... 14 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc. ....... 14 Section 5.4. Recordation and Other Instruments .................... 15 Section 5.5. No Warranty by the Issuer ............................ 15 Section 5.6. Agreement as to Ownership and Use of the Project ..... 15 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods ................................ 15 Section 5.8. Information Reporting, Etc. .......................... 15 -i- Section 5.9. Limited Liability of Issuer .......................... 15 Section 5.10. Inspection of Project ................................ 16 Section 5.11. Purchases of Bonds by Company or Issuer Prohibited; Exceptions ........................................... 16 Article VI EVENTS OF DEFAULT AND REMEDIES ......................... 16 Section 6.1. Events of Default Defined ............................ 16 Section 6.2. Remedies on Default .................................. 18 Section 6.3. No Remedy Exclusive .................................. 19 Section 6.4. Agreement to Pay Fees and Expenses of Counsel ........ 19 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers .................................. 19 Article VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS .................................... 20 Section 7.1. Option to Prepay ..................................... 20 Section 7.2. Obligation to Prepay ................................. 20 Section 7.3. Notice of Prepayment ................................. 20 Article VIII MISCELLANEOUS .......................................... 21 Section 8.1. Notices .............................................. 21 Section 8.2. Assignments .......................................... 21 Section 8.3. Severability ......................................... 22 Section 8.4. Execution of Counterparts ............................ 22 Section 8.5. Amounts Remaining in Bond Fund ....................... 22 Section 8.6. Amendments, Changes and Modifications ................ 22 Section 8.7. Governing Law ....................................... 22 Section 8.8. Authorized Issuer and Company Representatives ........ 22 Section 8.9. Term of the Agreement ................................ 23 Section 8.10. Cancellation at Expiration of Term ................... 23 Section 8.11. References to Bank and Provider ...................... 23 Signature ............................................................... 24 -ii- THIS FINANCING AGREEMENT made and entered into as of October 1, 1995, by and between CLARK COUNTY, NEVADA, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and NEVADA POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W I T N E S S E T H: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement by and between the Issuer and the Company, as from time to time amended and supplemented. "Alternate Credit Facility" means any credit facility, including any instruments accompanying or relating to such Alternate Credit Facility delivered to the Trustee in connection therewith, provided in accordance with Section 4.5 of this Agreement. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chair. Such certificate may designate an alternate or alternates. "Bank" means Barclays Bank PLC, acting through its New York Branch, in its capacity as issuer of the Letter of Credit, its successors in such capacity, and its assigns. If an Alternate Credit Facility in the form of a letter of credit has been issued and delivered in accordance with Section 4.5 of this Agreement, "Bank" shall mean the Provider of such Alternate Credit Facility, if in the form of a letter of credit, in its capacity as issuer of such Alternate Credit Facility, its successors in such capacity, and its assigns. "Bank Agent" means Barclays Bank PLC, acting through its New York Branch, in its capacity as agent for the Bank Group, and its successors in such capacity; provided, however, if there is no party acting as agent under the Reimbursement Agreement, "Bank Agent" shall mean the Bank. "Bank Group" means the banks party to the Reimbursement Agreement, including the Bank. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee, the Bank and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Business Day" means a day on which banks located in the city in which the Principal Office of the Trustee is located and in the city or cities in which any office at which any action must be instituted or taken in order to realize upon the Letter of Credit or an Alternate Credit Facility then in effect is or are located, are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. -2- "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "First Mortgage Indenture" means that certain Indenture of Mortgage and Deed of Trust, dated as of October 1, 1953, from Southern Nevada Power Co. (now Nevada Power Company) to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), as trustee, as supplemented, modified or amended from time to time or at any time by supplemental indentures. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and United States Trust Company of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Letter of Credit" means the irrevocable direct-pay Letter of Credit issued by the Bank to the Trustee, including any extensions thereof, contemporaneously with the issuance of the Bonds, provided that upon the issuance and delivery of an Alternate Credit Facility in the form of a letter of credit in accordance with Section 4.5 of this Agreement, "Letter of -3- Credit" shall mean such Alternate Credit Facility, if in the form of a letter of credit, instead of the letter of credit for which such Alternate Credit Facility has been substituted. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Original Purchaser" means Goldman, Sachs & Co., Lehman Brothers, Inc., M. R. Beal & Company and Artemis Capital Group, Inc. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Project" means the "Project" as defined in the Series 1985 Agreement. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 6.16 of the Indenture. "Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among the Company, the Bank Agent, the Bank and the Bank Group, pursuant to which the initial Letter of Credit is issued, and any subsequent reimbursement agreement between the Company and a Bank pursuant to which a subsequent Letter of Credit is issued by the Bank and delivered to the Trustee, and in each case any and all modifications, amendments and supplements thereto. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.11 of the Indenture and any permitted successor thereto. -4- "Revenues" means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of this Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, including all moneys drawn by the Trustee under the Letter of Credit to pay the principal of and premium, if any, and interest on the Bonds and all amounts realized by the Trustee from any Alternate Credit Facility to pay the principal of and premium, if any, and interest on the Bonds, all of which amounts are to be deposited in the Bond Fund, and (ii) any portion of the net proceeds of the Bonds deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Series 1985 Agreement" means the Financing Agreement, dated as of December 1, 1985, between the Issuer and the Company relating to the Series 1985 Bonds. "Series 1985 Bonds" means the Issuer's Floating Rate Weekly Demand Industrial Development Revenue Bonds (Nevada Power Company Project) Series 1985, currently outstanding in the aggregate principal amount of $44,000,000. "Series 1985 Bond Fund" means the fund established pursuant to Section 4.01 of the Series 1985 Indenture. "Series 1985 Indenture" means the Indenture of Trust, dated as of December 1, 1985, between the Issuer and the Series 1985 Trustee, pursuant to which the Series 1985 Bonds were issued. "Series 1985 Trustee" means United States Trust Company of New York, as trustee under the Series 1985 Indenture. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means United States Trust Company of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the -5- Indenture at the time serving as Trustee thereunder, and any separate or co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State of Nevada. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper -6- corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchaser, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In order to provide funds to lend to the Company to refund the Series 1985 Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Original Purchaser thereof, its Bonds in the aggregate principal amount of $44,000,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by the Original Purchaser of the Bonds; and (2) $44,000,000 of the proceeds from the sale of the Bonds in the Prior Bonds Redemption Fund to be remitted by the Trustee to the Series 1985 Trustee for deposit in the Series 1985 Bond Fund to be used to pay to the owners thereof the principal of the Series 1985 Bonds upon redemption thereof. SECTION 3.2. DEPOSIT OF ADDITIONAL FUNDS BY COMPANY; REDEMPTION OF SERIES 1985 BONDS. The Company covenants that such additional amounts as may be required to redeem the Series 1985 Bonds will be deposited with the Series 1985 Trustee pursuant to the Series 1985 Indenture for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used to satisfy to that extent the obligations of the Company specified in this Section 3.2 in connection with the Series 1985 Bonds. The Company covenants that it will cause the -7- Series 1985 Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. SECTION 3.3. INVESTMENT OF MONEYS IN THE BOND FUND AND THE PRIOR BONDS REDEMPTION FUND. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax -8- Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys realized under the Letter of Credit or any Alternate Credit Facility or moneys held for the payment of Bonds pursuant to Sections 6.07 and 6.13 of the Indenture or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. In addition, the Company agrees that to the extent that any moneys in the Bond Fund represent moneys to be used to pay the premium portion of the redemption price of Bonds pursuant to Section 3.01(A)(3) of the Indenture such moneys shall be invested only in Governmental Obligations maturing on or before the applicable redemption date or dates. SECTION 3.4. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Series 1985 Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Series 1985 Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit -9- in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or any Alternate Credit Facility; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or under any Alternate Credit Facility or to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. -10- (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $10,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (h) To the extent that the Letter of Credit is in effect and moneys on deposit in the Bond Fund constitute Available Moneys or have been deposited in separate, segregated accounts in the Bond Fund for the purpose of becoming Available Moneys, such moneys shall not be available for transfer and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy the requirements of the Tax Agreement (unless the Company fails to pay the amounts described below). In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(h) shall survive the termination of this Agreement. SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the -11- intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. LETTER OF CREDIT AND ALTERNATE CREDIT FACILITY. (a) The Company shall arrange for a Letter of Credit or an Alternate Credit Facility to be in effect at all times with such terms and conditions as required under Sections 6.14 and 6.15 of the Indenture. Such Letter of Credit or Alternate Credit Facility must be delivered to the Trustee by the Company not later than 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms. (b) At any time the Company may, at its option, provide for the delivery to the Trustee of an Alternate Credit Facility. The Alternate Credit Facility (a) may consist, at the option of the Company, of (i) first mortgage bonds of the Company, (ii) a letter of credit, or (iii) such other security or credit support as the Company may elect to furnish and which is acceptable to the Issuer, in each case in an amount and having terms sufficient to support the payment of the principal of and interest on all Bonds then outstanding and, at the election of the Company, any of its other obligations under this Agreement, (b) shall have administrative provisions satisfactory to the Trustee, and (c) shall be for a stated term and shall not be terminable prior to the end of such term except by action of the Trustee at the direction of the Company upon the fulfillment of any requirements of such Alternate Credit Facility and compliance with the conditions set forth in Section 4.5(c) hereof. The Company shall have an option, at any time, and from time to time, upon notice given as provided in Section 4.5(c) hereof, to provide an Alternate Credit Facility in substitution for the Letter of Credit or another Alternate Credit Facility, but only in accordance with the provisions of this Section 4.5(b) and Section 4.5(c) hereof. (c) As a condition to the exercise by the Company of its option set forth in Section 4.5(b) hereof to deliver an Alternate Credit Facility, the Company shall provide to the Issuer, the Trustee and the Remarketing Agent, at least 20 days prior to the fifth Business Day next preceding the effective date of such change, a notice specifying (i) that the Letter of Credit or the Alternate Credit Facility then in effect will be changed, (ii) the effective date of such change (which must be at least five Business Days prior to the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms), (iii) the -12- form and substance of the Letter of Credit or the Alternate Credit Facility then in effect, and (iv) the form and substance of the Alternate Credit Facility to be in effect on the date specified in (ii) above. Such notice to the Trustee must be accompanied by the opinion of Bond Counsel required by Sections 6.14 and 6.15 of the Indenture and (i) a letter from Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the Bonds should then be rated by S&P, to the effect that the substitution of the proposed Alternate Credit Facility for the Letter of Credit or the Alternate Credit Facility then in effect will not by itself result in a reduction, suspension or withdrawal of its ratings of the Bonds which then prevail (except that such rating evidence shall not be required if the Bonds are subject to a mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the Indenture), and (ii) the form of the substitute Alternate Credit Facility to be in place on the effective date of such change, together with any documentation and opinions referred to by Moody's or S&P in any such letter. (d) The Issuer and the Company agree that the Issuer will in the Indenture authorize and direct the Trustee to accept and agree to conditions and provisions of the Letter of Credit and any Alternate Credit Facility which may be provided in accordance with the provisions of this Section 4.5. SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof, (ii) amounts realized under the Letter of Credit or any Alternate Credit Facility and (iii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof, and the obligation to pay required by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to the extent of the corresponding payment made to the Trustee under the Letter of Credit or any Alternate Credit Facility. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof and amounts realized under the Letter of Credit or any Alternate Credit Facility equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are -13- thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) the acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. -14- SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee and, after payment in full of the Bonds as provided in the Indenture, the rights of the Bank Group provided in the Indenture, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE PERIODS. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture. SECTION 5.8. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). -15- Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement, the Letter of Credit and any Alternate Credit Facility. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED; EXCEPTIONS. At any time while the Letter of Credit is in effect, the Company shall not and shall not allow any Insider of the Company to purchase any Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b) hereof. At any time while the Letter of Credit is in effect, the Issuer shall not and shall not allow any Insider of the Issuer to purchase any Bonds except with Available Moneys. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or -16- (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.5(a) of this Agreement, including without limitation failure by the Company to provide the Trustee with a Letter of Credit or Alternate Credit Facility on or before 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire; or (d) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a), (b) and (c) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(h) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of Default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (e) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (f) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or -17- adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (g) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (h) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(d) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance -18- with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without both the consent of the Trustee and the Bank to such waiver. The Trustee and the Bank shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding -19- Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer or the Bank shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the -20- Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 35 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. On the date fixed for redemption of the Bonds or portions thereof, there shall be deposited with the Trustee from drawings upon the Letter of Credit or payments by the Company or from amounts realized under any Alternate Credit Facility as required by Section 7.1 or 7.2, as appropriate, for payment into the Bond Fund. Any other provision of this Agreement or the Indenture to the contrary notwithstanding, any prepayment of moneys hereunder shall be made in such manner and at such time that any redemption of Bonds or portions thereof will be made with Available Moneys. ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: if to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89151, or to telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at 114 West 47th Street, New York, New York 10036-1532 or to telecopy number (212) 852-1625 Attention: Corporate Trust Administration; if to the Remarketing Agent, at 3 World Financial Center, Eighth Floor, 200 Vesey Street, New York, New York 10285, Attention: Short-Term municipal Department, or to telecopy number (212) 528-0821; and if to the Bank or the Bank Agent, at 75 Wall Street, New York, New York 10265, Attention: Trade Services Group, or to telecopy number (212) 412-5111. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Bank or to the Bank Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent, the Bank and the Bank Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other and the Bank or the Bank Agent, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its -21- rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent and the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee; provided, however, that if there remain reimbursement or other obligations of the Company under the Reimbursement Agreement, such moneys remaining in the Bond Fund shall, subject to Section 13.10(b) of the Indenture, be paid by the Trustee to the Bank Agent upon written direction of the Bank Agent to such extent. SECTION 8.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee and the Bank thereto is obtained. Subject to the written consent of the Trustee and the Bank, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee, the Bank or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall -22- be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that the Letter of Credit (and if at such time there shall be no Pledged Bonds) or any Alternate Credit Facility is not in effect and the Bank Group shall have been paid all amounts owed them under the Reimbursement Agreement (as evidenced by a written certificate of the Bank Agent delivered to the Trustee to such effect), all references herein to the Bank or the Bank Agent or the Bank Group or the Provider, as the case may be, shall be deemed ineffective. Any provisions hereof requiring the consent of the Bank or the Bank Agent or the Bank Group or the Provider shall be deemed ineffective if the Bank or the Provider is at any such time in default in its obligations under the Letter of Credit or the Alternate Credit Facility, as the case may be, to find a drawing thereunder made in strict compliance with the terms of such Letter of Credit or Alternate Credit Facility. -23- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By YVONNE ATKINSON GATES -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: LORETTA BOWMAN - -------------------------------- County Clerk NEVADA POWER COMPANY By -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: - -------------------------------- Secretary -24- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: - -------------------------------- County Clerk NEVADA POWER COMPANY By STEVEN W. RIGAZIO -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: RICHARD L. HINCKLEY - -------------------------------- Secretary -24- EX-10.78 8 SERIES 1995D FINANCING AGREEMENT Series D -------- ============================================================================ FINANCING AGREEMENT Dated as of October 1, 1995 By and Between CLARK COUNTY, NEVADA and NEVADA POWER COMPANY RELATING TO POLLUTION CONTROL REFUNDING REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 1995D ============================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of October 1, 1995, between the Issuer and United States Trust Company of New York, as Trustee. FINANCING AGREEMENT ------------------- TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference). SECTION HEADING PAGE ARTICLE I DEFINITIONS ............................................ 1 ARTICLE II REPRESENTATIONS ........................................ 6 Section 2.1. Representations and Covenants by the Issuer .......... 6 Section 2.2. Representations by the Company ....................... 7 ARTICLE III ISSUANCE OF THE BONDS .................................. 7 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds ............................................. 7 Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds ....................................... 8 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund .......................... 8 Section 3.4. Tax Exempt Status of Bonds ........................... 9 ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT ...................... 9 Section 4.1. Loan of Bond Proceeds ................................ 9 Section 4.2. Loan Repayments and Other Amounts Payable ............ 10 Section 4.3. No Defense or Set-Off ................................ 11 Section 4.4. Payments Pledged and Assigned ........................ 12 Section 4.5. Letter of Credit and Alternate Credit Facility ....... 12 Section 4.6. Payment of the Bonds and Other Amounts ............... 13 ARTICLE V SPECIAL COVENANTS AND AGREEMENTS ....................... 14 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted .......... 14 Section 5.2. Annual Statement ..................................... 14 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc. ....... 14 Section 5.4. Recordation and Other Instruments .................... 14 Section 5.5. No Warranty by the Issuer ............................ 15 Section 5.6. Agreement as to Ownership and Use of the Project ..... 15 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods ................................ 15 Section 5.8. Information Reporting, Etc. .......................... 15 Section 5.9. Limited Liability of Issuer .......................... 15 Section 5.10. Inspection of Project ................................ 16 -i- Section 5.11. Purchases of Bonds by Company or Issuer Prohibited; Exceptions ........................................... 16 Article VI EVENTS OF DEFAULT AND REMEDIES ......................... 16 Section 6.1. Events of Default Defined ............................ 16 Section 6.2. Remedies on Default .................................. 18 Section 6.3. No Remedy Exclusive .................................. 18 Section 6.4. Agreement to Pay Fees and Expenses of Counsel ........ 19 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers .................................. 19 Article VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS .................................... 20 Section 7.1. Option to Prepay ..................................... 20 Section 7.2. Obligation to Prepay ................................. 20 Section 7.3. Notice of Prepayment ................................. 20 Article VIII MISCELLANEOUS .......................................... 21 Section 8.1. Notices .............................................. 21 Section 8.2. Assignments .......................................... 21 Section 8.3. Severability ......................................... 21 Section 8.4. Execution of Counterparts ............................ 21 Section 8.5. Amounts Remaining in Bond Fund ....................... 21 Section 8.6. Amendments, Changes and Modifications ................ 22 Section 8.7. Governing Law ........................................ 22 Section 8.8. Authorized Issuer and Company Representatives ........ 22 Section 8.9. Term of the Agreement ................................ 22 Section 8.10. Cancellation at Expiration of Term ................... 22 Section 8.11. References to Bank and Provider ...................... 23 Signature ............................................................... 24 -ii- Series D -------- THIS FINANCING AGREEMENT made and entered into as of October 1, 1995, by and between CLARK COUNTY, NEVADA, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and NEVADA POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W I T N E S S E T H: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement by and between the Issuer and the Company, as from time to time amended and supplemented. "Alternate Credit Facility" means any credit facility, including any instruments accompanying or relating to such Alternate Credit Facility delivered to the Trustee in connection therewith, provided in accordance with Section 4.5 of this Agreement. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chair. Such certificate may designate an alternate or alternates. "Bank" means Societe Generale, acting through its Los Angeles Branch, in its capacity as issuer of the Letter of Credit, its successors in such capacity, and its assigns. If an Alternate Credit Facility in the form of a letter of credit has been issued and delivered in accordance with Section 4.5 of this Agreement, "Bank" shall mean the Provider of such Alternate Credit Facility, if in the form of a letter of credit, in its capacity as issuer of such Alternate Credit Facility, its successors in such capacity, and its assigns. "Bank Agent" means Societe Generale, acting through its Los Angeles Branch, in its capacity as agent for the Bank Group, and its successors in such capacity; provided, however, if there is no party acting as agent under the Reimbursement Agreement, "Bank Agent" shall mean the Bank. "Bank Group" means the banks party to the Reimbursement Agreement, including the Bank. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee, the Bank and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Business Day" means a day on which banks located in the city in which the Principal Office of the Trustee is located and in the city or cities in which any office at which any action must be instituted or taken in order to realize upon the Letter of Credit or an Alternate Credit Facility then in effect is or are located, are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. -2- "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "First Mortgage Indenture" means that certain Indenture of Mortgage and Deed of Trust, dated as of October 1, 1953, from Southern Nevada Power Co. (now Nevada Power Company) to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), as trustee, as supplemented, modified or amended from time to time or at any time by supplemental indentures. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and United States Trust Company of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Letter of Credit" means the irrevocable direct-pay Letter of Credit issued by the Bank to the Trustee, including any extensions thereof, contemporaneously with the issuance of the Bonds, provided that upon the issuance and delivery of an Alternate Credit Facility in the form of a letter of credit in accordance with Section 4.5 of this Agreement, "Letter of Credit" shall mean such Alternate Credit Facility, if in the form of a letter of credit, instead of the letter of credit for which such Alternate Credit Facility has been substituted. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such -3- corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Original Purchaser" means Goldman, Sachs & Co., Lehman Brothers, Inc., M. R. Beal & Company and Artemis Capital Group, Inc. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Bonds" means the Series 1974 Bonds and the Series 1977 Bonds. "Project" means the Series 1974 Project and the Series 1977 Project. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 6.16 of the Indenture. "Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among the Company, the Bank Agent, the Bank and the Bank Group, pursuant to which the initial Letter of Credit is issued, and any subsequent reimbursement agreement between the Company and a Bank pursuant to which a subsequent Letter of Credit is issued by the Bank and delivered to the Trustee, and in each case any and all modifications, amendments and supplements thereto. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.11 of the Indenture and any permitted successor thereto. "Revenues" means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of this Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, including all moneys drawn by the Trustee under the Letter of Credit to pay the -4- principal of and premium, if any, and interest on the Bonds and all amounts realized by the Trustee from any Alternate Credit Facility to pay the principal of and premium, if any, and interest on the Bonds, all of which amounts are to be deposited in the Bond Fund, and (ii) any portion of the net proceeds of the Bonds deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Series 1974 Agreement" means the Sublease Agreement, dated as of March 1, 1974, between the Issuer and the Company relating to the Series 1974 Bonds. "Series 1974 Bonds" means the Issuer's 6-3/8% Pollution Control Revenue Bonds (Nevada Power Company Project) Series 1974, currently outstanding in the aggregate principal amount of $14,000,000. "Series 1974 Bond Fund" means the fund established pursuant to Section 5.02 of the Series 1974 Indenture. "Series 1974 Indenture" means the Indenture of Trust, dated as of March 1, 1974, between the Issuer and the Series 1974 Trustee, pursuant to which the Series 1974 Bonds were issued. "Series 1974 Project" means the "Project" as defined in the Series 1974 Agreement. "Series 1974 Trustee" means NationsBank of Tennessee (formerly Commence Union Bank), as trustee under the Series 1974 Indenture. "Series 1977 Agreement" means the Financing Agreement, dated as of May 1, 1977, between the Issuer and the Company, relating to the Series 1977 Bonds. "Series 1977 Bonds" means the Issuer's 6-3/4% Collateralized Pollution Control Revenue Bonds (Nevada Power Company Project) Series 1977, currently outstanding in the aggregate principal amount of $6,300,000. "Series 1977 Bond Fund" means the fund established pursuant to Section 5.02 of the Series 1977 Indenture. "Series 1977 Indenture" means the Indenture of Trust, dated as of May 1, 1977, between the Issuer and the Series 1977 Trustee, pursuant to which the Series 1977 Bonds were issued. "Series 1977 Project" means the "Project" as defined in the Series 1977 Agreement. -5- "Series 1977 Trustee" means First Interstate Bank of Nevada, N.A. (formerly Nevada National Bank), as trustee under the Series 1977 Indenture. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means United States Trust Company of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as Trustee thereunder, and any separate or co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State of Nevada. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. -6- (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchaser, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In order to provide funds to lend to the Company to refund the Prior Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Original Purchaser thereof, its Bonds in the aggregate principal amount of $20,300,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by the Original Purchaser of the Bonds; and (2) $20,300,000 of the proceeds from the sale of the Bonds in the Prior Bonds Redemption Fund to be remitted by the Trustee as follows: (a) $14,000,000 of the proceeds from the sale of the Bonds to be transferred at the direction of the Company to be used to pay to the owners thereof the principal of the Series 1974 Bonds upon redemption thereof (or to reimburse the Company -7- therefor); and (b) $6,300,000 of the proceeds from the sale of Bonds to the Series 1977 Trustee for deposit in the Series 1977 Bond Fund to be used to pay to the owners thereof the principal of the Series 1977 Bonds upon redemption thereof. SECTION 3.2. DEPOSIT OF ADDITIONAL FUNDS BY COMPANY; REDEMPTION OF PRIOR BONDS. The Company covenants that such additional amounts as may be required to redeem the Series 1974 Bonds and the Series 1977 Bonds will be deposited with the Series 1974 Trustee and the Series 1977 Trustee, as the case may be, pursuant to the Series 1974 and the Series 1997 Indenture, as the case may be, for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used, pro rata, to satisfy the obligations of the Company specified in this Section 3.2 in connection with the Series 1974 Bonds and the Series 1977 Bonds. The Company covenants that it will cause the Series 1977 Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. SECTION 3.3. INVESTMENT OF MONEYS IN THE BOND FUND AND THE PRIOR BONDS REDEMPTION FUND. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; -8- (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys realized under the Letter of Credit or any Alternate Credit Facility or moneys held for the payment of Bonds pursuant to Sections 6.07 and 6.13 of the Indenture or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. In addition, the Company agrees that to the extent that any moneys in the Bond Fund represent moneys to be used to pay the premium portion of the redemption price of Bonds pursuant to Section 3.01(A)(3) of the Indenture such moneys shall be invested only in Governmental Obligations maturing on or before the applicable redemption date or dates. SECTION 3.4. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage Bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Prior Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Prior Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. -9- SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or any Alternate Credit Facility; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or under any Alternate Credit Facility or to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold -10- harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $10,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (h) To the extent that the Letter of Credit is in effect and moneys on deposit in the Bond Fund constitute Available Moneys or have been deposited in separate, segregated accounts in the Bond Fund for the purpose of becoming Available Moneys, such moneys shall not be available for transfer and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy the requirements of the Tax Agreement (unless the Company fails to pay the amounts described below). In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(h) shall survive the termination of this Agreement. SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set- -11- off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. LETTER OF CREDIT AND ALTERNATE CREDIT FACILITY. (a) The Company shall arrange for a Letter of Credit or an Alternate Credit Facility to be in effect at all times with such terms and conditions as required under Sections 6.14 and 6.15 of the Indenture. Such Letter of Credit or Alternate Credit Facility must be delivered to the Trustee by the Company not later than 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms. (b) At any time the Company may, at its option, provide for the delivery to the Trustee of an Alternate Credit Facility. The Alternate Credit Facility (a) may consist, at the option of the Company, of (i) first mortgage bonds of the Company, (ii) a letter of credit, or (iii) such other security or credit support as the Company may elect to furnish and which is acceptable to the Issuer, in each case in an amount and having terms sufficient to support the payment of the principal of and interest on all Bonds then outstanding and, at the election of the Company, any of its other obligations under this Agreement, (b) shall have administrative provisions satisfactory to the Trustee, and (c) shall be for a stated term and shall not be terminable prior to the end of such term except by action of the Trustee at the direction of the Company upon the fulfillment of any requirements of such Alternate Credit Facility and compliance with the conditions set forth in Section 4.5(c) hereof. The Company shall have an option, at any time, and from time to time, upon notice given as provided in Section 4.5(c) hereof, to provide an Alternate Credit Facility in substitution for the Letter of Credit or another Alternate Credit Facility, but only in accordance with the provisions of this Section 4.5(b) and Section 4.5(c) hereof. (c) As a condition to the exercise by the Company of its option set forth in Section 4.5(b) hereof to deliver an Alternate Credit Facility, the Company shall provide to the Issuer, the Trustee and the Remarketing Agent, at least 20 days prior to the fifth Business Day next preceding the effective date of such change, a notice specifying (i) that the Letter of Credit or the Alternate Credit Facility then in effect will be changed, (ii) the effective date of such change (which must be at least five Business Days prior to the date the then existing Letter of -12- Credit or Alternate Credit Facility is to expire by its terms), (iii) the form and substance of the Letter of Credit or the Alternate Credit Facility then in effect, and (iv) the form and substance of the Alternate Credit Facility to be in effect on the date specified in (ii) above. Such notice to the Trustee must be accompanied by the opinion of Bond Counsel required by Sections 6.14 and 6.15 of the Indenture and (i) a letter from Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the Bonds should then be rated by S&P, to the effect that the substitution of the proposed Alternate Credit Facility for the Letter of Credit or the Alternate Credit Facility then in effect will not by itself result in a reduction, suspension or withdrawal of its ratings of the Bonds which then prevail (except that such rating evidence shall not be required if the Bonds are subject to a mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the Indenture), and (ii) the form of the substitute Alternate Credit Facility to be in place on the effective date of such change, together with any documentation and opinions referred to by Moody's or S&P in any such letter. (d) The Issuer and the Company agree that the Issuer will in the Indenture authorize and direct the Trustee to accept and agree to conditions and provisions of the Letter of Credit and any Alternate Credit Facility which may be provided in accordance with the provisions of this Section 4.5. SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof, (ii) amounts realized under the Letter of Credit or any Alternate Credit Facility and (iii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof, and the obligation to pay required by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to the extent of the corresponding payment made to the Trustee under the Letter of Credit or any Alternate Credit Facility. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof and amounts realized under the Letter of Credit or any Alternate Credit Facility equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a -13- credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) The acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee and, after payment -14- in full of the Bonds as provided in the Indenture, the rights of the Bank Group provided in the Indenture, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE PERIODS. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture. SECTION 5.8. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and -15- premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement, the Letter of Credit and any Alternate Credit Facility. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED; EXCEPTIONS. At any time while the Letter of Credit is in effect, the Company shall not and shall not allow any Insider of the Company to purchase any Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b) hereof. At any time while the Letter of Credit is in effect, the Issuer shall not and shall not allow any Insider of the Issuer to purchase any Bonds except with Available Moneys. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.5(a) of this Agreement, including without limitation failure by the Company to provide the Trustee with a Letter of Credit or Alternate Credit Facility on or before 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire; or -16- (d) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a), (b) and (c) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(h) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (e) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (f) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (g) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or -17- (h) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(d) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other -18- remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without both the consent of the Trustee and the Bank to such waiver. The Trustee and the Bank shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer or the Bank shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. -19- ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 35 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. On the date fixed for redemption of the Bonds or portions thereof, there shall be deposited with the Trustee from drawings upon the Letter of Credit or payments by the Company or from amounts realized under any Alternate Credit Facility as required by Section 7.1 or 7.2, as appropriate, for payment into the Bond Fund. Any other provision of this Agreement or the Indenture to the contrary notwithstanding, any prepayment of moneys hereunder shall be made in such manner and at such time that any redemption of Bonds or portions thereof will be made with Available Moneys. -20- ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: if to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89151, or to telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at 114 West 47th Street, New York, New York 10036-1532 or to telecopy number (212) 852-1625 Attention: Corporate Trust Administration; if to the Remarketing Agent, at 85 Broad Street, 24th Floor, New York, New York 10004, Attention: Municipal Money Markets Desk, or to telecopy number (212) 346-4209; and if to the Bank or the Bank Agent, at 2029 Century Park East, Suite 2900, Los Angeles, California 90067, Attention: Minerva Arvisu, or to telecopy number (310) 203-0539. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Bank or to the Bank Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent, the Bank and the Bank Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other and the Bank or the Bank Agent, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent and the Issuer and (v) all other amounts required to be -21- paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee; provided, however, that if there remain reimbursement or other obligations of the Company under the Reimbursement Agreement, such moneys remaining in the Bond Fund shall, subject to Section 13.10(b) of the Indenture, be paid by the Trustee to the Bank Agent upon written direction of the Bank Agent to such extent. SECTION 8.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee and the Bank thereto is obtained. Subject to the written consent of the Trustee and the Bank, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee, the Bank or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. -22- SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that the Letter of Credit (and if at such time there shall be no Pledged Bonds) or any Alternate Credit Facility is not in effect and the Bank Group shall have been paid all amounts owed them under the Reimbursement Agreement (as evidenced by a written certificate of the Bank Agent delivered to the Trustee to such effect), all references herein to the Bank or the Bank Agent or the Bank Group or the Provider, as the case may be, shall be deemed ineffective. Any provisions hereof requiring the consent of the Bank or the Bank Agent or the Bank Group or the Provider shall be deemed ineffective if the Bank or the Provider is at any such time in default in its obligations under the Letter of Credit or the Alternate Credit Facility, as the case may be, to fund a drawing thereunder made in strict compliance with the terms of such Letter of Credit or Alternate Credit Facility. -23- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By YVONNE ATKINSON GATES -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: LORETTA BOWMAN - -------------------------------- County Clerk NEVADA POWER COMPANY By -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: - -------------------------------- Secretary -24- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By -------------------------------------- Chair Board of County Commissioners (SEAL) Attest: - -------------------------------- County Clerk NEVADA POWER COMPANY By STEVEN W. RIGAZIO -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: RICHARD L. HINCKLEY - -------------------------------- Secretary -24- EX-10.79 9 SERIES 1995E FINANCING AGREEMENT Series E -------- ============================================================================ FINANCING AGREEMENT Dated as of October 1, 1995 By and Between COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION and NEVADA POWER COMPANY RELATING TO POLLUTION CONTROL REFUNDING REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 1995E ============================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of October 1, 1995, between the Issuer and United States Trust Company of New York, as Trustee. FINANCING AGREEMENT ------------------- TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference). SECTION HEADING PAGE ARTICLE I DEFINITIONS ............................................ 1 ARTICLE II REPRESENTATIONS ........................................ 6 Section 2.1. Representations and Covenants by the Issuer .......... 6 Section 2.2. Representations by the Company ....................... 6 ARTICLE III ISSUANCE OF THE BONDS .................................. 7 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds ............................................. 7 Section 3.2. Deposit of Additional Funds by Company; Redemption Series 1976 Bonds .................................... 7 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund .......................... 7 Section 3.4. Tax Exempt Status of Bonds ........................... 8 ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT ...................... 9 Section 4.1. Loan of Bond Proceeds ................................ 9 Section 4.2. Loan Repayments and Other Amounts Payable ............ 9 Section 4.3. No Defense or Set-Off ................................ 11 Section 4.4. Payments Pledged and Assigned ........................ 11 Section 4.5. Letter of Credit and Alternate Credit Facility ....... 11 Section 4.6. Payment of the Bonds and Other Amounts ............... 12 ARTICLE V SPECIAL COVENANTS AND AGREEMENTS ....................... 13 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted .......... 13 Section 5.2. Annual Statement ..................................... 14 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc. ....... 14 Section 5.4. Recordation and Other Instruments .................... 14 Section 5.5. No Warranty by the Issuer ............................ 14 Section 5.6. Agreement as to Ownership and Use of the Project ..... 14 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods ................................ 14 Section 5.8. Information Reporting, Etc. .......................... 15 Section 5.9. Limited Liability of Issuer .......................... 15 -i- Section 5.10. Inspection of Project ................................ 15 Section 5.11. Purchases of Bonds by Company or Issuer Prohibited; Exceptions ........................................... 16 Article VI EVENTS OF DEFAULT AND REMEDIES ......................... 16 Section 6.1. Events of Default Defined ............................ 16 Section 6.2. Remedies on Default .................................. 18 Section 6.3. No Remedy Exclusive .................................. 18 Section 6.4. Agreement to Pay Fees and Expenses of Counsel ........ 18 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers .................................. 19 Article VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS .................................... 19 Section 7.1. Option to Prepay ..................................... 19 Section 7.2. Obligation to Prepay ................................. 20 Section 7.3. Notice of Prepayment ................................. 20 Article VIII MISCELLANEOUS .......................................... 20 Section 8.1. Notices .............................................. 20 Section 8.2. Assignments .......................................... 21 Section 8.3. Severability ......................................... 21 Section 8.4. Execution of Counterparts ............................ 21 Section 8.5. Amounts Remaining in Bond Fund ....................... 21 Section 8.6. Amendments, Changes and Modifications ................ 21 Section 8.7. Governing Law ........................................ 22 Section 8.8. Authorized Issuer and Company Representatives ........ 22 Section 8.9. Term of the Agreement ................................ 22 Section 8.10. Cancellation at Expiration of Term ................... 22 Section 8.11. References to Bank and Provider ...................... 22 Section 8.12. Notice Regarding Cancellation of Contracts............ 22 Signature ............................................................... 24 -ii- THIS FINANCING AGREEMENT made and entered into as of October 1, 1995, by and between COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, a political subdivision of the State of Arizona, party of the first part (hereinafter referred to as the "Issuer"), and NEVADA POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W I T N E S S E T H: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means Sections 35-801 to 35-841, inclusive, of the Arizona Revised Statutes (formerly Title 9, Chapter 12, Arizona Revised Statutes). "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement by and between the Issuer and the Company, as from time to time amended and supplemented. "Alternate Credit Facility" means any credit facility, including any instruments accompanying or relating to such Alternate Credit Facility delivered to the Trustee in connection therewith, provided in accordance with Section 4.5 of this Agreement. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its President. Such certificate may designate an alternate or alternates. "Bank" means Societe Generale, acting through its Los Angeles Branch, in its capacity as issuer of the Letter of Credit, its successors in such capacity, and its assigns. If an Alternate Credit Facility in the form of a letter of credit has been issued and delivered in accordance with Section 4.5 of this Agreement, "Bank" shall mean the Provider of such Alternate Credit Facility, if in the form of a letter of credit, in its capacity as issuer of such Alternate Credit Facility, its successors in such capacity, and its assigns. "Bank Agent" means Societe Generale, acting through its Los Angeles Branch, in its capacity as agent for the Bank Group, and its successors in such capacity; provided, however, if there is no party acting as agent under the Reimbursement Agreement, "Bank Agent" shall mean the Bank. "Bank Group" means the banks party to the Reimbursement Agreement, including the Bank. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee, the Bank and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Business Day" means a day on which banks located in the city in which the Principal Office of the Trustee is located and in the city or cities in which any office at which any action must be instituted or taken in order to realize upon the Letter of Credit or an Alternate Credit Facility then in effect is or are located, are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. -2- "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "First Mortgage Indenture" means that certain Indenture of Mortgage and Deed of Trust, dated as of October 1, 1953, from Southern Nevada Power Co. (now Nevada Power Company) to Bankers Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno, Nevada), as trustee, as supplemented, modified or amended from time to time or at any time by supplemental indentures. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and United States Trust Company of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Coconino County, Arizona Pollution Control Corporation, and any successor body to the duties or functions of the Issuer. "Letter of Credit" means the irrevocable direct-pay Letter of Credit issued by the Bank to the Trustee, including any extensions thereof, contemporaneously with the issuance of the Bonds, provided that upon the issuance and delivery of an Alternate Credit Facility in the form of a letter of credit in accordance with Section 4.5 of this Agreement, "Letter of Credit" shall mean such Alternate Credit Facility, if in the form of a letter of credit, instead of the letter of credit for which such Alternate Credit Facility has been substituted. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such -3- corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Original Purchaser" means Goldman, Sachs & Co., Lehman Brothers, Inc., M. R. Beal & Company and Artemis Capital Group, Inc. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Project" means "Project" as defined in the Series 1976 Agreement. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 6.16 of the Indenture. "Reimbursement Agreement" means the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among the Company, the Bank Agent, the Bank and the Bank Group, pursuant to which the initial Letter of Credit is issued, and any subsequent reimbursement agreement between the Company and a Bank pursuant to which a subsequent Letter of Credit is issued by the Bank and delivered to the Trustee, and in each case any and all modifications, amendments and supplements thereto. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.11 of the Indenture and any permitted successor thereto. "Revenues" means the amounts pledged under the Indenture to the payment of principal of, premium, if any, and interest on the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of this Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, including all moneys drawn by the Trustee under the Letter of Credit to pay the principal of and premium, if any, and interest on the Bonds and all amounts realized by the Trustee from any Alternate Credit Facility to pay the principal of and premium, if any, and -4- interest on the Bonds, all of which amounts are to be deposited in the Bond Fund, and (ii) any portion of the net proceeds of the Bonds deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Series 1976 Agreement" means the Financing Agreement, dated as of October 1, 1976, between the Issuer and the Company relating to the Series 1976 Bonds. "Series 1976 Bonds" means the Issuer's 7-1/8% Collateralized Pollution Control Revenue Bonds (Nevada Power Company Project) Series 1976, currently outstanding in the aggregate principal amount of $13,000,000. "Series 1976 Bond Fund" means the fund established pursuant to Section 5.02 of the Series 1976 Indenture. "Series 1976 Indenture" means the Indenture of Trust, dated as of October 1, 1976, between the Issuer and the Series 1976 Trustee, pursuant to which the Series 1976 Bonds were issued. "Series 1976 Trustee" means NationsBank of Tennessee (formerly Commence Union Bank), as trustee under the Series 1976 Indenture. "State" means the State of Arizona. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means United States Trust Company of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as Trustee thereunder, and any separate or co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. -5- ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State of Arizona. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of -6- the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchaser, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In order to provide funds to lend to the Company to refund the Series 1976 Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Original Purchaser thereof, its Bonds in the aggregate principal amount of $13,000,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by the Original Purchaser of the Bonds; and (2) $13,000,000 of the proceeds from the sale of the Bonds in the Prior Bonds Redemption Fund to be remitted by the Trustee to the Series 1976 Trustee for deposit in the Series 1976 Bond Fund to be used to pay to the owners thereof the principal of the Series 1976 Bonds upon redemption thereof. SECTION 3.2. DEPOSIT OF ADDITIONAL FUNDS BY COMPANY; REDEMPTION OF 1976 BONDS. The Company covenants that such additional amounts as may be required to redeem the Series 1976 Bonds will be deposited with the Series 1976 Trustee pursuant to the Series 1976 Indenture for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used to satisfy to that extent the obligations of the Company specified in this Section 3.2 in connection with the Series 1976 Bonds. The Company covenants that it will cause the Series 1976 Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. SECTION 3.3. INVESTMENT OF MONEYS IN THE BOND FUND AND THE PRIOR BONDS REDEMPTION FUND. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; -7- (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys realized under the Letter of Credit or any Alternate Credit Facility or moneys held for the payment of Bonds pursuant to Sections 6.07 and 6.13 of the Indenture or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. In addition, the Company agrees that to the extent that any moneys in the Bond Fund represent moneys to be used to pay the premium portion of the redemption price of Bonds pursuant to Section 3.01(A)(3) of the Indenture such moneys shall be invested only in Governmental Obligations maturing on or before the applicable redemption date or dates. SECTION 3.4. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner -8- who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage Bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Series 1976 Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Series 1976 Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the Letter of Credit or any Alternate Credit Facility; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent of the corresponding payment realized by the Trustee under the -9- Letter of Credit or under any Alternate Credit Facility or to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. -10- (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (h) To the extent that the Letter of Credit is in effect and moneys on deposit in the Bond Fund constitute Available Moneys or have been deposited in separate, segregated accounts in the Bond Fund for the purpose of becoming Available Moneys, such moneys shall not be available for transfer and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy the requirements of the Tax Agreement (unless the Company fails to pay the amounts described below). In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(h) shall survive the termination of this Agreement. SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. LETTER OF CREDIT AND ALTERNATE CREDIT FACILITY. (a) The Company shall arrange for a Letter of Credit or an Alternate Credit Facility to be in effect at all times with such terms and conditions as required under Sections 6.14 and 6.15 of the Indenture. Such Letter of Credit or Alternate Credit Facility must be delivered to the Trustee -11- by the Company not later than 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms. (b) At any time the Company may, at its option, provide for the delivery to the Trustee of an Alternate Credit Facility. The Alternate Credit Facility (a) may consist, at the option of the Company, of (i) first mortgage bonds of the Company, (ii) a letter of credit, or (iii) such other security or credit support as the Company may elect to furnish and which is acceptable to the Issuer, in each case in an amount and having terms sufficient to support the payment of the principal of and interest on all Bonds then outstanding and, at the election of the Company, any of its other obligations under this Agreement, (b) shall have administrative provisions satisfactory to the Trustee, and (c) shall be for a stated term and shall not be terminable prior to the end of such term except by action of the Trustee at the direction of the Company upon the fulfillment of any requirements of such Alternate Credit Facility and compliance with the conditions set forth in Section 4.5(c) hereof. The Company shall have an option, at any time, and from time to time, upon notice given as provided in Section 4.5(c) hereof, to provide an Alternate Credit Facility in substitution for the Letter of Credit or another Alternate Credit Facility, but only in accordance with the provisions of this Section 4.5(b) and Section 4.5(c) hereof. (c) As a condition to the exercise by the Company of its option set forth in Section 4.5(b) hereof to deliver an Alternate Credit Facility, the Company shall provide to the Issuer, the Trustee and the Remarketing Agent, at least 20 days prior to the fifth Business Day next preceding the effective date of such change, a notice specifying (i) that the Letter of Credit or the Alternate Credit Facility then in effect will be changed, (ii) the effective date of such change (which must be at least five Business Days prior to the date the then existing Letter of Credit or Alternate Credit Facility is to expire by its terms), (iii) the form and substance of the Letter of Credit or the Alternate Credit Facility then in effect, and (iv) the form and substance of the Alternate Credit Facility to be in effect on the date specified in (ii) above. Such notice to the Trustee must be accompanied by the opinion of Bond Counsel required by Sections 6.14 and 6.15 of the Indenture and (i) a letter from Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the Bonds should then be rated by S&P, to the effect that the substitution of the proposed Alternate Credit Facility for the Letter of Credit or the Alternate Credit Facility then in effect will not by itself result in a reduction, suspension or withdrawal of its ratings of the Bonds which then prevail (except that such rating evidence shall not be required if the Bonds are subject to a mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the Indenture), and (ii) the form of the substitute Alternate Credit Facility to be in place on the effective date of such change, together with any documentation and opinions referred to by Moody's or S&P in any such letter. (d) The Issuer and the Company agree that the Issuer will in the Indenture authorize and direct the Trustee to accept and agree to conditions and provisions of the Letter of Credit and any Alternate Credit Facility which may be provided in accordance with the provisions of this Section 4.5. SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the -12- Company to the Trustee under Section 4.2(a) hereof, (ii) amounts realized under the Letter of Credit or any Alternate Credit Facility and (iii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof, and the obligation to pay required by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to the extent of the corresponding payment made to the Trustee under the Letter of Credit or any Alternate Credit Facility. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof and amounts realized under the Letter of Credit or any Alternate Credit Facility equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) The acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of -13- the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee and, after payment in full of the Bonds as provided in the Indenture, the rights of the Bank Group provided in the Indenture, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE PERIODS. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, -14- the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture. SECTION 5.8. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement, the Letter of Credit and any Alternate Credit Facility. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. -15- SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED; EXCEPTIONS. At any time while the Letter of Credit is in effect, the Company shall not and shall not allow any Insider of the Company to purchase any Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b) hereof. At any time while the Letter of Credit is in effect, the Issuer shall not and shall not allow any Insider of the Issuer to purchase any Bonds except with Available Moneys. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.5(a) of this Agreement, including without limitation failure by the Company to provide the Trustee with a Letter of Credit or Alternate Credit Facility on or before 10:30 a.m., New York time, on the fifth Business Day preceding the date the then existing Letter of Credit or Alternate Credit Facility is to expire; or (d) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a), (b) and (c) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(h) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or -16- (e) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (f) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (g) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (h) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(d) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. -17- SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the -18- indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without both the consent of the Trustee and the Bank to such waiver. The Trustee and the Bank shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer or the Bank shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in -19- advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 35 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. On the date fixed for redemption of the Bonds or portions thereof, there shall be deposited with the Trustee from drawings upon the Letter of Credit or payments by the Company or from amounts realized under any Alternate Credit Facility as required by Section 7.1 or 7.2, as appropriate, for payment into the Bond Fund. Any other provision of this Agreement or the Indenture to the contrary notwithstanding, any prepayment of moneys hereunder shall be made in such manner and at such time that any redemption of Bonds or portions thereof will be made with Available Moneys. ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: if to the Issuer, at P.O. Box 10, Flagstaff, Arizona 86002 or at 222 East Birch Avenue, Flagstaff, Arizona 86001, or to telecopy number (602) 773-1312, Attention President; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89151, or to telecopy number (702) 367-5629, Attention: Treasurer; if to the Trustee, at 114 West 47th Street, New York, New York 10036-1532 or to telecopy number (212) 852-1625 Attention: Corporate Trust Administration; if to the Remarketing Agent, at 85 Broad Street, 24th Floor, New York, New York 10004, Attention: Municipal Money Markets Desk, or to telecopy number (212) 346-4209; and if to the Bank or the Bank Agent, at 2029 Century Park East, Suite 2900, Los Angeles, California 90067, -20- Attention: Minerva Arvisu, or to telecopy number (310) 203-0539. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Bank or to the Bank Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent, the Bank and the Bank Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other and the Bank or the Bank Agent, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent and the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee; provided, however, that if there remain reimbursement or other obligations of the Company under the Reimbursement Agreement, such moneys remaining in the Bond Fund shall, subject to Section 13.10(b) of the Indenture, be paid by the Trustee to the Bank Agent upon written direction of the Bank Agent to such extent. SECTION 8.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee and the Bank thereto is obtained. Subject to the written consent of the Trustee and the Bank, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, -21- or (v) in connection with any other change herein which is not to the prejudice of the Trustee, the Bank or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that the Letter of Credit (and if at such time there shall be no Pledged Bonds) or any Alternate Credit Facility is not in effect and the Bank Group shall have been paid all amounts owed them under the Reimbursement Agreement (as evidenced by a written certificate of the Bank Agent delivered to the Trustee to such effect), all references herein to the Bank or the Bank Agent or the Bank Group or the Provider, as the case may be, shall be deemed ineffective. Any provisions hereof requiring the consent of the Bank or the Bank Agent or the Bank Group or the Provider shall be deemed ineffective if the Bank or the Provider is at any such time in default in its obligations under the Letter of Credit or the Alternate Credit Facility, as the case may be, to fund a drawing thereunder made in strict compliance with the terms of such Letter of Credit or Alternate Credit Facility. SECTION 8.12. NOTICE REGARDING CANCELLATION OF CONTRACTS. As required by the provisions of Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given -22- that political subdivisions of the State of Arizona or any of their departments or agencies may, within three (3) years of its execution, cancel any contract, without penalty or further obligation, made by the political subdivisions or any of their departments or agencies on or after September 30, 1988, if any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the political subdivisions or any of their departments or agencies is at any time while the contract or any extension of the contract is in effect, an employee or agent of any other part to the contract in any capacity or a consultant to any other party of the contract with respect to the subject matter of the contract. The cancellation shall be effective when written notice from the chief executive officer or governing body of the political subdivision is received by all other parties to the contract unless the notice specifies a later time. The Company covenants and agrees not to employ as an employee, agent or, with respect to the subject matter of this Agreement, a consultant, any person significantly involved in initiating, negotiating, securing, drafting or creating this Agreement on behalf of the Issuer within three (3) years from the execution hereof, unless a waiver is provided by the Issuer. -23- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION By -------------------------------------- President Board of Directors (SEAL) Attest: - -------------------------------- Secretary NEVADA POWER COMPANY By STEVEN W. RIGAZIO -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: RICHARD L. HINCKLEY - -------------------------------- Secretary -24- IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION By BRUCE J. NORDSTROM -------------------------------------- President Board of Directors (SEAL) Attest: TERRANCE RICE - -------------------------------- Secretary NEVADA POWER COMPANY By -------------------------------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer (SEAL) Attest: - -------------------------------- Secretary -24- EX-27 10 FINANCIAL DATA SCHEDULE AS OF 12/31/95
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF NEVADA POWER COMPANY AS OF DECEMBER 31, 1995, AND THE RELATED STATEMENTS OF INCOME, CASH FLOWS, AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 DEC-31-1995 PER-BOOK $1,701,120 9,989 124,917 211,585 0 2,047,611 50,243 595,258 118,860 764,361 38,000 3,863 703,775 0 0 0 300 200 96,224 5,309 435,579 2,047,611 749,981 34,372 598,051 632,423 117,558 6,349 123,907 46,936 76,971 3,966 73,005 73,745 47,745 185,919 1.58 0 INAPPLICABLE.
EX-10.80 11 SOCIETE GENERALE 1995 LOC AGREEMENT ============================================================================== LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT dated as of October 1, 1995 among NEVADA POWER COMPANY, THE BANKS NAMED HEREIN and SOCIETE GENERALE, LOS ANGELES BRANCH, as Administrative Agent and Letter of Credit Bank ============================================================================== TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms.......................1 SECTION 1.02. Computation of Time Periods.................10 SECTION 1.03. Accounting Terms...........................10 SECTION 1.04. Interpretation.............................11 ARTICLE II AMOUNT AND TERMS OF THE LETTERS OF CREDIT SECTION 2.01. The Letters of Credit......................11 SECTION 2.02. Issuing the Letters of Credit..............11 SECTION 2.03. Commissions and Fees.......................11 SECTION 2.04. Reimbursement On Demand....................12 SECTION 2.05. Advances and Interest......................12 SECTION 2.06. Prepayments................................13 SECTION 2.07. Increased Costs............................14 SECTION 2.08. Increased Capital..........................15 SECTION 2.09. Payments and Computations..................15 SECTION 2.10. Non-Business Days..........................15 SECTION 2.11. Extension of the Stated Termination Date...15 SECTION 2.12. Evidence of Debt...........................16 SECTION 2.13. Obligations Absolute.......................16 SECTION 2.14. Taxes......................................17 SECTION 2.15. Additional Interest.........................18 SECTION 2.16. Funding Indemnity...........................18 SECTION 2.17. Illegality, etc.............................18 SECTION 2.18. Reinstatement of Letter of Credit...........19 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Condition Precedent to Issuance of the Letters of Credit..........................20 SECTION 3.02. Additional Conditions Precedent to Issuance of the Letters of Credit..........21 SECTION 3.03. Conditions Precedent to Each Advance.......22 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Company....................................23 ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. Affirmative Covenants......................26 TABLE OF CONTENTS (Continued) Page ---- SECTION 5.02. Negative Covenants.........................30 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default..........................32 SECTION 6.02. Upon an Event of Default...................34 ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc............................35 SECTION 7.02. Notices, Etc...............................35 SECTION 7.03. No Waiver: Remedies........................36 SECTION 7.04. Right of Set-off...........................36 SECTION 7.05. Indemnification............................37 SECTION 7.06. Banks Not Liable...........................37 SECTION 7.07. Costs, Expenses and Taxes..................38 SECTION 7.08. Binding Effect.............................39 SECTION 7.09. Severability...............................39 SECTION 7.10. Governing Law; Submission to Jurisdiction; Etc. ......................................39 SECTION 7.11. Headings...................................40 SECTION 7.12. Counterparts...............................40 SECTION 7.13. Waiver of Jury Trial.......................40 SECTION 7.14. Participation and Assignment...............40 ARTICLE VIII SYNDICATION..................................41 SECTION 8.01. Syndication................................41 SECTION 8.02. Sharing of Payments........................42 ARTICLE IX THE ADMINISTRATIVE AGENT AND THE LC BANK......42 SECTION 9.01. Authorization and Action...................42 SECTION 9.02. Administrative Agent's Reliance, Etc........43 SECTION 9.03. Bank Credit Decision.......................43 SECTION 9.04. Indemnification............................44 SECTION 9.05. Barclays and Affiliates....................44 SECTION 9.06. Successor Administrative Agent.............44 EXHIBIT A Form of Irrevocable Letter of Credit with Exhibits 1 through 5 thereto EXHIBIT B Form of Custodian Agreement -ii- TABLE OF CONTENTS (Continued) Page ---- EXHIBIT C Form of Opinion of General Counsel of the Company EXHIBIT D Form of Opinion of Special Counsel to the Company -iii- LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of October 1, 1995, among NEVADA POWER COMPANY, a Nevada corporation (the "Company"), SOCIETE GENERALE, LOS ANGELES BRANCH, as Administrative Agent and Letter of Credit Bank, and the Banks (as defined herein). PRELIMINARY STATEMENTS. (1) Clark County, Nevada and Coconino County, Arizona Pollution Control Corporation (collectively, the "Issuer") have issued various refunding bonds for the purpose of refunding certain tax-exempt bonds issued for the benefit of the Company. (2) The Company has requested that the Letter of Credit Bank issue three irrevocable, transferable letters of credit in substantially the form of Exhibit A hereto (such letters of credit, as they may from time to time be extended pursuant to the terms of this Agreement, being collectively the "Letters of Credit" and each individually a "Letter of Credit"), in the aggregate amount of $120,711,377 (the "Total Commitment"), of which (i) $118,300,000 shall support the payment of principal of the Series B Bonds, the Series D Bonds and the Series E Bonds (as defined herein) or the portion of the purchase price of such Bonds corresponding to principal (the "Principal Component"), and (ii) $2,411,377 shall support the payment of up to 62 days' interest on the principal amount of the Series B Bonds, the Series D Bonds and the Series E Bonds or the portion of the purchase price of such Bonds corresponding to interest (the "Interest Component"), computed at an assumed rate of 12% per annum on the basis of a year of 365 days (the Letter of Credit Bank's obligation to issue the Letters of Credit as hereinafter provided being hereinafter referred to as the Commitment (the "Commitment"). NOW, THEREFORE, in consideration of the premises and in order to induce the Letter of Credit Bank to issue the Letters of Credit, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, --------------------- the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Interest Margin" means the following percentages per -------------------------- annum: (i) .07% for any period that Level I, II, or III Status exists; (ii) .10% for any period that Level IV Status exists; and (iii) .125% for any period that Level V Status exists. "Advance" has the meaning provided in Section 2.05 (a). -------- "Administrative Agent" means Societe Generale, acting in its capacity -------------------- as Administrative Agent for the Banks hereunder, and any successor Administrative Agent. 2 "Affiliate" means any trade or business (whether or not --------- incorporated) which is a member of a group of which the Company is a member and which is under common control within the meaning of the regulations under Section 414 of the Code. "Applicable Eurodollar Margin" means the Applicable L/C Rate then ---------------------------- in effect plus the applicable Additional Interest Margin. "Applicable L/C Rate" shall mean the following percentages: (i) ------------------- .26% for any day that Level I Status exists; (ii) .295% for any day that Level II Status exists; (iii) .35% for any day that Level III Status exists; (iv) .40% for any day that Level IV Status exists; and (v) .625% for any day that Level V Status exists. "Authorized Representative" means (i) for the Company, the -------------------------- Chairman of the Board, the President, any Vice President, the Director, Treasury and the Secretary and (ii) for any other Person, an authorized officer of such Person. "Bank" means each of the LC Bank and each of the parties ---- identified as a "Bank" on the signature pages hereto, and each Bank that becomes a party hereto in accordance with Section 7.14(b); provided that the rights of the LC Bank under this Agreement shall not be diminished or impaired by reason of the LC Bank also being a Bank hereunder. "Base Rate" means a fluctuating interest rate per annum equal at --------- all times to the higher of (i) the Prime Rate or (ii) 1/2 of one percent above the Federal Funds Rate in effect from time to time. The Base Rate shall change concurrently with each change in the Prime Rate or Federal Funds Rate, as the case may be. "Base Rate Advance" means an Advance bearing interest at the Base ----------------- Rate. "Bond Purchase Agreement" means the Bond Purchase Agreement ------------------------- executed with respect to each Series of Bonds. "Bonds" means, collectively, the Series B Bonds, the Series D ----- Bonds and the Series E Bonds. "Business Day" means a day of the year on which banks are not ------------ required or authorized by law to close in New York City or in Los Angeles, California, and if the applicable Business Day relates to a Eurodollar Rate Advance, on which dealings are carried on the London interbank eurodollar market. "Cancellation Date" has the meaning assigned to that term in each ----------------- Letter of Credit. "Code" means the Internal Revenue Code of 1986, as amended from ---- time to time after the date hereof, and the rules and regulations promulgated thereunder. "Commitment" has the meaning assigned to that term in the second ---------- Preliminary Statement hereto. 3 "Commitment Termination Date" has the meaning assigned to that --------------------------- term in Section 2.01. "Common Equity" means the common stockholders' equity of the ------------- Company, less the book value of all intangible assets of the Company. "Common Stock" means the $1.00 par value common stock of the ------------ Company. "Custodian Agreement" means the Custodian Agreement in ------------------- substantially the form of Exhibit B hereto. "Date of Issuance" has the meaning assigned to that term in ---------------- Section 2.02. "Debt" or "Indebtedness" means (i) indebtedness for borrowed money ---- ------------ or for the deferred purchase price of property or services, (ii) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iii) obligations (contingent or otherwise) in respect of bankers' acceptances or letters of credit, (iv) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (i) through (iii) above, (v) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA, and (vi) withdrawal liability incurred under ERISA by the Company or any of its Affiliates to any Multiemployer Plan. "Default Rate" means a fluctuating interest rate equal at all ------------ times to 2% per annum above the Base Rate in effect from time to time; provided that with respect to a Eurodollar Rate Advance the Default Rate - -------- shall be the higher of (i) such rate then in effect with respect to such Eurodollar Rate Advance plus 2% per annum or (ii) the Base Rate plus 2% per annum. "Designated Rating" means, with respect to any Rating Agency for ----------------- any day, the rating of the senior secured long-term debt of the Company (a "Secured Rating") outstanding and in effect on such day (including for this purpose as separate categories "+" and "-" designations by S&P or "1", "2" and "3" designations by Moody's). If a Rating Agency does not have a Secured Rating outstanding and in effect on any day, then there exists no Designated Rating by such Rating Agency for such day. "Environmental Claim" means any allegation, notice of violation, ------------------- claim, demand, or order by any governmental authority or any Person for any damage or for fines, penalties or restrictions, resulting from or based upon (i) the existence of a Release of, or exposure to, any Hazardous Material, in, into or onto the environment at, in, by, from or related to any facility, (ii) the use, handling, transportation, storage, treatment or disposal of Hazardous Materials in connection with the operation of any facility, or (iii) the violation of any Environmental Laws. "Environmental Laws" means all Laws relating to environmental ------------------ matters, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, 4 contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials and to the generation, use, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Company or any of its Subsidiaries or any of their respective properties, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Subsection 9601 et seq.), the Hazardous Material Transportation Act -- --- (49 U.S.C. Subsection 1801 et seq.), the Resource Conservation and Recovery Act -- --- (42 U.S.C. Subsection 6901 et seq.), the Federal Water Pollution Control Act -- --- (33 U.S.C. Subsection 1251 et seq.), the Clean Air Act (42 U.S.C. Subsection -- --- 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Subsection 2601 et -- --- -- seq.), the Occupational Safety and Health Act ( 29 U.S.C. Subsection 65l et - --- -- seq.) and the Emergency Planning and Community Right to Know Act (42 U.S.C. - --- Subsection 11001 et seq.), each as amended or supplemented, and any analogous -- --- future or present applicable local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974. ----- "Eurocurrency Liabilities" has the meaning assigned to that term ------------------------ in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Rate" means, with respect to an Interest Period for a --------------- Eurodollar Rate Advance, an interest rate per annum equal to (a) the rate (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) per annum at which deposits in U.S. dollars are offered to the Administrative Agent by prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, in an amount substantially equal to the amount of the relevant Eurodollar Rate Advance and for a period equal to such Interest Period, plus (b) the Applicable Eurodollar Margin, as such rate may be adjusted pursuant to Section 2.15. "Eurodollar Rate Advance" means an Advance bearing interest at the ----------------------- Eurodollar Rate. "Eurodollar Rate Reserve Percentage" means for any Interest Period ---------------------------------- for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the applicable reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Banks with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Event of Default" has the meaning assigned to that term in ---------------- Section 6.01. "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds 5 brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" means that certain letter agreement dated the Date of ---------- Issuance executed by the Company and addressed to the Administrative Agent and LC Bank. "Financing Agreement" means each Financing Agreement, dated as of ------------------- October 1, 1995 between the Issuer and the Company, executed with respect to a Series of Bonds. "First Mortgage Bond Indenture" means the Indenture of Mortgage ----------------------------- and Deed of Trust dated October 1, 1953 between the Company and First Interstate Bank of Nevada, N.A., as amended to the Date of Issuance. "Fiscal Quarter" means the fiscal quarter of the Company --------------- consisting of a three month fiscal period ending on each March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of the Company consisting of a ----------- twelve month fiscal period ending on each December 31. "Governmental Agency" means (a) any foreign, federal, state, -------------------- county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body, (c) any court or administrative tribunal or (d) with respect to any Person, any arbitration tribunal or other non-governmental authority to whose jurisdiction that Person has consented. "Hazardous Materials" means (i) any chemical, material or ------------------- substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable local, state or federal Law or under the regulations adopted or publications promulgated pursuant thereto, including, without limitation, Environmental Laws, (ii) any oil, petroleum or petroleum-derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (A) pose a hazard to any Property of the Company or any of its Subsidiaries or to Persons on or about such Property or (B) cause such Property to be in violation of any Environmental Laws, (iii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyl's in excess of fifty parts per million, and (iv) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or may or could pose a hazard to the health and safety of the owners, occupants or any Persons surrounding any Property of the Company. 6 "Indenture" means each Indenture of Trust, dated as of October 1, --------- 1995 between the Issuer and the Trustee, pursuant to which a Series of Bonds was issued. "Initial Stated Amount" means $86,732,603 with respect to the --------------------- Letter of Credit supporting the Series B Bonds; $20,713,787 with respect to the Letter of Credit supporting the Series D Bonds; and $13,264,987 with respect to the Letter of Credit supporting the Series E Bonds. "Interest Component" has the meaning assigned to that term in the ------------------ second Preliminary Statement herein. "Interest Period" means, with respect to a Eurodollar Rate --------------- Advance, a period of one day or one month, in each case as elected by the Company pursuant to Section 2.05(b); provided that any such Interest Period -------- that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and provided, further that no Interest Period shall -------- ------- extend beyond the scheduled repayment date of an Advance. "Issuer" has the meaning assigned to that term in the first ------ Preliminary Statement hereto. "Laws" means, collectively, all foreign, federal state and local ---- statutes, treaties, rules, regulations, ordinances, codes and administrative or controlling precedents of any Governmental Agency. "LC Bank" or "Letter of Credit Bank" means Societe Generale, Los ------- --------------------- Angeles Branch. "Letter of Credit" and "Letters of Credit" have the meanings ---------------- ----------------- assigned to those terms in the second Preliminary Statement hereto. "Level I Status" exists for any day if, on such day, the Company -------------- has a Designated Rating of (i) A or higher by S&P or (ii) A2 or higher by Moody's. "Level II Status" exists for any day if, on such day, (a) Level I --------------- Status does not exist and (b) the Company has a Designated Rating of (i) BBB+ or higher by S&P or (ii) Baa1 or higher by Moodys. "Level III Status" exists for any day if, on such day, (a) Level I ---------------- or II Status does not exist and (b) the Company has a Designated Rating of (i) BBB by S&P or (ii) Baa2 by Moody's. "Level IV Status" exists for any day if, on such day, (a) Level I, --------------- II or III Status does not exist and (b) the Company has a Designated Rating of (i) BBB- by S&P or (ii) Baa3 by Moody's. 7 "Level V Status" exists for any day if, on such day, (a) Level I, -------------- II, III or IV Status does not exist and (b) the Company has a Designated Rating of (i) below BBB- by S&P or is unrated or (ii) below Baa3 by Moody's or is unrated. "Lien" means, with respect to any asset, any lien, security ---- interest or other charge or encumbrance, or any other type of preferential arrangement in respect of such asset. "Material Adverse Effect" means any set of circumstances or events ----------------------- which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any Related Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise) or business operations of the Company and its Subsidiaries, taken as a whole, or to the prospects of the Company and its Subsidiaries, taken as a whole, (c) materially impairs or could reasonably be expected to materially impair the ability of the Company and its Subsidiaries, taken as a whole, to perform its obligations hereunder or under the Related Documents or (d) materially impairs or could reasonably be expected to materially impair the ability of the Administrative Agent or the Banks to enforce any of their legal remedies pursuant to this Agreement or the Related Documents. "Moody's" means Moody's Investors Service, Inc. or its successor ------- and assigns. "Multiemployer Plan" means a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA with respect to which the Company or any Affiliate (i) has an obligation to contribute to or (ii) could have liability. "Participant" has the meaning provided in Section 7.14(a) ----------- "PBGC" means the Pension Benefit Guaranty Corporation or any ---- successor thereto. "Person" means an individual, partnership, corporation (including ------ a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Agency. "Plan" means an employee benefit plan (other than a Multiemployer ---- Plan) maintained or contributed to for employees of the Company or any Affiliate and covered by Title IV of ERISA or the minimum funding requirements of Section 412 of the Code. "Pledged Bond" has the meaning assigned to that term in the ------------ Custodian Agreement. "Preferred Stock" means each of (a) the Cumulative Preferred Stock --------------- $20.00 par value 5.40% Series Preferred Stock of the Company, (b) the Cumulative Preferred Stock $20.00 par value 5.20% Series Preferred Stock of the Company, (c) the Cumulative Preferred Stock $20.00 par value 4.70% Preferred Stock of the Company, and (d) the Cumulative Preferred Stock $20.00 par value Auction Series A of the Company. 8 "Prime Rate" means a fluctuating annual rate of interest equal to ---------- the rate publicly announced or quoted internally by the Administrative Agent as its Prime Rate. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change is publicly announced or quoted internally by the Administrative Agent. "Principal Facility" means that certain Loan Agreement dated as of ------------------ November 21, 1994 by and among the Company, First Interstate Bank of Nevada, N.A., as agent, and the financial institutions party thereto. "Prior Bonds" means each of the Series 1974 Bonds, the Series 1977 ----------- Bonds, the Series 1988 Bonds and the Series 1989 Bonds as defined in Resolution No. 10-3-95-1 adopted by Clark County Nevada on October 3, 1995 and also includes the Coconino County, Arizona Collateralized Pollution Control Revenue Bonds (Nevada Power Company Project) Series 1976. "Property" means any interest in any kind of property or asset, -------- whether real, personal or mixed, or tangible or intangible. "PSC" means the Public Service Commission of Nevada, or any --- successor or other agency or authority of the State of Nevada from time to time having a similar jurisdiction. "PSC Order" means, at any time, the order by the PSC in effect at --------- such time that authorizes the Company to enter into this Agreement and the Related Documents to which it is, or is to be, a party, to request the LC Bank to issue the Letters of Credit hereunder and to incur Debt to the Banks hereunder in an amount not less than the Total Commitment. The PSC Order, when given by PSC, shall be deemed to include the application for such order by the Company. "Rating Agency" means S&P or Moody's. ------------- "Reimbursement Obligations" means all of the obligations of the ------------------------- Company to reimburse or repay the LC Bank or the Banks pursuant to Section 2.04 or 2.05. "Related Documents" has the meaning assigned to that term in ----------------- Section 2.13. "Release" means any release, emission, disposal, leaching, or ------- migration into the environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), or into or out of any of the facilities. "Remarketing Agent" has the meaning assigned to that term in each ----------------- Indenture. "Required Banks" means, at any time, Banks having Shares equal to -------------- at least 66 2/3% of the aggregate Shares; provided that such term shall in any event include the LC Bank unless expressly provided otherwise in this Agreement. "Series B Bonds" means the Clark County, Nevada $85,000,000 -------------- Industrial Development Refunding Revenue Bonds (Nevada Power Company Project) Series 1995B. 9 "Series D Bonds" means the Clark County, Nevada $20,300,000 -------------- Pollution Control Refunding Revenue Bonds (Nevada Power Company Project) Series 1995D. "Series E Bonds" means the Coconino County, Arizona Pollution -------------- Control Corporation $13,000,000 Pollution Contol Refunding Revenue Bonds (Nevada Power Company Project) Series 1995E. "Series of Bonds" means any of the following Series of Bonds: --------------- the Series B Bonds, the Series D Bonds, and the Series E Bonds. "Share" means, with respect to each Bank, the percentage of the ----- rights and obligations hereunder purchased by, or otherwise attributable to, such Bank, as specified on Schedule 7.02 hereof or in any assignment entered into pursuant to Section 7.14(b). "Societe Generale" means Societe Generale, Los Angeles Branch. ---------------- "S&P" means Standard & Poor's, a division of The McGraw-Hill --- Companies, Inc. and its successors and assigns. "Stated Amount" has the meaning assigned to such term in each ------------- Letter of Credit. "Stated Termination Date" means, with respect to each Letter of ----------------------- Credit, October 12, 1999, as such date may be extended pursuant to Section 2.11. "Subsidiary" means, as to any Person, (i) any corporation of which ---------- more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person or by one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other Person in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Tender Drawing" has the meaning assigned to that term in each -------------- Letter of Credit. "Termination Event" means (i) a Reportable Event described in ----------------- Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of the Company or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. 10 "Total Capitalization" means, as of any date of determination, the -------------------- sum of (a) Total Common Shareholders Equity as of that date, plus (b) the - --- ---- book value of the Preferred Stock as of that date, plus (c) the principal ---- amount as of that date of the Company's Indebtedness for borrowed money having an initial maturity in excess of one year from the date of its incurrence. "Total Common Shareholders Equity" means, as of any date of -------------------------------- determination, the sum of (a) the book value of the Common Stock of the --- Company as of that date, determined in accordance with generally accepted accounting principles, plus (b) the retained earnings of the Company as of ---- that date, determined in accordance with generally accepted accounting principles, plus (c) the premium on the capital stock of the Company which ---- should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of the Company as of that date, minus (y) the ----- book value of treasury stock which should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of the Company as of that date, and minus (z) the amount of unamortized capital ----- stock expense which should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of the Company as of that date; provided that there shall be excluded from Total Common Shareholders -------- Equity any amount attributable to Common Stock that is, directly or indirectly, required to be redeemed or repurchased by the Company at a specified date or upon the occurrence of specified events or at the election of the holder thereof. "Total Debt" means, as of any date of determination, the Company's ---------- Indebtedness for borrowed money on that date, minus the amount of all cash ----- and securities deposited in trust as security for such Indebtedness with the lenders thereof on that date. "Trustee" means the Person serving as Trustee under the Indenture ------- for each Series of Bonds, initially United States Trust Company of New York. In the event different Persons are acting as trustee for separate Series of Bonds, the term "Trustee" shall refer to each such Trustee unless the context requires otherwise. SECTION 1.02. Computation of Time Periods. In this Agreement, in --------------------------- the computation of a period of time from a specified date to a later specified date, the word "from" means from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.03. Accounting Terms. All accounting terms not ---------------- specifically defined herein shall be construed in accordance with generally accepted United States accounting principles consistent (except as otherwise stated herein) with those applied in the preparation of the December 31, 1994 financial statements referred to in Section 4.01(f). SECTION 1.04. Interpretation. The following rules shall apply to -------------- the construction of this Agreement unless the context requires otherwise: (a) the singular includes the plural and the plural the singular; (b) words importing any genderinclude the other gender; (c) references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made, and all regulations adopted and publications promulgated pursuant to such statutes; (d) references to "writing" include printing, photocopy, typing, lithography and other means of reproducing words in a tangible visible form; (e) the words "including", "includes" and "include" shall be deemed to be followed by the words 11 "without limitation"; (f) except as otherwise provided herein, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent that such amendments and other modifications are permitted or not limited by the terms of this Agreement; (g) references to Persons include their respective permitted successors and assigns; and (h) the words "herein," "hereof" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any provision of this Agreement, and "Article," "Section," "subsection," "paragraph," and respective references are to this Agreement unless otherwise specified. ARTICLE II AMOUNT AND TERMS OF THE LETTERS OF CREDIT SECTION 2.01. The Letters of Credit. The LC Bank agrees, on the --------------------- terms and conditions hereinafter set forth, to issue the Letters of Credit to the Trustee on any Business Day during the period from the date hereof to and including November 30, 1995 (the "Commitment Termination Date") in the Initial Stated Amounts thereof and in an aggregate amount not exceeding the Total Commitment. SECTION 2.02. Issuing the Letters of Credit. The Letters of ----------------------------- Credit shall be issued on at least three Business Days' notice from the Company to the LC Bank specifying the Business Day of issuance thereof. On such Business Day specified by the Company in such notice (such date, the "Date of Issuance") and upon fulfillment of the applicable conditions precedent set forth in Article III, the LC Bank will issue the Letters of Credit to the Trustee. SECTION 2.03. Commissions and Fees. (a) The Company hereby -------------------- agrees to pay to the Administrative Agent for the benefit of the Banks a letter of credit fee on the Stated Amount of each Letter of Credit from the Date of Issuance through and including the applicable Cancellation Date of a Letter of Credit, at the Applicable L/C Rate as adjusted from time to time, which letter of credit fee shall be payable on the Date of Issuance (for the period from the date hereof to and including December 31, 1995) and thereafter quarterly in advance on the last Business Day of each March, June, September and December commencing on December 31, 1995. In the event that following the payment by the Company of the letter of credit fee for any quarterly period (or any part thereof) a Letter of Credit shall be canceled or otherwise terminate prior to the end of such quarterly period (or any part thereof), the Banks agree that they will return to the Company (after applying any such amounts to any unreimbursed drawings under the Letters of Credit, unpaid Advances, interest thereon or any fees, commissions or any other amounts then due and payable by the Company to the Banks) the portion of the letter of credit fee as shall be obtained by multiplying (i) the total amount of letter of credit fee paid by the Company to the Banks for such quarterly period (or part thereof) by (ii) the quotient of (A) the number of days left during such quarterly period (or part thereof) divided by (B) the total number of days in such quarterly period (or part thereof). Solely for purposes hereof, the Stated Amount 12 of a Letter of Credit shall be deemed not to be reduced with respect to any amount drawn thereunder that is subject to reinstatement. (b) The Company agrees to pay to the Administrative Agent and the LC Bank, respectively, the fees and other amounts set forth in the Fee Letter on the dates set forth therein. SECTION 2.04. Reimbursement On Demand. Except as otherwise ----------------------- specified in Section 2.05 (and provided the conditions precedent specified therein shall have been fulfilled), each amount paid by the LC Bank under a Letter of Credit (including, without limitation, amounts in respect of any reinstatement of the Interest Component (as defined in such Letter of Credit) at the election of the LC Bank notwithstanding any failure by the Company to reimburse the Banks for any previous drawing to pay interest on the Bonds) shall constitute a demand loan made by the Banks to the Company on the date of such payment by the LC Bank under such Letter of Credit. The Company agrees to pay each such demand loan on the date of its making. Any such demand loan (or any portion thereof) not so paid on such date shall bear interest, payable on demand, from the date of making of such demand loan until payment in full, at a fluctuating interest rate per annum equal to the Default Rate. SECTION 2.05. Advances and Interest. (a) If the LC Bank shall --------------------- make any payment under a Letter of Credit upon a Tender Drawing submitted thereunder pursuant to Section 4.01 of the relevant Indenture and, on the date of such payment, the conditions precedent set forth in Section 3.03 shall have been fulfilled, the portion of such payment corresponding to principal on the Bonds shall constitute an advance made by the Banks to the Company on the date and in the amount of such payment (each such advance being an "Advance"). The Company shall pay interest on the unpaid principal amount of each Advance monthly in arrears on the last Business Day of each month (or, if earlier, the last day of an Interest Period for an Advance), and on the date of repayment of such Advance. Each Advance shall bear interest from the date of the incurrence thereof until the date upon which such Advance is paid in full at the Base Rate unless the Company has elected to pay interest at the Eurodollar Rate pursuant to subsection (b) below. Notwithstanding any other provision to the contrary herein, each Advance shall be due and payable by the Company to the Banks on the earlier of (i) the Cancellation Date, (ii) the date 180 days from the making of such Advance, (iii) the date specified in Section 2.06(b) below, and (iv) the date required by Section 6.02. (b) The Company may from time to time elect to convert any Advance to a Eurodollar Rate Advance by notice to the Administrative Agent, specifying the Advance, the duration of the Interest Period for such Advance, the amount of such Advance, and the date on which such Advance shall become a Eurodollar Rate Advance, such notice to be received by the Administrative Agent by 11:00 A.M. (New York time) at least three Business Days prior to the effective date of the requested conversion. Such Advance shall continue to be a Eurodollar Rate Advance, with an Interest Period of the duration selected by the Company in accordance with the immediately preceding sentence, determined by the Administrative Agent in accordance herewith, until the Company shall elect, by written notice to the Administrative Agent in accordance with the next following sentence, to convert such Advance to a Base Rate Advance or to convert the Interest Period for such Advance to an Interest Period of a different duration. 