-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Ox4oNkGY/wWLRdoFabJ9B+oC+/PXk2TCV181Zc5EfTzLvdsPqDYYbEg3kktolyE0 1TffROapg54fS8pEASz2xw== 0000912057-95-005709.txt : 19950731 0000912057-95-005709.hdr.sgml : 19950731 ACCESSION NUMBER: 0000912057-95-005709 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19950728 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000073088 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 460172280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423 FILM NUMBER: 95556712 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING I CENTRAL INDEX KEY: 0000946925 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-01 FILM NUMBER: 95556713 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: C/O NORTHWESTERN PUBLIC SERVICE CO STREET 2: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING II CENTRAL INDEX KEY: 0000946938 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-02 FILM NUMBER: 95556714 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NWPS CAPITAL FINANCING III CENTRAL INDEX KEY: 0000946940 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60423-03 FILM NUMBER: 95556715 BUSINESS ADDRESS: STREET 1: 33 THIRD ST SE STREET 2: PO BOX 1318 CITY: HURON STATE: SD ZIP: 57350-1318 BUSINESS PHONE: 6053528411 MAIL ADDRESS: STREET 1: 33 THIRD STREET SE CITY: MURON STATE: SD ZIP: 57350-1318 S-3/A 1 S-3/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1995 REGISTRATION NO. 33-60423 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED NORTHWESTERN PUBLIC DELAWARE 46-0172280 SERVICE COMPANY NWPS CAPITAL FINANCING I DELAWARE TO BE APPLIED FOR NWPS CAPITAL FINANCING II DELAWARE TO BE APPLIED FOR NWPS CAPITAL FINANCING III DELAWARE TO BE APPLIED FOR (Exact name of registrant as (State or other (I.R.S. Employer specified in its charter) jurisdiction of Identification No.) incorporation or organization)
33 THIRD STREET S.E. HURON, SOUTH DAKOTA 57350-1318 605-352-8411 (Address, including zip code, and telephone number, including area code, of each registrant's principal executive offices) MERLE D. LEWIS, PRESIDENT AND CHIEF EXECUTIVE OFFICER 33 THIRD STREET S.E. HURON, SOUTH DAKOTA 57350-1318 605-352-8411 (Name, address, including zip code, and telephone number including area code, of agent for service) ------------------------ WITH COPIES TO: JAMES M. VAN VLIET, JR. DAVID P. FALCK SCHIFF HARDIN & WAITE WINTHROP, STIMSON, 7200 SEARS TOWER PUTNAM & ROBERTS CHICAGO, ILLINOIS 60606 ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AND FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT AS DETERMINED BY MARKET CONDITIONS. ------------------------ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /___________________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /___________________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) (TO PROSPECTUS DATED , 1995) $60,000,000 NORTHWESTERN PUBLIC SERVICE COMPANY % MORTGAGE BONDS DUE , 2005 ----------------- INTEREST PAYABLE AND ------------------- THE MORTGAGE BONDS OFFERED HEREBY (THE "OFFERED BONDS") WILL MATURE ON , 2005. THE OFFERED BONDS WILL NOT BE REDEEMABLE PRIOR TO MATURITY. THEREAFTER, THE OFFERED BONDS MAY BE REDEEMED AT THE OPTION OF THE COMPANY AT THE REDEMPTION PRICES SET FORTH HEREIN. THE OFFERED BONDS WILL BE ISSUED IN THE FORM OF FULLY-REGISTERED BOOK-ENTRY OFFERED BONDS WHICH WILL BE DEPOSITED WITH, AND REGISTERED IN THE NAME OF A NOMINEE OF, THE DEPOSITORY TRUST COMPANY. SEE "CERTAIN TERMS OF THE OFFERED BONDS" HEREIN. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- PRICE % AND ACCRUED INTEREST, IF ANY -------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS PUBLIC (1) COMMISSIONS (2) TO COMPANY (1)(3) --------------------- --------------------- --------------------- PER OFFERED BOND.......................... % % % TOTAL..................................... $ $ $ - --------- (1) PLUS ACCRUED INTEREST, IF ANY, FROM , 1995. (2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. (3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $700,000.
------------------- THE OFFERED BONDS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY WINTHROP, STIMSON, PUTNAM & ROBERTS, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE OFFERED BONDS WILL BE MADE ON OR ABOUT AUGUST , 1995 THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS. ------------------- MORGAN STANLEY & CO. NATWEST CAPITAL MARKETS LIMITED INCORPORATED AUGUST , 1995 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. ------------------- TABLE OF CONTENTS
PAGE PROSPECTUS SUPPLEMENT Prospectus Supplement Summary.............................................................................. S-3 The Company................................................................................................ S-3 Summary Financial Information.............................................................................. S-5 Use of Proceeds............................................................................................ S-6 Certain Terms of the Offered Bonds......................................................................... S-6 Underwriting............................................................................................... S-8 PROSPECTUS Available Information...................................................................................... 1 Documents Incorporated by Reference........................................................................ 1 The Company................................................................................................ 2 Pending Acquisition of Synergy Group Incorporated.......................................................... 5 Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information......... 10 The NWPS Trusts............................................................................................ 19 Use of Proceeds............................................................................................ 20 Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends.......... 20 Description of the Mortgage Bonds.......................................................................... 20 Description of the Subordinated Debt Securities............................................................ 32 Description of the Preferred Securities.................................................................... 40 Description of the Guarantees.............................................................................. 41 Description of the Common Stock............................................................................ 43 Legal Opinions............................................................................................. 45 Experts.................................................................................................... 46 Plan of Distribution....................................................................................... 46
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 PROSPECTUS SUPPLEMENT SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE CONSIDERED IN CONJUNCTION WITH, THE INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE. THE COMPANY The principal business of Northwestern Public Service Company (the "Company") is energy distribution. The Company is engaged in providing regulated electric and natural gas service in South Dakota and natural gas service in Nebraska. The Company serves approximately 54,900 electric customers and 75,000 gas customers representing a diverse mix of residential, commercial and industrial customers. In addition, the Company has investments in nonutility businesses and has recently contracted to acquire Synergy Group Incorporated ("Synergy"), a major propane distribution company. See "The Company" and "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. The Company's electric business generates, transmits and distributes electricity to over 100 communities in eastern South Dakota. In 1994, 46% of the Company's total operating revenues were from the sale of electric energy. At December 31, 1994, the aggregate capacity of all Company-owned electric generating units was 309,000 kilowatts ("kw"), consisting of 202,000 kw from jointly-owned baseload plants and 107,000 kw from internal combustion turbine and diesel units used primarily for peaking purposes. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. The Company's natural gas business purchases, transports and distributes natural gas to over 50 communities in eastern South Dakota and 4 communities in central Nebraska. In 1994, 40% of the Company's total operating revenues were from the sale of natural gas. The Company purchases gas supply from more than 20 domestic and Canadian suppliers and transports natural gas supply through five pipelines. Gas agreements provide for firm deliverable pipeline capacity of approximately 98,900 million british thermal units ("MMBTU"), per day. To supplement firm gas supplies, the Company owns six propane-air plants and has contracts for underground natural gas storage services. Over the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company's business strategy is summarized by three primary objectives: - To enhance the Company's competitive position in its energy distribution businesses; - To expand energy sales and markets with value-added services for customers; and - To provide earnings and dividend growth and increased shareholder value through its energy distribution businesses and investment and acquisition activities. By enhancing the competitive position of its core electric and gas distribution businesses and expanding its energy sales and markets, the Company believes it will position itself to be successful in the increasingly competitive electric and gas distribution businesses anticipated over the next several years. To supplement growth strategies in its electric and natural gas businesses, the Company also plans to seek new investment and acquisition opportunities that have demonstrable growth potential. The primary focus of these investment and acquisition activities is targeted in energy distribution businesses. The Company also plans to pursue opportunities in non-energy businesses that complement its existing operations and provide the capability to enhance shareholder value. In May 1995, the Company contracted to acquire Synergy, a retail propane distributor serving over 200,000 customers from 152 locations in 23 states in the eastern and south central regions of the U.S. See "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. In S-3 accordance with its strategic plan, the Company believes that the Synergy propane distribution operations are complementary to the Company's electric and natural gas businesses. Propane is the nation's fourth largest energy source after electricity, natural gas and fuel oil. The acquisition price to be paid for Synergy is $137.5 million cash (subject to certain adjustments) and certain securities of the Company's acquisition subsidiary. The Company has entered into an agreement with a third party for the sale of certain Synergy properties which will reduce the cash portion of the acquisition price to approximately $100 million. The Company has executed a management agreement with Empire Gas Corporation ("Empire Gas") for the joint management of the properties after the acquisition. Empire Gas is the nation's eleventh largest retail propane distributor. Subsequent to the acquisition and expected third party sale, the Company's total assets will consist of approximately 65% electric and gas distribution, 25% propane distribution and 10% marketable securities and other diversified investments. The Company's principal executive offices are located at 33 Third Street S.E., Huron, South Dakota 57350. The Company's telephone number is (605) 352-8411. S-4 SUMMARY FINANCIAL INFORMATION (in thousands, except percentages and per share amounts) The financial information presented below should be read in conjunction with the Company's historical financial statements and the notes thereto which are incorporated by reference herein and the pro forma financial statements and the notes thereto included in the accompanying Prospectus. The pro forma financial information contained in the right column, reflecting the pending acquisition of Synergy and related matters, was prepared solely to comply with Regulation S-X of the Securities and Exchange Commission. The pro forma financial information is based on the assumptions and adjustments set forth under "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" in the accompanying Prospectus.
PRO FORMA(1) ------------------------ THREE THREE MONTHS YEAR MONTHS YEAR ENDED DECEMBER 31, ENDED ENDED ENDED ---------------------------- MARCH 31, DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1994 1995(2) -------- -------- -------- --------- ------------ --------- INCOME STATEMENT DATA: Revenues............................................. $119,197 $153,257 $157,266 $50,754 $256,634 $82,612 Operating income..................................... 24,809 27,246 30,368 12,882 37,985 20,088 Net income........................................... 13,721 15,191 15,440 7,103 17,463 13,840 Net income available for common stock................ 13,578 15,070 15,320 7,073 15,300 13,299 Earnings per share................................... 1.77 1.96 2.00 0.92 1.74 1.51 Dividends paid per common share...................... 1.59 1.63 1.67 0.425 1.67 0.425 Weighted average shares outstanding.................. 7,677 7,677 7,677 7,677 8,805 8,805
AS OF MARCH 31, 1995 ------------------------------------- ACTUAL PRO FORMA -------- --------- BALANCE SHEET DATA: Assets................................................................... $363,432 $ 487,435 -------- --------- -------- --------- Capitalization Summary Long-term debt (including current maturities)........................................ $129,888 51.6% $ 181,592 50.7% Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust (3).................................................. -- -- 24,212 6.8 Cumulative preferred stock (including portion to be redeemed within one year)................................................................. 2,640 1.1 2,640 0.7 Common Stock Equity Common stock........................................................... 26,870 -- 31,179 -- Additional paid-in capital............................................. 29,923 -- 56,398 -- Retained earnings...................................................... 59,183 -- 59,183 -- Unrealized gain on investments, net.................................... 3,181 -- 3,181 -- -------- --------- $119,157 47.3 $ 149,941 41.8 -------- ------ --------- ------ Total................................................................ $251,685 100.0% $ 358,385 100.0% -------- ------ --------- ------ -------- ------ --------- ------ - ---------- (1) The pro forma financial information does not purport to present the financial position or results of operations of the Company had the acquisition of Synergy actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations. (2) The results of operations of Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations. (3) As described in the accompanying Prospectus, all of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at a rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of Preferred Securities to be used to fund the acquisition of Synergy.
S-5 USE OF PROCEEDS The net proceeds from the sale of approximately $50 million of the Offered Bonds will be applied to fund the acquisition of Synergy, including certain transaction expenses. The additional net proceeds from the sale of the Offered Bonds will be applied to repay short term debt of the Company. See "Use of Proceeds" in the accompanying Prospectus. CERTAIN TERMS OF THE OFFERED BONDS GENERAL. The Offered Bonds are being issued under the Company's General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 (the "New Mortgage") between the Company and The Chase Manhattan Bank (National Association), as trustee (the "New Mortgage Trustee"), as supplemented by various supplemental indentures, including the Supplemental Indenture dated as of , 1995 relating to the Offered Bonds (the "Supplemental Indenture"). The Offered Bonds will be issued on the basis of a First Mortgage Bond in the principal amount of $ (the "Pledged Bond") issued to the New Mortgage Trustee under the Company's Indenture dated August 1, 1940 (the "First Mortgage") between the Company and The Chase Manhattan Bank (National Association) and C. J. Heinzelmann, as successor Trustees, as supplemented by various supplemental indentures, including the supplemental indenture dated as of , 1995 relating to the Pledged Bond, and on the basis of property additions. The Offered Bonds will be secured, in part, by the First Mortgage Bonds (including the Pledged Bond) held by the New Mortgage Trustee. The First Mortgage constitutes, subject to certain exceptions, a first lien on substantially all properties of the Company. The Offered Bonds will also be secured by the lien of the New Mortgage on the Company's properties used in the generation, production, transmission or distribution of electricity or the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska, which lien is junior to the lien of the First Mortgage. See "Description of the Mortgage Bonds" in the accompanying Prospectus. The following summaries of certain provisions of the New Mortgage, the Supplemental Indenture and the Offered Bonds (referred to in the Prospectus as "Mortgage Bonds") hereby supplement, and to the extent inconsistent therewith replace, the description of the general terms and provisions of the Mortgage Bonds set forth under "Description of the Mortgage Bonds" in the Prospectus, to which description reference is hereby made. The following summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the New Mortgage and the Supplemental Indenture. The following makes use of defined terms in the New Mortgage and the Supplemental Indenture. BOOK-ENTRY SYSTEM. The Offered Bonds will be issued in the form of fully-registered book-entry Offered Bonds which will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of the Depositary's nominee (each, a "Book-Entry Security"). Except as set forth below, a Book-Entry Security may not be transferred except as a whole by the Depositary or by a nominee of the Depositary to the Depositary, by a nominee of the Depositary to another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. The Depositary has advised the Company and the Underwriters that it is a limited-purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York banking law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The Depositary was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among the participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain S-6 other organizations, some of whom (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Persons who are not participants may beneficially own securities held by the Depositary only through participants. The rules applicable to the Depositary are on file with the Securities and Exchange Commission. Upon the issuance by the Company of the Book-Entry Securities, the Depositary will credit, on its book-entry registration and transfer system, the principal amount of the Offered Bonds represented by such Book-Entry Securities to the accounts of participants. The accounts to be credited shall be designated by the applicable Underwriter. Ownership of beneficial interests in a Book-Entry Security will be limited to participants or persons that may hold interests through participants. Beneficial interests in a Book-Entry Security will be shown on, and the transfer thereof will be effected only through, records maintained by the Depositary (with respect to beneficial interests of participants) or by participants, or persons that may hold interests through participants (with respect to beneficial interests to beneficial owners). The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and such laws may impair the ability to transfer beneficial interests in a Book-Entry Security. For a Book-Entry Security, so long as the Depositary or its nominee is the registered owner of a Book-Entry Security, the Depositary or its nominee, as the case may be, will be considered the sole owner or holder of the Offered Bonds represented by such Book-Entry Security for all purposes under the New Mortgage. Except as provided below, owners of beneficial interests in a Book-Entry Security will not be entitled to have Offered Bonds represented by such Book-Entry Security registered in their names, will not receive or be entitled to receive physical delivery of such Offered Bonds in certificated form and will not be considered the owners or holders thereof under the New Mortgage. Principal and interest payments on Offered Bonds issued in book-entry form and represented by the Book-Entry Securities will be made by the Company to the Depositary or its nominee, as the case may be, as the registered owner of the related Book-Entry Securities. The Company will not have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Securities, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depositary, upon receipt of any payment of principal or interest in respect of any Book-Entry Securities, will credit immediately the accounts of the related participants with payment in amounts proportionate to their respective beneficial interest in the principal amount of such Book-Entry Securities as shown on the records of the Depositary. The Company also expects the payments by participants to owners of beneficial interests in the Book-Entry Securities will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will issue Offered Bonds in certificated form in exchange for each Book-Entry Security. In addition, the Company may at any time determine not to have Offered Bonds represented by the Book-Entry Securities. In any such instance, owners of beneficial interests in such Book-Entry Securities will be entitled to physical delivery of Offered Bonds in certificated form equal in principal amount to such beneficial interests and to have such Offered Bonds registered in its name. Offered Bonds so issued in certificated form will be issued in denominations of $1,000 or any larger amount that is an integral multiple thereof and will be issued in registered form only, without coupons. SAME-DAY PAYMENT AND SETTLEMENT. All payments of principal of and interest on the Offered Bonds will be made by the Company in same-day funds. S-7 SECURITY. The Offered Bonds will be issued on the basis of the Pledged Bond and on the basis of property additions. The Pledged Bond will be issued and delivered to, and registered in the name of, the New Mortgage Trustee or its nominee and will be owned and held by the New Mortgage Trustee, subject to the provisions of the New Mortgage, for the benefit of the Holders (as defined in the accompanying Prospectus) of the Offered Bonds and all other outstanding Mortgage Bonds issued under the New Mortgage, and the Company will have no interest in the Pledged Bond. The Pledged Bond will be issued in the principal amount of and, as is the case with the Offered Bonds, will mature on , will bear interest at the rate of % per annum, and will be payable semi-annually on and , beginning . Any payment by the Company of principal of, or interest on, the Pledged Bond shall be applied by the New Mortgage Trustee to the payment of any principal, or interest, as the case may be, in respect of the Offered Bonds which is then due and, to the extent of such application, the obligation of the Company under the New Mortgage to make such payment in respect of the Offered Bonds will be deemed satisfied and discharged. Any payment by the Company under the New Mortgage of principal of, or interest on, the Offered Bonds will, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company to make a corresponding payment of principal, or interest, as the case may be, in respect of the Pledged Bond which is then due. UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement dated the date hereof, the Underwriters named below have severally agreed to purchase, and the Company has agreed to sell to the Underwriters, severally, the following respective principal amounts of the Offered Bonds:
PRINCIPAL AMOUNT OF THE UNDERWRITERS OFFERED BONDS - -------------------------------------------------------------------------------- -------------- Morgan Stanley & Co. Incorporated............................................... $ NatWest Capital Markets Limited................................................. Total....................................................................... -------------- --------------
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the Offered Bonds are subject to approval of certain legal matters by counsel and to certain other conditions. The Underwriters are committed to pay for and accept delivery of all of the Offered Bonds if any are taken; provided that under certain circumstances involving a default of Underwriters, less than all of the Offered Bonds may be purchased. The Underwriters initially propose to offer part of the Offered Bonds directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement and part to certain dealers at a price which represents a concession not in excess of % of the principal amount of the Offered Bonds. The Underwriters may allow and such dealers may reallow a concession of % of the principal amount of the Offered Bonds to certain other dealers. After the initial public offering, the public offering price and the other selling items may be changed. Each series of Offered Bonds will be a new issue of securities and will have no established trading market. Any Underwriter to whom Offered Bonds of any series are sold for public offering and sale may make a market in such series of Offered Bonds, but such Underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of, or trading market for, any Offered Bonds. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Underwriters engage in (or in the future may engage in) transactions with, and perform services for, the Company or its affiliates in the ordinary course of business. Morgan Stanley & Co. S-8 Incorporated represents Synergy in connection with the pending acquisition of Synergy by the Company described under "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. National Westminster Bank P l c. is the parent of NatWest Capital Markets Limited and is serving as the managing agent for the short-term loan for the Synergy acquisition. NatWest Capital Markets Limited ("NatWest"), a United Kingdom broker-dealer and a member of the Securities Futures Authority Limited, has agreed that, as part of the distribution of the Offered Bonds and subject to certain exceptions, it will not offer or sell any Offered Bonds within the United States, its territories or possessions or to persons who are citizens thereof or residents therein. The Underwriting Agreement does not limit sale of the Offered Bonds offered hereby outside the United States. NatWest has further represented and agreed that (i) it has not offered or sold and will not offer or sell prior to the date six months after their date of issue any Offered Bonds to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Bonds in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issued or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Bonds to a person who is of the kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. S-9 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) (TO PROSPECTUS DATED , 1995) 1,200,000 SHARES NORTHWESTERN PUBLIC SERVICE COMPANY COMMON STOCK, $3.50 PAR VALUE ------------ ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE. ON JULY 27, 1995, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS $26 PER SHARE. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OF ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- PRICE $ A SHARE -------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS PUBLIC COMMISSIONS (1) TO COMPANY (2) --------------------- --------------------- --------------------- PER SHARE................................. TOTAL (3)................................. $ $ $ - --------- (1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. (2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $700,000. (3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS AN OPTION, EXERCISABLE WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF 180,000 ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC LESS UNDERWRITING DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF THE UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY WILL BE $ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITING."
------------------- THE COMMON STOCK IS OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY WINTHROP, STIMSON, PUTNAM & ROBERTS, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE COMMON STOCK WILL BE MADE ON OR ABOUT AUGUST , 1995 AT THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN NEW YORK FUNDS. ------------------- MORGAN STANLEY & CO. PAINEWEBBER INCORPORATED INCORPORATED AUGUST , 1995 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. ------------------- TABLE OF CONTENTS
PAGE PROSPECTUS SUPPLEMENT Prospectus Supplement Summary.............................................................................. S-3 The Company................................................................................................ S-3 The Offering............................................................................................... S-4 Summary Financial Information.............................................................................. S-5 Use of Proceeds............................................................................................ S-6 Supplemental Description of the Common Stock............................................................... S-6 Underwriting............................................................................................... S-6 PROSPECTUS Available Information...................................................................................... 1 Documents Incorporated by Reference........................................................................ 1 The Company................................................................................................ 2 Pending Acquisition of Synergy Group Incorporated.......................................................... 5 Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information......... 10 The NWPS Trusts............................................................................................ 19 Use of Proceeds............................................................................................ 20 Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends.......... 20 Description of the Mortgage Bonds.......................................................................... 20 Description of the Subordinated Debt Securities............................................................ 32 Description of the Preferred Securities.................................................................... 40 Description of the Guarantees.............................................................................. 41 Description of the Common Stock............................................................................ 43 Legal Opinions............................................................................................. 45 Experts.................................................................................................... 46 Plan of Distribution....................................................................................... 46
S-2 PROSPECTUS SUPPLEMENT SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE CONSIDERED IN CONJUNCTION WITH, THE INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE. THE COMPANY The principal business of Northwestern Public Service Company (the "Company") is energy distribution. The Company is engaged in providing regulated electric and natural gas service in South Dakota and natural gas service in Nebraska. The Company serves approximately 54,900 electric customers and 75,000 gas customers representing a diverse mix of residential, commercial and industrial customers. In addition, the Company has investments in nonutility businesses and has recently contracted to acquire Synergy Group Incorporated ("Synergy"), a major propane distribution company. See "The Company" and "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. The Company's electric business generates, transmits and distributes electricity to over 100 communities in eastern South Dakota. In 1994, 46% of the Company's total operating revenues were from the sale of electric energy. At December 31, 1994, the aggregate capacity of all Company-owned electric generating units was 309,000 kilowatts ("kw"), consisting of 202,000 kw from jointly-owned baseload plants and 107,000 kw from internal combustion turbine and diesel units used primarily for peaking purposes. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. The Company's natural gas business purchases, transports and distributes natural gas to over 50 communities in eastern South Dakota and 4 communities in central Nebraska. In 1994, 40% of the Company's total operating revenues were from the sale of natural gas. The Company purchases gas supply from more than 20 domestic and Canadian suppliers and transports natural gas supply through five pipelines. Gas agreements provide for firm deliverable pipeline capacity of approximately 98,900 million british thermal units ("MMBTU") per day. To supplement firm gas supplies, the Company owns six propane-air plants and has contracts for underground natural gas storage services. Over the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company's business strategy is summarized by three primary objectives: - To enhance the Company's competitive position in its energy distribution businesses; - To expand energy sales and markets with value-added services for customers; and - To provide earnings and dividend growth and increased shareholder value through its energy distribution businesses and investment and acquisition activities. By enhancing the competitive position of its core electric and gas distribution businesses and expanding its energy sales and markets, the Company believes it will position itself to be successful in the increasingly competitive electric and gas distribution businesses anticipated over the next several years. To supplement growth strategies in its electric and natural gas businesses, the Company also plans to seek new investment and acquisition opportunities that have demonstrable growth potential. The primary focus of these investment and acquisition activities is targeted in energy distribution businesses. The Company also plans to pursue opportunities in non-energy businesses that complement its existing operations and provide the capability to enhance shareholder value. In May 1995, the Company contracted to acquire Synergy, a retail propane distributor serving over 200,000 customers from 152 locations in 23 states in the eastern and south central regions of the U.S. See "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. In S-3 accordance with its strategic plan, the Company believes that the Synergy propane distribution operations are complementary to the Company's electric and natural gas businesses. Propane is the nation's fourth largest energy source after electricity, natural gas and fuel oil. The acquisition price to be paid for Synergy is $137.5 million cash (subject to certain adjustments) and certain securities of the Company's acquisition subsidiary. The Company has entered into an agreement with a third party for the sale of certain Synergy properties which will reduce the cash portion of the acquisition price to approximately $100 million. The Company has executed a management agreement with Empire Gas Corporation ("Empire Gas") for the joint management of the properties after the acquisition. Empire Gas is the nation's eleventh largest retail propane distributor. Subsequent to the acquisition and expected third party sale, the Company's total assets will consist of approximately 65% electric and gas distribution, 25% propane distribution and 10% marketable securities and other diversified investments. The Company's principal executive offices are located at 33 Third Street S.E., Huron, South Dakota 57350. The Company's telephone number is (605) 352-8411. THE OFFERING Common Shares offered.................. 1,200,000 shares (1) Common Shares to be outstanding after the offering........................... Approximately 8,877,232 shares (1) Price Range (January 1, 1995 through July 27, 1995)......................... $25-28 3/8 Current Indicated Annual Dividend...... $1.70 per share Use of Proceeds........................ The net proceeds will be used to repay short-term debt to be incurred in connection with a portion of the financing for the Company's acquisition of a propane distribution company. NYSE Symbol............................ NPS - ------------------------ (1) Does not include the Underwriters' option to purchase up to an aggregate of 180,000 additional shares.
S-4 SUMMARY FINANCIAL INFORMATION (in thousands, except percentages and per share amounts) The financial information presented below should be read in conjunction with the Company's historical financial statements and the notes thereto which are incorporated by reference herein and the pro forma financial statements and the notes thereto included in the accompanying Prospectus. The pro forma financial information contained in the right column, reflecting the pending acquisition of Synergy and related matters, was prepared solely to comply with Regulation S-X of the Securities and Exchange Commission. The pro forma financial information is based on the assumptions and adjustments set forth under "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" in the accompanying Prospectus.
PRO FORMA (1) ------------------------ THREE THREE MONTHS MONTHS YEAR ENDED DECEMBER 31, ENDED YEAR ENDED ENDED ---------------------------- MARCH 31, DECEMBER 31, MARCH 31, 1992 1993 1994 1995 1994 1995 (2) -------- -------- -------- --------- ------------ --------- INCOME STATEMENT DATA Revenues..................................................... $119,197 $153,257 $157,266 $50,754 $256,634 $82,612 Operating income............................................. 24,809 27,246 30,368 12,882 37,985 20,088 Net income................................................... 13,721 15,191 15,440 7,103 17,463 13,840 Net income available for common stock........................ 13,578 15,070 15,320 7,073 15,300 13,299 Earnings per share........................................... 1.77 1.96 2.00 0.92 1.74 1.51 Dividends paid per common share.............................. 1.59 1.63 1.67 0.425 1.67 0.425 Weighted average shares outstanding.......................... 7,677 7,677 7,677 7,677 8,805 8,805
AS OF MARCH 31, 1995 ----------------------------------- PRO ACTUAL FORMA -------- -------- BALANCE SHEET DATA: Assets.................................................................................... $363,432 $487,435 -------- -------- -------- -------- Capitalization Summary Long-term debt (including current maturities)........................................... $129,888 51.6% $181,592 50.7% Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust (3)... -- -- 24,212 6.8 Cumulative preferred stock (including portion to be redeemed within one year)........... 2,640 1.1 2,640 0.7 Common Stock Equity Common stock............................................................................ 26,870 -- 31,179 -- Additional paid-in capital.............................................................. 29,923 -- 56,398 -- Retained earnings....................................................................... 59,183 -- 59,183 -- Unrealized gain on investments, net..................................................... 3,181 -- 3,181 -- -------- -------- $119,157 47.3 $149,941 41.8 -------- ------ -------- ------ Total................................................................................. $251,685 100.0% $358,385 100.0% -------- ------ -------- ------ -------- ------ -------- ------ - ------------------------ (1) The pro forma financial information does not purport to present the financial position or results of operations of the Company had the acquisition of Synergy actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations. (2) The results of operations of Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations. (3) As described in the accompanying Prospectus, all of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at the rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of Preferred Securities to be used to fund the acquisition of Synergy.
S-5 USE OF PROCEEDS The net proceeds from the sale of the Common Stock will be used to repay short-term debt incurred in connection with a portion of the financing obtained to fund the acquisition of Synergy, including certain transaction costs. See "Use of Proceeds" in the accompanying Prospectus. SUPPLEMENTAL DESCRIPTION OF THE COMMON STOCK PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION The Common Stock of the Company is listed on the New York Stock Exchange (NYSE). The ticker symbol is "NPS", although it is frequently presented as "NowestPS" or "NWPS" in various financial publications. The following table sets forth, for the indicated periods, the price range of the Common Stock as reported on the NYSE Composite Tape. As of June 8, 1995, there were 7,999 record holders of the Company's Common Stock (7,677,232 Shares of Common Stock outstanding).
PRICE PER SHARE CASH --------------- DIVIDENDS HIGH LOW PER SHARE ------- ---- --------- 1993 - ----------------------------------------------------------- First Quarter............................................ $29 1/2 $26 1/4 $ .405 Second Quarter........................................... 31 1/2 28 3/4 .405 Third Quarter............................................ 33 1/2 29 1/4 .405 Fourth Quarter........................................... 32 1/2 28 1/2 .415 1994 - ----------------------------------------------------------- First Quarter............................................ $29 $26 .415 Second Quarter........................................... 29 5/8 26 .415 Third Quarter............................................ 29 3/8 27 1/2 .415 Fourth Quarter........................................... 28 7/8 24 1/2 .425 1995 - ----------------------------------------------------------- First Quarter............................................ 27 3/8 25 1/4 .425 Second Quarter........................................... 28 3/8 25 .425 Third Quarter (through July 27, 1995).................... 26 1/4 25 1/4
The last reported sale price of the Common Stock on July 27, 1995 was $26 per share. The Company has paid cash dividends on its Common Stock in each fiscal quarter since 1947. The payment of dividends in the future is subject to the Company's earnings and financial condition and such other factors as the Company's Board of Directors may deem relevant. In addition, certain covenants in the debt instruments of the Company's subsidiaries limit the amounts available for dividends. See "Description of the Common Stock" in the accompanying Prospectus. UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement dated the date hereof (the Underwriting Agreement), each of the Underwriters named below, for whom Morgan Stanley & Co. Incorporated and PaineWebber Incorporated are acting as representatives (the S-6 "Representatives"), have severally agreed to purchase, and the Company has agreed to sell to them, severally, the respective number of shares of Common Stock set forth opposite their respective names below:
NUMBER OF NAME SHARES - -------------------------------------------------------------------------------- -------------- Morgan Stanley & Co. Incorporated............................................... PaineWebber Incorporated........................................................ -------------- Total....................................................................... 1,200,000 -------------- --------------
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the Common Stock offered hereby are subject to the approval of certain legal matters by its counsel and to certain other conditions. The Underwriters are committed to take and pay for all of the Common Stock offered hereby (other than those covered by the Underwriters' over-allotment option described below) if any such shares are taken. The Underwriters propose to offer part of the Common Stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ per share of Common Stock. The Underwriters may allow, and such dealers may reallow, a concession of $ per share of Common Stock to certain other dealers. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Company has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus Supplement, to purchase up to an additional 180,000 shares of Common Stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, incurred in the sale of the Common Stock. The Company has agreed in the Underwriting Agreement not to directly or indirectly (1) offer, pledge, sell, contract or otherwise dispose of any Common Stock or any securities convertible into or exchangeable for Common Stock or (2) enter into any swap or similar agreement that transfers, in whole or in part, the economic risk of ownership of Common Stock, whether any such transaction described in clause (1) or (2) is to be settled by delivery of Common Stock or other securities, in cash or otherwise, for a period of 90 days after the date of this Prospectus Supplement, without the prior written consent of Morgan Stanley & Co. Incorporated, provided that the Company may during such 90 day period issue shares under its dividend reinvestment, customer stock purchase and other plans. Certain of the Underwriters engage in (or in the future may engage in) transactions with, and provide services for, the Company or its affiliates in the ordinary course of business. Morgan Stanley & Co. Incorporated represents Synergy in connection with the pending acquisition of Synergy by the Company described under "Pending Acquisition of Synergy Group Incorporated" included in the accompanying Prospectus. S-7 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) (TO PROSPECTUS DATED , 1995) 1,200,000 PREFERRED SECURITIES NWPS CAPITAL FINANCING I % TRUST PREFERRED CAPITAL SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY NORTHWESTERN PUBLIC SERVICE COMPANY ------------ THE % TRUST PREFERRED CAPITAL SECURITIES (THE "PREFERRED SECURITIES") OFFERED HEREBY REPRESENT PREFERRED UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS OF NWPS CAPITAL FINANCING I, A STATUTORY BUSINESS TRUST FORMED UNDER THE LAWS OF THE STATE OF DELAWARE ("NWPS CAPITAL" OR THE "TRUST"). NORTHWESTERN PUBLIC SERVICE COMPANY, A DELAWARE CORPORATION (THE "COMPANY"), WILL DIRECTLY OR INDIRECTLY OWN ALL THE COMMON SECURITIES (THE "COMMON SECURITIES" AND, TOGETHER WITH THE PREFERRED SECURITIES, THE "TRUST SECURITIES") REPRESENTING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS OF NWPS CAPITAL. NWPS CAPITAL EXISTS FOR THE SOLE PURPOSE OF ISSUING THE PREFERRED SECURITIES AND COMMON SECURITIES AND INVESTING THE PROCEEDS THEREOF IN AN EQUIVALENT AMOUNT OF % JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE , 2025 ("SUBORDINATED DEBT SECURITIES") OF THE COMPANY. UPON AN EVENT OF A DEFAULT UNDER THE DECLARATION (AS DEFINED HEREIN), THE HOLDERS OF PREFERRED SECURITIES WILL HAVE A PREFERENCE OVER THE HOLDERS OF THE COMMON SECURITIES WITH RESPECT TO PAYMENTS IN RESPECT OF DISTRIBUTIONS AND PAYMENTS UPON REDEMPTION, LIQUIDATION AND OTHERWISE. (CONTINUED ON FOLLOWING PAGE) ------------------------ SEE "RISK FACTORS" COMMENCING ON PAGE S-7 HEREOF FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL. ----------------- THE PREFERRED SECURITIES HAVE BEEN APPROVED FOR LISTING ON THE NEW YORK STOCK EXCHANGE, SUBJECT TO OFFICIAL NOTICE OF ISSUANCE. TRADING OF THE PREFERRED SECURITIES ON THE NEW YORK STOCK EXCHANGE IS EXPECTED TO COMMENCE WITHIN A SEVEN-DAY PERIOD AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT. SEE "UNDERWRITING." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- PRICE $25 PER SECURITY AND ACCRUED DISTRIBUTIONS, IF ANY -------------------
UNDERWRITING PROCEEDS PRICE TO DISCOUNTS AND TO NWPS PUBLIC (1) COMMISSION (2) CAPITAL (3)(4) --------------------- --------------------- --------------------- PER PREFERRED SECURITY................................ $25.00 (4) $25.00 TOTAL................................................. $30,000,000 (4) $30,000,000 - --------- (1) PLUS ACCRUED DISTRIBUTIONS, IF ANY, FROM THE DATE OF INITIAL ISSUE. (2) NWPS CAPITAL AND THE COMPANY HAVE AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING." (3) BECAUSE THE PROCEEDS OF THE SALE OF THE PREFERRED SECURITIES WILL ULTIMATELY BE USED TO PURCHASE SUBORDINATED DEBT SECURITIES, THE COMPANY HAS AGREED, IN THE UNDERWRITING AGREEMENT, TO PAY TO THE UNDERWRITERS AS COMPENSATION FOR THEIR SERVICES $ PER PREFERRED SECURITY (OR $ IN THE AGGREGATE); PROVIDED THAT SUCH COMPENSATION WILL BE $ PER PREFERRED SECURITY SOLD TO CERTAIN INSTITUTIONS. SEE "UNDERWRITING." (4) EXPENSES OF THE OFFERING, WHICH ARE PAYABLE BY THE COMPANY, ARE ESTIMATED TO BE $700,000.
------------------- THE PREFERRED SECURITIES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY WINTHROP, STIMSON, PUTNAM & ROBERTS, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE PREFERRED SECURITIES WILL BE MADE ON OR ABOUT AUGUST , 1995 THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS. ------------------- MORGAN STANLEY & CO. INCORPORATED DEAN WITTER REYNOLDS INC. NATWEST CAPITAL MARKETS LIMITED PAINEWEBBER INCORPORATED PIPER JAFFRAY INC. AUGUST , 1995 (CONTINUED FROM PRIOR PAGE) HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED TO RECEIVE CUMULATIVE CASH DISTRIBUTIONS AT AN ANNUAL RATE OF % OF THE LIQUIDATION AMOUNT OF $25 PER PREFERRED SECURITY, ACCRUING FROM THE DATE OF ORIGINAL ISSUANCE AND PAYABLE QUARTERLY IN ARREARS ON MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31 OF EACH YEAR, COMMENCING , 1995 ("DISTRIBUTIONS"). THE PAYMENT OF DISTRIBUTIONS OUT OF MONEYS HELD BY NWPS CAPITAL AND PAYMENTS ON LIQUIDATION OF NWPS CAPITAL OR THE REDEMPTION OF PREFERRED SECURITIES, AS SET FORTH BELOW, ARE GUARANTEED BY THE COMPANY (THE "GUARANTEE") TO THE EXTENT NWPS CAPITAL HAS FUNDS LEGALLY AVAILABLE THEREFOR AS DESCRIBED UNDER "DESCRIPTION OF THE GUARANTEES" IN THE ACCOMPANYING PROSPECTUS. THE OBLIGATIONS OF THE COMPANY UNDER THE GUARANTEE ARE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL OTHER LIABILITIES OF THE COMPANY AND PARI PASSU WITH THE MOST SENIOR PREFERRED STOCK ISSUED FROM TIME TO TIME BY THE COMPANY. THE OBLIGATIONS OF THE COMPANY UNDER THE SUBORDINATED DEBT SECURITIES ARE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL PRESENT AND FUTURE SENIOR INDEBTEDNESS (AS DEFINED HEREIN) OF THE COMPANY, WHICH AGGREGATED APPROXIMATELY $124 MILLION AT MARCH 31, 1995, AND RANK PARI PASSU WITH THE COMPANY'S OTHER GENERAL UNSECURED CREDITORS. THE DISTRIBUTION RATE AND THE DISTRIBUTION AND OTHER PAYMENT DATES FOR THE PREFERRED SECURITIES WILL CORRESPOND TO THE INTEREST RATE AND INTEREST AND OTHER PAYMENT DATES ON THE SUBORDINATED DEBT SECURITIES, WHICH WILL BE THE SOLE ASSETS OF NWPS CAPITAL. AS A RESULT, IF PRINCIPAL OR INTEREST IS NOT PAID ON THE SUBORDINATED DEBT SECURITIES, NO AMOUNTS WILL BE PAID ON THE PREFERRED SECURITIES. IF THE COMPANY DOES NOT MAKE PRINCIPAL OR INTEREST PAYMENTS ON THE SUBORDINATED DEBT SECURITIES, NWPS CAPITAL WILL NOT HAVE SUFFICIENT FUNDS TO MAKE DISTRIBUTIONS ON THE PREFERRED SECURITIES, IN WHICH EVENT, THE GUARANTEE WILL NOT APPLY TO SUCH DISTRIBUTIONS UNTIL NWPS CAPITAL HAS SUFFICIENT FUNDS LEGALLY AVAILABLE THEREFOR. THE COMPANY HAS THE RIGHT TO DEFER PAYMENTS OF INTEREST ON THE SUBORDINATED DEBT SECURITIES BY EXTENDING THE INTEREST PAYMENT PERIOD ON THE SUBORDINATED DEBT SECURITIES AT ANY TIME FOR UP TO 20 CONSECUTIVE QUARTERS (EACH, AN "EXTENSION PERIOD"). IF INTEREST PAYMENTS ARE SO DEFERRED, DISTRIBUTIONS ON THE PREFERRED SECURITIES WILL ALSO BE DEFERRED. DURING AN EXTENSION PERIOD, DISTRIBUTIONS WILL CONTINUE TO ACCRUE WITH INTEREST THEREON (TO THE EXTENT PERMITTED BY APPLICABLE LAW) AT AN ANNUAL RATE OF % PER ANNUM, COMPOUNDED QUARTERLY. DURING ANY EXTENSION PERIOD, HOLDERS OF PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE DEFERRED INTEREST INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT TO SUCH DEFERRED INTEREST PAYMENTS. THERE COULD BE MULTIPLE EXTENSION PERIODS OF VARYING LENGTHS THROUGHOUT THE TERM OF THE SUBORDINATED DEBT SECURITIES. SEE "DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES -- OPTION TO EXTEND INTEREST PAYMENT PERIOD." IF THE COMPANY EXERCISES THE RIGHT TO EXTEND AN INTEREST PAYMENT PERIOD, THE COMPANY SHALL NOT DURING SUCH EXTENSION PERIOD (A) DECLARE OR PAY DIVIDENDS ON, OR MAKE A DISTRIBUTION WITH RESPECT TO, OR REDEEM, PURCHASE OR ACQUIRE, OR MAKE A LIQUIDATION PAYMENT WITH RESPECT TO, ANY OF ITS CAPITAL STOCK AND (B) MAKE ANY PAYMENT OF INTEREST, PRINCIPAL OR PREMIUM, IF ANY, ON OR REPAY, REPURCHASE OR REDEEM ANY DEBT SECURITIES ISSUED BY THE COMPANY THAT RANK PARI PASSU WITH OR JUNIOR TO THE SUBORDINATED DEBT SECURITIES; PROVIDED, HOWEVER, THAT RESTRICTION (A) ABOVE DOES NOT APPLY TO ANY STOCK DIVIDENDS PAID BY THE COMPANY WHERE THE DIVIDEND STOCK IS THE SAME AS THAT ON WHICH THE DIVIDEND IS BEING PAID. THE COMPANY HAS NO PRESENT INTENTION OF EXERCISING ITS RIGHT TO EXTEND AN INTEREST PAYMENT PERIOD. SEE "RISK FACTORS -- OPTION TO EXTEND INTEREST PAYMENT PERIOD" AND "UNITED STATES FEDERAL INCOME TAXATION -- ORIGINAL ISSUE DISCOUNT." THE SUBORDINATED DEBT SECURITIES ARE REDEEMABLE BY THE COMPANY, IN WHOLE OR IN PART, FROM TIME TO TIME, ON OR AFTER , 2000, OR AT ANY TIME IN CERTAIN CIRCUMSTANCES UPON THE OCCURRENCE OF A TAX EVENT (AS DEFINED HEREIN). IF THE COMPANY REDEEMS SUBORDINATED DEBT SECURITIES, NWPS CAPITAL MUST REDEEM TRUST SECURITIES HAVING AN AGGREGATE LIQUIDATION AMOUNT EQUAL TO THE AGGREGATE PRINCIPAL AMOUNT OF THE SUBORDINATED DEBT SECURITIES SO REDEEMED AT $25 PER SECURITY PLUS ACCRUED AND UNPAID DISTRIBUTIONS THEREON (THE "REDEMPTION PRICE") TO THE DATE FIXED FOR REDEMPTION. SEE "DESCRIPTION OF THE PREFERRED SECURITIES - -- MANDATORY REDEMPTION." THE PREFERRED SECURITIES WILL BE REDEEMED UPON MATURITY OF THE SUBORDINATED DEBT SECURITIES. THE SUBORDINATED DEBT SECURITIES MATURE ON , 2025 BUT THE MATURITY DATE MAY BE EXTENDED ONLY ONCE, FOR UP TO AN ADDITIONAL 19 YEARS AT THE OPTION OF THE COMPANY, PROVIDED CERTAIN CONDITIONS ARE MET. SEE "DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES -- OPTION TO EXTEND MATURITY DATE." IN ADDITION, UPON THE OCCURRENCE OF CERTAIN SPECIAL EVENTS (AS DEFINED HEREIN) ARISING FROM A CHANGE IN LAW OR A CHANGE IN LEGAL INTERPRETATION, UNLESS THE SUBORDINATED DEBT SECURITIES ARE REDEEMED IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, NWPS CAPITAL SHALL BE DISSOLVED, WITH THE RESULT THAT THE SUBORDINATED DEBT SECURITIES WILL BE DISTRIBUTED TO THE HOLDERS OF THE PREFERRED SECURITIES, ON A PRO RATA BASIS, IN LIEU OF ANY CASH DISTRIBUTION. SEE "DESCRIPTION OF THE PREFERRED SECURITIES --SPECIAL EVENT REDEMPTION OR DISTRIBUTION." IN CERTAIN CIRCUMSTANCES, THE COMPANY WILL HAVE THE RIGHT TO REDEEM THE SUBORDINATED DEBT SECURITIES, WHICH WOULD RESULT IN THE REDEMPTION BY NWPS CAPITAL OF TRUST SECURITIES IN THE SAME AMOUNT ON A PRO RATA BASIS. IF THE SUBORDINATED DEBT SECURITIES ARE DISTRIBUTED TO THE HOLDERS OF THE PREFERRED SECURITIES, THE COMPANY WILL USE ITS BEST EFFORTS TO HAVE THE SUBORDINATED DEBT SECURITIES LISTED ON THE NEW YORK STOCK EXCHANGE OR ON SUCH OTHER EXCHANGE AS THE PREFERRED SECURITIES ARE THEN LISTED. SEE "DESCRIPTION OF THE PREFERRED SECURITIES -- TAX EVENT REDEMPTION OR DISTRIBUTION" AND "DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES." IN THE EVENT OF THE INVOLUNTARY OR VOLUNTARY DISSOLUTION, WINDING UP OR TERMINATION OF NWPS CAPITAL, THE HOLDERS OF THE PREFERRED SECURITIES WILL BE ENTITLED TO RECEIVE FOR EACH PREFERRED SECURITY A LIQUIDATION AMOUNT OF $25 PLUS ACCRUED AND UNPAID DISTRIBUTIONS THEREON (INCLUDING INTEREST THEREON) TO THE DATE OF PAYMENT, UNLESS, IN CONNECTION WITH SUCH DISSOLUTION, THE SUBORDINATED DEBT SECURITIES ARE DISTRIBUTED TO THE HOLDERS OF THE PREFERRED SECURITIES. SEE "DESCRIPTION OF THE PREFERRED SECURITIES -- LIQUIDATION DISTRIBUTION UPON DISSOLUTION." S-2 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, NWPS CAPITAL OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. ------------------- TABLE OF CONTENTS
PAGE PROSPECTUS SUPPLEMENT Prospectus Supplement Summary................................................................................... S-4 The Company..................................................................................................... S-4 Summary Financial Information................................................................................... S-6 Risk Factors.................................................................................................... S-7 NWPS Capital Financing I........................................................................................ S-10 Use of Proceeds................................................................................................. S-11 Accounting Treatment............................................................................................ S-11 Description of the Preferred Securities......................................................................... S-11 Description of the Subordinated Debt Securites.................................................................. S-22 Effect of Obligations Under the Subordinated Debt Securities and the Guarantee.................................. S-28 United States Federal Income Taxation........................................................................... S-29 Underwriting.................................................................................................... S-32 Legal Matters................................................................................................... S-33 PROSPECTUS Available Information........................................................................................... 1 Documents Incorporated by Reference............................................................................. 1 The Company..................................................................................................... 2 Pending Acquisition of Synergy Group Incorporated............................................................... 5 Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information.............. 10 The NWPS Trusts................................................................................................. 19 Use of Proceeds................................................................................................. 20 Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends............... 20 Description of the Mortgage Bonds............................................................................... 20 Description of the Subordinated Debt Securities................................................................. 32 Description of the Preferred Securities......................................................................... 40 Description of the Guarantees................................................................................... 41 Description of the Common Stock................................................................................. 43 Legal Opinions.................................................................................................. 45 Experts......................................................................................................... 46 Plan of Distribution............................................................................................ 46
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-3 PROSPECTUS SUPPLEMENT SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE CONSIDERED IN CONJUNCTION WITH, THE INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE. THE COMPANY The principal business of Northwestern Public Service Company (the "Company") is energy distribution. The Company is engaged in providing regulated electric and natural gas service in South Dakota and natural gas service in Nebraska. The Company serves approximately 54,900 electric customers and 75,000 gas customers representing a diverse mix of residential, commercial and industrial customers. In addition, the Company has investments in nonutility businesses and has recently contracted to acquire Synergy Group Incorporated ("Synergy"), a major propane distribution company. See "The Company" and "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. The Company's electric business generates, transmits and distributes electricity to over 100 communities in eastern South Dakota. In 1994, 46% of the Company's total operating revenues were from the sale of electric energy. At December 31, 1994, the aggregate capacity of all Company-owned electric generating units was 309,000 kilowatts ("kw"), consisting of 202,000 kw from jointly-owned baseload plants and 107,000 kw from internal combustion turbine and diesel units used primarily for peaking purposes. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. The Company's natural gas business purchases, transports and distributes natural gas to over 50 communities in eastern South Dakota and 4 communities in central Nebraska. In 1994, 40% of the Company's total operating revenues were from the sale of natural gas. The Company purchases gas supply from more than 20 domestic and Canadian suppliers and transports natural gas supply through five pipelines. Gas agreements provide for firm deliverable pipeline capacity of approximately 98,900 million british thermal units ("MMBTU") per day. To supplement firm gas supplies, the Company owns six propane-air plants and has contracts for underground natural gas storage services. Over the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company's business strategy is summarized by three primary objectives: - To enhance the Company's competitive position in its energy distribution businesses; - To expand energy sales and markets with value-added services for customers; and - To provide earnings and dividend growth and increased shareholder value through its energy distribution businesses and investment and acquisition activities. By enhancing the competitive position of its core electric and gas distribution businesses and expanding its energy sales and markets, the Company believes it will position itself to be successful in the increasingly competitive electric and gas distribution businesses anticipated over the next several years. To supplement growth strategies in its electric and natural gas businesses, the Company also plans to seek new investment and acquisition opportunities that have demonstrable growth potential. The primary focus of these investment and acquisition activities is targeted in energy distribution businesses. The Company also plans to pursue opportunities in non-energy businesses that complement its existing operations and provide the capability to enhance shareholder value. In May 1995, the Company contracted to acquire Synergy, a retail propane distributor serving over 200,000 customers from 152 locations in 23 states in the eastern and south central regions of the U.S. See "Pending Acquisition of Synergy Group Incorporated" in the accompanying Prospectus. In S-4 accordance with its strategic plan, the Company believes that the Synergy propane distribution operations are complementary to the Company's electric and natural gas businesses. Propane is the nation's fourth largest energy source after electricity, natural gas and fuel oil. The acquisition price to be paid for Synergy is $137.5 million cash (subject to certain adjustments) and certain securities of the Company's acquisition subsidiary. The Company has entered into an agreement with a third party for the sale of certain Synergy properties which will reduce the cash portion of the acquisition price to approximately $100 million. The Company has executed a management agreement with Empire Gas Corporation ("Empire Gas") for the joint management of the properties after the acquisition. Empire Gas is the nation's eleventh largest retail propane distributor. Subsequent to the acquisition and expected third party sale, the Company's total assets will consist of approximately 65% electric and gas distribution, 25% propane distribution and 10% marketable securities and other diversified investments. The Company's principal executive offices are located at 33 Third Street S.E., Huron, South Dakota 57350. The Company's telephone number is (605) 352-8411. S-5 SUMMARY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) The financial information presented below should be read in conjunction with the Company's historical financial statements and the notes thereto which are incorporated by reference herein and the pro forma financial statements and the notes thereto included in the accompanying Prospectus. The pro forma financial information contained in the right column, reflecting the pending acquisition of Synergy and related matters, was prepared solely to comply with Regulation S-X of the Securities and Exchange Commission. The pro forma financial information is based on the assumptions and adjustments set forth under "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" in the accompanying Prospectus.