13 Any such notice to the Administrative Agent requesting a conversion from a Eurodollar Rate Advance to a Base Rate Advance, or to an Interest Period of a different duration, shall be given to the Administrative Agent by 11:00 A.M. (New York time) at least three Business Days prior to the effective date of the requested conversion; provided, however, that -------- ------- conversion of any Eurodollar Rate Advance shall only be made at the end of the Interest Period for such Advance. The Company agrees that, unless the Company shall have requested that a Eurodollar Rate Advance be converted to a Base Rate Advance or to an Interest Period of a different duration in accordance herewith, the Eurodollar Rate with respect to such Advance shall be determined each Business Day or each month by the Administrative Agent, as the case may be, with respect to such Advance. (c) Notwithstanding any provision to the contrary herein, the Company shall pay interest on all past-due amounts of principal and (to the fullest extent permitted by law) interest, costs, fees and expenses hereunder, from the date when such amounts became due until paid in full, payable on demand, at the default Rate in effect from time to time. SECTION 2.06. Prepayments. (a) The Company may, upon at least ----------- two Business Days' notice to the Administrative Agent, prepay the outstanding amount of any Advance in whole or in part with accrued interest to the date of such prepayment on the amount prepaid. (b) Prior to or simultaneously with the resale of all of the Bonds purchased with the proceeds of a Tender Drawing under a Letter of Credit, the Company shall prepay or cause to be prepaid in full the then outstanding principal amount (pursuant to Section 2.04) or Advance arising pursuant to such Tender Drawing, together with all interest thereon to the date of such prepayment. If less than all of such Bonds are resold, then prior to or simultaneously with such resale the Company shall prepay or cause to be prepaid a portion (as specified below) of the then outstanding principal amount (pursuant to Section 2.04) or Advance arising pursuant to such Tender Drawing, together with all interest thereon to the date of such prepayment. The portion of such principal amount or such Advance to be prepaid shall be determined by multiplying such principal amount or such Advance by a fraction, the numerator of which shall be the principal amount of the Bonds resold and the denominator of which shall be the principal amount of all of the Bonds purchased with the proceeds of the relevant Tender Drawing. SECTION 2.07. Increased Costs. (a) If either (i) the introduction --------------- of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any Law or (ii) the compliance by any Bank with any guideline or request from any central bank or other Governmental Agency (whether or not having the force of law), shall either (A) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit issued by, or assets held by, or deposits in or for the account of, such Bank or participated in by any Participant or (B) impose on any Bank any other condition regarding this Agreement, the Letters of Credit, any amount outstanding hereunder or any Advance, and the result of any event referred to in clause (A) or (B), above, shall be to increase the cost to any Bank or any Participant of issuing or maintaining the Letters of Credit (or its participation therein) or agreeing to make or making, funding or maintaining any 14 Advance, then, upon demand by the Administrative Agent on behalf of a Bank, the Company shall pay to such Bank (for its own account or for the account of such Participant, as the case may be, within 10 days of receipt of such notice and from time to time as specified by the Bank, all additional amounts which shall be sufficient to compensate such Bank for such increased costs. A certificate setting forth such increased costs incurred by the Bank as a result of any event referred to in clause (i) or (ii) above, submitted by the Administrative Agent to the Company on behalf of such Bank, shall constitute such demand and shall, in the absence of manifest error, be conclusive and binding for all purposes. (b) In the event that after the date hereof the implementation of or any change in any Law, or any guideline or directive (whether or not having the force of law) or the interpretation or administration thereof, in each case by any administrative or governmental authority charged with the administration thereof shall: (i) subject any Bank or any Participant to any tax of any kind with respect to this Agreement, the Advances or the transactions contemplated hereby or shall change the basis of taxation of any Bank or any Participant (other than a change in the rate of tax on the overall net income of such Bank); or (ii) impose, modify or deem applicable any reserve, special deposit, capital adequacy or similar requirement (other than any change by way of imposition on increase of reserve requirements included in the Eurodollar Rate Reserve Percentage); or (iii) impose on the Banks any other condition; and as a result of any of the foregoing, in the sole opinion of any Bank, there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Company shall from time to time, upon demand by such Bank or such Participant, pay to the Bank or such Participant additional amounts sufficient to compensate the Bank or such Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to the Company by the Administrative Agent on behalf of such Bank or such Participant, as the case may be, shall be conclusive and binding for all purposes. SECTION 2.08. Increased Capital. If any Bank determines that (1) ----------------- the adoption of any applicable Law, after the date hereof regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any court or Governmental Agency charged with the interpretation or administration thereof, or (2) compliance by such Bank with any directive regarding capital adequacy of any such Governmental Agency, generally affects banks issuing letters of credit or entering into agreements similar to or of the same type as this Agreement and has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of issuing or maintaining the Letters of Credit (or its participation therein) to a level below that which the Bank would have achieved but for such adoption, change or compliance (taking into consideration the Bank's policies with respect to capital adequacy), then, upon demand by the Administrative Agent on behalf of such Bank, the Company shall immediately pay to such Bank, from time to time as specified by the Bank, additional amounts 15 sufficient to compensate such Bank in the light of such circumstances, to the extent that the Bank reasonably determined such capital to be allocable to this Agreement or the issuance or maintenance of the Letters of Credit (or its participation therein). In determining such increased fee, the Banks may use reasonable and customary averaging and attribution methods. A certificate as to such amounts submitted to the Company by the Administrative Agent on behalf of such Bank shall constitute such demand and shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.09. Payments and Computations. The Company shall make ------------------------- each payment hereunder not later than 3:00 p.m. (New York time) on the day when due in lawful money of the United States of America to the Administrative Agent on behalf of the Banks (i) at its address referred to in Section 7.02 in same day funds or (ii) by federal funds transfer to Societe Generale, New York, ABA No. 0260-0422-6 for further credit to Nevada Power NY LSA 9027238. Computations of the Base Rate, the Eurodollar Rate, the Default Rate and the commissions and fees under Section 2.03 shall be made by the Administrative Agent on the basis of a year of 360 days and the actual number of days (including the first day but excluding the last day) elapsed. To the extent the Company has made any payments to the Administrative Agent on behalf of the Banks, such payment shall be deemed to have been made to the Banks by the Company for purposes of this Agreement. SECTION 2.10. Non-Business Days. Whenever any payment to be made ----------------- hereunder shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest, commission or fee, as the case may be. SECTION 2.11. Extension of the Stated Termination Date. Unless a ---------------------------------------- Letter of Credit shall have expired in accordance with its terms on the Cancellation Date, at least 75 but not more than 120 days before each anniversary of the Date of Issuance of such Letter of Credit, commencing on the anniversary thereof in 1996, the Company may, by notice to the Administrative Agent, request the Banks in writing (each such request being irrevocable) to extend for one year the Stated Termination Date of such Letter of Credit. If the Company shall make such request, the Administrative Agent shall, no later than 30 days following the date on which the Administrative Agent shall have received such request, notify the Company in writing (with a copy of such notice to the Trustee) whether or not all of the Banks consent to such request and, if all of the Banks do so consent, the conditions of such consent (including conditions relating to legal documentation). If the Administrative Agent shall not so notify the Company, the Banks shall be deemed not to have consented to such request. In connection with such extension, the Banks may at their option do or require any of the following: (a) issue an amendment to such Letter of Credit to the Trustee reflecting the extension of the scheduled expiration date, (b) cause the Company to cause the Trustee to return the Letter of Credit to the LC Bank and thereafter (i) the LC Bank shall return the Letter of Credit after amendment thereof to reflect the extension of the scheduled expiration date or (ii) cancel the Letter of Credit and issue to the Trustee, in substitution therefor, a substitute irrevocable letter of credit in the form of Exhibit A hereto, dated the date of such surrender, reflecting the extension of the scheduled 16 expiration date but otherwise having terms substantially identical to the Letter of Credit being so extended. SECTION 2.12. Evidence of Debt. Each Bank shall maintain, in ---------------- accordance with its usual practice, an account or accounts evidencing the indebtedness of the Company resulting from each drawing under a Letter of Credit and from each Advance made from time to time hereunder and its respective Share of the Reimbursement Obligations and the amounts of principal and interest payable and paid from time to time hereunder . In any dispute, legal action or proceeding in respect of this Agreement, the entries made in such account or accounts shall, in the absence of manifest error, be conclusive evidence of the existence and amounts of the obligations of the Company therein recorded. SECTION 2.13. Obligations Absolute. The payment obligations of -------------------- the Company under this Agreement shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any of the Letters of Credit, the Bonds, the Indentures, the Financing Agreements, the Custodian Agreement, the Fee Letter or any Bond Purchase Agreement (collectively, the "Related Documents") or any other agreement or instrument relating thereto; (ii) any amendment or waiver of or any consent to or departure from all or any of the Related Documents; (iii) the existence of any claim, set-off, defense or other right which the Company may have at any time against the Trustee or any other beneficiary, or any transferee, of a Letter of Credit (or any Person for whom the Trustee, any such beneficiary or any such transferee may be acting), the Banks, or any other Person, whether in connection with this Agreement, the transactions contemplated herein or in the Related Documents, or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the LC Bank under a Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. SECTION 2.14. Taxes. All payments made by the Company hereunder ----- will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any 17 jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, any tax imposed on or measured by the net income of any of the Banks pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the principal office or lending office of a Bank is located ) and all interest, penalties or similar liabilities with respect thereto (collectively, "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Fee Letter, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) each Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make all such required deductions and shall pay the full amount deducted to the relevant taxing authority in accordance with applicable law and (iii) the Company will furnish to the Banks within 45 days after the date the payment of any Taxes is due certified copies of tax receipts evidencing such payment by the Company. The Company will indemnify and hold harmless each Bank, and reimburse any Bank upon written request of the Administrative Agent on behalf of such Bank the amount of any Taxes so levied or imposed and paid by any Bank. Each Bank represents and warrants to the Company that either (1) it is entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments to be made by the Company to the Banks pursuant to the terms of this Agreement; or (2) all interest and other payments to be made by the Company to such Bank pursuant to the terms of this Agreement will be effectively connected with the conduct by the Bank of a trade or business within the United States (within the meaning of Section 882 of the Code). Prior to the Date of Issuance and thereafter upon the request of the Company, each Bank agrees to furnish to the Company two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the Bank claims entitlement to complete exemption from U.S. federal withholding tax on all interest and other payments hereunder). In the event a Bank fails to provide an accurate Form 4224 or Form 1001 as required by this paragraph and which it is legally entitled to provide, the Company shall not be required to pay any additional amounts with respect to U.S. Federal income taxes to such Bank pursuant to this paragraph. Notwithstanding any other provisions of this Agreement and except in the event of a change in applicable law, the representations, warranties and obligations of the Bank set forth in this paragraph in respect of any interest in this Agreement or the Letters of Credit shall survive until the assignment, sale, payment or other disposition of such interest or the Letters of Credit. SECTION 2.15. Additional Interest. The Company shall pay to the ------------------- Administrative Agent on behalf of any Bank during each Interest Period for a Eurodollar Rate Advance, so long as such Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on each Eurodollar Rate Advance, from the first day of such Interest Period until paid in full or the last day of such Interest Period, at an interest rate per annum equal at all times to the difference obtained by subtracting (i) the Eurodollar Rate in effect for such Interest Period from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period, payable on each date on which interest is payable on such Eurodollar Rate Advance. Such additional interest shall be determined by the Bank and notified to the 18 Administrative Agent, which shall forward such notice to the Company and such determination shall be binding and conclusive, absent manifest error. SECTION 2.16. Funding Indemnity. The Company agrees to indemnify ----------------- and hold harmless each Bank from any loss or expense which it may sustain or incur as a result of: (i) the failure by the Company to borrow or prepay an Advance bearing interest at the Eurodollar Rate after giving notice of its intention to do so pursuant to Section 2.06; (ii) the failure by the Company to pay the principal of or interest on any Eurodollar Rate Advance when due (whether at stated maturity, upon acceleration or otherwise); or (iii) the conversion, prepayment or repayment of any Eurodollar Rate Advance on a date that results in breakage or similar costs to the Bank; including but not limited to any such loss or expense arising from interest, fees or other amounts payable by the Bank to lenders of funds obtained by it in order to make and maintain the Advances thereunder. A certificate setting forth such loss or expense submitted by the Bank to the Administrative Agent and the Company shall be conclusive and binding as to the amount owed such Bank. SECTION 2.17. Illegality, etc. If the adoption of any Law, or --------------- any change therein, or any change in the interpretation or administration thereof by any Governmental Agency, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such Governmental Agency, shall make it, in the sole opinion of the Required Banks, unlawful for the Required Banks to obtain funds in the London interbank Eurodollar market to make, maintain or fund Eurodollar Rate Advances, or if, as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the London interbank Eurodollar market it shall become impracticable, in the sole judgment of the Required Banks, for the Required Banks to obtain funds in the London interbank Eurodollar market to make, maintain or fund Eurodollar Rate Advances or otherwise to perform its obligations hereunder with respect to any Eurodollar Rate Advance, the Required Banks shall immediately notify the Administrative Agent and the Administrative Agent shall immediately so notify the Company, but the failure of the Administrative Agent to give such notice shall not affect the terms of this Section 2.17. Upon receipt of such notice, (i) the right of the Company to select for any Advance the Eurodollar Rate shall forthwith be canceled, such cancellation to continue unless and until the Administrative Agent shall notify the Company that it has determined that it is no longer unlawful or impracticable for the Banks to make, maintain or fund Eurodollar Rate Advances and (ii) outstanding or requested Eurodollar Rate Advances shall be converted automatically into or made as, Base Rate Advances. The Company hereby agrees to pay to the Administrative Agent on behalf of any Bank upon demand of such Bank, any additional amounts necessary to compensate such Bank for any loss, cost or expense incurred by the Bank in connection with any Eurodollar Rate Advance as a result of any such illegality. A 19 certificate setting forth such cost, loss or expense submitted by the Bank to the Administrative Agent and the Company shall constitute such demand and shall be conclusive and binding. SECTION 2.18. Reinstatement of Letter of Credit. The consent of --------------------------------- the Banks shall not be required with respect to the automatic reinstatement of the Interest Component of a Letter of Credit resulting from a drawing under the Letter of Credit to pay interest on the Bonds (an "Interest Drawing"), except as provided in this Section 2.18. If the Company has not reimbursed the Banks in full for such Interest Payment by making payment to the Administrative Agent within five Business Days after an Interest Drawing, the Administrative Agent shall notify the Banks to such effect. Unless an Event of Default shall have been declared pursuant to Section 6.02, on the fifteenth calendar day after such Interest Drawing, or if such day will not be a Business Day, on the immediately preceding Business Day, the LC Bank shall deliver to the Trustee a written notice stating that the Banks have not been reimbursed for such drawing and that the Interest Component will not be reinstated, unless either (A) the Administrative Agent has received the necessary reimbursement payment by such fifteenth calendar day (or preceding Business Day, as the case may be) or (B) all of the Banks have in their respective sole discretion agreed that such notice shall not be sent and that the Interest Component shall consequently be allowed to automatically reinstate. ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Condition Precedent to Issuance of the Letters of ---------------------------------------------------- Credit. The obligation of the LC Bank to issue the Letters of Credit is - ------ subject to the conditions precedent that the Administrative Agent (in sufficient copies for each Bank) shall have received the following on or before the Date of the Issuance, each dated such date, in form and substance satisfactory to the Banks: (a) A copy of the Custodian Agreement, duly executed by the Company and the Trustee. (b) A copy of each Indenture, in each case duly executed by the Issuer and the Trustee. (c) A copy of each Financing Agreement, in each case duly executed by the Issuer and the Company. (d) A copy of each Bond Purchase Agreement and Remarketing Agreement, in each case duly executed by all parties thereto. (e) Certified copies of the resolutions of the Board of Directors of the Company approving this Agreement, the Letters of Credit and the Custodian Agreement and the transactions contemplated hereby and thereby, and of all other documents evidencing any other necessary corporate action. 20 (f) An original (or a duplicate copy certified by the Company in a manner satisfactory to the Administrative Agent to be a true copy) of the application filed by the Company for the PSC Order and of each governmental action and regulatory approval (including, without limitation, the PSC Order and approvals or orders of the Issuer and the PSC) necessary for the Company to enter into this Agreement, the Letters of Credit and the Custodian Agreement and for the transactions contemplated hereby and thereby. (g) A certificate of the Secretary or an Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and the other documents to be delivered by it hereunder. (h) A letter from Chapman and Cutler, Bond Counsel, addressed to the Banks and stating therein that the Banks may rely on the opinions of such firm delivered in connection with the transactions contemplated hereby. (i) A letter from Best, Best & Krieger, Special Counsel to the Company, addressed to the Administrative Agent and to each of the Banks and stating therein that the Banks may rely on the opinion of such firm delivered pursuant to Section 6(a)(i) of each Bond Purchase Agreement. (j) A letter from Richard L. Hinckley, Esq., General Counsel to the Company, addressed to the Administrative Agent and to each of the Banks and stating therein that the Banks may rely on his opinion delivered pursuant to Section 6(a)(i) of each Bond Purchase Agreement. (k) An opinion of Richard L. Hinckley, Esq., General Counsel to the Company, in substantially the form of Exhibit C hereto and as to such other matters as the Banks may reasonably request. (l) An opinion of Best, Best & Krieger, Special Counsel to the Company, in substantially the form of Exhibit D hereto and as to such other matters as the Banks may reasonably request. (m) Receipt by the Administrative Agent from the Company of (i) an executed copy of the Fee Letter and the fees provided for in the Fee Letter which by its terms are due and payable on or prior to the Date of Issuance, (ii) the letter of credit fee payable for the period from the Date of Issuance to December 31, 1995 and (iii) receipt by counsel to the Letter of Credit Bank of their fees and expenses incurred to date on behalf of the Administrative Agent and Letter of Credit Bank in connection with the negotiation and drafting of this Agreement and the Related Documents; provided that the fees of Hughes Hubbard & Reed, New York counsel to the Administrative Agent, will not exceed $17,500, plus disbursements. (n) Receipt by the Administrative Agent of a letter from Moody's or S&P assigning the rating of the LC Bank to the Bonds. 21 SECTION 3.02. Additional Conditions Precedent to Issuance of the --------------------------------------------------- Letters of Credit. The obligation of the LC Bank to issue the Letters of - ----------------- Credit shall be subject to the further conditions precedent that on the Date of Issuance: (a) The following statements shall be true and the Administrative Agent shall have received a certificate signed by an Authorized Representative of the Company, dated the Date of Issuance, stating that: (i) The representations and warranties contained in Section 4.01 of this Agreement are true and correct on and as of the Date of Issuance as though made on and as of such date; (ii) No event has occurred and is continuing, or would result from the issuance of the Letters of Credit, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse, or both; and (iii) No material adverse change in the financial condition, business, prospects or operations of the Company shall have occurred since June 30, 1995; (b) All legal matters incident to this Agreement and the Related Documents shall be reasonably satisfactory to counsel for the Administrative Agent; (c) There shall have been no introduction of or change in or in the interpretation of any Law that would make it unlawful or unduly burdensome for the LC Bank to issue the Letters of Credit, no outbreak or escalation of hostilities or other calamity or crisis, no suspension of or material limitation on trading on the New York Stock Exchange or any other national securities exchange, no declaration of a general banking moratorium by United States, California or French banking authorities, and no establishment of any new restrictions on transactions in securities or on banks materially affecting the free market for securities or the extension of credit by banks; and (d) The Banks shall have received such other approvals, opinions or documents as the Banks may reasonably request. SECTION 3.03. Conditions Precedent to Each Advance. The obligation ------------------------------------ of the Banks to make each Advance shall be subject to the conditions precedent that, on the date of such Advance, the following statements shall be true: (a) The representations and warranties contained in Section 4.01 of this Agreement are true and correct on and as of the date of such Advance as though made on and as of such date; and 22 (b) No event has occurred and is continuing, or would result from such Advance, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse, or both. Unless the Company shall have previously advised the Administrative Agent in writing that one or more of the statements contained in clauses (a) and (b) above is not true or will not be true on the date of such Advance, the Company shall be deemed to have represented and warranted, on and as of the date of such Advance, that the above statements are true. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Company. The --------------------------------------------- Company hereby represents and warrants, as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which the ownership of its Property and the conduct of its business makes such qualification necessary. The Company has all requisite power and authority to conduct its business as presently conducted and to own its Property. (b) The execution, delivery and performance by the Company of this Agreement and the Related Documents to which it is or is to be a party are within the Company's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Company's charter or by-laws or (ii) any Law, order, writ, judgment or similar restriction (including, without limitation, any order, rule or regulation of the PSC) or any contractual restriction binding on or affecting the Company, and do not result in or require the creation of any Lien (except as may be created under the Related Documents) upon or with respect to any of its Property. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Agency is required for the due execution, delivery and performance by the Company of this Agreement or any Related Document to which the Company is or is to be a party, except for the PSC Order, which, on the Date of the Issuance, has been duly obtained, is final and in full force and effect and has not been, is not and will not be the subject of appeal or reconsideration or other review. (d) This Agreement is, and the Related Documents to which the Company is a party are, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. Each of the Related Documents to which the Company is a party is in full force and effect and no party to such agreements has contested or challenged the validity or enforceability thereof or refused to perform its obligations thereunder. 23 (e) The Bonds have been duly authorized, authenticated and issued and delivered, and are the legal, valid and binding obligations of the Issuer. All payments of principal and interest on the Prior Bonds have been made on the due dates thereof and no Prior Bonds are in default. (f) The balance sheet (including the notes thereto) of the Company as at December 31, 1994 and the related statements of income and retained earnings of the Company for the fiscal year then ended, certified by Deloitte & Touche independent public accountants, in each case as set forth in the annual report of the Company contained in the Company's December 31, 1994 Report on Form 10-K as filed with the Securities and Exchange Commission, a copy of which has been furnished to each Bank, fairly present the financial condition of the Company as at such date and the results of the operations of the Company for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since December 31, 1994, there has been no material adverse change in the Company's financial condition, results of operations, business, properties, operations or prospects. (g) Except as disclosed in the Company's December 31, 1994 Report on Form 10-K as filed with the Securities and Exchange Commission, there is no pending or threatened action or proceeding affecting the Company or any of its Subsidiaries before any court, governmental agency or arbitrator, which is likely to have a Material Adverse Effect on the financial condition, results of operations, business, properties, operations or prospects of the Company and its Subsidiaries, taken as a whole, and there has occurred no material adverse developments in any such action or proceeding so disclosed. (h) No proceeds of any drawing under any Letter of Credit will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) The Company is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any drawing under any Letter of Credit will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock. (j) No Termination Event has occurred nor is reasonably expected to occur with respect to any Plan. (k) Schedule B (Actuarial Information) to the 1994 annual report (Form 5500 Series) of the Company with respect to each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Banks, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (l) Neither the Company nor any of its Affiliates has incurred, or reasonably expects to incur, any withdrawal liability under ERISA to any Multiemployer Plan. 24 (m) Neither the Company nor any of its Affiliates has incurred or reasonably expects to incur material liability under Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(l) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code. (n) The Company and each Subsidiary have filed all tax returns (Federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, other than such taxes that the Company or its Subsidiary is contesting in good faith and by appropriate legal proceedings and for which adequate reserves have been set aside on the books of the Company or such Subsidiary in accordance with generally accepted accounting principles. (o) Neither the Company nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument which would have a Material Adverse Effect on the ability of the Company to perform its obligations under this Agreement or any of the Related Documents to which it is, or is to be, a party. (p) Except for information describing the LC Bank contained in the Preliminary Official Statement, the Official Statement or any other offering document relating to the Bonds, as to which no representation is made, such Official Statement, such Preliminary Official Statement and such other offering document was, and any supplement or amendment thereof shall be, accurate in all material respects for the purposes for which its use was or shall be authorized; and such Official Statement, Preliminary Official Statement and such other offering document as of its date did not, and any such supplement or amendment shall not, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (q) Environmental Compliance. Except as set forth in Schedule ------------------------ 4.01(q) hereto: (1) the operations of the Company and of each of its Subsidiaries (including, without limitation, all operations and conditions at or in the facilities currently used by the Company and its Subsidiaries) comply in all material respects with all Environmental Laws; (2) neither the Company nor any of its Subsidiaries has received (A) any notice or claim to the effect that it is or may be liable to any person as a result of the Release or threatened Release of any Hazardous Material or (B) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Subsection 9604) or comparable state laws, and to the best of the Company's knowledge, none of the operations of the Company or any of its Subsidiaries is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a Release or threatened Release of any Hazardous Material at any facility or at any other location; 25 (3) the Company and each of its Subsidiaries and all of their respective facilities or operations are not subject to any outstanding written order or agreement with any governmental authority or private party respecting (A) any Environmental Law or (B) any Environmental Claim; (4) neither the Company nor any of its Subsidiaries has any contingent obligation in connection with any Release of any Hazardous Material by the Company or any of its Subsidiaries; (5) except in the ordinary course of its business and in compliance with all Environmental Laws, neither the Company nor any of its Subsidiaries nor any predecessor of the Company or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment or disposal of any Hazardous Material at any facility, and none of the Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent or of any other Hazardous Material; (6) no Hazardous Material exists on, under or around any facility in a manner that could give rise to an Environmental Claim resulting in a material adverse effect on the financial condition or operations of the Company, and neither the Company nor any of its Subsidiaries has filed any notice or report of a Release of any Hazardous Materials that could give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company; (7) neither the Company nor any of its Subsidiaries (nor any of their respective predecessors) has disposed of any Hazardous Material in a manner that may give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company; and (8) neither the Company nor any of its Subsidiaries maintains any underground storage tanks or surface impoundments in a manner that may give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company. (r) The representations and warranties contained in Article IV of the Principal Facility are true and correct in all material respects as if made on the date hereof. 26 ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. Affirmative Covenants. So long as(i) the Commitment --------------------- Termination Date has not yet occurred, (ii) any drawing is available under a Letter of Credit, or (iii) the Company shall have any obligation to pay any amount to the Banks hereunder, the Company will, unless the Required Banks shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each of its ------------------------- Subsidiaries to comply, in all material respects, with all applicable Laws, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its Property, except to the extent that any such non- compliance would not, individually or in the aggregate, have a Material Adverse Effect on the financial condition, results of operations, operations, business or credit of the Company or its ability to perform its obligations hereunder or under any Related Document to which it is or is to be a party. (b) Visitation Rights. At any reasonable time and from time to ----------------- time, permit the Administrative Agent or the LC Bank or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the Property of, the Company and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Company and any of its Subsidiaries, with any of their respective officers or directors or with the independent auditors of the Company. (c) [Intentionally Omitted] (d) [Intentionally Omitted] (e) Reporting Requirements. Furnish to the Administrative Agent ---------------------- (with sufficient copies for each Bank) the following: (i) as soon as possible and in any event within five Business Days after the occurrence of each Event of Default and each event which, with the giving of notice, lapse of time, or both, would constitute any such Event of Default, the statement of an Authorized Representative of the Company setting forth details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (ii) as soon as available and in any event within 45 days after the close of each of the first three Fiscal Quarters in each Fiscal Year of the Company: (A) an unaudited balance sheet of the Company as at the end of such quarter and statements of income and retained earnings of the Company for the period commencing at the end of the previous Fiscal 27 Year and ending with the end of such quarter, fairly presenting the financial condition of the Company as at such date and the results of operations of the Company for such period and setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer (or the designee of such officer) of the Company as having been prepared in accordance with generally accepted accounting principles consistently applied (it being understood and agreed that the delivery by the Company to the Administrative Agent within such 45-day period of the Company's Quarterly Report on Form 10-Q for such quarter, as filed with the Securities and Exchange Commission, containing such balance sheet and statements shall be deemed to satisfy the requirements of this subparagraph (A)); and (B)a certificate of the chief financial officer (or the designee of such officer) of the Company setting forth the calculation of the ratios contemplated by this Agreement, as of the date of the most recent financial statements accompanying such certificate, to show the Company's compliance with or the status of the financial covenants, agreements, representations and warranties contained herein, and a certificate of such officer (or such designee) stating whether he or she has any knowledge of the occurrence at any time prior to the date of such certificate of any Event of Default not previously reported pursuant to the provisions of paragraph (i) of this subsection (e), or of the occurrence at any time prior to such date of any event, except events previously reported pursuant to the provisions of paragraph (i) of this subsection (e) and remedied, which, with notice or lapse of time, or both, would constitute an Event of Default and, if so, setting forth the details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (iii) (A) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Company, a copy of the annual report for such year for the Company, containing financial statements for such year certified in a manner acceptable to the Required Banks by Deloitte & Touche or other independent public accountants acceptable to the Required Banks (it being understood and agreed that the delivery by the Company to the Administrative Agent within such 90-day period of the Company's Annual Report on Form 10-K for such year, as filed with the Securities and Exchange Commission, containing such financial statements shall be deemed to satisfy the requirements of this subparagraph (A)), and (B) a certificate of the chief financial officer (or the designee of such officer) of the Company setting forth the calculation of the ratios contemplated by this Agreement, as of the date of the most recent financial statements accompanying such certificate, to show the Company's compliance 28 with or the status of the financial covenants, agreements, representations and warranties contained herein, and a certificate of such officer (or such designee) stating whether he or she has any knowledge of the occurrence at any time prior to the date of such certificate of any Event of Default not previously reported pursuant to the provisions of paragraph (i) of this subsection (e), or of the occurrence at any time prior to such date of any such event, except events previously reported pursuant to the provisions of paragraph (i) of this subsection (e) and remedied, which, with notice or lapse of time, or both, would constitute an Event of Default and, if so, setting forth the details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports which the Company or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (v) as soon as possible and in any event (i) within 30 days after the Company or any Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within ten days after the Company or any Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer (or the designee of such officer) of the Company describing such Termination Event and the action, if any, which the Company or such Affiliate proposes to take with respect thereto; (vi) promptly and in any event within two Business Days after receipt thereof by the Company or any Affiliate from the PBGC, copies of each notice received by the Company or any such Affiliate concerning the PBGC's possible intention to terminate any Plan or to have a trustee appointed to administer any Plan; (vii) promptly and in any event within ten Business Days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan which is a pension plan (other than a Multiemployer Plan) maintained or contributed to for employees of the Company or any Affiliate, which provides payments at, or defers receipt of payment until, retirement and is subject to Title IV of ERISA; (viii) promptly and in any event within ten Business Days after receipt thereof by the Company or any Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by the Company or any Affiliate concerning (A) the imposition of withdrawal liability by a Multiemployer Plan pursuant to Section 4202 of ERISA, (B) the determination that a Multiemployer 29 Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or expected to be incurred, by the Company or any Affiliate in connection with any event described in clause (A), (B) or (C), above; (ix) promptly and in any event within two Business Days after the Company or any Affiliate knows or has reason to know that it has incurred or could reasonably expect to incur material liability under Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(1) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code; and (x) such other information respecting the condition or operations, financial or otherwise, of the Company or any of its Subsidiaries as the Administrative Agent or the LC Bank may from time to time reasonably request. (f) Maintenance of Insurance. Maintain, and cause each of its ------------------------ Subsidiaries to maintain, insurance (subject to customary deductibles and retentions) with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates and, upon the written request of the Administrative Agent at the request of a Bank, (1) deliver to the Administrative Agent on behalf of such Bank a certificate of an Authorized Representative of the Company specifying the details of such insurance in effect or (2) cause its insurance agent to deliver to the Administrative Agent a certificate specifying the details of such insurance in effect. (g) Preservation of Corporate Existence, Etc. Except to the ------------------------------------------ extent not prohibited by Section 5.02(c), preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), franchises and, to the extent required in connection with its operations, foreign qualifications. (h) Keeping of Books. Keep, and cause each of its Subsidiaries ---------------- to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its Subsidiaries in accordance with generally accepted accounting principles consistently applied. (i) Maintenance of Properties, Etc. Maintain and preserve, and ------------------------------- cause each of its Subsidiaries to maintain and preserve, all of its Property which is used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (j) Performance and Compliance with Other Covenants. Perform and ----------------------------------------------- comply with each of the covenants to be performed by the Company, as set forth in Articles II, III, IV, V, VI and VII of each Financing Agreement, without giving effect to any subsequent amendment, modification or termination thereof after the date hereof, unless such amendment, modification, or termination was consented to by the Required Banks. 30 (k) Accounting Method. Continue to account for its Subsidiaries ----------------- according to the equity method of accounting. SECTION 5.02. Negative Covenants. So long as (i) the Commitment ------------------ Termination Date has not yet occurred, (ii) any drawing is available under a Letter of Credit, or (iii) the Company shall have any obligation to pay any amount to the Banks hereunder, the Company will not, and will not permit any of its Subsidiaries to, without the written consent of the Required Banks: (a) [Intentionally Omitted] (b) Sales, Etc. of Assets. Sell, lease, transfer or otherwise --------------------- dispose of, directly or indirectly, whether in one transaction or in a series of transactions, all or any substantial part of the assets of the Company or any of its Subsidiaries, including, without limitation, all or substantially all assets constituting the business of a division, branch or other unit operation, except in the ordinary course of business as presently conducted or in a transaction not prohibited by subsection (c) below. (c) Mergers, Etc. Merge or consolidate with or into, or acquire ------------ all of the assets of, any other Person, except that (i) any Subsidiary may merge or consolidate with or into, or acquire assets from, any other Subsidiary, (ii) any Subsidiary may merge into the Company and (iii) the Company may merge with or into, and any Subsidiary may merge or consolidate with or into, any other Person; provided, however, that (A) in the case of any such merger, consolidation or acquisition, both immediately before and after giving effect thereto, no Event of Default or event which, with the passage of time or the giving of notice, or both, would constitute an Event of Default shall have occurred and be continuing, (B) in the case of any consolidation referred to in clause (i) or ( iii) above , the corporation formed by such consolidation shall be a Subsidiary of the Company, and (C) in the case of any merger to which the Company is a party, either the Company is the surviving corporation or the corporation into which the Company shall be merged shall (1) assume the Company's obligations under this Agreement and the Related Documents to which it is, or is to be, a party in a writing in form and substance satisfactory to the Administrative Agent, (2) demonstrate to the satisfaction of the Administrative Agent compliance with the covenants set forth in Section 5.02(h) and (i) below, calculated on a pro forma basis as of the last day of the immediately preceding fiscal quarter and giving effect to such merger as if such corporation were the Company and the Company were its Subsidiary and (3) enter into written amendment to this Agreement in form and substance satisfactory to the Administrative Agent for the purpose of conforming, as closely as possible, the substance of Articles III through VI of this Agreement to the corporate structure of such corporation and its Subsidiaries after giving effect to such merger. (d) Related Documents. Amend or modify any Related Document to ----------------- which the Company is or is to be a party or consent to any amendment or modification of any Related Document to which the Company is not party. (e) Compliance with ERISA. (i) Terminate, or permit any Affiliate --------------------- to terminate, any Plan so as to result in any material (in the opinion of the Required Banks) liability of the 31 Company, or (ii) permit to exist any occurrence of any Reportable Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Required Banks) risk of a Plan termination by the PBGC. (f) Alternate Credit Facility. Cause a substitute letter of ------------------------- credit or other similar facility to be delivered to the Trustee in substitution of a Letter of Credit without paying to the Banks all obligations hereunder following the Cancellation Date. (g) Optional Redemption of Bonds. Cause an optional redemption ---------------------------- of any Bonds without providing for the payment of all amounts due or to become due to the Banks hereunder. (h) Common Equity. Permit Total Common Shareholders Equity, as ------------- of the last day of any Fiscal Quarter, to be less than $575,000,000, plus ---- thirty-three and one third percent (33 1/3%) of the net cash proceeds to the Company of any permanent equity capital of the Company issued following the Date of Issuance. (i) Total Debt to Total Capitalization. Permit the ratio of ---------------------------------- Total Debt to Total Capitalization, as of the last day of any Fiscal Quarter, to be greater than 0.65 to 1.00. (j) Amendments to Certain Agreements. Amend the First Mortgage -------------------------------- Bond Indenture in a manner which is adverse to the interests of the Banks or, in any event, to change the definition or means of application of the definition of "Excluded Property" used therein. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. The occurrence of any of the ----------------- following events shall be an "Event of Default" hereunder: (a) The Company shall fail to pay any amount payable under any provision of Article II when due; or (b) Any representation or warranty made, or deemed made, by the Company herein or by the Company (or any of its officers) in connection with this Agreement or any of the Related Documents shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Company shall fail to perform or observe any of its covenants and agreements contained in Section 5.02 hereof; or (d) The Company shall fail to perform or observe any other covenant or agreement contained in this Agreement or the Custodian Agreement and, in any such case, such failure shall continue for ten Business Days after written notice thereof from the Administrative Agent to the Company; or 32 (e) The Company or any of its Subsidiaries shall fail to pay any Debt (excluding Debt under this Agreement) of the Company or such Subsidiary (as the case may be), when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other default under any agreement or instrument relating to any such Debt, or any other default or event shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (f) A judgment or order for the payment of money in excess of $5,000,000 shall be rendered against the Company or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of ten consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any approval of the PSC (including the PSC Order) or any governmental body, public board or public body related to this Agreement or the Custodian Agreement shall be modified, rescinded, revoked or set aside or otherwise cease to remain in full force and effect or shall otherwise not authorize the entirety of the Advances and other amounts outstanding hereunder; or (h) Any provision of this Agreement or the Custodian Agreement shall at any time for any reason cease to be valid and binding on the Company, or shall be declared to be null and void, or the validity or enforceability thereof shall be denied or contested by the Company, or a proceeding shall be commenced by any Governmental Agency having jurisdiction over the Company seeking to establish the invalidity or unenforceability thereof, or the Company shall deny that it has any further liability or obligation thereunder; or (i) Any "Event of Default" under and as defined in any Financing Agreement or an Indenture shall have occurred and be continuing; or (j) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Company by the Administrative Agent, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $10,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the Company's or any Affiliate's withdrawing employer's proportionate share of such excess shall exceed such amount); or (k) The Company or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that 33 such employer has incurred a withdrawal liability in an aggregate amount exceeding $10,000,000; or (l) The Company or any of its Affiliates shall incur liability in an aggregate amount exceeding $10,000,000 pursuant to any one or more of Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(1) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code; or (m) The Company or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its Property; or the Company or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (m); or (n) Any event which materially and adversely affects the financial condition or results of operations of the Company or the ability of the Company to observe and perform the terms of this Agreement or any Related Document to which the Company is or is to be a party shall have occurred and be continuing. SECTION 6.02. Upon an Event of Default. If any Event of Default ------------------------ shall have occurred and be continuing, the Administrative Agent, at the request of the LC Bank or the Required Banks, shall (i) if the Letters of Credit shall not have been issued, by notice to the Company declare the Commitment to be terminated, whereupon the same shall forthwith terminate, (ii) if the Letters of Credit shall have been issued, notify the Trustee of such Event of Default and direct that the Trustee either (A) declare the mandatory purchase of all Bonds then outstanding pursuant to Section 4.02(a)(iv) of each Indenture or (B) accelerate the Bonds pursuant to Section 9.02 of each Indenture, which direction to accelerate the Bonds will state that the Letters of Credit will terminate on the 10th business day (as defined in the Indenture) following the Trustee's receipt of such notice, and, in either case, provide a copy of such notice to the Company and the Issuer, (iii) if the Administrative Agent shall have directed the Trustee to declare the mandatory purchase of all Bonds under Section 4.02(a)(iv) of each Indenture pursuant to the immediately preceding clause (ii) (A), in a subsequent notice to the Trustee, notify the Trustee of the determination to terminate the Letters of Credit on the 10th business day (as defined in the Letters of Credit) following the Trustee's receipt of such notice, (iv) if the Letters of Credit shall have been issued and a drawing to pay interest on the Bonds shall have been made thereunder (other than such a drawing in respect of the payment of interest upon scheduled or accelerated maturity, or redemption, of the Bonds), notify the Trustee prior to the sixteenth day following such drawing that the Interest Component in the amount of such drawing will not be reinstated, (v) declare the Advances and all other principal amounts outstanding hereunder, all interest thereon and all other amounts payable hereunder to be forthwith due and 34 payable, whereupon the Advances and all other principal amounts outstanding hereunder, all such interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company, and (vi) exercise in respect of the Pledged Bonds, in addition to other rights and remedies provided for herein or in the Custodian Agreement or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at that time; provided, however, that -------- ------- in the event of an actual or deemed entry of an order for relief with respect to the Company or any of its Subsidiaries under the Federal Bankruptcy Code, (A) the Commitment (if the Letters of Credit have not been issued) and the obligation of the Banks to make Advances shall automatically be terminated, and (B) the Advances and all amounts reimbursable on demand pursuant to Section 2.04, all interest accrued and unpaid thereon and all other amounts payable hereunder shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company. Upon the occurrence of an Event of Default hereunder, all amounts payable hereunder shall bear interest at the Default Rate. ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc. No amendment or waiver of any --------------- provision of this Agreement, or any Letter of Credit, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Company and the Required Banks and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless it - -------- is in writing and signed by all the Banks, do any of the following: (a) increase the amount of a Letter of Credit (other than reinstatements expressly provided for in a Letter of Credit and herein) or otherwise amend a Letter of Credit, extend the Stated Termination Date then in effect, or subject the Banks to any additional obligations, (b) reduce the principal of, or interest on, the Reimbursement Obligations or any fees or other amounts payable hereunder (except fees payable to the Administrative Agent or the LC Bank), (c) postpone any date fixed for any payment of principal of, or interest on, the Reimbursement Obligations or any fees or other amounts payable hereunder (except fees payable to the Administrative Agent or the LC Bank), (d) change the percentage of the Shares or the number of Banks that shall be required for the Banks or any of them to take any action hereunder, (e) release any collateral for the obligations of the Company under this Agreement (except as contemplated by the Custodian Agreement), or (f) amend this Section 7.01 or Section 7.14; provided, further that no amendment, waiver or consent shall, unless in - -------- ------- writing and signed by the LC Bank, affect the rights and duties of the LC Bank under this Agreement. SECTION 7.02. Notices, Etc. All notices and other communications ------- --- provided for hereunder shall be in writing (including telegraphic communication) and mailed, telecopied, telexed, telegraphed or delivered, if to the Company, to it at its address at 6226 West Sahara Avenue, P.O. Box 230, Las Vegas, Nevada 89151, Attention: Mr. Richard C. Schmalz, Director, 35 Treasury, telecopy no. (702) 367-5864; and if to the LC Bank, to it at its address at 2029 Century Park East, Suite 2900, Los Angeles, California 90067, Attention: Minerva Arvisu, telecopy number (310) 203-0539 and if to the Administrative Agent to it at its address at 2029 Century Park East, Suite 2900, Los Angeles, California 90067 Attention: Hillary Adkins, telecopy number. (310) 203-0539; and if to the Banks to the address of each Bank specified on Schedule 7.02 hereto; or, as to each party, at such other address or telecopy number as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed, telecopied, telexed or telegraphed, be effective when deposited in the mails or sent by telecopy or telex or delivered to the telegraph company, respectively, addressed as aforesaid, except that notices to the Administrative Agent and Banks pursuant to the provisions of Article II shall not be effective until received by the Administrative Agent and Banks. SECTION 7.03. No Waiver: Remedies. No failure on the part of the ------------------- Administrative Agent or the Banks to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 7.04. Right of Set-off. (a) Upon the occurrence and ---------------- during the continuance of any Event of Default, the Administrative Agent and each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Administrative Agent or such Bank to or for the credit or the account of the Company against any and all of the obligations of the Company now or hereafter existing under this Agreement, irrespective of whether or not the Administrative Agent or such Bank shall have made any demand hereunder and although such obligations may be contingent or unmatured. The rights of the Administrative Agent and the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or the Banks may have. (b) The Administrative Agent and each Bank agrees promptly to notify the Company after any such set-off and application referred to in subsection (a) above; provided that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 7.05. Indemnification. The Company hereby indemnifies --------------- and holds the Administrative Agent and each Bank, and their officers, directors, employees and agents harmless from and against any and all claims, damages, losses, liabilities, costs and expenses which they may incur or which may be claimed against the Administrative Agent or the Banks; or their respective officers, directors, employees and agents by any Person: (a) by reason of or in connection with the execution, delivery or performance of, or the sale or resale of, the Bonds including those resulting from any misstatement in or omission from any official statement or other offering document or supplement thereto relating to the Bonds (except any misstatement in or omission resulting from information furnished in writing by the LC Bank expressly for inclusion in such offering documents), the Indentures, or the 36 Financing Agreements, or any transaction contemplated by the Indentures or the Financing Agreements, other than as specified in subsection (b) below; or (b) by reason of or in connection with the execution and delivery, transfer or use of the proceeds of, or payment or failure to make payment under, a Letter of Credit; provided, however, that the Company shall -------- ------- not be required to indemnify the Administrative Agent or the Banks pursuant to this Section 7.05(b) for any claims, damages, losses, liabilities, costs or expenses to the extent caused by (i) the LC Bank's willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit are genuine or comply with the terms of a Letter of Credit or (ii) the LC Bank's willful or grossly negligent failure to make lawful payment under a Letter of Credit after the presentation to it by the Trustee under the related Indenture of a draft and certificate strictly complying with the terms and conditions of such Letter of Credit. (c) The Company will also indemnify and hold harmless the Administrative Agent and the Banks from and against all losses and reasonable costs or expenses which the Administrative Agent and the Banks may incur by reason of either (i) any failure of the related Remarketing Agent to pay when due the purchase price of any Bond for which such Remarketing Agent has given the notice referred to in paragraph (1) of Exhibit 4 of a Letter of Credit and/or (ii) any failure by the Trustee promptly to turn over to the LC Bank in accordance with the provisions of an Indenture the proceeds from the sale of any such Bond received from the Remarketing Agent. The Company shall pay to the Administrative Agent any such amounts not paid by a Remarketing Agent or the Trustee, as the case may be, upon demand. Nothing in this Section 7.05 is intended to limit the Company's obligations contained in Article II. Without prejudice to the survival of any other obligation of the Company hereunder, the indemnities and obligations of the Company contained in this Section 7.05 shall survive the payment in full of amounts payable pursuant to Article II and the termination of the Letters of Credit. SECTION 7.06. Banks Not Liable. (a) The Company assumes all ---------------- risks of the acts or omissions of the Trustee, any Remarketing Agent and any beneficiary or transferee of a Letter of Credit with respect to its use of the Letter of Credit. Neither the Banks, the Administrative Agent, nor any of their officers, directors, employees or agents shall be liable or responsible for: (a) the use which may be made of a Letter of Credit or any acts or omissions of the Trustee and any other beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the LC Bank against presentation of documents which do not comply with terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under a Letter of Credit, except that the Company shall have a ------ claim against the LC Bank, and the LC Bank shall be liable to the Company, to the extent of any direct, as opposed to consequential, damages suffered by the Company which the Company proves were caused by (i) the LC Bank's willful misconduct or gross negligence in determining whether documents 37 presented under a Letter of Credit are genuine or comply with the terms of the Letter of Credit or (ii) the LC Bank's willful or grossly negligent failure to make lawful payment under a Letter of Credit after the presentation to it by the Trustee under an Indenture of a draft and certificate strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the LC Bank may accept original or facsimile (including telecopy) sight drafts and accompanying certificates presented under a Letter of Credit that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (b) Neither the Administrative Agent nor the Banks shall have any liability to the Company, and the obligations of the Company under this Agreement shall not be affected by (1) the form, sufficiency, correctness, validity, genuineness and legal effect of any drafts, demands and other documents, instruments and other papers relating thereto, (2) the good faith and acts of any Person, (3) the existence, form, sufficiency and breach of contracts of any nature whatsoever, including the Related Documents, (4) the solvency, standing and responsibility of any Person, (5) any delay in giving or failure to give any notice, demand or protest, (6) failure of any Person to comply with the terms of a Letter of Credit, (7) errors, omissions or delays in or nondelivery of any message, however sent, and (8) any other error, neglect or omission, except as provided in the next to last sentence of paragraph (a) of this Section. (c) Neither the Administrative Agent nor the Banks shall have any liability to the Company for, and the Company waives any right to object to, payment made under a Letter of Credit against a demand varying in punctuation, capitalization, spelling or similar matters of form. The determination whether a demand has been made before the expiration of a Letter of Credit and whether a demand is in proper and sufficient form for compliance with a Letter of Credit shall be made by the LC Bank in its sole discretion, which determination shall be conclusive and binding upon the Company except as otherwise expressly provided in this Agreement. SECTION 7.07. Costs, Expenses and Taxes. The Company agrees to ------------------------- pay on demand all costs and expenses in connection with the preparation, execution, delivery, filing, recording, and administration (including any amendment or waiver) of this Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and LC Bank, and local counsel who may be retained by said counsel, with respect thereto and with respect to advising the Administrative Agent and LC Bank as to its rights and responsibilities under this Agreement and such other documents which may be delivered in connection with this Agreement and all costs and expenses (including counsel fees and expenses) in connection with (i) the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and such other documents which may be delivered in connection with this Agreement (and, upon the occurrence of an Event of Default, all such costs and expenses of the Banks) or (ii) any action or proceeding relating to a court order, injunction, or other process or decree restraining or seeking to restrain the Administrative Agent and LC Bank from paying any amount under any Letter of Credit. In addition, the Company shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the 38 execution, delivery, filing and recording of this Agreement or the Letters of Credit or any of such other documents, and agrees to save the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 7.08. Binding Effect. This Agreement shall become -------------- effective when it shall have been executed and delivered by the Company, the Administrative Agent and the Banks and thereafter shall be binding upon and inure to the benefit of the Company, the Administrative Agent and the Banks and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Administrative Agent and the Banks. SECTION 7.09. Severability. Any provision of this Agreement ------------ which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. SECTION 7.10. Governing Law; Submission to Jurisdiction; Etc. --------------------------------------------------- This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to choice of law provisions. Any action or proceeding arising out of or relating to this Agreement or the Letter of Credit shall be heard and determined in an appropriate state or federal court in the State of New York, New York County. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. The Company also irrevocably consents to the service of any and all process in any such suit, action or proceeding by mailing of copies of such process to the Company at its address provided in Section 7.02. The Company agrees that a final judgment not stayed in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under this Section 7.10 shall be by certified mail, return receipt requested. Nothing in this Section 7.10 shall affect the right of the Administrative Agent or the Banks to serve legal process in any other manner permitted by law or affect the right of the Banks to bring any suit, action or proceeding against the Company or its property in the courts of any other jurisdiction. SECTION 7.11. Headings. Section headings in this Agreement are -------- included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. SECTION 7.12. Counterparts. This Agreement may be executed by ------------ the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 7.13. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO -------------------- THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR 39 INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. THE PARTIES HERETO (A) CERTIFY THAT NO REPRESENTATIVE OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGE THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. SECTION 7.14. Participation and Assignment. (a) Each Bank may, ---------------------------- without the consent of the Company, sell participations to one or more banks or other financial institutions (each a "Participant") in all or a portion of its rights and obligations under this Agreement; provided, however, (i) -------- ------- such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the Company for the performance of such obligations, (iii) except as expressly set forth herein, any such Participant shall be entitled to the benefit of the cost and fee protection and indemnification provisions contained in Sections 2.07, 2.08, 2.14, 2.15, 2.16, 7.04, 7.05 and 7.07 to the same extent as if the Participant were such Bank hereunder, and (iv) such Bank shall retain the sole right to approve any amendment, modification or waiver of any provisions of this Agreement or any Related Document (other than amendments, modifications, releases or waivers with respect to any amounts payable hereunder or the amount of principal of or the rate at which interest is payable hereunder or the dates fixed for payments of interest or fees or the date of termination or expiration of any Letter of Credit or any change to the Stated Amount thereof). (b) Each Bank may assign all or a portion of its rights and obligations under this Agreement, in the Letters of Credit or in any security hereunder, including, without limitation, any instruments securing the Company's obligations hereunder; provided that (i) no assignment by any -------- Bank may be made to any Person, except with the prior written consent of the LC Bank, (ii) any assignment shall be of a constant and not a varying percentage of all of the assignor's rights and obligations hereunder, and (iii) the parties to such assignment shall execute and deliver to the Administrative Agent an instrument of assignment (an "Assignment") in form and substance satisfactory to the Administrative Agent and the LC Bank, together with a processing fee of $3,000 for the Administrative Agent's account. Upon receipt of a completed Assignment and the processing fee, the Administrative Agent will record in a register maintained for such purpose the name of the assignee and the percentage participation interest assigned by the assignor and assumed by the assignee for purposes of the determination of such assignor's and assignee's respective Shares. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment, which effective date shall be at least five Business Days after the execution thereof, the assignee shall, to the extent of such assignment, become a party hereto and have all of the rights and obligations of a Bank hereunder, including without limitation a right to share in the proceeds of any amount realized under any security documents with respect to the interest acquired, and, to the extent of such assignment, such assigning Bank shall be released from its obligations hereunder (without relieving such Bank 40 from any liability for damages, costs and expenses suffered by the Administrative Agent, the LC Bank or the Company as a result of the failure by such Bank to perform its obligations hereunder). (c) A Bank may disclose to any Participant or proposed Participant, or any assignee or proposed assignee, any information that the Company has delivered or is required to deliver to such Bank pursuant to this Agreement or the other Related Documents. (d) Nothing herein shall limit a Bank's right to assign its interests hereunder to a Federal Reserve Bank. (e) The LC Bank hereby acknowledges and agrees that it shall remain solely liable under the Letters of Credit notwithstanding any sale or transfer contemplated by this Section 7.14. ARTICLE VIII SYNDICATION SECTION 8.01. Syndication. (a) In the event that the LC Bank ----------- shall make any payment under a Letter of Credit and the Company shall not reimburse the LC Bank by 3:00 p.m. (New York City time) on the same Business Day in full for such payment in accordance with Section 2.04 (the difference between the amount of such payment and the amount reimbursed by the Company being the "Principal Amount"), the LC Bank will immediately notify each of the Banks of such Principal Amount and each Bank will immediately on the same Business Day and unconditionally pay to the LC Bank an amount equal to its Share of the Principal Amount in United States dollars and in same day funds in payment for its Share of the Reimbursement Obligations with respect to such Principal Amount, plus compensation, payable on demand, from and including the date when such amount is due to, but not including, the date such amount is paid at the Federal Funds Rate, in effect from time to time. (b) Upon payment in full by a Bank of its Share of the Reimbursement Obligations pursuant to Section 8.01(a), such Bank shall have purchased an assignment of its Share of the right, title and interest of the LC Bank in and to such Reimbursement Obligations, without recourse, representation or warranty, and shall to the extent of such Share, be a direct creditor of the Company. (c) If any Bank shall default in the payment when due of its Share of any Reimbursement Obligations, in addition to any other claim or remedy the LC Bank may have against such Bank, such Bank shall not be entitled to receive any payments pursuant to this Agreement or otherwise have any other rights hereunder or under the Related Documents until all amounts due and payable by such Bank to the LC Bank hereunder shall have been paid in full. SECTION 8.02. Sharing of Payments. If any Bank shall obtain any ------------------- payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on 41 account of the Reimbursement Obligations in excess of its ratable share of payments on account of the Reimbursement Obligations obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in the Reimbursement Obligations as shall be necessary to cause such purchasing Bank to share such excess payment ratably with each of them, provided, however, that, if all or any portion of such excess -------- ------- payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (i) the amount of such Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 8.02 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. ARTICLE IX THE ADMINISTRATIVE AGENT AND THE LC BANK SECTION 9.01. Authorization and Action. Each Bank hereby appoints ------------------------ and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Related Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Reimbursement Obligations), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Banks or the Required Banks, as applicable, and such instructions shall be binding upon all Banks; provided, -------- however, that the Administrative Agent shall not be required to take any - ------- action that exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Bank prompt notice of each written notice given to it by the Company, the Trustee, or the LC Bank pursuant to the terms of this Agreement or the Indenture. SECTION 9.02. Administrative Agent's Reliance, Etc. Neither the ------------------------------------- Administrative Agent, the LC Bank, nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any Related Document, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each of the Administrative Agent and the LC Bank: (i) may consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representations to any Bank and shall not be responsible to any Bank for any statements, warranties or representations 42 (whether written or oral) made in or in connection with this Agreement or any Related Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any Related Document on the part of the Company or to inspect the property (including the books and records) of the Company; (iv) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any Related Document or any other instrument r document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this agreement or any Related Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 9.03. Bank Credit Decision. Each Bank acknowledges that -------------------- it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements referred to in Section 4.01(f) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 9.04. Indemnification. The Banks agree to indemnify the --------------- Administrative Agent and the LC Bank (to the extent not reimbursed by the Company), ratably according to their respective Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent or the LC Bank in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent or the LC Bank under this Agreement or the Related Documents; provided that -------- no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or the LC Bank's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent and the LC Bank promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent or the LC Bank in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent or the LC Bank is not reimbursed for such expenses by the Company. SECTION 9.05. Societe Generale and affiliates. With respect to ------------------------------- its Share and the Reimbursement Obligations held by it, Societe Generale shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Societe Generale in its individual capacity. Societe Generale and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally 43 engage in any kind of business with, the Company, any of its subsidiaries and any Person who may do business with the Company or any such subsidiary, all as if Societe Generale were not the Administrative Agent and without any duty to account therefor to the Banks. SECTION 9.06. Successor Administrative Agent. The Administrative ------------------------------ Agent may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time for cause by the agreement of all of the Banks; provided that solely for purposes hereof if the same -------- entity is the LC Bank and the Administrative Agent then the agreement of the LC Bank shall not be required. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Administrative Agent subject to the approval of the Company. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the removal of the retiring Administrative Agent, then the retiring Administrative Agent after consultation with the Company may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If at any time there shall be no Person serving as Administrative Agent under this Agreement, then the LC Bank shall be the Administrative Agent hereunder until a successor is appointed in accordance herewith. 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized representatives as of the date first above written. NEVADA POWER COMPANY By: R.C. Schmalz ----------------------------------- Title: Director, Treasury SOCIETE GENERALE, LOS ANGELES BRANCH, as Administrative Agent and LC Bank By: George Chen ------------------------------------ Title: Vice President George Chen THE LONG TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, as a Bank By: Mike Thieme ------------------------------------ Title: Deputy General Manager THE BANK OF CALIFORNIA, N.A., as a Bank By: Susan K. Johnson ------------------------------------ Title: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY, as a Bank By: S.C. Schumacher ----------------------------------- Title: Sr. Vice President and Chief Manager BANK OF MONTREAL, as a Bank By: Warren R. Wimmer ----------------------------------- Title: Warren R. Wimmer Director BANK HAPOALIM B.M., as a Bank By: Jonathan Kulka Peter Dovas ----------------------------------- Title: First Vice Peter Dovas President and Vice President Branch Manager Schedule 4.01(q) [Environmental Disclosure] NONE Schedule 7.02 [Addresses and information for Banks] Bank Share Address Wire Information - ---- ----- ------- ---------------- Bank Hapoalim B.M. 12.4263% 1515 Market Street Federal Reserve Bank Philadelphia, PA 19102 of Philadelphia Attn: Ellen Frank Acct: Bank Hapoalim Tel: (215) 665-2251 B.M. Fax: (215) 665-2217 ABA #: 036001581 Ref: Nevada Power Bank of Montreal 12.4263% 601 South Figueroa St. Harris Trust & Savings Suite 4900 Bank Los Angeles, CA Chicago, Illinois 90017 ABA #: 071-000-288 Attn: Warren R. Wimmer Acct #: 124856-6 Tel: (213) 239-0633 For Credit to: Fax: (213) 239-0680 Bank of Montreal Letters of Credit Account Ref: Nevada Power Co. The Long Term 12.4263% 444 South Flower St. First Interstate Bank Credit Bank of Suite 3700 Los Angeles, CA Japan Ltd., Los Angeles, CA 90071 ABA #: 122000218 Los Angeles Agency Attn: Micheal Yurkas Further Credit: Tel: (213) 689-6321 LTCB-Los Angeles Fax: (213) 622-6908 Agency A/C #: 220234834 The Mitsubishi 8.2842% 801 S. Figueroa St. Bank of America Trust & Banking 24th Floor San Francisco, CA Corporation, Los Angeles, CA 90017 ABA #: 121-0003-58 Los Angeles Agency Attention: H. Rachel Further Credit: Ono The Mitsubishi Trust Tel: (213) 896-4665 and Banking Corporation Fax: (213) 687-4631 LA Agency A/C #: 62908-04915 2 The Bank of 12.4263% 550 South Hope The Bank of California Street, California, N.A. 3rd Floor San Francisco, CA Los Angeles, CA ABA #: 121000015 90071 A/C #: 001 060 235 Attn: Susan K. Johnson Ref: Nevada Power Co. Tel: (213) 243-3535 Fax: (213) 243-3552 EXHIBIT A FORM OF LETTER OF CREDIT ------------------------ IRREVOCABLE LETTER OF CREDIT NO. ________________ [Issuance date of the Letter of Credit] United States Trust Company of New York, as Trustee 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Administration Dear Sir or Madam: We hereby establish, at the request and for the account of Nevada Power Company (the "Company"), in your favor, as Trustee under the Indenture of Trust, dated as of October 1, 1995 (the "Indenture"), by and between [__________________] (the "Issuer") and you, as Trustee, pursuant to which [__________________] in aggregate principal amount of [____________________] (including any beneficial interests therein, the "Bonds"), are being issued, our Irrevocable Letter of Credit No. _________________ in the amount of the [Initial Stated Amount] (subject to reduction and reinstatement as provided below, the "Stated Amount"). (l) Cancellation Date. This Letter of Credit shall expire on the ----------------- earliest to occur of (i) October 12, 1999 (the "Stated Termination Date''), (ii) the date upon which we honor a draft accompanying a written and completed certificate signed by you in substantially the form of Exhibit 1 or Exhibit 3 attached hereto, and stating therein that such draft is the final draft to be drawn under this Letter of Credit and that, upon the honoring of such draft, this Letter of Credit will expire in accordance with its terms, (iii) the date upon which we receive a written certificate signed by you and stating therein that no Bonds are "outstanding" under the Indenture,(iv) on the second business day (as hereinafter defined) following the effective date of the conversion of the Bonds to a "Term Rate" pursuant to Section 2.03(c) of the Indenture which provides that all of the Bonds shall bear interest at a Term Rate to maturity, (v) the 10th business day following your having received a notice from the Administrative Agent (as defined in paragraph 5, below) that we are terminating this Letter of Credit pursuant to Section 9.01(d) of the Indenture in connection with the occurrence of an Event of Default under the Reimbursement Agreement (as defined in paragraph (5) below) and (vi) the date upon which we receive a written A-1 certificate signed by you and stating therein that an "Alternate Credit Facility" has been provided under the Indenture (such earliest date being the "Cancellation Date"). As used herein, "business day" shall mean any day on which banks are not required or authorized to remain closed in New York City or Los Angeles, California and on which the New York Stock Exchange is not closed and, for purposes of clauses (v) and (vi) of the immediately preceding paragraph, the location of your office specified above or the principal corporate trust office designated to us in a certificate substantially in the form set forth in Exhibit 5 by any transferee who has succeeded you as Trustee under the Indenture. (2) Principal and Interest Components. The aggregate amount which --------------------------------- may be drawn under this Letter of Credit, subject to reductions in amount and reinstatement as provided below, is [______________] ([______________]), of which the aggregate amounts set forth below may be drawn as indicated. (i) An aggregate amount not exceeding [__________________] ([____________________]), as such amount may be reduced and reinstated as provided below, may be drawn in respect of payment of principal (whether upon scheduled or accelerated maturity, or upon redemption) of the Bonds or the portion of the purchase price of Bonds corresponding to principal (the "Principal Component"). (ii) An aggregate amount not exceeding [_____________________] ([_________________________]), as such amount may be reduced and reinstated as provided below, may be drawn in respect of payment of interest on the Bonds or the portion of the purchase price of Bonds corresponding to interest, but not more than an amount equal to accrued interest on the Bonds for the period of 62 days immediately preceding the date of such drawing at a maximum rate of twelve percent (12%) per annum calculated on the basis of a year of 365 days (the "Interest Component"). (3) Drawings. Funds under this Letter of Credit are available to -------- you against (i) your draft payable on the date such draft is drawn on us, stating on its face: "Drawn under Irrevocable Letter of Credit No. ________, dated October __, 1995", and (ii) the appropriate certificate specified below, duly executed by you and appropriately completed. Exhibit Setting Forth Type of Drawing Form of Certificate Required ----------------------- ------------------------------- Drawing in respect of regularly Exhibit 1 scheduled interest payment or payment of principal of and interest on the Bonds upon scheduled or accelerated maturity Tender Drawing (as hereinafter Exhibit 2 defined) Redemption/Mandatory Purchase Exhibit 3 Drawing (as hereinafter defined) A-2 Drafts and certificates hereunder shall be dated the date of presentation and shall be presented to our office at 2029 Century Park East, Suite 2900, Los Angeles, California 90067 Attention: Minerva Arvisu (or at such other office as we may designate by written notice to you) or upon prior telephone notice to us at (310) 788-7119, by facsimile transmission received by us at the following telecopier number: (310) 203-0539 (or at such other numbers as we may designate by written notice to you), promptly thereafter, confirmed by delivery of the original drafts, prominently marked to indicate they are confirmations. If we receive your draft(s) and certificate(s) at such office, all in strict conformity with the terms and conditions of this Letter of Credit, at or before 12:00 noon (New York time), on a business day on or before the Cancellation Date, we will honor such draft(s) at or before 3:00 p.m. (New York time) on the same business day to your order in accordance with your payment instructions; and draft(s) so received following 12:00 noon (New York time) will be so honored at or before 1:00 p.m. (New York time) on the next business day (notwithstanding that such prior business day may have been the Cancellation Date). If you request, by written notice to us delivered in a timely fashion, payment under this Letter of Credit will be made by wire transfer of federal funds to your account with any bank that is a member of the Federal Reserve System, or by deposit of immediately available funds into a designated account that you maintain with us. All payments made by us under this Letter of Credit will be made with our own funds and not with any funds of the Company or the Issuer. (4) Reductions. The Principal Component and the Interest ---------- Component shall be reduced immediately following our honoring any draft drawn hereunder (i) to pay principal of, or interest on, the Bonds or to pay the purchase price of Bonds that are subject to mandatory purchase by the Company pursuant to Section 4.02(a) of the Indenture (any such drawing in respect of the payment of principal of and interest, if any, on the Bonds upon redemption of the Bonds in whole or in part or the purchase price of Bonds that are so subject to mandatory purchase by the Company being a "Redemption/Mandatory Purchase Drawing"), or (ii) to pay the purchase price of Bonds that are purchased pursuant to an election by the holders thereof pursuant to Section 4.01 of the Indenture (any such drawing in respect of the circumstances referred to in this clause (ii) being a "Tender Drawing"), in each case by an amount equal to the respective component of the amount of such draft. (5) Reinstatement. On the sixteenth day following each drawing ------------- hereunder to pay interest on the Bonds (other than a drawing in respect of the interest component of a Tender Drawing or a Redemption/Mandatory Purchase Drawing), the amount so drawn shall be reinstated to the Interest Component, unless you shall have theretofore received written notice from us or the Administrative Agent that we will not reinstate this Letter of Credit in the amount of such drawing because (i) we (or the Banks party to the Reimbursement Agreement referred to below) have not been reimbursed in full by the Company for the amount of such drawing, together with interest, if any, owing thereon pursuant to the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among the Company, us, Societe Generale, Los Angeles Branch, as Administrative Agent (the "Administrative Agent"), and the Banks party thereto (the "Banks"), or (ii) an Event of Default under the Reimbursement Agreement has occurred and is then continuing; provided, however, that we shall not be -------- ------- entitled to give any such notice in the event that, pursuant to our direction, A-3 you shall be required to give notice of mandatory purchase of the Bonds in accordance with Section 4.02(a)(iv) of the Indenture. Immediately upon our notice to you by hand delivery or facsimile transmission in the form set forth in Exhibit 4 hereto that (a) we have been reimbursed by or for the account of the Company in respect of any Tender Drawing or Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture), together with interest, if any, owing thereon pursuant to the Reimbursement Agreement, the amounts of which we notify you we have been reimbursed in respect of such Tender Drawing or Redemption/Mandatory Purchase Drawing shall be reinstated to the Principal Component and the Interest Component, as specified in such notice, or (b) we have received notice from a person stating therein that he or she is a representative of the "Remarketing Agent" referred to in the Indenture and that such Remarketing Agent has wired us amounts in immediately available funds in connection with a Tender Drawing pursuant to Section 4.01 of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) which amounts were received as the purchase price of remarketed Bonds and which amounts, when added to amounts, if any, theretofore reimbursed to us by or for the account of the Company in respect of the purchase price of such Bonds paid by us as part of such Tender Drawing or Redemption/Mandatory Purchase Drawing and interest, if any, owing thereon pursuant to the Reimbursement Agreement, to reimburse us in full for such purchase price theretofore paid by us and such interest, if any, the Principal Component and the Interest Component shall be reinstated to the extent of the principal and interest components of the purchase price of such Bonds as specified in such notice. This Letter of Credit will not be reinstated following a Redemption/Mandatory Purchase Drawing (i) pursuant to Section 4.02 (a)(iv) of the Indenture unless we notify you by hand delivery or facsimile transmission that we in our discretion have reinstated the Letter of Credit by the amount of such Redemption/Mandatory Purchase Drawing, or (ii) pursuant to Section 4.02(a)(ii) of the Indenture upon a conversion to a Term Rate to maturity pursuant to Section 2.03 of the Indenture, or (iii) to pay Bonds upon redemption or scheduled maturity of the Bonds, or accelerated maturity of the Bonds pursuant to Section 9.02 of the Indenture or (iv) pursuant to Section 4.02(a)(iii) of the Indenture. (6) Notices. Communications with respect to this Letter of Credit ------- shall be in writing and shall be addressed to us at 2029 Century Park East, Suite 2900, Los Angeles, California 90067, Attention: Minerva Arvisu (or at such other office as we may designate by written notice to you) or by facsimile transmission received by us at the following telecopier number: (310) 788-0539 (or at such other telephone number as we may designate by written notice to you) specifically referring to the number of this Letter of Credit. (7) Transfer. This Letter of Credit is transferable in its -------- entirety (but not in part) to any transferee who has succeeded you as Trustee under the Indenture and may be successively so transferred. Transfer of this Letter of Credit to such transferee shall be effected A-4 by the presentation to us of this Letter of Credit accompanied by a certificate substantially in form set forth in Exhibit 5. (8) Governing Laws, Etc. This Letter of Credit shall be governed ------------------- by and construed in accordance with the laws of the State of New York, including the Uniform Commercial Code as in effect in the State of New York. This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Bonds, the Indenture and the Reimbursement Agreement), except only the certificates and the drafts referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificates and such drafts. Whenever and wherever the terms of this Letter of Credit shall refer to the purpose of a draft hereunder, or the provisions of any agreement or document pursuant to which such draft may be presented hereunder, such purpose or provisions shall be conclusively determined by reference to the certificate accompanying such draft; in furtherance of this sentence, whether any drawing is in respect of payment of regularly scheduled interest on the Bonds or of principal of or interest on the Bonds upon scheduled or accelerated maturity or is a Tender Drawing or a Redemption/Mandatory Purchase Drawing shall be conclusively determined by reference to the certificate accompanying such drawing. Very truly yours, SOCIETE GENERALE, LOS ANGELES BRANCH By: ------------------------------- Title: A-5 EXHIBIT 1 TO THE LETTER OF CREDIT CERTIFICATE FOR DRAWING IN RESPECT OF REGULARLY SCHEDULED INTEREST PAYMENT OR PAYMENT OF PRINCIPAL OF AND INTEREST ON THE BONDS UPON SCHEDULED OR ACCELERATED MATURITY OF THE BONDS The undersigned, a duly authorized officer of [_____________] (the "Trustee"), hereby certifies as follows to Societe Generale, Los Angeles Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. ______________ (the "Letter of Credit") issued by the Bank in favor of the Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a drawing under the Letter of Credit in respect of [a regularly scheduled interest payment]1 [the payment of principal of and interest on the Bonds upon the scheduled or accelerated maturity of the Bonds]2 in accordance with Section 6.05 of the Indenture. Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. (3) The respective amounts of principal of and interest on the Bonds which are due and payable (or which have been declared to be due and payable) and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 6.04 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $__________________ Interest: $__________________ (4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of principal of the Bonds, as indicated in paragraph (3) above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of interest on the Bonds, - --------------------------- 1. To be used for regularly scheduled interest payments. 2. To be used upon scheduled or accelerated maturity of the Bonds. A-6 as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of payment of principal of and interest on the Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture. [(5) The draft accompanying this Certificate being presented upon the [scheduled maturity of the Bonds] [accelerated maturity of the Bonds pursuant to Section 9.02 of the Indenture]3 is the final draft to be drawn under the Letter of Credit in respect of principal of and interest on the Bonds. Upon the honoring of such draft the Letter of Credit will expire in accordance with its terms.]4 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the ____ day of_________________, ____. [_______________], as Trustee By -------------------------------------- Title: - ----------------------- 3. Insert appropriate bracketed language. 4. To be used upon scheduled or accelerated maturity of the Bonds. A-7 EXHIBIT 2 TO THE LETTER OF CREDIT CERTIFICATE FOR TENDER DRAWING UPON BONDHOLDER ELECTION The undersigned, a duly authorized officer of [__________________] (the "Trustee"), hereby certifies as follows to Societe Generale, Los Angeles Branch (the "Bank"), with reference to Irrevocable Letter of Credit No.__________ (the "Letter of Credit") issued by the Bank in favor of the Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a Tender Drawing under the Letter of Credit with respect to the purchase price of Bonds delivered pursuant to an election by Bondholders pursuant to Section 4.01 of the Indenture and the Bonds. Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. (3) The respective amounts of purchase price corresponding to principal of and accrued interest, if any, on such Bonds and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 4.05 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $__________________ Interest: $__________________ (4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to principal of the Bonds, as indicated in paragraph (3) above does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of purchase price corresponding to principal of and interest on such Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the ____ day of ________________, ____. A-8 [_______________], as Trustee By -------------------------------------- Title: A-9 EXHIBIT 3 TO THE LETTER OF CREDIT CERTIFICATE FOR REDEMPTION/MANDATORY PURCHASE DRAWING IN RESPECT OF PAYMENT OF PRINCIPAL OF AND INTEREST ON BONDS UPON REDEMPTION OR MANDATORY PURCHASE The undersigned, a duly authorized officer of[_______________] (the "Trustee"), hereby certifies as follows to Societe Generale, Los Angeles Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. ____ (the "Letter of Credit") issued by the Bank in favor of the Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a Redemption/Mandatory Purchase Drawing under the Letter of Credit with respect to [the payment of principal of and accrued interest, if any, on the Bonds upon redemption of the Bonds in accordance with Section 3.01 of the Indenture]1 [the purchase price of Bonds subject to mandatory purchase by the Company pursuant to Section 4.02(a) [(i)], [(ii)], [(iii)], or [(iv)] of the Indenture].2 Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. [(3) The respective amounts of principal of and interest on the Bonds which are due and payable and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 6.04 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $________________ Interest: $_______________]3 - --------------------- 1. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. 2. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 3. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. A-10 [(3) The respective amounts of the purchase price corresponding to principal of and accrued interest, if any, on such Bonds and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 4.05 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $_________________ Interest: $_________________]4 [(4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of principal of the Bonds, as indicated in paragraph (3) above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of payment of principal of and interest on the Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture.])5 [(4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to principal of the Bonds, as indicated in paragraph (3), above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of purchase price corresponding to principal of and interest on such Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture.]6 [(5) The draft accompanying this Certificate is the final draft to be drawn under the Letter of Credit in respect of principal of and interest on the Bonds and, upon the honoring of such draft, the Letter of Credit will expire in accordance with its terms.]7 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the ____ day of __________________, ____. - --------------------------- 4. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 5. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. 6. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 7. To be used in the case of all redemption of the Bonds other than redemptions in part. A-11 [_______________], as Trustee By --------------------------------- Title: A-12 EXHIBIT 4 TO THE LETTER OF CREDIT NOTICE OF REINSTATEMENT The undersigned, a duly authorized officer of Societe Generale, Los Angeles Branch (the "Bank"), hereby gives the following notice to [___], as trustee and as custodian, with reference to Irrevocable Letter of Credit No. _______ (the "Letter of Credit") issued by the Bank in favor of [_____], as trustee. Terms defined in the Letter of Credit and used but not defined herein have the meanings given them in the Letter of Credit. [(1) We have received the amount of $_________ today in reimbursement of amounts paid under the Letter of Credit with respect to Tender Drawings pursuant to Section 4.01 of the Indenture or Redemption/Mandatory Purchase Drawings pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) relating to certain Bonds, together with interest if any, owing thereon pursuant to the Reimbursement Agreement. The respective amounts of principal of and interest on such Bonds covered by that reimbursement are as follows: Principal: $_________________ Interest: $_________________]1 [(1) We have received notice from the Remarketing Agent that it has wired us amounts in immediately available funds in connection with a Tender Drawing pursuant to Section 4.01 of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) which amounts were received as the purchase price of remarketed Bonds. The sum of (i) the principal amount of such Bonds and the amount of accrued interest, if any, thereon, as communicated to us by the Remarketing Agent and (ii) amounts, if any, heretofore reimbursed to us by or for the account of the Company in respect of the purchase price of such Bonds paid by us as parts of such Tender Drawing pursuant to Section 4.01(a) of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) on account of such principal and interest are as follows: Principal: $____________ - ---------------------------- 1. To be used in event of actual receipt of reimbursed amounts. A-13 Interest: $____________]2 (2) In accordance with the provisions of the Letter of Credit, the Principal Component and the Interest Component have been reinstated to the extent of the respective amounts specified in Paragraph (1) above.3 IN WITNESS WHEREOF, the Bank has executed and delivered this Notice as of the __ day of _____________, ____. [_______________] By --------------------------------- Title: - -------------------------- 2. To be used in event of notification from the Remarketing Agent that it has wired immediately available funds to the Bank to reimburse it for drawings pursuant to Section 4.01 or 4.02(a)(i) and (ii) of the Indenture. 