PRO FORMA (1) ------------------------- THREE THREE YEAR ENDED DECEMBER 31, MONTHS YEAR ENDED MONTHS ------------------------------------- ENDED MARCH DECEMBER 31, ENDED MARCH 1992 1993 1994 31, 1995 1994 31, 1995(2) ----------- ----------- ----------- ----------- ------------ ----------- INCOME STATEMENT DATA: Revenues.......................... $ 119,197 $ 153,257 $ 157,266 $ 50,754 $ 256,634 $ 82,612 Operating income.................. 24,809 27,246 30,368 12,882 37,985 20,088 Net income........................ 13,721 15,191 15,440 7,103 17,463 13,840 Net income available for common stock............................ 13,578 15,070 15,320 7,073 15,300 13,299 Earnings per share................ 1.77 1.96 2.00 0.92 1.74 1.51 Dividends paid per common share... 1.59 1.63 1.67 0.425 1.67 0.425 Weighted average shares outstanding...................... 7,677 7,677 7,677 7,677 8,805 8,805
AS OF MARCH 31, 1995 -------------------------------------------------- ACTUAL PRO FORMA ----------- ----------- BALANCE SHEET DATA: Assets.......................................................... $ 363,432 $ 487,435 ----------- ----------- ----------- ----------- Capitalization Summary Long-term debt (including current maturities)................. $ 129,888 51.6% $ 181,592 50.7% Company-Obligated Mandatory Redeemable Preferred Securities of Subsidiary Trust (3)......................................... -- -- 24,212 6.8 Cumulative preferred stock (including portion to be redeemed within one year)............................................. 2,640 1.1 2,640 0.7 Common Stock Equity Common stock.................................................. 26,870 -- 31,179 -- Additional paid-in capital.................................... 29,923 -- 56,398 -- Retained earnings............................................. 59,183 -- 59,183 -- Unrealized gain on investments, net........................... 3,181 -- 3,181 -- ----------- ----------- $ 119,157 47.3 $ 149,941 41.8 ----------- ----- ----------- ----- Total....................................................... $ 251,685 100.0% $ 358,385 100.0% ----------- ----- ----------- ----- ----------- ----- ----------- ----- - ------------------------ (1) The pro forma financial information does not purport to present the financial position or results of operations of the Company had the acquisition of Synergy actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations. (2) The results of operations of Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations. (3) As described herein, all of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at the rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of the Preferred Securities to be used to fund the acquisition of Synergy.
S-6 The following information concerning the Company, NWPS Capital, the Preferred Securities, the Guarantee and the Subordinated Debt Securities supplements, and should be read in conjunction with, the information contained in the accompanying Prospectus. Capitalized terms used in this Prospectus Supplement have the same meanings as in the accompanying Prospectus. RISK FACTORS Prospective purchasers of Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters. RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED DEBT SECURITIES The Company's obligations under the Guarantee are subordinate and junior in right of payment to all other liabilities of the Company and pari passu with the most senior preferred stock issued from time to time by the Company. The obligations of the Company under the Subordinated Debt Securities are subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company and pari passu with obligations to or rights of the Company's other general unsecured creditors. As of March 31, 1995, Senior Indebtedness aggregated approximately $124 million. There are no terms in the Preferred Securities, the Subordinated Debt Securities or the Guarantee that limit the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Subordinated Debt Securities and the Guarantee. See "Description of the Guarantees -- Status of the Guarantees" and "Description of the Subordinated Debt Securities -- Subordination" in the accompanying Prospectus, and "Description of the Subordinated Debt Securities -- Subordination" herein. RIGHTS UNDER THE GUARANTEE The Guarantee will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Wilmington Trust Company will act as indenture trustee under the Guarantee for the purposes of compliance with the Trust Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Preferred Securities. The Guarantee guarantees to the holders of the Preferred Securities the payment of (i) any accrued and unpaid distributions that are required to be paid on the Preferred Securities, to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, (ii) the Redemption Price, including all accrued and unpaid distributions with respect to Preferred Securities called for redemption by NWPS Capital, to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of NWPS Capital (other than in connection with the distribution of Subordinated Debt Securities to the holders of Preferred Securities or redemption of all the Preferred Securities upon the maturity or redemption of the Subordinated Debt Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on the Preferred Securities to the date of the payment to the extent NWPS Capital has funds legally available therefor and (b) the amount of assets of NWPS Capital remaining available for distribution to holders of the Preferred Securities in liquidation of NWPS Capital. The holders of a majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred Securities may, after such holder's written request to the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding directly against the Company to enforce the Guarantee Trustee's rights under the Guarantee without first instituting a legal proceeding against NWPS Capital, the Guarantee Trustee or any other person or entity. If the Company were to default on its obligation to pay amounts payable on the Subordinated Debt Securities, NWPS Capital would lack available funds for the payment of distributions or amounts payable on S-7 redemption of the Preferred Securities or otherwise, and, in such event, holders of the Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. Instead, holders of the Preferred Securities would be required to rely on the enforcement by the Property Trustee of its rights as registered holder of the Subordinated Debt Securities against the Company pursuant to the terms of the Subordinated Debt Securities and may also vote to appoint a Special Regular Trustee who shall have the same rights, powers and privileges as the Regular Trustees. See "Description of the Guarantees" and "Description of the Subordinated Debt Securities" in the accompanying Prospectus. The Declaration provides that each holder of Preferred Securities, by acceptance thereof, agrees to the provisions of the Guarantee, including the subordination provisions thereof, and the Subordinated Debt Securities Indenture. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES If (i) NWPS Capital fails to pay distributions in full on the Preferred Securities for six consecutive quarterly distribution periods or (ii) a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of Preferred Securities would be entitled, by majority vote, to appoint a Special Regular Trustee, who shall have the same rights, powers and privileges as the other Regular Trustees. In addition, the holders of a majority in aggregate liquidation amount of the Preferred Securities will have the right to: (i) direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration; (ii) waive any past default; or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debt Securities shall be due and payable; provided, however, that where a consent under the Indenture requires the consent of all holders of the Subordinated Debt Securities affected thereby, the Property Trustee may only give such consent at the direction of all holders of the Preferred Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities, to the fullest extent permitted by law, a holder of Preferred Securities may, after such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against the Company to enforce the Property Trustee's rights under the Subordinated Debt Securities without first instituting any legal proceeding against the Property Trustee or any other person or entity. If the Company exercises its right to defer payments of interest on the Subordinated Debt Securities (See "Option to Extend Interest Payment Period" below), appointment of a Special Regular Trustee would be the only right of the holders of the Preferred Securities if NWPS Capital fails to pay distributions in full on the Preferred Securities for six consecutive quarters until expiration of the extended interest payment period (20 consecutive quarters). OPTION TO EXTEND INTEREST PAYMENT PERIOD The Company has the right under the Indenture (as such term is defined in "Description of Subordinated Debt Securities" herein), to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period at any time, and from time to time, on the Subordinated Debt Securities. As a consequence of such an extension, quarterly distributions on the Preferred Securities would be deferred (but despite such deferral would continue to accrue with interest thereon compounded quarterly) by NWPS Capital during any such extended interest payment period. Such right to extend the interest payment period for the Subordinated Debt Securities is limited to a period not exceeding 20 consecutive quarters (each, an "Extension Period"). In the event that the Company exercises this right to defer interest payments, then during such Extension Period (a) the Company shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Subordinated Debt Securities; provided, however, that restriction (a) above does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that, such Extension Period, together with all S-8 such previous and further extensions thereof, may not exceed 20 consecutive quarters. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. See "Description of the Preferred Securities -- Distributions" and "Description of the Subordinated Debt Securities -- Option to Extend Interest Payment Period." Should the Company exercise its right to defer payments of interest by extending the interest payment period, each holder of Preferred Securities will continue to accrue interest income (as original issue discount) in respect of the deferred interest allocable to its Preferred Securities for United States federal income tax purposes, which will be allocated but not distributed to holders of record of Preferred Securities. As a result, each such holder of Preferred Securities will recognize income for United States federal income tax purposes in advance of the receipt of cash and will not receive the cash from NWPS Capital related to such income if such holder disposes of its Preferred Securities prior to the record date for the date on which distributions of such amounts are made. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debt Securities. However, should the Company determine to exercise such right in the future, the market price of the Preferred Securities is likely to be affected. A holder that disposes of its Preferred Securities during an Extension Period, therefore, may not receive the same return on its investment as a holder that continues to hold its Preferred Securities. In addition, as a result of the Company's right to defer interest payments, the market price of the Preferred Securities (which represent an undivided beneficial interest in the Subordinated Debt Securities) may be more volatile than other securities on which original issue discount accrues but with respect to which there is no right to defer interest payments. See "United States Federal Income Taxation -- Original Issue Discount." SPECIAL EVENT REDEMPTION OR DISTRIBUTION Upon the occurrence of a Special Event (as defined herein), NWPS Capital shall be dissolved, except in the limited circumstance described below, with the result that the Subordinated Debt Securities will be distributed to the holders of the Trust Securities in connection with the liquidation of NWPS Capital. In certain circumstances, the Company shall have the right to redeem the Subordinated Debt Securities, in whole or in part, in lieu of a distribution of the Subordinated Debt Securities by NWPS Capital, in which event NWPS Capital will redeem the Trust Securities on a pro rata basis to the same extent as the Subordinated Debt Securities are redeemed by the Company. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." Under current United States federal income tax law, a distribution of Subordinated Debt Securities upon the dissolution of NWPS Capital would not be a taxable event to holders of the Preferred Securities. Upon occurrence of a Tax Event (as defined herein), however, a dissolution of NWPS Capital in which holders of the Preferred Securities receive cash would be a taxable event to such holders. See "United States Federal Income Taxation -- Receipt of Subordinated Debt Securities or Cash Upon Liquidation of NWPS Capital." There can be no assurance as to the market prices for the Preferred Securities or the Subordinated Debt Securities that may be distributed in exchange for Preferred Securities if a dissolution or liquidation of NWPS Capital were to occur. Accordingly, the Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Subordinated Debt Securities that a holder of Preferred Securities may receive on dissolution and liquidation of NWPS Capital, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Subordinated Debt Securities upon the occurrence of a Special Event, prospective purchasers of Preferred Securities are also making an investment decision with regard to the Subordinated Debt Securities and should carefully review all the information regarding the Subordinated Debt Securities contained herein and in the accompanying Prospectus. See "Description of the Preferred Securities -- Special Event Redemption or Distribution" and "Description of the Subordinated Debt Securities -- General." S-9 LIMITED VOTING RIGHTS Holders of Preferred Securities will have limited voting rights and, except for the rights of holders of Preferred Securities to appoint a Special Regular Trustee upon the occurrence of certain events described herein, will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, NWPS Trustees, which voting rights are vested exclusively in the holder of the Common Securities. TRADING PRICE The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debt Securities. A holder who disposes of his Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Subordinated Debt Securities through the date of disposition in income as ordinary income (i.e., OID), and to add such amount to his adjusted tax basis in his pro rata share of the underlying Subordinated Debt Securities deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See "United States Federal Income Taxation -- Original Issue Discount" and "Sales of Preferred Securities." NWPS CAPITAL FINANCING I NWPS Capital is a statutory business trust formed under Delaware law pursuant to (i) a declaration of trust, dated as of June 19, 1995, executed by the Company, as sponsor (the "Sponsor"), and the trustees of NWPS Capital (the "NWPS Trustees") and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on June 19, 1995. The declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. The Declaration will be qualified as an indenture under the Trust Indenture Act. Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities. See "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company." The Company will directly or indirectly acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of NWPS Capital. NWPS Capital exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Subordinated Debt Securities and (iii) engaging in only those other activities necessary or incidental thereto. Pursuant to the Declaration, the number of NWPS Trustees will initially be three. Two of the NWPS Trustees (the "Regular Trustees") will be persons who are employees or officers of or who are affiliated with the Company. The third trustee will be a financial institution that maintains its principal place of business in the State of Delaware and is unaffiliated with the Company, which trustee will serve as property trustee under the Declaration and as indenture trustee for the purposes of the Trust Indenture Act (the "Property Trustee"). Initially, Wilmington Trust Company, a Delaware banking corporation, will be the Property Trustee unless removed or replaced by the holder of the Common Securities. Wilmington Trust Company will also act as indenture trustee under the Guarantee (the "Guarantee Trustee"). See "Description of the Guarantees" in the accompanying Prospectus. In certain circumstances, the holders of a majority in aggregate liquidation amount of the Preferred Securities will be entitled to appoint one Regular Trustee (a "Special Regular Trustee"), who need not be an officer or employee of or otherwise affiliated with the Company. See "Description of the Preferred Securities -- Voting Rights." The Property Trustee will hold title to the Subordinated Debt Securities for the benefit of the holders of the Trust Securities, and the Property Trustee will have the power to exercise all rights, S-10 powers, and privileges under the Indenture (as defined herein) as the holder of the Subordinated Debt Securities. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the Subordinated Debt Securities for the benefit of the holders of the Trust Securities. The Property Trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Preferred Securities. Subject to the right of the holders of the Preferred Securities to appoint a Special Regular Trustee, the Company, as the direct or indirect holder of all the Common Securities, will have the right to appoint, remove or replace any NWPS Trustee and to increase or decrease the number of NWPS Trustees; provided that, (i) the number of NWPS Trustees shall be at least three and (ii) a majority shall be Regular Trustees. The Company will pay all fees and expenses related to NWPS Capital and the offering of the Trust Securities. See "Description of the Subordinated Debt Securities -- Miscellaneous." The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration, the Delaware Business Trust Act (the "Business Trust Act") and the Trust Indenture Act. See "Description of the Preferred Securities." USE OF PROCEEDS The net proceeds from the sale of approximately 1,000,000 Preferred Securities (approximately $24,212,000) will be applied to fund the acquisition of Synergy, including certain transaction expenses. The additional net proceeds from the sale of the Preferred Securities will be applied to repay short-term debt of the Company. See "Use of Proceeds" in the accompanying Prospectus. ACCOUNTING TREATMENT The financial statements of NWPS Capital will be reflected in the Company's consolidated financial statements with the Preferred Securities shown as Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust. All of the assets of NWPS Capital will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at a rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. DESCRIPTION OF THE PREFERRED SECURITIES The Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, the Wilmington Trust Company, will act as the indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Preferred Securities will include those stated in the Declaration, the Business Trust Act and those made part of the Declaration by the Trust Indenture Act. The following summary of the principal terms and provisions of the Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus Supplement is a part, the Business Trust Act and the Trust Indenture Act. GENERAL The Declaration authorizes the Regular Trustees to issue on behalf of NWPS Capital the Trust Securities, which represent undivided beneficial interests in the assets of NWPS Capital. All of the Common Securities will be owned, directly or indirectly, by the Company. The Common Securities rank pari passu, and payments will be made thereon on a pro rata basis, with the Preferred Securities, except that upon the occurrence of a Declaration Event of Default, the rights of the holders of the Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Declaration does not permit the issuance by NWPS Capital of any securities other than the Trust Securities or the incurrence of any indebtedness by NWPS Capital. Pursuant to the Declaration, the S-11 Property Trustee will own the Subordinated Debt Securities purchased by NWPS Capital for the benefit of the holders of the Trust Securities. The payment of distributions out of money held by NWPS Capital, and payments upon redemption of the Preferred Securities or liquidation of NWPS Capital, are guaranteed by the Company to the extent described under "Description of the Guarantees" in the accompanying Prospectus. The Guarantee will be held by Wilmington Trust Company, the Guarantee Trustee, for the benefit of the holders of the Preferred Securities. The Guarantee does not cover payment of distributions when NWPS Capital does not have sufficient available funds to pay such distributions. In such event, the remedy of a holder of Preferred Securities is to vote to appoint a Special Regular Trustee and to direct the Property Trustee to enforce the Property Trustee's rights under the Subordinated Debt Securities. See "Description of the Preferred Securities -- Voting Rights." DISTRIBUTIONS Distributions on the Preferred Securities will be fixed at a rate per annum of % of the stated liquidation amount of $25 per Preferred Security. Distributions in arrears for more than one quarter will bear interest thereon at the rate per annum of % thereof, compounded quarterly. The term "distribution" as used herein includes any such interest payable unless otherwise stated. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Distributions on the Preferred Securities will be cumulative, will accrue from , 1995, the date of initial issuance thereof, and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing , 1995, when, as and if available and determined to be so payable by the Property Trustee, except as otherwise described below. The Company has the right under the Indenture to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period from time to time on the Subordinated Debt Securities, which right, if exercised, would defer quarterly distributions on the Preferred Securities (but such distributions would continue to accrue with interest since interest would continue to accrue on the Subordinated Debt Securities) during any such Extension Period. Such right to extend the interest payment period for the Subordinated Debt Securities is limited to a period not exceeding 20 consecutive quarters. In the event that the Company exercises this right, then during such Extension Period (a) the Company shall not declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Subordinated Debt Securities; provided, however, that, the foregoing restriction (a) does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that, such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the maturity of the Subordinated Debt Securities. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may select a new Extension Period, subject to the above requirements. See "Description of the Subordinated Debt Securities -- Interest" and "-- Option to Extend Interest Payment Period." If distributions are deferred, the deferred distributions and accrued interest thereon shall be paid to holders of record of the Preferred Securities as they appear on the books and records of NWPS Capital on the record date next following the termination of such deferral period. Distributions on the Preferred Securities must be paid on the dates payable to the extent that NWPS Capital has funds legally available for the payment of such distributions in the Property Account. NWPS Capital's funds available for distribution to the holders of the Preferred Securities will be limited to payments received from the Company on the Subordinated Debt Securities. See S-12 "Description of the Subordinated Debt Securities." The payment of distributions out of moneys held by NWPS Capital is guaranteed by the Company to the extent set forth under "Description of the Guarantees" in the accompanying Prospectus. Distributions on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of NWPS Capital on the relevant record dates, which, as long as the Preferred Securities remain in book-entry only form, will be one Business Day prior to the relevant payment dates. Such distributions will be paid through the Property Trustee who will hold amounts received in respect of the Subordinated Debt Securities in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "Book-Entry Only Issuance -- The Depository Trust Company" below. In the event that the Preferred Securities do not continue to remain in book-entry only form, the Regular Trustees shall have the right to select relevant record dates, which shall be more than one Business Day prior to the relevant payment dates. In the event that any date on which distributions are to be made on the Preferred Securities is not a Business Day, then payment of the distributions payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date. A "Business Day" shall mean any day other than Saturday, Sunday or any other day on which banking institutions in the City of New York (in the state of New York) are permitted or required by any applicable law to close. MANDATORY REDEMPTION The Subordinated Debt Securities will mature on , 2025, unless the maturity date is extended at the option of the Company (provided certain conditions are met), and may be redeemed, in whole or in part, at any time on or after , 2000, or at any time in certain circumstances upon the occurrence of a Tax Event. Upon the repayment of the Subordinated Debt Securities, whether at maturity or upon redemption, the proceeds from such repayment or payment shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debt Securities so repaid or redeemed at the Redemption Price; provided that, holders of Trust Securities shall be given not less than 30 nor more than 60 days notice of such redemption. See "Description of the Subordinated Debt Securities -- Optional Redemption." In the event that fewer than all of the outstanding Preferred Securities are to be redeemed, the Preferred Securities will be redeemed pro rata as described under "Book-Entry Only Issuance -- the Depository Trust Company" below. SPECIAL EVENT REDEMPTION OR DISTRIBUTION "Tax Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) NWPS Capital is, or will be within 90 days after the date thereof, subject to United States federal income tax with respect to income accrued or received on the Subordinated Debt Securities, (ii) interest payable to NWPS Capital on the Subordinated Debt Securities is not, or will S-13 not be within 90 days after the date thereof, in whole or in part, deductible by the Company for United States federal income tax purposes or (iii) NWPS Capital is or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. If, at any time, a Tax Event or an Investment Company Event (each, a "Special Event") shall occur and be continuing, NWPS Capital shall, except in the limited circumstances described below, be dissolved with the result that, after satisfaction of liabilities to creditors of the Trust, Subordinated Debt Securities with an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Trust Securities, would be distributed to the holders of the Trust Securities in liquidation of such holders' interests in NWPS Capital on a pro rata basis within 90 days following the occurrence of such Special Event; provided, however, that in the case of the occurrence of a Tax Event, such dissolution and distribution shall be conditioned on the Regular Trustees' receipt of an opinion of nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the holders of the Trust Securities will not recognize any gain or loss for United States federal income tax purposes as a result of such dissolution and distribution of Subordinated Debt Securities; and provided, further, that, if at the time there is available to NWPS Capital the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election or pursuing some other reasonable measure that will have no adverse effect on NWPS Capital, the Company or the holders of the Trust Securities, NWPS Capital will pursue such measure in lieu of dissolution. Furthermore, if in the case of the occurrence of a Tax Event, after receipt of a Dissolution Tax Opinion by the Regular Trustees (i) the Company has received an opinion (a "Redemption Tax Opinion") of nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Company would be precluded from deducting the interest on the Subordinated Debt Securities for United States federal income tax purposes even if the Subordinated Debt Securities were distributed to the holders of Trust Securities in liquidation of such holders' interests in NWPS Capital as described above, or (ii) the Regular Trustees shall have been informed by such tax counsel that it cannot deliver a No Recognition Opinion to NWPS Capital, the Company shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Subordinated Debt Securities, in whole or in part, for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Trust Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debt Securities so redeemed shall be redeemed by NWPS Capital at the Redemption Price on a pro rata basis; provided, however, that, if at the time there is available to the Company or NWPS Capital the opportunity to eliminate, within such 90-day period, the Tax Event by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure which has no adverse effect on NWPS Capital, the Company or the holders of the Trust Securities, the Company or NWPS Capital will pursue such measure in lieu of redemption. If the Subordinated Debt Securities are distributed to the holders of the Preferred Securities, the Company will use its best efforts to cause the Subordinated Debt Securities to be listed on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. S-14 After the date for any distribution of Subordinated Debt Securities upon dissolution of NWPS Capital, (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) the Depositary or its nominee, as the record holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Subordinated Debt Securities to be delivered upon such distribution, and (iii) any certificates representing Preferred Securities not held by the Depositary or its nominee will be deemed to represent Subordinated Debt Securities having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on such Preferred Securities until such certificates are presented to the Company or its agent for transfer or reissuance. There can be no assurance as to the market prices for either the Preferred Securities or the Subordinated Debt Securities that may be distributed in exchange for the Preferred Securities if a dissolution and liquidation of NWPS Capital were to occur. Accordingly, the Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Subordinated Debt Securities that an investor may receive if a dissolution and liquidation of NWPS Capital were to occur, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. REDEMPTION PROCEDURES NWPS Capital may not redeem fewer than all of the outstanding Preferred Securities unless all accrued and unpaid distributions have been paid on all Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. If NWPS Capital gives a notice of redemption in respect of Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York City time, on the redemption date, and if the Company has paid to the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Subordinated Debt Securities, then NWPS Capital will irrevocably deposit with the Depositary funds sufficient to pay the applicable Redemption Price and will give the Depositary irrevocable instructions and authority to pay the Redemption Price to the holders of the Preferred Securities. See "Book-Entry Only Issuance -- The Depository Trust Company." If notice of redemption shall have been given and funds deposited as required, then, immediately prior to the close of business on the date of such deposit, distributions will cease to accrue and all rights of holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price but without interest on such Redemption Price. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by NWPS Capital, or by the Company pursuant to the Guarantee, distributions on such Preferred Securities will continue to accrue at the then applicable rate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. In the event that fewer than all of the outstanding Preferred Securities are to be redeemed, the Preferred Securities will be redeemed pro rata as described below under "Book-Entry Only Issuance -- The Depository Trust Company." Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time, and from time to time, purchase outstanding Preferred Securities by tender, in the open market or by private agreement. S-15 LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of NWPS Capital (each a "Liquidation"), the then holders of the Preferred Securities will be entitled to receive out of the assets of NWPS Capital, after satisfaction of liabilities to creditors of the Trust, distributions in an amount equal to the aggregate of the stated liquidation amount of $25 per Preferred Security plus accrued and unpaid distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such Liquidation, Subordinated Debt Securities in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Preferred Securities have been distributed on a pro rata basis to the holders of the Preferred Securities in exchange for such Securities. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because NWPS Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by NWPS Capital on the Preferred Securities shall be paid on a pro rata basis. The holders of the Common Securities will be entitled to receive distributions upon any such dissolution pro rata with the holders of the Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Preferred Securities shall have a preference over the Common Securities with regard to such distributions. Pursuant to the Declaration, NWPS Capital shall terminate (i) on , 2050, the expiration of the term of NWPS Capital, (ii) upon the bankruptcy of the Company or the holder of the Common Securities, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to the holder of the Common Securities or the Company, the filing of a certificate of cancellation with respect to NWPS Capital, or the revocation of the charter of the holder of the Common Securities or the Company and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) upon the distribution of Subordinated Debt Securities upon the occurrence of a Special Event, (v) upon the entry of a decree of a judicial dissolution of the holder of the Common Securities, the Company or NWPS Capital, or (vi) upon the redemption of all the Trust Securities. DECLARATION EVENTS OF DEFAULT An event of default under the Indenture (an "Indenture Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"), provided that, pursuant to the Declaration, the holder of the Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Common Securities until all Declaration Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the Preferred Securities have been so cured, waived, or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Preferred Securities and only the holders of the Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration, and therefore the Indenture. Upon the occurrence of a Declaration Event of Default, the Property Trustee as the sole holder of the Subordinated Debt Securities will have the right under the Indenture to declare the principal of and interest on the Subordinated Debt Securities to be immediately due and payable. The Company and NWPS Capital are each required to file annually with the Property Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. VOTING RIGHTS Except as described herein, under the Business Trust Act, the Trust Indenture Act and under "Description of the Guarantees -- Amendments and Assignment" in the accompanying Prospectus, and as otherwise required by law and the Declaration, the holders of the Preferred Securities will have no voting rights. S-16 If (i) NWPS Capital fails to pay distributions in full on the Preferred Securities for six (6) consecutive quarterly distribution periods or (ii) a Declaration Event of Default occurs and is continuing (each an "Appointment Event"), then the holders of the Preferred Securities, acting as a single class, will be entitled by a vote of a majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. If the Company exercises its right to defer payments of interest on the Subordinated Debt Securities (See "Option to Extend Interest Payment Period" below), appointment of a Special Regular Trustee would be the only right of the holders of the Preferred Securities if NWPS Capital fails to pay distributions in full on the Preferred Securities for six consecutive quarters until expiration of the extended interest payment period (20 consecutive quarters). For purposes of determining whether NWPS Capital has failed to pay distributions in full for six (6) consecutive quarterly distribution periods, distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative distributions have been or contemporaneously are paid with respect to all quarterly distribution periods terminating on or prior to the date of payment of such cumulative distributions. Any holder of Preferred Securities (other than the Company or any of its affiliates) shall be entitled to nominate any person to be appointed as Special Regular Trustee. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees shall convene a meeting of the holders of Preferred Securities for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the holders of not less than 10% of the aggregate stated liquidation amount of the Preferred Securities will be entitled to convene such meeting. The provisions of the Declaration relating to the convening and conduct of the meetings of the holders will apply with respect to any such meeting. Any Special Regular Trustee so appointed shall cease to be a Special Regular Trustee if the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Notwithstanding the appointment of any such Special Regular Trustee, the Company shall retain all rights under the Indenture, including the right to defer payments of interest by extending the interest payment period as provided under "Description of the Subordinated Debt Securities -- Option to Extend Interest Payment Period." If such an extension occurs, there will be no Indenture Event of Default and, consequently, no Declaration Event of Default for failure to make any scheduled interest payment during the Extension Period on the date originally scheduled. Subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in the last sentence of this paragraph, the holders of a majority in aggregate liquidation amount of the Preferred Securities have the right to (i) direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration including the right to direct the Property Trustee, as holder of the Subordinated Debt Securities, to exercise the remedies available under the Indenture with respect to the Subordinated Debt Securities, (ii) waive any past Indenture Event of Default that is waivable under Section 513 of the Base Indenture (as defined herein), or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debt Securities shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all holders of the Subordinated Debt Securities, no such consent shall be given by the Property Trustee without the prior direction of all holders of the Preferred Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities, to the fullest extent permitted by law, a record holder of Preferred Securities may, after such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against the Company to enforce the Property Trustee's rights under the Subordinated Debt Securities without first instituting any legal proceeding against the Property Trustee or any other person or entity. The Property Trustee shall notify all holders of the Preferred Securities of any notice of default received from the Indenture Trustee with respect to the Subordinated Debt Securities. Such notice shall state that such Indenture Event of Default also constitutes a Declaration Event of Default. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Property Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) S-17 above unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, NWPS Capital will not fail to be classified as a grantor trust for United States federal income tax purposes. In the event the consent of the Property Trustee, as the holder of the Subordinated Debt Securities, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Subordinated Debt Securities, the Property Trustee shall request the direction of the holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the Trust Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of all holders of the Subordinated Debt Securities, the Property Trustee may only give such consent at the direction of all holders of the Trust Securities. The Property Trustee shall be under no obligation to take any such action in accordance with the directions of the holders of the Trust Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax NWPS Capital will not be classified as other than a grantor trust. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Any required approval or direction of holders of Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Preferred Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Preferred Securities will be required for NWPS Capital to redeem and cancel Preferred Securities or distribute Subordinated Debt Securities in accordance with the Declaration. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned at such time by the Company or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Company, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not outstanding. The procedures by which holders of Preferred Securities may exercise their voting rights are described below. See "-- Book-Entry Only Issuance -- The Depository Trust Company" below. Except in the limited circumstances described above, in connection with the appointment of a Special Regular Trustee, holders of the Preferred Securities will have no rights to appoint or remove the NWPS Trustees, who may be appointed, removed or replaced solely by the Company as the indirect or direct holder of all of the Common Securities. MODIFICATION OF THE DECLARATION The Declaration may be modified and amended if approved by a majority of the Regular Trustees (and in certain circumstances the Property Trustee), provided that, if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of NWPS Capital other than pursuant to the terms of the Declaration, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least 66 2/3% in S-18 liquidation amount of the Trust Securities affected thereby; provided that, the rights of holders of Preferred Securities to appoint a Special Regular Trustee shall not be amended without the consent of each holder of Preferred Securities; provided further that, if any amendment or proposal referred to in clause (i) above would materially adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause NWPS Capital to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) affect the powers, rights, duties, obligations or immunities of the Property Trustee or the Delaware Trustee (unless such amendment is consented to by the Property Trustee or the Delaware Trustee, as the case may be), or (iii) cause NWPS Capital to be deemed an "investment company" which is required to be registered under the 1940 Act. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS NWPS Capital may not consolidate, amalgamate, merge or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety, to any corporation or other body, except as described below. NWPS Capital may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the Trust Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State, provided that (i) such successor entity either (x) expressly assumes all of the obligations of NWPS Capital under the Trust Securities or (y) substitutes for the Preferred Securities other securities (the "Successor Securities"), so long as the Successor Securities rank the same as the Trust Securities rank with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Subordinated Debt Securities, (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Preferred Securities are then listed or quoted, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities or any Successor Securities to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities or any Successor Securities in any material respect under the documents governing the Trust Securities or the Successor Securities (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose substantially identical to that of NWPS Capital, (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of a nationally recognized independent counsel to NWPS Capital experienced in such matters to the effect that, (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities or any Successor Securities in any material respect under the documents governing the Trust Securities or the Successor Securities (other than with respect to any dilution of the holders' interest in the new entity), and (B) following such merger, consolidation, amalgamation or replacement, neither NWPS Capital nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) the Company guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and the Common Securities Guarantee. Notwithstanding the foregoing, NWPS Capital shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger or replacement would cause NWPS Capital or the Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. S-19 There are no provisions which afford the holders of the Preferred Securities protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company. There are also no provisions which require the repurchase of the Preferred Securities upon a change in control of the Company. BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depositary for the Preferred Securities. The Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Preferred Securities certificates, representing the total aggregate number of Preferred Securities, will be issued and will be deposited with DTC or a custodian thereof. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global Preferred Securities as represented by a global certificate. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. To facilitate subsequent transfers, all the Preferred Securities deposited by Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Preferred Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. S-20 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Preferred Securities are being redeemed, DTC will reduce the amount of the interest of each Direct Participant in such Preferred Securities in accordance with its procedures. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to NWPS Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). The Company and NWPS Capital believe that the arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in NWPS Capital. Distribution payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name," and such payments will be the responsibility of such Participant and not of DTC, NWPS Capital or the Company, subject to any statutory or regulatory requirements to the contrary that may be in effect from time to time. Payment of distributions to DTC is the responsibility of NWPS Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. Except as provided herein, a Beneficial Owner in a global Preferred Security certificate will not be entitled to receive physical delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Preferred Securities. DTC may discontinue providing its services as securities depositary with respect to the Preferred Securities at any time by giving reasonable notice to NWPS Capital. Under such circumstances, in the event that a successor securities depositary is not obtained, Preferred Securities certificates are required to be printed and delivered. Additionally, the Regular Trustees (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depositary) with respect to the Preferred Securities. In that event, certificates for the Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company and NWPS Capital believe to be reliable, but neither the Company nor NWPS Capital takes responsibility for the accuracy thereof. INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee, prior to the occurrence of a default with respect to the Trust Securities, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be S-21 incurred thereby. The holders of Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Property Trustee to take any action following a Declaration Event of Default. PAYING AGENT In the event that the Preferred Securities do not remain in book-entry only form, the following provisions would apply: The Property Trustee will act as paying agent, and may designate an additional or substitute paying agent at any time. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of NWPS Capital, but upon payment (with the giving of such indemnity as NWPS Capital or the Company may require) in respect of any tax or other government charges that may be imposed in relation to it. NWPS Capital will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. GOVERNING LAW The Declaration and the Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. MISCELLANEOUS The Regular Trustees are authorized and directed to operate NWPS Capital in such a way so that NWPS Capital will not be (i) required to register as an "investment company" under the 1940 Act or (ii) characterized as other than a grantor trust for United States federal income tax purposes. The Company is authorized and directed to conduct its affairs so that the Subordinated Debt Securities will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Company and the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of NWPS Capital or the certificate of incorporation of the Company, that each of the Company and the Regular Trustees determines in its discretion to be necessary or desirable to achieve such end, as long as such action does not adversely affect the interests of the holders of the Preferred Securities or vary the terms thereof. Holders of the Preferred Securities have no preemptive rights. DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES Set forth below is a description of the specific terms of the Subordinated Debt Securities in which NWPS Capital will invest the proceeds from the issuance and sale of the Trust Securities. This description supplements the description of the general terms and provisions of the Subordinated Debt Securities set forth in the accompanying Prospectus under the caption "Description of the Subordinated Debt Securities." The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the description in the accompanying Prospectus and the Subordinated Debt Securities Indenture, dated as of , 1995 (the "Base Indenture") between the Company and The Chase Manhattan Bank (N.A.), as Trustee (the "Indenture Trustee"), as supplemented by a First Supplemental Indenture, dated as of , 1995 (the Base Indenture, as so supplemented, is hereinafter referred to as the "Indenture"), the forms of which are filed as Exhibits to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. Certain capitalized terms used herein are defined in the Indenture. Under certain circumstances involving the dissolution of NWPS Capital following the occurrence of a Special Event, Subordinated Debt Securities may be distributed to the holders of the Trust Securities in liquidation of NWPS Capital. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." S-22 If the Subordinated Debt Securities are distributed to the holders of the Preferred Securities, the Company will use its best efforts to have the Subordinated Debt Securities listed on the New York Stock Exchange or on such other national securities exchange or similar organization on which the Preferred Securities are then listed or quoted. GENERAL The Subordinated Debt Securities will be issued as unsecured debt under the Indenture. The Subordinated Debt Securities will be limited in aggregate principal amount to approximately $31 million, such amount being the sum of the aggregate stated liquidation amount of the Preferred Securities and the capital contributed by the Company in exchange for the Common Securities (the "Company Payment"). The Subordinated Debt Securities are not subject to a sinking fund provision. The entire principal amount of the Subordinated Debt Securities will mature and become due and payable, together with any accrued and unpaid interest thereon including Compound Interest (as hereinafter defined) and Additional Interest (as hereinafter defined), if any, on , 2025 subject to the election of the Company to extend the scheduled maturity date of the Subordinated Debt Securities to a date not later than , 2044 which election is subject to the Company's satisfying certain conditions. See " -- Option to Extend Maturity." If Subordinated Debt Securities are distributed to holders of Preferred Securities in liquidation of such holders' interests in NWPS Capital, such Subordinated Debt Securities will initially be issued as a Global Security. As described herein, under certain limited circumstances, Subordinated Debt Securities may be issued in certificated form in exchange for a Global Security (as defined below). See "Book-Entry and Settlement" below. In the event that Subordinated Debt Securities are issued in certificated form, such Subordinated Debt Securities will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Subordinated Debt Securities issued as a Global Security will be made to DTC, a successor depositary or, in the event that no depositary is used, to a Paying Agent for the Subordinated Debt Securities. In the event Subordinated Debt Securities are issued in certificated form, principal and interest will be payable, the transfer of the Subordinated Debt Securities will be registrable and Subordinated Debt Securities will be exchangeable for Subordinated Debt Securities of other denominations of a like aggregate principal amount at the corporate trust office of the Indenture Trustee in Brooklyn, New York; provided that, payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto. SUBORDINATION The Indenture provides that the Subordinated Debt Securities are subordinated and junior in right of payment to all Senior Indebtedness of the Company. No payment of principal (including redemption and sinking fund payments), premium, if any, or interest on the Subordinated Debt Securities may be made (i) if any Senior Indebtedness of the Company is not paid when due, (ii) any applicable grace period with respect to such default has ended and such default has not been cured or waived or ceased to exist, or (iii) if the maturity of any Senior Indebtedness of the Company has been accelerated because of a default. Upon any distribution of assets of the Company to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due on all Senior Indebtedness of the Company must be paid in full before the holders of Subordinated Debt Securities are entitled to receive or retain any payment. Upon satisfaction of all claims of all Senior Indebtedness then outstanding, the rights of the holders of the Subordinated Debt Securities will be subrogated to the rights of the holders of Senior Indebtedness of the Company to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Subordinated Debt Securities are paid in full. The term "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such obligor for money borrowed and S-23 (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor including, without limitation, in the case of the Company, all obligations under its New Mortgage and 1940 Indenture (each as defined in the accompanying Prospectus), (ii) all capital lease obligations of such obligor, (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (iv) all obligations of such obligor for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction, (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise, and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Subordinated Debt Securities and (2) any indebtedness between or among such obligor or its affiliates, including all other debt securities and guarantees in respect of those debt securities issued, to (a) any other NWPS Trust (as defined in the accompanying Prospectus), or a trustee of such trust, and (b) any other trust, or a trustee of such trust, partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "financing entity") in connection with the issuance by such financing entity of Preferred Securities or other securities that rank pari passu with, or junior to, the Preferred Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. The Indenture does not limit the aggregate amount of Senior Indebtedness that may be issued by the Company. As of March 31, 1995, Senior Indebtedness of the Company aggregated approximately $124 million. OPTIONAL REDEMPTION The Company shall have the right to redeem the Subordinated Debt Securities, in whole or in part, from time to time, on or after , 2000, or at any time in certain circumstances upon the occurrence of a Tax Event as described under "Description of the Preferred Securities -- Special Event Redemption or Distribution," upon not less than 30 nor more than 60 days notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. If a partial redemption of the Preferred Securities resulting from a partial redemption of the Subordinated Debt Securities would result in the delisting of the Preferred Securities, the Company may only redeem the Subordinated Debt Securities in whole. INTEREST Each Subordinated Debt Security shall bear interest at the rate of % per annum (the "Coupon Rate") from the original date of issuance until the principal becomes due and payable, and on any overdue principal and on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing , 1995, to the person in whose name such Subordinated Debt Security is registered, at the close of business on the Business Day next preceding such Interest Payment Date. In the event the Subordinated Debt Securities shall not continue to remain in book-entry only form, the Company shall have the right to select record dates, which shall be any date at least one Business Day prior to the Interest Payment Date. It is anticipated that NWPS Capital will be the sole holder of the Subordinated Debt Securities. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Subordinated S-24 Debt Securities is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, then such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND MATURITY DATE The maturity date of the Subordinated Debt Securities is , 2025 (the "Scheduled Maturity Date"). The Company, however, may, before the Scheduled Maturity Date, extend such maturity date no more than one time for up to an additional 19 years from the Scheduled Maturity Date; provided that (a) the Company is not in bankruptcy or otherwise insolvent, (b) the Company is not in default on any Subordinated Debt Securities issued to a NWPS Trust or to any trustee of such trust in connection with an issuance of Trust Securities by such NWPS Trust, (c) the Company has made timely payments on the Subordinated Debt Securities for the immediately preceding six quarters without deferrals, (d) NWPS Capital is not in arrears on payments of distributions on the Preferred Securities, (e) the Subordinated Debt Securities are rated Investment Grade by any one of Standard & Poor's Rating Group, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization, and (g) the final maturity of such Subordinated Debt Securities is not later than the 49th anniversary of the issuance of the Preferred Securities. Pursuant to the Declaration, the Regular Trustees are required to give notice of the Company's election to extend the Scheduled Maturity Date to the holders of the Preferred Securities. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES If (i) NWPS Capital fails to pay distributions in full on the Preferred Securities for six consecutive quarterly distribution periods or (ii) a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of Preferred Securities would be entitled, by majority vote, to appoint a Special Regular Trustee, who shall have the same rights, powers and privileges as the other Regular Trustees. In addition, the holders of a majority in aggregate liquidation amount of the Preferred Securities will have the right to: (i) direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration; (ii) waive any past default; or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debt Securities shall be due and payable; provided, however, that where a consent under the Indenture requires the consent of all holders of the Subordinated Debt Securities affected thereby, the Property Trustee may only give such consent at the direction of all holders of the Preferred Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities, to the fullest extent permitted by law, a holder of Preferred Securities may, after such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against the Company to enforce the Property Trustee's rights under the Subordinated Debt Securities without first instituting any legal proceeding against the Property Trustee or any other person or entity. If the Company exercises its right to defer payments of interest on the Subordinated Debt Securities (See "Option to Extend Interest Payment Period" below) appointment of a Special Regular Trustee would be the only right of the holders of the Preferred Securities if NWPS Capital fails to pay distributions in full on the Preferred Securities for six consecutive quarters until expiration of the extended interest payment period (20 consecutive quarters). OPTION TO EXTEND INTEREST PAYMENT PERIOD The Company shall have the right at any time, and from time to time, during the term of the Subordinated Debt Securities to defer payments of interest by extending the interest payment period for a period not exceeding 20 consecutive quarters, at the end of which Extension Period, the Company shall pay all interest then accrued and unpaid (including any Additional Interest, as herein defined) together with interest thereon compounded quarterly at the rate specified for the Subordinated Debt Securities to the extent permitted by applicable law ("Compound Interest"); provided that, during S-25 any such Extension Period, (a) the Company shall not declare or pay any dividends on, make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Subordinated Debt Securities; provided, however, that, the foregoing restriction (a) does not apply to any stock dividends paid by the Company where the dividend stock is the same as that on which the dividend is paid. Prior to the termination of any such Extension Period, the Company may further defer payments of interest by extending the interest payment period; provided, however, that, such Extension Period, including all such previous and further extensions, may not exceed 20 consecutive quarters. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the terms set forth in this section. No interest during an Extension Period, except at the end thereof, shall be due and payable. The Company has no present intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debt Securities. If the Property Trustee shall be the sole holder of the Subordinated Debt Securities, the Company shall give the Regular Trustees and the Property Trustee notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the Preferred Securities are payable or (ii) the date the Regular Trustees are required to give notice to the New York Stock Exchange (or other applicable self-regulatory organization) or to holders of the Preferred Securities of the record date or the date such distribution is payable. The Regular Trustees shall give notice of the Company's selection of such Extension Period to the holders of the Preferred Securities. If the Property Trustee shall not be the sole holder of the Subordinated Debt Securities, the Company shall give the holders of the Subordinated Debt Securities notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date upon which the Company is required to give notice to the New York Stock Exchange (or other applicable self-regulatory organization) or to holders of the Subordinated Debt Securities of the record or payment date of such related interest payment. ADDITIONAL INTEREST If at any time while the Property Trustee is the holder of the Subordinated Debt Securities, NWPS Capital shall be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will pay as additional interest ("Additional Interest") on the Subordinated Debt Securities such additional amounts as shall be required so that the net amounts received and retained by NWPS Capital after paying any such taxes, duties, assessments or other governmental charges will be not less than the amounts NWPS Capital would have received had no such taxes, duties, assessments or other governmental charges been imposed. INDENTURE EVENTS OF DEFAULT If any Indenture Event of Default shall occur and be continuing, the Property Trustee, as the holder of the Subordinated Debt Securities, will have the right to declare the principal of and the interest on the Subordinated Debt Securities (including any Compound Interest and Additional Interest, if any) and any other amounts payable under the Indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Subordinated Debt Securities. See "Description of the Subordinated Debt Securities -- Events of Default" in the accompanying Prospectus for a description of the Events of Default. An Indenture Event of Default also constitutes a Declaration Event of Default. The holders of Preferred Securities in certain circumstances have the right to direct the Property Trustee to exercise its rights as the holder of the Subordinated Debt Securities. See "Description of the Preferred Securities -- Declaration Events of Default" and "Voting Rights." BOOK-ENTRY AND SETTLEMENT If distributed to holders of Preferred Securities in connection with the involuntary or voluntary dissolution, winding-up or liquidation of NWPS Capital as a result of the occurrence of a Special S-26 Event, the Subordinated Debt Securities will be issued in the form of one or more global certificates (each, a "Global Security") registered in the name of the Depositary or its nominee. Except under the limited circumstances described below, Subordinated Debt Securities represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Subordinated Debt Securities in definitive form. The Global Securities described above may not be transferred except by the depositary to a nominee of the depositary or by a nominee of the depositary to the depositary or another nominee of the depositary or to a successor depositary or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Subordinated Debt Securities in definitive form and will not be considered the holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Subordinated Debt Securities shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the Depositary or its nominee or to a successor Depositary or its nominee. Accordingly, each Beneficial Owner must rely on the procedures of the Depositary or if such person is not a Participant, on the procedures of the Participant through which such person owns its interest to exercise any rights of a holder under the Indenture. THE DEPOSITARY If Subordinated Debt Securities are distributed to holders of Preferred Securities in liquidation of such holders' interests in NWPS Capital, DTC will act as securities depositary for the Subordinated Debt Securities. For a description of DTC and the specific terms of the depositary arrangements, see "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company." As of the date of this Prospectus Supplement, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. The Company may appoint a successor to DTC or any successor depositary in the event DTC or such successor depositary is unable or unwilling to continue as a depository for the Global Securities. None of the Company, NWPS Capital, the Indenture Trustee, any paying agent and any other agent of the Company or the Indenture Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Subordinated Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DISCONTINUANCE OF THE DEPOSITARY'S SERVICES A Global Security shall be exchangeable for Subordinated Debt Securities registered in the names of persons other than the depositary or its nominee only if (i) the depositary notifies the Company that it is unwilling or unable to continue as a depositary for such Global Security and no successor depositary shall have been appointed, (ii) the depositary, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the depositary is required to be so registered to act as such depositary and no successor depositary shall have been appointed, (iii) the Company, in its sole discretion, determines that such Global Security shall be so exchangeable or (iv) there shall have occurred an Event of Default with respect to such Subordinated Debt Securities. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Subordinated Debt Securities registered in such names as the depositary shall direct. It is expected that such instructions will be based upon directions received by the depositary from its Participants with respect to ownership of beneficial interests in such Global Security. S-27 MISCELLANEOUS The Indenture will provide that the Company will pay all fees and expenses related to (i) the offering of the Trust Securities and the Subordinated Debt Securities, (ii) the organization, maintenance and dissolution of NWPS Capital, (iii) the retention of the NWPS Trustees and (iv) the enforcement by the Property Trustee of the rights of the holders of the Preferred Securities. The payment of such fees and expenses will be fully and unconditionally guaranteed by the Company. EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES AND THE GUARANTEE As set forth in the Declaration, the sole purpose of NWPS Capital is to issue the Trust Securities evidencing undivided beneficial interests in the assets of NWPS Capital, and to invest the proceeds from such issuance and sale in the Subordinated Debt Securities. As long as payments of interest and other payments are made when due on the Subordinated Debt Securities, such payments will be sufficient to cover distributions and payments due on the Trust Securities because of the following factors: (i) the aggregate principal amount of Subordinated Debt Securities will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and the interest and other payment dates on the Subordinated Debt Securities will match the distribution rate and distribution and other payment dates for the Preferred Securities; (iii) the Company shall pay all costs and expenses of the Trust to the extent not satisfied out of the Trust's assets; and (iv) the Declaration further provides that the NWPS Trustees shall not cause or permit NWPS Capital to, among other things, engage in any activity that is not consistent with the purposes of NWPS Capital. Payments of distributions (to the extent funds therefor are legally available) and other payments due on the Preferred Securities (to the extent funds therefor are legally available) are guaranteed by the Company as and to the extent set forth under "Description of the Guarantees" in the accompanying Prospectus. If the Company does not make interest payments on the Subordinated Debt Securities purchased by NWPS Capital, it is expected that NWPS Capital will not have sufficient funds to pay distributions on the Preferred Securities. The Guarantee is a full and unconditional guarantee from the time of its issuance but does not apply to any payment of distributions unless and until NWPS Capital has sufficient funds legally available for the payment of such distributions. If the Company fails to make interest or other payments on the Subordinated Debt Securities when due (taking account of any Extension Period), the Declaration provides a mechanism whereby the holders of the Preferred Securities, using the procedures described in "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and "-- Voting Rights," may (i) appoint a Special Regular Trustee and (ii) direct the Property Trustee to enforce its rights under the Subordinated Debt Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debt Securities, to the fullest extent permitted by law, a holder of Preferred Securities may, after such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding against the Company to enforce the Property Trustee's rights under the Subordinated Debt Securities without first instituting any legal proceeding against the Property Trustee or any other person or entity. The Company, under the Guarantee, acknowledges that the Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the Preferred Securities. If the Company fails to make payments under the Guarantee, the Guarantee provides a mechanism whereby the holders of the Preferred Securities may direct the Guarantee Trustee to enforce its rights thereunder. If the Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred Securities may, after such holder's written request to the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding directly against the Company to enforce the Guarantee Trustee's rights under the Guarantee without first instituting a legal proceeding against NWPS Capital, the Guarantee Trustee, or any other person. S-28 The Company and NWPS Capital believe that the above mechanisms and obligations, taken together, are substantially equivalent to a full and unconditional guarantee by the Company of payments due on the Preferred Securities. See "Description of the Guarantees -- General" in the accompanying Prospectus. UNITED STATES FEDERAL INCOME TAXATION GENERAL The following is a summary of certain of the material United States federal income tax consequences of the purchase, ownership and disposition of Preferred Securities. Unless otherwise stated, this summary deals only with Preferred Securities held as capital assets by holders who purchase the Preferred Securities upon original issuance ("Initial Holders"). It does not deal with special classes of holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, or persons that will hold the Preferred Securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. This summary also does not address the tax consequences to persons whose functional currency is other than the U.S. Dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of Preferred Securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Preferred Securities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. CLASSIFICATION OF THE SUBORDINATED DEBT SECURITIES In connection with the issuance of the Subordinated Debt Securities, Schiff Hardin & Waite, special tax counsel to the Company and NWPS Capital, will render its opinion generally to the effect that, although not entirely free from doubt, under then current law and assuming full compliance with the terms of the Indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, the Subordinated Debt Securities held by NWPS Capital will be classified for United States federal income tax purposes as indebtedness of the Company. CLASSIFICATION OF NWPS CAPITAL In connection with the issuance of the Preferred Securities, Schiff Hardin & Waite, special tax counsel to the Company and NWPS Capital, will render its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Declaration and the Indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, NWPS Capital will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Preferred Securities will be considered the owner of an undivided interest in the Subordinated Debt Securities, and each holder will be required to include in its gross income any original issue discount ("OID") accrued with respect to its allocable share of those Subordinated Debt Securities. ORIGINAL ISSUE DISCOUNT Because the Company has the option, under the terms of the Subordinated Debt Securities, to defer payments of interest by extending interest payment periods for up to 20 quarters, all payments in respect of the Subordinated Debt Securities will be treated as "original issue discount." Holders of debt instruments issued with OID must include that discount in income on an economic accrual basis before the receipt of cash attributable to the interest, regardless of their method of tax accounting. Generally, all of a holder's taxable interest income with respect to the Subordinated Debt Securities will be accounted for as OID, and actual distributions of stated interest will not be separately reported as taxable income. The amount of OID that accrues in any month will approximately equal the amount of the interest that accrues on the Subordinated Debt Securities in that month at the stated S-29 interest rate. In the event that the interest payment period is extended, holders will continue to accrue OID approximately equal to the amount of the interest payment due at the end of the Extension Period on an economic accrual basis over the length of the extended interest period. Corporate holders of Preferred Securities will not be entitled to a dividends received deduction with respect to any income recognized with respect to the Preferred Securities. MARKET DISCOUNT AND BOND PREMIUM Holders of Preferred Securities other than Initial Holders may be considered to have acquired their undivided interests in the Subordinated Debt Securities with market discount or acquisition premium as such phrases are defined for United States federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the Preferred Securities. RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF NWPS CAPITAL Under certain circumstances, as described under the caption "Description of the Preferred Securities -- Special Event Redemption or Distribution," Subordinated Debt Securities may be distributed to holders in exchange for the Preferred Securities and in liquidation of NWPS Capital. Under current law, such a distribution, for United States federal income tax purposes, would be treated as a non-taxable event to each holder, and each holder would receive an aggregate tax basis in the Subordinated Debt Securities equal to such holder's aggregate tax basis in its Preferred Securities. A holder's holding period in the Subordinated Debt Securities so received in liquidation of NWPS Capital would include the period during which the Preferred Securities were held by such holder. Under certain circumstances described herein (see "Description of the Preferred Securities -- Special Event Redemption or Distribution"), the Subordinated Debt Securities may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their Preferred Securities. Under current law, such a redemption would, for United States federal income tax purposes, constitute a taxable disposition of the redeemed Preferred Securities, and a holder could recognize gain or loss as if it sold such redeemed Preferred Securities for cash. See "United States Federal Income Taxation -- Sales of Preferred Securities." SALES OF PREFERRED SECURITIES A holder that sells Preferred Securities will recognize gain or loss equal to the difference between its adjusted tax basis in the Preferred Securities and the amount realized on the sale of such Preferred Securities. A holder's adjusted tax basis in the Preferred Securities generally will be its initial purchase price increased by OID previously includible in such holder's gross income to the date of disposition and decreased by payments received on the Preferred Securities. Such gain or loss generally will be a capital gain or loss and generally will be a long-term capital gain or loss if the Preferred Securities have been held for more than one year. The Preferred Securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debt Securities. A holder who disposes of his Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Subordinated Debt Securities through the date of disposition in income as ordinary income, and to add such amount to his adjusted tax basis in his pro rata share of the underlying Subordinated Debt Securities deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest) a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. S-30 UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership, or a non-resident fiduciary of a foreign estate or trust. Under present United States federal income tax law: (i) payments by NWPS Capital or any of its paying agents to any holder of a Preferred Security that is a United States Alien Holder will not be subject to United States federal withholding tax; provided that (a) the beneficial owner of the Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) the beneficial owner of the Preferred Security is not a controlled foreign corporation that is related to the Company through stock ownership, and (c) either (A) the beneficial owner of the Preferred Security certifies to NWPS Capital or its agent, under penalties of perjury, that it is not a United States holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the Preferred Security in such capacity, certifies to NWPS Capital or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes NWPS Capital or its agent with a copy thereof; and (ii) a United States Alien Holder of a Preferred Security will generally not be subject to United States federal income or withholding tax on any gain realized upon the sale or other disposition of a Preferred Security, except that a United States Alien Holder will be subject to United States income tax on any gain if such United States Alien Holder (a) is engaged in a trade or business in the United States and such gain is effectively connected to the conduct of such trade or business or (b) is an individual present in the United States for 183 days or more during the taxable year, and certain other conditions are met. INFORMATION REPORTING TO HOLDERS Subject to the qualifications discussed below, income on the Preferred Securities will be reported to holders on Forms 1099, which forms should be mailed to holders of Preferred Securities by January 31 following each calendar year. NWPS Capital will be obligated to report annually to Cede & Co., as holder of record of the Preferred Securities, the OID related to the Subordinated Debt Securities that accrued during the year. NWPS Capital currently intends to report such information on Form 1099 prior to January 31 following each calendar year. The Underwriters have indicated to NWPS Capital that, to the extent that they hold Preferred Securities as nominees for beneficial holders, they currently expect to report to such beneficial holders on Forms 1099 by January 31 following each calendar year. Under current law, holders of Preferred Securities who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to NWPS Capital. NWPS Capital, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, beneficial holders of Preferred Securities who hold their Preferred Securities through the Underwriters will receive Forms 1099 reflecting the income on their Preferred Securities from such nominee holders rather than NWPS Capital. BACKUP WITHHOLDING Payments made in respect of, and proceeds from the sale of, the Preferred Securities, or Subordinated Debentures distributed to Holders of Preferred Securities, may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a credit against the holder's United States federal income tax, provided the required information is provided to the Service. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, S-31 OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement dated the date hereof, each of the Underwriters named below, for whom Morgan Stanley & Co. Incorporated, Dean Witter Reynolds Inc., NatWest Capital Markets Limited, PaineWebber Incorporated and Piper Jaffray Inc. are acting as representatives (the "Representatives") has severally agreed to purchase, and NWPS Capital has agreed to sell to each of the Underwriters, severally, the respective number of Preferred Securities set opposite its name below:
NUMBER OF PREFERRED UNDERWRITERS SECURITIES - -------------------------------------------------------------------------- ------------------ Morgan Stanley & Co. Incorporated......................................... Dean Witter Reynolds Inc.................................................. NatWest Capital Markets Limited........................................... PaineWebber Incorporated.................................................. Piper Jaffray Inc......................................................... ---------- Total................................................................. 1,200,000 ---------- ----------
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the Preferred Securities are subject to the approval of certain legal matters by their counsel and to certain other conditions. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Preferred Securities offered hereby if any of the Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or the Underwriting Agreement may be terminated. The Underwriters propose to offer all or part of the Preferred Securities directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and all or part to certain securities dealers at a price that represents a concession not in excess of $ per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Preferred Security to certain other dealers. After the Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representative. Because the proceeds of the sale of the Preferred Securities will ultimately be used to purchase the Subordinated Debt Securities of the Company, the Underwriting Agreement provides that the Company will pay to the Underwriters as compensation for their services $ per Preferred Security (or $ in the aggregate); provided that such compensation will be $ per Preferred Security sold to certain institutions. During a period of 90 days from the date of the Prospectus Supplement, neither NWPS Capital nor the Company will, without the prior written consent of Morgan Stanley & Co. Incorporated, directly or indirectly, sell, offer to sell, grant any option for the sale of, pledge, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for Preferred Securities or any equity securities substantially similar to the Preferred Securities (except for any series of Subordinated Debt Securities and the Preferred Securities offered hereby) or enter into any swap or similar agreement that transfers, in whole or in part, the economic risk of ownership of Preferred Securities, whether any such transaction is to be settled by delivery of Preferred Securities or other securities, in cash or otherwise. S-32 Application has been made to list the Preferred Securities on the New York Stock Exchange. Listing will be contingent upon meeting the requirements of the New York Stock Exchange, including those relating to distribution. If listing is approved, trading of the Preferred Securities on the New York Stock Exchange is expected to commence within a 7-day period after the date of this Prospectus Supplement. The Representatives have advised NWPS Capital that they intend to make a market in the Preferred Securities prior to the commencement of trading on the New York Stock Exchange. The Representatives will have no obligation to make a market in the Preferred Securities, however, and may cease market making activities, if commenced, at any time. NWPS Capital and the Company have agreed to indemnify the Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act of 1933, as amended. Certain of the Underwriters engage in (or in the future may engage in) transactions with, and perform services for, the Company and certain of its affiliates in the ordinary course of business. Morgan Stanley & Co. Incorporated represents Synergy Group Incorporated in connection with the pending acquisition of Synergy by the Company described under "Pending Acquisition of Synergy Group Incorporated" included in the accompanying Prospectus. Piper Jaffray Inc. rendered financial advisory services to the Company in connection with the Company's evaluation of the Synergy acquisition. National Westminster Bank, P l c. is the parent of NatWest Capital Markets Limited and is serving as the managing agent for the short-term loan for the Synergy acquisition. NatWest Capital Markets Limited ("NatWest"), a United Kingdom broker-dealer and a member of the Securities Futures Authority Limited, has agreed that, as part of the distribution of the Preferred Securities offered hereby and subject to certain exceptions, it will not offer or sell any Preferred Securities within the United States, its territories or possessions or to persons who are citizens thereof or residents therein. The Underwriting Agreement does not limit sale of the Preferred Securitites offered hereby outside the United States. NatWest has further represented and agreed that (i) it has not offered or sold and will not offer or sell any Preferred Securities to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Preferred Securities in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Preferred Securities to a person who is of the kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. LEGAL MATTERS The validity of the Preferred Securities, the Subordinated Debt Securities, the Guarantee and certain matters relating thereto will be passed upon for the Company and NWPS Capital by Schiff Hardin & Waite, Chicago, Illinois. Certain legal matters will be passed upon for the Underwriters by Winthrop, Stimson, Putnam & Roberts, New York, New York. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the Company and NWPS Capital. S-33 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS (SUBJECT TO COMPLETION, ISSUED JULY 28, 1995) $200,000,000 NORTHWESTERN PUBLIC SERVICE COMPANY MORTGAGE BONDS SUBORDINATED DEBT SECURITIES COMMON STOCK NWPS CAPITAL FINANCING I NWPS CAPITAL FINANCING II NWPS CAPITAL FINANCING III PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY NORTHWESTERN PUBLIC SERVICE COMPANY ----------------- NORTHWESTERN PUBLIC SERVICE COMPANY, A DELAWARE CORPORATION (THE "COMPANY"), MAY OFFER FROM TIME TO TIME, TOGETHER OR SEPARATELY, (I) MORTGAGE BONDS ("MORTGAGE BONDS"); (II) SUBORDINATED DEBT SECURITIES ("SUBORDINATED DEBT SECURITIES"); AND (III) COMMON STOCK, PAR VALUE $3.50 PER SHARE ("COMMON STOCK"). NWPS CAPITAL FINANCING I, NWPS CAPITAL FINANCING II AND NWPS CAPITAL FINANCING III (EACH, A "NWPS TRUST"), EACH A STATUTORY BUSINESS TRUST FORMED UNDER THE LAWS OF THE STATE OF DELAWARE, MAY OFFER, FROM TIME TO TIME, PREFERRED SECURITIES REPRESENTING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS OF THE RESPECTIVE NWPS TRUSTS ("PREFERRED SECURITIES"). THE PAYMENT OF PERIODIC CASH DISTRIBUTIONS ("DISTRIBUTIONS") WITH RESPECT TO PREFERRED SECURITIES OF A PARTICULAR NWPS TRUST OUT OF MONEYS HELD BY THAT NWPS TRUST, AND PAYMENTS ON LIQUIDATION, REDEMPTION OR OTHERWISE WITH RESPECT TO SUCH PREFERRED SECURITIES, WILL BE GUARANTEED BY THE COMPANY TO THE EXTENT DESCRIBED HEREIN ("GUARANTEE"). SEE "DESCRIPTION OF THE GUARANTEES" BELOW. THE COMPANY'S OBLIGATIONS UNDER EACH GUARANTEE ARE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL OTHER LIABILITIES OF THE COMPANY AND RANK PARI PASSU WITH THE MOST SENIOR PREFERRED STOCK ISSUED FROM TIME TO TIME BY THE COMPANY. THE SUBORDINATED DEBT SECURITIES MAY BE ISSUED AND SOLD FROM TIME TO TIME IN ONE OR MORE SERIES BY THE COMPANY TO A NWPS TRUST, OR A TRUSTEE OF SUCH TRUST, IN CONNECTION WITH THE INVESTMENT OF THE PROCEEDS FROM THE OFFERING OF PREFERRED SECURITIES AND COMMON SECURITIES (AS DEFINED HEREIN) OF SUCH NWPS TRUST. THE SUBORDINATED DEBT SECURITIES PURCHASED BY A NWPS TRUST MAY BE SUBSEQUENTLY DISTRIBUTED PRO RATA TO HOLDERS OF PREFERRED SECURITIES AND COMMON SECURITIES IN CONNECTION WITH THE DISSOLUTION OF SUCH NWPS TRUST UPON THE OCCURRENCE OF CERTAIN EVENTS AS MAY BE DESCRIBED IN AN ACCOMPANYING PROSPECTUS SUPPLEMENT. THE SUBORDINATED DEBT SECURITIES WILL BE UNSECURED AND SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO CERTAIN OTHER INDEBTEDNESS OF THE COMPANY AS MAY BE DESCRIBED IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT. THE MORTGAGE BONDS, SUBORDINATED DEBT SECURITIES AND COMMON STOCK OF THE COMPANY, AND THE PREFERRED SECURITIES OF ANY NWPS TRUST, ARE COLLECTIVELY REFERRED TO HEREIN AS THE "OFFERED SECURITIES." THE OFFERED SECURITIES MAY BE ISSUED IN ONE OR MORE SERIES OR ISSUANCES IN AN AMOUNT NOT TO EXCEED IN THE AGGREGATE $200,000,000, BASED ON THE INITIAL OFFERING PRICE, WITH THE AMOUNTS, PRICES AND TERMS TO BE DETERMINED AT OR PRIOR TO THE TIME OF SALE AND SET FORTH IN ONE OR MORE SUPPLEMENTS TO THIS PROSPECTUS (EACH, A "PROSPECTUS SUPPLEMENT"). (CONTINUED ON FOLLOWING PAGE) ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- THE OFFERED SECURITIES WILL BE SOLD DIRECTLY, THROUGH AGENTS, UNDERWRITERS AND DEALERS, INCLUDING MORGAN STANLEY & CO. INCORPORATED, AS DESIGNATED FROM TIME TO TIME, OR THROUGH A COMBINATION OF SUCH METHODS. SEE "PLAN OF DISTRIBUTION." THE NAMES OF SUCH AGENTS, UNDERWRITERS OR DEALERS AND ANY APPLICABLE COMMISSIONS OR DISCOUNTS WILL BE SET FORTH IN, OR MAY BE CALCULATED FROM, THE PROSPECTUS SUPPLEMENT. SEE "PLAN OF DISTRIBUTION" FOR A DESCRIPTION OF ANY INDEMNIFICATION ARRANGEMENTS BETWEEN THE COMPANY, EACH OF THE NWPS TRUSTS AND ANY UNDERWRITERS, DEALERS OR AGENTS. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. MORGAN STANLEY & CO. INCORPORATED , 1995 (CONTINUED FROM PREVIOUS PAGE) CERTAIN SPECIFIC TERMS OF THE PARTICULAR OFFERED SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS IS BEING DELIVERED WILL BE SET FORTH IN AN ACCOMPANYING PROSPECTUS SUPPLEMENT, INCLUDING, WHERE APPLICABLE, THE INITIAL PUBLIC OFFERING PRICE OF THE OFFERED SECURITIES, THE NET PROCEEDS THEREOF TO THE COMPANY OR A NWPS TRUST, AS APPLICABLE, ANY LISTING OF SUCH OFFERED SECURITIES ON A SECURITIES EXCHANGE AND ANY OTHER SPECIAL TERMS. THE PROSPECTUS SUPPLEMENT WILL ALSO SET FORTH CERTAIN OTHER INFORMATION WITH REGARD TO OFFERED SECURITIES BEING OFFERED, INCLUDING WITHOUT LIMITATION, THE FOLLOWING: (I) IN THE CASE OF MORTGAGE BONDS, THE SERIES DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED DENOMINATIONS, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR METHOD OF CALCULATION OF INTEREST AND DATE OF PAYMENT OF ANY INTEREST, AND ANY EXCHANGE, CONVERSION, REDEMPTION, SINKING FUND, OR CREDIT ENHANCEMENT PROVISIONS AND OTHER SPECIAL TERMS OF EACH SERIES; (II) IN THE CASE OF SUBORDINATED DEBT SECURITIES, THE SPECIFIC DESIGNATION, AGGREGATE PRINCIPAL AMOUNT, AUTHORIZED DENOMINATION, MATURITY, INTEREST RATE (WHICH MAY BE FIXED OR VARIABLE) OR METHOD OF CALCULATION OF INTEREST, DATE OF PAYMENT OF ANY INTEREST, ANY PREMIUM, THE PLACE OR PLACES WHERE PRINCIPAL OF, PREMIUM, IF ANY, AND ANY INTEREST ON SUCH SUBORDINATED DEBT SECURITIES WILL BE PAYABLE, THE RIGHT OF THE COMPANY, IF ANY, TO DEFER PAYMENT OF INTEREST ON THE SUBORDINATED DEBT SECURITIES AND THE MAXIMUM LENGTH OF SUCH DEFERRAL PERIOD, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING FUND PROVISIONS, AND ANY SECURITY, SUBORDINATION OR OTHER TERMS IN CONNECTION WITH THE OFFERING AND SALE OF THE SUBORDINATED DEBT SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS IS DELIVERED; (III) IN THE CASE OF COMMON STOCK, THE NUMBER OF SHARES AND THE TERMS OF OFFERING THEREOF; AND (IV) IN THE CASE OF PREFERRED SECURITIES, THE DESIGNATION, NUMBER OF SECURITIES, LIQUIDATION PREFERENCE PER SECURITY, DISTRIBUTION RATE (OR METHOD OF CALCULATION THEREOF), DATES ON WHICH DISTRIBUTIONS SHALL BE PAYABLE AND DATES FROM WHICH DISTRIBUTIONS SHALL ACCRUE, ANY VOTING RIGHTS, ANY EXCHANGE, CONVERSION, REDEMPTION OR SINKING FUND PROVISIONS, ANY OTHER RIGHTS, PREFERENCES, PRIVILEGES, LIMITATIONS OR RESTRICTIONS RELATING TO THE PREFERRED SECURITIES AND THE TERMS UPON WHICH THE PROCEEDS OF THE SALE OF THE PREFERRED SECURITIES SHALL BE USED TO PURCHASE A SPECIFIC SERIES OF SUBORDINATED DEBT SECURITIES OF THE COMPANY. IF SO SPECIFIED IN THE APPLICABLE PROSPECTUS SUPPLEMENT, OFFERED SECURITIES MAY BE ISSUED IN WHOLE OR IN PART IN THE FORM OF ONE OR MORE TEMPORARY OR GLOBAL SECURITIES. THE PROSPECTUS SUPPLEMENT WILL ALSO CONTAIN INFORMATION, WHERE APPLICABLE, ABOUT CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE OFFERED SECURITIES COVERED BY THE PROSPECTUS SUPPLEMENT. For United Kingdom Purchasers: The Offered Securities may not be sold in the United Kingdom other than to persons whose ordinary business is to buy or sell securities, whether as principal or agent (except in circumstances that do not constitute an offer to the public within the meaning of the Companies Act of 1985), and this Prospectus may only be issued or passed on to any person in the United Kingdom if that person is of a kind described in Article 9(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemption) Order 1988, as amended. AVAILABLE INFORMATION The Company and the NWPS Trusts have filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 (including any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Offered Securities. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which have been omitted pursuant to the rules of the Commission. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete. With respect to each such contract, agreement or other document filed or incorporated by reference as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. The Company and Synergy Group Incorporated ("Synergy"), a corporation which the Company proposes to acquire (see "Pending Acquisition of Synergy Group Incorporated"), are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith file reports and other information with the Commission, including proxy statements in the case of the Company, but not Synergy. Reports, proxy statements and other information filed by the Company and Synergy with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such materials may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which exchange certain of the Company's securities are listed. Information in this Prospectus concerning Synergy has been obtained from reports and other information filed by Synergy with the Commission. No separate financial statements of any of the NWPS Trusts have been included herein. The Company and the NWPS Trusts do not consider that such financial statements would be material to holders of the Preferred Securities because (i) all of the common securities of the NWPS Trusts will be owned, directly or indirectly, by the Company, a reporting company under the Exchange Act, (ii) each of the NWPS Trusts is a newly organized special purpose entity, has no operating history and has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in the assets of such NWPS Trust, investing the proceeds thereof in Subordinated Debt Securities issued by the Company and engaging in activities necessary or incidental thereto, and (iii) the obligations of each of the NWPS Trusts under the Trust Securities (as defined herein) are fully and unconditionally guaranteed by the Company to the extent that such NWPS Trust has funds legally available to meet such obligations. See "Description of the Subordinated Debt Securities" and "Description of the Guarantees." DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1994; (b) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; 1 (c) The Company's Current Report on Form 8-K filed May 26, 1995; (d) The Company's Current Report on Form 8-K filed June 21, 1995; and (e) The Company's Current Report on Form 8-K filed July 27, 1995. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), or 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Offered Securities shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein, or in the Prospectus Supplement for the offering of the particular Offered Securities, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THE PROSPECTUS INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MS. ROGENE THADEN, TREASURER, NORTHWESTERN PUBLIC SERVICE COMPANY, 33 THIRD STREET S.E., HURON, SOUTH DAKOTA 57350-1318, TELEPHONE NUMBER 605-353-8320. THE COMPANY The Company's principal business is energy distribution. The Company is engaged as an electric and gas utility in generating, transmitting, distributing, and selling electric energy in eastern South Dakota, where it furnishes electric service to approximately 54,900 customers in more than 100 communities and adjacent rural areas and in purchasing, distributing, selling, and transporting natural gas to approximately 75,000 customers in four communities in Nebraska and 56 communities in eastern South Dakota. The Company, through its subsidiaries, is also engaged in certain nonutility operations as more fully discussed under the caption "Nonutility Operations" and has recently contracted to acquire Synergy Group Incorporated, a major propane distribution company. See "Pending Acquisition of Synergy Group Incorporated." The Company was incorporated under the laws of the State of Delaware in 1923 and has its principal office at 33 Third Street SE, Huron, South Dakota 57350-1318. Its telephone number is 605-352-8411. ELECTRIC BUSINESS On a fully consolidated basis, 46% of the Company's 1994 operating revenues were from the sale of electric energy. All of the Company's electric revenues are derived from customers in South Dakota. By customer category, 33% of 1994 total electric sales were from residential sales, 50% were from commercial and industrial sales, 2% was from street lighting and sales to public authorities, and 15% were from sales for resale. The Company has relatively few large customers in its service territory. Sales for resale primarily include power pool sales to other utilities. Power pool sales fluctuate from year to year depending on a number of factors including the Company's availability of excess short-term generation and the ability to sell the excess power to other utilities in the power pool. The Company also sells power and energy at wholesale to certain municipalities for resale and to various governmental agencies. The Company shares in the ownership of the Big Stone Generating Plant ("Big Stone"), located near Big Stone City in northeastern South Dakota, the Coyote I Electric Generating Plant ("Coyote"), located near Beulah, North Dakota, and the Neal Electric Generating Unit #4 ("Neal"), located near Sioux City. At December 31, 1994, the aggregate net summer peaking capacity of all Company owned electric generating units was 309,480 kw, consisting of 105,711 kw from Big Stone (the Company's 23.4% share), 2 42,600 kw from Coyote (the Company's 10.0% share), 54,169 kw from Neal (the Company's 8.7% share), and 107,000 kw from internal combustion turbine units and small diesel units, used primarily for peaking purposes. The Company is a summer peaking utility. The 1994 peak demand of 229,922 kw occurred on July 18, 1994. Total system capability at the time of peak was 309,480 kw. The reserve margin for 1994 was 35%. The minimum reserve margin requirement as determined by the members of the Mid-Continent Area Power Pool, of which the Company is a member, is 15%. The Company has an integrated resource plan to identify how to meet the energy needs of its customers. The plan includes estimates of customer usage and programs to provide for economic, reliable, and timely supplies of energy. The plan does not anticipate the need for additional baseload generating capacity for the Company for at least the next 10 years. All of the Company's baseload plants are fueled by coal. The Company has maintained competitive electric rates when compared to neighboring utilities and has a competitive electric baseload generating production cost, which includes fuel and plant operating expenses, of less than 1.5 CENTS per kilowatt hour. Lignite and sub-bituminous coal were utilized by the Company as fuel for virtually all of the electric energy generated during 1994. The continued delivery of lignite and sub-bituminous coal to the three large steam generating units in which the Company is part owner is reasonably assured by contracts covering various periods of the operating lives of these units. GAS BUSINESS On a fully consolidated basis, 40% of the Company's 1994 operating revenues were from the sale of gas energy. During 1994, the Company derived 56% of its gas revenues from South Dakota and 44% from Nebraska. The Company's peak daily sendout was 128,700 MMBTU. For the year ended December 1994, 44% of the Company's gas sales were from residential customers and 56% of sales were from commercial and industrial sales. During the last five years the Company has expanded its gas distribution operations to serve 29 new communities in South Dakota. The Company owns and operates natural gas distribution systems serving approximately 36,000 customers in eastern South Dakota, for which it purchases gas from various gas marketing firms under gas transportation service agreements with various gas marketing firms. These agreements provide for firm deliverable pipeline capacity of approximately 49,300 MMBTU per day in South Dakota. The Company has service agreements with Northern Natural Gas Company ("NNG") providing for firm transportation of natural gas. While NNG has eliminated nearly all of its gas supply activities, the Company has supply contracts in place and peak shaving capacity to meet its peak day system needs. In Nebraska, the Company owns and operates natural gas distribution systems serving approximately 39,000 retail customers in the village of Alda and the cities of Grand Island, Kearney, and North Platte, Nebraska. The Company purchases much of its natural gas for these systems from KN Gas Supply Co. under a seven-year service agreement entered into in 1993. The Company also purchases certain quantities of gas for its Nebraska customers from various gas marketing firms. These agreements provide for firm deliverable pipeline capacity of approximately 49,600 MMBTU per day in Nebraska. To supplement firm gas supplies, the Company has contracts for underground natural gas storage services to meet the heating season and peak day requirements of its gas customers. In addition, the Company owns and operates six propane-air plants with a total rated capacity of 18,000 MMBTU per day, or approximately 14% of peak day requirements. The propane-air plants provide an economic alternative to pipeline transportation charges to meet the extreme peaks caused by customer demand on extremely cold days. A few of the Company's industrial customers purchase their natural gas requirements directly from gas marketing firms for transportation and delivery through the Company's distribution system. The transportation rates have been designed to make the Company economically indifferent as to whether the Company sells and transports gas or only transports gas. 3 COMPETITION Although the Company's electric service territory is assigned according to the South Dakota Public Utilities Act, and the Company has the right to provide electric service to present and future electric customers in its assigned service area for so long as the service provided is deemed adequate, the energy industry in general has become increasingly competitive. Electric service also competes with other forms of energy and the degree of competition may vary from time to time depending on relative costs and supplies of other forms of energy. The National Energy Policy Act of 1992 was designed to promote energy efficiency and increased competition in the electric wholesale markets. Such Act also allows the Federal Energy Regulatory Commission ("FERC") to order wholesale wheeling by public utilities to provide utility and nonutility generators access to public utility transmission facilitates. The FERC is currently investigating a restructuring of the electric utility industry. Many states are currently considering retail wheeling, which aims to provide all customers with the right to choose their electricity supplier. No regulatory proposals have yet been formally introduced in South Dakota. FERC Order 636 requires, among other provisions, that all companies with natural gas pipelines separate natural gas supply or production services from transportation service and storage businesses. This allows gas distribution companies, such as the Company, and individual customers to purchase gas directly from producers, third parties, and various gas marketing entities and transport it through the suppliers' pipelines. While Order 636 had positive aspects by providing for more diversified supply and storage options, it also required the Company to assume responsibility for the procurement, transportation, and storage of natural gas. The alternatives now available under Order 636 create additional pressure on all distribution companies to keep gas supply and transportation pricing competitive, particularly for large customers. WEATHER Weather fluctuations in the Company's service area have the greatest influence on the Company's revenues from year to year. Typically gas sales peak when colder winter weather patterns create increased winter heating needs while sales decline during warmer winter periods. Electric sales peak during warmer summer periods due to increased air conditioning sales while cooler summer weather patterns produce less sales of electric energy. REGULATION The Company is a "public utility" within the meaning of the Federal Power Act and the South Dakota Public Utilities Act and, as such, is subject to the jurisdiction of, and regulation by, FERC with respect to issuance of securities, the South Dakota Public Utilities Commission ("PUC") with respect to electric service territories, and both FERC and the PUC with respect to rates, service, accounting records, and in other respects. The State of Nebraska has no centralized regulatory agency which has jurisdiction over the Company's operations in that state; however, the Company's natural gas rates are subject to regulation by the municipalities in which it operates. Under the South Dakota Public Utilities Act, enacted in 1975, a requested rate increase may be implemented by the Company 30 days after the date of its filing unless its effectiveness is suspended by the PUC and, in such event, can be implemented subject to refund with interest six months after the date of filing, unless sooner authorized by the PUC. The Company's electric rate schedules provide that it may pass along to all classes of customers qualified increases or decreases in the cost of fuel used in its generating stations and in the cost of fuel included in purchased power. A purchased gas adjustment provision in its gas rate schedules permits the company to pass along to gas customers increases or decreases in the cost of purchased gas. The Company's last electric rate increase amounted to less than 1% in May, 1985. On May 26, 1994, the Company filed for a $2.4 million increase in South Dakota natural gas revenues. As a result of a negotiated settlement with the PUC on November 15, 1994, the Company implemented rates which will produce additional annual natural gas revenues of $2.1 million, assuming normal weather, representing an overall 4 increase of 6.2%. On December 30, 1994, the Company filed for a $2.7 million increase in rates applicable to its Nebraska natural gas service area. Following a negotiated settlement, an annual increase of $2.275 million has been implemented, effective July 1, 1995, an overall increase of 8.7%. CAPITAL SPENDING AND FINANCING The Company's primary capital requirements include the funding of its utility construction and expansion programs, the funding of debt and preferred stock retirements and sinking fund requirements, and the funding of its corporate development and investment activities. Expenditures for regulated utility construction activities for 1994, 1993, and 1992 were $22.7 million, $20.0 million, and $18.5 million. Construction expenditures during the last three years included expenditures related to the installation of an additional 43 mw of internal electric peaking capacity, the expansion of the Company's natural gas system into 29 additional communities in eastern South Dakota, and to construction of an operations center which will provide future cost savings and operating efficiencies through consolidation of activities. Construction expenditures for the Company's regulated utility businesses are estimated to be $19.3 million in 1995. The majority of these projected expenditures will be spent on enhancements of the electric and gas distribution systems and completion of the operations center. Estimated construction expenditures for the Company's regulated utility businesses for the years 1995 through 1999 are expected to be approximately $69 million. Capital requirements for the mandatory retirement of long-term debt and the mandatory preferred stock sinking fund redemption totaled $600,000, $180,000, and $513,000, for the years ended 1994, 1993, and 1992. It is expected that such mandatory retirements will be $600,000 in 1995, $1,080,000 in 1996, $570,000 in 1997, $20.6 million in 1998, and $13.5 million in 1999. NONUTILITY OPERATIONS NORTHWESTERN GROWTH CORPORATION ("NGC"). NGC was incorporated under the laws of South Dakota in 1994 to pursue and manage nonutility investments and development activities. Although the primary focus of NGC's investment program will be to seek growth opportunities in the energy, energy equipment, and energy services industries, NGC is also pursuing opportunities in existing and emerging growth entities in nonenergy industries that meet return and capital gain requirements. Along with a portfolio of marketable securities, NGC's assets include the investments of three subsidiaries: Northwestern Networks, Inc., Northwestern Systems, Inc., and SYN Inc. NORTHWESTERN NETWORKS, INC. ("NNI"). NNI was incorporated in South Dakota in 1986. NNI holds a common stock investment in LodgeNet Entertainment Corporation, a provider of television entertainment and information systems to hotels and motels. NORTHWESTERN SYSTEMS, INC. ("NSI"). NSI was incorporated in South Dakota in 1986. NSI owns all of the common stock ownership in Lucht, Inc., a firm that develops, manufactures, and markets multi-image photographic printers and other related equipment. SYN INC. ("SYN"). SYN, a Delaware corporation, was formed for the purpose of acquiring Synergy Group Incorporated, a major propane distributor. See "Pending Acquisition of Synergy Group Incorporated." GRANT, INC. Grant, Inc., which holds title to property not used in the Company's utility business, was incorporated in South Dakota in 1972. PENDING ACQUISITION OF SYNERGY GROUP INCORPORATED GENERAL On May 17, 1995, SYN entered into a Purchase and Sale Agreement (the "Acquisition Agreement") with Synergy Group Incorporated, a Delaware corporation ("Synergy"), S & J Investments and the stockholders of Synergy (the "Synergy Stockholders"), providing for the acquisition by SYN of Synergy and its 5 subsidiaries and of certain operating equipment which Synergy has been leasing from S & J Investments (the "Acquisition"). NGC, the immediate parent corporation of SYN, joined in the Acquisition Agreement to guarantee SYN's performance thereof. Under the terms of the Acquisition Agreement, the Acquisition is subject to various conditions and approvals, including the accuracy of various representations and warranties made by the sellers as to the business, assets, financial condition and results of operations of Synergy and its subsidiaries, the obtaining of financing needed by SYN for the Acquisition, the issuance of orders by the FERC authorizing the Company's issuance of the securities offered under this Prospectus, the net proceeds from which are to be used to provide such financing for SYN (see "Use of Proceeds"), and the expiration or termination of the waiting period for the Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On June 19, 1995 the FERC issued the required orders and on July 6, 1995 early termination of the Hart-Scott-Rodino waiting period was granted. The Acquisition will be an expansion of the Company's energy distribution business, which currently is primarily regulated electric and gas utility distribution. See "The Company". Two of the Company's corporate objectives are intended to be accomplished through the Acquisition. The immediate objective is to expand the Company's energy distribution business. The second objective is to use the business acquired from Synergy as a base for additional acquisitions in the propane distribution industry which, unlike the Company's electric and gas public utility business, is not regulated as to rates or territory served. The Company is currently considering the acquisition of a small propane distributor. The propane distribution industry currently consists of approximately 8,000 retail propane marketing companies in the continental United States, with propane being the fourth largest source of energy marketed at retail in the United States, following electricity, natural gas and fuel oil. As a result of the factors affecting Synergy's business, see "Business of Synergy", the Company expects that its consolidated revenues and earnings may be subject to increased variability following consummation of the Acquisition. BUSINESS OF SYNERGY Synergy, headquartered in Farmingdale, New York, is a multi-state marketer principally engaged in the retail distribution of propane and other fuels for residential, commercial, industrial, agricultural and other uses. Synergy's propane sales during the past three fiscal years represented approximately 83% of its annual revenues, of which the major portion (approximately 50% of propane sales in the fiscal year ending March 31, 1995) resulted from sales to customers who utilize propane for residential purposes, primarily for home heating, water heating and cooking. The balance of propane sales are primarily for commercial, industrial and agricultural use. Synergy also sells propane for use as engine fuel for forklifts and over-the-road vehicles. Synergy currently maintains 152 retail branches which service approximately 200,000 customers in 23 states, primarily in rural and suburban areas of the Northeast, Mid-Atlantic, Southeast and Southcentral regions of the United States. According to available industry data, Synergy is, based upon volume sold, one of the nation's 10 largest retailers of propane. Synergy also sells gasoline, diesel and aviation fuel, and appliances and equipment which use propane, and is engaged in the sale, repair and leasing of forklift trucks. Synergy purchases propane from major domestic oil companies as well as independent oil and liquid gas producers. These producers ship the propane via pipeline to immediate supply terminals at which Synergy's large transport trucks take delivery and transport the propane to bulk storage tanks. Synergy's fleet of approximately 500 tank trucks delivers the propane from these bulk storage facilities to approximately 193,000 propane storage tanks or cylinders which it leases to its customers and which are located at customer premises. These tanks are used exclusively to hold propane purchased from Synergy, thereby promoting the stability of Synergy's customer base. While the cost and inconvenience of switching tanks tends to minimize switching by customers among suppliers on the basis of minimal price variations, it also makes it more difficult to obtain new customers, other than through acquisitions, in areas where there are existing relationships between potential customers and other distributors. 6 The retail propane industry is mature, with only limited growth in total demand for the product foreseen. The Company expects the overall demand for propane to remain relatively constant over the next several years, with year-to-year industry volumes being impacted primarily by weather patterns. Therefore, Synergy's ability to grow within the industry will be dependent on its ability to acquire other retail distributors, on the success of opening new district locations and on the success of its marketing efforts to acquire new customers. Synergy competes with other distributors of propane, including several major companies and several thousand small independent operators. Synergy's ability to compete effectively depends on the reliability of its service, its responsiveness to customers and its ability to maintain competitive retail prices. Synergy competes for customers against suppliers of electricity, fuel oil and natural gas. In the last two decades, many new homes were built, and older homes converted to use electrical heating systems and appliances. Electricity is a major competitor of propane, but propane generally enjoys a substantial competitive price advantage over electricity. The Company believes that fuel oil does not present a significant competitive threat in Synergy's primary service areas because: (i) propane is a residue-free, cleaner energy source, (ii) environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances generally are not as efficient as propane appliances. Furnaces and appliances that burn propane will not operate on fuel oil, and therefore a conversion from one fuel to the other requires the installation of new equipment. Synergy's customers will have an incentive to switch to fuel oil only if fuel oil becomes significantly less expensive than propane. Synergy generally does not attempt to sell propane in areas served by natural gas distribution systems, except sales for specialized industrial applications because the price per equivalent energy unit of propane is, and has historically been, higher than that of natural gas. To use natural gas, however, a retail customer must be connected to a distribution system provided by a local utility. Natural gas is not expected by management of the Company to create significant competition for Synergy in areas that are not currently served by natural gas distribution systems because of the costs involved in building or connecting to a natural gas distribution system. The propane gas distribution business is affected by economic and other factors, some of which are beyond the control of the Synergy, such as weather conditions. Synergy's business is highly seasonal, with a substantial portion of its revenues customarily being generated during the six month winter period ending in March. Synergy's business was adversely affected by unusually warm winter conditions in fiscal 1995. Warm winter conditions in the future periods may adversely affect Synergy's revenues, operating income and cash flow in such years. The retail propane business is a "margin-based" business in which gross profits are dependent upon the excess of the sales price over the propane supply costs. Propane is a commodity, and, as such, its unit price is subject to changes in response to changes in supply or other market conditions. Consequently, the unit price of propane purchased by Synergy, as well as other marketers, can change rapidly over a short period. In general, product supply contracts permit suppliers to charge posted prices at the time of delivery or the current prices established at major storage points. If rapid increases in the wholesale cost of propane cannot be immediately passed on to retail customers, such increases may reduce margins on retail sales. Consequently, Synergy's profitability will be sensitive to changes in wholesale propane prices. According to public reports filed by Synergy with the Commission, Synergy incurred substantial net losses in each of its last five fiscal years. As a result of such net losses, Synergy has been in default under certain of its debt covenants and the audit report prepared by Synergy's independent accountants relating to Synergy's financial statements for the last two fiscal years noted that Synergy's recurring losses from operations, net capital deficiency and default on certain of its debt "raise substantial doubt about the entity's ability to continue as a going concern." Although Synergy has recorded net losses during each of the last five years, its operating income for the years ended March 31, 1995 and 1994 was approximately $6,492,000 and $4,090,000, respectively. See "Management of Synergy" for a description of the Company's financing plans and anticipated operating efficiencies which the Company believes will substantially improve Synergy's results of operations following the Acquisition. 7 ACQUISITION CONSIDERATION The consideration to be paid by SYN for the Acquisition, in addition to assuming various liabilities of Synergy and its subsidiaries, consists of (i) cash in the amount of $137,500,000, which amount will be subject to adjustment upward or downward according to whether the working capital of Synergy (as specifically defined in the Acquisition Agreement) exceeds or is less than $21,042,000 at the time of closing of the Acquisition, (ii) a promissory note payable by SYN in the principal amount of $1,250,000, and (iii) the issuance to the Synergy Stockholders of 17,500 shares of the Common Stock of SYN (17.5% of the total that will be outstanding) and 2,500 shares of the 15% Series A Cumulative Preferred Stock of SYN (valued at $2,500,000), such shares of preferred stock being part of a series of preferred stock of SYN for which the remaining 50,000 shares are expected to be issued to the Company in exchange for a $50,000,000 portion of the long-term financing which the Company expects to provide to SYN. Substantially all of Synergy's loan indebtedness ($88.2 million) will be paid from the cash portion of the consideration for the Acquisition. MANAGEMENT OF SYNERGY The Acquisition will be made in association with Empire Gas Corporation ("Empire Gas"), a large propane distribution company headquartered in Lebanon, Missouri, which has a management experienced in the retail propane distribution business. NGC and SYN have entered into a management agreement (the "Management Agreement") with Empire Gas, pursuant to which Empire Gas has been engaged to perform the planning and management of the assets and business operations of SYN and its subsidiaries, subject to the direction of the Board of Directors of SYN, following the Acquisition (the "Management Services"). It is planned that, immediately upon the consummation of the Acquisition, substantial changes will be made in the management and operation of the acquired business in order to achieve improvement in the results of operations of the business. NGC and Empire Gas will implement significant cost efficiency measures to reduce Synergy's operating, selling and general and administrative expenses. These measures include the elimination of employee positions, corporate overhead and field location operating expenses. The Synergy headquarters office operations will be consolidated with the Empire Gas corporate offices in Lebanon, Missouri, resulting in substantial expense savings. Another significant portion of the expense reductions is represented by the elimination of compensation and vehicle lease expenses previously paid to the Synergy Stockholders. In addition to operating cost reductions, the Company's post acquisition financing and capitalization plan for Synergy will reduce overall financing expenses and provide capital for growth that was not available prior to the acquisition. See "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information." As compensation for the Management Services, SYN will pay Empire Gas a Fixed Fee and a Management Fee. The Fixed Fee is intended to cover Empire Gas' operating overhead in performing the Management Services and initially will be $3,250,000 per annum, subject to adjustment annually based upon increases in the Consumer Price Index. The Management Fee will be at the rate of $500,000 per annum plus 10% of the amount by which the earnings before interest, taxes, depreciation and amortization of SYN and its subsidiaries, on a consolidated basis, exceed certain threshold amounts. At the time of the Acquisition, Empire Gas will purchase 10% of the common stock of SYN for $10,000 and will have an ongoing option to purchase from NGC an additional 20% of the common stock of SYN for $20,000. However, according to the formula stated in another agreement among SYN, Empire Gas and NGC, NGC will be allowed to reacquire from Empire Gas up to 7,500 shares of such common stock of SYN, without payment, if Empire Gas fails to achieve certain cumulative results from the management of SYN and its subsidiaries while the Management Agreement remains in effect. The term of the Management Agreement extends to June 30, 2000 and continues year to year thereafter unless terminated earlier by SYN or Empire Gas. The Management Agreement may be terminated by either party prior to the expiration of the term on any one of several grounds specified in the Agreement. The Management Agreement includes a right of termination by SYN if its operating results do not exceed prescribed thresholds which increase annually as specified therein. In the event the Company receives notice 8 that the Management Agreement will be terminated by Empire Gas, SYN has the right to the use of the personnel and facilities of Empire Gas for a period of up to 18 months following such notice by Empire Gas, while developing an alternative for Empire Gas' services. THIRD PARTY SALE NGC and SYN have entered into a purchase agreement with an unrelated party, granting that party the right to purchase certain of the retail branches to be acquired by SYN from Synergy (the "Third Party Sale"). The third party purchase must occur immediately after the closing of the Acquisition and the purchase price is payable in cash and will be based on the price paid by SYN to Synergy for such outlets. Such cash price is estimated to be approximately $40 million, which would decrease SYN's cash payment for the Acquisition to approximately $100 million, which reduction would be applied to reduce the long-term investment in securities to be issued by SYN to NGC or the Company and the loan to be made by NGC to SYN. CAPITALIZATION OF SYN The capitalization of SYN, taking into account the financing intended to be provided to SYN by the Company and NGC from the net proceeds of certain of the securities being offered pursuant to this Prospectus (see "Use of Proceeds"), is planned to be as follows at the time of the Acquisition closing, assuming consummation of the third party sale: Common Stock (100,000 shares outstanding): NGC (72,500 shares) (1)............................................. $ 72,500 Empire Gas (10,000 shares) (1)...................................... 10,000 Former Synergy Stockholders (17,500 shares) (2)..................... 17,500 $ 100,000 15% Series A Cumulative Preferred Stock (52,500 shares outstanding): NGC (50,000 shares)................................................. $ 50,000,000 Former Synergy Stockholders (2,500 shares) (2)...................... 2,500,000 $ 52,500,000 Long Term Debt: Secured Term Loan from NGC (3)...................................... $ 52,500,000 Total Capitalization.............................................. $105,100,000 - ------------------------ (1) Empire Gas has an option to purchase 20,000 of the shares owned by NGC for a price of $1 per share. (2) Issued to Former Synergy Stockholders as part of Acquisition consideration. (3) The Company anticipates that SYN will obtain a bank borrowing facility to fund SYN's working capital needs.