3. After such reinstatement, the Interest Component must be equal to an amount calculated by multiplying the Principal Component by 12% and then multiplying the product thereof by the quotient obtained by dividing 62 by 365. A-14 EXHIBIT 5 TO THE LETTER OF CREDIT INSTRUCTIONS TO TRANSFER ------------------------ Societe Generale Los Angeles Branch 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attention: Minerva Arvisu Re: Irrevocable Letter of Credit No. ______ issued by Societe Generale, Los Angeles Branch] Gentlemen: The undersigned, as Trustee under the Indenture of Trust dated as of October 1, 1995 by and between [Clark County, Nevada/Coconino County], Arizona (the "Issuer") and the undersigned, is named as beneficiary in the Letter of Credit referred to above (the "Letter of Credit"). The Transferee named below has succeeded the undersigned as Trustee under such Indenture. ____________________________________________ (Name of Transferee) ____________________________________________ (Address) Therefore, for value received, the undersigned hereby irrevocably instructs you to transfer to such Transferee all rights of the undersigned to draw under the Letter of Credit. By this transfer, all rights of the undersigned in the Letter of Credit, and all obligations of the undersigned under the Custodian Agreement, dated as of October 1, 1995, between the undersigned, as "Custodian", and you (the "Custodian Agreement"), are transferred to such Transferee, and such Transferee shall hereafter have the sole rights as beneficiary under the Letter of Credit and the obligations as "Custodian" under the Custodian Agreement; provided, however, that no rights shall be -------- ------- deemed to have been transferred to such Transferee until such transfer complies with the requirements of the Letter of Credit pertaining to transfers. A-15 IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the ____ day of __________,_____. [_______________], as Trustee By ------------------------------------------- Title: The undersigned, [Name of Transferee], hereby accepts the foregoing transfer of rights under the Letter of Credit and obligations under the Custodian Agreement. [Name of Transferee] By ------------------------------------------- Title: Address of Principal Corporate Trust Office: [insert address] A-16 EXHIBIT B FORM OF CUSTODIAN AGREEMENT --------------------------- THIS CUSTODIAN AGREEMENT (the "Agreement"), dated as of [October 1, 1995], is made by and among NEVADA POWER COMPANY (the "Company"), UNITED STATES TRUST COMPANY OF NEW YORK, as custodian (such entity and any successor custodian hereunder being the "Custodian") and SOCIETE GENERALE, LOS ANGELES BRANCH, as Letter of Credit Bank (the "Bank"). WHEREAS, at the request of the Company, Clark County, Nevada and Coconino County, Arizona Pollution Control Corporation (collectively the "Issuer") issued and sold, respectively, their Industrial Development Revenue Refunding Bonds, (Nevada Power Company Project) Series B, D and E (the "Bonds"), pursuant to respective Indentures of Trust, each dated as of October 1, 1995 (as amended, modified or supplemented from time to time, each an "Indenture" and collectively , the "Indentures"), between the Issuer and United States Trust Company of New York, as trustee (such trustee and any successor trustee under an Indenture, in such capacity, being the "Trustee"), for the purpose stated in the Indentures; and WHEREAS, to induce the Bank to issue certain letters of credit to support certain amounts payable on and in respect of the Bonds (each a "Letter of Credit" and collectively the "Letters of Credit") and to enter into a Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among Societe Generale, Los Angeles Branch, as Administrative Agent and Letter of Credit Bank, the Banks party thereto and the Company relating thereto (the "Reimbursement Agreement"), the Company proposes to pledge the Collateral (as hereinafter defined) and to enter into this Agreement; NOW, THEREFORE, the Company, the Custodian and the Bank hereby agree as follows: ARTICLE l DEFINITIONS; INTERPRETATION SECTION 1.1. Definitions. For the purposes of this Agreement, ----------- terms defined in the Reimbursement Agreement and used but not otherwise defined herein have the meanings given them in the Reimbursement Agreement, and the following terms have the meanings indicated: "Collateral" means each Pledged Bond, all payments of principal ---------- and interest payable on Pledged Bonds, all of the Company's rights to receive Pledged Bonds and amounts payable thereon and all of the Company's right, title and interest in and to Pledged Bonds and such principal of and interest thereon, and all proceeds thereof, as they may from time to time be B-1 delivered to or held, pending payment by the Custodian, the Remarketing Agent or the Trustee, in money, securities or collections from or with respect to any or all of the foregoing. "Custodian" means United States Trust Company of New York, or such --------- other Person appointed from time to time by the Bank to act as Custodian hereunder and accepting such appointment. Unless the Indentures are appropriately modified to provide for a Person other than the Trustee to act as Custodian, the entity serving as Trustee for the Bonds shall be the Custodian hereunder at all times. "Obligations" means (a) all amounts of principal of and interest ----------- on each Advance, (b) all other amounts due under or in respect of the Reimbursement Agreement and (c) all amounts paid or costs or expenses incurred by the Bank in the collection of any of the foregoing or for the maintenance, preservation, protection or enforcement (whether through negotiations, legal proceedings or otherwise) of, or realization upon, the Collateral or in connection with the enforcement or administration of this Agreement or the Reimbursement Agreement, in each case irrespective of whether the obligation to pay any such amount is direct or indirect, absolute or contingent, joint or several, due or not due, liquidated or unliquidated, arises by operation of law or otherwise or is from time to time reduced and thereafter reincurred. To the extent any payment made with respect to an Obligation is rescinded or recovered or is otherwise avoided or must be restored under or by reason of any bankruptcy or insolvency proceedings of the Company or any other Person or otherwise, the amount of such payment so rescinded, recovered, restored or avoided shall again constitute an Obligation, as if such payment had never been made. "Pledged Bond" means each Bond for which payment of the purchase ------------ price is made, in whole or in part, with the proceeds of a drawing by the Trustee under a Letter of Credit. "Remarketing Agreement" means each Remarketing Agreement, dated as --------------------- of October 1, 1995, between the Company, on the one hand, and the Remarketing Agent, on the other hand as the same shall have been amended, modified or supplemented from time to time. SECTION 1.2. Interpretation. The headings of the articles and -------------- sections hereof are for convenience of reference only and shall not limit or affect the meaning or construction of any provision hereof. ARTICLE 2 SECURITY INTEREST SECTION 2.1. Grant of Security Interest. As security for the due -------------------------- and punctual payment in full of each of the Obligations, the Company hereby grants to the Bank a continuing first lien on and security interest in the Collateral. SECTION 2.2. Interest Continuing and Absolute. Until payment in -------------------------------- full of all the Obligations has been indefeasibly made after the Cancellation Date, the Bank's security B-2 interest in the Collateral hereunder shall continue in full force and effect, and it and the Company's obligations hereunder shall be effective irrespective of any illegality, invalidity or unenforceability of the Bonds, the Letters of Credit, the Reimbursement Agreement or any other Related Document. SECTION 2.3. Perfection. The Company shall perfect the security ---------- interest of the Bank in the Collateral (a) in the case of Pledged Bonds, by delivering such Pledged Bonds to the Custodian, (b) in the case of cash proceeds forming part of the Collateral, by delivering the Collateral to the Bank, (c) in the case of uncertificated securities forming part of the Collateral, by registering such securities in the name of the Bank or its designee, or (d) by any other method permitted by the Uniform Commercial Code as in effect in the State of New York on the date of such perfection. All steps necessary for such perfection shall be taken by the Company, in the case of each Pledged Bond forming part of the Collateral, on the day such Bond becomes a Pledged Bond and, in the case of proceeds, immediately. ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties. The Company ---------------------------------- represents and warrants to the Bank and, so long as any of the Obligations remains unpaid, shall be deemed continuously to represent and warrant to the Bank and the Custodian, as follows: (a) At the time of delivery or transfer to the Bank or the Custodian of any Collateral, the Company will have good and marketable title to and be the sole owner of, such Collateral, free and clear of all liens and other encumbrances, other than the security interest created hereby, the Bank' s security interest in such Collateral shall have been perfected and no financing statement or other instrument with respect to any of the Collateral shall have been and continue to be recorded, registered or filed and no security agreement with respect to any of the Collateral shall have been executed by the Company, other than with respect to such security interest in favor of the Bank. (b) The Bank has a valid and perfected first priority security interest in the Collateral. (c) The Collateral may be properly pledged hereunder. (d) No consents or approvals of any Person are required for the assignment and transfer by the Company of any of the Collateral to the Bank hereunder, or the subsequent sale or transfer of the Collateral by the Bank pursuant to the terms hereof. (e) This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms . B-3 ARTICLE 4 COVENANTS SECTION 4.1. Protection of the Bank's Security Interest. The ---------------------------------------------- Company shall defend its title to, and the Bank's security interest in, the Collateral against all claims of all other Persons, and shall keep the Collateral free from all liens and encumbrances (other than the Bank's security interest hereunder) and pay or cause to be paid promptly when due all taxes, fees, assessments and other charges now or hereafter imposed on or in respect of any of the Collateral. SECTION 4.2. Sale of Collateral. The Company shall not, without ------------------ the prior written consent of the Bank, sell, transfer or otherwise dispose of, or permit any other Person to sell, transfer or otherwise dispose of, any of the Collateral or any of the Company's interests therein, except in accordance with the terms of this Agreement, the Indentures and the Remarketing Agreement. The receipt by the Bank of all or any part of the proceeds of any sale, transfer or other disposition of any of the Collateral, except in accordance with the prior sentence, shall not be deemed or construed to be a consent by the Bank to any such sale, transfer or other disposition. SECTION 4.3. Further Assurances. The Company shall execute and ------------------ deliver to the Bank or the Custodian such assignments and other documents and instruments, and shall take all other action relating to the Collateral and the preservation, protection or perfection of the Bank's security interest therein, as the Bank may request, and the Company shall not file or permit to be filed any financing statement (or amendment or continuation statement) or execute any security agreement with respect to any of the Collateral unless it names the Bank as the only secured party. To the extent permitted by law, the Company hereby appoints the Bank as its attorney-in- fact (without requiring the Bank to act as such) to perform all acts that the Bank deems appropriate to preserve, protect and perfect its continuing security interest in the Collateral or to preserve or protect the Collateral. ARTICLE 5 REMEDIES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT SECTION 5.1. Default Remedies. If an Event of Default under the ---------------- Reimbursement Agreement shall occur and be continuing, the Bank shall be entitled to exercise any one or more (at the Bank's discretion, at one or more times) of the following remedies: (a) The Bank shall have the right to receive the Collateral, if any, then held by the Custodian, the Remarketing Agent, the Trustee or any other Person, endorse, assign or deliver in its own name or the name of the Company any and all checks, drafts and other instruments for the payment of money relating to or constituting part of the Collateral, and cause the Collateral to be registered in the name of the Bank or its designee, and the Company hereby waives presentment, protest and notice of B-4 nonpayment of any instrument so endorsed. In furtherance of the foregoing, the Company hereby irrevocably appoints the Bank, or any of its officers or designees, the Company's lawful attorney-in-fact (without requiring the Bank so to act), with power of substitution, in the name of the Company or in the name of the Bank (i) to endorse the name of the Company upon any of the Collateral, including proceeds, and to cause any of the Collateral to be registered in the name of the Bank or its designee; (ii) to demand, collect, receive payment of, receipt for and give discharges and releases of any of the Collateral; (iii) to commence and prosecute any and all actions or proceedings at law or in equity in any court to collect or otherwise realize on any of the Collateral to enforce any rights in respect thereof; (iv) to initiate, settle, compromise, compound, adjust or defend any actions, suits or proceedings relating or pertaining to any of the Collateral; and (v) to sell, transfer, assign, discount, negotiate or otherwise deal in all or any portion of the Collateral or the proceeds thereof and generally to perform all other acts necessary or desirable to realize on, and obtain the benefits of, the Collateral and otherwise to carry out the intention of this Agreement, as fully and effectively as though the Bank were the absolute owner thereof, and the Company hereby ratifies and confirms all that the Bank shall do by virtue of this appointment. The Bank shall not, under any circumstances, have any liability for any error or omission made in the settlement t collection or payment or other disposition of any or all of the Collateral or of any instrument received in payment therefor. (b) The Bank may sell or cause to be sold, in one or more sales, at such price as the Bank may deem adequate, and for cash or on credit or for future delivery, with or without assumption of any credit risk , all or any portion of the Collateral, at public or private sale, without demand of performance or notice of intention to sell or of time or place of sale (except such notice as may be required by applicable statute and cannot be waived), and the Bank may be the purchaser of all or any portion of the Collateral so sold; provided, however, that the -------- ------- Bank shall first give notice to the Trustee that an Event of Default has occurred and is continuing. The purchaser(s) at any such sale shall thereafter hold the Collateral so sold absolutely, free from any claim or right whatsoever, including any equity of redemption, of the Company. Any such demand, notice, claim, right or equity is hereby expressly waived and released by the Company. Without limiting the foregoing, if any such notice of the time or place of sale is so required, the Company agrees that the Bank need not give more than ten days' notice of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place and that such notice is reasonable notification of such matters . The Bank shall not, under any circumstances, incur any liability as a result of the sale of the Collateral or any part thereof at any sale conducted in accordance with the provisions of this Agreement. The Company hereby waives any claims against the Bank arising by reason of the fact that the price at which the Collateral may have been sold at any private sale was less than the price which might have been obtained at a public sale or was less than the aggregate principal amount of the Pledged Bonds or the then total unpaid Obligations. B-5 (c) The Company recognizes that the Bank may not deem it desirable to effect a public sale of any or all of the Pledged Bonds or otherwise but may deem it desirable to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Bank shall be under no obligation to delay a sale of any of the Pledged Bonds for the period of time necessary to permit the Issuer to register them for public sale under the Securities Act of 1933, as amended (the "Act"), or under applicable state securities laws, even should the Issuer agree to do so. (d) The Company shall do or cause to be done all such other acts and things as may be deemed necessary or desirable by the Bank to make such sale or sales of any portion or all of the Pledged Bonds valid and binding and in compliance with all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, including registering such Bonds under the Act, or any state securities laws (to the extent necessary), all at the Company's expense. (e) The Company acknowledges that a breach of any of the covenants contained in this Article 5 will cause irreparable injury to the Bank and that the Bank has no adequate remedy at law in respect of any such breach and, as a consequence, agrees that each and every covenant contained in this Article 5 shall be specifically enforceable against the Company, and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. SECTION 5.2. Remedies Not Exclusive. (a) The remedies provided ---------------------- for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or under the Reimbursement Agreement, including, without limitation, all rights and remedies of a secured party under Article 9 of the Uniform Commercial Code as in effect in the State of New York on the date of the exercise of any such remedy. The exercise by the Bank of any one or more remedies under Section 5.1, above, shall not constitute a waiver, or otherwise prohibit, the exercise by the Bank of other remedies provided herein or by law at the same or other times. (b) The Bank shall not be required to exercise any particular rights, powers, remedies or benefits hereunder or under the Reimbursement Agreement or any Related Document. Without limiting the generality of the foregoing, the Bank (i) shall be entitled to seek to realize upon or enforce the Collateral in such order as it may from time to time determine and without regard to whether or not any other collateral or security for any of the Obligations shall have been resorted to, and (ii) shall not be required to exhaust or enforce any particular portion of the Collateral before seeking to realize or enforce upon any other portion thereof. B-6 ARTICLE 6 COLLECTIONS BY THE COMPANY AND APPLICATIONS OF PROCEEDS IN RESPECT OF COLLATERAL SECTION 6.1. Collections on Pledged Bonds by the Company. (a) ---------------------------------------------- If, while any of the Obligations are outstanding, the Company becomes entitled to receive or receives any payment in respect of any Pledged Bond, the Company shall accept such payment as the Bank's agent, hold it in trust on behalf of the Bank and deliver it forthwith to the Bank for application to satisfaction of the Obligations then due and payable. All sums of money so paid in respect of any payment of interest on, or any portion of purchase price equal to the amount of accrued interest on, any Pledged Bond which are received by the Company and paid to the Bank shall be credited against the obligation of the Company to pay interest to the Banks set forth in Sections 2.04 and 2.05 of the Reimbursement Agreement. All sums of money so paid in respect of any payment of principal of, or any portion of purchase price equal to the principal amount of, any Pledged Bond which are received by the Company and paid to the Bank shall be credited against the obligation of the Company to pay principal to the Banks set forth in Sections 2.04 and 2.05 of the Reimbursement Agreement. SECTION 6.2. Application of Proceeds. All proceeds received from ----------------------- the sale or other disposition of, or realization on or with respect to, all or any part of the Collateral shall be applied by the Bank, in such order as the Bank, in its sole discretion, may determine to the payment of the costs and expenses of such sale, disposition or realization, including, without limitation, reasonable fees and expenses of counsel for the Bank and all expenses, liabilities and advances of the Banks in connection therewith, and to the payment of the remaining Obligations. ARTICLE 7 RELEASE OF COLLATERAL; COMPANY'S LIABILITY FOR DEFICIENCY SECTION 7.1. Release of Collateral. If (a) the Company prepays --------------------- or causes to be prepaid any Advance pursuant to Section 2.06 of the Reimbursement Agreement, (b) the Remarketing Agent causes Pledged Bonds at the time held hereunder to be sold, or (c) the Obligations are otherwise satisfied, upon receipt of such prepayment or of the proceeds of such sale or other satisfaction of the Obligations, Pledged Bonds in an aggregate principal amount equal to the prepayment so made, or the principal amount of Pledged Bonds so sold, or the Obligations so satisfied, shall be automatically released from the lien of this Agreement and the Company or its designee shall be entitled to have the released Bonds delivered to the Remarketing Agent, the Company or such other Person as designated by the Company in accordance with the terms of the relevant Indenture; provided, --------- however, that before any delivery of such released Bonds, the Trustee and - ------- the Custodian shall have received notice from the Bank, in the form of Exhibit 4 to the relevant Letter of Credit, of the reinstatement of the amounts so B-7 prepaid, sold or satisfied as available under such Letter of Credit and such notice shall constitute notice to release the Pledged Bonds pursuant to Section 406(b) of the Indenture. SECTION 7.2. Company's Liability for Deficiency. The Company ------------------------------------ shall in any event remain liable for any deficiency remaining unpaid after the application of the proceeds of the Collateral to the satisfaction of the Obligations. ARTICLE 8 GENERAL SECTION 8.1. Expenses. The Company shall pay to the Bank all -------- expenses (including reasonable fees and expenses of counsel) of, or incident to, any actual or attempted sale or other disposition of, or any exchange, enforcement (whether through negotiations, legal proceedings or otherwise), collection, compromise or settlement of or with respect to, all or any of the Collateral, by litigation or otherwise. The Company shall reimburse the Bank on demand for all reasonable costs and expenses incurred in connection with the negotiation, preparation, execution and administration of this Agreement, including, without limitation, any fees or expenses (including reasonable fees and expenses of counsel to the Custodian) paid by the Bank to the Custodian for its services in connection with this Agreement. SECTION 8.2. Notices. All notices and other communications ------- provided for hereunder shall be in writing (including telegraphic communication) and mailed, telecopied, telexed, telegraphed or delivered to the parties to the telex or telecopier number or address (as the case may be) specified for the intended recipient on the signature page hereof, or to such other number or address as such recipient may have last specified by notice to the other party. All such notices and communications shall, when mailed, telecopied, telexed or telegraphed, be effective when deposited in the mails or sent by telecopy or telex or delivered to the telegraph company, respectively, addressed as aforesaid. SECTION 8.3. Remedies and Waivers. No failure or delay on the -------------------- part of the Bank in exercising any right hereunder shall operate as a waiver of, or impair, any such right. No single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right shall be effective unless given in writing. No waiver of any such right shall be deemed a waiver of any other right hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.4. Amendment. No amendment or waiver of any provision --------- of this Agreement, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Custodian and the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.5. Assignment. (a) This Agreement shall be binding ---------- upon and inure to the benefit of the Custodian, the Bank and the Company and their respective successors B-8 and assigns; provided, however, that the Company may not assign any of its -------- ------- rights or obligations under this Agreement without the prior written consent of the Bank. (b) If the Bank or the Custodian assigns or otherwise transfers any of its rights and obligations hereunder, each reference in this Agreement to the Bank or the Custodian, as the case may be, shall be deemed to be a reference to the Bank or the Custodian, as the case may be, and the Person or Persons to which such rights and obligations were assigned and transferred to the extent of their respective interests. SECTION 8.6. Governing Law. This Agreement shall be governed ------------- by, and construed and interpreted in accordance with, the laws of the State of New York. SECTION 8.7. Custodian Appointed Agent. The Bank hereby appoints ------------------------- the Custodian as its agent to receive and hold Pledged Bonds constituting Collateral granted hereunder for the Bank's account. The Company acknowledges such appointment and agrees with the Bank and the Custodian, which by its execution of this Agreement accepts such appointment, that, for so long as this Agreement shall remain in full force and effect, all certificates or instruments representing or evidencing the Pledged Bonds shall be delivered to and held by the Custodian, as agent for the Bank. SECTION 8.8. Reasonable Care. The Custodian shall be deemed to --------------- have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Custodian accords its own property. SECTION 8.9. Integration of Terms. This Agreement contains the -------------------- entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. SECTION 8.10. Counterparts. This Agreement may be executed in ------------ counterparts, and such counterparts taken together shall be deemed to constitute one and the same agreement. SECTION 8.11. Severability. Any provision of this Agreement ------------ which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. B-9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. NEVADA POWER COMPANY 6226 West Sahara Avenue P.O. Box 230 Las Vegas, Nevada 89151 Telecopy: (702) 367-8803 Attention: Treasurer By ----------------------------------- Title: THE UNITED STATES TRUST COMPANY OF NEW YORK, as Custodian Attention: By: ------------------------------------ Title: SOCIETE GENERALE, LOS ANGELES BRANCH By: ------------------------------------ Title: B-10 EXHIBIT C [LETTERHEAD OF GENERAL COUNSEL OF THE COMPANY] [Date of Issuance of Letter of Credit] Societe Generale, Los Angeles Branch, as Administrative Agent and the Banks party to the Reimbursement Agreement referred to below Clark County, Nevada Nevada Power Company -------------------- Gentlemen: This opinion is furnished to you pursuant to Section 3.01(k) of the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among Nevada Power Company (the "Company"), Societe Generale, New York Branch, as Letter of Credit Bank and Administrative Agent, and the Banks party thereto. Terms defined in the Reimbursement Agreement are used herein as therein defined. I am General Counsel of the Company and, as such, have acted as counsel for the Company in connection with the preparation, execution and delivery of, and the closing on this date under, the Reimbursement Agreement. In that connection, I have examined: (1) The Reimbursement Agreement. (2) The Related Documents. (3) The other documents furnished by the Company pursuant to Article III of the Reimbursement Agreement, including the PUC Order. (4) The Articles of Incorporation of the Company and all amendments thereto (the "Charter"). (5) The by-laws of the Company and all amendments thereto (the "By-laws"). C-1 (6) A certificate of the Secretary of State of the State of Nevada, dated [________________], attesting to the continued corporate existence and good standing of the Company in that State. I have also examined the originals, or copies certified to my satisfaction, of all of the indentures, loan or credit agreements, leases, guarantees, mortgages, security agreements, bonds, notes and other agreements or instruments, and all of the orders, writs, judgments, awards, injunctions and decrees (each, a "Restrictive Document"), which affect or purport to affect the Company's right to borrow money or the Company's obligations under the Reimbursement Agreement or the Related Documents to which it is a party. In addition, I have examined the originals, or copies certified to my satisfaction, of such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the due execution and delivery, pursuant to due authorization, of the Reimbursement Agreement and the Related Documents by the parties thereto other than the Company. I am qualified to practice law in the State of Nevada and I do not express any opinion on any laws other than the laws of the State of Nevada and the Federal laws of the United States. Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. 2. The execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to which it is a party are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to the Company (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any contractual or legal restriction contained in any Restrictive Document or, to the best of my knowledge, contained in any other similar document. The Reimbursement Agreement and the Related Documents to which it is a party have been duly executed and delivered on behalf of the Company. 3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to which it is a party, except for the PSC Order, which has been duly obtained, is final and is in full force and effect. The PSC Order is not the subject of appeal or reconsideration or other review, and no subsequent appeal or reconsideration or C-2 other review of the PSC Order will have any adverse effect upon the legality, validity or enforceability of the Company's obligations under the Reimbursement Agreement or the Related Documents to which the Company is a party. 4. There are no pending or, to the best of my knowledge, overtly threatened actions or proceedings against the Company or any of its Subsidiaries before any court, governmental agency or arbitrator (i) which purport to affect the legality, validity, binding effect or enforceability of the Reimbursement Agreement or any Related Document to which the Company is a party or (ii) except as disclosed in the Company's December 31, 1994] Report on Form 10-K as filed with the Securities and Exchange Commission, which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of its Subsidiaries; and there has occurred no material adverse developments in any such action or proceeding so disclosed. Very truly yours, C-3 EXHIBIT D [LETTERHEAD OF SPECIAL COUNSEL TO THE COMPANY] [Dates of Issuance of Letter of Credit] To Societe Generale, Los Angeles Branch, as Administrative Agent and the Banks party to the Reimbursement Agreement referred to below Clark County, Nevada Nevada Power Company -------------------- Gentlemen: This opinion is furnished to you pursuant to Section 3.01(n) of the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among Nevada Power Company (the "Company"), Societe Generale, New York Branch, as Administrative Agent and Letter of Credit Bank, and the Banks party thereto. Terms defined in the Reimbursement Agreement are used herein as therein defined. We have acted as Special Counsel to the Company in connection with the preparation, execution and delivery of, and the closing on this date under, the Reimbursement Agreement. In that connection, we have examined: (1) The Reimbursement Agreement. (2) The Related Documents. (3) The other documents furnished by the Company pursuant to Article III of the Reimbursement Agreement, including the PUC Order . In addition, we have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of D-1 the Company or its officers or of public officials. We have assumed the due execution and delivery, pursuant to due authorization, of the Reimbursement Agreement and the Related Documents by the parties thereto other than the Company. We are qualified to practice law in the State of California and are familiar with the laws of the State of Nevada to the extent necessary to permit us to express the opinions hereinafter set forth in paragraph 3. Accordingly, our opinions herein are limited to the laws of the State of California, the State of Nevada and the Federal laws of the United States. For purposes of the opinions expressed below, we have relied with your permission on the opinion of Richard L. Hinckley, General Counsel of the Company, being delivered to you on this date pursuant to Section 3.01(m) of the Reimbursement Agreement. Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the opinion that 1. Each of the Reimbursement Agreement, the Custodian Agreement and the other Related Documents to which the Company is a party is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 2. The Custodian Agreement is effective to create a valid and perfected security interest in any right, title and interest in the Bonds from time to time pledged thereunder superior in right to any liens, existing or future, which the Company, the Issuer, the Trustee, the Remarketing Agent or any other Person may have against such Bonds or any interest therein. 3. In any action or proceeding arising out of or relating to the Reimbursement Agreement or the Custodian Agreement in any court of the State of Nevada or in any Federal court sitting in the State of Nevada, such court would recognize and give effect to the provisions of Section 7.10 of the Reimbursement Agreement and Section 8.6 of the Custodian Agreement wherein the parties thereto agree that the Reimbursement Agreement and the Custodian Agreement, as the case may be, shall be governed by, and construed in accordance with, the laws of the State of New York. Without limiting the generality of the foregoing, a court of the State of Nevada or a Federal court sitting in the State of Nevada would apply the usury law of the State of New York, and would not apply the usury law of the State of Nevada, to the Reimbursement Agreement. In this connection, we call your attention to the fact that the Supreme Court of Nevada has indicated in certain of its opinions that it may decline to enforce laws of other jurisdictions which it believes to be contrary to the public policy of Nevada. Although the Supreme Court of Nevada has sustained a decision enforcing the laws of another state, including usury provisions, we cannot give any assurance that, under any specific circumstances, the courts might not decline to enforce New York usury or other laws on public policy grounds not previously indicated (although no facts or circumstances have come to our attention in the context of the present transaction that D-2 lead us to believe that the present transaction would be contrary to public policy considerations articulated by the Supreme Court of Nevada to date). However, if a court were to hold that the Reimbursement Agreement and the Custodian Agreement are governed by, and to be construed in accordance with, the laws of the State of Nevada, the Reimbursement Agreement and the Custodian Agreement would be, under the laws of the State of Nevada, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. 4. The offer, sale and delivery of the Bonds under the circumstances contemplated by the Related Documents do not require registration of the Bonds under the Securities Act of 1933, as amended, and do not require compliance with the qualification requirements of the Trust Indenture Act of 1939, as amended. 5. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to it is a party, expect for the PSC Order, which has been duly obtained, is final and is in full force and effect. The PSC Order is not the subject of appeal or reconsideration or other review, and no subsequent appeal or reconsideration or other review of the PSC Order will have any adverse effect upon the legality, validity or enforceability of the Company's obligations under the Reimbursement Agreement or the Related Documents to which the Company is a party. Our opinions set forth in paragraphs 1 and 3, above, are subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). Very truly yours, D-3 EX-10.81 12 BARCLAYS 1995 LOC AGREEMENT =============================================================================== LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT dated as of October 1, 1995 among NEVADA POWER COMPANY, THE BANKS NAMED HEREIN and BARCLAYS BANK PLC, NEW YORK BRANCH, as Administrative Agent and Letter of Credit Bank =============================================================================== TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms...................... 1 SECTION 1.02. Computation of Time Periods.................10 SECTION 1.03. Accounting Terms...........................10 SECTION 1.04. Interpretation.............................10 ARTICLE II AMOUNT AND TERMS OF THE LETTERS OF CREDIT SECTION 2.01. The Letters of Credit......................11 SECTION 2.02. Issuing the Letters of Credit..............11 SECTION 2.03. Commissions and Fees.......................11 SECTION 2.04. Reimbursement On Demand....................11 SECTION 2.05. Advances and Interest......................12 SECTION 2.06. Prepayments................................13 SECTION 2.07. Increased Costs............................13 SECTION 2.08. Increased Capital..........................14 SECTION 2.09. Payments and Computations..................15 SECTION 2.10. Non-Business Days..........................15 SECTION 2.11. Extension of the Stated Termination Date...15 SECTION 2.12. Evidence of Debt...........................15 SECTION 2.13. Obligations Absolute.......................16 SECTION 2.14. Taxes......................................16 SECTION 2.15. Additional Interest.........................17 SECTION 2.16. Funding Indemnity...........................18 SECTION 2.17. Illegality, etc.............................18 SECTION 2.18. Reinstatement of Letter of Credit...........19 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Condition Precedent to Issuance of the Letters of Credit..........................19 SECTION 3.02. Additional Conditions Precedent to Issuance of the Letters of Credit..........21 SECTION 3.03. Conditions Precedent to Each Advance.......21 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Company....................................22 ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. Affirmative Covenants......................26 TABLE OF CONTENTS (Continued) Page ---- SECTION 5.02. Negative Covenants.........................30 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default..........................31 SECTION 6.02. Upon an Event of Default...................33 ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc............................34 SECTION 7.02. Notices, Etc...............................35 SECTION 7.03. No Waiver: Remedies........................35 SECTION 7.04. Right of Set-off...........................35 SECTION 7.05. Indemnification............................36 SECTION 7.06. Banks Not Liable...........................36 SECTION 7.07. Costs, Expenses and Taxes..................37 SECTION 7.08. Binding Effect.............................38 SECTION 7.09. Severability...............................38 SECTION 7.10. Governing Law; Submission to Jurisdiction; Etc. ......................................38 SECTION 7.11. Headings...................................39 SECTION 7.12. Counterparts...............................39 SECTION 7.13. Waiver of Jury Trial.......................39 SECTION 7.14. Participation and Assignment...............39 ARTICLE VIII SYNDICATION..................................40 SECTION 8.01. Syndication................................40 SECTION 8.02. Sharing of Payments........................41 ARTICLE IX THE ADMINISTRATIVE AGENT AND THE LC BANK......41 SECTION 9.01. Authorization and Action...................41 SECTION 9.02. Administrative Agent's Reliance, Etc........42 SECTION 9.03. Bank Credit Decision.......................42 SECTION 9.04. Indemnification............................42 SECTION 9.05. Barclays and Affiliates....................43 SECTION 9.06. Successor Administrative Agent.............43 EXHIBIT A Form of Irrevocable Letter of Credit with Exhibits 1 through 5 thereto EXHIBIT B Form of Custodian Agreement -ii- TABLE OF CONTENTS (Continued) Page ---- EXHIBIT C Form of Opinion of General Counsel of the Company EXHIBIT D Form of Opinion of Special Counsel to the Company -iii- LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of October 1, 1995, among NEVADA POWER COMPANY, a Nevada corporation (the "Company"), BARCLAYS BANK PLC, NEW YORK BRANCH, as Administrative Agent and Letter of Credit Bank, and the Banks (as defined herein). PRELIMINARY STATEMENTS. (1) Clark County, Nevada (the "Issuer") has issued various refunding bonds for the purpose of refunding certain tax- exempt bonds issued for the benefit of the Company and has issued the Series A Bonds (as defined herein) for the purpose of financing the cost of facilities for the local furnishing of electric energy. (2) The Company has requested that the Letter of Credit Bank issue two irrevocable, transferable letters of credit in substantially the form of Exhibit A hereto (such letters of credit, as they may from time to time be extended pursuant to the terms of this Agreement, being collectively the "Letters of Credit" and each individually a "Letter of Credit"), in the aggregate amount of $123,211,316 (the "Total Commitment"), of which (i) $120,750,000 shall support the payment of principal of the Series A Bonds and the Series C Bonds (as defined herein) or the portion of the purchase price of such Bonds corresponding to principal (the "Principal Component"), and (ii) $2,461,316 shall support the payment of up to 62 days' interest on the principal amount of the Series A Bonds and the Series C Bonds or the portion of the purchase price of such Bonds corresponding to interest (the "Interest Component"), computed at an assumed rate of 12% per annum on the basis of a year of 365 days (the Letter of Credit Bank's obligation to issue the Letters of Credit as hereinafter provided being hereinafter referred to as the Commitment (the "Commitment"). NOW, THEREFORE, in consideration of the premises and in order to induce the Letter of Credit Bank to issue the Letters of Credit, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, --------------------- the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" has the meaning provided in Section 2.05 (a). -------- "Administrative Agent" means Barclays, acting in its capacity as -------------------- Administrative Agent for the Banks hereunder, and any successor Administrative Agent. "Affiliate" means any trade or business (whether or not --------- incorporated) which is a member of a group of which the Company is a member and which is under common control within the meaning of the regulations under Section 414 of the Code. "Applicable Eurodollar Margin" means the Applicable L/C Rate then ---------------------------- in effect. 2 "Applicable L/C Rate" shall mean the following percentages: (i) ------------------- .26% for any day that Level I Status exists; (ii) .295% for any day that Level II Status exists; (iii) .35% for any day that Level III Status exists; (iv) .40% for any day that Level IV Status exists; and (v) .625% for any day that Level V Status exists. "Authorized Representative" means (i) for the Company, the -------------------------- Chairman of the Board, the President, any Vice President, the Director, Treasury and the Secretary and (ii) for any other Person, an authorized officer of such Person. "Bank" means each of the LC Bank and each of the parties ---- identified as a "Bank" on the signature pages hereto, and each Bank that becomes a party hereto in accordance with Section 7.14(b); provided that the rights of the LC Bank under this Agreement shall not be diminished or impaired by reason of the LC Bank also being a Bank hereunder. "Barclays" means Barclays Bank PLC, New York Branch. -------- "Base Rate" means a fluctuating interest rate per annum equal at --------- all times to the higher of (i) the Prime Rate or (ii) 1/2 of one percent above the Federal Funds Rate in effect from time to time. The Base Rate shall change concurrently with each change in the Prime Rate or Federal Funds Rate, as the case may be. "Base Rate Advance" means an Advance bearing interest at the Base ----------------- Rate. "Bond Purchase Agreement" means the Bond Purchase Agreement ------------------------- executed with respect to each Series of Bonds. "Bonds" means, collectively, the Series A Bonds and the Series C ----- Bonds. "Business Day" means a day of the year on which banks are not ------------ required or authorized by law to close in New York City or in Los Angeles, California, and if the applicable Business Day relates to a Eurodollar Rate Advance, on which dealings are carried on the London interbank eurodollar market. "Cancellation Date" has the meaning assigned to that term in each ----------------- Letter of Credit. "Code" means the Internal Revenue Code of 1986, as amended from ---- time to time after the date hereof, and the rules and regulations promulgated thereunder. "Commitment" has the meaning assigned to that term in the second ---------- Preliminary Statement hereto. "Commitment Termination Date" has the meaning assigned to that --------------------------- term in Section 2.01. "Common Equity" means the common stockholders' equity of the ------------- Company, less the book value of all intangible assets of the Company. 3 "Common Stock" means the $1.00 par value common stock of the ------------ Company. "Custodian Agreement" means the Custodian Agreement in ------------------- substantially the form of Exhibit B hereto. "Date of Issuance" has the meaning assigned to that term in ---------------- Section 2.02. "Debt" or "Indebtedness" means (i) indebtedness for borrowed money ---- ------------ or for the deferred purchase price of property or services, (ii) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iii) obligations (contingent or otherwise) in respect of bankers' acceptances or letters of credit, (iv) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (i) through (iii) above, (v) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA, and (vi) withdrawal liability incurred under ERISA by the Company or any of its Affiliates to any Multiemployer Plan. "Default Rate" means a fluctuating interest rate equal at all ------------ times to 2% per annum above the Base Rate in effect from time to time; provided that with respect to a Eurodollar Rate Advance the Default Rate - -------- shall be the higher of (i) such rate then in effect with respect to such Eurodollar Rate Advance plus 2% per annum or (ii) the Base Rate plus 2% per annum. "Designated Rating" means, with respect to any Rating Agency for ----------------- any day, the rating of the senior secured long-term debt of the Company (a "Secured Rating") outstanding and in effect on such day (including for this purpose as separate categories "+" and "-" designations by S&P or "1", "2" and "3" designations by Moody's). If a Rating Agency does not have a Secured Rating outstanding and in effect on any day, then there exists no Designated Rating by such Rating Agency for such day. "Environmental Claim" means any allegation, notice of violation, ------------------- claim, demand, or order by any governmental authority or any Person for any damage or for fines, penalties or restrictions, resulting from or based upon (i) the existence of a Release of, or exposure to, any Hazardous Material, in, into or onto the environment at, in, by, from or related to any facility, (ii) the use, handling, transportation, storage, treatment or disposal of Hazardous Materials in connection with the operation of any facility, or (iii) the violation of any Environmental Laws. "Environmental Laws" means all Laws relating to environmental ------------------ matters, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials and to the generation, use, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Company or any of its Subsidiaries or any of their respective properties, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ( 42 U.S.C. Subsection 9601 et seq. ), the Hazardous -- ---- Material Transportation Act ( 49 U.S.C . Subsection 1801 et seq. ), the -- ---- Resource Conservation 4 and Recovery Act ( 42 U.S.C. Subsection 6901 et seq. ), the Federal Water -- ---- Pollution Control Act (33 U.S.C. Subsection 1251 et seq.), the Clean Air Act -- ---- (42 U.S.C. Subsection 7401 et seq.), the Toxic Substances Control Act (15 -- ---- U.S.C. Subsection 2601 et seq.), the Occupational Safety and Health Act (29 -- ---- U.S.C. Subsection 65l et seq.) and the Emergency Planning and Community -- ---- Right to Know Act (42 U.S.C. Subsection 11001 et seq.), each as amended or -- ---- supplemented, and any analogous future or present applicable local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974. ----- "Eurocurrency Liabilities" has the meaning assigned to that term ------------------------ in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Rate" means, with respect to an Interest Period for a --------------- Eurodollar Rate Advance, an interest rate per annum equal to (a) the rate (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) per annum at which deposits in U.S. dollars are offered by the principal office of the Administrative Agent in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, in an amount substantially equal to the amount of the relevant Eurodollar Rate Advance and for a period equal to such Interest Period, plus (b) the Applicable Eurodollar Margin, as such rate may be adjusted pursuant to Section 2.15. "Eurodollar Rate Advance" means an Advance bearing interest at the ----------------------- Eurodollar Rate. "Eurodollar Rate Reserve Percentage" means for any Interest Period ---------------------------------- for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the applicable reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Banks with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Event of Default" has the meaning assigned to that term in ---------------- Section 6.01. "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. 5 "Fee Letter" means that certain letter agreement dated the Date of ---------- Issuance executed by the Company and addressed to the Administrative Agent and LC Bank. "Financing Agreement" means each Financing Agreement, dated as of ------------------- October 1, 1995 between the Issuer and the Company, executed with respect to a Series of Bonds. "First Mortgage Bond Indenture" means the Indenture of Mortgage ----------------------------- and Deed of Trust dated October 1, 1953 between the Company and First Interstate Bank of Nevada, N.A., as amended to the Date of Issuance. "Fiscal Quarter" means the fiscal quarter of the Company --------------- consisting of a three month fiscal period ending on each March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of the Company consisting of a ----------- twelve month fiscal period ending on each December 31. "Governmental Agency" means (a) any foreign, federal, state, -------------------- county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body, (c) any court or administrative tribunal or (d) with respect to any Person, any arbitration tribunal or other non-governmental authority to whose jurisdiction that Person has consented. "Hazardous Materials" means (i) any chemical, material or ------------------- substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable local, state or federal Law or under the regulations adopted or publications promulgated pursuant thereto, including, without limitation, Environmental Laws, (ii) any oil, petroleum or petroleum-derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (A) pose a hazard to any Property of the Company or any of its Subsidiaries or to Persons on or about such Property or (B) cause such Property to be in violation of any Environmental Laws, (iii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyl's in excess of fifty parts per million, and (iv) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or may or could pose a hazard to the health and safety of the owners, occupants or any Persons surrounding any Property of the Company. "Indenture" means each Indenture of Trust, dated as of October 1, --------- 1995 between the Issuer and the Trustee, pursuant to which a Series of Bonds was issued. 6 "Initial Stated Amount" means $78,314,439 with respect to the --------------------- Letter of Credit supporting the Series A Bonds and $44,896,877 with respect to the Letter of Credit supporting the Series C Bonds. "Interest Component" has the meaning assigned to that term in the ------------------ second Preliminary Statement herein. "Interest Period" means, with respect to a Eurodollar Rate --------------- Advance, a period of one day or one month, in each case as elected by the Company pursuant to Section 2.05(b); provided that any such Interest Period -------- that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and provided, further that no Interest Period shall -------- ------- extend beyond the scheduled repayment date of an Advance. "Issuer" has the meaning assigned to that term in the first ------ Preliminary Statement hereto. "Laws" means, collectively, all foreign, federal state and local ---- statutes, treaties, rules, regulations, ordinances, codes and administrative or controlling precedents of any Governmental Agency. "LC Bank" or "Letter of Credit Bank" means Barclays Bank PLC, New ------- --------------------- York Branch. "Letter of Credit" and "Letters of Credit" have the meanings ---------------- ----------------- assigned to those terms in the second Preliminary Statement hereto. "Level I Status" exists for any day if, on such day, the Company -------------- has a Designated Rating of (i) A or higher by S&P or (ii) A2 or higher by Moody's. "Level II Status" exists for any day if, on such day, (a) Level I --------------- Status does not exist and (b) the Company has a Designated Rating of (i) BBB+ or higher by S&P or (ii) Baa1 or higher by Moodys. "Level III Status" exists for any day if, on such day, (a) Level I ---------------- or II Status does not exist and (b) the Company has a Designated Rating of (i) BBB by S&P or (ii) Baa2 by Moody's. "Level IV Status" exists for any day if, on such day, (a) Level I, --------------- II or III Status does not exist and (b) the Company has a Designated Rating of (i) BBB- by S&P or (ii) Baa3 by Moody's. "Level V Status" exists for any day if, on such day, (a) Level I, -------------- II, III or IV Status does not exist and (b) the Company has a Designated Rating of (i) below BBB- by S&P or is unrated or (ii) below Baa3 by Moody's or is unrated. 