9 NORTHWESTERN PUBLIC SERVICE COMPANY AND SYNERGY GROUP INCORPORATED PRO FORMA FINANCIAL INFORMATION Set forth below are summary financial data extracted from the audited consolidated statement of operations of the Company for the year ended December 31, 1994, the unaudited consolidated financial statements of the Company as of March 31, 1995, and for the three months then ended; the summary financial data extracted from the unaudited statement of operations of Synergy for the 12 months ended December 31, 1994 and for the three months ended March 31, 1995, and balance sheet information as of March 31, 1995; and the pro forma financial information for the Company ("the Pro Forma Financial Information") for the year ended December 31, 1994, for the three months ended March 31, 1995, and as of March 31, 1995, based on such historical financial statements, to illustrate the effects of the Acquisition. The Pro Forma Financial Information illustrates the effects of the Acquisition as adjusted to give effect to the Third Party Sale. (See "Pending Acquisition of Synergy Group Incorporated.") The Acquisition will be accounted for using the purchase method of accounting. After the Acquisition, the total purchase price of the Acquisition will be allocated to Synergy's tangible and intangible assets and liabilities based upon their respective fair values. The allocation of the aggregate purchase price included in the Pro Forma Financial Information is preliminary, but the final allocation of the purchase price is not expected to differ materially from the preliminary allocation. The financing plan to be executed for the funding of the Acquisition is expected to be as presented in the Pro Forma Financial Information. Although market conditions may impact certain financing options and assumptions as to interest and dividend rates, the overall financing plan is not expected to vary materially from that presented. The pro forma statements of operations for the year ended December 31, 1994 and for the three months ended March 31, 1995, give effect to the Acquisition, and the related transactions as if they had occurred on January 1, 1994. The pro forma balance sheet as of March 31, 1995 has been prepared as if the transaction had occurred on that date. The pro forma financial information does not purport to present the financial position or results of operations of the Company had the Acquisition actually been completed as of the dates indicated. In addition, the pro forma financial information is not necessarily indicative of future results of operations and should be read in conjunction with the historical consolidated financial statements of the Company incorporated by reference herein. 10 UNAUDITED PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ESTIMATED EFFECTS OF PARTIAL SALE OF ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Operating Revenue............................ $ 157,266 $ 128,182 $(28,814) $256,634 -- $256,634 Cost of Product Sold......................... 80,457 62,242 (14,748) 127,951 -- 127,951 ---------- ---------- -------------- -------- ----------- --------- Gross Profit................................. 76,809 65,940 (14,066) 128,683 -- 128,683 ---------- ---------- -------------- -------- ----------- --------- Operating Costs and Expenses Operating and maintenance expenses......... 18,191 44,663 (10,046) 52,808 $(4,181)(B) 48,627 General and administrative................. 9,707 14,239 -- 23,946 (4,944)(B) 19,002 Depreciation and amortization.............. 12,439 4,983 (905) 16,517 448(C) 16,965 Property and other taxes................... 6,104 -- -- 6,104 -- 6,104 ---------- ---------- -------------- -------- ----------- --------- 46,441 63,885 (10,951) 99,375 (8,677) 90,698 ---------- ---------- -------------- -------- ----------- --------- Operating Income............................. 30,368 2,055 (3,115) 29,308 8,677 37,985 ---------- ---------- -------------- -------- ----------- --------- Other Income (Expense) Investment income and other................ 2,611 1,185 -- 3,796 -- 3,796 Interest expense........................... (9,670) (11,994) -- (21,664) 7,504(D) (14,160) Debt restructuring costs................... -- (2,976)(G) -- (2,976) -- (2,976) ---------- ---------- -------------- -------- ----------- --------- (7,059) (13,785) -- (20,844) 7,504 (13,340) ---------- ---------- -------------- -------- ----------- --------- Income (Loss) Before Income Taxes............ 23,309 (11,730) (3,115) 8,464 16,181 24,645 Provision (Credit) for Income Taxes.......... 7,869 (324) (94) 7,451 (269)(E) 7,182 ---------- ---------- -------------- -------- ----------- --------- Net Income................................. 15,440 (11,406) (3,021) 1,013 16,450 17,463 Dividends on Preferred Stock................. (120) -- -- (120) (2,043)(F) (2,163) ---------- ---------- -------------- -------- ----------- --------- Net Income Available for Common............ $ 15,320 $ (11,406) $ (3,021) $ 893 $14,407 $ 15,300(G) ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Net Income per Share......................... $ 2.00 $ 1.74(G) ---------- --------- ---------- --------- Weighted Average Shares Outstanding.......... 7,677 8,805 ---------- --------- ---------- --------- Selected Financial Ratios Interest coverage.......................... 5.14(H) 4.65 ---------- --------- ---------- --------- Ratio of earnings to fixed charges......... 3.39(H) 2.73(G) ---------- --------- ---------- --------- Ratio of earnings to fixed charges, including preferred dividends............. 3.33(H) 2.25(G) ---------- --------- ---------- ---------
11 UNAUDITED PRO FORMA STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ESTIMATED EFFECTS OF PARTIAL SALE OF ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(A) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Operating Revenue............................ $ 50,754 $ 42,816 ($10,958) $ 82,612 $-- $ 82,612 Cost of Product Sold......................... 26,185 20,907 (6,001) 41,091 -- 41,091 ---------- ---------- -------------- -------- ----------- --------- 24,569 21,909 (4,957) 41,521 -- 41,521 ---------- ---------- -------------- -------- ----------- --------- Operating Costs and Expenses Operating and maintenance expenses......... 4,210 11,889 (2,819) 13,280 197(B) 13,477 General and administrative................. 2,594 (159)(G) -- 2,435 (690)(B) 1,745 Depreciation and amortization.............. 3,210 1,476 (220) 4,466 72(C) 4,538 Property and other taxes................... 1,673 -- -- 1,673 -- 1,673 ---------- ---------- -------------- -------- ----------- --------- 11,687 13,206 (3,039) 21,854 (421) 21,433 ---------- ---------- -------------- -------- ----------- --------- Operating Income............................. 12,882 8,703 (1,918) 19,667 421 20,088 ---------- ---------- -------------- -------- ----------- --------- Other Income (Expense) Investment income and other................ 565 172 -- 737 -- 737 Interest expense........................... (2,590) (2,390) -- (4,980) 1,267(D) (3,713) Debt restructuring costs................... -- (24) -- (24) -- (24) ---------- ---------- -------------- -------- ----------- --------- (2,025) (2,242) -- (4,267) 1,267 (3,000) ---------- ---------- -------------- -------- ----------- --------- Income (Loss) Before Income Taxes............ 10,857 6,461 (1,918) 15,400 1,688 17,088 Provision (Credit) for Income Taxes.......... 3,754 (224) -- 3,530 (282)(E) 3,248 ---------- ---------- -------------- -------- ----------- --------- Net Income................................... 7,103 6,685 (1,918) 11,870 1,970 13,840 Dividends on Preferred Stock................. (30) -- -- (30) (511)(F) (541) ---------- ---------- -------------- -------- ----------- --------- Net Income Available for Common.............. $ 7,073 $ 6,685 ($ 1,918) $ 11,840 $ 1,459 $ 13,299(G) ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Net Income per Share......................... $ 0.92 $ 1.51(G) ---------- --------- ---------- --------- Weighted Average Shares Outstanding.......... 7,677 8,805 ---------- --------- ---------- --------- Selected Financial Ratios Interest coverage.......................... 7.53(H) 6.68 ---------- --------- ---------- --------- Ratio of earnings to fixed charges........... 5.09(H) 5.52(G) ---------- --------- ---------- --------- Ratio of earnings to fixed charges, including preferred dividends......................... 5.00(H) 4.69(G) ---------- --------- ---------- --------- - ------------------------ Note: The results of operations for Synergy for the three months ended March 31, 1995 are not indicative of a full year's results of operations.
12 UNAUDITED PRO FORMA BALANCE SHEET MARCH 31, 1995 (DOLLARS IN THOUSANDS)
ESTIMATED SALE OF CERTAIN ASSETS TO NPS SYNERGY UNRELATED PRO FORMA HISTORICAL HISTORICAL THIRD PARTY(I) SUBTOTAL ADJUSTMENT PRO FORMA ---------- ---------- -------------- -------- ----------- --------- Current Assets Cash....................................... $ 3,338 $ 4,117 $ 40,000 $ 47,455 ($40,000)(J) $ 7,455 Trade receivables.......................... 13,890 16,677 (4,598) 25,969 (990)(K) 24,979 Inventories................................ 13,332 10,607 (2,393) 21,546 (1,500)(K) 20,046 Prepaid expenses........................... -- 1,137 -- 1,137 -- 1,137 Other...................................... 5,765 -- -- 5,765 -- 5,765 ---------- ---------- -------------- -------- ----------- --------- 36,325 32,538 33,009 101,872 (42,490) 59,382 ---------- ---------- -------------- -------- ----------- --------- Property and Equipment At cost, net of accumulated depreciation... 252,806 70,045 (13,685) 309,166 7,140(K) 316,306 ---------- ---------- -------------- -------- ----------- --------- Other Assets (net) Goodwill and other intangibles............. -- 2,348 (19,324) (16,976) 54,422(K) 37,446 Other...................................... 74,301 1,014 -- 75,315 (1,014)(K) 74,301 ---------- ---------- -------------- -------- ----------- --------- 74,301 3,362 (19,324) 58,339 53,408 111,747 ---------- ---------- -------------- -------- ----------- --------- Total Assets............................... $ 363,432 $ 105,945 $-- $469,377 $ 18,058 $487,435 ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- --------- Current Liabilities Commercial paper........................... $ 6,000 $ -- $-- $ 6,000 $ -- $ 6,000 Current maturities of long-term debt....... 570 88,387 -- 88,957 (88,387)(L) 570 Accounts payable and accrued expenses...... 29,699 10,540 -- 40,239 5,455(K) 45,694 ---------- ---------- -------------- -------- ----------- --------- 36,269 98,927 -- 135,196 (82,932) 52,264 ---------- ---------- -------------- -------- ----------- --------- Other Liabilities Deferred income taxes...................... 37,742 2,093 -- 39,835 (1,720)(L) 38,115 Unamortized investment tax credits......... 10,444 -- -- 10,444 -- 10,444 Deferred interest payable.................. -- 1,030 -- 1,030 (1,030)(L) -- Other...................................... 27,862 935 -- 28,797 -- 28,797 ---------- ---------- -------------- -------- ----------- --------- 76,048 4,058 -- 80,106 (2,750) 77,356 ---------- ---------- -------------- -------- ----------- --------- Long Term Debt............................... 129,318 4,330 -- 133,648 47,374(M) 181,022 ---------- ---------- -------------- -------- ----------- --------- Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust.... -- -- -- -- 24,212(N) 24,212 ---------- ---------- -------------- -------- ----------- --------- Cumulative Preferred Stock................... 2,640 41,700 -- 44,340 (41,700)(Q) 2,640 ---------- ---------- -------------- -------- ----------- --------- Common Stock Equity (Deficit) Common stock............................... 26,870 41 -- 26,911 4,268(O) 31,179 Additional paid-in capital................... 29,923 5,284 -- 35,207 21,191(P) 56,398 Retained earnings.......................... 59,183 (48,395) -- 10,788 48,395(Q) 59,183 Unrealized gain on investments, net........ 3,181 -- -- 3,181 -- 3,181 ---------- ---------- -------------- -------- ----------- --------- 119,157 (43,070) -- 76,087 73,854 149,941 ---------- ---------- -------------- -------- ----------- --------- Total Liabilities & Stockholders Equity.... $ 363,432 $ 105,945 -- $469,377 $ 18,058 $487,435 ---------- ---------- -------------- -------- ----------- --------- ---------- ---------- -------------- -------- ----------- ---------
13 NOTES TO PRO FORMA FINANCIAL INFORMATION A) Represents all relevant statement of operations effects, net of income taxes, generated by the expected sale of certain Synergy properties to an unrelated third party. Although a purchase agreement to sell certain properties has been executed and it is anticipated that such transaction will be consummated, in the event the Third Party Sale is not closed, pro forma net income available for common would have been $15,343,000 and $14,040,000; and pro forma net income per common share would have been $1.73 and $1.58 for the year ended December 31, 1994 and for the three months ended March 31, 1995, respectively. The following represents the estimated impact on pro forma net income available for common as presented if the sale does not occur (in thousands):
YEAR THREE ENDED MONTHS 12/31/94 ENDED --------- 3/31/95 INCREASE ----------- (DECREASE) Pro forma net income available for common as presented........................... $ 15,300 $ 13,299 --------- ----------- 1) Operating income retained............................................ 3,115 1,918 2) Additional reductions in operating costs and expenses................ 610 153 3) Increased general and administrative charge.......................... (750) (188) 4) Increased interest expense........................................... (1,934) (483) 5) Increased income tax expense......................................... (180) (455) 6) Increased dividends on preferred stock............................... (818) (204) --------- ----------- Subtotal........................................................... 43 741 --------- ----------- Pro forma net income available for common without sale to third party............ $ 15,343 $ 14,040 --------- ----------- --------- -----------
The following represents the estimated impact on the pro forma balance sheet at March 31, 1995 as presented if the sale does not occur (in thousands):
3/31/95 ----------- INCREASE (DECREASE) 1) Trade receivables................................................... $ 4,598 2) Inventories......................................................... 2,393 3) Property and equipment, net......................................... 13,685 4) Goodwill............................................................ 19,324 ----------- Total Assets...................................................... $ 40,000 ----------- ----------- 1) Long-term debt...................................................... 28,000 2) Common stock........................................................ 2,000 3) Preferred stock..................................................... 10,000 ----------- Total Liabilities & Equity........................................ $ 40,000 ----------- -----------
14 NOTES TO PRO FORMA FINANCIAL INFORMATION B) Represents the following breakdown of reductions in operating costs and expenses principally related to employee positions, corporate administrative expenses and certain other specifically identified cost savings (in thousands):
YEAR ENDED THREE 12/31/94 MONTHS ----------- ENDED 3/31/95 INCREASE ----------- (DECREASE) Operating expenses -- 1) Employee related expenses................................................... $ (1,834) $ (458) 2) Vehicle lease expenses...................................................... (2,047) 730 3) Store consolidations........................................................ (300) (75) ----------- ----------- Total..................................................................... $ (4,181) $ 197 ----------- ----------- ----------- ----------- General and administrative expenses -- 1) Employee related expenses................................................... $ (7,863) $ (1,431) 2) Occupancy costs............................................................. (643) (151) 3) Bank account charges........................................................ (188) (45) 4) Empire Gas general and administrative charge................................ 3,250 812 5) Empire Gas management fee................................................... 500 125 ----------- ----------- Total..................................................................... $ (4,944) $ (690) ----------- ----------- ----------- -----------
All general and administrative functions previously performed at Synergy headquarters would be undertaken by Empire Gas, Inc. under a management agreement governing the operation of the Synergy properties. (See "Pending Acquisition of Synergy Group Incorporated.") Under the terms of the management agreement, Empire Gas will be compensated through a general and administrative charge and a management fee arrangement. The vehicle lease expenses are primarily attributable to property owned by affiliates of existing Synergy shareholders. Such property will be purchased as a part of the acquisition transaction. The increase in lease expense for the three months ended March 31, 1995 reflects the net effect of the elimination of such lease expense and a reversal of the credit to expense created by a $1,328,000 forgiveness by these same affiliates of accrued rental obligations. In addition, general and administrative expense savings include shareholder compensation. C) Represents additional depreciation and amortization of fixed assets and intangibles related to the adjustment of assets to fair market value in accordance with the purchase method of accounting. D) Represents interest expense savings associated with the retirement of Synergy's debt as a result of the Acquisition net of additional interest expense related to NPS issuing new debt securities. 15 NOTES TO PRO FORMA FINANCIAL INFORMATION The following table presents a reconciliation of the pro forma interest expense to the historical interest expense for the year ended December 31, 1994, and the three months ended March 31, 1995 (in thousands):
THREE MONTHS YEAR ENDED ENDED 12/31/94 3/31/95 ---------- --------- Historical interest expense -- NPS....................................................................................... $ 9,670 $ 2,590 Synergy................................................................................... 11,994 2,390 ---------- --------- 21,664 4,980 ---------- --------- Add: Interest on short-term bridge financing at an assumed rate of 7.5%.................... 649 162 Interest on new debt securities issued for permanent financing at an assumed rate of 7.5%.................................................................................. 3,639 910 Less: Interest on retired long-term debt of Synergy.................................. (11,792) (2,339) ---------- --------- Pro forma adjustment........................................................................ (7,504) (1,267) ---------- --------- Pro forma interest expense.................................................................. $ 14,160 $ 3,713 ---------- --------- ---------- ---------
E) Represents income tax effect of all pro forma adjustments. Such adjustments assume Synergy will be a separate income tax filing and reporting entity. F) Represents preferred stock dividend requirements related to the issuance of new securities as part of the permanent financing. This dividend requirement is based on an 8.5% pretax rate. G) The net income of Synergy for the year ended December 31, 1994 includes a nonrecurring charge of $2,976,000 for debt restructing costs. Had the debt restructuring not occurred, pro forma net income available for common would have been $18,276,000; pro forma net income per common share would have been $2.08; ratio of earnings to fixed charges would have been 2.94x; and ratio of fixed charges, including preferred dividends would have been 2.42x for the year ended December 31, 1994. The net income of Synergy for the three months ended March 31, 1995 includes a nonrecurring credit to general and administrative expense of $4,326,000 for the reversal of previously accrued shareholders' compensation. Had this compensation adjustment not been made, pro forma net income available for common would have been $8,973,000; pro forma net income per common share would been $1.02; ratio of earnings to fixed charges would have been 4.38x and ratio of earnings to fixed charges, including preferred dividends would have been 3.68x for the three months ended March 31, 1995. In accordance with the current guidelines of the SEC, no minority interest has been recognized even though NPS will initially own 72.5% of the common stock of SYN. H) The Company has calculated the interest coverage ratio pursuant to the Company's general mortgage indenture and has calculated the ratio of earnings to fixed charges pursuant to Item 503 of the Commission's Regulation S-K. I) Represents the sale of certain assets to an unrelated third party in a separate transaction. J) Represents cash purchase price from the unrelated third party sale proceeds. K) Represents various purchase accounting adjustments to be accounted for in accordance with the purchase method of accounting. 16 NOTES TO PRO FORMA FINANCIAL INFORMATION The following is a detailed allocation of the purchase price and source of funds, net of underwriting fees, related to the acquisition transaction (in thousands): Purchase price.......................................................... $ 140,000 Add: Debt, acquisition, and transition costs........................... 5,000 --------- Total............................................................... 145,000 Less: Sale to an unrelated third party................................. 40,000 --------- Adjusted purchase price................................................. $ 105,000 --------- --------- Allocation of purchase price -- Cash.................................................................. $ 4,117 Trade receivables..................................................... 11,089 Inventories........................................................... 6,714 Prepaid expenses and other............................................ 1,137 Property, plant, and equipment........................................ 63,500 Goodwill and other intangibles........................................ 37,446 Accounts payable and accrued expenses................................. (15,995) Customer deposits..................................................... (935) Deferred income tax................................................... (373) Long-term debt........................................................ (1,700) --------- Net assets acquired................................................. $ 105,000 --------- --------- Source of funds, net -- Long-term debt........................................................ $ 50,004 Company-Obligated Mandatorily Redeemable Preferred Securities of Trust Subsidiary........................................................... 24,212 Common stock.......................................................... 30,784 --------- Total............................................................... $ 105,000 --------- ---------
L) Represents liabilities and other deferred credits that would be paid with proceeds of the transaction. M) Represents the following debt restructuring of the combined companies (in thousands): Historical long-term debt -- NPS................................................................... $ 129,318 Synergy............................................................... 4,330 --------- Total............................................................... 133,648 --------- Add: New debt offering................................................. 50,004 Less: Retirement of Synergy long-term debt............................. (2,630) --------- Pro forma adjustment.................................................. 47,374 --------- Pro forma long-term debt.............................................. $ 181,022 --------- ---------
N) Represents the net proceeds expected to be generated by a Company-Obligated Mandatorily Redeemable Preferred Securities of Trust Subsidiary offering that is part of the permanent financing. All of the assets of NWPS Capital, the subsidiary trust, will be approximately $31 million of Subordinated Debt Securities of the Company which will bear interest at a rate of % per annum, assuming the issuance of 1.2 million Preferred Securities. Pro Forma amounts shown in the table reflect the portion of the estimated net proceeds of the offering of Preferred Securities to be used to fund the Acquisition. O) Represents the combination of purchase accounting adjustments eliminating Synergy's common stock investment of $41,000 against the par value of shares expected to be sold in a common stock offering that is part of the permanent financing. 17 NOTES TO PRO FORMA FINANCIAL INFORMATION The following provides a summary of the net adjustment (in thousands): Par value of shares generated from NPS common stock offering.............. $ 4,309 Less: elimination of Synergy common stock................................ (41) --------- Net..................................................................... $ 4,268 --------- ---------
P) Represents the combination of purchase accounting adjustments eliminating Synergy's additional paid-in capital of $5,284,000 against the net proceeds expected to be allocated to NPS additional paid-in capital as a result of the common stock offering that is part of the permanent financing. The following provides a summary of the net adjustment (in thousands): Net allocation to additional paid-in capital from NPS common stock offering................................................................ $ 26,475 Less: elimination of Synergy additional paid-in capital................. (5,284) --------- Net.................................................................... $ 21,191 --------- ---------
Q) Represents the elimination of Synergy's remaining equity accounts. 18 THE NWPS TRUSTS Each of NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III is a statutory business trust formed under Delaware law pursuant to (i) a separate declaration of trust ( each, a "Declaration") executed by the Company, as sponsor for such trust (the "Sponsor"), and the NWPS Trustees (as defined below) of such trust and (ii) the filing of a separate certificate of trust with the Secretary of State of the State of Delaware on June 19, 1995. Each NWPS Trust exists for the exclusive purposes of (i) issuing the Preferred Securities and common securities representing undivided beneficial interests in the assets of such NWPS Trust (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities"), (ii) investing the gross proceeds from the sale of the Trust Securities in the Subordinated Debt Securities of the Company and (iii) engaging in only those other activities necessary or incidental thereto. All of the Common Securities will be directly or indirectly owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that, upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Company will directly or indirectly acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of each NWPS Trust. Each NWPS Trust has a term of approximately 55 years but may terminate earlier, as provided in each Declaration. The business and affairs of each NWPS Trust will be conducted by the trustees (the "NWPS Trustees") appointed by the Company as the direct or indirect holder of all the Common Securities. The holder of the Common Securities will be entitled to appoint, remove or replace any of, or increase or reduce the number of, the NWPS Trustees of a NWPS Trust. The duties and obligations of the NWPS Trustees for each NWPS Trust shall be governed by the Declaration for such trust. A majority of the NWPS Trustees will be persons who are employees or officers of or who are affiliated with the Company (the "Regular Trustees"). In certain limited circumstances set forth in the Prospectus Supplement for the Preferred Securities, the holders of a majority in liquidation amount of the Preferred Securities will be entitled to appoint one additional Regular Trustee who need not be an employee or officer of or otherwise affiliated with the Company. One NWPS Trustee of each NWPS Trust will be a financial institution that is not affiliated with the Company and has a specified minimum amount of aggregate capital, surplus, and undivided profits of not less than $50,000,000, which shall act as property trustee and as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the terms set forth in the Prospectus Supplement for the Preferred Securities (the "Property Trustee"). In addition, unless the Property Trustee maintains a principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, one NWPS Trustee of each NWPS Trust will have a principal place of business or reside in the State of Delaware (the "Delaware Trustee"). The Company will pay all fees and expenses related to the NWPS Trusts and the offering of the Trust Securities, the payment of which will be guaranteed by the Company as described under "Description of the Guarantees" herein. The Delaware Trustee for each NWPS Trust is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. The principal place of business of each NWPS Trust is c/o the Company, 33 Third Street S.E., Huron, South Dakota, 57350-1318, telephone (605) 352-8411. 19 USE OF PROCEEDS If the Third Party Sale is consummated, the net proceeds from the sale of $102.5 million of the Offered Securities will be applied to fund the Acquisition, including certain transaction expenses. The Company will use $50 million of the net proceeds to purchase 50,000 shares of the 15% Series A Cumulative Preferred Stock of SYN, the subsidiary of the Company formed to effect the Acquisition, and $52.5 million of the net proceeds will be loaned by the Company to SYN. If the Third Party Sale is not consummated, the net proceeds from the sale of $142,500,000 of the Offered Securities will be applied to fund the Acquisition, including certain transaction expenses. In that case the Company will use $68 million of the net proceeds to purchase 68,000 shares of the 15% Series A Cumulative Preferred Stock of SYN and $74.5 million of the net proceeds will be loaned by NGC to SYN. Each NWPS Trust will use all of the proceeds received from the sale of its Preferred Securities to purchase Subordinated Debt Securities from the Company. The Company intends to add the net proceeds from the sale of the Subordinated Debt Securities to its general funds, to be used to fund the Acquisition, as described above, and for other general corporate purposes, as described below. The net proceeds from the sale of any other Offered Securities will be used for general corporate purposes, which may include the repayment of indebtedness, working capital expenditures and other investments in, or acquisitions of, businesses and assets. Pending application of such net proceeds for specific purposes, such proceeds may be invested in short-term or marketable securities. Specific allocations of proceeds to a particular purpose that have been made at the date of any Prospectus Supplement will be described therein. In the event the Acquisition is not consummated, the net proceeds from the sale of the Offered Securities will be used to redeem or acquire and retire outstanding First Mortgage Bonds (as defined under "Description of the Mortgage Bonds"), repay short term debt, and for other general corporate purposes, as described above. RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS The following table sets forth the ratios of earnings to fixed charges and earnings to combined fixed charges and preferred dividends for the Company on an historical basis for the fiscal years ended December 31, 1994, 1993, 1992, 1991 and 1990, and for the three-month period ended March 31, 1995. Such ratios are also presented on a pro forma basis for the year ended December 31, 1994 and the three-month period ended March 31, 1995. For the purpose of calculating such ratios, "earnings" consist of income from continuing operations before income taxes, "fixed charges" consist of interest on all indebtedness, amortization of debt expense and the percentage of rental expense on operating leases deemed representative of the interest factor and "preferred dividends" represent dividends paid on all preferred shares outstanding during the periods. See "Northwestern Public Service Company and Synergy Group Incorporated Pro Forma Financial Information" for the assumptions upon which the pro forma ratios are based.
YEAR ENDED DECEMBER 31, QUARTER ENDED --------------------------------------------------------------- MARCH 31, 1990 1991 1992 1993 1994 1995 ----- ----- ----- ----- ----- ------------- Ratio of Earnings to Fixed Charges....... 4.61 4.09 3.42 3.52 3.39 5.09 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends......... 4.28 3.79 3.33 3.45 3.33 5.00 PRO FORMA -------------------------------- YEAR ENDED QUARTER ENDED DECEMBER 31, MARCH 31, 1994 1995 ----------------- ------------- Ratio of Earnings to Fixed Charges....... 2.73 5.52 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends......... 2.25 4.69
DESCRIPTION OF THE MORTGAGE BONDS GENERAL The Mortgage Bonds will be bonds, notes or other evidences of indebtedness authenticated and delivered under a General Mortgage Indenture and Deed of Trust, between the Company and The Chase 20 Manhattan Bank (N.A.) (the "New Mortgage Trustee"), dated as of August 1, 1993. The New Mortgage Trustee shall act as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended. Such General Mortgage and Deed of Trust, as supplemented by various supplemental indentures, including one or more supplemental indentures relating to the Mortgage Bonds, is hereinafter referred to as the "New Mortgage." The summaries under this heading do not purport to be complete and are subject to the detailed provisions of the New Mortgage. Capitalized terms used under this heading which are not otherwise defined in this Prospectus shall have the meanings ascribed thereto in the New Mortgage. Wherever particular provisions of the New Mortgage or terms defined therein are referred to, such provisions or definitions are incorporated by reference as a part of the statements made herein and such statements are qualified in their entirety by such reference. References to article and section numbers in this description of the Mortgage Bonds, unless otherwise indicated, are references to article and section numbers of the New Mortgage. The New Mortgage provides that additional bonds may be issued thereunder on the basis of Pledged Bonds (as hereinafter defined), property additions, retired bonds and cash. (See "Issuance of Additional Mortgage Bonds" below.) The Mortgage Bonds and all other bonds heretofore or hereafter issued under the New Mortgage are collectively referred to herein as the "Mortgage Bonds." Reference is made to the Prospectus Supplement for the Mortgage Bonds for a description of the following terms of the series of Mortgage Bonds in respect of which this Prospectus is being delivered: (i) the title (series designation) of such Mortgage Bonds; (ii) the limit, if any, upon the aggregate principal amount of such Mortgage Bonds, (iii) the date or dates on which the principal of such Mortgage Bonds is payable; (iv) the rate or rates at which such Mortgage Bonds will bear interest, if any; the date or dates from which such interest will accrue; the dates on which such interest will be payable ("Interest Payment Dates") and the regular record dates for the interest payable on such Interest Payment Dates; (v) the bases on which the Mortgage Bonds will be issued; (vi) the option, if any, of the Company to redeem such Mortgage Bonds and the periods within which or the dates on which, the prices at which and the terms and conditions upon which, such Mortgage Bonds may be redeemed, in whole or in part, upon the exercise of such option; (vii) the obligation, if any, of the Company to redeem or purchase such Mortgage Bonds pursuant to any sinking fund or analogous provisions or at the option of the Holder and the periods within which or the dates on which, the prices at which and the terms and conditions upon which such Mortgage Bonds will be redeemed, in whole or in part, pursuant to such obligation; (viii) the denominations in which such Mortgage Bonds will be issuable; and (ix) any other terms of such Mortgage Bonds not inconsistent with the provisions of the New Mortgage. While the New Mortgage contains provisions for the maintenance of the Mortgaged Property, it does not contain any provisions for a maintenance or sinking fund and, except as may be provided in a Supplemental Indenture (and described in the applicable Prospectus Supplement), there will be no provisions for any such funds for the Mortgage Bonds. REDEMPTION OF THE MORTGAGE BONDS Any terms for the optional or mandatory redemption of Mortgage Bonds will be set forth in the Prospectus Supplement. Except as shall otherwise be provided in the applicable Prospectus Supplement with respect to Mortgage Bonds redeemable at the option of the Holder, Mortgage Bonds will be redeemable only upon notice by mail not less than 30 days prior to the date fixed for redemption, and, if less than all the Mortgage Bonds of a series, or any tranche thereof, are to be redeemed, the particular Mortgage Bonds to be redeemed will be selected by such method as shall be provided for the particular series or tranche, or in the absence of any such provision, by such method as the Bond Registrar deems fair and appropriate. (See Sections 5.03 and 5.04.) Any notice of redemption at the option of the Company may state that such redemption shall be conditioned upon receipt by the New Mortgage Trustee, on or prior to the dated fixed for such redemption, of money sufficient to pay the principal of and premium, if any, and interest, if any, on such Mortgage Bonds and that if such money has not been so received, such notice will be of no force and effect and the Company will not be required to redeem such Mortgage Bonds. (See Section 5.04.) 21 SECURITY GENERAL. Except as discussed below, Mortgage Bonds now or hereafter issued under the New Mortgage will be secured primarily by: (a) bonds ("First Mortgage Bonds") issued under the Company's Indenture dated August 1, 1940 (the "First Mortgage"), to The Chase Manhattan Bank (National Association), successor by merger to The Chase National Bank of the City of New York, as trustee (the "First Mortgage Trustee"), and C. J. Heinzelmann, successor to Carl E. Buckley, as individual trustee, and delivered to the New Mortgage Trustee under the New Mortgage, which First Mortgage Bonds will be secured, equally and ratably with all other bonds issued under the First Mortgage, by a valid first lien on substantially all of the fixed property, franchises and rights of the Company of a character not expressly excepted from the lien (which excepted property consists principally of cash, securities, receivables, personal property held for sale or lease or consumable in operations, and certain real estate held for resale and not used or useful in the public utility business of the Company), subject to permitted encumbrances and liens as defined in the First Mortgage; and (b) the lien of the New Mortgage on the Company's properties used in the generation, production, transmission or distribution of electricity or the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska, together with the properties owned by the Company as of August 1, 1993 located in the States of North Dakota and Iowa which consist principally of shared ownership interests in electric generating facilities (the Company does not serve customers in the States of North Dakota and Iowa), but not, unless the Company otherwise elects, any future acquired properties in the States of North Dakota and Iowa, which lien is junior to the lien of the First Mortgage. As discussed below under "Pledged Bonds," following a merger or consolidation of another corporation into the Company, the Company could deliver to the New Mortgage Trustee bonds issued under an existing mortgage on the properties of such other corporation in lieu of or in addition to bonds issued under the First Mortgage. In such event, the Mortgage Bonds would be secured, additionally, by such bonds and by the lien of the New Mortgage on the properties of such other corporation, which would be junior to the liens of such existing mortgage and the First Mortgage. The First Mortgage and all such other mortgages are hereinafter, collectively, called the "Class "A" Mortgages," and all bonds issued under the Class "A" Mortgages and delivered to the New Mortgage Trustee are hereinafter collectively called the "Pledged Bonds." If and when no Class "A" Mortgages are in effect, the New Mortgage will constitute a first mortgage lien on all property of the Company subject thereto. PLEDGED BONDS. The Pledged Bonds will be issued and delivered to, and registered in the name of, the New Mortgage Trustee or its nominee and will be owned and held by the New Mortgage Trustee, subject to the provisions of the New Mortgage, for the benefit of the Holders of all Mortgage Bonds Outstanding from time to time, and the Company will have no interest in such Pledged Bonds. Except as may be otherwise set forth in the supplemental indenture pursuant to which any Mortgage Bonds are to be issued, Pledged Bonds issued as the basis for the authentication and delivery of such Mortgage Bonds (a) will mature on the same dates, and in the same principal amounts, as such Mortgage Bonds, and (b) will contain, in addition to any mandatory redemption provisions applicable to all Pledged Bonds Outstanding under the related Class "A" Mortgage, mandatory redemption provisions correlative to provisions for mandatory redemption, or for redemption at the option of the Holder, of such Mortgage Bonds. Pledged Bonds issued as the basis for authentication and delivery of a series or tranche of Mortgage Bonds (x) may, but need not, bear interest, any such interest to be payable at the same times as interest on the Mortgage Bonds of such series or tranche, and (y) may, but need not, contain provisions for the redemption thereof at the option of the Company, any such redemption to be made at a redemption price or prices not less than the principal amount of such Pledged Bonds. (See Sections 4.02 and 7.01.) Any payment by the Company of principal of or premium or interest on the Pledged Bonds held by the New Mortgage Trustee will be applied by the New Mortgage Trustee to the payment of any principal, premium or interest, as the case may be, in respect of the Mortgage Bonds which is then due, and, to the extent of such application, the obligation of the Company under the New Mortgage to make such payment in 22 respect of the Mortgage Bonds will be deemed satisfied and discharged. If, at the time of any such payment of principal of Pledged Bonds, there shall be no principal then due in respect to the Mortgage Bonds, the proceeds of such payment will be deemed to constitute Funded Cash and will be held by the New Mortgage Trustee as part of the New Mortgaged Property, to be withdrawn, used or applied as provided in the New Mortgage. If, at the time of any such payment of premium or interest on Pledged Bonds, there shall be no premium or interest, as the case may be, then due in respect of the Mortgage Bonds, the proceeds of such payment will be remitted to the Company at its request. (See Section 7.02 and "Withdrawal of Cash" below.) Any payment by the Company of principal of or premium or interest on Mortgage Bonds authenticated and delivered on the basis of the deposit with the New Mortgage Trustee of Pledged Bonds (other than by application of the proceeds in respect of such Pledged Bonds) will, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal, premium or interest, as the case may be, in respect of such Pledged Bonds which is then due. The New Mortgage Trustee may not sell, assign or otherwise transfer any Pledged Bonds except to a successor trustee under the New Mortgage. (See Section 7.04.) At the time any Mortgage Bonds of any series or tranche which have been authenticated and delivered upon the basis of Pledged Bonds cease to be Outstanding (other than as a result of the application of the proceeds of the payment or redemption of such Pledged Bonds), the New Mortgage Trustee shall surrender to or upon the order of the Company an equal principal amount of such Pledged Bonds having the same Stated Maturity and mandatory redemption provisions as such Mortgage Bonds. (See Section 7.03.) At the date of this Prospectus, the only Class "A" Mortgage is the First Mortgage and the only Pledged Bonds issuable at this time are First Mortgage Bonds issuable thereunder. The New Mortgage provides that in the event of the merger or consolidation of another company with or into the Company, an existing mortgage constituting a lien on properties of such other company prior to the lien of the New Mortgage may be designated by the Company as an additional Class "A" Mortgage. Bonds thereafter issued under such additional mortgage would be Pledged Bonds and could provide the basis for the authentication and delivery of Mortgage Bonds under the New Mortgage. (See Section 7.06.) When no Pledged Bonds are Outstanding under a Class "A" Mortgage except for Pledged Bonds held by the New Mortgage Trustee, then, at the request of the Company and subject to satisfaction of certain conditions, the New Mortgage Trustee will surrender such Pledged Bonds for cancellation, and the related Class "A" Mortgage will be satisfied and discharged, the lien of such Class "A" Mortgage on the Company's property will cease to exist and the priority of the lien of the New Mortgage will be increased. (See Section 7.07.) The New Mortgage contains no restrictions on the issuance of bonds under Class "A" Mortgages in addition to Pledged Bonds issued to the New Mortgage Trustee as the basis for the authentication and delivery of Mortgage Bonds. First Mortgage Bonds may currently be issued under the First Mortgage on the basis of property additions, retirements of bonds previously issued under the First Mortgage and cash deposited with the First Mortgage Trustee. As of July 27, 1995, $47,500,000 of First Mortgage Bonds (other than Pledged Bonds) were outstanding. LIEN OF THE NEW MORTGAGE. The properties of the Company used in the generation, production, transmission and distribution of electricity and the distribution of gas in any form and for any purpose in the States of South Dakota or Nebraska together with properties owned by the Company as of August 1, 1993 located in the States of North Dakota and Iowa (but not, unless the Company otherwise elects, any future acquired properties in the States of North Dakota and Iowa) are subject to the lien of the New Mortgage. Substantially all of such property, while subject to the lien of the New Mortgage, will be also subject to the prior lien of the First Mortgage. The Mortgage Bonds will have the benefit of the prior lien of the First Mortgage on such property, and the benefit of the prior lien of any additional Class "A" Mortgage on any property subject thereto, to the extent of the aggregate principal amount of Pledged Bonds, issued under the respective Class "A" Mortgages, held by the New Mortgage Trustee. The lien of the New Mortgage is subject to Permitted Liens which include tax liens and other governmental charges which are not delinquent and which are being contested, construction and materialmen's liens, certain judgment liens, easements, reservations and rights of others (including governmental entities) 23 in, and defects of title in, certain property of the Company, certain leasehold interests, liens on the Company's pollution control and sewage and solid waste facilities and certain other liens and encumbrances. (See Section 1.01.) There are excepted from the lien of the New Mortgage, among other things, cash and securities not paid to, deposited with or held by the New Mortgage Trustee under the New Mortgage; contracts, leases and other agreements of all kinds, contract rights, bills, notes and other instruments, accounts receivable, claims, certain intellectual property rights and other general intangibles; permits, licenses and franchises; automobiles, other vehicles, movable equipment, aircraft and vessels; all goods, wares and merchandise held for sale in the ordinary course of business or for use by or for the benefit of the Company; fuel, materials, supplies and other personal property consumable in the operations of the Company's business; computers, machinery and equipment; coal, ore, gas, oil, minerals and timber mined or extracted from the land; gas transmission lines connecting wells with main or branch trunk lines or field gathering lines connecting wells with main or branch trunk lines; electric energy, gas, steam, water and other products generated, produced or purchased; leasehold interests; and all books and records. (See Granting Clauses.) The First Mortgage contains similar, but not identical, exceptions. Without the consent of the Holders, the Company and the New Mortgage Trustee may enter into supplemental indentures to subject to the lien of the New Mortgage additional property, whether or not used in the electric or gas utility businesses (including property which would otherwise be excepted from such lien). (See Section 14.01.) Such property, so long as the same would otherwise constitute Property Additions (as described below), would thereupon constitute Property Additions and be available as a basis for the issuance of Mortgage Bonds. (See "Issuance of Additional Mortgage Bonds" below.) The New Mortgage contains provisions subjecting after-acquired property to the lien thereof, subject to the prior lien of the First Mortgage. These provisions are limited in the case of consolidation or merger (whether or not the Company is the surviving corporation) or sale of substantially all of the Company's assets. In the event of consolidation or merger or the transfer of all the mortgaged property as or substantially as an entirety, the New Mortgage will not be required to be a lien upon any of the properties then owned or thereafter acquired by the successor corporation, except properties acquired from the Company in or as a result of such transaction and improvements, extensions and additions to such properties and renewals, replacements and substitutions of or for any part or parts of such properties. (See Article Thirteen and "Consolidation, Merger, Conveyance, Transfer or Lease" below.) In addition, after-acquired property may be subject to vendors' liens, purchase money mortgages and other liens thereon at the time of acquisition thereof, including the lien of any Class "A" Mortgage. The New Mortgage provides that the New Mortgage Trustee will have a lien, prior to the lien on behalf of the holders of Mortgage Bonds, upon Mortgaged Property and any money collected by the New Mortgage Trustee as proceeds of the Mortgaged Property, for the payment of its reasonable compensation and expenses and for indemnity against certain liabilities. (See Section 11.07.) ISSUANCE OF ADDITIONAL MORTGAGE BONDS The maximum principal amount of Mortgage Bonds which may be issued under the New Mortgage is limited to $500,000,000, provided that, without the consent of the Holders, the Company and the New Mortgage Trustee may enter into supplemental indentures to increase such amount. (See Sections 3.01 and 14.01.) Mortgage Bonds of any series may be issued from time to time under Article Four of the New Mortgage on the basis of, and in an aggregate principal amount not exceeding: (1) the aggregate principal amount of Pledged Bonds issued and delivered to the Trustee; (2) 75% of the Cost or Fair Value (whichever is less) of Property Additions (as described below) which do not constitute Bonded Property Additions (being, generally, Property Additions which have been made the basis of the authentication and delivery of Mortgage Bonds, the release of mortgaged property or cash withdrawals) after certain deductions and additions, primarily including adjustments to offset property retirements; 24 (3) the aggregate principal amount of Retired Bonds (which consist of Mortgage Bonds no longer Outstanding under the New Mortgage (including Mortgage Bonds deposited under any sinking or analogous funds) which have not been used for certain other purposes under the New Mortgage and which are not to be paid, redeemed or otherwise retired by the application of Funded Cash), but if Pledged Bonds have been made the basis for the authentication and delivery of such Retired Bonds, only if the related Class "A" Mortgage has been discharged; and (4) an amount of cash deposited with the Trustee. In general, the issuance of Mortgage Bonds is subject to Adjusted New Earnings of the Company for 12 consecutive months within the preceding 18 months being at least one and three-fourths the Annual Interest Requirements on all Mortgage Bonds at the time Outstanding, Mortgage Bonds then applied for, all outstanding Pledged Bonds other than Pledged Bonds held by the New Mortgage Trustee under the New Mortgage, and all other indebtedness (with certain exceptions) secured by a lien prior to the lien of the New Mortgage, except that no such net earnings requirement need be met if the additional Mortgage Bonds to be issued are to have no Stated Interest Rate prior to Maturity. The Company is not required to satisfy the net earnings requirement prior to issuance of Mortgage Bonds as provided in (1) above if the Pledged Bonds issued and delivered to the New Mortgage Trustee as the basis for such issuance have been authenticated and delivered under the related Class "A" Mortgage on the basis of retired Pledged Bonds unless (a) the Stated Maturity of such retired Pledged Bonds is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Mortgage Bonds and (b) the Stated Interest Rate, if any, on such retired Pledged Bonds immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Mortgage Bonds to be in effect upon the initial authentication and delivery thereof. In addition, the Company is not required to satisfy the net earnings requirement prior to issuance of Mortgage Bonds as provided in (3) above unless (a) the Stated Maturity of the Retired Bonds is a date more than five years after the date of the Company Order requesting the authentication and delivery of such Mortgage Bonds and (b) the Stated Interest Rate, if any, on such Retired Bonds immediately prior to Maturity is less than the Stated Interest Rate, if any, on such Mortgage Bonds to be in effect upon the initial authentication and delivery of such Mortgage Bonds. In general, the interest requirement with respect to variable interest rate indebtedness, if any, is determined with reference to the rate or rates in effect on the date immediately preceding such determination or the rate to be in effect upon initial authentication. (See Section 1.03 and Article Four). Adjusted Net Earnings are calculated before, among other things, provisions for income taxes; depreciation or amortization of property; interest on any indebtedness and amortization of debt discount and expense; any non-recurring charge to income of whatever kind or nature (including without limitation the recognition of expense or impairment due to the non-recoverability of assets or expense), whether or not recorded as a non-recurring item in the Company's books of account; and any refund of revenues previously collected or accrued by the Company subject to possible refund. With respect to Mortgage Bonds of a series subject to a Periodic Offering (such as a medium-term note program), the New Mortgage Trustee will be entitled to receive a certificate evidencing compliance with the net earnings requirements only once, at or prior to the time of the first authentication and delivery of the Mortgage Bonds of such series (unless the Company Order requesting the authentication and delivery of such Mortgage Bonds is delivered on or after the date which is two years after the most recent Net Earnings Certificate was delivered, in which case an updated certificate would be required to be delivered). (See Sections 1.03 and 4.01.) Property Additions generally include any property which is owned by the Company and is subject to the lien of the New Mortgage, except any property the cost of acquisition or construction of which is properly chargeable to an operating expense account of the Company. (See Section 1.04.) Unless otherwise provided in the applicable Prospectus Supplement, the Company will issue the Mortgage Bonds on the basis of Pledged Bonds (I.E., First Mortgage Bonds) issued under its First Mortgage. 25 RELEASE OF PROPERTY The Company may obtain the release from the lien of the New Mortgage of any Mortgaged Property if the Fair Value of all of the Mortgaged Property (excluding the Mortgaged Property to be released but including any Mortgaged Property to be acquired by the Company with the proceeds of, or otherwise in connection with, such release) equals or exceeds an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Mortgage Bonds Outstanding and bonds issued under Class "A" Mortgages outstanding (other than Pledged Bonds). The New Mortgage provides simplified procedures for the release of property which has been released from the lien of a Class "A" Mortgage, minor properties and property taken by eminent domain, and provides for dispositions of certain obsolete property and grants or surrender of certain rights without any release or consent by the New Mortgage Trustee. If any property released from the lien of the New Mortgage continues to be owned by the Company after such release, the New Mortgage will not become a lien on any improvement, extension or addition to such property or renewals, replacements or substitutions of or for any part or parts of such property. (See Article Eight.) WITHDRAWAL OF CASH Subject to certain limitations, cash held by the New Trustee may (1) be withdrawn by the Company (a) to the extent of the Cost or Fair Value (whichever is less) of Unbonded Property Additions, after certain deductions and additions primarily including adjustments to offset retirements, or (b) in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of Mortgage Bonds that the Company would be entitled to issue on the basis of Retired Bonds (with the entitlement to such issuance being waived by operation of such withdrawal), or (c) in an amount equal to twenty-fifteenths (20/15ths) of the aggregate principal amount of any Outstanding Mortgage Bonds delivered to the New Trustee, or (2) upon the request of the Company, be applied to (a) the purchase of Mortgage Bonds (at prices not exceeding twenty-fifteenths (20/15ths) of the principal amount thereof) or (b) the redemption or payment at Stated Maturity of Mortgage Bonds (with any Mortgage Bonds received by the New Trustee pursuant to these provisions being canceled by the New Trustee) (see Section 8.06); provided, however, that cash deposited with the New Mortgage Trustee as the basis for the authentication and delivery of Mortgage Bonds, as well as cash representing a payment of principal of Pledged Bonds, may only be withdrawn in an amount equal to the aggregate principal amount of Mortgage Bonds the Company would be entitled to issue on any basis (with the entitlement to such issuance being waived by operation of such withdrawal), or may, upon the request of the Company, be applied to the purchase, redemption or payment of Mortgage Bonds at prices not exceeding, in the aggregate, the principal amount thereof (See Sections 4.05 and 7.02). CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE The Company may not consolidate with or merge into any other corporation or convey, transfer or lease the Mortgaged Property as or substantially as an entirety to any person unless (a) such transaction is on such terms as will fully preserve the lien and security of the New Mortgage and the rights and powers of the New Mortgage Trustee and Holders, (b) the corporation formed by such consolidation or into which the Company is merged or the person which acquires by conveyance or transfer, or which leases, the Mortgaged Property as or substantially as an entirety is a corporation organized and existing under the laws of the United States of America or any state or territory thereof or the District of Columbia, and such corporation executes and delivers to the New Mortgage Trustee a supplemental indenture, which contains an assumption by such corporation of the due and punctual payment of the principal of and premium, if any, and interest, if any, on the Mortgage Bonds and the performance of all of the covenants of the Company under the New Mortgage and which contains a grant, conveyance, transfer and mortgage by the corporation confirming the lien of the New Mortgage on the Mortgaged Property and subjecting to such lien all property thereafter acquired by the corporation which shall constitute an improvement, extension or addition to the Mortgaged Property or a renewal, replacement or substitution of or for any part thereof, and, at the election of the corporation, subjecting to the lien of the New Mortgage such other property then owned or thereafter acquired by the 26 corporation as the corporation shall specify, and (c) in the case of a lease, such lease will be made expressly subject to termination by the Company or the New Mortgage Trustee at any time during the continuance of an Event of Default. (See Section 13.01.) Other than the security afforded by the lien of the First Mortgage and the New Mortgage and the restrictions on the issuance of additional First Mortgage Bonds and New Mortgage Bonds, there are no provisions of the First Mortgage or the New Mortgage which afford the holders of the Offered Bonds protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company. Neither the First Mortgage nor the New Mortgage contain provisions requiring the repurchase of the Offered Bonds upon a change in control of the Company. MODIFICATION OF NEW MORTGAGE Without the consent of any Holders, the Company and the New Mortgage Trustee may enter into one or more supplemental indentures for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company in the New Mortgage and in the Mortgage Bonds; or (b) to add one or more covenants of the Company or other provisions for the benefit of all Holders or for the benefit of the Holders of, or to remain in effect only so long as there shall be Outstanding, Mortgage Bonds of one or more specified series, or one or more tranches thereof, or to surrender any right or power conferred upon the Company by the New Mortgage; or (c) to correct or amplify the description of any property at any time subject to the lien of the New Mortgage, or better to assure, convey and confirm to the New Mortgage Trustee any property subject or required to be subjected to the lien of the New Mortgage, or to subject to the lien of the New Mortgage additional property; or (d) to convey, transfer and assign to the New Mortgage Trustee and to subject to the lien of the New Mortgage with the same force and effect as if included in the New Mortgage, property of subsidiaries of the Company used or to be used for one or more purposes which if owned by the Company would constitute property used or to be used for one or more of the Primary Purposes of the Company's Business, which property shall for all purposes of the New Mortgage be deemed to be property of the Company, together with such other provisions as may be appropriate to express the respective rights of the New Mortgage Trustee and the Company in regard thereto; or (e) to change or eliminate any provision of the New Mortgage or to add any new provision to the New Mortgage, provided that if such change, elimination or addition adversely affects the interests of the Holders of the Mortgage Bonds of any series or tranche in any material respect, such change, elimination or addition will become effective with respect to such series or tranche only when no Mortgage Bond of such series or tranche remains outstanding under the New Mortgage; or (f) to establish the form or terms of the Mortgage Bonds of any series or tranche as permitted by the New Mortgage; or (g) to provide for the authentication and delivery of bearer securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or (h) to evidence and provide for the acceptance of appointment by a successor trustee or by a co-trustee or separate trustee; or (i) to provide for the procedures required to permit the Company to utilize, at its option, a noncertificated system of registration for all, or any series or tranche of, the Mortgage Bonds; or (j) to change any place where (1) the principal of and premium, if any, and interest, if any, on the Mortgage Bonds of any series, or any tranche thereof, will be payable, (2) any Mortgage Bonds of any series, or any tranche thereof, may be surrendered for registration of transfer, (3) any Mortgage Bonds 27 of any series, or any tranche thereof, may be surrendered for exchange, and (4) notices and demands to or upon the Company in respect of the Mortgage Bonds of any series, or any tranche thereof, and the New Mortgage may be served; or (k) to cure any ambiguity, to correct or supplement any provision therein which may be defective or inconsistent with any other provision therein, or to make any changes to the provisions thereof or to add other provisions with respect to matters and questions arising under the New Mortgage, so long as such other changes or additions do not adversely affect the interests of the Holders of Mortgage Bonds of any series or tranche in any material respect; or (l) to reflect changes in Generally Accepted Accounting Principles; or (m) to provide the terms and conditions of the exchange or conversion, at the option of the holders of Mortgage Bonds of any series, of the Mortgage Bonds of such series for or into Mortgage Bonds of other series or stock or other securities of the Company or any other corporation; or (n) to change the words "Mortgage Bonds" to "First Mortgage Bonds" in the descriptive title of all Outstanding Bonds at any time after the discharge of the First Mortgage; or (o) to comply with the rules or regulations of any national securities exchange on which any of the Mortgage Bonds may be listed; or (p) to modify Section 3.01(a) to increase the aggregate principal amount of Mortgage Bonds which may be authenticated and delivered under the New Mortgage. (See Section 14.01.) Without limiting the generality of the foregoing, if the Trust Indenture Act is amended after the date of the New Mortgage in such a way as to require changes to the New Mortgage or the incorporation therein of additional provisions or so as to permit changes to, or the elimination of, provisions which, at the date of the New Mortgage or at any time thereafter, were required by the Trust Indenture Act to be contained in the New Mortgage, the Company and the New Mortgage Trustee may, without the consent of any Holders, enter into one or more supplemental indentures to evidence or effect such amendment. (See Section 14.01.) Except as provided above, the consent of the Holders of not less than a majority in aggregate principal amount of the Mortgage Bonds of all series then Outstanding, considered as one class, is required for the purpose of adding any provisions to, or changing in any manner, or eliminating any of the provisions of, the New Mortgage pursuant to one or more supplemental indentures; provided, however, if less than all of the series of Mortgage Bonds Outstanding are directly affected by a proposed supplemental indenture, then the consent only of the Holders of a majority in aggregate principal amount of Outstanding Mortgage Bonds of all series so directly affected, considered as one class, will be required; and provided, further, that if the Mortgage Bonds of any series have been issued in more than one tranche and if the proposed supplemental indenture directly affects the rights of the Holders of one or more, but less than all, such tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Mortgage Bonds of all tranches so directly affected, considered as one class, will be required; and provided, further, that no such amendment or modification may, without the consent of each Holder of the Outstanding New Mortgage of each series or tranche directly affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Mortgage Bond, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Bond that would be due and payable upon a declaration of acceleration of maturity or change the coin or currency (or other property) in which any Mortgage Bond or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date), (b) permit the creation of any lien ranking prior to the lien of the New Mortgage with respect to all or substantially all of the Mortgaged Property or terminate the lien of the New Mortgage on all or substantially all of the Mortgaged Property, or deprive such Holder of the benefit of the security of the lien of the New Mortgage, (c) reduce the percentage in principal amount of the Outstanding Mortgage Bonds of such series or tranche, the consent of the Holders of which is required for any such supplemental 28 indenture, or the consent of the Holder of which is required for any waiver of compliance with any provision of the New Mortgage or any default thereunder and its consequences, or reduce the requirements for quorum or voting, or (d) modify certain of the provisions of the New Mortgage relating to supplemental indentures, waiver of certain covenants and waivers of past defaults. A supplemental indenture which changes or eliminates any covenant or other provision of the New Mortgage which has expressly been included solely for the benefit of the Holders of, or which is to remain in effect only so long as there shall be Outstanding Mortgage Bonds of one or more specified series, or one or more tranches thereof, or modifies the rights of the Holders of Mortgage Bonds of such series or tranches with respect to such covenant or other provision, will be deemed not to affect the rights under the New Mortgage of the Holders of the Mortgage Bonds of any other series or tranche. (See Section 14.02.) WAIVER The Holders of at least a majority in aggregate principal amount of all Mortgage Bonds may waive the Company's obligations to comply with certain covenants, including the Company's obligation to maintain its corporate existence and properties, pay taxes and discharge liens, maintain certain insurance and to make such recordings and filings as are necessary to protect the security of the Holders and the rights of the New Mortgage Trustee, provided that such waiver occurs before the time such compliance is required. The Holders of at least a majority of the aggregate principal amount of Outstanding Mortgage Bonds of all affected series or tranches, considered as one class, may waive, before the time for such compliance, compliance with the Company's obligation to maintain an office or agency where the Mortgage Bonds of such series or tranches may be surrendered for payment, registration, transfer or exchange, and compliance with any other covenant specified in a supplemental indenture respecting such series or tranches. (See Section 6.09.) EVENTS OF DEFAULT Each of the following events constitutes an Event of Default under the New Mortgage: (1) failure to pay interest on any Mortgage Bond within 60 days after the same becomes due; (2) failure to pay principal or premium, if any, on any Mortgage Bond within 15 days after its Maturity; (3) failure to perform or breach of any covenant or warranty of the Company in the New Mortgage (other than a covenant or a warranty a default in the performance of which or breach of which is dealt with elsewhere under this paragraph) for a period of 60 days after there has been given to the Company by the New Mortgage Trustee, or to the Company and the New Mortgage Trustee by the Holders of at least 50% in principal amount of Outstanding Mortgage Bonds, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default," unless the New Mortgage Trustee, or the New Mortgage Trustee and the Holders of a principal amount of Mortgage Bonds not less than the principal amount of Mortgage Bonds the Holders of which gave such notice, as the case may be, agree in writing to an extension of such period prior to its expiration; provided, however, that the New Mortgage Trustee, or the New Mortgage Trustee and such Holders, as the case may be, will be deemed to have agreed to an extension of such period if corrective action has been initiated by the Company within such period and is being diligently pursued; (4) certain events relating to reorganization, bankruptcy and insolvency of the Company and appointment of a receiver or trustee for its property; or (5) the occurrence of a Matured Event of Default under any Class "A" Mortgage; provided that the waiver or cure of any such Matured Event of Default and the rescission and annulment of the consequences thereof shall constitute a waiver of the corresponding Event of Default under the New Mortgage and a rescission and annulment of the consequences thereof. (See Section 10.01.) REMEDIES If an Event of Default occurs and is continuing, then the New Mortgage Trustee or the Holders of not less than a majority in principal amount of Mortgage Bonds then Outstanding may declare the principal 29 amount (or if the Mortgage Bonds are Discount Bonds, such portion of the principal amount as may be provided for such Discount Bonds pursuant to the terms of the New Mortgage) of all of the Mortgage Bonds together with premium, if any, and interest accrued, if any, thereon to be immediately due and payable. At any time after such declaration of the maturity of the Mortgage Bonds then Outstanding, but before the sale of any of the Mortgaged Property and before a judgment or decree for payment of money shall have been obtained by the New Mortgage Trustee as provided in the New Mortgage, the Event or Events of Default giving rise to such declaration of acceleration will, without further act, be deemed to have been waived, and such declaration and its consequences will, without further act, be deemed to have been rescinded and annulled, if: (a) the Company has paid or deposited with the New Mortgage Trustee a sum sufficient to pay: (1) all overdue interest, if any, on all Mortgage Bonds then Outstanding; (2) the principal of and premium, if any, on any Mortgage Bonds then Outstanding which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Mortgage Bonds; and (3) all amounts due to the New Mortgage Trustee as compensation and reimbursement as provided in the New Mortgage; and (b) any other Event or Events of Default other than the non-payment of the principal of Mortgage Bonds which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in the New Mortgage. (See Sections 10.02 and 10.17.) The New Mortgage provides that, under certain circumstances and to the extent permitted by law, if an Event of Default occurs and is continuing, the New Mortgage Trustee has the power to take possession of, and to hold, operate and manage, the Mortgaged Property, or with or without entry, sell the Mortgaged Property. If the Mortgaged Property is sold, whether by the New Mortgage Trustee or pursuant to judicial proceedings, the principal of the Outstanding Mortgage Bonds, if not previously due, will become immediately due, together with premium, if any, and any accrued interest. (See Sections 10.03, 10.04 and 10.05.) If an Event of Default occurs and is continuing, the Holders of a majority in principal amount of the Mortgage Bonds then Outstanding will have the right to direct the time, method and place of conducting any proceedings for any remedy available to the New Mortgage Trustee or exercising any trust or power conferred on the New Mortgage Trustee, provided that (a) such direction does not conflict with any rule of law or with the New Mortgage, and could not involve the New Mortgage Trustee in personal liability in circumstances where indemnity would not, in the New Mortgage Trustee's sole discretion, be adequate, (b) such direction is not unduly prejudicial to the rights of the nonassenting Holders, and (c) the New Mortgage Trustee may take any other action deemed proper by the New Mortgage Trustee which is not inconsistent with such discretion. (See Section 10.16.) The New Mortgage provides that no Holder of any Mortgage Bond will have any right to institute any proceeding, judicial or otherwise, with respect to the New Mortgage, or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless (a) such Holder has previously given to the New Mortgage Trustee written notice of a continuing Event of Default; (b) the Holders of not less than a majority in aggregate principal amount of the Mortgage Bonds then Outstanding have made written request to the New Mortgage Trustee to institute proceedings in respect of such Event of Default and have offered the New Mortgage Trustee reasonable indemnity against cost and liabilities incurred in complying with such request; and (c) for 60 days after receipt of such notice, the New Mortgage Trustee has failed to institute any such proceeding and no direction inconsistent with such request has been given to the New Mortgage Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of Mortgage Bonds then Outstanding. Furthermore, no Holder will be entitled to institute any such action if and to the extent that such action would disturb or prejudice the rights of other Holders. (See Section 10.11.) Notwithstanding that the right of a Holder to institute a proceeding with respect to the New Mortgage is subject to certain conditions precedent, each Holder of a Mortgage Bond has the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and interest, if any, on such Mortgage Bond when 30 due and to institute suit for the enforcement of any such payment, and such rights may not be impaired without the consent of such Holder. (See Section 10.12.) The New Mortgage provides that the New Mortgage Trustee give the Holders notice of any default under the New Mortgage to the extent required by the Trust Indenture Act, unless such default shall have been cured or waived, except that no such notice to Holders of a default of the character described in paragraph (3) under "Events of Default" shall be given until at least 45 days after the occurrence thereof. (See Section 11.02.) The Trust Indenture Act currently permits the New Mortgage Trustee to withhold notice of default (except for certain payment defaults) if the New Mortgage Trustee in good faith determines the withholding of such notice to be in the interests of the Holders. As a condition precedent to certain actions by the New Mortgage Trustee in the enforcement of the lien of the New Mortgage and institution of action on the Mortgage Bonds, the New Mortgage Trustee may require adequate indemnity against costs, expense and liabilities to be incurred in connection therewith. (See Sections 10.11 and 11.01.) In addition to every other right and remedy provided in the New Mortgage, the New Mortgage Trustee may exercise any right or remedy available to the New Mortgage Trustee in its capacity as owner and holder of Pledged Bonds which arises as a result of a default or Matured Event of Default under any Class "A" Mortgage, whether or not an Event of Default under the New Mortgage has then occurred and is continuing. (See Section 10.20.) DEFEASANCE Any Mortgage Bond or Bonds, or any portion of the principal amount thereof, will be deemed to have been paid for purposes of the New Mortgage, and the entire indebtedness of the Company in respect thereof will be deemed to have been satisfied and discharged, if there has been irrevocably deposited with the New Mortgage Trustee, in trust: (a) money (including Funded Cash) in the amount which will be sufficient, or (b) Eligible Obligations (as described below), which do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide monies which will be sufficient, or (c) a combination of (a) and (b) which will be sufficient, to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Mortgage Bond or Bonds or portions thereof. (See Section 9.01.) For this purpose, Eligible Obligations include direct obligations of, or obligations unconditionally guaranteed by, the United States of America, entitled to the benefit of the full faith and credit thereof, and certificates, depositary receipts or other instruments which evidence a direct ownership interest in such obligations or in any specific interest or principal payments due in respect thereof. While there is no legal precedent directly on point, it is possible that, for federal income tax purposes, any deposit contemplated in the preceding paragraph could be treated as a taxable exchange of the related Mortgage Bonds for an issue of obligations of the trust or a direct interest in the cash and securities held in the trust. In that case, Holders of such Mortgage Bonds would recognize gain or loss as if the trust obligations or the cash or securities deposited, as the case may be, had actually been received by them in exchange for their Mortgage Bonds. Such Holders thereafter would be required to include in income a share of the income, gain or loss of the trust. The amount so required to be included in income could be different from the amount that would be includible in the absence of such deposit. Prospective investors are urged to consult their own tax advisors as to the specific consequences to them of such deposit. RESIGNATION OF THE NEW MORTGAGE TRUSTEE The New Mortgage Trustee may resign at any time by giving written notice thereof to the Company or may be removed at any time by Act of the Holders of a majority in principal amount of Mortgage Bonds then Outstanding delivered to the New Mortgage Trustee and the Company. No resignation or removal of the New Mortgage Trustee and no appointment of a successor trustee will become effective until the acceptance of appointment by a successor trustee in accordance with the requirements of the New Mortgage. In addition, so long as no Event of Default or event which, after notice or lapse of time, or both, would become an Event of Default has occurred and is continuing, under certain circumstances, if the Company has delivered to the New Mortgage Trustee a resolution of its Board of Directors appointing a successor trustee 31 and such successor has accepted such appointment in accordance with the terms of the New Mortgage, the New Mortgage Trustee will be deemed to have resigned and the successor will be deemed to have been appointed as trustee in accordance with the New Mortgage. (See Section 11.10.) CONCERNING THE NEW MORTGAGE TRUSTEE The Chase Manhattan Bank (N.A.), the Trustee under the New Mortgage, has been a regular depositary of funds of the Company. As trustee under both the New Mortgage and the First Mortgage, The Chase Manhattan Bank (N.A.) would have a conflicting interest for purposes of the Trust Indenture Act if an Event of Default were to occur under either mortgage. In that case, the New Mortgage Trustee may be required to eliminate such conflicting interest by resigning either as New Mortgage Trustee or as First Mortgage Trustee. There are other instances under the Trust Indenture Act which would require the resignation of the New Mortgage Trustee, such as an affiliate of the New Mortgage Trustee acting as underwriter with respect to any of the Mortgage Bonds. TRANSFER The transfer of the Mortgage Bonds may be registered, and Mortgage Bonds may be exchanged for other Mortgage Bonds of the same series and tranche, of authorized denominations and of like tenor and aggregate principal amount, at the office of The Chase Manhattan Bank (N.A.), as Bond Registrar for the Mortgage Bonds, in Brooklyn, New York. The Company may change the place for registration of transfer of the Mortgage Bonds, may appoint one or more additional Bond Registrars (including the Company) and may remove any Bond Registrar, all at its discretion. (See Section 6.02.) The applicable Prospectus Supplement will identify any new place for registration of transfer and additional Bond Registrar appointed, and will disclose the removal of any Bond Registrar effected, prior to the date of such Prospectus Supplement. Except as otherwise provided in the applicable Prospectus Supplement, no service charge will be made for any transfer or exchange of the Mortgage Bonds, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of the Mortgage Bonds. The Company will not be required to issue, and no Bond Registrar will be required to register, the transfer of or to exchange (a) Mortgage Bonds of any series (including the Mortgage Bonds) during a period of 15 days prior to giving any notice of redemption, or (b) any Mortgage Bond selected for redemption in whole or in part, except the unredeemed portion of any Mortgage Bond being redeemed in part. (See Section 3.05.) DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES The following description sets forth certain general terms and provisions of the Subordinated Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Subordinated Debt Securities offered by any Prospectus Supplement and the extent, if any, to which such general terms and provisions may apply to the Subordinated Debt Securities so offered will be described in the Prospectus Supplement relating to such Debt Securities. The Subordinated Debt Securities may be issued, in one or more series, from time to time under an Indenture dated as of , 1995 (the "Indenture"), between the Company and The Chase Manhattan Bank N.A., as trustee (the "Indenture Trustee"), which shall act as indenture trustee for the purposes of the Trust Indenture Act of 1939, as amended. The form of the Indenture is filed as an exhibit to the Registration Statement. Capitalized terms used in this section which are not otherwise defined in this Prospectus shall have the meanings set forth in the Indenture. The following summaries of certain provisions of the Subordinated Debt Securities and the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by express reference to all the provisions of the Indenture, including the definitions therein of certain terms. GENERAL The Subordinated Debt Securities will be direct, unsecured, subordinated obligations of the Company. The Indenture does not limit the aggregate principal amount of Subordinated Debt Securities that may be issued thereunder and provides that Subordinated Debt Securities may be issued thereunder from time to 32 time in one or more series. The Subordinated Debt Securities are issuable in one or more series pursuant to an indenture supplement to the Indenture or a resolution of the Company's Board of Directors or a special committee thereof (each, a "Supplemental Indenture"). The Restated Certificate of Incorporation of the Company limits, subject to certain exceptions, the amount of unsecured indebtedness that the Company may issue or assume, without the consent of the holders of a majority of the total number of shares of preferred stock then outstanding, to 25% of the aggregate of (i) the total principal amount of all outstanding bonds or other securities representing secured indebtedness of the Company, and (ii) the total of the capital stocks and premiums thereon and the surplus of the Company as then stated on the Company's books. At March 31, 1995, the Company could have issued approximately $57 million of unsecured indebtedness (such as the Subordinated Debt Securities) without violating this provision. Reference is made to the Prospectus Supplement relating to any Subordinated Debt Securities being offered for, among other things, the following terms thereof: (1) the title of the Subordinated Debt Securities; (2) any limit on the aggregate principal amount of such Subordinated Debt Securities; (3) the percentage of the principal amount at which such Subordinated Debt Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount thereof payable upon acceleration of the maturity thereof, or the method by which such portion shall be determined; (4) the date or dates on which the principal of such Subordinated Debt Securities will be payable; (5) the rights, if any, to defer payments of interest on the Subordinated Debt Securities by extending the interest payment period, and the duration of such extensions; (6) the subordination terms of the Subordinated Debt Securities of such series; (7) the rate or rates at which such Subordinated Debt Securities will bear interest, or the method by which such rate or rates shall be determined, and the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined; (8) the dates on which such interest will be payable and the Regular Record Dates for any Interest Payment Dates and the basis on which interest shall be calculated; (9) the dates, if any, on which, the price or prices at which the Subordinated Debt Securities may, pursuant to any mandatory or optional sinking fund provisions, be redeemed by the Company and other detailed terms and provisions of such sinking funds; (10) the date, if any, after which, and the price or prices at which, the Subordinated Debt Securities may, pursuant to any optional redemption provisions, be redeemed at the option of the Company or of the Holder thereof, and other detailed terms and provisions of such optional redemption; (11) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1005 of the Indenture on such Subordinated Debt Securities to any Holder who is not a United States person (including any modification to the definition of such term as provided for in the Indenture as originally executed) in respect to any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Subordinated Debt Securities rather than pay such Additional Amounts (and the terms of any such option); (12) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to such Subordinated Debt Securities, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (13) any security for such Subordinated Debt Securities; and (14) any other terms of such Subordinated Debt Securities. For a description of the terms of any series of the Subordinated Debt Securities, reference must be made to both the Prospectus Supplement relating thereto and to the description of Subordinated Debt Securities set forth herein. Unless otherwise indicated in the Prospectus Supplement relating thereto, the Subordinated Debt Securities will be issued in United States dollars in fully registered form, without coupons, in denominations of $25 or any integral multiple thereof. No service charge will be made for any transfer or exchange of the Subordinated Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Unless otherwise indicated in the Prospectus Supplement relating thereto, the principal of, and any premium or interest on, the Subordinated Debt Securities will be payable, and the Subordinated Debt Securities will be exchangeable and transfers thereof will be registrable, at the Place of Payment; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. 33 The Indenture does not contain any provisions that may afford the Holders of Subordinated Debt Securities protection in the event of a highly leveraged transaction or other transaction involving the Company that may occur in connection with a takeover attempt resulting in a decline in the credit rating of the Subordinated Debt Securities. The Indenture also does not contain any provisions that would limit the ability of the Company to incur indebtedness. REGISTRATION AND TRANSFER Subordinated Debt Securities will be issued as Registered Securities and either will be in certificated form or will be represented by Global Securities. Registered Securities will be issuable in denominations of $25 and integral multiples of $25 or in such other denominations as may be in the terms of the Subordinated Debt Securities. Registered Securities will be exchangeable for other Registered Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. Registered Securities may be presented for registration of transfer (duly endorsed or accompanied by a written instrument of transfer), at the corporate trust office of the Indenture Trustee in New York, New York, or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Subordinated Debt Securities and referred to in any Prospectus Supplement. No service charge will be made for any transfer or exchange of Subordinated Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. If any Prospectus Supplement refers to any transfer agent (in addition to the Indenture Trustee) initially designated by the Company with respect to any series of Subordinated Debt Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location at which any such transfer agent acts, except that, if Subordinated Debt Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a transfer agent in each Place of Payment for such series. The Company may at any time designate additional transfer agents with respect to any series of Subordinated Debt Securities. In the event of any redemption of any Subordinated Debt Securities, the Company shall not be required to: (i) issue, register the transfer of or exchange any Subordinated Debt Securities during a period beginning at the opening of business 15 days before any selection of Subordinated Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Subordinated Debt Securities, or portion thereof, called for redemption, except the unredeemed portion of any Subordinated Debt Security being redeemed in part; or (iii) issue, register the transfer of or exchange any Subordinated Debt Securities that has been surrendered for repayment at the option of the Holder, except the portion if any, thereof not to be so repaid. GLOBAL SECURITIES The Subordinated Debt Securities of a series may be issued in whole or in part in the form of one or more Global Securities (as such term is defined below), which will be deposited with, or on behalf of, a depositary (the "Depositary") or its nominee identified in the applicable Prospectus Supplement. In such case, one or more Global Securities will be issued in a denomination or aggregate denomination equal to the portion of the aggregate principal amount of outstanding Subordinated Debt Securities of the series to be represented by such Global Security or Global Securities. Unless and until it is exchanged in whole or in part for Subordinated Debt Securities in registered form, a Global Security may not be registered for transfer or exchange except as (i) a whole by the Depositary for such Global Security to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary, or by any nominee to a successor Depositary or a nominee of such successor Depositary, and (ii) in the circumstances described in the applicable Prospectus Supplement. The term "Global Security," when used with respect to any series of Subordinated Debt Securities, means a Debt Security that is executed by the Company and authenticated and delivered by the Indenture Trustee to the Depositary or pursuant to the Depositary's instruction, which shall be registered in the name of the Depositary or its nominee and which shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all 34 of the Outstanding Subordinated Debt Securities of such series or any portion thereof, in either case having the same terms, including, without limitation, the same original issue date, date or dates on which principal is due, and interest rate or method of determining the interest rate. The specific terms of the depositary arrangement with respect to any portion of a series of Subordinated Debt Securities to be represented by a Global Security will be described in the applicable Prospectus Supplement. The Company expects that the following provisions will apply to depositary arrangements. Unless otherwise specified in the applicable Prospectus Supplement, Subordinated Debt Securities that are to be represented by a Global Security to be deposited with or on behalf of a Depositary will be represented by a Global Security registered in the name of such Depositary or its nominee. Upon the issuance of such Global Security, and the deposit of such Global Security with or on behalf of the Depositary for such Global Security, the Depositary will credit on its book-entry registration and transfer system the respective principal amounts of the Subordinated Debt Securities represented by such Global Security to the accounts of institutions that have accounts with such Depositary or its nominee ("participants"). The accounts to be credited will be designated by the underwriters or agents of such Subordinated Debt Securities or, if such Subordinated Debt Securities are offered and sold directly by the Company, by the Company. Ownership of beneficial interests in such Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in such Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the Depositary or its nominee for such Global Security. Ownership of beneficial interests in such Global Security by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. The foregoing limitations and such laws may impair the ability to transfer beneficial interests in such Global Securities. So long as the Depositary for a Global Security, or its nominee, is the registered owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the Subordinated Debt Securities represented by such Global Security for all purposes under the Indenture. Unless otherwise specified in the applicable Prospectus Supplement, owners of beneficial interests in such Global Security will not be entitled to have Subordinated Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Subordinated Debt Securities of such series in certificated form and will not be considered the Holders thereof for any purposes under the Indenture. Accordingly, each person owning a beneficial interest in such Global Security must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest to exercise any rights of a Holder under the Indenture. The Company understands that under existing industry practices, if the Company requests any action of Holders or an owner of a beneficial interest in such Global Security desires to give any notice or take any action a Holder is entitled to give or take under the Indenture, then the Depositary would authorize the participants to give such notice or take such action, and participants would authorize beneficial owners owning through such participants to give such notice or take such action or would otherwise act upon the instructions of beneficial owners owning through them. Principal of and any premium and interest on a Global Security will be payable in the manner described in the applicable Prospectus Supplement. CONSOLIDATION, MERGER AND SALE The Indenture does not contain any covenant which restricts the Company's ability to merge or consolidate with or into any other corporation, sell or convey all or substantially all of its assets to any person, firm or corporation or otherwise engage in restructuring transactions. EVENTS OF DEFAULT The Indenture provides, with respect to any series of Subordinated Debt Securities outstanding thereunder, that any one or more of the following events that has occurred and is continuing shall constitute an 35 Event of Default: (i) default in the payment of any interest upon or any Additional Amounts payable in respect of any Subordinated Debt Security of that series, or of any coupon appertaining thereto, when the same becomes due and payable and continues for 30 days; provided, however, that, a valid extension of the interest payment period by the Company for the Subordinated Debt Securities shall not constitute a default in the payment of interest for this purpose, and provided further that, if Subordinated Debt Securities are issued to a NWPS Trust, or a trustee of such trust, in connection with the issuance of Trust Securities by such NWPS Trust, said 30-day period will be replaced by a ten-day period; (ii) default in the payment of the principal of or any premium on any Subordinated Debt Security of that series when due, whether at maturity, upon redemption, by declaration or otherwise; provided, however, that, a valid extension of the maturity of the Subordinated Debt Securities shall not constitute a default for this purpose; (iii) default in the deposit of any sinking fund payment, when and as due by the terms of any Subordinated Debt Securities of that series; (iv) default in the performance or breach of any covenant or agreement of the Company in the Indenture with respect to any Subordinated Debt Security of that series, continued for 60 days after written notice to the Company from the Indenture Trustee or from the holders of at least 25% of the outstanding Subordinated Debt Securities of that series; (v) certain events in bankruptcy, insolvency or reorganization of the Company; (vi) the voluntary or involuntary dissolution, winding-up or termination of a NWPS Trust to which (or to a trustee of such trust to which) Subordinated Debt Securities were issued in connection with the issuance of Trust Securities by such NWPS Trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such NWPS Trust, the redemption of all of the Trust Securities of such NWPS Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such NWPS Trust; and (vii) any other Event of Default provided with respect to Subordinated Debt Securities of that series. The Company is required to file annually with the Indenture Trustee an officer's certificate as to the Company's compliance with all conditions and covenants under the Indenture. The Indenture provides that the Indenture Trustee may withhold notice to the Holders of Subordinated Debt Securities of any default, except in the case of a default on the payment of the principal of (or premium), if any, or interest on any Subordinated Debt Securities or the payment of any sinking fund installment with respect to such Subordinated Debt Securities if it considers it in the interest of the Holders of Subordinated Debt Securities to do so. If an Event of Default, other than certain events with respect to bankruptcy, insolvency and reorganization of the Company or any Significant Subsidiary, occurs and is continuing with respect to Subordinated Debt Securities of a particular series, the Indenture Trustee or the Holders of not less than 25% in principal amount of Outstanding Subordinated Debt Securities of that series may declare the Outstanding Subordinated Debt Securities of that series due and payable immediately. If an Event of Default with respect to certain events of bankruptcy, insolvency or reorganization of the Company or any Significant Subsidiary with respect to Subordinated Debt Securities of a particular series shall occur and be continuing, then the principal of all the Outstanding Subordinated Debt Securities of that series, and accrued and unpaid interest thereon, shall automatically be due and payable without any act on the part of the Indenture Trustee or any Holder. Subject to the provisions relating to the duties of the Indenture Trustee, if an Event of Default with respect to Subordinated Debt Securities of a particular series occurs and is continuing, the Indenture Trustee shall be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of Subordinated Debt Securities of such series, unless such Holders shall have offered to the Indenture Trustee reasonable indemnity and security against the costs, expenses and liabilities that might be incurred by it in compliance with such request. Subject to such provisions for the indemnification of the Indenture Trustee, the Holders of a majority in principal amount of the Outstanding Subordinated Debt Securities of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee under the Indenture, or exercising any trust or power conferred on the Indenture Trustee with respect to the Subordinated Debt Securities of that series. The Indenture Trustee may refuse to follow directions in conflict with law or the Indenture that may involve the Indenture Trustee in personal liability or may be unduly prejudicial to Holders not joining therein. 