7 "Lien" means, with respect to any asset, any lien, security ---- interest or other charge or encumbrance, or any other type of preferential arrangement in respect of such asset. "Material Adverse Effect" means any set of circumstances or events ----------------------- which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any Related Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise) or business operations of the Company and its Subsidiaries, taken as a whole, or to the prospects of the Company and its Subsidiaries, taken as a whole, (c) materially impairs or could reasonably be expected to materially impair the ability of the Company and its Subsidiaries, taken as a whole, to perform its obligations hereunder or under the Related Documents or (d) materially impairs or could reasonably be expected to materially impair the ability of the Administrative Agent or the Banks to enforce any of their legal remedies pursuant to this Agreement or the Related Documents. "Moody's" means Moody's Investors Service, Inc. or its successor ------- and assigns. "Multiemployer Plan" means a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA with respect to which the Company or any Affiliate (i) has an obligation to contribute to or (ii) could have liability. "Participant" has the meaning provided in Section 7.14(a) ----------- "PBGC" means the Pension Benefit Guaranty Corporation or any ---- successor thereto. "Person" means an individual, partnership, corporation (including ------ a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Agency. "Plan" means an employee benefit plan (other than a Multiemployer ---- Plan) maintained or contributed to for employees of the Company or any Affiliate and covered by Title IV of ERISA or the minimum funding requirements of Section 412 of the Code. "Pledged Bond" has the meaning assigned to that term in the ------------ Custodian Agreement. "Preferred Stock" means each of (a) the Cumulative Preferred Stock --------------- $20.00 par value 5.40% Series Preferred Stock of the Company, (b) the Cumulative Preferred Stock $20.00 par value 5.20% Series Preferred Stock of the Company, (c) the Cumulative Preferred Stock $20.00 par value 4.70% Preferred Stock of the Company, and (d) the Cumulative Preferred Stock $20.00 par value Auction Series A of the Company. "Prime Rate" means a fluctuating annual rate of interest equal to ---------- the rate publicly announced or quoted internally by the Administrative Agent as its Prime Rate. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change is publicly announced or quoted internally by the Administrative Agent. 8 "Principal Facility" means that certain Loan Agreement dated as of ------------------ November 21, 1994 by and among the Company, First Interstate Bank of Nevada, N.A., as agent, and the financial institutions party thereto. "Prior Bonds" means the Series 1985 Bonds as defined in Resolution ----------- No. 10-3-95-1 adopted by Clark County Nevada on October 3, 1995. "Property" means any interest in any kind of property or asset, -------- whether real, personal or mixed, or tangible or intangible. "PSC" means the Public Service Commission of Nevada, or any --- successor or other agency or authority of the State of Nevada from time to time having a similar jurisdiction. "PSC Order" means, at any time, the order by the PSC in effect at --------- such time that authorizes the Company to enter into this Agreement and the Related Documents to which it is, or is to be, a party, to request the LC Bank to issue the Letters of Credit hereunder and to incur Debt to the Banks hereunder in an amount not less than the Total Commitment. The PSC Order, when given by PSC, shall be deemed to include the application for such order by the Company. "Rating Agency" means S&P or Moody's. ------------- "Reimbursement Obligations" means all of the obligations of the ------------------------- Company to reimburse or repay the LC Bank or the Banks pursuant to Section 2.04 or 2.05. "Related Documents" has the meaning assigned to that term in ----------------- Section 2.13. "Release" means any release, emission, disposal, leaching, or ------- migration into the environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), or into or out of any of the facilities. "Remarketing Agent" has the meaning assigned to that term in each ----------------- Indenture. "Required Banks" means, at any time, Banks having Shares equal to -------------- at least 66 2/3% of the aggregate Shares; provided that such term shall in any event include the LC Bank unless expressly provided otherwise in this Agreement. "Series A Bonds" means the Issuer's $76,750,000 Industrial -------------- Development Revenue Bonds (Nevada Power Company Project) Series 1995A. "Series C Bonds" means the Issuer's $44,000,000 Industrial -------------- Development Refunding Revenue Bonds (Nevada Power Company Project) Series 1995C. "Series of Bonds" means any of the Series A Bonds or the Series C --------------- Bonds. 9 "Share" means, with respect to each Bank, the percentage of the ----- rights and obligations hereunder purchased by, or otherwise attributable to, such Bank, as specified on Schedule 7.02 hereof or in any assignment entered into pursuant to Section 7.14(b). "S&P" means Standard & Poor's, a division of The McGraw-Hill --- Companies, Inc. and its successors and assigns. "Stated Amount" has the meaning assigned to such term in each ------------- Letter of Credit. "Stated Termination Date" means, with respect to each Letter of ----------------------- Credit, October 12, 1999, as such date may be extended pursuant to Section 2.11. "Subsidiary" means, as to any Person, (i) any corporation of which ---------- more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person or by one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other Person in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Tender Drawing" has the meaning assigned to that term in each -------------- Letter of Credit. "Termination Event" means (i) a Reportable Event described in ----------------- Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of the Company or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Total Capitalization" means, as of any date of determination, the -------------------- sum of (a) Total Common Shareholders Equity as of that date, plus (b) the - --- ---- book value of the Preferred Stock as of that date, plus (c) the principal ---- amount as of that date of the Company's Indebtedness for borrowed money having an initial maturity in excess of one year from the date of its incurrence. "Total Common Shareholders Equity" means, as of any date of -------------------------------- determination, the sum of (a) the book value of the Common Stock of the --- Company as of that date, determined in accordance with generally accepted accounting principles, plus (b) the retained earnings of the Company as of ---- that date, determined in accordance with generally accepted accounting principles, plus (c) the premium on the capital stock of the Company which ---- should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of the Company as of that date, minus (y) the ----- book value of treasury stock which should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of 10 the Company as of that date, and minus (z) the amount of unamortized capital ----- stock expense which should, in accordance with generally accepted accounting principles, be reflected on the balance sheet of the Company as of that date; provided that there shall be excluded from Total Common Shareholders -------- Equity any amount attributable to Common Stock that is, directly or indirectly, required to be redeemed or repurchased by the Company at a specified date or upon the occurrence of specified events or at the election of the holder thereof. "Total Debt" means, as of any date of determination, the Company's ---------- Indebtedness for borrowed money on that date, minus the amount of all cash ----- and securities deposited in trust as security for such Indebtedness with the lenders thereof on that date. "Trustee" means the Person serving as Trustee under the Indenture ------- for each Series of Bonds, initially United States Trust Company of New York. In the event different Persons are acting as trustee for separate Series of Bonds, the term "Trustee" shall refer to each such Trustee unless the context requires otherwise. SECTION 1.02. Computation of Time Periods. In this Agreement, in --------------------------- the computation of a period of time from a specified date to a later specified date, the word "from" means from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.03. Accounting Terms. All accounting terms not ---------------- specifically defined herein shall be construed in accordance with generally accepted United States accounting principles consistent (except as otherwise stated herein) with those applied in the preparation of the December 31, 1994 financial statements referred to in Section 4.01(f). SECTION 1.04. Interpretation. The following rules shall apply to -------------- the construction of this Agreement unless the context requires otherwise: (a) the singular includes the plural and the plural the singular; (b) words importing any genderinclude the other gender; (c) references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made, and all regulations adopted and publications promulgated pursuant to such statutes; (d) references to "writing" include printing, photocopy, typing, lithography and other means of reproducing words in a tangible visible form; (e) the words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; (f) except as otherwise provided herein, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent that such amendments and other modifications are permitted or not limited by the terms of this Agreement; (g) references to Persons include their respective permitted successors and assigns; and (h) the words "herein," "hereof" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any provision of thisAgreement, and "Article," "Section," "subsection," "paragraph," and respective references are to this Agreement unless otherwise specified. 11 ARTICLE II AMOUNT AND TERMS OF THE LETTERS OF CREDIT SECTION 2.01. The Letters of Credit. The LC Bank agrees, on the --------------------- terms and conditions hereinafter set forth, to issue the Letters of Credit to the Trustee on any Business Day during the period from the date hereof to and including November 30, 1995 (the "Commitment Termination Date") in the Initial Stated Amounts thereof and in an aggregate amount not exceeding the Total Commitment. SECTION 2.02. Issuing the Letters of Credit. The Letters of ----------------------------- Credit shall be issued on at least three Business Days' notice from the Company to the LC Bank specifying the Business Day of issuance thereof. On such Business Day specified by the Company in such notice (such date, the "Date of Issuance") and upon fulfillment of the applicable conditions precedent set forth in Article III, the LC Bank will issue the Letters of Credit to the Trustee. SECTION 2.03. Commissions and Fees. (a) The Company hereby -------------------- agrees to pay to the Administrative Agent for the benefit of the Banks a letter of credit fee on the Stated Amount of each Letter of Credit from the Date of Issuance through and including the applicable Cancellation Date of a Letter of Credit, at the Applicable L/C Rate as adjusted from time to time, which letter of credit fee shall be payable on the Date of Issuance (for the period from the date hereof to and including December 31, 1995) and thereafter quarterly in advance on the last Business Day of each March, June, September and December commencing on December 31, 1995. In the event that following the payment by the Company of the letter of credit fee for any quarterly period (or any part thereof) a Letter of Credit shall be canceled or otherwise terminate prior to the end of such quarterly period (or any part thereof), the Banks agree that they will return to the Company (after applying any such amounts to any unreimbursed drawings under the Letters of Credit, unpaid Advances, interest thereon or any fees, commissions or any other amounts then due and payable by the Company to the Banks) the portion of the letter of credit fee as shall be obtained by multiplying (i) the total amount of letter of credit fee paid by the Company to the Banks for such quarterly period (or part thereof) by (ii) the quotient of (A) the number of days left during such quarterly period (or part thereof) divided by (B) the total number of days in such quarterly period (or part thereof). Solely for purposes hereof, the Stated Amount of a Letter of Credit shall be deemed not to be reduced with respect to any amount drawn thereunder that is subject to reinstatement. (b) The Company agrees to pay to the Administrative Agent and the LC Bank, respectively, the fees and other amounts set forth in the Fee Letter on the dates set forth therein. SECTION 2.04. Reimbursement On Demand. Except as otherwise ----------------------- specified in Section 2.05 (and provided the conditions precedent specified therein shall have been fulfilled), each amount paid by the LC Bank under a Letter of Credit (including, without limitation, amounts in respect of any reinstatement of the Interest Component (as defined in such Letter of Credit) at the election of the LC Bank notwithstanding any failure by the Company to reimburse the Banks for any previous drawing to pay interest on the Bonds) shall constitute a demand loan made by the Banks to the Company on the date of such payment by the LC Bank under such 12 Letter of Credit. The Company agrees to pay each such demand loan on the date of its making. Any such demand loan (or any portion thereof) not so paid on such date shall bear interest, payable on demand, from the date of making of such demand loan until payment in full, at a fluctuating interest rate per annum equal to the Default Rate. SECTION 2.05. Advances and Interest. (a) If the LC Bank shall --------------------- make any payment under a Letter of Credit upon a Tender Drawing submitted thereunder pursuant to Section 4.01 of the relevant Indenture and, on the date of such payment, the conditions precedent set forth in Section 3.03 shall have been fulfilled, the portion of such payment corresponding to principal on the Bonds shall constitute an advance made by the Banks to the Company on the date and in the amount of such payment (each such advance being an "Advance"). The Company shall pay interest on the unpaid principal amount of each Advance monthly in arrears on the last Business Day of each month (or, if earlier, the last day of an Interest Period for an Advance), and on the date of repayment of such Advance. Each Advance shall bear interest from the date of the incurrence thereof until the date upon which such Advance is paid in full at the Base Rate unless the Company has elected to pay interest at the Eurodollar Rate pursuant to subsection (b) below. Notwithstanding any other provision to the contrary herein, each Advance shall be due and payable by the Company to the Banks on the earlier of (i) the Cancellation Date, (ii) the date 180 days from the making of such Advance, (iii) the date specified in Section 2.06(b) below, and (iv) the date required by Section 6.02. (b) The Company may from time to time elect to convert any Advance to a Eurodollar Rate Advance by notice to the Administrative Agent, specifying the Advance, the duration of the Interest Period for such Advance, the amount of such Advance, and the date on which such Advance shall become a Eurodollar Rate Advance, such notice to be received by the Administrative Agent by 11:00 A.M. (New York time) at least three Business Days prior to the effective date of the requested conversion. Such Advance shall continue to be a Eurodollar Rate Advance, with an Interest Period of the duration selected by the Company in accordance with the immediately preceding sentence, determined by the Administrative Agent in accordance herewith, until the Company shall elect, by written notice to the Administrative Agent in accordance with the next following sentence, to convert such Advance to a Base Rate Advance or to convert the Interest Period for such Advance to an Interest Period of a different duration. Any such notice to the Administrative Agent requesting a conversion from a Eurodollar Rate Advance to a Base Rate Advance, or to an Interest Period of a different duration, shall be given to the Administrative Agent by 11:00 A.M. (New York time) at least three Business Days prior to the effective date of the requested conversion; provided, however, that conversion of any -------- ------- Eurodollar Rate Advance shall only be made at the end of the Interest Period for such Advance. The Company agrees that, unless the Company shall have requested that a Eurodollar Rate Advance be converted to a Base Rate Advance or to an Interest Period of a different duration in accordance herewith, the Eurodollar Rate with respect to such Advance shall be determined each Business Day or each month by the Administrative Agent, as the case may be, with respect to such Advance. (c) Notwithstanding any provision to the contrary herein, the Company shall pay interest on all past-due amounts of principal and (to the fullest extent permitted by law) interest, 13 costs, fees and expenses hereunder, from the date when such amounts became due until paid in full, payable on demand, at the default Rate in effect from time to time. SECTION 2.06. Prepayments. (a) The Company may, upon at least ----------- two Business Days' notice to the Administrative Agent, prepay the outstanding amount of any Advance in whole or in part with accrued interest to the date of such prepayment on the amount prepaid. (b) Prior to or simultaneously with the resale of all of the Bonds purchased with the proceeds of a Tender Drawing under a Letter of Credit, the Company shall prepay or cause to be prepaid in full the then outstanding principal amount (pursuant to Section 2.04) or Advance arising pursuant to such Tender Drawing, together with all interest thereon to the date of such prepayment. If less than all of such Bonds are resold, then prior to or simultaneously with such resale the Company shall prepay or cause to be prepaid a portion (as specified below) of the then outstanding principal amount (pursuant to Section 2.04) or Advance arising pursuant to such Tender Drawing, together with all interest thereon to the date of such prepayment. The portion of such principal amount or such Advance to be prepaid shall be determined by multiplying such principal amount or such Advance by a fraction, the numerator of which shall be the principal amount of the Bonds resold and the denominator of which shall be the principal amount of all of the Bonds purchased with the proceeds of the relevant Tender Drawing. SECTION 2.07. Increased Costs. (a) If either (i) the introduction --------------- of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any Law or (ii) the compliance by any Bank with any guideline or request from any central bank or other Governmental Agency (whether or not having the force of law), shall either (A) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit issued by, or assets held by, or deposits in or for the account of, such Bank or participated in by any Participant or (B) impose on any Bank any other condition regarding this Agreement, the Letters of Credit, any amount outstanding hereunder or any Advance, and the result of any event referred to in clause (A) or (B), above, shall be to increase the cost to any Bank or any Participant of issuing or maintaining the Letters of Credit (or its participation therein) or agreeing to make or making, funding or maintaining any Advance, then, upon demand by the Administrative Agent on behalf of a Bank, the Company shall pay to such Bank (for its own account or for the account of such Participant, as the case may be, within 10 days of receipt of such notice and from time to time as specified by the Bank, all additional amounts which shall be sufficient to compensate such Bank for such increased costs. A certificate setting forth such increased costs incurred by the Bank as a result of any event referred to in clause (i) or (ii) above, submitted by the Administrative Agent to the Company on behalf of such Bank, shall constitute such demand and shall, in the absence of manifest error, be conclusive and binding for all purposes. (b) In the event that after the date hereof the implementation of or any change in any Law, or any guideline or directive (whether or not having the force of law) or the interpretation or administration thereof, in each case by any administrative or governmental authority charged with the administration thereof shall: 14 (i) subject any Bank or any Participant to any tax of any kind with respect to this Agreement, the Advances or the transactions contemplated hereby or shall change the basis of taxation of any Bank or any Participant (other than a change in the rate of tax on the overall net income of such Bank); or (ii) impose, modify or deem applicable any reserve, special deposit, capital adequacy or similar requirement (other than any change by way of imposition on increase of reserve requirements included in the Eurodollar Rate Reserve Percentage); or (iii) impose on the Banks any other condition; and as a result of any of the foregoing, in the sole opinion of any Bank, there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Company shall from time to time, upon demand by such Bank or such Participant, pay to the Bank or such Participant additional amounts sufficient to compensate the Bank or such Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to the Company by the Administrative Agent on behalf of such Bank or such Participant, as the case may be, shall be conclusive and binding for all purposes. SECTION 2.08. Increased Capital. If any Bank determines that (1) ----------------- the adoption of any applicable Law, after the date hereof regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any court or Governmental Agency charged with the interpretation or administration thereof, or (2) compliance by such Bank with any directive regarding capital adequacy of any such Governmental Agency, generally affects banks issuing letters of credit or entering into agreements similar to or of the same type as this Agreement and has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of issuing or maintaining the Letters of Credit (or its participation therein) to a level below that which the Bank would have achieved but for such adoption, change or compliance (taking into consideration the Bank's policies with respect to capital adequacy), then, upon demand by the Administrative Agent on behalf of such Bank, the Company shall immediately pay to such Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate such Bank in the light of such circumstances, to the extent that the Bank reasonably determined such capital to be allocable to this Agreement or the issuance or maintenance of the Letters of Credit (or its participation therein). In determining such increased fee, the Banks may use reasonable and customary averaging and attribution methods. A certificate as to such amounts submitted to the Company by the Administrative Agent on behalf of such Bank shall constitute such demand and shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.09. Payments and Computations. The Company shall make ------------------------- each payment hereunder not later than 3:00 p.m. (New York time) on the day when due in lawful money of the United States of America to the Administrative Agent on behalf of the Banks (i) at its address referred to in Section 7.02 in same day funds or (ii) by federal funds transfer to the Administrative Agent's ABA Account No. 026-002-574 at the Federal Reserve Bank of New York for credit to CLAD Control Account, Account No. 050-019014, referencing Nevada Power 15 Company Letters of Credit. Computations of the Base Rate, the Eurodollar Rate, the Default Rate and the commissions and fees under Section 2.03 shall be made by the Administrative Agent on the basis of a year of 360 days and the actual number of days (including the first day but excluding the last day) elapsed. To the extent the Company has made any payments to the Administrative Agent on behalf of the Banks, such payment shall be deemed to have been made to the Banks by the Company for purposes of this Agreement. SECTION 2.10. Non-Business Days. Whenever any payment to be made ----------------- hereunder shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest, commission or fee, as the case may be. SECTION 2.11. Extension of the Stated Termination Date. Unless a ---------------------------------------- Letter of Credit shall have expired in accordance with its terms on the Cancellation Date, at least 75 but not more than 120 days before each anniversary of the Date of Issuance of such Letter of Credit, commencing on the anniversary thereof in 1996, the Company may, by notice to the Administrative Agent, request the Banks in writing (each such request being irrevocable) to extend for one year the Stated Termination Date of such Letter of Credit. If the Company shall make such request, the Administrative Agent shall, no later than 30 days following the date on which the Administrative Agent shall have received such request, notify the Company in writing (with a copy of such notice to the Trustee) whether or not all of the Banks consent to such request and, if all of the Banks do so consent, the conditions of such consent (including conditions relating to legal documentation). If the Administrative Agent shall not so notify the Company, the Banks shall be deemed not to have consented to such request. In connection with such extension, the Banks may at their option do or require any of the following: (a) issue an amendment to such Letter of Credit to the Trustee reflecting the extension of the scheduled expiration date, (b) cause the Company to cause the Trustee to return the Letter of Credit to the LC Bank and thereafter (i) the LC Bank shall return the Letter of Credit after amendment thereof to reflect the extension of the scheduled expiration date or (ii) cancel the Letter of Credit and issue to the Trustee, in substitution therefor, a substitute irrevocable letter of credit in the form of Exhibit A hereto, dated the date of such surrender, reflecting the extension of the scheduled expiration date but otherwise having terms substantially identical to the Letter of Credit being so extended. SECTION 2.12. Evidence of Debt. Each Bank shall maintain, in ---------------- accordance with its usual practice, an account or accounts evidencing the indebtedness of the Company resulting from each drawing under a Letter of Credit and from each Advance made from time to time hereunder and its respective Share of the Reimbursement Obligations and the amounts of principal and interest payable and paid from time to time hereunder . In any dispute, legal action or proceeding in respect of this Agreement, the entries made in such account or accounts shall, in the absence of manifest error, be conclusive evidence of the existence and amounts of the obligations of the Company therein recorded. SECTION 2.13. Obligations Absolute. The payment obligations of -------------------- the Company under this Agreement shall be unconditional and irrevocable, and shall be paid strictly 16 in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any of the Letters of Credit, the Bonds, the Indentures, the Financing Agreements, the Custodian Agreement, the Fee Letter or any Bond Purchase Agreement (collectively, the "Related Documents") or any other agreement or instrument relating thereto; (ii) any amendment or waiver of or any consent to or departure from all or any of the Related Documents; (iii) the existence of any claim, set-off, defense or other right which the Company may have at any time against the Trustee or any other beneficiary, or any transferee, of a Letter of Credit (or any Person for whom the Trustee, any such beneficiary or any such transferee may be acting), the Banks, or any other Person, whether in connection with this Agreement, the transactions contemplated herein or in the Related Documents, or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the LC Bank under a Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. SECTION 2.14. Taxes. All payments made by the Company hereunder ----- will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, any tax imposed on or measured by the net income of any of the Banks pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the principal office or lending office of a Bank is located ) and all interest, penalties or similar liabilities with respect thereto (collectively, "Taxes"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Fee Letter, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) each Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make all such required deductions and shall pay the full amount deducted to the relevant taxing authority in accordance with applicable law and (iii) the Company will furnish to the Banks within 45 days after the date the payment of any Taxes is due certified copies of tax receipts evidencing such payment by the Company. The Company will indemnify and hold harmless each Bank, and reimburse any Bank upon written 17 request of the Administrative Agent on behalf of such Bank the amount of any Taxes so levied or imposed and paid by any Bank. Each Bank represents and warrants to the Company that either (1) it is entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments to be made by the Company to the Banks pursuant to the terms of this Agreement; or (2) all interest and other payments to be made by the Company to such Bank pursuant to the terms of this Agreement will be effectively connected with the conduct by the Bank of a trade or business within the United States (within the meaning of Section 882 of the Code). Prior to the Date of Issuance and thereafter upon the request of the Company, each Bank agrees to furnish to the Company two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the Bank claims entitlement to complete exemption from U.S. federal withholding tax on all interest and other payments hereunder). In the event a Bank fails to provide an accurate Form 4224 or Form 1001 as required by this paragraph and which it is legally entitled to provide, the Company shall not be required to pay any additional amounts with respect to U.S. Federal income taxes to such Bank pursuant to this paragraph. Notwithstanding any other provisions of this Agreement and except in the event of a change in applicable law, the representations, warranties and obligations of the Bank set forth in this paragraph in respect of any interest in this Agreement or the Letters of Credit shall survive until the assignment, sale, payment or other disposition of such interest or the Letters of Credit. SECTION 2.15. Additional Interest. The Company shall pay to the ------------------- Administrative Agent on behalf of any Bank during each Interest Period for a Eurodollar Rate Advance, so long as such Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on each Eurodollar Rate Advance, from the first day of such Interest Period until paid in full or the last day of such Interest Period, at an interest rate per annum equal at all times to the difference obtained by subtracting (i) the Eurodollar Rate in effect for such Interest Period from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period, payable on each date on which interest is payable on such Eurodollar Rate Advance. Such additional interest shall be determined by the Bank and notified to the Administrative Agent, which shall forward such notice to the Company and such determination shall be binding and conclusive, absent manifest error. SECTION 2.16. Funding Indemnity. The Company agrees to indemnify ----------------- and hold harmless each Bank from any loss or expense which it may sustain or incur as a result of: (i) the failure by the Company to borrow or prepay an Advance bearing interest at the Eurodollar Rate after giving notice of its intention to do so pursuant to Section 2.06; (ii) the failure by the Company to pay the principal of or interest on any Eurodollar Rate Advance when due (whether at stated maturity, upon acceleration or otherwise); or 18 (iii) the conversion, prepayment or repayment of any Eurodollar Rate Advance on a date that results in breakage or similar costs to the Bank; including but not limited to any such loss or expense arising from interest, fees or other amounts payable by the Bank to lenders of funds obtained by it in order to make and maintain the Advances thereunder. A certificate setting forth such loss or expense submitted by the Bank to the Administrative Agent and the Company shall be conclusive and binding as to the amount owed such Bank. SECTION 2.17. Illegality, etc. If the adoption of any Law, or --------------- any change therein, or any change in the interpretation or administration thereof by any Governmental Agency, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such Governmental Agency, shall make it, in the sole opinion of the Required Banks, unlawful for the Required Banks to obtain funds in the London interbank Eurodollar market to make, maintain or fund Eurodollar Rate Advances, or if, as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the London interbank Eurodollar market it shall become impracticable, in the sole judgment of the Required Banks, for the Required Banks to obtain funds in the London interbank Eurodollar market to make, maintain or fund Eurodollar Rate Advances or otherwise to perform its obligations hereunder with respect to any Eurodollar Rate Advance, the Required Banks shall immediately notify the Administrative Agent and the Administrative Agent shall immediately so notify the Company, but the failure of the Administrative Agent to give such notice shall not affect the terms of this Section 2.17. Upon receipt of such notice, (i) the right of the Company to select for any Advance the Eurodollar Rate shall forthwith be canceled, such cancellation to continue unless and until the Administrative Agent shall notify the Company that it has determined that it is no longer unlawful or impracticable for the Banks to make, maintain or fund Eurodollar Rate Advances and (ii) outstanding or requested Eurodollar Rate Advances shall be converted automatically into or made as, Base Rate Advances. The Company hereby agrees to pay to the Administrative Agent on behalf of any Bank upon demand of such Bank, any additional amounts necessary to compensate such Bank for any loss, cost or expense incurred by the Bank in connection with any Eurodollar Rate Advance as a result of any such illegality. A certificate setting forth such cost, loss or expense submitted by the Bank to the Administrative Agent and the Company shall constitute such demand and shall be conclusive and binding. SECTION 2.18. Reinstatement of Letter of Credit. The consent of --------------------------------- the Banks shall not be required with respect to the automatic reinstatement of the Interest Component of a Letter of Credit resulting from a drawing under the Letter of Credit to pay interest on the Bonds (an "Interest Drawing"), except as provided in this Section 2.18. If the Company has not reimbursed the Banks in full for such Interest Payment by making payment to the Administrative Agent within five Business Days after an Interest Drawing, the Administrative Agent shall notify the Banks to such effect. Unless an Event of Default shall have been declared pursuant to Section 6.02, on the fifteenth calendar day after such Interest Drawing, or if such day will not be a Business Day, on the immediately preceding Business Day, the LC Bank shall deliver to the Trustee a written notice stating that the Banks have not been reimbursed for such drawing and that the Interest Component will not be reinstated, unless either (A) the Administrative Agent has 19 received the necessary reimbursement payment by such fifteenth calendar day (or preceding Business Day, as the case may be) or (B) all of the Banks have in their respective sole discretion agreed that such notice shall not be sent and that the Interest Component shall consequently be allowed to automatically reinstate. ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Condition Precedent to Issuance of the Letters of ---------------------------------------------------- Credit. The obligation of the LC Bank to issue the Letters of Credit is - ------ subject to the conditions precedent that the Administrative Agent (in sufficient copies for each Bank) shall have received the following on or before the Date of the Issuance, each dated such date, in form and substance satisfactory to the Banks: (a) A copy of the Custodian Agreement, duly executed by the Company and the Trustee. (b) A copy of each Indenture, in each case duly executed by the Issuer and the Trustee. (c) A copy of each Financing Agreement, in each case duly executed by the Issuer and the Company. (d) A copy of each Bond Purchase Agreement and Remarketing Agreement, in each case duly executed by all parties thereto. (e) Certified copies of the resolutions of the Board of Directors of the Company approving this Agreement, the Letters of Credit and the Custodian Agreement and the transactions contemplated hereby and thereby, and of all other documents evidencing any other necessary corporate action. (f) An original (or a duplicate copy certified by the Company in a manner satisfactory to the Administrative Agent to be a true copy) of the application filed by the Company for the PSC Order and of each governmental action and regulatory approval (including, without limitation, the PSC Order and approvals or orders of the Issuer and the PSC) necessary for the Company to enter into this Agreement, the Letters of Credit and the Custodian Agreement and for the transactions contemplated hereby and thereby. (g) A certificate of the Secretary or an Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and the other documents to be delivered by it hereunder. (h) A letter from Chapman and Cutler, Bond Counsel, addressed to the Banks and stating therein that the Banks may rely on the opinions of such firm delivered in connection with the transactions contemplated hereby. 20 (i) A letter from Best, Best & Krieger, Special Counsel to the Company, addressed to the Administrative Agent and to each of the Banks and stating therein that the Banks may rely on the opinion of such firm delivered pursuant to Section 6(a)(i) of each Bond Purchase Agreement. (j) A letter from Richard L. Hinckley, Esq., General Counsel to the Company, addressed to the Administrative Agent and to each of the Banks and stating therein that the Banks may rely on his opinion delivered pursuant to Section 6(a)(i) of each Bond Purchase Agreement. (k) An opinion of Richard L. Hinckley, Esq., General Counsel to the Company, in substantially the form of Exhibit C hereto and as to such other matters as the Banks may reasonably request. (l) An opinion of Best, Best & Krieger, Special Counsel to the Company, in substantially the form of Exhibit D hereto and as to such other matters as the Banks may reasonably request. (m) Receipt by the Administrative Agent from the Company of (i) an executed copy of the Fee Letter and the fees provided for in the Fee Letter which by its terms are due and payable on or prior to the Date of Issuance, (ii) the letter of credit fee payable for the period from the Date of Issuance to December 31, 1995 and (iii) receipt by counsel to the Letter of Credit Bank of their fees and expenses incurred to date on behalf of the Administrative Agent and Letter of Credit Bank in connection with the negotiation and drafting of this Agreement and the Related Documents; provided that the fees of Hughes Hubbard & Reed, New York counsel to the Administrative Agent, will not exceed $17,500, plus disbursements. (n) Receipt by the Administrative Agent of a letter from Moody's or S&P assigning the rating of the LC Bank to the Bonds. SECTION 3.02. Additional Conditions Precedent to Issuance of the --------------------------------------------------- Letters of Credit. The obligation of the LC Bank to issue the Letters of - ----------------- Credit shall be subject to the further conditions precedent that on the Date of Issuance: (a) The following statements shall be true and the Administrative Agent shall have received a certificate signed by an Authorized Representative of the Company, dated the Date of Issuance, stating that: (i) The representations and warranties contained in Section 4.01 of this Agreement are true and correct on and as of the Date of Issuance as though made on and as of such date; (ii) No event has occurred and is continuing, or would result from the issuance of the Letters of Credit, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse, or both; and 21 (iii) No material adverse change in the financial condition, business, prospects or operations of the Company shall have occurred since June 30, 1995; (b) All legal matters incident to this Agreement and the Related Documents shall be reasonably satisfactory to counsel for the Administrative Agent; (c) There shall have been no introduction of or change in or in the interpretation of any Law that would make it unlawful or unduly burdensome for the LC Bank to issue the Letters of Credit, no outbreak or escalation of hostilities or other calamity or crisis, no suspension of or material limitation on trading on the New York Stock Exchange or any other national securities exchange, no declaration of a general banking moratorium by United States, New York or United Kingdom banking authorities, and no establishment of any new restrictions on transactions in securities or on banks materially affecting the free market for securities or the extension of credit by banks; and (d) The Banks shall have received such other approvals, opinions or documents as the Banks may reasonably request. SECTION 3.03. Conditions Precedent to Each Advance. The obligation ------------------------------------ of the Banks to make each Advance shall be subject to the conditions precedent that, on the date of such Advance, the following statements shall be true: (a) The representations and warranties contained in Section 4.01 of this Agreement are true and correct on and as of the date of such Advance as though made on and as of such date; and (b) No event has occurred and is continuing, or would result from such Advance, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse, or both. Unless the Company shall have previously advised the Administrative Agent in writing that one or more of the statements contained in clauses (a) and (b) above is not true or will not be true on the date of such Advance, the Company shall be deemed to have represented and warranted, on and as of the date of such Advance, that the above statements are true. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Company. The --------------------------------------------- Company hereby represents and warrants, as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which the ownership 22 of its Property and the conduct of its business makes such qualification necessary. The Company has all requisite power and authority to conduct its business as presently conducted and to own its Property. (b) The execution, delivery and performance by the Company of this Agreement and the Related Documents to which it is or is to be a party are within the Company's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Company's charter or by-laws or (ii) any Law, order, writ, judgment or similar restriction (including, without limitation, any order, rule or regulation of the PSC) or any contractual restriction binding on or affecting the Company, and do not result in or require the creation of any Lien (except as may be created under the Related Documents) upon or with respect to any of its Property. (c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Agency is required for the due execution, delivery and performance by the Company of this Agreement or any Related Document to which the Company is or is to be a party, except for the PSC Order, which, on the Date of the Issuance, has been duly obtained, is final and in full force and effect and has not been, is not and will not be the subject of appeal or reconsideration or other review. (d) This Agreement is, and the Related Documents to which the Company is a party are, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. Each of the Related Documents to which the Company is a party is in full force and effect and no party to such agreements has contested or challenged the validity or enforceability thereof or refused to perform its obligations thereunder. (e) The Bonds have been duly authorized, authenticated and issued and delivered, and are the legal, valid and binding obligations of the Issuer. All payments of principal and interest on the Prior Bonds have been made on the due dates thereof and no Prior Bonds are in default. (f) The balance sheet (including the notes thereto) of the Company as at December 31, 1994 and the related statements of income and retained earnings of the Company for the fiscal year then ended, certified by Deloitte & Touche independent public accountants, in each case as set forth in the annual report of the Company contained in the Company's December 31, 1994 Report on Form 10-K as filed with the Securities and Exchange Commission, a copy of which has been furnished to each Bank, fairly present the financial condition of the Company as at such date and the results of the operations of the Company for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since December 31, 1994, there has been no material adverse change in the Company's financial condition, results of operations, business, properties, operations or prospects. (g) Except as disclosed in the Company's December 31, 1994 Report on Form 10-K as filed with the Securities and Exchange Commission, there is no pending or threatened action or proceeding affecting the Company or any of its Subsidiariesbefore any 23 court, governmental agency or arbitrator, which is likely to have a Material Adverse Effect on the financial condition, results of operations, business, properties, operations or prospects of the Company and its Subsidiaries, taken as a whole, and there has occurred no material adverse developments in any such action or proceeding so disclosed. (h) No proceeds of any drawing under any Letter of Credit will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) The Company is not engaged in the business of extending credit for the purpose of buying or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any drawing under any Letter of Credit will be used to buy or carry any margin stock or to extend credit to others for the purpose of buying or carrying any margin stock. (j) No Termination Event has occurred nor is reasonably expected to occur with respect to any Plan. (k) Schedule B (Actuarial Information) to the 1994 annual report (Form 5500 Series) of the Company with respect to each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Banks, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (l) Neither the Company nor any of its Affiliates has incurred, or reasonably expects to incur, any withdrawal liability under ERISA to any Multiemployer Plan. (m) Neither the Company nor any of its Affiliates has incurred or reasonably expects to incur material liability under Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(l) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code. (n) The Company and each Subsidiary have filed all tax returns (Federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, other than such taxes that the Company or its Subsidiary is contesting in good faith and by appropriate legal proceedings and for which adequate reserves have been set aside on the books of the Company or such Subsidiary in accordance with generally accepted accounting principles. (o) Neither the Company nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument which would have a Material Adverse Effect on the ability of the Company to perform its obligations under this Agreement or any of the Related Documents to which it is, or is to be, a party. (p) Except for information describing the LC Bank contained in the Preliminary Official Statement, the Official Statement or any other offering document relating to the Bonds, as to which no representation is made, such Official Statement, such Preliminary Official 24 Statement and such other offering document was, and any supplement or amendment thereof shall be, accurate in all material respects for the purposes for which its use was or shall be authorized; and such Official Statement, Preliminary Official Statement and such other offering document as of its date did not, and any such supplement or amendment shall not, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (q) Environmental Compliance. Except as set forth in Schedule ------------------------ 4.01(q) hereto: (1) the operations of the Company and of each of its Subsidiaries (including, without limitation, all operations and conditions at or in the facilities currently used by the Company and its Subsidiaries) comply in all material respects with all Environmental Laws; (2) neither the Company nor any of its Subsidiaries has received (A) any notice or claim to the effect that it is or may be liable to any person as a result of the Release or threatened Release of any Hazardous Material or (B) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Subsection 9604) or comparable state laws, and to the best of the Company's knowledge, none of the operations of the Company or any of its Subsidiaries is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a Release or threatened Release of any Hazardous Material at any facility or at any other location; (3) the Company and each of its Subsidiaries and all of their respective facilities or operations are not subject to any outstanding written order or agreement with any governmental authority or private party respecting (A) any Environmental Law or (B) any Environmental Claim; (4) neither the Company nor any of its Subsidiaries has any contingent obligation in connection with any Release of any Hazardous Material by the Company or any of its Subsidiaries; (5) except in the ordinary course of its business and in compliance with all Environmental Laws, neither the Company nor any of its Subsidiaries nor any predecessor of the Company or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment or disposal of any Hazardous Material at any facility, and none of the Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent or of any other Hazardous Material; 25 (6) no Hazardous Material exists on, under or around any facility in a manner that could give rise to an Environmental Claim resulting in a material adverse effect on the financial condition or operations of the Company, and neither the Company nor any of its Subsidiaries has filed any notice or report of a Release of any Hazardous Materials that could give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company; (7) neither the Company nor any of its Subsidiaries (nor any of their respective predecessors) has disposed of any Hazardous Material in a manner that may give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company; and (8) neither the Company nor any of its Subsidiaries maintains any underground storage tanks or surface impoundments in a manner that may give rise to an Environmental Claim resulting in a Material Adverse Effect on the financial condition or operations of the Company. (r) The representations and warranties contained in Article IV of the Principal Facility are true and correct in all material respects as if made on the date hereof. ARTICLE V COVENANTS OF THE COMPANY SECTION 5.01. Affirmative Covenants. So long as(i) the Commitment --------------------- Termination Date has not yet occurred, (ii) any drawing is available under a Letter of Credit, or (iii) the Company shall have any obligation to pay any amount to the Banks hereunder, the Company will, unless the Required Banks shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each of its ------------------------- Subsidiaries to comply, in all material respects, with all applicable Laws, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its Property, except to the extent that any such non- compliance would not, individually or in the aggregate, have a Material Adverse Effect on the financial condition, results of operations, operations, business or credit of the Company or its ability to perform its obligations hereunder or under any Related Document to which it is or is to be a party. (b) Visitation Rights. At any reasonable time and from time to ----------------- time, permit the Administrative Agent or the LC Bank or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the Property of, the Company and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the 26 Company and any of its Subsidiaries, with any of their respective officers or directors or with the independent auditors of the Company. (c) [Intentionally Omitted] (d) [Intentionally Omitted] (e) Reporting Requirements. Furnish to the Administrative Agent ---------------------- (with