36 The Holders of not less than a majority in principal amount of the Outstanding Subordinated Debt Securities of any series may, on behalf of the Holders of all the Subordinated Debt Securities of such series and any related coupons, waive any past default under the Indenture with respect to such series and its consequences, except a default (i) in the payment of the principal of (or premium, if any) or interest on or Additional Amounts payable in respect of any Subordinated Debt Security of such series unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Indenture Trustee or (ii) in respect of a covenant or provision that cannot be modified or amended without the consent of the Holder of each Outstanding Subordinated Debt Security of such series affected thereby. MODIFICATION OR WAIVER Modification and amendment of the Indenture may be made by the Company and the Indenture Trustee with the consent of the Holders of not less than a majority in principal amount of all Outstanding Subordinated Debt Securities or any series that are affected by such modification or amendment; provided that, no such modification or amendment may, without the consent of the Holder of each Outstanding Subordinated Debt Security of such series, among other things, (i) change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on any Subordinated Debt Security of such series, (ii) reduce the principal amount or the rate of interest on or any Additional Amounts payable in respect of, or any premium payable upon the redemption of, any Subordinated Debt Security of such series, or change the redemption provisions of any Subordinated Debt Securities (iii) change any obligation of the Company to pay Additional Amounts in respect of any Subordinated Debt Security of such series, (iv) reduce the amount of principal of a Subordinated Debt Security of such series that is an Original Issue Discount Security and would be due and payable upon a declaration of acceleration of the Maturity thereof, (v) adversely affect any right of repayment at the option of the Holder of any Subordinated Debt Security of such series, (vi) change the place or currency of payment of principal of, or any premium or interest on, any Subordinated Debt Security of such series, (vii) impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof or any Redemption Date or Repayment Date therefor, (viii) reduce the above-stated percentage of Holders of Outstanding Subordinated Debt Securities of such series necessary to modify or amend the Indenture or to consent to any waiver thereunder or reduce the requirements for voting or quorum described below, (ix) modify the change of control provisions, if any, or (x) modify the foregoing requirements or reduce the percentage of Outstanding Subordinated Debt Securities of such series necessary to waive any past default. Modification and amendment of the Indenture may be made by the Company and the Indenture Trustee without the consent of any Holder, for any of the following purposes: (i) to evidence the succession of another person to the Company as obligor under the Indenture; (ii) to add to the covenants of the Company for the benefit of the Holders of all or any series of Subordinated Debt Securities; (iii) to add Events of Default for the benefit of the Holders of all or any series of Subordinated Debt Securities; (iv) to change or eliminate any provisions of the Indenture, provided that any such change or elimination shall become effective only when there are no Outstanding Subordinated Debt Securities of any series created prior thereto that are entitled to the benefit of such provision; (v) to establish the form or terms of Subordinated Debt Securities of any series; (vi) to secure the Subordinated Debt Securities; (vii) to provide for the acceptance of appointment by a successor Indenture Trustee or facilitate the administration of the trusts under the Indenture by more than one Indenture Trustee; and (viii) to close the Indenture with respect to the authentication and delivery of additional series of Subordinated Debt Securities, or to cure any ambiguity, defect or inconsistency in the Indenture, provided such action does not adversely affect the interest of Holders of Subordinated Debt Securities of any series. CERTAIN COVENANTS If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust and (i) there shall have occurred any event that would constitute an Event of Default or (ii) the Company shall be in default with respect to its payment of any obligations under the related Guarantee or Common Securities Guarantee, then (a) the Company shall not declare or pay dividends on, or make a distribution with respect to or redeem, purchase or acquire, or make a 37 liquidation payment with respect to, any of its capital stock, and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Subordinated Debt Securities; provided, however, that, restriction (a) above does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, and the Company shall have given notice of its election to defer payments of interest on such Subordinated Debt Securities by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing then (a) the Company shall not declare or pay dividends on, or make a distribution with respect to or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock, and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to such Subordinated Debt Securities; provided, however, that, the restriction (a) above does not apply to any stock dividends paid by the Company, where the dividend stock is the same as that on which the dividend is being paid. If Subordinated Debt Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, for so long as such Trust Securities remain outstanding, the Company will covenant (i) to directly or indirectly maintain 100% ownership of the Common Securities of such NWPS Trust; provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of such Common Securities and (ii) to use its reasonable efforts to cause such NWPS Trust (a) to remain a statutory business trust, except in connection with the distribution of Subordinated Debt Securities to the holders of Trust Securities in liquidation of such NWPS Trust, the redemption of all of the Trust Securities of such NWPS Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such NWPS Trust, and (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes. SECURITY AND SUBORDINATION Any security for the Subordinated Debt Securities will be described in the Prospectus Supplement that will accompany this Prospectus. The Subordinated Debt Securities will be subordinated and junior in right of payment to certain other indebtedness of the Company to the extent set forth in the Prospectus Supplement that will accompany this Prospectus. GOVERNING LAW The Indenture and the Subordinated Debt Securities will be governed by, and construed in accordance with, the internal laws of the State of New York. INFORMATION CONCERNING THE INDENTURE TRUSTEE The Indenture Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Indenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Subordinated Debt Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities that might be incurred thereby. The Indenture Trustee is not required to expand or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Indenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. DEFEASANCE The Indenture provides that, except as may be provided in respect of any series of Subordinated Debt Securities, the provisions of Article Fourteen shall apply to the Subordinated Debt Securities of any series and the Company may elect either to (a) except in respect of any Subordinated Debt Securities to which a NWPS Trust or a trustee of such trust is the holder, defease and be discharged from any and all obligations with respect to such Subordinated Debt Securities (except for the obligation to pay Additional Amounts, if any, to a holder who is not a United States person upon the occurrence of certain events of tax, assessment or 38 governmental charge with respect to payments on such Subordinated Debt Securities and the obligations to register the transfer or exchange of such Subordinated Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Subordinated Debt Securities, to maintain an office or agency in respect of such Subordinated Debt Securities, and to hold moneys for payment in trust) ("Defeasance") or (b) be released from its obligations with respect to such Subordinated Debt Securities under Section 1402 or, if provided pursuant to Section 1403 of the Indenture, its obligations with respect to any other covenant, and any omission to comply with such obligations shall not constitute a default or an Event of Default with respect to such Subordinated Debt Securities ("covenant defeasance"), in either case, upon the irrevocable deposit by the Company with the Indenture Trustee (or other qualifying trustee), in trust, of an amount, in such Currency in which such Subordinated Debt Securities are then specified as payable at Stated Maturity, or Government Obligations (as defined below), or both, applicable to such Subordinated Debt Securities (with such applicability being determined on the basis of the currency, currency unit or composite currency in which such Subordinated Debt Securities are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest, if any, on such Subordinated Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, the Company has delivered to the Indenture Trustee an Opinion of Counsel (as specified in the Indenture) to the effect that the Holders of such Subordinated Debt Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred; provided that, such Opinion of Counsel, in the case of defeasance under clause (a) above, must refer to and be based upon a revenue ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. "Government Obligations" means securities that are (i) direct obligations of the government that issued the Currency in which the Subordinated Debt Securities of a particular series are payable, for the payment of which its full faith and credit is pledged, or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the government that issued the Currency in which the Subordinated Debt Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest in or principal of the Government Obligation evidenced by such depository receipt. Unless otherwise provided in the Prospectus Supplement, if, after the Company has deposited funds and/or Government Obligations to effect defeasance or covenant defeasance relating thereto with respect to Subordinated Debt Securities of any series, (a) the Holder of a Subordinated Debt Security of such series is entitled to and does elect, pursuant to the terms of such Subordinated Debt Security, to receive payment in a currency other than that in which such deposit has been made in respect of such Subordinated Debt Security or (b) the currency in which such deposit has been made in respect of any Subordinated Debt Security of such series ceases to be used by its government of issuance, then the indebtedness represented by such Subordinated Debt Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest, if any, on such Subordinated Debt Security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such Subordinated Debt Security into the Currency in which such Subordinated Debt Security becomes 39 payable as a result of such election or such cessation of usage based on the applicable Market Exchange Rate. Unless otherwise provided in the Prospectus Supplement, all payments of principal of (and premium, if any) and interest, if any, and Additional Amounts, if any, on any Subordinated Debt Security that is payable in a Foreign Currency that ceases to be used by its government of issuance shall be made in U. S. Dollars. In the event the Company effects covenant defeasance with respect to (i) any Subordinated Debt Securities and any related coupons and (ii) such Subordinated Debt Securities are declared due and payable because of the occurrence of any Event of Default, other than the Event of Default described in clause (iii) or (v) under "Events of Default," with respect to any covenant for which there has been defeasance, the Currency and/or Government Obligations on deposit with the Indenture Trustee will be sufficient to pay amounts due on such Subordinated Debt Securities at the time of their Stated Maturity but may not be sufficient to pay amounts due on such Subordinated Debt Securities at the time of the acceleration resulting from such Event of Default. However, the Company would remain liable to make payment of such amounts due at the time of acceleration. The Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Subordinated Debt Securities of or within a particular series and any related coupons. MISCELLANEOUS The Company will have the right at all times to assign any of its respective rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of the Company; provided, that, in the event of any such assignment, the Company will remain liable for all of their respective obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. DESCRIPTION OF THE PREFERRED SECURITIES Each NWPS Trust may issue, from time to time, only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration of each NWPS Trust authorizes the Regular Trustees of such NWPS Trust to issue on behalf of such NWPS Trust one series of Preferred Securities. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the Declaration or made part of the Declaration by the Trust Indenture Act. Reference is made to the Prospectus Supplement relating to the Preferred Securities of a NWPS Trust for specific terms, including (i) the distinctive designation of such Preferred Securities, (ii) the number of Preferred Securities issued by such NWPS Trust, (iii) the annual distribution rate (or method of determining such rate) for Preferred Securities issued by such NWPS Trust and the date or dates upon which such distributions shall be payable (provided, however, that, distributions on such Preferred Securities shall be payable on a quarterly basis to holders of such Preferred Securities as of a record date in each quarter during which such Preferred Securities are outstanding), (iv) whether distributions on Preferred Securities issued by such NWPS Trust shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions on Preferred Securities issued by such NWPS Trust shall be cumulative, (v) the amount or amounts which shall be paid out of the assets of such NWPS Trust to the holders of Preferred Securities of such NWPS Trust upon voluntary or involuntary dissolution, winding-up or termination of such NWPS Trust, (vi) the obligation, if any, of such NWPS Trust to purchase or redeem Preferred Securities issued by such NWPS Trust and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities issued by such NWPS Trust shall be purchased or redeemed, in whole or in part, pursuant to such obligation, (vii) the voting rights, if any, of Preferred Securities issued by such NWPS Trust in addition to those required by law, including the number of votes per Preferred Security and any 40 requirement for the approval by the holders of Preferred Securities, or of Preferred Securities issued by one or more NWPS Trusts or of both, as a condition to specified action or amendments to the Declaration of such NWPS Trust, and (viii) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by such NWPS Trust consistent with the Declaration of such NWPS Trust, or with applicable law. All Preferred Securities offered hereby will be guaranteed by the Company to the extent set forth below under "Description of the Guarantees." Certain United States federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of Preferred Securities, each NWPS Trust will issue one series of Common Securities. The Declaration of each NWPS Trust authorizes the Regular Trustees of each trust to issue on behalf of such NWPS Trust one series of Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by a NWPS Trust will be substantially identical to the terms of the Preferred Securities issued by such NWPS Trust and the Common Securities will rank pari passu, and payments will be made thereon pro rata with the Preferred Securities except that, upon an event of default under the Declaration, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. Except in certain limited circumstances, the Common Securities will also carry the right to vote and to appoint, remove or replace any of the NWPS Trustees of a NWPS Trust. All of the Common Securities of a NWPS Trust will be directly or indirectly owned by the Company. DESCRIPTION OF THE GUARANTEES Set forth below is a summary of information concerning the Guarantees that will be executed and delivered by the Company for the benefit of the holders, from time to time, of Preferred Securities. Each Guarantee will be qualified as an indenture under the Trust Indenture Act. Wilmington Trust Company will act as indenture trustee under each Guarantee (the "Guarantee Trustee"). The terms of each Guarantee will be those set forth in each Guarantee and those made part of each Guarantee by the Trust Indenture Act. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. Each Guarantee will be held by the Guarantee Trustee for the benefit of the holders of the Preferred Securities of the applicable NWPS Trust. GENERAL Pursuant to each Guarantee, the Company will irrevocably and unconditionally agree, to the extent set forth herein, to pay in full to the holders of the Preferred Securities issued by a NWPS Trust, the Guarantee Payments (as defined herein) (except to the extent paid by such NWPS Trust), as and when due, regardless of any defense, right of set-off or counterclaim which such NWPS Trust may have or assert. The following payments with respect to Preferred Securities issued by a NWPS Trust (the "Guarantee Payments"), to the extent not paid by such NWPS Trust will be subject to the Guarantee (without duplication): (i) any accrued and unpaid distributions that are required to be paid on such Preferred Securities, to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, (ii) the redemption price, including all accrued and unpaid distributions to the date of redemption (the "Redemption Price"), to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, with respect to any Preferred Securities called for redemption by such NWPS Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of such NWPS Trust (other than in connection with the distribution of Subordinated Debt Securities to the holders of Preferred Securities or the redemption of all of the Preferred Securities upon the maturity or redemption of the Subordinated Debt Securities) the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment to the extent such NWPS Trust has funds legally available therefor and (b) the amount of assets of such NWPS Trust remaining available for distribution to 41 holders of such Preferred Securities in liquidation of such NWPS Trust. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by causing such NWPS Trust to pay such amounts to such holders. Each Guarantee will be a full and unconditional guarantee with respect to the Preferred Securities issued by the applicable NWPS Trust from the time of issuance of such Preferred Securities but will not apply to any payment of distributions due to the extent such NWPS Trust shall lack funds legally available therefor as a result of a failure by the Company to make payments of interest or principal on the Subordinated Debt Securities. If the Company does not make interest payments on the Subordinated Debt Securities purchased by such NWPS Trust, such NWPS Trust will not pay distributions on the Preferred Securities issued by a NWPS Trust and will not have funds legally available therefor. See "Description of the Subordinated Debt Securities." The Company and NWPS Capital believe that the above mechanisms and obligations, taken together, are substantially equivalent to a full and unconditional guarantee by the Company of payments due on the Preferred Securities. The Company has also agreed to irrevocably and unconditionally guarantee the obligations of the NWPS Trusts with respect to the Common Securities (the "Common Securities Guarantee") to the same extent as the Guarantees, except that, upon an event of default under the Indenture, holders of Preferred Securities under the Guarantees shall have priority over holders of Common Securities under the Common Securities Guarantees with respect to distributions and payments on liquidation, redemption or otherwise. CERTAIN COVENANTS OF THE COMPANY In each Guarantee, the Company will covenant that, so long as any Preferred Securities issued by the applicable NWPS Trust remain outstanding, if there shall have occurred any event that would constitute an event of default under such Guarantee or the Declaration of such NWPS Trust, then (a) the Company shall not declare or pay any dividend on, or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to such Subordinated Debt Securities. However, each Guarantee will except from the foregoing any stock dividends paid by the Company where the dividend stock is of the same as that on which the dividend is being paid. MODIFICATION OF THE GUARANTEES; ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), each Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% in liquidation amount of the outstanding Preferred Securities issued by the applicable NWPS Trust. The manner of obtaining any such approval of holders of such Preferred Securities will be set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in a Guarantee shall bind the successors, assignees, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities of the applicable NWPS Trust then outstanding. EVENTS OF DEFAULT An Event of Default under the Guarantee will occur upon the failure of the Company to perform any of its payments or other obligations thereunder. The holders of a majority in liquidation amount of the Preferred Securities to which a Guarantee relates have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce such Guarantee, any holder of Preferred Securities relating to such Guarantee may, after such holder's written request to the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding directly against the Company to enforce the Guarantee Trustee's rights under such Guarantee without first instituting a legal proceeding against the relevant NWPS Trust, the Guarantee Trustee or any other person or entity. 42 The Company will be required to provide annually to the Guarantee Trustee a statement as to the performance by the Company of certain of its obligations under each of the Guarantees and as to any default in such performance. The Company is required to file annually with the Guarantee Trustee an officer's certificate as to the Company's compliance with all conditions under each of the Guarantees. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, prior to the occurrence of a default, undertakes to perform only such duties as are specifically set forth in the Guarantee and, after default with respect to a Guarantee, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by a Guarantee Agreement at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE GUARANTEES Each Guarantee will terminate as to the Preferred Securities issued by the applicable NWPS Trust upon full payment of the Redemption Price of all Preferred Securities of the NWPS Trust, upon distribution of the Subordinated Debt Securities held by the NWPS Trust to the holders of the Preferred Securities of such NWPS Trust, or upon full payment of the amounts payable in accordance with the Declaration of such NWPS Trust upon liquidation of such NWPS Trust. Each Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities issued by the applicable NWPS Trust must restore payment of any sums paid under such Preferred Securities or such Guarantee. STATUS OF THE GUARANTEES Each Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company, and (iii) senior to the Company's common stock. The terms of the Preferred Securities provide that each holder of Preferred Securities issued by a NWPS Trust by acceptance thereof agrees to the subordination provisions and other terms of the applicable Guarantee. Each Guarantee will constitute a guarantee of payment and not of collection (allowing the guaranteed party to institute a legal proceeding directly against the guarantor to enforce its rights under a Guarantee without instituting a legal proceeding against any other person or entity). GOVERNING LAW The Guarantee will be governed by and construed in accordance with the internal laws of the State of New York. DESCRIPTION OF THE COMMON STOCK GENERAL Under the Company's Restated Certificate of Incorporation, as amended (the "Charter"), the Company is authorized to issue three classes of capital stock: 300,000 shares of Cumulative Preferred Stock, par value $100 per share, of which 26,000 shares of 4 1/2% Cumulative Preferred Stock and 40,000 shares of 5 1/4% Cumulative Preferred Stock are outstanding; 200,000 shares of Preference Stock, par value $50 per share, none of which are outstanding; and 20,000,000 shares of Common Stock, par value $3.50 per share, 7,677,232 of which were outstanding as of June 8, 1995. The Cumulative Preferred Stock and the Preference Stock may be issued at any time by the Board of Directors in such series with such terms as it may fix in resolutions providing for the issuance thereof. The following statements are summaries of certain provisions relating to the Common Stock contained in the Charter, the Company's First Mortgage Bond Indenture, as supplemented to date (the "1940 Indenture"), and the Company's New Mortgage (the 1940 Indenture and the New Mortgage Indenture are 43 referred to together as the "Bond Indentures"). Such summaries are not complete descriptions of the provisions of the Charter and the Bond Indentures and are qualified in their entirety by reference thereto. The Charter and the Bond Indentures are contained in exhibits to reports and registration statements which have been filed with the Commission (see "Available Information"). DIVIDEND RIGHTS Subject to the limitations described in the following three paragraphs, dividends may be paid on the Common Stock out of funds legally available for that purpose, when and as declared by the Company's Board of Directors. The Company may not declare or pay cash dividends on the Common Stock unless full dividends on all Cumulative Preferred Stock and on any Preference Stock then outstanding for the current and all past quarterly dividend periods have been paid or provided for. Also, dividends on the Common Stock may not be paid unless the Company has complied with all sinking fund requirements for those series of the Cumulative Preferred Stock and any Preference Stock which have such requirements. Under the terms of the Charter, for so long as shares of Cumulative Preferred Stock are outstanding, the following dividend limitations may not be exceeded unless authorized by the holders of two-thirds of the outstanding shares of such stock: dividends (other than dividends payable in Common Stock) and other distributions on, or acquisitions by the Company for value of, Common Stock (a) may not exceed 50% of the Company's Net Income Available for Common Stock for the preceding 12-months' period if the "common stock equity" of the Company is less than 20% of "total capitalization" (each calculated as required by the Charter) and (b) may not exceed 75% of such Net Income if such capitalization ratio is 20% or more but less than 25%. If such capitalization ratio is 25% or more, no such dividend, distribution or acquisition shall be declared, paid or effected which would reduce such ratio to less than 25%, except to the extent permitted by clauses (a) and (b). Pursuant to these provisions, at March 31, 1995, retained earnings were not restricted as to availability for cash dividends on the Common Stock and the Company's "common stock equity" was 47% of its "total capitalization". The Bond Indentures and certain purchase agreements relating to presently outstanding Cumulative Preferred Stock contain covenants limiting the funds available for payment of cash dividends and other distributions on the Common Stock (for payment as well as purchases of Common Stock by the Company). Under the most restrictive of existing covenants in the Bond Indentures or in such purchase agreements, at March 31, 1995, a total of approximately $46,271,000 was available for cash dividends on the Common Stock. In addition, under the 1940 Indenture cash dividends on the Common Stock and purchases of Common Stock may be made only if the aggregate amount expended for maintenance and provided for depreciation by the Company subsequent to January 1, 1946, plus Net Income Available for Common Stock earned after December 31, 1945, which remains after such dividend (or purchase) is equal to not less than the total of 3 1/2% of the fixed tangible property, plant and equipment of the Company for each full year, and a proportionate percentage for any fractional year, which shall have elapsed between January 1, 1946, and the date of such proposed action. VOTING RIGHTS Of the three classes of the Company's authorized capital stock, the Common Stock is the general voting stock. Holders of Common Stock are entitled to one vote for each share held. Except in the case of certain dividend arrearages on the Cumulative Preferred Stock or Preference Stock, the Common Stock is the only class of stock entitled to be voted for the election of directors. LIQUIDATION RIGHTS In the event of a liquidation (whether voluntary or involuntary) or reduction in the Company's capital resulting in any distribution of assets to its stockholders, the holders of the Common Stock are entitled to receive, pro rata according to the number of shares held by each, all of the assets of the Company remaining for distribution after payment to the holders of the Cumulative Preferred Stock and Preference Stock of the full preferential amounts to which they are entitled. 44 CERTAIN OTHER FEATURES Holders of Common Stock do not have any preemptive right to subscribe to or acquire any additional stock or other securities issued by the Company. TRANSFER AGENTS AND REGISTRARS The Transfer Agent and Registrars for the Common Stock are Norwest Bank, Minnesota, and the Company. PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS The Company's Charter currently provides for the classification of the Board of Directors into three classes. The Charter limits the number of directors that may be elected to not less than nine nor more than twelve (exclusive of such number of Directors as may be elected by any class of shares of the Company other than the Common Stock on account of specified dividend arrearages in accordance with the Charter) and provides that vacancies on the Board of Directors are to be filled by a majority vote of directors and that directors so chosen shall hold office until the end of the full term of the class in which the vacancy occurred. A vote of the holders of 75% of the Company's outstanding voting stock is required to amend these provisions. In addition, under the Charter and the Delaware General Corporation Law, directors of the Company may only be removed for cause. Removal for cause must be approved by either a majority vote of directors (excluding the director or directors subject to removal) or by a vote of the holders of at least a majority of the Company's outstanding voting stock. In addition, the "fair price provisions" of Charter require that certain proposed business combinations between the Company and any person who is the beneficial owner of more than 10% of the outstanding voting shares of the Company (an "interested party") must be approved by the holders of 75% of the voting shares, unless certain fair price and procedural requirements are met or the business combination is approved by a majority of "Continuing Directors," those directors who were elected prior to the time a person became an interested person and any other director so designated by such directors. A vote of the holders of 75% of the Company's outstanding voting stock is required to amend the fair price provisions. LEGAL OPINIONS The validity of the Offered Securities offered hereby will be passed upon for the Company and the NWPS Trusts by Schiff Hardin & Waite, 7200 Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606. Certain legal matters will be passed upon for any underwriters, dealers or agents by Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York 10004. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the Company and the NWPS Trusts. Schiff Hardin & Waite may rely on the opinion of Richards, Layton & Finger as to certain matters of Delaware law. Legal opinions relating to the Company's franchises, titles to its properties, the lien of the New Mortgage and the lien of the First Mortgage (and certain other matters) will be given as to South Dakota law by Churchill, Manolis, Freeman, Kludt & Kaufman, Huron, South Dakota, local counsel for the Company, as to Nebraska law by Shamberg, Wolf, McDermott & Depue, Grand Island, Nebraska, local counsel for the Company, as to North Dakota law by Pearce and Durick, Bismarck, North Dakota, local counsel for the Company, and as to Iowa law by Nymann & Kohl, Sioux City, Iowa, local counsel for the Company. The statements made in this Prospectus as to matters of law and legal conclusions under the captions "The NWPS Trusts", "Description of the Mortgage Bonds", "Description of the Subordinated Debt Securities", "Description of the Preferred Securities", "Description of the Guarantees" and "Description of the Common Stock" have been prepared under the supervision of, and reviewed by, Schiff Hardin & Waite, counsel for the Company, and such statements are made on the authority of that firm. 45 EXPERTS The audited financial statements of the Company incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants as indicated in their report with respect thereto and are incorporated by reference herein in reliance upon the authority of said firm as experts in auditing and accounting in giving such report. PLAN OF DISTRIBUTION The Company may sell the Offered Securities in any of the following ways: (i) through underwriters, dealers or agents, including Morgan Stanley & Co. Incorporated; (ii) directly to a limited number of purchasers or to a single purchaser; (iii) through agents or (iv) through any combination of the above. The Prospectus Supplement, with respect to the respective Offered Securities will set forth the terms of the offering of the Offered Securities, including the name or names of any underwriters, dealers or agents, the price to the public of the Offered Securities and the proceeds to the Company from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the Offered Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Offered Securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more underwriters. The underwriter or underwriters with respect to a particular underwritten offering of Offered Securities will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover page of such Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement relating hereto, the obligations of the underwriters to purchase the Offered Securities will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Offered Securities if any are purchased. If dealers are utilized in the sale of the Offered Securities in respect of which this Prospectus is delivered, the Company will sell such Offered Securities to the dealers as principals. The dealers may then resell such Offered Securities to the public at varying prices to be determined by such dealers at the time of resale. The names of the dealers and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. The Offered Securities may be sold directly by the Company or through agents designated by the Company from time to time. Any agent involved in the offer or sale of the Offered Securities in respect to which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth in the Prospectus Supplement relating thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a reasonable efforts basis for the period of its appointment. The Offered Securities may be sold directly by the Company to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale thereof. The terms of any such sales will be described in the Prospectus Supplement relating thereto. Agents, dealers and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which such agents, dealers or underwriters may be required to make in respect thereof. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for the Company in the ordinary course of business. Each series of Offered Securities will be a new issue of securities and, unless listed on a national securities exchange, will have no established trading market. Any underwriter to whom Offered Securities of 46 any series are sold for public offering and sale may make a market in such series of Offered Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. If so indicated in the Prospectus Supplement for any series of Offered Securities, the Offered Securities of such series may be listed on a national securities exchange. No assurance can be given as to the liquidity of, or the trading market for, any Offered Securities. 47 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. An itemized statement of the estimated amount of the expenses, other than underwriting discounts and commissions, incurred and to be incurred by the Company in connection with the issuance and distribution of the Securities registered pursuant to this Registration Statement is as follows: Securities and Exchange Commission registration fee....................... $ 68,966 Printing registration statement, prospectus, exhibits and other printing................................................................. 250,000 Printing and engraving securities......................................... 10,000 Trustees' fees and expenses............................................... 55,000 Fees and expenses of counsel for the Company.............................. 160,000 Transfer Agent's fees and expenses........................................ 10,000 New York Stock Exchange Listing Fees...................................... 20,000 Independent accountant's fees and expenses................................ 20,000 Blue Sky and legal investment fees and expenses........................... 15,000 Fees for rating agencies.................................................. 75,000 Miscellaneous............................................................. 16,034 --------- Total................................................................... $ 700,000 --------- ---------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The By-Laws of the Company provide for indemnification by the Company of each of its directors and officers to the fullest extent permitted by Delaware law for liability (including liability arising under the Securities Act of 1933) of such director or officer arising by reason of his or her status as a director or officer of the Company, provided that he or she met the standards established in the By-Laws, which include requirements that he or she acted in good faith and in a manner he or she reasonably believed to be in the Company's best interest. The Company will also advance expenses prior to final disposition of an action, suit or proceeding upon receipt of an undertaking by the director or officer to repay such amount if the director or officer is not entitled to indemnification. All rights to indemnification and advancement of expenses are deemed to be a contract between the Company and its directors and officers. The determination that a director or officer has met the standards established in the By-Laws may be made by a majority vote of a quorum consisting of disinterested directors, an opinion of counsel (if no such quorum is available or even if attainable, a quorum of disinterested directors so directs), a majority vote of stockholders, or a court (which may also overturn any of the preceding determinations). The Declaration of each NWPS Trust provides that no NWPS Trustee, affiliate of any NWPS Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any NWPS Trustee, or any employee or agent of such NWPS Trust or its affiliates (each an "Indemnified Person") shall be liable, responsible or accountable in damages or otherwise to such NWPS Trust or any employee or agent of the trust or its affiliates for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified person in good faith on behalf of such NWPS Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by such Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. The Declaration of each NWPS Trust also provides that to the fullest extent permitted by applicable law, the Company shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of such NWPS Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by such Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim II-1 ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED) incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. The Declaration of each NWPS Trust further provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by or an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified for the underlying cause of action as authorized by the Declaration of such NWPS Trust. The directors and officers of the Company and the Regular Trustees of each NWPS Trust are covered by insurance policies indemnifying against certain liabilities, including certain liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), which might be incurred by them in such capacities and against which they cannot be indemnified by the Company or such NWPS Trust. Any agents, dealers or underwriters who execute any of the agreements filed as Exhibit 1 to this registration statement will agree to indemnify the Company's directors and their officers and the NWPS Trustees of each NWPS Trust who signed the registration statement against certain liabilities that may arise under the Securities Act with respect to information furnished to the Company or such NWPS Trust by or on behalf of any such indemnifying party. ITEM 16. LIST OF EXHIBITS. The exhibits filed herewith are set forth on the Exhibit Index included as part of this Registration Statement. ITEM 17. UNDERTAKINGS. Each of the undersigned registrants hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement; (a) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; (b) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to rule 424(b) if, in the aggregate, the changes involve and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (c) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; PROVIDED, HOWEVER, that paragraphs (a) and (b) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Company pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. II-2 ITEM 17. UNDERTAKINGS. (CONTINUED) (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) that, for purposes of determining any liability under the Securities Act of 1933 each filing of the Company's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated by reference in the registration statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (6) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III, who are some of the registrants, hereby undertake to provide to the underwriter specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrants pursuant to the statutory and bylaw provisions referred to in Item 15, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Northwestern Public Service Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Huron, and State of South Dakota on the 27th day of July, 1995. NORTHWESTERN PUBLIC SERVICE COMPANY (Registrant) By __________/S/ MERLE D. LEWIS_________ Merle D. Lewis PRESIDENT AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------------ --------------------------------------- ---------------- President, Chief Executive July 27, 1995 /S/ MERLE D. LEWIS Officer and Director Merle D. Lewis (Principal Executive Officer) Vice President -- Finance & Corporate /S/ R. R. HYLLAND* Development R. R. Hylland (Principal Financial Officer) /S/ ROGENE A. THADEN* Treasurer Rogene A. Thaden (Principal Accounting Officer) /S/ ROBERT A. WILKENS* Robert A. Wilkens Chairman of the Board of Directors /S/ JERRY W. JOHNSON* Jerry W. Johnson Director /S/ AELRED J. KURTENBACH* Aelred J. Kurtenbach Director /S/ HERMAN LERDAL* Herman Lerdal Director /S/ LARRY F. NESS* Larry F. Ness Director
II-4 Raymond M. Schutz Director /S/ BRUCE I. SMITH* Bruce I. Smith Director W. W. Wood Director July 27, 1995 By:/S/ MERLE D. LEWIS Merle D. Lewis ATTORNEY-IN-FACT
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Huron, State of South Dakota, on the 27th day of July, 1995. NWPS CAPITAL FINANCING I (Registrant) By: Northwestern Public Service Company, as Sponsor By __________/S/ MERLE D. LEWIS_________ Merle D. Lewis PRESIDENT AND CHIEF EXECUTIVE OFFICER NWPS CAPITAL FINANCING II (Registrant) By: Northwestern Public Service Company, as Sponsor By __________/S/ MERLE D. LEWIS_________ Merle D. Lewis PRESIDENT AND CHIEF EXECUTIVE OFFICER NWPS CAPITAL FINANCING III (Registrant) By: Northwestern Public Service Company, as Sponsor By __________/S/ MERLE D. LEWIS_________ Merle D. Lewis PRESIDENT AND CHIEF EXECUTIVE OFFICER II-6 EXHIBIT INDEX
EXHIBIT NUMBER - ----------- 1(a) Form of Underwriting Agreement relating to Common Stock. 1(b) Form of Underwriting Agreement relating to Trust Preferred Capital Securities. 1(c) Form of Underwriting Agreement relating to Mortgage Bonds. 2(a) Purchase and Sale Agreement dated as of May 17, 1995 by and among Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon M. Vogel, Jeanette Vogel, Synergy Group Incorporated, S&J Investments, SYN Inc. and Northwestern Growth Corporation, including Exhibit B, the form of Agreement among SYN Inc. and its Stockholders is incorporated by reference to Exhibit 2 to Form 8-K dated June 21, 1995, Commission File No. 0-692. 2(b) Purchase and Sale Agreement dated as of July 25, 1995 by and between SYN Inc. and Empire Energy Corporation is incorporated by reference to Exhibit 2 to the Form 8-K dated July 27, 1995, Commission File No. 0-692. 4(a)(1) Indenture, dated August 1, 1940, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, and supplemental and amendatory indentures thereto are incorporated by reference to Exhibit 2 to Form 12-K for the year ended December 31, 1970, Commission File No. 2-4472. 4(a)(2) Supplemental Indenture, dated August 1, 1972, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 2 to Form 8-K for the month of August, 1972, Commission File No. 2-4472. 4(a)(3) Supplemental Indenture, dated July 1, 1973, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 1 to Form 8-K for the mouth of July, 1973, Commission File No. 2-4472. 4(a)(4) Supplemental Indenture, dated November 14, 1974, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 1 to Form 8-K for the month of November, 1974, Commission File No. 2-4472. 4(a)(5) Supplemental Indenture, dated May 1, 1975, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 2 to Form 8-K for the month of May, 1975, Commission File No. 2-4472. 4(a)(6) Supplemental Indenture, dated June 1, 1977, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 2(a)(34) to Registration Statement on Form S-7 (Reg. No. 2-58825). 4(a)(7) Supplemental Indenture, dated July 1, 1978, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 2(a)(43) to Registration Statement on Form S-7 (Reg. No. 2-63083). 4(a)(8) Supplemental Indenture, dated December 1, 1978, executed by the Company to The Chase Manhattan Bank (N.A.) and J.J. O'Connell, as Trustees, is incorporated by reference to Exhibit 11 to Form 10-K for the year ended December 31, 1978, Commission File No. 0-692. 4(a)(9) Supplemental Indenture, dated May 6, 1987, executed by the Company to The Chase Manhattan Bank (N.A. and Vincent J. Marino, as trustees, is incorporated by reference to Exhibit 3(a) to Form 10-Q for the quarter ended September 30, 1987, Commission File No. 0-692. 4(a)(10) Supplemental Indenture, dated November 1, 1989, executed by the Company to The Chase Manhattan Bank (N.A.) and Vincent J. Marino, as Trustees, is incorporated by reference to Exhibit 4(a)(10) to Form 10-K for the year ended December 31, 1989, Commission File No. 0-692. 4(a)(11) Supplemental Indenture, dated July 15, 1991, executed by the Company to The Chase Manhattan Bank (N.A.) and C J. Heinzelmann, as Trustees, is incorporated by reference to Exhibit 4(a)(11)(i) to Form 8-K dated August 1, 1991, Commission File No. 0-692.
EXHIBIT NUMBER - ----------- 4(a)(12) Supplemental Indenture, dated November 15, 1991, executed by the Company to The Chase Manhattan Bank (N.A.) and C.J. Heinzelmann, as Trustees, is incorporated by reference to Exhibit 4(a)(12) to Form 10-K for the year ended December 31, 1991, Commission File No. 0-692. 4(a)(13) Supplemental Indenture, dated September 1, 1992, executed by the Company to The Chase Manhattan Bank (N.A.) and C.J. Heinzelmann, as Trustees, is incorporated by reference to Exhibit 4(a)(11)(i) to Form 8-K, dated September 18, 1992, Commission File No. 0-692. 4(a)(14) General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 from the Company to The Chase Manhattan Bank (National Association), as Trustee, is incorporated by reference to Exhibit 4(a) to Form 8-K, dated August 16, 1993, Commission File No. 0-692. 4(a)(15) Supplemental Indenture dated as of August 15, 1993 to the General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 executed by the Company to The Chase Manhattan Bank (National Association), as Trustee, is incorporated by reference to Exhibit 4(b) to Form 8-K, dated August 16, 1993, Commission File No. 0-692. 4(a)(16) Supplemental Indenture dated August 15, 1993 to the Indenture dated August 1, 1940 from the Company to The Chase Manhattan Bank (National Association) and C. J. Heinzelmann, as successor Trustees, is incorporated by reference to Exhibit 4(c) to Form 8-K, dated August 16, 1993, Commission File No. 0-692. 4(a)(17) Form of General Mortgage Indenture and Deed of Trust (1993) Supplemental Indenture for Mortgage Bonds.* 4(a)(18) Specimen Mortgage Bonds included in Exhibit 4(a)(17).* 4(a)(19) Form of Indenture (1940) Supplemental Indenture for Pledged Bonds.* 4(a)(20) Form of Declaration of Trust of NWPS Capital Financing I.* 4(a)(21) Form of Declaration of Trust of NWPS Capital Financing II.* 4(a)(22) Form of Declaration of Trust of NWPS Capital Financing III.* 4(a)(23) Certificate of Trust of NWPS Capital Financing I.* 4(a)(24) Certificate of Trust of NWPS Capital Financing II.* 4(a)(25) Certificate of Trust of NWPS Capital Financing III.* 4(a)(26) Form of Amended and Restated Declaration of Trust of NWPS Capital Financing I. 4(a)(27) Form of Amended and Restated Declaration of Trust of NWPS Capital Financing II. 4(a)(28) Form of Amended and Restated Declaration of Trust of NWPS Capital Financing III. 4(a)(29) Form of Subordinated Debt Securities Indenture between the Company and The Chase Manhattan Bank (N.A.), as Trustee. 4(a)(30) Form of Supplemental Indenture to Subordinated Debt Securities Indenture to be used in connection with the issuance of Subordinated Debt Securities and Preferred Securities. 4(a)(31) Form of Preferred Security of NWPS Capital Financing I -- included in Exhibit 4(a)(26). 4(a)(32) Form of Preferred Security of NWPS Capital Financing II -- included in Exhibit 4(a)(27). 4(a)(33) Form of Preferred Security of NWPS Capital Financing II -- included in Exhibit 4(a)(28). 4(a)(34) Form of Subordinated Debt Security -- included in Exhibit 4(a)(30). 4(a)(35) Form of Guarantee with respect to Preferred Securities. 4(b)(1) Sale Agreement between Company and Mercer County, North Dakota, dated June 1, 1993, related to issuance of Pollution Control Refunding Revenue Bonds (Northwestern Public Service Company Project) Series 1993, is incorporated by reference to Exhibit 4(b)(1) to Form 10-Q for the quarter ending June 30, 1993, Commission File No. 0-692.
EXHIBIT NUMBER - ----------- 4(b)(2) Loan Agreement between Company and Grant County, South Dakota, dated June 1, 1993, related to issuance of Pollution Control Refunding Revenue Bonds (Northwestern Public Service Company Project) Series 1993A, is incorporated by reference to Exhibit 4(b)(2) to Form 10-Q for the quarter ending June 30, 1993, Commission File No. 0-692. 4(b)(3) Loan Agreement between Company and Grant County, South Dakota, dated June 1, 1993, related to issuance of Pollution Control Refunding Revenue Bonds (Northwestern Public Service Company Project) Series 1993B, is incorporated by reference to Exhibit 4(b)(3) to Form 10-Q for the quarter ending June 30, 1993, Commission File No. 0-692. 4(b)(4) Loan Agreement between Company and City of Salix, Iowa, dated June 1, 1993, related to issuance of Pollution Control Refunding Revenue Bonds (Northwestern Public Service Company Project) Series 1993, is incorporated by reference to Exhibit 4(b)(4) to Form 10-Q for the quarter ending June 30, 1993, Commission File No. 0-692. 5(a) Opinion of Schiff Hardin & Waite. 5(b)(i) Opinion of Richards, Layton & Finger, Special Delaware Counsel pertaining to NWPS Capital Financing I. 5(b)(ii) Opinion of Richards, Layton & Finger, Special Delaware Counsel pertaining to NWPS Capital Financing II. 5(b)(iii) Opinion of Richards, Layton & Finger, Special Delaware Counsel pertaining to NWPS Capital Financing III. 8 Tax Opinion of Schiff Hardin and Waite (contained in its opinion filed as Exhibit 5(a) to this Registration Statement). 12 Statement of Computation of Ratio of Earnings to Fixed Charges of the Company. 23(a) Consent of Arthur Andersen LLP.* 23(b) The consent of Schiff Hardin & Waite is contained in its opinion filed as Exhibit 5(a) to this Registration Statement. 23(c) The consents of Richards, Layton & Finger, Special Delaware Counsel, are contained in its opinions filed as Exhibits 5(b)(i), (ii) and (iii) to this Registration Statement. 24(a) Powers of Attorney for the directors and officers of the Company (set forth on the signature pages of the Registration Statement).* 24(b) Powers of Attorney for the Trustees of NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III (the powers of attorney are included in Exhibits 4(a)(20), 4(a)(21) and 4(a)(22), respectively).* 25(a) Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase Manhattan Bank (N.A.), as Trustee under the General Mortgage Indenture and Deed of Trust.* 25(b) Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase Manhattan Bank (N.A.), as Trustee under the Subordinated Debt Securities Indenture.* 25(c) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee under the Amended and Restated Declaration of Trust of NWPS Capital Financing I.* 25(d) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee under the Amended and Restated Declaration of Trust of NWPS Capital Financing II.* 25(e) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee under the Amended and Restated Declaration of Trust of NWPS Capital Financing III.* 25(f) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee of Preferred Securities Guarantee of NWPS Capital Financing I.* 25(g) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee of Preferred Securities Guarantee of NWPS Capital Financing II.*
EXHIBIT NUMBER - ----------- 25(h) Statement of Eligibility under the Trust Indenture Act of 1939 of Wilmington Trust Company, as Trustee of Preferred Securities Guarantee of NWPS Capital Financing III.* 99(a) Management Agreement dated May 17, 1995 among the Company, SYN Inc. and Empire Gas Company, is incorporated by reference to Exhibit 99.1 to Form 8-K dated June 21, 1995, Commission File No. 0-692. 99(b) Agreement Among Initial Stockholders and SYN Inc., dated May 17, 1995 among Empire Gas Corporation, Northwestern Growth Corporation and SYN Inc., is incorporated by reference to Exhibit 99.2 to Form 8-K dated June 21, 1995, Commission File No. 0-692.