sufficient copies for each Bank) the following: (i) as soon as possible and in any event within five Business Days after the occurrence of each Event of Default and each event which, with the giving of notice, lapse of time, or both, would constitute any such Event of Default, the statement of an Authorized Representative of the Company setting forth details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (ii) as soon as available and in any event within 45 days after the close of each of the first three Fiscal Quarters in each Fiscal Year of the Company: (A) an unaudited balance sheet of the Company as at the end of such quarter and statements of income and retained earnings of the Company for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, fairly presenting the financial condition of the Company as at such date and the results of operations of the Company for such period and setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer (or the designee of such officer) of the Company as having been prepared in accordance with generally accepted accounting principles consistently applied (it being understood and agreed that the delivery by the Company to the Administrative Agent within such 45-day period of the Company's Quarterly Report on Form 10-Q for such quarter, as filed with the Securities and Exchange Commission, containing such balance sheet and statements shall be deemed to satisfy the requirements of this subparagraph (A)); and (B)a certificate of the chief financial officer (or the designee of such officer) of the Company setting forth the calculation of the ratios contemplated by this Agreement, as of the date of the most recent financial statements accompanying such certificate, to show the Company's compliance with or the status of the financial covenants, agreements, representations and warranties contained herein, and a certificate of such officer (or such designee) stating whether he or she has any knowledge of 27 the occurrence at any time prior to the date of such certificate of any Event of Default not previously reported pursuant to the provisions of paragraph (i) of this subsection (e), or of the occurrence at any time prior to such date of any event, except events previously reported pursuant to the provisions of paragraph (i) of this subsection (e) and remedied, which, with notice or lapse of time, or both, would constitute an Event of Default and, if so, setting forth the details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (iii) (A) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Company, a copy of the annual report for such year for the Company, containing financial statements for such year certified in a manner acceptable to the Required Banks by Deloitte & Touche or other independent public accountants acceptable to the Required Banks (it being understood and agreed that the delivery by the Company to the Administrative Agent within such 90-day period of the Company's Annual Report on Form 10-K for such year, as filed with the Securities and Exchange Commission, containing such financial statements shall be deemed to satisfy the requirements of this subparagraph (A)), and (B) a certificate of the chief financial officer (or the designee of such officer) of the Company setting forth the calculation of the ratios contemplated by this Agreement, as of the date of the most recent financial statements accompanying such certificate, to show the Company's compliance with or the status of the financial covenants, agreements, representations and warranties contained herein, and a certificate of such officer (or such designee) stating whether he or she has any knowledge of the occurrence at any time prior to the date of such certificate of any Event of Default not previously reported pursuant to the provisions of paragraph (i) of this subsection (e), or of the occurrence at any time prior to such date of any such event, except events previously reported pursuant to the provisions of paragraph (i) of this subsection (e) and remedied, which, with notice or lapse of time, or both, would constitute an Event of Default and, if so, setting forth the details of such Event of Default or event and the action which the Company has taken and proposes to take with respect thereto; (iv) promptly after the sending or filing thereof, copies of all reports which the Company or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (v) as soon as possible and in any event (i) within 30 days after the Company or any Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within ten days after the Company or any Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer (or the 28 designee of such officer) of the Company describing such Termination Event and the action, if any, which the Company or such Affiliate proposes to take with respect thereto; (vi) promptly and in any event within two Business Days after receipt thereof by the Company or any Affiliate from the PBGC, copies of each notice received by the Company or any such Affiliate concerning the PBGC's possible intention to terminate any Plan or to have a trustee appointed to administer any Plan; (vii) promptly and in any event within ten Business Days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan which is a pension plan (other than a Multiemployer Plan) maintained or contributed to for employees of the Company or any Affiliate, which provides payments at, or defers receipt of payment until, retirement and is subject to Title IV of ERISA; (viii) promptly and in any event within ten Business Days after receipt thereof by the Company or any Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by the Company or any Affiliate concerning (A) the imposition of withdrawal liability by a Multiemployer Plan pursuant to Section 4202 of ERISA, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or expected to be incurred, by the Company or any Affiliate in connection with any event described in clause (A), (B) or (C), above; (ix) promptly and in any event within two Business Days after the Company or any Affiliate knows or has reason to know that it has incurred or could reasonably expect to incur material liability under Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(1) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code; and (x) such other information respecting the condition or operations, financial or otherwise, of the Company or any of its Subsidiaries as the Administrative Agent or the LC Bank may from time to time reasonably request. (f) Maintenance of Insurance. Maintain, and cause each of its ------------------------ Subsidiaries to maintain, insurance (subject to customary deductibles and retentions) with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates and, upon the written request of the Administrative Agent at the request of a Bank, (1) deliver to the Administrative Agent on behalf of such Bank a certificate of an Authorized Representative of the Company 29 specifying the details of such insurance in effect or (2) cause its insurance agent to deliver to the Administrative Agent a certificate specifying the details of such insurance in effect. (g) Preservation of Corporate Existence, Etc. Except to the ------------------------------------------ extent not prohibited by Section 5.02(c), preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), franchises and, to the extent required in connection with its operations, foreign qualifications. (h) Keeping of Books. Keep, and cause each of its Subsidiaries ---------------- to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its Subsidiaries in accordance with generally accepted accounting principles consistently applied. (i) Maintenance of Properties, Etc. Maintain and preserve, and ------------------------------- cause each of its Subsidiaries to maintain and preserve, all of its Property which is used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (j) Performance and Compliance with Other Covenants. Perform and ----------------------------------------------- comply with each of the covenants to be performed by the Company, as set forth in Articles II, III, IV, V, VI and VII of each Financing Agreement, without giving effect to any subsequent amendment, modification or termination thereof after the date hereof, unless such amendment, modification, or termination was consented to by the Required Banks. (k) Accounting Method. Continue to account for its Subsidiaries ----------------- according to the equity method of accounting. SECTION 5.02. Negative Covenants. So long as (i) the Commitment ------------------ Termination Date has not yet occurred, (ii) any drawing is available under a Letter of Credit, or (iii) the Company shall have any obligation to pay any amount to the Banks hereunder, the Company will not, and will not permit any of its Subsidiaries to, without the written consent of the Required Banks: (a) [Intentionally Omitted] (b) Sales, Etc. of Assets. Sell, lease, transfer or otherwise --------------------- dispose of, directly or indirectly, whether in one transaction or in a series of transactions, all or any substantial part of the assets of the Company or any of its Subsidiaries, including, without limitation, all or substantially all assets constituting the business of a division, branch or other unit operation, except in the ordinary course of business as presently conducted or in a transaction not prohibited by subsection (c) below. (c) Mergers, Etc. Merge or consolidate with or into, or acquire ------------ all of the assets of, any other Person, except that (i) any Subsidiary may merge or consolidate with or into, or acquire assets from, any other Subsidiary, (ii) any Subsidiary may merge into the Company and (iii) the Company may merge with or into, and any Subsidiary may merge or consolidate with or into, any other Person; provided, however, that (A) in the case of any such merger, consolidation 30 or acquisition, both immediately before and after giving effect thereto, no Event of Default or event which, with the passage of time or the giving of notice, or both, would constitute an Event of Default shall have occurred and be continuing, (B) in the case of any consolidation referred to in clause (i) or ( iii) above , the corporation formed by such consolidation shall be a Subsidiary of the Company, and (C) in the case of any merger to which the Company is a party, either the Company is the surviving corporation or the corporation into which the Company shall be merged shall (1) assume the Company's obligations under this Agreement and the Related Documents to which it is, or is to be, a party in a writing in form and substance satisfactory to the Administrative Agent, (2) demonstrate to the satisfaction of the Administrative Agent compliance with the covenants set forth in Section 5.02(h) and (i) below, calculated on a pro forma basis as of the last day of the immediately preceding fiscal quarter and giving effect to such merger as if such corporation were the Company and the Company were its Subsidiary and (3) enter into written amendment to this Agreement in form and substance satisfactory to the Administrative Agent for the purpose of conforming, as closely as possible, the substance of Articles III through VI of this Agreement to the corporate structure of such corporation and its Subsidiaries after giving effect to such merger. (d) Related Documents. Amend or modify any Related Document to ----------------- which the Company is or is to be a party or consent to any amendment or modification of any Related Document to which the Company is not party. (e) Compliance with ERISA. (i) Terminate, or permit any Affiliate --------------------- to terminate, any Plan so as to result in any material (in the opinion of the Required Banks) liability of the Company, or (ii) permit to exist any occurrence of any Reportable Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Required Banks) risk of a Plan termination by the PBGC. (f) Alternate Credit Facility. Cause a substitute letter of ------------------------- credit or other similar facility to be delivered to the Trustee in substitution of a Letter of Credit without paying to the Banks all obligations hereunder following the Cancellation Date. (g) Optional Redemption of Bonds. Cause an optional redemption ---------------------------- of any Bonds without providing for the payment of all amounts due or to become due to the Banks hereunder. (h) Common Equity. Permit Total Common Shareholders Equity, as ------------- of the last day of any Fiscal Quarter, to be less than $575,000,000, plus ---- thirty-three and one third percent (33 1/3%) of the net cash proceeds to the Company of any permanent equity capital of the Company issued following the Date of Issuance. (i) Total Debt to Total Capitalization. Permit the ratio of ---------------------------------- Total Debt to Total Capitalization, as of the last day of any Fiscal Quarter, to be greater than 0.65 to 1.00. (j) Amendments to Certain Agreements. Amend the First Mortgage -------------------------------- Bond Indenture in a manner which is adverse to the interests of the Banks or, in any event, to change the definition or means of application of the definition of "Excluded Property" used therein. 31 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. The occurrence of any of the ----------------- following events shall be an "Event of Default" hereunder: (a) The Company shall fail to pay any amount payable under any provision of Article II when due; or (b) Any representation or warranty made, or deemed made, by the Company herein or by the Company (or any of its officers) in connection with this Agreement or any of the Related Documents shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Company shall fail to perform or observe any of its covenants and agreements contained in Section 5.02 hereof; or (d) The Company shall fail to perform or observe any other covenant or agreement contained in this Agreement or the Custodian Agreement and, in any such case, such failure shall continue for ten Business Days after written notice thereof from the Administrative Agent to the Company; or (e) The Company or any of its Subsidiaries shall fail to pay any Debt (excluding Debt under this Agreement) of the Company or such Subsidiary (as the case may be), when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other default under any agreement or instrument relating to any such Debt, or any other default or event shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (f) A judgment or order for the payment of money in excess of $5,000,000 shall be rendered against the Company or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of ten consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any approval of the PSC (including the PSC Order) or any governmental body, public board or public body related to this Agreement or the Custodian Agreement shall be modified, rescinded, revoked or set aside or otherwise cease to remain in full force and effect or shall otherwise not authorize the entirety of the Advances and other amounts outstanding hereunder; or 32 (h) Any provision of this Agreement or the Custodian Agreement shall at any time for any reason cease to be valid and binding on the Company, or shall be declared to be null and void, or the validity or enforceability thereof shall be denied or contested by the Company, or a proceeding shall be commenced by any Governmental Agency having jurisdiction over the Company seeking to establish the invalidity or unenforceability thereof, or the Company shall deny that it has any further liability or obligation thereunder; or (i) Any "Event of Default" under and as defined in any Financing Agreement or an Indenture shall have occurred and be continuing; or (j) Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Company by the Administrative Agent, (i) such Termination Event (if correctable) shall not have been corrected and (ii) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $10,000,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the Company's or any Affiliate's withdrawing employer's proportionate share of such excess shall exceed such amount); or (k) The Company or any of its Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an aggregate amount exceeding $10,000,000; or (l) The Company or any of its Affiliates shall incur liability in an aggregate amount exceeding $10,000,000 pursuant to any one or more of Title IV of ERISA or pursuant to Section 406, 409, 502(i), 502(1) or 515 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code; or (m) The Company or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its Property; or the Company or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (m); or (n) Any event which materially and adversely affects the financial condition or results of operations of the Company or the ability of the Company to observe and perform the terms of this Agreement or any Related Document to which the Company is or is to be a party shall have occurred and be continuing. 33 SECTION 6.02. Upon an Event of Default. If any Event of Default ------------------------ shall have occurred and be continuing, the Administrative Agent, at the request of the LC Bank or the Required Banks, shall (i) if the Letters of Credit shall not have been issued, by notice to the Company declare the Commitment to be terminated, whereupon the same shall forthwith terminate, (ii) if the Letters of Credit shall have been issued, notify the Trustee of such Event of Default and direct that the Trustee either (A) declare the mandatory purchase of all Bonds then outstanding pursuant to Section 4.02(a)(iv) of each Indenture or (B) accelerate the Bonds pursuant to Section 9.02 of each Indenture, which direction to accelerate the Bonds will state that the Letters of Credit will terminate on the 10th business day (as defined in the Indenture) following the Trustee's receipt of such notice, and, in either case, provide a copy of such notice to the Company and the Issuer, (iii) if the Administrative Agent shall have directed the Trustee to declare the mandatory purchase of all Bonds under Section 4.02(a)(iv) of each Indenture pursuant to the immediately preceding clause (ii) (A), in a subsequent notice to the Trustee, notify the Trustee of the determination to terminate the Letters of Credit on the 10th business day (as defined in the Letters of Credit) following the Trustee's receipt of such notice, (iv) if the Letters of Credit shall have been issued and a drawing to pay interest on the Bonds shall have been made thereunder (other than such a drawing in respect of the payment of interest upon scheduled or accelerated maturity, or redemption, of the Bonds), notify the Trustee prior to the sixteenth day following such drawing that the Interest Component in the amount of such drawing will not be reinstated, (v) declare the Advances and all other principal amounts outstanding hereunder, all interest thereon and all other amounts payable hereunder to be forthwith due and payable, whereupon the Advances and all other principal amounts outstanding hereunder, all such interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company, and (vi) exercise in respect of the Pledged Bonds, in addition to other rights and remedies provided for herein or in the Custodian Agreement or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at that time; provided, however, that in the event of an actual or deemed entry of an - -------- ------- order for relief with respect to the Company or any of its Subsidiaries under the Federal Bankruptcy Code, (A) the Commitment (if the Letters of Credit have not been issued) and the obligation of the Banks to make Advances shall automatically be terminated, and (B) the Advances and all amounts reimbursable on demand pursuant to Section 2.04, all interest accrued and unpaid thereon and all other amounts payable hereunder shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company. Upon the occurrence of an Event of Default hereunder, all amounts payable hereunder shall bear interest at the Default Rate. ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc. No amendment or waiver of any --------------- provision of this Agreement, or any Letter of Credit, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the 34 Company and the Required Banks and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or -------- consent shall, unless it is in writing and signed by all the Banks, do any of the following: (a) increase the amount of a Letter of Credit (other than reinstatements expressly provided for in a Letter of Credit and herein) or otherwise amend a Letter of Credit, extend the Stated Termination Date then in effect, or subject the Banks to any additional obligations, (b) reduce the principal of, or interest on, the Reimbursement Obligations or any fees or other amounts payable hereunder (except fees payable to the Administrative Agent or the LC Bank), (c) postpone any date fixed for any payment of principal of, or interest on, the Reimbursement Obligations or any fees or other amounts payable hereunder (except fees payable to the Administrative Agent or the LC Bank), (d) change the percentage of the Shares or the number of Banks that shall be required for the Banks or any of them to take any action hereunder, (e) release any collateral for the obligations of the Company under this Agreement (except as contemplated by the Custodian Agreement), or (f) amend this Section 7.01 or Section 7.14; provided, further that no amendment, waiver or consent shall, unless in - -------- ------- writing and signed by the LC Bank, affect the rights and duties of the LC Bank under this Agreement. SECTION 7.02. Notices, Etc. All notices and other communications ------------ provided for hereunder shall be in writing (including telegraphic communication) and mailed, telecopied, telexed, telegraphed or delivered, if to the Company, to it at its address at 6226 West Sahara Avenue, P.O. Box 230, Las Vegas, Nevada 89151, Attention: Mr. Richard C. Schmalz, Director, Treasury, telecopy no. (702) 367-5864; and if to the LC Bank, to it at its address at 75 Wall Street, New York, New York 10265, Attention: Trade Services Group, telecopy number (212) 412-5111 and if to the Administrative Agent to it at its address at 222 Broadway, New York, New York 10038, Attention: Client Services Unit, telecopy No. (212) 412-2546; and if to the Banks to the address of each Bank specified on Schedule 7.02 hereto; or, as to each party, at such other address or telecopy number as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed, telecopied, telexed or telegraphed, be effective when deposited in the mails or sent by telecopy or telex or delivered to the telegraph company, respectively, addressed as aforesaid, except that notices to the Administrative Agent and Banks pursuant to the provisions of Article II shall not be effective until received by the Administrative Agent and Banks. SECTION 7.03. No Waiver: Remedies. No failure on the part of the ------------------- Administrative Agent or the Banks to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 7.04. Right of Set-off. (a) Upon the occurrence and ---------------- during the continuance of any Event of Default, the Administrative Agent and each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Administrative Agent or such Bank to or for the credit or the account of the Company against any and all of the obligations of the 35 Company now or hereafter existing under this Agreement, irrespective of whether or not the Administrative Agent or such Bank shall have made any demand hereunder and although such obligations may be contingent or unmatured. The rights of the Administrative Agent and the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or the Banks may have. (b) The Administrative Agent and each Bank agrees promptly to notify the Company after any such set-off and application referred to in subsection (a) above; provided that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 7.05. Indemnification. The Company hereby indemnifies --------------- and holds the Administrative Agent and each Bank, and their officers, directors, employees and agents harmless from and against any and all claims, damages, losses, liabilities, costs and expenses which they may incur or which may be claimed against the Administrative Agent or the Banks; or their respective officers, directors, employees and agents by any Person: (a) by reason of or in connection with the execution, delivery or performance of, or the sale or resale of, the Bonds including those resulting from any misstatement in or omission from any official statement or other offering document or supplement thereto relating to the Bonds (except any misstatement in or omission resulting from information furnished in writing by the LC Bank expressly for inclusion in such offering documents), the Indentures, or the Financing Agreements, or any transaction contemplated by the Indentures or the Financing Agreements, other than as specified in subsection (b) below; or (b) by reason of or in connection with the execution and delivery, transfer or use of the proceeds of, or payment or failure to make payment under, a Letter of Credit; provided, however, that the Company shall -------- ------- not be required to indemnify the Administrative Agent or the Banks pursuant to this Section 7.05(b) for any claims, damages, losses, liabilities, costs or expenses to the extent caused by (i) the LC Bank's willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit are genuine or comply with the terms of a Letter of Credit or (ii) the LC Bank's willful or grossly negligent failure to make lawful payment under a Letter of Credit after the presentation to it by the Trustee under the related Indenture of a draft and certificate strictly complying with the terms and conditions of such Letter of Credit. (c) The Company will also indemnify and hold harmless the Administrative Agent and the Banks from and against all losses and reasonable costs or expenses which the Administrative Agent and the Banks may incur by reason of either (i) any failure of the related Remarketing Agent to pay when due the purchase price of any Bond for which such Remarketing Agent has given the notice referred to in paragraph (1) of Exhibit 4 of a Letter of Credit and/or (ii) any failure by the Trustee promptly to turn over to the LC Bank in accordance with the provisions of an Indenture the proceeds from the sale of any such Bond received from the Remarketing Agent. The Company shall pay to the Administrative Agent any such amounts not paid by a Remarketing Agent or the Trustee, as the case may be, upon demand. 36 Nothing in this Section 7.05 is intended to limit the Company's obligations contained in Article II. Without prejudice to the survival of any other obligation of the Company hereunder, the indemnities and obligations of the Company contained in this Section 7.05 shall survive the payment in full of amounts payable pursuant to Article II and the termination of the Letters of Credit. SECTION 7.06. Banks Not Liable. (a) The Company assumes all ---------------- risks of the acts or omissions of the Trustee, any Remarketing Agent and any beneficiary or transferee of a Letter of Credit with respect to its use of the Letter of Credit. Neither the Banks, the Administrative Agent, nor any of their officers, directors, employees or agents shall be liable or responsible for: (a) the use which may be made of a Letter of Credit or any acts or omissions of the Trustee and any other beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the LC Bank against presentation of documents which do not comply with terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under a Letter of Credit, except that the Company shall have a ------ claim against the LC Bank, and the LC Bank shall be liable to the Company, to the extent of any direct, as opposed to consequential, damages suffered by the Company which the Company proves were caused by (i) the LC Bank's willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit are genuine or comply with the terms of the Letter of Credit or (ii) the LC Bank's willful or grossly negligent failure to make lawful payment under a Letter of Credit after the presentation to it by the Trustee under an Indenture of a draft and certificate strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the LC Bank may accept original or facsimile (including telecopy) sight drafts and accompanying certificates presented under a Letter of Credit that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (b) Neither the Administrative Agent nor the Banks shall have any liability to the Company, and the obligations of the Company under this Agreement shall not be affected by (1) the form, sufficiency, correctness, validity, genuineness and legal effect of any drafts, demands and other documents, instruments and other papers relating thereto, (2) the good faith and acts of any Person, (3) the existence, form, sufficiency and breach of contracts of any nature whatsoever, including the Related Documents, (4) the solvency, standing and responsibility of any Person, (5) any delay in giving or failure to give any notice, demand or protest, (6) failure of any Person to comply with the terms of a Letter of Credit, (7) errors, omissions or delays in or nondelivery of any message, however sent, and (8) any other error, neglect or omission, except as provided in the next to last sentence of paragraph (a) of this Section. (c) Neither the Administrative Agent nor the Banks shall have any liability to the Company for, and the Company waives any right to object to, payment made under a Letter of Credit against a demand varying in punctuation, capitalization, spelling or similar matters of form. The determination whether a demand has been made before the expiration of a Letter of 37 Credit and whether a demand is in proper and sufficient form for compliance with a Letter of Credit shall be made by the LC Bank in its sole discretion, which determination shall be conclusive and binding upon the Company except as otherwise expressly provided in this Agreement. SECTION 7.07. Costs, Expenses and Taxes. The Company agrees to ------------------------- pay on demand all costs and expenses in connection with the preparation, execution, delivery, filing, recording, and administration (including any amendment or waiver) of this Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and LC Bank, and local counsel who may be retained by said counsel, with respect thereto and with respect to advising the Administrative Agent and LC Bank as to its rights and responsibilities under this Agreement and such other documents which may be delivered in connection with this Agreement and all costs and expenses (including counsel fees and expenses) in connection with (i) the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and such other documents which may be delivered in connection with this Agreement (and, upon the occurrence of an Event of Default, all such costs and expenses of the Banks) or (ii) any action or proceeding relating to a court order, injunction, or other process or decree restraining or seeking to restrain the Administrative Agent and LC Bank from paying any amount under any Letter of Credit. In addition, the Company shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement or the Letters of Credit or any of such other documents, and agrees to save the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 7.08. Binding Effect. This Agreement shall become -------------- effective when it shall have been executed and delivered by the Company, the Administrative Agent and the Banks and thereafter shall be binding upon and inure to the benefit of the Company, the Administrative Agent and the Banks and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Administrative Agent and the Banks. SECTION 7.09. Severability. Any provision of this Agreement ------------ which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. SECTION 7.10. Governing Law; Submission to Jurisdiction; Etc. --------------------------------------------------- This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to choice of law provisions. Any action or proceeding arising out of or relating to this Agreement or the Letter of Credit shall be heard and determined in an appropriate state or federal court in the State of New York, New York County. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient 38 forum. The Company also irrevocably consents to the service of any and all process in any such suit, action or proceeding by mailing of copies of such process to the Company at its address provided in Section 7.02. The Company agrees that a final judgment not stayed in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under this Section 7.10 shall be by certified mail, return receipt requested. Nothing in this Section 7.10 shall affect the right of the Administrative Agent or the Banks to serve legal process in any other manner permitted by law or affect the right of the Banks to bring any suit, action or proceeding against the Company or its property in the courts of any other jurisdiction. SECTION 7.11. Headings. Section headings in this Agreement are -------- included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. SECTION 7.12. Counterparts. This Agreement may be executed by ------------ the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 7.13. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO -------------------- THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. THE PARTIES HERETO (A) CERTIFY THAT NO REPRESENTATIVE OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGE THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER RELATED DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. SECTION 7.14. Participation and Assignment. (a) Each Bank may, ---------------------------- without the consent of the Company, sell participations to one or more banks or other financial institutions (each a "Participant") in all or a portion of its rights and obligations under this Agreement; provided, however, (i) ----------------- such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the Company for the performance of such obligations, (iii) except as expressly set forth herein, any such Participant shall be entitled to the benefit of the cost and fee protection and indemnification provisions contained in Sections 2.07, 2.08, 2.14, 2.15, 2.16, 7.04, 7.05 and 7.07 to the same extent as if the Participant were such Bank hereunder, and (iv) such Bank shall retain the sole right to approve any amendment, modification or waiver of any provisions of this Agreement or any Related Document (other than amendments, modifications, releases or waivers with respect to any amounts payable hereunder or the amount of principal of or the rate at which interest is payable hereunder or the dates fixed for payments of interest or fees or the date of termination or expiration of any Letter of Credit or any change to the Stated Amount thereof). 39 (b) Each Bank may assign all or a portion of its rights and obligations under this Agreement, in the Letters of Credit or in any security hereunder, including, without limitation, any instruments securing the Company's obligations hereunder; provided that (i) no assignment by any -------- Bank may be made to any Person, except with the prior written consent of the LC Bank, (ii) any assignment shall be of a constant and not a varying percentage of all of the assignor's rights and obligations hereunder, and (iii) the parties to such assignment shall execute and deliver to the Administrative Agent an instrument of assignment (an "Assignment") in form and substance satisfactory to the Administrative Agent and the LC Bank, together with a processing fee of $3,000 for the Administrative Agent's account. Upon receipt of a completed Assignment and the processing fee, the Administrative Agent will record in a register maintained for such purpose the name of the assignee and the percentage participation interest assigned by the assignor and assumed by the assignee for purposes of the determination of such assignor's and assignee's respective Shares. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment, which effective date shall be at least five Business Days after the execution thereof, the assignee shall, to the extent of such assignment, become a party hereto and have all of the rights and obligations of a Bank hereunder, including without limitation a right to share in the proceeds of any amount realized under any security documents with respect to the interest acquired, and, to the extent of such assignment, such assigning Bank shall be released from its obligations hereunder (without relieving such Bank from any liability for damages, costs and expenses suffered by the Administrative Agent, the LC Bank or the Company as a result of the failure by such Bank to perform its obligations hereunder). (c) A Bank may disclose to any Participant or proposed Participant, or any assignee or proposed assignee, any information that the Company has delivered or is required to deliver to such Bank pursuant to this Agreement or the other Related Documents. (d) Nothing herein shall limit a Bank's right to assign its interests hereunder to a Federal Reserve Bank. (e) The LC Bank hereby acknowledges and agrees that it shall remain solely liable under the Letters of Credit notwithstanding any sale or transfer contemplated by this Section 7.14. ARTICLE VIII SYNDICATION SECTION 8.01. Syndication. (a) In the event that the LC Bank ----------- shall make any payment under a Letter of Credit and the Company shall not reimburse the LC Bank by 3:00 p.m. (New York City time) on the same Business Day in full for such payment in accordance with Section 2.04 (the difference between the amount of such payment and the amount reimbursed by the Company being the "Principal Amount"), the LC Bank will immediately notify each of the Banks of such Principal Amount and each Bank will immediately on the same Business Day and unconditionally pay to the LC Bank an amount equal to its Share of the Principal Amount in 40 United States dollars and in same day funds in payment for its Share of the Reimbursement Obligations with respect to such Principal Amount, plus compensation, payable on demand, from and including the date when such amount is due to, but not including, the date such amount is paid at the Federal Funds Rate, in effect from time to time. (b) Upon payment in full by a Bank of its Share of the Reimbursement Obligations pursuant to Section 8.01(a), such Bank shall have purchased an assignment of its Share of the right, title and interest of the LC Bank in and to such Reimbursement Obligations, without recourse, representation or warranty, and shall to the extent of such Share, be a direct creditor of the Company. (c) If any Bank shall default in the payment when due of its Share of any Reimbursement Obligations, in addition to any other claim or remedy the LC Bank may have against such Bank, such Bank shall not be entitled to receive any payments pursuant to this Agreement or otherwise have any other rights hereunder or under the Related Documents until all amounts due and payable by such Bank to the LC Bank hereunder shall have been paid in full. SECTION 8.02. Sharing of Payments. If any Bank shall obtain any ------------------- payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Reimbursement Obligations in excess of its ratable share of payments on account of the Reimbursement Obligations obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in the Reimbursement Obligations as shall be necessary to cause such purchasing Bank to share such excess payment ratably with each of them, provided, however, that, if all or any -------- ------- portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (i) the amount of such Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 8.02 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. ARTICLE IX THE ADMINISTRATIVE AGENT AND THE LC BANK SECTION 9.01. Authorization and Action. Each Bank hereby appoints ------------------------ and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Related Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Reimbursement Obligations), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall 41 be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Banks or the Required Banks, as applicable, and such instructions shall be binding upon all Banks; provided, however, that the Administrative Agent shall not --------- ------- be required to take any action that exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Bank prompt notice of each written notice given to it by the Company, the Trustee, or the LC Bank pursuant to the terms of this Agreement or the Indenture. SECTION 9.02. Administrative Agent's Reliance, Etc. Neither the ------------------------------------- Administrative Agent, the LC Bank, nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any Related Document, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each of the Administrative Agent and the LC Bank: (i) may consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representations to any Bank and shall not be responsible to any Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or any Related Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any Related Document on the part of the Company or to inspect the property (including the books and records) of the Company; (iv) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any Related Document or any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this agreement or any Related Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 9.03. Bank Credit Decision. Each Bank acknowledges that -------------------- it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements referred to in Section 4.01(f) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 9.04. Indemnification. The Banks agree to indemnify the --------------- Administrative Agent and the LC Bank (to the extent not reimbursed by the Company), ratably according to their respective Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent or the LC Bank in any way relating to or arising out of this Agreement or any action taken 42 or omitted by the Administrative Agent or the LC Bank under this Agreement or the Related Documents; provided that no Bank shall be liable for any -------- portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's or the LC Bank's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent and the LC Bank promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent or the LC Bank in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent or the LC Bank is not reimbursed for such expenses by the Company. SECTION 9.05. Barclays and affiliates. With respect to its Share ----------------------- and the Reimbursement Obligations held by it, Barclays shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Barclays in its individual capacity. Barclays and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage 0 in any kind of business with, the Company, any of its subsidiaries and any Person who may do business with the Company or any such subsidiary, all as if Barclays were not the Administrative Agent and without any duty to account therefor to the Banks. SECTION 9.06. Successor Administrative Agent. The Administrative ------------------------------ Agent may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time for cause by the agreement of all of the Banks; provided that solely for purposes hereof if the same -------- entity is the LC Bank and the Administrative Agent then the agreement of the LC Bank shall not be required. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Administrative Agent subject to the approval of the Company. If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the removal of the retiring Administrative Agent, then the retiring Administrative Agent after consultation with the Company may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of 43 any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If at any time there shall be no Person serving as Administrative Agent under this Agreement, then the LC Bank shall be the Administrative Agent hereunder until a successor is appointed in accordance herewith. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized representatives as of the date first above written. NEVADA POWER COMPANY By: R. C. SCHMALZ ----------------------------------- Title: Director, Treasury BARCLAYS BANK, PLC, NEW YORK BRANCH, as Administrative Agent and LC Bank By: JOHN P. BURKE ------------------------------------ Title: Associate Director UNION BANK OF SWITZERLAND, LOS ANGELES BRANCH, as a Bank By: DANIEL H. TO ------------------- Title: Daniel H. To Assistant Vice President By: SCOTT SOMMERS -------------------- Title: L. Scott Sommers Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as a Bank By: SALVATORE BATTINELLI --------------------------- Title: VP By: KAREN E. HAPLOCK ----------------------- Title: VP UNION BANK, as a Bank By: JOHN M. EDMONSTON ------------------------ Title: V.P. THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, as a Bank By: NOBUHIRO UMEMURA ----------------------- Title: NOBUHIRO UMEMURA JOINT GENERAL MANAGER ABN AMRO BANK N.V., as a Bank By: DAVID B. BRYANT ---------------------- Title: David B. Bryant Vice President By: KEVIN S. MCFOLDEN ------------------------ Title: Kevin S. McFolden AVP Schedule 4.01(q) [Environmental Disclosure] NONE Schedule 7.02 [Addresses and information for Banks] Bank Share Address Wire Information - ---- ----- ------- ---------------- ABN Amro Bank N.V., 16.2323% 135 S. LaSalle Street ABN Amro New York San Francisco Suite 711 New York, NY International Chicago, IL 60603 ABA# 026009580 Branch Attention: David For Credit to Bryant ABN Amro Tel: (312)904-2799 San Francisco Fax: (312)904-6387 Acct# 6510010545-41 101 California Ref: Nevada Street, Power Co. Suite 4550 San Francisco, CA 94111-5812 Attention: L.T. Osborne Tel: (415) 984-3722 Fax: (415) 362-3524 The Fuji Bank, 16.2323% 333 S. Grand Avenue, First Limited, #2500 Interstate Bank Los Angeles Los Angeles, CA of California Agency 90071 Los Angeles Attention: Ching L. Main Office Lim ABA# 122000218 Tel: (213) 253-4179 For Credit to: Fax: (213) 253-4198 The Fuji Bank, Limited, Los Angeles Agency Acct # 220834831 Ref: Nevada Power Union Bank 16.2323% Energy Capital Union Bank Services Monterey Park, 445 S. Figueroa Califoria Street, 15th Flr ABA# 122-000- Los Angeles, CA 496 90071 Acct# 77070- Attention: David 196431 Musicant Attention: 192 Tel: (213) 236-5023 Note Center Fax: (213) 236-4096 Ref: Nevada Power Company 2 Westdeutsche 16.2323% 1211 Avenue of the Chase Manhattan Landesbank Americas Bank Girozentrale, New York, NY 10036 Chase Manhattan New York Branch Attention: Karen Plaza Haplock New York, NY Tel: (212) 852-6087 WestLB New York Fax: (212) 852-6148 Branch Acct# 633 West Fifth Street 9201060663 Suite 6750 Ref: Nevada Los Angeles, CA Power Co. 90071 ABA 021000021 Attention: Nancy Tafoya CHIPS 201 Tel: (213) 623-2958 Swift WELAUS3X Fax: (213) 623-4706 Union Bank of 16.2323% 444 South Flower Union Bank of Switzerland, Street, Switzerland Los Angeles 45th Floor New York Branch Los Angeles, CA Fed Routing No. 90071 026008439 Attention: Daniel To Favor of UBS Tel: (213) 489-0646 Los Angeles Fax: (213) 489-0697 Account No. 40064502 Ref: Nevada Power Co. EXHIBIT A FORM OF LETTER OF CREDIT ------------------------ IRREVOCABLE LETTER OF CREDIT NO. ---------------- [Issuance date of the Letter of Credit] United States Trust Company of New York, as Trustee 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Administration Dear Sir or Madam: We hereby establish, at the request and for the account of Nevada Power Company (the "Company"), in your favor, as Trustee under the Indenture of Trust, dated as of October 1, 1995 (the "Indenture"), by and between [ ] (the "Issuer") and you, as Trustee, pursuant to which ------------------ [ ] in aggregate principal amount of [ ] ------------------ -------------------- (including any beneficial interests therein, the "Bonds"), are being issued, our Irrevocable Letter of Credit No. in the amount of the ----------------- [Initial Stated Amount] (subject to reduction and reinstatement as provided below, the "Stated Amount"). (l) Cancellation Date. This Letter of Credit shall expire on the ----------------- earliest to occur of (i) October 12, 1999 (the "Stated Termination Date"), (ii) the date upon which we honor a draft accompanying a written and completed certificate signed by you in substantially the form of Exhibit 1 or Exhibit 3 attached hereto, and stating therein that such draft is the final draft to be drawn under this Letter of Credit and that, upon the honoring of such draft, this Letter of Credit will expire in accordance with its terms, (iii) the date upon which we receive a written certificate signed by you and stating therein that no Bonds are "outstanding" under the Indenture,(iv) on the second business day (as hereinafter defined) following the effective date of the conversion of the Bonds to a "Term Rate" pursuant to Section 2.03(c) of the Indenture which provides that all of the Bonds shall bear interest at a Term Rate to maturity, (v) the 10th business day following your having received a notice from the Administrative Agent (as defined in paragraph 5, below) that we are terminating this Letter of Credit pursuant to Section 9.01(d) of the Indenture in connection with the occurrence of an Event of Default under the Reimbursement Agreement (as defined in paragraph (5) below) and (vi) the date upon which we receive a written A-1 certificate signed by you and stating therein that an "Alternate Credit Facility" has been provided under the Indenture (such earliest date being the "Cancellation Date"). As used herein, "business day" shall mean any day on which banks are not required or authorized to remain closed in New York City or Los Angeles, California and on which the New York Stock Exchange is not closed and, for purposes of clauses (v) and (vi) of the immediately preceding paragraph, the location of your office specified above or the principal corporate trust office designated to us in a certificate substantially in the form set forth in Exhibit 5 by any transferee who has succeeded you as Trustee under the Indenture. (2) Principal and Interest Components. The aggregate amount which --------------------------------- may be drawn under this Letter of Credit, subject to reductions in amount and reinstatement as provided below, is [ ] ([ ]), -------------- -------------- of which the aggregate amounts set forth below may be drawn as indicated. (i) An aggregate amount not exceeding [ ] ------------------ ([ ]), as such amount may be reduced and -------------------- reinstated as provided below, may be drawn in respect of payment of principal (whether upon scheduled or accelerated maturity, or upon redemption) of the Bonds or the portion of the purchase price of Bonds corresponding to principal (the "Principal Component"). (ii) An aggregate amount not exceeding [ ] --------------------- ([ ]), as such amount may be reduced and ------------------------- reinstated as provided below, may be drawn in respect of payment of interest on the Bonds or the portion of the purchase price of Bonds corresponding to interest, but not more than an amount equal to accrued interest on the Bonds for the period of 62 days immediately preceding the date of such drawing at a maximum rate of twelve percent (12%) per annum calculated on the basis of a year of 365 days (the "Interest Component"). (3) Drawings. Funds under this Letter of Credit are available to you against (i) your draft payable on the date such draft is drawn on us, stating on its face: "Drawn under Irrevocable Letter of Credit No. , -------- dated October , 1995", and (ii) the appropriate certificate specified -- below, duly executed by you and appropriately completed. Exhibit Setting Forth Type of Drawing Form of Certificate Required ----------------------- ------------------------------- Drawing in respect of regularly Exhibit 1 scheduled interest payment or payment of principal of and interest on the Bonds upon scheduled or accelerated maturity Tender Drawing (as hereinafter Exhibit 2 defined) Redemption/Mandatory Purchase Exhibit 3 Drawing (as hereinafter defined) A-2 Drafts and certificates hereunder shall be dated the date of presentation and shall be presented to our office at 75 Wall Street, New York, New York, Attention: Trade Services Group (or at such other office as we may designate by written notice to you) or upon prior telephone notice to us at (212) 412-5121 or 5122, by facsimile transmission received by us at the following telecopier number: (212) 412-5111 (or at such other numbers as we may designate by written notice to you), promptly thereafter, confirmed by delivery of the original drafts, prominently marked to indicate they are confirmations. If we receive your draft(s) and certificate(s) at such office, all in strict conformity with the terms and conditions of this Letter of Credit, at or before 12:00 noon (New York time), on a business day on or before the Cancellation Date, we will honor such draft(s) at or before 3:00 p.m. (New York time) on the same business day to your order in accordance with your payment instructions; and draft(s) so received following 12:00 noon (New York time) will be so honored at or before 1:00 p.m. (New York time) on the next business day (notwithstanding that such prior business day may have been the Cancellation Date). If you request, by written notice to us delivered in a timely fashion, payment under this Letter of Credit will be made by wire transfer of federal funds to your account with any bank that is a member of the Federal Reserve System, or by deposit of immediately available funds into a designated account that you maintain with us. All payments made by us under this Letter of Credit will be made with our own funds and not with any funds of the Company or the Issuer. (4) Reductions. The Principal Component and the Interest ---------- Component shall be reduced immediately following our honoring any draft drawn hereunder (i) to pay principal of, or interest on, the Bonds or to pay the purchase price of Bonds that are subject to mandatory purchase by the Company pursuant to Section 4.02(a) of the Indenture (any such drawing in respect of the payment of principal of and interest, if any, on the Bonds upon redemption of the Bonds in whole or in part or the purchase price of Bonds that are so subject to mandatory purchase by the Company being a "Redemption/Mandatory Purchase Drawing"), or (ii) to pay the purchase price of Bonds that are purchased pursuant to an election by the holders thereof pursuant to Section 4.01 of the Indenture (any such drawing in respect of the circumstances referred to in this clause (ii) being a "Tender Drawing"), in each case by an amount equal to the respective component of the amount of such draft. (5) Reinstatement. On the sixteenth day following each drawing ------------- hereunder to pay interest on the Bonds (other than a drawing in respect of the interest component of a Tender Drawing or a Redemption/Mandatory Purchase Drawing), the amount so drawn shall be reinstated to the Interest Component, unless you shall have theretofore received written notice from us or the Administrative Agent that we will not reinstate this Letter of Credit in the amount of such drawing because (i) we (or the Banks party to the Reimbursement Agreement referred to below) have not been reimbursed in full by the Company for the amount of such drawing, together with interest, if any, owing thereon pursuant to the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among the Company, us, Barclays Bank PLC, New York Branch, as Administrative Agent (the "Administrative Agent"), and the Banks party thereto (the "Banks"), or (ii) an Event of Default under the Reimbursement Agreement has occurred and is then continuing; provided, however, that we shall not be -------- ------- entitled to give any such notice in the event that, pursuant to our direction, A-3 you shall be required to give notice of mandatory purchase of the Bonds in accordance with Section 4.02(a)(iv) of the Indenture. Immediately upon our notice to you by hand delivery or facsimile transmission in the form set forth in Exhibit 4 hereto that (a) we have been reimbursed by or for the account of the Company in respect of any Tender Drawing or Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture), together with interest, if any, owing thereon pursuant to the Reimbursement Agreement, the amounts of which we notify you we have been reimbursed in respect of such Tender Drawing or Redemption/Mandatory Purchase Drawing shall be reinstated to the Principal Component and the Interest Component, as specified in such notice, or (b) we have received notice from a person stating therein that he or she is a representative of the "Remarketing Agent" referred to in the Indenture and that such Remarketing Agent has wired us amounts in immediately available funds in connection with a Tender Drawing pursuant to Section 4.01 of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) which amounts were received as the purchase price of remarketed Bonds and which amounts, when added to amounts, if any, theretofore reimbursed to us by or for the account of the Company in respect of the purchase price of such Bonds paid by us as part of such Tender Drawing or Redemption/Mandatory Purchase Drawing and interest, if any, owing thereon pursuant to the Reimbursement Agreement, to reimburse us in full for such purchase price theretofore paid by us and such interest, if any, the Principal Component and the Interest Component shall be reinstated to the extent of the principal and interest components of the purchase price of such Bonds as specified in such notice. This Letter of Credit will not be reinstated following a Redemption/Mandatory Purchase Drawing (i) pursuant to Section 4.02 (a)(iv) of the Indenture unless we notify you by hand delivery or facsimile transmission that we in our discretion have reinstated the Letter of Credit by the amount of such Redemption/Mandatory Purchase Drawing, or (ii) pursuant to Section 4.02(a)(ii) of the Indenture upon a conversion to a Term Rate to maturity pursuant to Section 2.03 of the Indenture, or (iii) to pay Bonds upon redemption or scheduled maturity of the Bonds, or accelerated maturity of the Bonds pursuant to Section 9.02 of the Indenture or (iv) pursuant to Section 4.02(a)(iii) of the Indenture. (6) Notices. Communications with respect to this Letter of Credit ------- shall be in writing and shall be addressed to us at 75 Wall Street, New York, New York 10265, Attention: Trade Services Group (or at such other office as we may designate by written notice to you) or by facsimile transmission received by us at the following telecopier number: (212) 412- 5111 (or at such other telephone number as we may designate by written notice to you) specifically referring to the number of this Letter of Credit. (7) Transfer. This Letter of Credit is transferable in its -------- entirety (but not in part) to any transferee who has succeeded you as Trustee under the Indenture and may be successively so transferred. Transfer of this Letter of Credit to such transferee shall be effected A-4 by the presentation to us of this Letter of Credit accompanied by a certificate substantially in form set forth in Exhibit 5. (8) Governing Laws, Etc. This Letter of Credit shall be governed -------------------- by and construed in accordance with the laws of the State of New York, including the Uniform Commercial Code as in effect in the State of New York. This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Bonds, the Indenture and the Reimbursement Agreement), except only the certificates and the drafts referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificates and such drafts. Whenever and wherever the terms of this Letter of Credit shall refer to the purpose of a draft hereunder, or the provisions of any agreement or document pursuant to which such draft may be presented hereunder, such purpose or provisions shall be conclusively determined by reference to the certificate accompanying such draft; in furtherance of this sentence, whether any drawing is in respect of payment of regularly scheduled interest on the Bonds or of principal of or interest on the Bonds upon scheduled or accelerated maturity or is a Tender Drawing or a Redemption/Mandatory Purchase Drawing shall be conclusively determined by reference to the certificate accompanying such drawing. Very truly yours, BARCLAYS BANK PLC, NEW YORK BRANCH By: ------------------------------- Title: A-5 EXHIBIT 1 TO THE LETTER OF CREDIT CERTIFICATE FOR DRAWING IN RESPECT OF REGULARLY SCHEDULED INTEREST PAYMENT OR PAYMENT OF PRINCIPAL OF AND INTEREST ON THE BONDS UPON SCHEDULED OR ACCELERATED MATURITY OF THE BONDS The undersigned, a duly authorized officer of [ ] (the ------------- "Trustee"), hereby certifies as follows to Barclays Bank PLC, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. (the "Letter of Credit") issued by the Bank in favor of the - -------------- Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a drawing under the Letter of Credit in respect of [a regularly scheduled interest payment]1 [the payment of principal of and interest on the Bonds upon the scheduled or accelerated maturity of the Bonds]2 in accordance with Section 6.05 of the Indenture. Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. (3) The respective amounts of principal of and interest on the Bonds which are due and payable (or which have been declared to be due and payable) and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 6.04 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $ ------------------ Interest: $ ------------------ (4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of principal of the Bonds, as indicated in paragraph (3) above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of interest on the Bonds, - --------------------------- 1. To be used for regularly scheduled interest payments. 2. To be used upon scheduled or accelerated maturity of the Bonds. A-6 as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of payment of principal of and interest on the Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture. [(5) The draft accompanying this Certificate being presented upon the [scheduled maturity of the Bonds] [accelerated maturity of the Bonds pursuant to Section 9.02 of the Indenture]3 is the final draft to be drawn under the Letter of Credit in respect of principal of and interest on the Bonds. Upon the honoring of such draft the Letter of Credit will expire in accordance with its terms.]4 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of ---- , . - ---------------- ---- [ ], as Trustee --------------- By -------------------------------------- Title: - ----------------------- 3. Insert appropriate bracketed language. 4. To be used upon scheduled or accelerated maturity of the Bonds. A-7 EXHIBIT 2 TO THE LETTER OF CREDIT CERTIFICATE FOR TENDER DRAWING UPON BONDHOLDER ELECTION The undersigned, a duly authorized officer of [ ] ------------------ (the "Trustee"), hereby certifies as follows to Barclays Bank PLC, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. (the "Letter of Credit") issued by the Bank in favor of the - ---------- Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a Tender Drawing under the Letter of Credit with respect to the purchase price of Bonds delivered pursuant to an election by Bondholders pursuant to Section 4.01 of the Indenture and the Bonds. Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. (3) The respective amounts of purchase price corresponding to principal of and accrued interest, if any, on such Bonds and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 4.05 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $ ------------------ Interest: $ ------------------ (4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to principal of the Bonds, as indicated in paragraph (3) above does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of purchase price corresponding to principal of and interest on such Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of , . ---- ---------------- ---- A-8 [ ], as Trustee --------------- By -------------------------------------- Title: A-9 EXHIBIT 3 TO THE LETTER OF CREDIT CERTIFICATE FOR REDEMPTION/MANDATORY PURCHASE DRAWING IN RESPECT OF PAYMENT OF PRINCIPAL OF AND INTEREST ON BONDS UPON REDEMPTION OR MANDATORY PURCHASE The undersigned, a duly authorized officer of[ ] --------------- (the "Trustee"), hereby certifies as follows to Barclays Bank PLC, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. ---- (the "Letter of Credit") issued by the Bank in favor of the Trustee. Terms defined in the Letter of Credit and used but not defined herein shall have the meanings given them in the Letter of Credit. (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee is making a Redemption/Mandatory Purchase Drawing under the Letter of Credit with respect to [the payment of principal of and accrued interest, if any, on the Bonds upon redemption of the Bonds in accordance with Section 3.01 of the Indenture]1 [the purchase price of Bonds subject to mandatory purchase by the Company pursuant to Section 4.02(a) [(i)], [(ii)], [(iii)], or [(iv)] of the Indenture].2 Such Bonds are not registered in the name of the Company and are not held or required to be held by the Trustee for the account of the Company pursuant to the Indenture. [(3) The respective amounts of principal of and interest on the Bonds which are due and payable and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 6.04 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $ ---------------- Interest: $ ]3 --------------- - --------------------- 1. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. 2. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 3. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. A-10 [(3) The respective amounts of the purchase price corresponding to principal of and accrued interest, if any, on such Bonds and with respect to the payment of which the Trustee does not have available amounts that, pursuant to Section 4.05 of the Indenture, are to be applied to such payment prior to moneys drawn under the Letter of Credit are as follows, and the amount of the draft accompanying this Certificate does not exceed the sum of such amounts: Principal: $ ----------------- Interest: $ ]4 ----------------- [(4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of principal of the Bonds, as indicated in paragraph (3) above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of payment of interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of payment of principal of and interest on the Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture.])5 [(4) The portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to principal of the Bonds, as indicated in paragraph (3), above, does not exceed the Principal Component of the Letter of Credit, and the portion of the amount of the draft accompanying this Certificate being drawn in respect of purchase price corresponding to interest on the Bonds, as indicated in paragraph (3) above, does not exceed the Interest Component of the Letter of Credit. The respective portions of the amount of the draft accompanying this Certificate in respect of purchase price corresponding to principal of and interest on such Bonds have been computed in accordance with the terms and conditions of the Bonds and the Indenture.]6 [(5) The draft accompanying this Certificate is the final draft to be drawn under the Letter of Credit in respect of principal of and interest on the Bonds and, upon the honoring of such draft, the Letter of Credit will expire in accordance with its terms.]7 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of , . ---- ------------------ ---- - --------------------------- 4. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 5. To be used upon an optional or mandatory redemption of the Bonds in whole or in part. 6. To be used upon a mandatory purchase of the Bonds pursuant to Section 4.02(a) of the Indenture. 7. To be used in the case of all redemption of the Bonds other than redemptions in part. A-11 [ ], as Trustee --------------- By --------------------------------- Title: A-12 EXHIBIT 4 TO THE LETTER OF CREDIT NOTICE OF REINSTATEMENT The undersigned, a duly authorized officer of Barclays Bank PLC, New York Branch (the "Bank"), hereby gives the following notice to [ ], ------ as trustee and as custodian, with reference to Irrevocable Letter of Credit No. (the "Letter of Credit") issued by the Bank in favor of [ ], ------- ----- as trustee. Terms defined in the Letter of Credit and used but not defined herein have the meanings giventhem in the Letter of Credit. [(1) We have received the amount of $ today in --------- reimbursement of amounts paid under the Letter of Credit with respect to Tender Drawings pursuant to Section 4.01 of the Indenture or Redemption/Mandatory Purchase Drawings pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) relating to certain Bonds, together with interest if any, owing thereon pursuant to the Reimbursement Agreement. The respective amounts of principal of and interest on such Bonds covered by that reimbursement are as follows: Principal: $ ----------------- Interest: $ ]1 ----------------- [(1) We have received notice from the Remarketing Agent that it has wired us amounts in immediately available funds in connection with a Tender Drawing pursuant to Section 4.01 of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) which amounts were received as the purchase price of remarketed Bonds. The sum of (i) the principal amount of such Bonds and the amount of accrued interest, if any, thereon, as communicated to us by the Remarketing Agent and (ii) amounts, if any, heretofore reimbursed to us by or for the account of the Company in respect of the purchase price of such Bonds paid by us as parts of such Tender Drawing pursuant to Section 4.01(a) of the Indenture or in connection with a Redemption/Mandatory Purchase Drawing pursuant to Section 4.02(a)(i) or (ii) of the Indenture (other than upon a conversion to a Term Rate to maturity pursuant to Section 2.03(c) of the Indenture) on account of such principal and interest are as follows: Principal: $ ------------ - ---------------------------- 1. To be used in event of actual receipt of reimbursed amounts. A-13 Interest: $ ]2 ------------ (2) In accordance with the provisions of the Letter of Credit, the Principal Component and the Interest Component have been reinstated to the extent of the respective amounts specified in Paragraph (1) above.3 IN WITNESS WHEREOF, the Bank has executed and delivered this Notice as of the day of , . -- ------------- ---- [ ] --------------- By --------------------------------- Title: - -------------------------- 2. To be used in event of notification from the Remarketing Agent that it has wired immediately available funds to the Bank to reimburse it for drawings pursuant to Section 4.01 or 4.02(a)(i) and (ii) of the Indenture. 3. After such reinstatement, the Interest Component must be equal to an amount calculated by multiplying the Principal Component by 12% and then multiplying the product thereof by the quotient obtained by dividing 62 by 365. A-14 EXHIBIT 5 TO THE LETTER OF CREDIT INSTRUCTIONS TO TRANSFER ------------------------ Barclays Bank PLC, New York Branch 75 Wall Street New York, New York 10265 Attention: Trade Services Group Re: Irrevocable Letter of Credit No. issued by Barclays Bank ------ PLC, New York Branch Gentlemen: The undersigned, as Trustee under the Indenture of Trust dated as of October 1, 1995 by and between Clark County, Nevada (the "Issuer") and the undersigned, is named as beneficiary in the Letter of Credit referred to above (the "Letter of Credit"). The Transferee named below has succeeded the undersigned as Trustee under such Indenture. -------------------------------------------- (Name of Transferee) -------------------------------------------- (Address) Therefore, for value received, the undersigned hereby irrevocably instructs you to transfer to such Transferee all rights of the undersigned to draw under the Letter of Credit. By this transfer, all rights of the undersigned in the Letter of Credit, and all obligations of the undersigned under the Custodian Agreement, dated as of October 1, 1995, between the undersigned, as "Custodian", and you (the "Custodian Agreement"), are transferred to such Transferee, and such Transferee shall hereafter have the sole rights as beneficiary under the Letter of Credit and the obligations as "Custodian" under the Custodian Agreement; provided, however, that no rights shall be -------- ------- deemed to have been transferred to such Transferee until such transfer complies with the requirements of the Letter of Credit pertaining to transfers. A-15 IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the day of , . ---- ---------- ----- [ ], as Trustee --------------- By ------------------------------------------- Title: The undersigned, [Name of Transferee], hereby accepts the foregoing transfer of rights under the Letter of Credit and obligations under the Custodian Agreement. [Name of Transferee] By ------------------------------------------- Title: Address of Principal Corporate Trust Office: [insert address] A-16 EXHIBIT B FORM OF CUSTODIAN AGREEMENT --------------------------- THIS CUSTODIAN AGREEMENT (the "Agreement"), dated as of October 1, 1995, is made by and among NEVADA POWER COMPANY (the "Company"), UNITED STATES TRUST COMPANY OF NEW YORK, as custodian (such entity and any successor custodian hereunder being the "Custodian") and BARCLAYS BANK PLC, NEW YORK BRANCH, as Letter of Credit Bank (the "Bank"). WHEREAS, at the request of the Company, Clark County, Nevada (the "Issuer") issued and sold its Industrial Development Revenue [Refunding] Bonds, (Nevada Power Company Project) Series A and C (the "Bonds"), pursuant to respective Indentures of Trust, each dated as of October 1, 1995 (as amended, modified or supplemented from time to time, each an "Indenture" and collectively , the "Indentures"), between the Issuer and United States Trust Company of New York, as trustee (such trustee and any successor trustee under an Indenture, in such capacity, being the "Trustee"), for the purpose stated in the Indentures; and WHEREAS, to induce the Bank to issue certain letters of credit to support certain amounts payable on and in respect of the Bonds (each a "Letter of Credit" and collectively the "Letters of Credit") and to enter into a Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995, among Barclays Bank PLC, New York Branch, as Administrative Agent and Letter of Credit Bank, the Banks party thereto and the Company relating thereto (the "Reimbursement Agreement"), the Company proposes to pledge the Collateral (as hereinafter defined) and to enter into this Agreement; NOW, THEREFORE, the Company, the Custodian and the Bank hereby agree as follows: ARTICLE l DEFINITIONS; INTERPRETATION SECTION 1.1. Definitions. For the purposes of this Agreement, ----------- terms defined in the Reimbursement Agreement and used but not otherwise defined herein have the meanings given them in the Reimbursement Agreement, and the following terms have the meanings indicated: "Collateral" means each Pledged Bond, all payments of principal ---------- and interest payable on Pledged Bonds, all of the Company's rights to receive Pledged Bonds and amounts payable thereon and all of the Company's right, title and interest in and to Pledged Bonds and such principal of and interest thereon, and all proceeds thereof, as they may from time to time be B-1 delivered to or held, pending payment by the Custodian, the Remarketing Agent or the Trustee, in money, securities or collections from or with respect to any or all of the foregoing. "Custodian" means United States Trust Company of New York, or such --------- other Person appointed from time to time by the Bank to act as Custodian hereunder and accepting such appointment. Unless the Indentures are appropriately modified to provide for a Person other than the Trustee to act as Custodian, the entity serving as Trustee for the Bonds shall be the Custodian hereunder at all times. "Obligations" means (a) all amounts of principal of and interest ----------- on each Advance, (b) all other amounts due under or in respect of the Reimbursement Agreement and (c) all amounts paid or costs or expenses incurred by the Bank in the collection of any of the foregoing or for the maintenance, preservation, protection or enforcement (whether through negotiations, legal proceedings or otherwise) of, or realization upon, the Collateral or in connection with the enforcement or administration of this Agreement or the Reimbursement Agreement, in each case irrespective of whether the obligation to pay any such amount is direct or indirect, absolute or contingent, joint or several, due or not due, liquidated or unliquidated, arises by operation of law or otherwise or is from time to time reduced and thereafter reincurred. To the extent any payment made with respect to an Obligation is rescinded or recovered or is otherwise avoided or must be restored under or by reason of any bankruptcy or insolvency proceedings of the Company or any other Person or otherwise, the amount of such payment so rescinded, recovered, restored or avoided shall again constitute an Obligation, as if such payment had never been made. "Pledged Bond" means each Bond for which payment of the purchase ------------ price is made, in whole or in part, with the proceeds of a drawing by the Trustee under a Letter of Credit. "Remarketing Agreement" means each Remarketing Agreement, dated as --------------------- of October 1, 1995, between the Company, on the one hand, and the Remarketing Agent, on the other hand as the same shall have been amended, modified or supplemented from time to time. SECTION 1.2. Interpretation. The headings of the articles and -------------- sections hereof are for convenience of reference only and shall not limit or affect the meaning or construction of any provision hereof. ARTICLE 2 SECURITY INTEREST SECTION 2.1. Grant of Security Interest. As security for the due -------------------------- and punctual payment in full of each of the Obligations, the Company hereby grants to the Bank a continuing first lien on and security interest in the Collateral. SECTION 2.2. Interest Continuing and Absolute. Until payment in -------------------------------- full of all the Obligations has been indefeasibly made after the Cancellation Date, the Bank's security B-2 interest in the Collateral hereunder shall continue in full force and effect, and it and the Company's obligations hereunder shall be effective irrespective of any illegality, invalidity or unenforceability of the Bonds, the Letters of Credit, the Reimbursement Agreement or any other Related Document. SECTION 2.3. Perfection. The Company shall perfect the security ---------- interest of the Bank in the Collateral (a) in the case of Pledged Bonds, by delivering such Pledged Bonds to the Custodian, (b) in the case of cash proceeds forming part of the Collateral, by delivering the Collateral to the Bank, (c) in the case of uncertificated securities forming part of the Collateral, by registering such securities in the name of the Bank or its designee, or (d) by any other method permitted by the Uniform Commercial Code as in effect in the State of New York on the date of such perfection. All steps necessary for such perfection shall be taken by the Company, in the case of each Pledged Bond forming part of the Collateral, on the day such Bond becomes a Pledged Bond and, in the case of proceeds, immediately. ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties. The Company ---------------------------------- represents and warrants to the Bank and, so long as any of the Obligations remains unpaid, shall be deemed continuously to represent and warrant to the Bank and the Custodian, as follows: (a) At the time of delivery or transfer to the Bank or the Custodian of any Collateral, the Company will have good and marketable title to and be the sole owner of, such Collateral, free and clear of all liens and other encumbrances, other than the security interest created hereby, the Bank' s security interest in such Collateral shall have been perfected and no financing statement or other instrument with respect to any of the Collateral shall have been and continue to be recorded, registered or filed and no security agreement with respect to any of the Collateral shall have been executed by the Company, other than with respect to such security interest in favor of the Bank. (b) The Bank has a valid and perfected first priority security interest in the Collateral. (c) The Collateral may be properly pledged hereunder. (d) No consents or approvals of any Person are required for the assignment and transfer by the Company of any of the Collateral to the Bank hereunder, or the subsequent sale or transfer of the Collateral by the Bank pursuant to the terms hereof. (e) This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. B-3 ARTICLE 4 COVENANTS SECTION 4.1. Protection of the Bank's Security Interest. The ---------------------------------------------- Company shall defend its title to, and the Bank's security interest in, the Collateral against all claims of all other Persons, and shall keep the Collateral free from all liens and encumbrances (other than the Bank's security interest hereunder) and pay or cause to be paid promptly when due all taxes, fees, assessments and other charges now or hereafter imposed on or in respect of any of the Collateral. SECTION 4.2. Sale of Collateral. The Company shall not, without ------------------ the prior written consent of the Bank, sell, transfer or otherwise dispose of, or permit any other Person to sell, transfer or otherwise dispose of, any of the Collateral or any of the Company's interests therein, except in accordance with the terms of this Agreement, the Indentures and the Remarketing Agreement. The receipt by the Bank of all or any part of the proceeds of any sale, transfer or other disposition of any of the Collateral, except in accordance with the prior sentence, shall not be deemed or construed to be a consent by the Bank to any such sale, transfer or other disposition. SECTION 4.3. Further Assurances. The Company shall execute and ------------------ deliver to the Bank or the Custodian such assignments and other documents and instruments, and shall take all other action relating to the Collateral and the preservation, protection or perfection of the Bank's security interest therein, as the Bank may request, and the Company shall not file or permit to be filed any financing statement (or amendment or continuation statement) or execute any security agreement with respect to any of the Collateral unless it names the Bank as the only secured party. To the extent permitted by law, the Company hereby appoints the Bank as its attorney-in- fact (without requiring the Bank to act as such) to perform all acts that the Bank deems appropriate to preserve, protect and perfect its continuing security interest in the Collateral or to preserve or protect the Collateral. ARTICLE 5 REMEDIES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT SECTION 5.1. Default Remedies. If an Event of Default under the ---------------- Reimbursement Agreement shall occur and be continuing, the Bank shall be entitled to exercise any one or more (at the Bank's discretion, at one or more times) of the following remedies: (a) The Bank shall have the right to receive the Collateral, if any, then held by the Custodian, the Remarketing Agent, the Trustee or any other Person, endorse, assign or deliver in its own name or the name of the Company any and all checks, drafts and other instruments for the payment of money relating to or constituting part of the Collateral, and cause the Collateral to be registered in the name of the Bank or its designee, and the Company hereby waives presentment, protest and notice of B-4 nonpayment of any instrument so endorsed. In furtherance of the foregoing, the Company hereby irrevocably appoints the Bank, or any of its officers or designees, the Company's lawful attorney-in-fact (without requiring the Bank so to act), with power of substitution, in the name of the Company or in the name of the Bank (i) to endorse the name of the Company upon any of the Collateral, including proceeds, and to cause any of the Collateral to be registered in the name of the Bank or its designee; (ii) to demand, collect, receive payment of, receipt for and give discharges and releases of any of the Collateral; (iii) to commence and prosecute any and all actions or proceedings at law or in equity in any cour t to collect or otherwise realize on any of the Collateral to enforce any rights in respect thereof; (iv) to initiate, settle, compromise, compound, adjust or defend any actions, suits or proceedings relating or pertaining to any of the Collateral; and (v) to sell, transfer, assign, discount, negotiate or otherwise deal in all or any portion of the Collateral or the proceeds thereof and generally to perform all other acts necessary or desirable to realize on, and obtain the benefits of, the Collateral and otherwise to carry out the intention of this Agreement, as fully and effectively as though the Bank were the absolute owner thereof, and the Company hereby ratifies and confirms all that the Bank shall do by virtue of this appointment. The Bank shall not, under any circumstances, have any liability for any error or omission made in the settlement t collection or payment or other disposition of any or all of the Collateral or of any instrument received in payment therefor. (b) The Bank may sell or cause to be sold, in one or more sales, at such price as the Bank may deem adequate, and for cash or on credit or for future delivery, with or without assumption of any credit risk , all or any portion of the Collateral, at public or private sale, without demand of performance or notice of intention to sell or of time or place of sale (except such notice as may be required by applicable statute and cannot be waived), and the Bank may be the purchaser of all or any portion of the Collateral so sold; provided, however, that the -------- ------- Bank shall first give notice to the Trustee that an Event of Default has occurred and is continuing. The purchaser(s) at any such sale shall thereafter hold the Collateral so sold absolutely, free from any claim or right whatsoever, including any equity of redemption, of the Company. Any such demand, notice, claim, right or equity is hereby expressly waived and released by the Company. Without limiting the foregoing, if any such notice of the time or place of sale is so required, the Company agrees that the Bank need not give more than ten days' notice of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place and that such notice is reasonable notification of such matters . The Bank shall not, under any circumstances, incur any liability as a result of the sale of the Collateral or any part thereof at any sale conducted in accordance with the provisions of this Agreement. The Company hereby waives any claims against the Bank arising by reason of the fact that the price at which the Collateral may have been sold at any private sale was less than the price which might have been obtained at a public sale or was less than the aggregate principal amount of the Pledged Bonds or the then total unpaid Obligations. B-5 (c) The Company recognizes that the Bank may not deem it desirable to effect a public sale of any or all of the Pledged Bonds or otherwise but may deem it desirable to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Bank shall be under no obligation to delay a sale of any of the Pledged Bonds for the period of time necessary to permit the Issuer to register them for public sale under the Securities Act of 1933, as amended (the "Act"), or under applicable state securities laws, even should the Issuer agree to do so. (d) The Company shall do or cause to be done all such other acts and things as may be deemed necessary or desirable by the Bank to make such sale or sales of any portion or all of the Pledged Bonds valid and binding and in compliance with all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, including registering such Bonds under the Act, or any state securities laws (to the extent necessary), all at the Company's expense. (e) The Company acknowledges that a breach of any of the covenants contained in this Article 5 will cause irreparable injury to the Bank and that the Bank has no adequate remedy at law in respect of any such breach and, as a consequence, agrees that each and every covenant contained in this Article 5 shall be specifically enforceable against the Company, and the Company hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. SECTION 5.2. Remedies Not Exclusive. (a) The remedies provided ---------------------- for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or under the Reimbursement Agreement, including, without limitation, all rights and remedies of a secured party under Article 9 of the Uniform Commercial Code as in effect in the State of New York on the date of the exercise of any such remedy. The exercise by the Bank of any one or more remedies under Section 5.1, above, shall not constitute a waiver, or otherwise prohibit, the exercise by the Bank of other remedies provided herein or by law at the same or other times. (b) The Bank shall not be required to exercise any particular rights, powers, remedies or benefits hereunder or under the Reimbursement Agreement or any Related Document. Without limiting the generality of the foregoing, the Bank (i) shall be entitled to seek to realize upon or enforce the Collateral in such order as it may from time to time determine and without regard to whether or not any other collateral or security for any of the Obligations shall have been resorted to, and (ii) shall not be required to exhaust or enforce any particular portion of the Collateral before seeking to realize or enforce upon any other portion thereof. B-6 ARTICLE 6 COLLECTIONS BY THE COMPANY AND APPLICATIONS OF PROCEEDS IN RESPECT OF COLLATERAL SECTION 6.1. Collections on Pledged Bonds by the Company. (a) ---------------------------------------------- If, while any of the Obligations are outstanding, the Company becomes entitled to receive or receives any payment in respect of any Pledged Bond, the Company shall accept such payment as the Bank's agent, hold it in trust on behalf of the Bank and deliver it forthwith to the Bank for application to satisfaction of the Obligations then due and payable. All sums of money so paid in respect of any payment of interest on, or any portion of purchase price equal to the amount of accrued interest on, any Pledged Bond which are received by the Company and paid to the Bank shall be credited against the obligation of the Company to pay interest to the Banks set forth in Sections 2.04 and 2.05 of the Reimbursement Agreement. All sums of money so paid in respect of any payment of principal of, or any portion of purchase price equal to the principal amount of, any Pledged Bond which are received by the Company and paid to the Bank shall be credited against the obligation of the Company to pay principal to the Banks set forth in Sections 2.04 and 2.05 of the Reimbursement Agreement. SECTION 6.2. Application of Proceeds. All proceeds received from ----------------------- the sale or other disposition of, or realization on or with respect to, all or any part of the Collateral shall be applied by the Bank, in such order as the Bank, in its sole discretion, may determine to the payment of the costs and expenses of such sale, disposition or realization, including, without limitation, reasonable fees and expenses of counsel for the Bank and all expenses, liabilities and advances of the Banks in connection therewith, and to the payment of the remaining Obligations. ARTICLE 7 RELEASE OF COLLATERAL; COMPANY'S LIABILITY FOR DEFICIENCY SECTION 7.1. Release of Collateral. If (a) the Company prepays --------------------- or causes to be prepaid any Advance pursuant to Section 2.06 of the Reimbursement Agreement, (b) the Remarketing Agent causes Pledged Bonds at the time held hereunder to be sold, or (c) the Obligations are otherwise satisfied, upon receipt of such prepayment or of the proceeds of such sale or other satisfaction of the Obligations, Pledged Bonds in an aggregate principal amount equal to the prepayment so made, or the principal amount of Pledged Bonds so sold, or the Obligations so satisfied, shall be automatically released from the lien of this Agreement and the Company or its designee shall be entitled to have the released Bonds delivered to the Remarketing Agent, the Company or such other Person as designated by the Company in accordance with the terms of the relevant Indenture; provided, --------- however, that before any delivery of such released Bonds, the Trustee and - ------- the Custodian shall have received notice from the Bank, in the form of Exhibit 4 to the relevant Letter of Credit, of the reinstatement of the amounts so B-7 prepaid, sold or satisfied as available under such Letter of Credit and such notice shall constitute notice to release the Pledged Bonds pursuant to Section 406(b) of the Indenture. SECTION 7.2. Company's Liability for Deficiency. The Company ------------------------------------ shall in any event remain liable for any deficiency remaining unpaid after the application of the proceeds of the Collateral to the satisfaction of the Obligations. ARTICLE 8 GENERAL SECTION 8.1. Expenses. The Company shall pay to the Bank all -------- expenses (including reasonable fees and expenses of counsel) of, or incident to, any actual or attempted sale or other disposition of, or any exchange, enforcement (whether through negotiations, legal proceedings or otherwise), collection, compromise or settlement of or with respect to, all or any of the Collateral, by litigation or otherwise. The Company shall reimburse the Bank on demand for all reasonable costs and expenses incurred in connection with the negotiation, preparation, execution and administration of this Agreement, including, without limitation, any fees or expenses (including reasonable fees and expenses of counsel to the Custodian) paid by the Bank to the Custodian for its services in connection with this Agreement. SECTION 8.2. Notices. All notices and other communications ------- provided for hereunder shall be in writing (including telegraphic communication) and mailed, telecopied, telexed, telegraphed or delivered to the parties to the telex or telecopier number or address (as the case may be) specified for the intended recipient on the signature page hereof, or to such other number or address as such recipient may have last specified by notice to the other party. All such notices and communications shall, when mailed, telecopied, telexed or telegraphed, be effective when deposited in the mails or sent by telecopy or telex or delivered to the telegraph company, respectively, addressed as aforesaid. SECTION 8.3. Remedies and Waivers. No failure or delay on the -------------------- part of the Bank in exercising any right hereunder shall operate as a waiver of, or impair, any such right. No single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right shall be effective unless given in writing. No waiver of any such right shall be deemed a waiver of any other right hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.4. Amendment. No amendment or waiver of any provision --------- of this Agreement, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Custodian and the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.5. Assignment. (a) This Agreement shall be binding ---------- upon and inure to the benefit of the Custodian, the Bank and the Company and their respective successors B-8 and assigns; provided, however, that the Company may not assign any of its -------- ------- rights or obligations under this Agreement without the prior written consent of the Bank. (b) If the Bank or the Custodian assigns or otherwise transfers any of its rights and obligations hereunder, each reference in this Agreement to the Bank or the Custodian, as the case may be, shall be deemed to be a reference to the Bank or the Custodian, as the case may be, and the Person or Persons to which such rights and obligations were assigned and transferred to the extent of their respective interests. SECTION 8.6. Governing Law. This Agreement shall be governed ------------- by, and construed and interpreted in accordance with, the laws of the State of New York. SECTION 8.7. Custodian Appointed Agent. The Bank hereby appoints ------------------------- the Custodian as its agent to receive and hold Pledged Bonds constituting Collateral granted hereunder for the Bank's account. The Company acknowledges such appointment and agrees with the Bank and the Custodian, which by its execution of this Agreement accepts such appointment, that, for so long as this Agreement shall remain in full force and effect, all certificates or instruments representing or evidencing the Pledged Bonds shall be delivered to and held by the Custodian, as agent for the Bank. SECTION 8.8. Reasonable Care. The Custodian shall be deemed to --------------- have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Custodian accords its own property. SECTION 8.9. Integration of Terms. This Agreement contains the -------------------- entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. SECTION 8.10. Counterparts. This Agreement may be executed in ------------ counterparts, and such counterparts taken together shall be deemed to constitute one and the same agreement. SECTION 8.11. Severability. Any provision of this Agreement ------------ which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. B-9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. NEVADA POWER COMPANY 6226 West Sahara Avenue P.O. Box 230 Las Vegas, Nevada 89151 Telecopy: (702) 367-8803 Attention: Treasurer By ----------------------------------- Title: THE UNITED STATES TRUST COMPANY OF NEW YORK, as Custodian Attention: By: ------------------------------------ Title: BARCLAYS BANK PLC, NEW YORK BRANCH By B-10 Title: EXHIBIT C [LETTERHEAD OF GENERAL COUNSEL OF THE COMPANY] [Date of Issuance of Letter of Credit] To Barclays Bank PLC, New York Branch, as Administrative Agent and the Banks party to the Reimbursement Agreement referred to below Nevada Power Company -------------------- Gentlemen: This opinion is furnished to you pursuant to Section 3.01(k) of the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among Nevada Power Company (the "Company"), Barclays Bank PLC New York Branch, as Letter of Credit Bank and Administrative Agent, and the Banks party thereto. Terms defined in the Reimbursement Agreement are used herein as therein defined. I am General Counsel of the Company and, as such, have acted as counsel for the Company in connection with the preparation, execution and delivery of, and the closing on this date under, the Reimbursement Agreement. In that connection, I have examined: (1) The Reimbursement Agreement . (2) The Related Documents. (3) The other documents furnished by the Company pursuant to Article III of the Reimbursement Agreement, including the PUC Order. (4) The Articles of Incorporation of the Company and all amendments thereto (the "Charter"). (5) The by-laws of the Company and all amendments thereto (the "By-laws"). C-1 (6) A certificate of the Secretary of State of the State of Nevada, dated [ ], attesting to the continued corporate ---------------- existence and good standing of the Company in that State. I have also examined the originals, or copies certified to my satisfaction, of all of the indentures, loan or credit agreements, leases, guarantees, mortgages, security agreements, bonds, notes and other agreements or instruments, and all of the orders, writs, judgments, awards, injunctions and decrees (each, a "Restrictive Document"), which affect or purport to affect the Company's right to borrow money or the Company's obligations under the Reimbursement Agreement or the Related Documents to which it is a party. In addition, I have examined the originals, or copies certified to my satisfaction, of such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Company or its officers or of public officials. I have assumed the due execution and delivery, pursuant to due authorization, of the Reimbursement Agreement and the Related Documents by the parties thereto other than the Company. I am qualified to practice law in the State of Nevada and I do not express any opinion on any laws other than the laws of the State of Nevada and the Federal laws of the United States. Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the following opinion: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. 2. The execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to which it is a party are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to the Company (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any contractual or legal restriction contained in any Restrictive Document or, to the best of my knowledge, contained in any other similar document. The Reimbursement Agreement and the Related Documents to which it is a party have been duly executed and delivered on behalf of the Company. 3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to which it is a party, except for the PSC Order, which has been duly obtained, is final and is in full force and effect. The PSC Order is not the subject of appeal or reconsideration or other review, and no subsequent appeal or reconsideration or C-2 other review of the PSC Order will have any adverse effect upon the legality, validity or enforceability of the Company's obligations under the Reimbursement Agreement or the Related Documents to which the Company is a party. 4. There are no pending or, to the best of my knowledge, overtly threatened actions or proceedings against the Company or any of its Subsidiaries before any court, governmental agency or arbitrator (i) which purport to affect the legality, validity, binding effect or enforceability of the Reimbursement Agreement or any Related Document to which the Company is a party or (ii) except as disclosed in the Company's December 31, 1994] Report on Form 10-K as filed with the Securities and Exchange Commission, which are likely to have a materially adverse effect upon the financial condition or operations of the Company or any of its Subsidiaries; and there has occurred no material adverse developments in any such action or proceeding so disclosed. Very truly yours, C-3 EXHIBIT D [LETTERHEAD OF SPECIAL COUNSEL TO THE COMPANY] [Dates of Issuance of Letter of Credit] To Barclays Bank PLC, New York Branch, as Administrative Agent and the Banks party to the Reimbursement Agreement referred to below Nevada Power Company -------------------- Gentlemen: This opinion is furnished to you pursuant to Section 3.01(l) of the Letter of Credit and Reimbursement Agreement, dated as of October 1, 1995 (the "Reimbursement Agreement"), among Nevada Power Company (the "Company"), Barclays Bank PLC, New York Branch, as Administrative Agent and Letter of Credit Bank, and the Banks party thereto. Terms defined in the Reimbursement Agreement are used herein as therein defined. We have acted as Special Counsel to the Company in connection with the preparation, execution and delivery of, and the closing on this date under, the Reimbursement Agreement. In that connection, we have examined: (1) The Reimbursement Agreement. (2) The Related Documents. (3) The other documents furnished by the Company pursuant to Article III of the Reimbursement Agreement, including the PUC Order . In addition, we have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Company, certificates of public officials and of officers of the Company, and agreements, instruments and other documents, as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Company or its officers or of public officials. We have assumed the due execution and D-1 delivery, pursuant to due authorization, of the Reimbursement Agreement and the Related Documents by the parties thereto other than the Company. We are qualified to practice law in the State of California and are familiar with the laws of the State of Nevada to the extent necessary to permit us to express the opinions hereinafter set forth in paragraph 3. Accordingly, our opinions herein are limited to the laws of the State of California, the State of Nevada and the Federal laws of the United States. For purposes of the opinions expressed below, we have relied with your permission on the opinion of Richard L. Hinckley, General Counsel of the Company, being delivered to you on this date pursuant to Section 3.01(m) of the Reimbursement Agreement. Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the opinion that 1. Each of the Reimbursement Agreement, the Custodian Agreement and the other Related Documents to which the Company is a party is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 2. The Custodian Agreement is effective to create a valid and perfected security interest in any right, title and interest in the Bonds from time to time pledged thereunder superior in right to any liens, existing or future, which the Company, the Issuer, the Trustee, the Remarketing Agent or any other Person may have against such Bonds or any interest therein. 3. In any action or proceeding arising out of or relating to the Reimbursement Agreement or the Custodian Agreement in any court of the State of Nevada or in any Federal court sitting in the State of Nevada, such court would recognize and give effect to the provisions of Section 7.10 of the Reimbursement Agreement and Section 8.6 of the Custodian Agreement wherein the parties thereto agree that the Reimbursement Agreement and the Custodian Agreement, as the case may be, shall be governed by, and construed in accordance with, the laws of the State of New York. Without limiting the generality of the foregoing, a court of the State of Nevada or a Federal court sitting in the State of Nevada would apply the usury law of the State of New York, and would not apply the usury law of the State of Nevada, to the Reimbursement Agreement. In this connection, we call your attention to the fact that the Supreme Court of Nevada has indicated in certain of its opinions that it may decline to enforce laws of other jurisdictions which it believes to be contrary to the public policy of Nevada. Although the Supreme Court of Nevada has sustained a decision enforcing the laws of another state, including usury provisions, we cannot give any assurance that, under any specific circumstances, the courts might not decline to enforce New York usury or other laws on public policy grounds not previously indicated (although no facts or circumstances have come to our attention in the context of the present transaction that lead us to believe that the present transaction would be contrary to public policy D-2 considerations articulated by the Supreme Court of Nevada to date). However, if a court were to hold that the Reimbursement Agreement and the Custodian Agreement are governed by, and to be construed in accordance with, the laws of the State of Nevada, the Reimbursement Agreement and the Custodian Agreement would be, under the laws of the State of Nevada, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. 4. The offer, sale and delivery of the Bonds under the circumstances contemplated by the Related Documents do not require registration of the Bonds under the Securities Act of 1933, as amended, and do not require compliance with the qualification requirements of the Trust Indenture Act of 1939, as amended. 5. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Company of the Reimbursement Agreement and the Related Documents to it is a party, expect for the PSC Order, which has been duly obtained, is final and is in full force and effect. The PSC Order is not the subject of appeal or reconsideration or other review, and no subsequent appeal or reconsideration or other review of the PSC Order will have any adverse effect upon the legality, validity or enforceability of the Company's obligations under the Reimbursement Agreement or the Related Documents to which the Company is a party. Our opinions set forth in paragraphs 1 and 3, above, are subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). Very truly yours, D-3 -----END PRIVACY-ENHANCED MESSAGE-----