- ------------------------ *Previously filed. EX-1.(A) 2 EXHIBIT 1(A) Exhibit 1(a) WSP&R Draft 7/25/95 COMMON STOCK UNDERWRITING AGREEMENT NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street SE Huron, South Dakota 57350-1318 ______ __, 1995 Ladies and Gentlemen: On the basis of the representations and warranties, and subject to the terms and conditions, set forth in this agreement ("this Agreement" or the "Underwriting Agreement"), we, the Underwriters (as defined below), understand that Northwestern Public Service Company, a Delaware corporation (the "Company"), proposes to issue and sell to the Underwriters __________ shares of its Common Stock, par value $3.50 per share (the "Firm Shares"). The Company also proposes to issue and sell to the several Underwriters not more than an additional __________ shares of its Common Stock, par value $3.50 per share (the "Additional Shares"), if and to the extent that we, as Representative, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the Shares. The shares of Common Stock, par value $3.50 per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the Common Stock. The term "Underwriters," as used herein, shall be deemed to mean the several persons, firms or corporations named in Schedule I hereto, and the term "Representative," as used herein, shall be deemed to mean the representative or representatives of such Underwriters by whom or on whose behalf this Underwriting Agreement is signed. If there shall be one person, firm or corporation named in Schedule I, the term "Underwriters" and the term "Representative," as used herein, shall mean that person, firm or corporation. All obligations of the Underwriters are several and not joint. The use of the term "Underwriter" herein shall not be deemed to establish or admit that a purchaser of the Shares is an "underwriter" of the Shares as such term is defined in and used under the Securities Act of 1933, as amended (the "Securities Act"). 1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration Statement No. 33-60423), including a prospectus, relating to the Shares, and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the "Prospectus Supplement") specifically relating to the Shares pursuant to Rule 424 under the Securities Act. The term "Registration Statement" means the registration statement, including the exhibits thereto, as amended to the date of this Agreement. The term "Basic Prospectus" means the prospectus included in the Registration Statement, as amended and supplemented to the date of this Agreement (exclusive of any supplement to the prospectus relating solely to securities other than the Shares). The term "Prospectus" means the Basic Prospectus together with the Prospectus Supplement. The term "preliminary prospectus" means a preliminary prospectus supplement specifically relating to the Shares, together with the Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement," "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and, to the Company's knowledge, after due inquiry, no proceedings for such purpose are pending before or threatened by the Commission. (c) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; (ii) each part of the Registration Statement, when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Registration Statement and the Prospectus comply, and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations -2- will be deemed to comply therewith; and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 1(c) do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein. (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (e) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of the Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (i) This Agreement has been duly authorized, executed and delivered by the Company. -3- (j) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not conflict with, result in a breach of or constitute a default under any provision of (A) applicable law (except for the indemnification provisions hereof which may be unenforceable as against public policy under certain circumstances), (B) the certificate of incorporation or by-laws of the Company, (C) any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its subsidiaries is a party that is material to the Company and its subsidiaries, taken as a whole, or (D) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary. (k) The Federal Energy Regulatory Commission (the "FERC") has issued an appropriate order or orders with respect to the issuance and sale of the Shares in accordance with this Agreement; such order or orders are in full force and effect; the issuance and sale of the Shares are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency is legally required for the issuance and sale of the Shares as contemplated hereby, except such as have been obtained under the Securities Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (l) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus. (m) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described, or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required. (n) Each of the Company and its subsidiaries has all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent that the -4- failure to obtain or file would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the rules and regulations of the Commission thereunder. (p) The Company is not an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). (q) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (r) In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries taken as a whole. (s) The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida). (t) On the basis of the present knowledge of the senior management of the Company as to the business and affairs of Synergy Group Incorporated, a Delaware corporation ("Synergy"), and its subsidiaries, the Company has no reason to believe that the representations contained in subsections (l) and -5- (m) above would be incorrect in any material respect on the date hereof as a result of the consummation of the acquisition of such business on the terms described in the Prospectus (the "Acquisition"). (u) The unaudited pro forma consolidated financial statements included or incorporated by reference in the Registration Statement and the Prospectus have been prepared in good faith by the Company, and the assumptions on which such pro forma financial statements have been prepared provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes thereto. (v) The Company is not aware of any facts or circumstances that would prevent any of the conditions to the consummation of the Acquisition contained in the Purchase and Sale Agreement dated as of May 17, 1995, by and among Synergy and the other parties thereto (the "Acquisition Agreement") from being satisfied in the ordinary course on or prior to September 30, 1995. 2. PUBLIC OFFERING. The Company is advised by the Underwriters that they propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Representative's judgment is advisable. The Company is further advised by the Representative that the Shares are to be offered to the public initially at $_____________ a share (the public offering price) and to certain dealers selected by the Underwriters at a price that represents a concession not in excess of $______ a share under the public offering price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $_____ a share, to any Underwriter or to certain other dealers. 3. PURCHASE AND DELIVERY. Subject to the terms and conditions herein set forth, the Company hereby agrees to sell and the Underwriters agree to purchase, severally and not jointly, the respective numbers of Firm Shares set forth in Schedule I hereto opposite their names at $ _______ a share (the "Purchase Price"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to ______________ Additional Shares at the purchase price. Additional Shares may be purchased as provided herein solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the Representative -6- may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. Payment for the Firm Shares shall be made by certified or official bank check or checks payable to the order of the Company in New York Clearing House funds at the office of Winthrop, Stimson, Putnam & Roberts, New York, New York, at 10:00 A.M., local time, on ___________, 1995, or at such other time on the same or such other date, not later than ________, 1995, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the Closing Date. Payment for any Additional Shares shall be made by certified or official bank check or checks payable to the order of the Company in New York Clearing House funds at the office of Winthrop, Stimson, Putnam & Roberts, New York, New York, at 10:00 A.M., local time, on such date (which may be the same as the Closing Date but shall in no event be earlier than the Closing Date nor later than ten business days after the giving of the notice hereinafter referred to) as shall be designated in a written notice from the Representative to the Company of the Representative's determination, on behalf of the Underwriters, to purchase a number, specified in said notice, of Additional Shares, or on such other date, in any event not later than ____________, 1995, as shall be designated in writing by the Representative. The time and date of such payment are hereinafter referred to as the Option Closing Date. The notice of the determination to exercise the option to purchase Additional Shares and of the Option Closing Date may be given at any time within 30 days after the date of this Agreement. Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as the Representative shall request in writing not later than two full business days prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to the Representative on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the purchase price therefor. 4. CONDITIONS TO CLOSING. The several obligations of the Underwriters hereunder are subject to the following conditions: (a) Subsequent to the execution and delivery of the Underwriting Agreement and prior to the Closing Date, (i) there shall not have occurred any downgrading in the rating accorded any of the Company's securities by -7- any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus, that, in the judgment of the Representative, is material and adverse and that makes it, in the judgment of the Representative, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus; and (iii) the Company shall have obtained an appropriate order or orders of the FERC authorizing the issuance, sale and delivery of the Shares as contemplated by this Agreement, which order or orders at the Closing Date shall be in full force and effect and shall not be contested or the subject of review or appeal. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company to the effect (x) set forth in clauses (a)(i) and (a)(iii) above; (y) that the representations and warranties of the Company contained in the Underwriting Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date; and (z) that no executive officer of the Company has received any notification from the Sellers (as defined in the Acquisition Agreement) or their counsel that any information (including, without limitation, financial information) relating to Synergy contained or incorporated by reference in the Registration Statement or the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The officer signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened. (c) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Schiff Hardin & Waite, special counsel to the Company, to the effect that (i) the Company has been duly incorporated and, based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified and in good standing as a foreign corporation in the States of Iowa, Nebraska, North Dakota and South Dakota, with corporate powers and statutory authority to carry on the business which it now carries on -8- as stated in the Prospectus and to own and operate the properties used by it in such business; (ii) each subsidiary of the Company has been duly incorporated and based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation with corporate powers and statutory authority to carry on the business which it now carries on as stated in the Prospectus and to own and operate the properties used by it in such business and is duly qualified and in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the shares of the Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable; (v) the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights; (vi) this Agreement has been duly authorized, executed and delivered by the Company; (vii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement will not conflict with, result in a breach of or constitute a default under any provision of (A) applicable law (except for the indemnification provisions hereof which may be unenforceable as against public policy under certain circumstances), (B) the certificate of incorporation or by-laws of the Company, (C) any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its subsidiaries is a party that is material to the Company and its subsidiaries, taken as a whole, or (D) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary; (viii) the FERC has issued an appropriate order or orders with respect to the issuance and sale of the Shares in accordance with the Underwriting Agreement; such order or -9- orders are in full force and effect; the issuance and sale of the Shares are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency (including, without limitation, in the jurisdictions of South Dakota, Nebraska, North Dakota and Iowa) is legally required for the issuance and sale of the Shares as contemplated by the Underwriting Agreement, except such as have been obtained under the Securities Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (ix) there are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described, or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required; (x) the statements (A) in the Prospectus under the captions "Description of the Common Stock," "Underwriting," "Pending Acquisition of Synergy Group Incorporated" and "Plan of Distribution," (B) in the Registration Statement under Item 15, (C) in "Item 3 - Legal Proceedings" of the Company's most recent annual report on Form 10-K incorporated by reference in the Prospectus and (D) in "Item 1 - Legal Proceedings" of Part II of the Company's quarterly reports on Form 10-Q filed since such annual report and reviewed by such counsel, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (xi) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required; -10- (xii) the Company is (A) not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act or (B) a "holding company" as such term is defined in the Public Utility Holding Company Act of 1935, as amended; (xiii) the Registration Statement has become and is effective under the Securities Act, and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for a stop order with respect thereto are pending or threatened under Section 8(d) of the Securities Act; and (xiv) such counsel (A) is of the opinion that (except for financial statements and schedules included therein as to which such counsel need not express any opinion) each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (B) believes that (except for financial statements and schedules as to which such counsel need not express any belief and except for that part of the Registration Statement that constitutes the Form T-l) each part of the Registration Statement, when such part became effective did not, and, as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (C) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules included therein as to which such counsel need not express any opinion), comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (D) believes that (except for financial statements and schedules as to which such counsel need not express any belief) the Prospectus as of the date such opinion is delivered does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Alan D. Dietrich, Esq., Vice President, Corporate Services of the Company to the effect that the Company is (i) in compliance with any and all applicable Environmental Laws, (ii) has received all permits, license or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with -11- Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company. (e) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, covering such matters as the Representative may reasonably request. With respect to subparagraph (xi) of paragraph (c) above, Schiff Hardin & Waite, special counsel to the Company, may state that its opinion and belief are based upon its participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto (excluding (for purposes of clauses (B) and (D) of such paragraph) certain of the documents incorporated by reference therein (to be specified in such opinion)) and review and discussion of the contents thereof (including the documents incorporated by reference therein), but are without independent check or verification, except as specified. The opinions of Schiff Hardin & Waite and Alan D. Dietrich, Esq. shall be rendered to the Underwriters at the request of the Company and shall so state therein. (f) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus. Such letter shall include, without limitation, statements to the effect that (i) the unaudited pro forma condensed consolidated financial statements included or incorporated by reference in the Prospectus comply as to form with the applicable accounting requirements of Rule 11-02 of Regulation S-X, (ii) management's assumptions provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes to the unaudited pro forma condensed consolidated financial statements, (iii) the related pro forma adjustments give appropriate effect to those assumptions, and (iv) the pro forma column reflects the proper application of those adjustments to the historical financial statement amounts contained in such unaudited pro forma consolidated statements. (g) The Representative shall have received on the Closing Date a letter, dated the Closing Date, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, to -12- the effect that such accountants reaffirm, as of the Closing Date, and as though made on the Closing Date, the statements made in the letter furnished by such accountants pursuant to Section 4(f), except that the specified date referred to therein shall be a date not more than five business days prior to the Closing Date. (h) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from KPMG Peat Marwick LLP, Synergy's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained or incorporated by reference into the Prospectus. (i) At the Closing Date, the Firm Shares shall have been approved for listing on the New York Stock Exchange upon notice of issuance. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to the Representative on the Option Closing Date of such documents as the Representative may reasonably request. 5. COVENANTS OF THE COMPANY. In further consideration of the agreements of the Underwriters herein contained, the Company covenants as follows: (a) To furnish the Representative, without charge, a signed copy of the Registration Statement (including exhibits thereto) and to deliver to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and, during the period mentioned in paragraph (c) below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as the Underwriters may reasonably request (delivery of the Prospectus to be made in New York, New York no later than 10:00 A.M. on the business day immediately succeeding the date of this Agreement). (b) To cause the Prospectus to be filed with the Commission pursuant to and in compliance with Rule 424 under the Act. (c) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to the Underwriters a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Underwriters reasonably object. (d) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for -13- the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters, and to the dealers (whose names and addresses the Representative will furnish to the Company) to which Shares may have been sold by the Underwriters on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (e) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Underwriters shall reasonably request and to maintain such qualification for as long as the Underwriters shall reasonably request. (f) To make generally available to the Company's security holders and to the Representative as soon as practicable an earning statement covering a twelve month period beginning on the first day of the first full fiscal quarter after the date of the Underwriting Agreement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. If such fiscal quarter is the last fiscal quarter of the Company's fiscal year, such earning statement shall be made available not later than 90 days after the close of the period covered thereby and in all other cases shall be made available not later than 45 days after the close of the period covered thereby. (g) Whether or not any sale of Shares is consummated, to pay all expenses incident to the performance of its obligations under the Underwriting Agreement, including: (i) the preparation and filing of the Registration Statement and the Prospectus and all amendments and supplements thereto, (ii) the preparation, issuance and delivery of the Shares, (iii) the fees and disbursements of the Company's counsel and accountants, (iv) the qualification of the Shares under securities or Blue Sky laws in accordance with the provisions of Section 5(d), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of any Blue Sky Memoranda in an aggregate amount not to exceed $10,000, (v) the printing and delivery to the Underwriters in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto and of the Prospectus and any amendments or supplements thereto, (vi) the -14- fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc., and (vii) the fees and expenses incurred in connection with the listing of the Shares on any securities exchange. (h) During the period ending [90] days after the date of this Agreement, without the prior written consent of Morgan Stanley & Co. Incorporated, not to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock of the Company or any securities convertible into or exercisable or exchangeable for such common stock, other than (i) the Shares to be sold hereunder and (ii) any shares of such common stock sold by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof or (2) enter into any swap or similar arrangement that transfers, in whole or in part, the economic risk of ownership of the common stock of the Company, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. (i) To use its reasonable efforts to cause each of its current executive officers and directors to refrain, during the period ending [90] days after the date of this Agreement, without the prior written consent of Morgan Stanley & Co. Incorporated, from (1) offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to sell, granting any option, right or warrant to purchase or otherwise transferring or disposing of, directly or indirectly, any shares of common stock of the Company or any securities convertible into or exercisable or exchangeable for such common stock, other than any shares of such common stock sold by such executive officers and directors upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof or (2) entering into any swap or similar arrangement that transfers, in whole or in part, the economic risk of ownership of the common stock of such executive officers and directors, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities in cash or otherwise. 6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Underwriter or any such controlling person in connection with investigating or defending any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, -15- any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to paragraph (a) above, and by the Company, in the case of parties indemnified pursuant to paragraph (b) above. The -16- indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of such Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus Supplement, bear to the aggregate public offering price of the Shares. The relative fault of the Company on the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the -17- untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 6 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, no Underwriter shall be required to contribute any amount in excess of the amount by which the total amount of Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 7. TERMINATION. This Agreement shall be subject to termination, by notice given by the Representative to the Company, if (a) after the execution and delivery of the Underwriting Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Representative, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such -18- event, singly or together with any other such event, makes it, in the judgment of the Representative, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. This Agreement may also be terminated at any time prior to the Closing Date if in the judgment of the Representative the subject matter of any amendment or supplement to the Registration Statement or Prospectus prepared and furnished by the Company reflects a material adverse change in the business, properties or financial condition of the Company and its subsidiaries, taken as a whole, which renders it either inadvisable to proceed with such offering, if any, or inadvisable to proceed with the delivery of the Shares to be purchased hereunder. 8. DEFAULTING UNDERWRITERS. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Shares set forth opposite their respective names in the Underwriting Agreement bears to the aggregate number of Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representative may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date, PROVIDED that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 8 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date or the Option Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase the Shares that it has or they have agreed to purchase and the aggregate amount of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Shares are not made within 36 hours after such default, the Underwriting Agreement shall terminate without liability on the part of any non- defaulting Underwriter or the Company. In any such case either the Representative or the Company shall have the right to postpone the Closing Date or the Option Closing Date, as the case may be, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under the Underwriting Agreement. -19- If the Underwriting Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Company shall be unable to perform its obligations under the Underwriting Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated the Underwriting Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with the Underwriting Agreement or the offering of the Shares. If the Underwriting Agreement shall be terminated by the Company because of any failure or refusal on the part of the Underwriters to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Underwriters shall be unable to perform their obligations under the Underwriting Agreement, the Underwriters will reimburse the Company for all out-of-pocket expenses (including the fees and disbursements of its counsel) reasonably incurred by the Company in connection with the Underwriting Agreement or the offering of the Shares. 9. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective indemnity and contribution agreements and the representations, warranties and other statements of the Company, its officers and the Underwriters set forth in the Underwriting Agreement will remain in full force and effect, regardless of any termination of the Underwriting Agreement, any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 6 and delivery of and payment for the Shares. 10. SUCCESSORS. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder. 11. COUNTERPARTS. The Underwriting Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. APPLICABLE LAW. The Underwriting Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. HEADINGS. The headings of the sections of the Underwriting Agreement have been inserted for convenience of reference only and shall not be deemed a part of the Underwriting Agreement. -20- 14. NOTICES. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telecopied and confirmed to Morgan Stanley & Co. Incorporated at 1251 Avenue of the Americas, New York, New York 10020, Attn: Mr. Jay D. Hatfield or, if sent to the Company, will be mailed, delivered or telecopied and confirmed to it at 33 Third Street SE, Huron, South Dakota, 57350, Attn: Mr. Richard R. Hylland, Vice President -- Finance & Corporate Development, Telecopy No: (605) 353-8286. 15. DEFINITION OF "SUBSIDIARY". The term "subsidiary," as used in this Agreement, shall be deemed to refer only to (i) those direct or indirect subsidiaries of the Company which would qualify as "significant subsidiaries" pursuant to Rule 405 under the Securities Act, and (ii) SYN Inc. -21- Please confirm your agreement by having an authorized officer sign a copy of the Underwriting Agreement in the space set forth below. Very truly yours, MORGAN STANLEY & CO. INCORPORATED PAINEWEBBER INCORPORATED Acting severally on behalf of themselves and the several Underwriters named herein By: MORGAN STANLEY & CO. INCORPORATED By: _______________________________ Name: Title: Accepted, ______ __, 1995 NORTHWESTERN PUBLIC SERVICE COMPANY By: _______________________________ Name: Title: SCHEDULE I Number Name of Underwriter of Shares - ------------------- --------- Morgan Stanley & Co. Incorporated. . . . . . . . __________ PaineWebber Incorporated . . . . . . . . . . . . __________ ___________________. . . . . . . . . . . . . . . __________ ___________________. . . . . . . . . . . . . . . __________ ___________________. . . . . . . . . . . . . . . __________ ___________________. . . . . . . . . . . . . . . __________ ___________________. . . . . . . . . . . . . . . __________ _______________ Total _______________ _______________ EX-1.(B) 3 EXHIBIT 1(B) Exhibit 1(b) WSP&R DRAFT 7/25/95 TRUST PREFERRED CAPITAL SECURITIES UNDERWRITING AGREEMENT NWPS CAPITAL FINANCING I c/o Northwestern Public Service Company 33 Third Street SE Huron, South Dakota 57350-1318 NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street SE Huron, South Dakota 57350-1318 ______ __, 1995 Ladies and Gentlemen: On the basis of the representations and warranties, and subject to the terms and conditions, set forth in this agreement ("this Agreement" or the "Underwriting Agreement"), we, the Representative of the Underwriters (as defined below), understand that NWPS Capital Financing I (the "Trust"), a statutory business trust organized under the Delaware Business Trust Act of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 ET SEQ.) (the "Delaware Act") and Northwestern Public Service Company, a Delaware corporation, as holder of the Common Securities (as defined herein) of the Trust and as guarantor (the "Company"), propose that the Trust issue and sell [ ] aggregate number of its [ ]% Trust Preferred Capital Securities (liquidation amount $25 per security), representing preferred undivided beneficial interests in the assets of the Trust (the "Preferred Securities"). The Preferred Securities will be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise (the "Preferred Securities Guarantee") pursuant to, and to the extent set forth in, the Preferred Securities Guarantee Agreement (the "Preferred Securities Guarantee Agreement"), dated as of _________ __, 1995, between the Company and Wilmington Trust Company, as Trustee (the "Guarantee Trustee"). The Preferred Securities and the related Preferred Securities Guarantee are referred to herein as the Securities. The entire proceeds from the sale of the Securities will be combined with the entire proceeds from the sale by the Trust to the Company of its common securities representing common undivided beneficial interests in the assets of the Trust (the "Common Securities") guaranteed by the Company, to the extent set forth in the Prospectus, with respect to distributions and payments upon liquidation, redemption and otherwise (the "Common Securities Guarantee" and together with the Preferred Securities Guarantee, the "Guarantees") pursuant to the Common Securities Guarantee Agreement (the "Common Securities Guarantee Agreement" and, together with the Preferred Securities Guarantee Agreement, the "Guarantee Agreements"), dated as of _______ __, 1995, between the Company and the Guarantee Trustee, as Trustee, and will be used by the Trust to purchase subordinated debt securities issued by the Company ("Subordinated Debt Securities" and, together with the Guarantee Agreements and the Guarantees, the "Company Securities"). The Preferred Securities and the Common Securities will be issued pursuant to the amended and restated declaration of trust of the Trust, dated as of _______ __, 1995 (the "Declaration"), among the Company, as Sponsor, the trustees named therein (the "Trustees") and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Subordinated Debt Securities will be issued pursuant to an indenture, dated as of _____ __, 1995 (the "Base Indenture"), between the Company and The Chase Manhattan Bank (N.A.), as trustee (the "Debt Trustee"), and a supplement to the Base Indenture, dated as of _______ __, 1995 (the "Supplemental Indenture," and together with the Base Indenture and any other amendments or supplements thereto, the "Indenture"), between the Company and the Debt Trustee. The term "Underwriters" as used herein, shall be deemed to mean the several persons, firms or corporations named in Schedule I hereto, and the term "Representative," as used herein, shall be deemed to mean the representative or representatives of such Underwriters by whom or on whose behalf this Underwriting Agreement is signed. If there shall be one person, firm or corporation named in Schedule I, the term "Underwriters" and the term "Representative," as used herein, shall mean that person, firm or corporation. All obligations of the Underwriters are several and not joint. The use of the term "Underwriter" herein shall not be deemed to establish or admit that a purchaser of the Securities is an "underwriter" of the Securities as such term is defined in and used under the Securities Act of 1933, as amended (the "Securities Act"). 1. REPRESENTATIONS AND WARRANTIES. Each of the Trust and the Company jointly and severally represents and warrants to and agrees with each of the Underwriters that: (a) The Trust and the Company have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration Statement No. 33-60423), including a prospectus, relating to the Securities, and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the "Prospectus Supplement") specifically relating to the Securities pursuant to Rule 424 under the Securities Act. The term "Registration Statement" -2- means the registration statement, including the exhibits thereto, as amended to the date of this Agreement (exclusive of any supplement to the prospectus relating solely to securities other than the Securities). The term "Basic Prospectus" means the prospectus included in the Registration Statement, as amended and supplemented to the date of this Agreement. The term "Prospectus" means the Basic Prospectus together with the Prospectus Supplement. The term "preliminary prospectus" means a preliminary prospectus supplement specifically relating to the Securities, together with the Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement," "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and, to the Trust's and the Company's knowledge, after due inquiry, no proceedings for such purpose are pending before or threatened by the Commission. (c) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; (ii) each part of the Registration Statement, when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Registration Statement and the Prospectus comply, and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 1(c) do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Trust or the Company in writing by such Underwriter expressly for use therein or (B) to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-l) under -3- the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus, to issue the Company Securities, to enter into and perform its obligations under the Underwriting Agreement, the Declaration, the Indenture and the Company Securities and to purchase, own, and hold the Common Securities issued by the Trust and to consummate the transactions herein and therein contemplated. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (e) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (f) The Trust has been duly created and is validly existing as a business trust in good standing under the Delaware Act, has the power and authority to own its property and to conduct its business as described in the Prospectus, to issue and sell the Preferred Securities and the Common Securities, and to enter into and perform its obligations under this Agreement, the Preferred Securities, the Common Securities and the Declaration and to consummate the transactions herein and therein contemplated; the Trust has no subsidiaries and is duly qualified to transact business and in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to do so qualified or be in good standing would not have a material adverse effect on the Trust; the Trust has conducted and will conduct no business other than the transactions contemplated by this Agreement and described in the Prospectus; the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus, and is not a party to any action, suit or proceeding of any nature; the Trust is not and will not be classified as an association taxable as a corporation for United States federal income tax purposes; and the Trust is and will be treated as a consolidated subsidiary of the Company. -4- (g) The Common Securities have been duly authorized and, when issued and delivered by the Trust to the Company against payment therefor as described in the Registration Statement and Prospectus, will be validly issued common undivided beneficial interests in the assets of the Trust; the issuance of the Common Securities is not subject to preemptive or other similar rights; at the Closing Date (as defined below), all of the issued and outstanding Common Securities of the Trust will be, directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and the Common Securities will conform to the descriptions thereof contained in the Prospectus. (h) This Agreement has been duly authorized, executed and delivered by each of the Trust and the Company. (i) The Declaration has been duly qualified under the Trust Indenture Act, has been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company and each of the Trustees, and assuming due authorization, execution and delivery of the Declaration by the Property Trustee (as defined in the Declaration), the Declaration will, on the Closing Date, be a valid and binding obligation of the Company and the Trustees, enforceable against the Company and the Trustees in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally and general principles of equity (whether as considered in a proceeding at law or in equity) and will conform to the descriptions thereof in the Prospectus. (j) The Preferred Securities Guarantee Agreement has been duly qualified under the Trust Indenture Act, and each of the Guarantee Agreements has been duly authorized by the Company and, when validly executed and delivered by the Company, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; and the Guarantees and the Guarantee Agreement will conform to the descriptions thereof contained in the Prospectus. (k) The Preferred Securities have been duly authorized and, when issued and delivered against payment therefor in accordance with the provisions of this Agreement and the Declaration, will be validly issued and (subject to the terms of the Declaration) fully paid and non-assessable preferred undivided beneficial interests in the assets of the Trust, and be entitled to the benefits of the Declaration; the issuance of the Preferred Securities is not subject to preemptive or other similar rights; holders of Preferred Securities will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware (the "GCL"); the Preferred Securities will conform to the description thereof contained in the Prospectus. -5- (l) The Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized by the Company and, when validly executed and delivered by the Company, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally or by general principles of equity (whether considered in a proceeding at law or in equity); the Indenture will conform to the description thereof contained in the Prospectus. (m) The Subordinated Debt Securities have been duly authorized and, on the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment therefor as described in the Prospectus, will be entitled to the benefits, of the Indenture, will rank PARI PASSU without any preference among themselves and subordinated to all Senior Indebtedness (as defined in the Indenture) and will constitute validly and binding obligations of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally or by general or by general principles of equity (whether considered in a proceeding at law or in equity). (n) The Company's obligations under the Guarantees are subordinate and junior in right of payment to all liabilities of the Company and are pari passu with the most senior preferred stock issued by the Company. (o) Merle D. Lewis and Richard R. Hylland, as Trustees (the "Regular Trustees") of the Trust, are employees of the Company and have been duly authorized by the Company to execute and deliver the Declaration. (p) Neither the Trust nor the Company is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"). (q) Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws; the Trust is not in violation of the Declaration or its Certificate of Trust filed with the State of Delaware on June 19, 1995 (the "Certificate of Trust"); none of the Company, any of its subsidiaries or the Trust is in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company, any of its subsidiaries or the Trust is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, any of its subsidiaries or the Trust is subject, except for such -6- defaults that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Trust or of the Company and its subsidiaries, taken as a whole; and the execution, delivery and performance of this Agreement, the Declaration, the Preferred Securities, the Common Securities, the Indenture, the Subordinated Debt Securities, the Guarantee Agreements and the Guarantees and the consummation of the transactions contemplated herein and therein and compliance by the Trust and the Company with their respective obligations hereunder and thereunder have been duly authorized by all necessary action (corporate or otherwise) on the part of the Trust and the Company and do not and will not result in any violation of the charter or by-laws of the Company or any subsidiary, or the Declaration or Certificate of Trust and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust, the Company or any subsidiary under (A) any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Trust, the Company or any subsidiary is a party or by which it may be bound or to which any of its properties may be subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Trust or the Company and its subsidiaries, taken as a whole as one enterprise) or (B) any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, or any regulatory body or administrative agency or other governmental body having jurisdiction over the Trust, the Company, or any subsidiary or any of their respective properties. (r) There are no legal or governmental proceedings pending or threatened to which the Company, any of its subsidiaries or the Trust is a party or to which any of the properties of the Company, any of its subsidiaries or the Trust is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (s) The Federal Energy Regulatory Commission (the "FERC") has issued an appropriate order or orders with respect to the issuance and sale of the Company Securities in accordance with, and as contemplated by, this Agreement; such order or orders are in full force and effect; the issuance and sale of the Company Securities are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency is legally required for the issuance and sale of the Common Securities, the Preferred -7- Securities and the Company Securities as contemplated by this Agreement, except such as have been obtained under the Securities Act and the Trust Indenture Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Underwriters. (t) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries (taken as a whole) or the Trust from that set forth in the Prospectus. (u) On the basis of the present knowledge of the senior management of the Company as to the business and affairs of Synergy Group Incorporated, a Delaware corporation ("Synergy"), and its subsidiaries, the Company has no reason to believe that the representations contained in subsections (r) and (t) above would be incorrect in any material respect on the date hereof as a result of the consummation of the acquisition of such business on the terms described in the Prospectus (the "Acquisition"). (v) The unaudited pro forma consolidated financial statements included or incorporated by reference in the Registration Statement and the Prospectus have been prepared in good faith by the Company, and the assumptions on which such pro forma financial statements have been prepared provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes thereto. (w) The Company is not aware of any facts or circumstances that would prevent any of the conditions to the consummation of the Acquisition contained in the Purchase and Sale Agreement dated as of May 17, 1995, by and among Synergy and the other parties thereto (the "Acquisition Agreement") from being satisfied in the ordinary course on or prior to September 30, 1995. 2. PUBLIC OFFERING. The Trust and the Company are advised by the Representative that the Underwriters propose to make a public offering of their respective portions of the Preferred Securities as soon after this Agreement has been entered into as in the judgment of the Representative is advisable. The terms of the public offering of the Preferred Securities are set forth in the Prospectus. 3. PURCHASE AND DELIVERY. Subject to the terms and conditions set forth or incorporated by reference herein, the Trust hereby agrees to sell, and the Underwriters agree to purchase, severally and not jointly, the respective number of Preferred Securities set forth below opposite their names in Schedule I hereto at a purchase price of $[ ] per Preferred Security. -8- The Company agrees to issue the Company Securities concurrently with the issue and sale of the Preferred Securities as contemplated herein. The Company hereby guarantees the timely performance by the Trust of its obligations under this Section 3. The Trust agrees to purchase the Subordinated Debt Securities with the proceeds of, and concurrently with, the issue and sale of the Securities. As compensation to the Underwriters for their commitments hereunder, and because the proceeds of the sale of the Preferred Securities will be loaned by the Trust to the Company, the Company hereby agrees to pay on the Closing Date to the Representative, for the accounts of the several Underwriters, an amount equal to (i) in the case of such number of Preferred Securities as are reserved by the Underwriters for sale to institutional investors, $ ____ per Preferred Security and (ii) in the case of such number of Preferred Securities as are not so reserved, $ _____ per Preferred Security. The Underwriters shall inform the Company in writing, not later than the business day prior to the Closing Date, of the number of Preferred Securities reserved for sale to such institutional investors. Payment for the Preferred Securities shall be made by certified or official bank check or checks payable, or by wire transfer, to the order of the Trust in immediately available funds at the office of Winthrop, Stimson, Putnam & Roberts, New York, New York, at 10:00 A.M. local time, on _____, 1995, or at such other time on the same or such other date, not later than _______, 199_, as shall be designated in writing by the Representative. The time and date of such payment are hereinafter referred to as the "Closing Date". Certificates for the Preferred Securities shall be in definitive form and registered in such names and in such denominations as the Underwriters shall request not later than two full business days prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Preferred Securities shall be delivered to the Representative, through the facilities of the Depository Trust Company ("DTC") for the account of the Representative with any transfer taxes payable in connection with the transfer of the Securities duly paid, against payment of the purchase price therefor. 4. CONDITIONS TO CLOSING. The several obligations of the Underwriters hereunder are subject to the following conditions: (a) Subsequent to the execution and delivery of the Underwriting Agreement and prior to the Closing Date, (i) there shall not have occurred any downgrading in the rating accorded any of the Company's securities by -9- any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, or the Trust, from that set forth in the Prospectus, that, in the judgment of the Representative, is material and adverse and that makes it, in the judgment of the Representative, impracticable to market the Preferred Securities on the terms and in the manner contemplated in the Prospectus; and (iii) the Company shall have obtained an appropriate order or orders of the FERC authorizing the issuance, sale and delivery of the Company Securities as contemplated by this Agreement, which order or orders at the Closing Date shall be in full force and effect and shall not be contested or the subject of review or appeal. (b)(i) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company to the effect (x) set forth in clauses (a)(i) and (a)(iii) above; (y) that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date; and (z) that no executive officer of the Company has received any notification from the Sellers (as defined in the Acquisition Agreement) or their counsel that any information (including without limitation financial information) relating to Synergy contained or incorporated by reference in the Registration Statement or the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The officer signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened. (ii) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an authorized representative of the Trust to the effect set forth in clause (a)(i) above and to the effect that the representations and warranties of the Trust contained in the Underwriting Agreement are true and correct as of the Closing Date and that the Trust has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date. The representative signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened. -10- (c) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Schiff Hardin & Waite, counsel to the Company and the Trust, to the effect that (i) the Company has been duly incorporated and, based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified and in good standing as a foreign corporation in the States of Iowa, Nebraska, North Dakota and South Dakota, with corporate powers and statutory authority to carry on the business which it now carries on as stated in the Prospectus and to own and operate the properties used by it in such business; (ii) each subsidiary of the Company has been duly incorporated and based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation with corporate powers and statutory authority to carry on the business which it now carries on as stated in the Prospectus and to own and operate the properties used by it in such business and is duly qualified and in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the Underwriting Agreement has been duly authorized, executed and delivered by the Trust and the Company; (iv) the FERC has issued an appropriate order or orders with respect to the issuance and sale of the Company Securities, in accordance with, or as contemplated by, the Underwriting Agreement; such order or orders are in full force and effect; the issuance and sale of the Company Securities are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency (including, without limitation, in the jurisdictions of South Dakota, Nebraska, North Dakota and Iowa) is legally required for the issuance and sale of the Common Securities, the Preferred Securities and the Company Securities as contemplated by the Underwriting Agreement, except such as have been obtained under the Securities Act and the Trust Indenture Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Underwriters; (v) the statements (A) in the Prospectus under the captions "Risk Factors," "NWPS Capital Financing I," -11- "Description of the Preferred Securities," "Description of the Subordinated Debt Securities," "Effect of Obligations Under the Subordinated Debt Securities and the Guarantee," "United States Federal Income Taxation," "Underwriting, "Pending Acquisition of Synergy Group Incorporated," "The NWPS Trusts," "Description of the Subordinated Debt Securities," "Description of the Guarantees," and "Plan of Distribution," (B) in the Registration Statement under Item 15, (C) in "Item 3 - Legal Proceedings" of the Company's most recent annual report on Form 10-K incorporated by reference in the Prospectus and (D) in "Item 1 - Legal Proceedings" of Part II of the Company's quarterly reports on Form 10-Q filed since such annual report and reviewed by such counsel, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (vi) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries, or the Trust, is a party or to which any of the properties of the Company or any of its subsidiaries, or the Trust, is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required; (vii) neither the Trust nor the Company is (x) an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act, or (y) a "holding company" as such term is defined in the Public Utility Holding Company Act of 1935, as amended. (viii) the Registration Statement has become and is effective under the Securities Act, and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for a stop order with respect thereto are pending or threatened under Section 8(d) of the Securities Act; and (ix) such counsel (A) is of the opinion that (except for financial statements and schedules included therein as to which such counsel need not express any opinion) each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Prospectus -12- complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (B) believes that (except for financial statements and schedules as to which such counsel need not express any belief and except for that part of the Registration Statement that constitutes the Form T-l heretofore referred to) each part of the Registration Statement, when such part became effective did not, and, as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (C) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules included therein as to which such counsel need not express any opinion), comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (D) believes that (except for financial statements and schedules as to which such counsel need not express any belief) the Prospectus as of the date such opinion is delivered does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (x) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act; all filings required under the laws of the State of Delaware with respect to the formation and valid existence of the Trust as a business trust have been made; the Trust has all necessary power and authority to own property and to conduct its business as described in the Prospectus, to issue and sell the Preferred Securities and the Common Securities, and to enter into and perform its obligations under this Agreement, the Preferred Securities, the Common Securities and the Declaration and to consummate the transactions herein and therein contemplated; the Trust has no subsidiaries and is duly authorized to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, and is not required to be authorized to do business in any other jurisdiction; the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus, and is not a party to any action, suit or proceeding of any nature; the Trust is not and will not be classified as an association taxable as a corporation for United States federal income tax purposes. (xi) The Declaration has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and the Trustees and is a valid and binding obligation of the Company and each of the Regular Trustees enforceable against the Company and each of -13- the Regular Trustees in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally and by general principles of equity (whether considered in a proceeding, in equity or at law). (xii) The Common Securities have been duly authorized and are validly issued common undivided beneficial interests in the assets of the Trust; and the issuance of the Common Securities is not subject to preemptive or other similar rights. (xiii) The Preferred Securities have been duly authorized and are validly issued and (subject to the terms of the Declaration) when delivered to and paid for by Underwriters pursuant to this Agreement will be validly issued, fully paid and non-assessable preferred undivided beneficial interests in the assets of the Trust; the holders of the Preferred Securities will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the GCL; and the issuance of the Preferred Securities is not subject to preemptive or other similar rights. (xiv) The issuance and sale by the Trust of the Preferred Securities and Common Securities, the execution, delivery and performance by the Trust of this Agreement, the Guarantee Agreements, and the consummation of the transactions contemplated hereby and thereby and compliance by the Trust with its obligations hereunder and thereunder have been duly authorized by all necessary actions of the Trust and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Trust is a party or by which it or any of them may be bound, or to which any of the property or assets of the Trust is subject, nor will such action result in any violation of the provisions of the Certificate of Trust or the Declaration, or any applicable law, administrative regulation or administrative or court decree to which it is subject. (xv) The Trust is not in violation of its Certificate of Trust or the Declaration or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or any other instrument of which the Trust is a party or by which it may be bound, or to which any of the property or assets of the Trust is subject. -14- (xvi) The Common Securities, the Preferred Securities, the Subordinated Debt Securities, the Guarantees, the Declaration, the Indenture and the Guarantee Agreements conform to all statements relating thereto contained in the Prospectus. (xvii) All of the issued and outstanding Common Securities of the Trust are directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (xviii) This Agreement has been duly authorized, executed and delivered by the Trust and the Company. (xix) Each of the Guarantee Agreements has been duly authorized, executed and delivered by the Company and, (in the case of the Preferred Security Guarantee Agreement only) assuming it is duly authorized, executed, and delivered by the Property Trustee, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency or other similar laws involving creditors' rights generally and general principles of equity (whether considered in a proceeding at law or in equity); and the Preferred Securities Guarantee Agreement has been duly qualified under the Trust Indenture Act. (xx) The Indenture has been duly executed and delivered by the Company and, assuming due authorization, execution, and delivery thereof by the Debt Trustee, is a valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that enforcement thereof may be limited by the bankruptcy, insolvency or other similar laws involving creditors' rights generally and general principles of equity (whether considered in a proceeding at law or in equity); and the Indenture has been duly qualified under the Trust Indenture Act. (xxi) The Subordinated Debt Securities are in the form contemplated by the Indenture; the Subordinated Debt Securities have been duly authorized, executed and delivered by the Company and when authenticated by the Debt Trustee in the manner provided in the Indenture and delivered against payment therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency or other similar laws involving creditors' rights generally and general principles of equity (whether considered in a proceeding at law or in equity). -15- (xxii) The execution, delivery and performance of this Agreement, the Subordinated Debt Securities, the Guarantee Agreements, the Indenture and the Guarantees and the consummation of the transactions contemplated herein and therein and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary action (corporate or otherwise) and do not and will not result in any violation of the charter or by-laws of the Company or any subsidiary, and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary under (A) any contract, indenture, mortgage, loan agreement, note, lease or any other agreement or instrument known to such counsel, to which the Company or any subsidiary is a party or by which it may be bound or to which any of its properties may be subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise), (B) any existing applicable law, rule or regulation (other than the securities or blue sky laws of the various states, as to which such counsel need express no opinion), or (C) any judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, or any regulatory body or administrative agency or other governmental body having jurisdiction over the Company or any subsidiary or any of their respective properties. (d) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Richards, Layton & Finger, Delaware counsel to the Company and the Trust, with respect to the matters referred to in subparagraphs (x), (xi), (xii), (xiii), (xiv), (xv) and (xviii). (e) The Representative shall have received on the Closing Date, opinions dated the Closing date of _________________________________, counsel to Wilmington Trust Company, as Property Trustee under the Declaration, and Guarantee Trustee under the Guarantee Agreements, in form and substance satisfactory to counsel for the Underwriters, to the effect that, (i) Wilmington Trust Company ("WTC") is duly organized, validly existing and in good standing as a banking corporation with trust powers under the laws of the State of Delaware. (ii) WTC, the Property Trustee and the Guarantee Trustee each has all necessary power and authority to execute and deliver, and to carry out and perform its -16- obligations under the terms of the Declaration and the Guarantee Agreements. (iii) The execution, delivery and performance by the Property Trustee of the Declaration and the Guarantee Agreements have been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration and the Guarantee Agreements have been duly executed and delivered by the Property Trustee, and constitutes the legal, valid and binding obligation of the Property Trustee, enforceable against the Property Trustee in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally and by general principles of equity (whether considered in a proceeding in equity or at law). (iv) The execution, delivery and performance of the Declaration and the Guarantee Agreements by WTC, the Property Trustee or the Guarantee Trustee, as the case may be, do not conflict with or constitute a breach of the Articles of Organization or Bylaws of the WTC. (v) No consent, approval or authorization of, or registration with or notice to, any governmental authority or agency of the State of Delaware or United States governing the banking trust powers of WTC is required for the execution, delivery or performance by the Property Trustee or the Guarantee Trustee, as the case may be, of the Declaration and the Guarantee Agreements. (vi) The Property Trustee is the record holder of the Subordinated Debt Securities and the Guarantees and no security interest, mortgage, pledge, lien, encumbrance, claim or equity is noted thereon or on the register. (f) The Representative shall have received on the Closing Date an opinion dated the Closing Date, of Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, covering such matters as the Underwriters may reasonably request. With respect to subparagraph (ix) of paragraph (c) above, Schiff Hardin & Waite, counsel to the Company, may state that its opinion and belief are based upon its participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto (excluding (for purposes of clauses (B) and (D) of such paragraph ) certain of the documents incorporated by reference therein (to be specified in such opinion)) and review and discussion of the contents thereof (including the documents incorporated by reference therein), but are without independent check or verification, except as specified. -17- The opinions of Schiff Hardin & Waite, special counsel to the Company and Richards, Layton & Finger, Delaware counsel to the Company and the Trust described in paragraphs (c) and (d) above shall be rendered to the Underwriters at the request of the Company and shall so state therein. (g) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus. Such letter shall include, without limitation, statements to the effect that (i) the unaudited pro forma condensed consolidated financial statements included or incorporated by reference in the Prospectus comply as to form with the applicable accounting requirements of Rule 11-02 of Regulation S-X of the Commission, (ii) management's assumptions provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes to the unaudited pro forma condensed consolidated financial statements, (iii) the related pro forma adjustments give appropriate effect to those assumptions, and (iv) the pro forma column reflects the proper application of those adjustments to the historical financial statement amounts contained in such unaudited pro forma consolidated statements. (h) The Representative shall have received on the Closing Date a letter, dated the Closing Date, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, to the effect that such accountants reaffirm, as of the Closing Date, and as though made on the Closing Date, the statements made in the letter furnished by such accountants pursuant to Section 4(g), except that the specified date referred to therein shall be a date not more than five business days prior to the Closing Date. (i) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from KPMG Peat Marwick LLP, Synergy's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information of Synergy contained or incorporated by reference into the Prospectus. (j) At the Closing Date, a registration statement on Form 8-A under the Exchange Act with respect to the Preferred Securities shall be effective and the Preferred Securities shall -18- have been approved for listing on the New York Stock Exchange upon notice of issuance. (k) On the Closing Date, Standard & Poor's and Moody's Investors Service, Inc. shall have publicly assigned to the Preferred Securities ratings of ___ and ___, respectively, which ratings shall be in full force and effect on the Closing Date. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated at any time at or prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 5(i) hereof. 5. COVENANTS OF THE TRUST AND THE COMPANY. In further consideration of the agreements of the Underwriters herein contained, the Trust and the Company covenant as follows: (a) To furnish the Representative, without charge, a signed copy of the Registration Statement (including exhibits thereto) and to deliver to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and, during the period mentioned in paragraph (c) below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as the Underwriters may reasonably request (delivery of the Prospectus to be made in New York, New York no later than 10:00 A.M. on the business day immediately succeeding the date of this Agreement). (b) To cause the Prospectus to be filed with the Commission pursuant to and in compliance with Rule 424 under the Act. (c) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to the Underwriters a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Underwriters reasonably object. (d) If, during such period after the first date of the public offering of the Preferred Securities as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters, and to the dealers (whose names and addresses the -19- Representative will furnish to the Company) to which Preferred Securities may have been sold by the Underwriters on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (e) To endeavor to qualify the Preferred Securities and Subordinated Debt Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Underwriters shall reasonably request and to maintain such qualification for as long as the Underwriters shall reasonably request. (f) To make generally available to the Trust's security holders and to the Representative as soon as practicable an earning statement covering a twelve month period beginning on the first day of the first full fiscal quarter after the date of the Underwriting Agreement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. If such fiscal quarter is the last fiscal quarter of the Company's fiscal year, such earning statement shall be made available not later than 90 days after the close of the period covered thereby and in all other cases shall be made available not later than 45 days after the close of the period covered thereby. (g) During the period ending [90] days after the date of this Agreement, without the prior written consent of Morgan Stanley & Co. Incorporated, not to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any debt securities or preferred securities of the Company or the Trust or warrants to purchase debt securities or preferred securities of the Company or the Trust substantially similar to the Preferred Securities or any securities convertible into or exercisable or exchangeable therefor (other than (i) the Preferred Securities, (ii) commercial paper issued in the ordinary course of business and (iii) other debt securities evidencing commercial bank loans), or (2) enter into any swap or similar arrangement that transfers, in whole or in part, the economic risk or ownership of the foregoing, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Preferred Securities or such other securities, in cash or otherwise. (h) To use its reasonable efforts to cause each of its current executive officers and directors to refrain, during the period ending [90] days after the date of this Agreement, without the prior written consent of Morgan Stanley & Co. Incorporated, from (1) offering, pledging, selling, contracting to sell, -20- granting any option, right or warrant to purchase, or otherwise transferring or disposing of, directly or indirectly, any debt securities or preferred securities of the Company or the Trust substantially similar to the Preferred Securities or any securities convertible into or exercisable or exchangeable therefor or (2) entering into any swap or similar arrangement that transfers, in whole or in part, the economic risk or ownership of the foregoing, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Preferred Securities or such other securities, in cash or otherwise. (i) Whether or not any sale of Preferred Securities is consummated, to pay all expenses incident to the performance of its obligations under the Underwriting Agreement, including: (i) the preparation and filing of the Registration Statement and the Prospectus and all amendments and supplements thereto, (ii) the preparation, issuance and delivery of the Preferred Securities, (iii) the fees and disbursements of the Company's counsel and accountants and of the Trustee and its counsel, (iv) the qualification of the Preferred Securities under securities or Blue Sky laws in accordance with the provisions of Section 5(d), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of any Blue Sky Memoranda in an aggregate amount not to exceed $10,000, (v) the printing and delivery to the Underwriters in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto and of the Prospectus and any amendments or supplements thereto, (vi) any fees charged by rating agencies for the rating of the Preferred Securities, (vii) the fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc., and (viii) the fees and expenses, if any, incurred in connection with the listing of the Preferred Securities on any securities exchange. 6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Trust agree to jointly and severally indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Underwriter or any such controlling person in connection with investigating or defending any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company or the Trust shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused -21- by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company or the Trust in writing by such Underwriter expressly for use therein. (b) The Company agrees jointly and severally to indemnify the Trust against all loss, liability, claim, damage and expense whatsoever, as due from the Trust under Section 6(a) hereof. (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the directors, officers or Trustees of the Company or the Trust who sign the Registration Statement and each person, if any, who controls the Company or the Trust within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company and the Trust to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company and Trust in writing by such Underwriter expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to paragraph (a) above, and by the Company, in the case of parties indemnified pursuant to paragraph (b) above. The -22- indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (e) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Trust on the one hand and the Underwriters on the other hand from the offering of the Preferred Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company or the Trust on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Trust on the one hand and the Underwriters on the other hand in connection with the offering of the Preferred Securities shall be deemed to be in the same respective proportions as the net proceeds from the offering of such Securities (before deducting expenses) received by the Company and the Trust and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus Supplement, bear to the aggregate public offering price of the Preferred Securities. The relative fault of the Company and the Trust on -23- the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Trust or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 6 are several in proportion to the respective principal amounts of Preferred Securities they have purchased hereunder, and not joint. (f) The Company, the Trust and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Preferred Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 7. TERMINATION. This Agreement shall be subject to termination, by notice given by the Representative to the Company and the Trust, if (a) after the execution and delivery of the Underwriting Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Trust or the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets -24- or any calamity or crisis that, in the judgment of the Representative, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event, singly or together with any other such event, makes it, in the judgment of the Representative, impracticable to market the Preferred Securities on the terms and in the manner contemplated in the Prospectus. This Agreement may also be terminated at any time prior to the Closing Date if in the judgment of the Representative the subject matter of any amendment or supplement to the Registration Statement or Prospectus prepared and furnished by the Company and its subsidiaries, taken as a whole, or the Trustee reflects a material adverse change in the business, properties or financial condition of the Company or the Trust which renders it either inadvisable to proceed with such offering, if any, or inadvisable to proceed with the delivery of the Preferred Securities to be purchased hereunder. 8. DEFAULTING UNDERWRITERS. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Preferred Securities that it has or they have agreed to purchase hereunder on such date, and the aggregate amount of Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate amount of the Preferred Securities to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the amount of Preferred Securities set forth opposite their respective names in the Underwriting Agreement bears to the aggregate amount of Preferred Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representative may specify, to purchase the Preferred Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the amount of Preferred Securities that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 8 by an amount in excess of one-ninth of such amount of Preferred Securities without the written consent of such Underwriter. If, on the Closing Date or the Option Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase Securities that it has or they have agreed to purchase and the aggregate amount of Preferred Securities with respect to which such default occurs is more than one-tenth of the aggregate amount of Preferred Securities to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Preferred Securities are not made within 36 hours after such default, the Underwriting Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Company or the Trust. In any such case either the Representative or the Company shall have the right to postpone the Closing Date or the Option Closing Date, as the case may be, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and -25- in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under the Underwriting Agreement. If the Underwriting Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company or the Trust to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Company or the Trust shall be unable to perform its obligations under the Underwriting Agreement, the Company and the Trust will reimburse the Underwriters or such Underwriters as have so terminated the Underwriting Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with the Underwriting Agreement or the offering of the Preferred Securities. If the Underwriting Agreement shall be terminated by the Company because of any failure or refusal on the part of the Underwriters to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Underwriters shall be unable to perform their obligations under the Underwriting Agreement, the Underwriters will reimburse the Company for all out-of-pocket expenses (including the fees and disbursements of its counsel) reasonably incurred by the Company in connection with the Underwriting Agreement or the offering of the Preferred Securities. 9. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective indemnity and contribution agreements and the representations, warranties and other statements of the officers or Trustees of the Company and the Trust (as the case may be) and the Underwriters set forth in the Underwriting Agreement will remain in full force and effect, regardless of any termination of the Underwriting Agreement, any investigation made by or on behalf of any Underwriter, the Company or the Trust or any of the officers, directors or controlling persons referred to in Section 6 and delivery of and payment for the Preferred Securities. 10. SUCCESSORS. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder. 11. COUNTERPARTS. The Underwriting Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -26- 12. APPLICABLE LAW. The Underwriting Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. HEADINGS. The headings of the sections of the Underwriting Agreement have been inserted for convenience of reference only and shall not be deemed a part of the Underwriting Agreement. 14. NOTICES. All communications hereunder will be in writing and, if sent to (i) the Underwriters, will be mailed, delivered or telecopied and confirmed to Morgan Stanley & Co. Incorporated at 1251 Avenue of the Americas, New York, New York 10020, Attn: Mr. Jay D. Hatfield, (ii) the Company, will be mailed, delivered or telecopied and confirmed to it at 33 Third Street SE, Huron, South Dakota 57350, Attn: Mr. Richard R. Hylland, Vice President -- Finance & Corporate Development, Telecopy No: (605) 353-8286 and (iii) the Trust, will be mailed, delivered or telecopied and confirmed to it at 33 Third Street SE, Huron, South Dakota 57350. 15. DEFINITION OF "SUBSIDIARY". The term "subsidiary," as used in this Agreement, shall be deemed to refer only to (i) those direct or indirect subsidiaries of the Company which would qualify as "significant subsidiaries" pursuant to Rule 405 under the Securities Act, and (ii) SYN Inc. 16. CERTAIN AGREEMENTS AND REPRESENTATIONS OF NATWEST CAPITAL MARKETS LIMITED. NatWest Capital Markets Limited agrees and represents that (i) it has not offered or sold and will not offer or sell any Preferred Securities to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstance which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Preferred Securities in, from or otherwise involving the United Kingdom and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Preferred Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)(Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. -27- Please confirm your agreement by having an authorized officer sign a copy of the Underwriting Agreement in the space set forth below. Very truly yours, MORGAN STANLEY & CO. INCORPORATED DEAN WITTER REYNOLDS INC. PAINEWEBBER INCORPORATED PIPER JAFFRAY INC. NATWEST CAPITAL MARKETS LIMITED Acting severally on behalf of itself and the several Underwriters named herein By: MORGAN STANLEY & CO. INCORPORATED By: _______________________________ Name: Title: Accepted, ______ __, 1995 NWPS CAPITAL FINANCING I By: _______________________________ Name: Title: Trustee By: _______________________________ Name: Title: Trustee NORTHWESTERN PUBLIC SERVICE COMPANY By: _______________________________ Name: Title: SCHEDULE I Number of Name of Underwriter Preferred Securities - ------------------- -------------------- Morgan Stanley & Co. Incorporated. . . . . . . . __________ Dean Witter Reynolds Inc.. . . . . . . . . . . . __________ PaineWebber Incorporated . . . . . . . . . . . . __________ Piper Jaffray Inc. . . . . . . . . . . . . . . . __________ NatWest Capital Markets Limited. . . . . . . . . __________ ________________ Total ________________ ________________ EX-1.(C) 4 EXHIBIT 1(C) Exhibit 1(c) WSP&R DRAFT 7/25/95 MORTGAGE BONDS UNDERWRITING AGREEMENT NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street SE Huron, South Dakota 57350-1318 ______ __, 1995 Ladies and Gentlemen: On the basis of the representations and warranties, and subject to the terms and conditions, set forth in this agreement ("this Agreement" or the "Underwriting Agreement"), we, the Underwriters (as defined below), understand that Northwestern Public Service Company, a Delaware corporation (the "Company"), proposes to issue and sell to the Underwriters $__________ aggregate principal amount of its New Mortgage Bonds, _% Series due ____________ (the "Bonds"). The Bonds will be issued pursuant to the provisions of the General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 between the Company and The Chase Manhattan Bank (National Association), as Trustee (the "Trustee"), as it will be supplemented by a supplemental indenture (the "Supplemental Indenture") relating to the Bonds (said Mortgage Indenture and Deed of Trust as so supplemented is hereinafter referred to as the "Indenture"). The Bonds will be a portion of the Company's New Mortgage Bonds issued under the Indenture (the "New Mortgage Bonds"). The term "Underwriters," as used herein, shall be deemed to mean the several persons, firms or corporations named in Schedule I hereto, and the term "Representative," as used herein, shall be deemed to mean the representative or representatives of such Underwriters by whom or on whose behalf this Underwriting Agreement is signed. If there shall be one person, firm or corporation named in Schedule I, the term "Underwriters" and the term "Representative," as used herein, shall mean that person, firm or corporation. All obligations of the Underwriters are several and not joint. The use of the term "Underwriter" herein shall not be deemed to establish or admit that a purchaser of the Bonds is an "underwriter" of the Bonds as such term is defined in and used under the Securities Act of 1933, as amended (the "Securities Act"). 1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration Statement No. 33-60423), including a prospectus, relating to the Bonds, and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the "Prospectus Supplement") specifically relating to the Bonds pursuant to Rule 424 under the Securities Act. The term "Registration Statement" means the registration statement, including the exhibits thereto, as amended to the date of this Agreement. The term "Basic Prospectus" means the prospectus included in the Registration Statement, as amended and supplemented to the date of this Agreement (exclusive of any supplement to the prospectus relating solely to securities other than the New Mortgage Bonds). The term "Prospectus" means the Basic Prospectus together with the Prospectus Supplement. The term "preliminary prospectus" means a preliminary prospectus supplement specifically relating to the Bonds, together with the Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement", "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and, to the Company's knowledge, after due inquiry, no proceedings for such purpose are pending before or threatened by the Commission. (c) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; (ii) each part of the Registration Statement, when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to -2- comply therewith; and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 1(c) do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein or (B) to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-l) under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee. (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and to enter into and perform its obligations under the Underwriting Agreement, the Indenture and the Bonds. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (e) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (f) This Agreement has been duly authorized, executed and delivered by the Company. (g) The execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement, the Indenture and the Bonds will not conflict with, result in a breach of or constitute a default under any provision of (A) applicable law (except for the indemnification provisions hereof which may be unenforceable as against public policy under certain circumstances), (B) the certificate of incorporation or by- laws of the Company, (C) any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its subsidiaries is a party that is material to the Company and its subsidiaries, taken -3- as a whole, or (D) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary. (h) The Federal Energy Regulatory Commission (the "FERC") has issued an appropriate order or orders with respect to the issuance and sale of the Bonds in accordance with the Underwriting Agreement; such order or orders are in full force and effect; the issuance and sale of the Bonds are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency is legally required for the issuance and sale of the Bonds as contemplated by the Underwriting Agreement, except such as have been obtained under the Securities Act and the Trust Indenture Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Bonds by the Underwriters. (i) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus. (j) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described, or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required. (k) On the basis of the present knowledge of the senior management of the Company as to the business and affairs of Synergy Group Incorporated, a Delaware corporation ("Synergy"), and its subsidiaries, the Company has no reason to believe that the representations contained in subsections (i) and (j) above would be incorrect in any material respect on the date hereof as a result of the consummation of the acquisition of such business on the terms described in the Prospectus (the "Acquisition"). (l) The unaudited pro forma consolidated financial statements included or incorporated by reference in the Registration Statement and the Prospectus have been prepared in good faith by the Company, and the assumptions on which such pro forma financial statements have been prepared provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes thereto. -4- (m) The Company is not aware of any facts or circumstances that would prevent any of the conditions to the consummation of the Acquisition contained in the Purchase and Sale Agreement dated as of May 17, 1995, by and among Synergy and the other parties thereto (the "Acquisition Agreement") from being satisfied in the ordinary course on or prior to September 30, 1995. 2. PUBLIC OFFERING. The Company is advised by the Underwriters that they propose to make a public offering of their respective portions of the Bonds as soon after the Underwriting Agreement has been entered into as in the Underwriters' judgment is advisable. The terms of the public offering of the Bonds are set forth in the Prospectus. 3. PURCHASE AND DELIVERY. Subject to the terms and conditions herein set forth, the Company hereby agrees to sell and the Underwriters agree to purchase, severally and not jointly, the respective principal amounts of Bonds set forth opposite the name of such Underwriter in Schedule I hereto at the purchase price set forth in Schedule II in the type of funds and method of payment specified in Schedule II. Delivery of the Bonds and payment of the purchase price shall be made at the time, date and place indicated in Schedule II. The time and date of such payment and delivery are hereinafter referred to as the Closing Date. The Bonds shall be delivered to the Underwriters in such authorized denominations and registered in such names as the Representative shall request in writing not less than two full business days prior to the date of delivery. The Company agrees to make the Bonds available to the Underwriters for checking not later than 2:30 P.M., New York time, on the last business day preceding the Closing Date at such place as may be agreed upon between the Representative and the Company. 4. CONDITIONS TO CLOSING. The several obligations of the Underwriters hereunder are subject to the following conditions: (a) Subsequent to the execution and delivery of the Underwriting Agreement and prior to the Closing Date, (i) there shall not have occurred any downgrading in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, -5- taken as a whole, from that set forth in the Prospectus, that, in the judgment of the Representative, is material and adverse and that makes it, in the judgment of the Representative, impracticable to market the Bonds on the terms and in the manner contemplated in the Prospectus; and (iii) the Company shall have obtained an appropriate order or orders of the FERC authorizing the issuance, sale and delivery of the Bonds as contemplated by this Agreement, which order or orders at the Closing Date shall be in full force and effect and shall not be contested or the subject of review or appeal. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company to the effect (x) set forth in clause (a)(i) and (iii) above; (y) that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date; and (z) that no executive officer of the Company has received any notification from the Sellers (as defined in the Acquisition Agreement) or their counsel that any information (including, without limitation, financial information) relating to Synergy contained or incorporated by reference in the Registration Statement or the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The officer signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened. (c) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Schiff Hardin & Waite, special counsel to the Company, to the effect that (i) the Company has been duly incorporated and, based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified and in good standing as a foreign corporation in the States of Iowa, Nebraska, North Dakota and South Dakota, with corporate powers and statutory authority to carry on the business which it now carries on as stated in the Prospectus and to own and operate the properties used by it in such business; (ii) each subsidiary of the Company has been duly incorporated and based upon certificates or letters from state or other appropriate authorities, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation with corporate powers and -6- statutory authority to carry on the business which it now carries on as stated in the Prospectus and to own and operate the properties used by it in such business and is duly qualified and in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the Class "A" Bonds (as that term is defined in the Indenture) which, at the date hereof, have been deposited with the Trustee under the Indenture have been duly pledged, assigned and transferred to the Trustee, and the Indenture constitutes a direct and valid first lien thereupon; no registration, recording or filing of the Indenture (or notices or financing statements in respect thereof) is required by law to make effective and to maintain the lien intended to be created by the Indenture on such Class "A" Bonds; (iv) the Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of mortgagees' and other creditors' rights and general equitable principles (whether considered in a proceeding at law or in equity) and except that no opinion is expressed with respect to the enforceability of the lien of the Indenture on chattels as against third parties (other than chattels delivered in pledge to the Trustee), or with respect to the enforceability of the lien of the Indenture on after acquired property (in respect of which a supplemental indenture shall not have been executed, delivered and recorded) as against purchasers for value without notice; (v) the Bonds have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of mortgagees' and other creditors' rights and by general equitable principles (whether considered in a proceeding at law or in equity); (vi) each Class "A" Mortgage (as that term is defined in the Indenture, including all supplemental indentures thereto executed and delivered on or prior to the -7- Closing Date) has been duly and validly authorized by all necessary corporate action, has been duly and validly executed and delivered, and is a valid and binding instrument, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of mortgagees' and other creditors' rights and by general equitable principles (whether considered in a proceeding at law or in equity) and except that no opinion is expressed with respect to the enforceability of the lien of each Class "A" Mortgage on chattels as against third parties (other than chattels delivered in pledge to the Class A Mortgage Trustee), or with respect to the enforceability of the lien of the Class A Mortgage on after acquired property (in respect of which a supplemental indenture shall not have been executed, delivered and recorded) as against purchasers for value without notice; (vii) each Class "A" Mortgage constitutes a valid and direct first mortgage lien on the properties which are described therein subject only to excepted encumbrances as defined therein and to minor defects and encumbrances customarily found on properties of like size and character, which do not materially impair the use of such properties by the Company; (viii) the Class "A" Bonds which, at the date hereof, have been deposited with the Trustee under the Indenture, have been duly authorized, executed and delivered by the Company, have been issued in accordance with the requirements of the applicable Class "A" Mortgage and are legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of mortgagees' and other creditors' rights and by general equitable principles (whether considered in a proceeding at law or in equity), and are entitled to the benefit of the security afforded by the respective Class "A" Mortgage under which they were issued; (ix) the Underwriting Agreement has been duly authorized, executed and delivered by the Company; (x) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement, the Indenture and the Bonds will not conflict with, result in a breach of or constitute a default under any provision of (A) applicable law (except for the indemnification provisions hereof which may be unenforceable as against public policy under certain circumstances), (B) the certificate of incorporation or by-laws of the Company, (C) to the best of such counsel's knowledge, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its -8- subsidiaries is a party that is material to the Company and its subsidiaries, taken as a whole, or (D) to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary; (xi) the FERC has issued an appropriate order or orders with respect to the issuance and sale of the Bonds in accordance with the Underwriting Agreement; such order or orders are in full force and effect; the issuance and sale of the Bonds are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency (including, without limitation, in the jurisdictions of South Dakota, Nebraska, North Dakota and Iowa) is legally required for the issuance and sale of the Bonds as contemplated by the Underwriting Agreement, except such as have been obtained under the Securities Act and the Trust Indenture Act and such as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Bonds by the Underwriters; (xii) the statements (A) in the Prospectus under the captions "Certain Terms of the Offered Securities," "Description of the Mortgage Bonds," "Underwriting" and "Plan of Distribution," (B) "Pending Acquisition of Synergy Group Incorporated," (C) in the Registration Statement under Item 15, (D) in "Item 3 - Legal Proceedings" of the Company's most recent annual report on Form 10-K incorporated by reference in the Prospectus and (E) in "Item 1 - Legal Proceedings" of Part II of the Company's quarterly reports on Form 10-Q filed since such annual report and reviewed by such counsel, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (xiii) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required; (xiv) the Company is not (A) an "investment company" or an entity "controlled" by an "investment -9- company," as such terms are defined in the Investment Company Act of 1940, as amended or (B) a "holding company" as such term is defined in the Public Utility Holding Company Act of 1935, as amended; (xv) the Registration Statement has become and is effective under the Securities Act, and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for a stop order with respect thereto are pending or threatened under Section 8(d) of the Securities Act; and (xvi) such counsel (A) is of the opinion that (except for financial statements and schedules included therein as to which such counsel need not express any opinion) each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (B) believes that (except for financial statements and schedules as to which such counsel need not express any belief and except for that part of the Registration Statement that constitutes the Form T-l heretofore referred to) each part of the Registration Statement, when such part became effective did not, and, as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (C) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules included therein as to which such counsel need not express any opinion), comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (D) believes that (except for financial statements and schedules as to which such counsel need not express any belief) the Prospectus as of the date such opinion is delivered does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Representative shall have received on the Closing Date opinions dated the Closing Date (i) of Churchill, Manolis, Freeman, Kludt & Kaufman, South Dakota counsel to the Company, with respect to franchises and titles to the properties of the Company, the validity and enforceability of the lien of the Indenture and of each Class "A" Mortgage with respect thereto and the non-necessity of authorization by any public body of the State of South Dakota with respect to the issuance of the Bonds and the Class "A" Bonds, (ii) of Shamberg, Wolf, McDermott & Depue, Nebraska counsel to the Company, with respect to -10- franchises and titles to the properties of the Company, the validity and enforceability of the lien of the Indenture and of each Class "A" Mortgage with respect thereto and the non-necessity of authorization by any public body of the State of Nebraska with respect to the issuance of the Bonds and the Class "A" Bonds, (iii) of Pearce & Durick, North Dakota counsel to the Company, with respect to titles to the properties of the Company, the validity and enforceability of the lien of the Indenture and of each Class "A" Mortgage with respect thereto and the non-necessity of authorization by any public body of the State of North Dakota with respect to the issuance of the Bonds and the Class "A" Bonds, and (iv) of Nymann & Kohl, Iowa counsel to the Company, with respect to franchises, if any, and titles to the properties of the Company, the validity and enforceability of the lien of the Indenture and of each Class "A" Mortgage with respect thereto and the non-necessity of authorization by any public body of the State of Iowa with respect to the issuance of the Bonds and the Class "A" Bonds. (e) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, covering the matters referred to in subparagraphs (iv), (v), (ix), (xii) (but only as to the statements referred to in clause (A) thereof), (xv) and (xvi) (B), (C) and (D) of paragraph (c) above. As to matters of South Dakota, Nebraska, North Dakota and Iowa law, Winthrop, Stimson, Putnam & Roberts and Schiff Hardin & Waite may rely upon the opinions of even date herewith of Churchill, Manolis, Freeman, Kludt & Kaufman; Shamberg, Wolf, McDermott & Depue; Pearce & Durick and Nymann & Kohl, respectively. With respect to the subparagraph (xvi) of paragraph (c) above, Schiff Hardin & Waite, special counsel to the Company, may state that its opinion and belief are based upon its participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto (excluding (for purposes of clauses (B) and (D) of such paragraph) certain of the documents incorporated by reference therein (to be specified in such opinion)) and review and discussion of the contents thereof (including the documents incorporated by reference therein), but are without independent check or verification, except as specified. With respect to clauses (B), (C) and (D) of subparagraph (xvi) of paragraph (c) above, Winthrop, Stimson, Putnam & Roberts may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto (but not including documents incorporated therein by reference) and review and discussion of the contents thereof (including documents incorporated therein by reference) but are without independent check or verification, except as specified. -11- The opinions of Schiff Hardin & Waite, special counsel to the Company, Churchill, Manolis, Freeman, Kludt & Kaufman, South Dakota counsel to the Company, Shamberg, Wolf, McDermott & Depue, Nebraska counsel to the Company, Pearce & Durick, North Dakota counsel to the Company and Nymann & Kohl, Iowa counsel to the Company, described in paragraphs (c) and (d) above shall be rendered to the Underwriters at the request of the Company and shall so state therein. (f) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus. Such letter shall include, without limitation, statements to the effect that (i) the unaudited pro forma condensed consolidated financial statements included or incorporated by reference in the Prospectus comply as to form with the applicable accounting requirements of Rule 11-02 of Regulation S-X of the Commission, (ii) management's assumptions provide a reasonable basis for presenting the significant effects directly attributable to the Acquisition described in the notes to the unaudited pro forma condensed consolidated financial statements, (iii) the related pro forma adjustments give appropriate effect to those assumptions, and (iv) the pro forma column reflects the proper application of those adjustments to the historical financial statement amounts contained in such unaudited pro forma consolidated statements. (g) The Representative shall have received on the Closing Date a letter, dated the Closing Date, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, to the effect that such accountants reaffirm, as of the Closing Date, and as though made on the Closing Date, the statements made in the letter furnished by such accountants pursuant to Section 4(f), except that the specified date referred to therein shall be a date not more than five business days prior to the Closing Date. (h) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from KPMG Peat Marwick LLP, Synergy's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information of Synergy contained or incorporated by reference into the Prospectus. -12- (i) On the Closing Date, Standard & Poor's and Moody's Investors Service, Inc. shall have publicly assigned to the Bonds ratings of ____ and ____, respectively, which ratings shall be in full force and effect on the Closing Date. 5. COVENANTS OF THE COMPANY. In further consideration of the agreements of the Underwriters herein contained, the Company covenants as follows: (a) To furnish the Representative, without charge, a signed copy of the Registration Statement (including exhibits thereto) and to deliver to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and, during the period mentioned in paragraph (c) below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as the Underwriters may reasonably request (delivery of the Prospectus to be made in New York, New York no later than 10:00 A.M. on the business day immediately succeeding the date of this Agreement). (b) To cause the Prospectus to be filed with the Commission pursuant to and in compliance with Rule 424 under the Act. (c) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to the Underwriters a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Underwriters reasonably object. (d) If, during such period after the first date of the public offering of the Bonds as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters, and to the dealers (whose names and addresses the Representative will furnish to the Company) to which Bonds may have been sold by the Underwriters on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (e) To endeavor to qualify the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions -13- as the Underwriters shall reasonably request and to maintain such qualification for as long as the Underwriters shall reasonably request. (f) To make generally available to the Company's security holders and to the Representative as soon as practicable an earning statement covering a twelve month period beginning on the first day of the first full fiscal quarter after the date of the Underwriting Agreement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. If such fiscal quarter is the last fiscal quarter of the Company's fiscal year, such earning statement shall be made available not later than 90 days after the close of the period covered thereby and in all other cases shall be made available not later than 45 days after the close of the period covered thereby. (g) During the period beginning on the date of this Agreement and continuing to and including the Closing Date, without the prior written consent of Morgan Stanley & Co. Incorporated, not to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any debt securities of the Company or warrants to purchase debt securities of the Company substantially similar to the Bonds or any securities convertible into or exercisable or exchangeable therefor (other than (i) the Bonds, (ii) commercial paper issued in the ordinary course of business and (iii) other debt securities evidencing commercial bank loans) or (2) enter into any swap or similar arrangement that transfers, in whole or part, the economic risk of ownership of any of the foregoing, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Bonds or such other securities, in cash or otherwise. (h) Whether or not any sale of Bonds is consummated, to pay all expenses incident to the performance of its obligations under the Underwriting Agreement, including: (i) the preparation and filing of the Registration Statement and the Prospectus and all amendments and supplements thereto, (ii) the preparation, issuance and delivery of the Bonds, (iii) the fees and disbursements of the Company's counsel and accountants and of the Trustee and its counsel, (iv) the qualification of the Bonds under securities or Blue Sky laws in accordance with the provisions of Section 5(d), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of any Blue Sky Memoranda in an aggregate amount not to exceed $10,000, (v) the printing and delivery to the Underwriters in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto and of the Prospectus and any amendments or supplements thereto, (vi) any fees charged by rating agencies for the rating of the Bonds and (vii) the fees and expenses, if -14- any, incurred with respect to any filing with the National Association of Securities Dealers, Inc. 6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Underwriter or any such controlling person in connection with investigating or defending any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding -15- (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to paragraph (a) above, and by the Company, in the case of parties indemnified pursuant to paragraph (b) above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on -16- the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Bonds shall be deemed to be in the same respective proportions as the net proceeds from the offering of such Bonds (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus Supplement, bear to the aggregate public offering price of the Bonds. The relative fault of the Company on the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 6 are several in proportion to the respective principal amounts of Bonds they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Bonds underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 7. TERMINATION. This Agreement shall be subject to termination, by notice given by the Representative to the Company, if (a) after the execution and delivery of the -17- Underwriting Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or thee Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Representative, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event, singly or together with any other such event, makes it, in the judgment of the Representative, impracticable to market the Bonds on the terms and in the manner contemplated in the Prospectus. This Agreement may also be terminated at any time prior to the Closing Date if in the judgment of the Representative the subject matter of any amendment or supplement to the Registration Statement or Prospectus prepared and furnished by the Company reflects a material adverse change in the business, properties or financial condition of the Company which renders it either inadvisable to proceed with such offering, if any, or inadvisable to proceed with the delivery of the Bonds to be purchased hereunder. 8. DEFAULTING UNDERWRITERS. If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase the Bonds that it has or they have agreed to purchase hereunder on such date, and the aggregate amount of Bonds which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate amount of the Bonds to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the amount of Bonds set forth opposite their respective names in the Underwriting Agreement bears to the aggregate amount of Bonds set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representative may specify, to purchase the Bonds which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the amount of Bonds that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 8 by an amount in excess of one-ninth of such amount of Bonds without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Bonds that it has or they have agreed to purchase and the aggregate amount of Bonds with respect to which such default occurs is more than one-tenth of the aggregate amount of Bonds to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Bonds are not made within 36 hours after such default, the Underwriting -18- Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either the Representative or the Company shall have the right to postpone the Closing Date but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under the Underwriting Agreement. If the Underwriting Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Company shall be unable to perform its obligations under the Underwriting Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated the Underwriting Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with the Underwriting Agreement or the offering of the Bonds. If the Underwriting Agreement shall be terminated by the Company because of any failure or refusal on the part of the Underwriters to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Underwriters shall be unable to perform their obligations under the Underwriting Agreement, the Underwriters will reimburse the Company for all out-of-pocket expenses (including the fees and disbursements of its counsel) reasonably incurred by the Company in connection with the Underwriting Agreement or the offering of the Bonds. 9. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective indemnity and contribution agreements and the representations, warranties and other statements of the Company, its officers and the Underwriters set forth in the Underwriting Agreement will remain in full force and effect, regardless of any termination of the Underwriting Agreement, any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 6 and delivery of and payment for the Bonds. 10. SUCCESSORS. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder. 11. COUNTERPARTS. The Underwriting Agreement may be signed in any number of counterparts, each of which shall be an -19- original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. APPLICABLE LAW. The Underwriting Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. HEADINGS. The headings of the sections of the Underwriting Agreement have been inserted for convenience of reference only and shall not be deemed a part of the Underwriting Agreement. 14. NOTICES. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telecopied and confirmed to Morgan Stanley & Co. Incorporated at 1221 Avenue of the Americas, 4th Floor, New York, New York 10020, Attn: Manager - Debt Syndicate, Telecopy No: (212) 764-7490, or, if sent to the Company, will be mailed, delivered or telecopied and confirmed to it at 33 Third Street SE, Huron, South Dakota, 57350, Attn: Mr. Richard R. Hylland, Vice President -- Finance & Corporate Development, Telecopy No: (605) 353-8286. 15. DEFINITION OF "SUBSIDIARY". The term "subsidiary," as used in this Agreement, shall be deemed to refer only to (i) those direct or indirect subsidiaries of the Company which would qualify as "significant subsidiaries" pursuant to Rule 405 under the Securities Act and (ii) SYN Inc. 16. CERTAIN AGREEMENTS AND REPRESENTATIONS OF NATWEST CAPITAL MARKETS LIMITED. NatWest Capital Markets Limited agrees and represents that (i) it has not offered or sold and will not offer or sell prior to the date six months after their date of issue any Bonds, having an original maturity of one year or greater, to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Bonds to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. -20- Please confirm your agreement by having an authorized officer sign a copy of the Underwriting Agreement in the space set forth below. Very truly yours, MORGAN STANLEY & CO. INCORPORATED NATWEST CAPITAL MARKETS LIMITED Acting severally on behalf of themselves and the several Underwriters named herein By: MORGAN STANLEY & CO. INCORPORATED By: _______________________________ Name: Title: Accepted, _______________ NORTHWESTERN PUBLIC SERVICE COMPANY By: _______________________________ Name: Title: -21- SCHEDULE I Principal Amount Name of Underwriter of Bonds - ------------------- ---------------- Morgan Stanley & Co. Incorporated. . . . . . . . $__________ NatWest Capital Markets Limited. . . . . . . . . $__________ ________________ Total $ ________________ ________________ SCHEDULE II Underwriting Agreement dated ________ __, 1995 Registration Statement No. 33-60423 Representative and Address: Morgan Stanley & Co. Incorporated 1251 Avenue of the Americas New York, NY 10020 Securities: Designation: Principal Amount: Supplemental Indenture dated as of: Date of Maturity: Interest Rate: Purchase Price: Public Offering Price: Type of Funds/Method of Payment: Immediately available funds Closing Date and Location: ___________________________, 1995 at the office of Winthrop, Stimson, Putnam & Roberts, New York, New York EX-4.(A)(26) 5 EXHIBIT 4(A)(26) FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING I NWPS CAPITAL FINANCING I CROSS-REFERENCE TABLE FOR THE AMENDED AND RESTATED DECLARATION OF TRUST SECTION OF SECTION OF TRUST INDENTURE AMENDED AND RESTATED ACT OF 1939, AS AMENDED DECLARATION OF TRUST Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 (a)(4). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3(c) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4, 3.6(j) (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9, 3.10 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7(a) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(a) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(b) (e) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.8(h) Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(c) - ------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Amended and Restated Declaration of Trust. TABLE OF CONTENTS ARTICLE I Interpretation and Definitions SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Appointment Event . . . . . . . . . . . . . . . . . . . . . . . 2 Authorized Officer. . . . . . . . . . . . . . . . . . . . . . . 2 Book Entry Interest . . . . . . . . . . . . . . . . . . . . . . 2 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Trust Act. . . . . . . . . . . . . . . . . . . . . . . 2 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency Participant . . . . . . . . . . . . . . . . . . 3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Security . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities Guarantee . . . . . . . . . . . . . . . . . . 3 Common Security Certificate . . . . . . . . . . . . . . . . . . 3 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Issuer. . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Trustee . . . . . . . . . . . . . . . . . . . . . . . 3 Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . . 3 Definitive Preferred Security Certificates. . . . . . . . . . . 3 Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . 4 DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Certificate. . . . . . . . . . . . . . . . . . . . . . . 4 Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indemnified Person. . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company. . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company Act. . . . . . . . . . . . . . . . . . . . . 4 Investment Company Event. . . . . . . . . . . . . . . . . . . . 4 Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . . 5 List of Holders . . . . . . . . . . . . . . . . . . . . . . . . 5 Majority in Liquidation Amount of the Securities. . . . . . . . 5 Ministerial Action. . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 5 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Preferred Securities Guarantee. . . . . . . . . . . . . . . . . 5 Preferred Security. . . . . . . . . . . . . . . . . . . . . . . 6 Preferred Security Beneficial Owner . . . . . . . . . . . . . . 6 Preferred Security Certificate. . . . . . . . . . . . . . . . . 6 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -i- Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . 6 Property Trustee Account. . . . . . . . . . . . . . . . . . . . 6 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Regular Trustee . . . . . . . . . . . . . . . . . . . . . . . . 6 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . 6 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . 6 Rule 3a-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 6 66- 2/3% in Liquidation Amount of the Securities. . . . . . . . 6 Special Event . . . . . . . . . . . . . . . . . . . . . . . . . 7 Special Regular Trustee . . . . . . . . . . . . . . . . . . . . 7 Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Entity. . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Securities. . . . . . . . . . . . . . . . . . . . . . 7 Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10% in Liquidation Amount of the Securities . . . . . . . . . . 8 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . 8 Trustee; Trustees . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 8 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . 8 ARTICLE II Trust Indenture Act SECTION 2.1. Trust Indenture Act; Application. . . . . . . . . . . . . . . . 8 SECTION 2.2. Lists of Holders of Securities. . . . . . . . . . . . . . . . . 9 SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . . . . . 9 SECTION 2.4 Periodic Reports to Property Trustee. . . . . . . . . . . . . . 9 SECTION 2.5. Evidence of Compliance with Conditions Precedent. . . . . . . .10 SECTION 2.6. Events of Default; Waiver . . . . . . . . . . . . . . . . . . .10 SECTION 2.7. Event of Default; Notice. . . . . . . . . . . . . . . . . . . .11 ARTICLE III Organization SECTION 3.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.2. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.3. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -ii- SECTION 3.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .13 SECTION 3.5. Title to Property of the Trust. . . . . . . . . . . . . . . . .13 SECTION 3.6. Powers and Duties of the Regular Trustees . . . . . . . . . . .13 SECTION 3.7. Prohibition of Actions by the Trust and the Trustees . . . . . . . . . . . . . . . . . . . . . . . . .16 SECTION 3.8. Powers and Duties of the Property Trustee . . . . . . . . . . .17 SECTION 3.9. Certain Duties and Responsibilities of the Property Trustee . . . . . . . . . . . . . . . . . . . . .19 SECTION 3.10. Certain Rights of Property Trustee. . . . . . . . . . . . . . .21 SECTION 3.11. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.12. Execution of Documents. . . . . . . . . . . . . . . . . . . . .24 SECTION 3.13. Not Responsible for Recitals or Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.14. Duration of Trust . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 ARTICLE IV Sponsor SECTION 4.1. Sponsor's Purchase of Common Securities. . . . . . . . . . . ..26 SECTION 4.2. Responsibilities of the Sponsor . . . . . . . . . . . . . . . .27 SECTION 4.3. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .27 ARTICLE V Trustees SECTION 5.1. Number of Trustees. . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.2. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.3. Property Trustee; Eligibility . . . . . . . . . . . . . . . . .29 SECTION 5.4. Qualifications of Regular Trustees and Delaware Trustee Generally . . . . . . . . . . . . . . . .30 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iii- SECTION 5.5. Initial Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.6. Appointment, Removal and Resignation of Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.7. Vacancies Among Trustees. . . . . . . . . . . . . . . . . . . .33 SECTION 5.8. Effect of Vacancies . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.9 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.10. Delegation of Power . . . . . . . . . . . . . . . . . . . . . .33 ARTICLE VI Distributions SECTION 6.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . .34 ARTICLE VII Issuance of Securities SECTION 7.1. General Provisions Regarding Securities . . . . . . . . . . . .34 ARTICLE VIII Termination of Trust SECTION 8.1. Termination of Trust. . . . . . . . . . . . . . . . . . . . . .36 ARTICLE IX Transfer of Securities SECTION 9.1. Transfer of Securities. . . . . . . . . . . . . . . . . . . . .37 SECTION 9.2. Transfer of Certificates. . . . . . . . . . . . . . . . . . . .37 SECTION 9.3. Deemed Security Holders . . . . . . . . . . . . . . . . . . . .38 SECTION 9.4. Book Entry Interests. . . . . . . . . . . . . . . . . . . . . .38 SECTION 9.5. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . .39 SECTION 9.6. Appointment of Successor Clearing Agency. . . . . . . . . . . .39 SECTION 9.7. Definitive Preferred Security Certificates. . . . . . . . . . .39 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iv- SECTION 9.8. Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .40 ARTICLE X Limitation of Liability of Holders of Securities, Trustees and Others SECTION 10.1. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . .40 SECTION 10.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . .41 SECTION 10.3. Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . .42 SECTION 10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .43 SECTION 10.5. Outside Business. . . . . . . . . . . . . . . . . . . . . . . .43 ARTICLE XI Accounting SECTION 11.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .44 SECTION 11.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . .44 SECTION 11.3. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 11.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . .45 ARTICLE XII Amendments and Meetings SECTION 12.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 12.2. Meetings of the Holders of Securities; Action by Written Consent . . . . . . . . . . . . . . . . . . . .47 ARTICLE XIII Representations of Property Trustee SECTION 13.1. Representations and Warranties of Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . .49 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -v- ARTICLE XIV Miscellaneous SECTION 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 SECTION 14.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .50 SECTION 14.3. Intention of the Parties. . . . . . . . . . . . . . . . . . . .51 SECTION 14.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .51 SECTION 14.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.6 Partial Enforceability. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .51 TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 SIGNATURE AND SEALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 EXHIBIT A: Form of Terms of _______% Trust Preferred Capital Securities and _______% Trust Common Capital Securities EXHIBIT B: Specimen of Debenture EXHIBIT C: Underwriting Agreement - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -vi- FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING I AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of _______________, 1995, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Northwestern Public Service Company, a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Business Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of June 19, 1995 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on June 19, 1995, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as defined herein) of the Debenture Issuer (as defined herein). WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 promulgated under the Securities Act or any successor rule thereunder. "Appointment Event" means an event defined in the terms of the Securities, as set forth in Exhibit A, which entitles the Holders of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York, New York are authorized or required by applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. -2- "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Security" has the meaning specified in Section 7.1. "Common Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995 of the Sponsor in respect of the Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex II to Exhibit A. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Northwestern Public Service Company, in its capacity as issuer of the Debentures. "Debenture Trustee" means The Chase Manhattan Bank (N.A.), as trustee under the Indenture, until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of Debentures entitled "___% Junior Subordinated Deferrable Interest Debentures due ____" to be issued to the Property Trustee by the Debenture Issuer under the Indenture, a specimen certificate of which is attached as Exhibit B. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Direction" by a Person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. -3- "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Fiscal Year" has the meaning set forth in Section 11.1. "Global Certificate" has the meaning set forth in Section 9.4. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of __________, 1995, between the Debenture Issuer and The Chase Manhattan Bank (N.A.), as trustee, and the indenture supplemental thereto pursuant to which the Debentures are to be issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act, that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. -4- "Legal Action" has the meaning set forth in Section 3.6(g). "List of Holders" has the meaning set forth in Section 2.2. "Majority in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing a majority of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibit A. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995, of the Sponsor in respect of the Preferred Securities. -5- "Preferred Security" has the meaning specified in Section 7.1. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Annex I to Exhibit A. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 promulgated under the Investment Company Act or any successor rule thereunder. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. -6- "66-2/3% in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing 66 2/3% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Special Event" means an Investment Company Event or a Tax Event. "Special Regular Trustee" means a Regular Trustee appointed by the Holders of a Majority in liquidation amount of the Preferred Securities in accordance with Section 5.6(a)(ii)(B). "Sponsor" means Northwestern Public Service Company, a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Entity" has the meaning set forth in Section 3.15. "Successor Securities" has the meaning set forth in Section 3.15. "Tax Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, -7- (ii) interest payable to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes or (iii) the Trust is or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "10% in liquidation amount of the Securities" means, except as provided in the Terms of Preferred Securities and by the Trust Indenture Act, the vote by Holder(s) of Securities voting together as a single class or, as the context may require, the vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities, voting separately as a class, representing 10% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Preferred Securities in the form of Exhibit C. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) the Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act; -8- (c) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that none of the Sponsor, the Debenture Issuer or the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as -9- required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) which requires the consent or vote of all of the holders of the Debentures to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Preferred Securities . Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. -10- (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration is not waivable; or (ii) which requires the consent or vote of all of the Debentures to be waived under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Common Securities ; provided that, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 Event of Default; Notice. -11- (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein; provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named "NWPS Capital Financing I", as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Northwestern Public Service Company, 33 Third Street, S.E., Huron, South Dakota 57350. On ten Business Days -12- written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would (i) cause the Trust not to be classified for United States federal income tax purposes as a grantor trust or (ii) cause each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures at any time the Securities are outstanding. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. Subject to Section 4.2, any Regular Trustee shall have the power, duty and authority to cause the Trust to engage in the following activities: -13- (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Preferred Securities and Common Securities; (b) in connection with the issue and sale of the Preferred Securities, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Preferred Securities in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Underwriting Agreement providing for the sale of the Preferred Securities; (c) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Holders of Common Securities; (d) to give the Debenture Issuer, the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Debenture Issuer, the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; -14- (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses which are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election (i) to defer payments of interest on the Debentures by extending the interest payment period under the Indenture, or (ii) to extend the scheduled maturity date on the Debentures; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and -15- privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust not to be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but for each Holder of Securities to be treated as owning an undivided beneficial interest in the Debentures; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall not engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not: -16- (i) invest any proceeds received by the Trust from holding the Debentures but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under Section 513 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will be characterized as an association taxable as a corporation or a partnership and that each Holder of Securities will not be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered; -17- (b) the Property Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee); (c) the Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Preferred Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities; (d) the Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities; (e) the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; -18- (f) the Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6; (g) the Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities; (h) the Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee; and (i) subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their -19- exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (b) no provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; -20- (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration, the Trust Indenture Act and Rule 3a-7; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsors with their respective duties under this Declaration, nor shall the Property Trustee be liable for the default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or -21- other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities) (or any rerecording, refiling or registration thereof); (v) the Property Trustee may consult with counsel and the advice or opinion of such counsel and the experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity, which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee, provided that nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property -22- Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same proportion and liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedies, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. -23- (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent, in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. Unless otherwise determined by the Regular Trustees, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.6. Notwithstanding anything to the contrary herein, the Sponsor is authorized to execute on behalf of the Trust any documents referred to in Section 4.2. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for 55 years from the date of the Prospectus Supplement relating to the Debentures. -24- SECTION 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c); (b) the Trust may, with the consent of a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided, that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Preferred Securities; or (B) substitutes for the Preferred Securities other securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and maturity; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity which possesses the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities or any Successor Securities to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of such Holders' interests in the new entity); -25- (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee; and (c) notwithstanding Section 3.15(b), the Trust shall, except with the consent of Holders of 100% in liquidation amount of the Securities, not consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity for United States federal income tax purposes to be classified as an association taxable as a corporation or a partnership and each Holder of the Securities not to be treated as owning an undivided beneficial interest in the Debentures. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On ___________________, 1995 the Sponsor will purchase all the Common Securities issued by the Trust, in an amount equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold. The purchase price paid for the Common -26- Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to engage in the following activities and may execute on behalf of the Trust the documents referred to in subsections (a) through (e) of this Section 4.2: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to take any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Preferred Securities. 4.3 Expenses (a) The Sponsor shall be directly responsible for and pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, including, without limitation, the costs and expenses relating to the organization of the Trust, the issuance of the Preferred Securities, the fees and expenses of any Special Regular Trustee, the Property Trustee and the Delaware Trustee, the costs and expenses related to the operation of the Trust, including, without limitation, the costs and -27- expenses of accountants, attorneys, statistical or bookkeeping services, expenses of printing and engraving, paying agents(s), registrar(s), transfer agent(s), duplicating, travel, telephone and costs and expenses incurred in connection with the disposition of Trust assets. (b) The Sponsor will pay any and all taxes and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The number of Trustees shall initially be three (3), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities: (i) and except as provided in Sections 5.1(b)(ii) and 5.6(a)(ii)(B) with respect to the Special Regular Trustee, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in liquidation amount of the Preferred Securities appoint a Special Regular Trustee in accordance with Section 5.6, provided that in any case, the number of Trustees shall be at least three (3) (the majority of which shall be Regular Trustees), and if there are only three Trustees: (c) the Trustee that acts as the Property Trustee shall also act as the Delaware Trustee pursuant to Section 5.2. SECTION 5.2 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or -28- (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set out in Section 5.6(c) (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all -29- respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. The initial Regular Trustees shall be: Merle D. Lewis 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 Richard R. Hylland 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 The initial Delaware Trustee shall be: Wilmington Trust Company Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 who shall also act as Property Trustee. SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and -30- (ii) after the issuance of any Securities; (A) other than in respect to a Special Regular Trustee by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (B) if an Appointment Event has occurred and is continuing, one (1) additional Regular Trustee (the "Special Regular Trustee") may be appointed by vote of the Holders of a Majority in liquidation amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities and such Special Regular Trustee may only be removed (otherwise than by the operation of Section 5.6(c)), by vote of the Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, provided that a Special Regular Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: -31- (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is not deemed an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Regular Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Regular Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Regular Trustee as provided in this Section 5.6; and (d) the Holders of the Common Securities shall use their best efforts to appoint promptly a Successor Delaware Trustee or successor Property Trustee, as the case may be, if the Delaware Trustee or the Property Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) if no successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after causing such notice to be given, if any, as it may deem proper and prescribe, appoint a successor Property Trustee or Successor Delaware Trustee, as the case may be. -32- SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.10 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her -33- power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture)) and Additional Interest (as defined in the Indenture), premium of and principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are legally available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Preferred Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A (the "Common Securities"). The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. -34- (b) The Certificates shall be signed on behalf of the Trust by any two of the Regular Trustees. Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the Person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such Persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such Person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable, except with respect to the Common Securities as provided in Section 10.1(b) of this Declaration. (e) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration, the Preferred Securities Guarantee and the Indenture. -35- ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Common Securities, the Sponsor or the Debenture Issuer; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities, the Sponsor or the Debenture Issuer, the filing of a certificate of cancellation with respect to the Trust or the revocation of the charter of the Holder of the Common Securities, the Sponsor or the Debenture Issuer and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Debenture Issuer or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor; and (b) as soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware; and (c) the provisions of Article X shall survive the termination of the Trust. -36- ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void; (b) subject to this Article IX, Preferred Securities shall be freely transferable; and (c) subject to this Article IX, to the fullest extent permitted by law, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and each Holder of Securities would not be treated as owning an undivided beneficial interest in the Debentures; and (ii) the Trust or the transferree would be an Investment Company or would be controlled by an Investment Company. SECTION 9.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance -37- of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the documents incorporated by reference herein. SECTION 9.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and -38- receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 9.7 Definitive Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then: (c) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be -39- protected in relying on, said instructions of the Clearing Agency. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof in accordance with Section 7.1(b), and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Preferred Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless. then: In the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee and the Terms of Securities, the Sponsor shall not be: -40- (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise; and (b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities). (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) an Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. -41- SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or -42- (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and -43- the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees; (b) the Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) the Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities any United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust; and -44- (d) the Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return on such form as is required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, to the fullest extent permitted by law, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, -45- a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); provided, however, that: (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to (A) cause the Trust to be characterized for purposes of United States federal income taxation as an association taxable as a corporation or a partnership and each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures; (B) affect the powers, rights, duties, obligations or immunities of the Property Trustee or the Delaware Trustee (unless such amendment is consented to in writing by the Property Trustee or the Delaware Trustee, as the case may be); or (C) cause the Trust to be deemed an Investment Company that is required to be registered under the Investment Company Act; (ii) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would materially adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (iii) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (iv) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (v) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities (except to the extent such amendment relates to the Special Regular Trustee, in which case such amendment may only be made in accordance with the terms of the Preferred Securities). (b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended without the consent of the Holders of the Securities to: -46- (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class, if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met; and (b) except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the -47- Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. -48- ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: -49- (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): NWPS CAPITAL FINANCING I 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (b) if given to the Property Trustee or the Delaware Trustee, at the mailing address set forth below (or such other address as the Property Trustee or the Delaware Trustee may give notice of to the Holders of the Securities): WILMINGTON TRUST COMPANY Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. -50- SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust not be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but rather, the Trust be characterized as a grantor trust or otherwise in a manner that each Holder of Securities be treated as owning an undivided beneficial interest in the Debentures. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. -51- IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. NORTHWESTERN PUBLIC SERVICE COMPANY as Sponsor By: ----------------------------------------------- Name: Title: -------------------------------------------------- Merle D. Lewis, as Regular Trustee -------------------------------------------------- Richard R. Hylland, as Regular Trustee WILMINGTON TRUST COMPANY as Delaware Trustee and Property Trustee By: ----------------------------------------------- Name: Title: -52- EXHIBIT A TERMS OF SECURITIES TERMS OF _____% TRUST PREFERRED CAPITAL SECURITIES _____% TRUST COMMON CAPITAL SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of __________, 1995 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. DESIGNATION AND NUMBER. (a) "Preferred Securities." Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($__________) and a liquidation amount with respect to the assets of the Trust of $25 per Preferred Security, are hereby designated for the purposes of identification only as "_____% Trust Preferred Capital Securities" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. (b) "Common Securities." Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($___________) and a liquidation amount with respect to the assets of the Trust of $25 per Common Security, are hereby designated for the purposes of identification only as "_____% Trust Common Capital Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex II, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. (a) Distributions payable on each Security will be fixed at a rate per annum of _____% (the "Coupon Rate") of the stated liquidation amount of $25 per Security, such rate being the rate of interest payable on the Debentures to A-1 be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed in such a 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from __________, 1995 and will be payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year, commencing on __________, 1995, except as otherwise described below. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such extension, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus Supplement dated A-2 __________, 1995, to the Prospectus dated __________, 1995 (together, the "Prospectus"), of the Trust included in the Registration Statement on Form S-3 of the Sponsor, the Debenture Issuer and the Trust. The relevant record dates for the Common Securities, and, if the Preferred Securities shall not continue to remain in book-entry only form, the relevant record dates for the Preferred Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer having failed to make a payment under the Debentures will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities of creditors of the Trust an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such A-3 Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, winding-up or termination of the Trust, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. REDEMPTION AND DISTRIBUTION. (a) Upon the repayment of the Debentures in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be thereupon applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon at the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Paragraph 4(f)(ii) below. (c) If a Tax Event (as defined below) or an Investment Company Event (as defined below) (each, a "Special Event"), shall occur and be continuing, the Regular Trustees shall dissolve the Trust except in the limited circumstances described below, and, after satisfaction of liabilities to creditors of the Trust, cause Debentures held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90-Day Period"); provided, however, that in the case of the occurrence of a Tax Event, such dissolution and distribution shall be conditioned on the Regular Trustees' receipt of an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the A-4 dissolution of the Trust and the distribution of Debentures; and provided, further, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90-Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution and distribution as described therein. Furthermore, if in the case of the occurrence of a Tax Event, after receipt of a Dissolution Tax Opinion (as defined below) by the Regular Trustees (i) the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even if the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this paragraph 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, the Debenture Issuer shall have the right at any time, upon not less than 30 nor more than 60 days notice, to redeem the Debentures in whole or in part for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Tax Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus Supplement, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the A-5 theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable by the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. On and from the date fixed by the Regular Trustees for any distribution of Debentures and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and (iii) any certificates representing Securities, except for certificates representing Preferred Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions, on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. A-6 (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Debentures are distributed to holders of the Securities, pursuant to the terms of the Indenture, the Debenture Issuer will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) "Redemption or Distribution Procedures." (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Preferred Securities, it being understood that, in respect of Preferred Securities registered in the name of and held of record by the Depository (or any successor Clearing Agency) or any nominee, the distribution of the proceeds of such redemption will be made to such Clearing Agency Participant (or Person on whose behalf such nominee holds such Securities) in accordance with the procedures applied by such offering or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which A-7 notice will be irrevocable), then (A) while the Preferred Securities are in book-entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with the Depositary (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities, and (B) with respect to Preferred Securities issued in definitive form and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/ Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Preferred Securities Guarantee or Common Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. A-8 (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Preferred Securities, the Depositary or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. VOTING RIGHTS -- PREFERRED SECURITIES. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If (i) the Trust fails to pay Distributions in full on the Preferred Securities for six (6) consecutive quarterly Distribution periods, or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee in accordance with Section 5.6(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any Person to be appointed as Special Regular Trustee. For purposes of determining whether the Trust has failed to make Distributions in full for six (6) consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees will convene a meeting for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.2 of the Declaration. The record date for A-9 such meeting will be the close of business on the Business Day that is one Business Day before the day on which notice of the meeting is sent to the Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. A Special Regular Trustee may be removed without cause at any time by vote of the Holders of a Majority in liquidation amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities in accordance with Section 5.6(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Regular Trustee, the Debenture Issuer shall retain all rights under the Indenture, including the right to extend the interest payment period on the Debentures. Subject to the requirements set forth in this paragraph, the Holders of a majority in liquidation amount of the Preferred Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures affected thereby, the Property Trustee may only give such consent at the direction of all holders of the Preferred Securities . The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the A-10 Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, for the purposes of United States federal income tax the Trust will not fail to be classified as a grantor trust. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Preferred Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. VOTING RIGHTS -- COMMON SECURITIES. (a) Except as provided under paragraphs 6(b), 6(c) and 7, and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any A-11 Trustee or to increase or decrease the number of Trustees, subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Regular Trustee. (c) Subject to Section 2.6 of the Declaration and only after the Event of Default with respect to the Preferred Securities has been cured, waived, or otherwise eliminated, and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Common Securities. Pursuant to this paragraph 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Common Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. A-12 Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities, voting together as a class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66 2/3% in liquidation amount of the Securities affected thereby; provided, however, that, the rights of Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Regular Trustee shall not be amended without the consent of each Holder of Preferred Securities; provided, further however, if any amendment or proposal referred to in clause (i) above would materially adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures and the Preferred Securities Guarantee is required under the A-13 Indenture with respect to any amendment, modification or termination of the Indenture, the Debentures or the Preferred Securities Guarantee, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of all Holders of the Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Debentures ; provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this paragraph 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. 8. PRO RATA. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. RANKING. The Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. A-14 10. LISTING. The Regular Trustees shall use their best efforts to cause the Preferred Securities to be listed for quotation on the New York Stock Exchange Limited. 11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. 13. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration and the Preferred Securities Guarantee and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. These terms and the rights of the parties herewith shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. A-15 ANNEX I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE, INSERT: This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depository or by a nominee of the Depository to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of the Depositary (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Preferred Securities ------------ ------------ CUSIP NO. ---------- Certificate Evidencing Preferred Securities of NWPS CAPITAL FINANCING I Preferred Securities. (liquidation amount $25 per Preferred Security) NWPS CAPITAL FINANCING I, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that _______________ (the "Holder") is the registered owner of ________________ preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Preferred Capital Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. A-16 THE DESIGNATION, RIGHTS, PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE PREFERRED SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of __________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee A-17 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints ------------- agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Preferred Security Certificate) A-18 ANNEX II Certificate Number Number of Common Securities ------------ ------------ Certificate Evidencing Common Securities of NWPS CAPITAL FINANCING I Common Securities. (liquidation amount $25 per Common Security) NWPS CAPITAL FINANCING I, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________ (the "Holder") is the registered owner of ________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Common Capital Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. THE DESIGNATION, RIGHTS, PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE COMMON SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. A-19 Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat for United States federal income tax purposes the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of ___________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints -------------- agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Common Security Certificate) A-20 EXHIBIT B SPECIMEN OF DEBENTURE B-1 EXHIBIT C UNDERWRITING AGREEMENT C-1 EX-4.(A)(27) 6 EXHIBIT 4(A)(27) FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING II NWPS CAPITAL FINANCING II CROSS-REFERENCE TABLE FOR THE AMENDED AND RESTATED DECLARATION OF TRUST SECTION OF SECTION OF TRUST INDENTURE AMENDED AND RESTATED ACT OF 1939, AS AMENDED DECLARATION OF TRUST Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 (a)(4). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3(c) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4, 3.6(j) (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9, 3.10 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7(a) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(a) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(b) (e) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.8(h) Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(c) - ------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Amended and Restated Declaration of Trust. TABLE OF CONTENTS ARTICLE I Interpretation and Definitions SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Appointment Event . . . . . . . . . . . . . . . . . . . . . . . 2 Authorized Officer. . . . . . . . . . . . . . . . . . . . . . . 2 Book Entry Interest . . . . . . . . . . . . . . . . . . . . . . 2 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Trust Act. . . . . . . . . . . . . . . . . . . . . . . 2 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency Participant . . . . . . . . . . . . . . . . . . 3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Security . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities Guarantee . . . . . . . . . . . . . . . . . . 3 Common Security Certificate . . . . . . . . . . . . . . . . . . 3 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Issuer. . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Trustee . . . . . . . . . . . . . . . . . . . . . . . 3 Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . . 3 Definitive Preferred Security Certificates. . . . . . . . . . . 3 Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . 4 DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Certificate. . . . . . . . . . . . . . . . . . . . . . . 4 Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indemnified Person. . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company. . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company Act. . . . . . . . . . . . . . . . . . . . . 4 Investment Company Event. . . . . . . . . . . . . . . . . . . . 4 Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . . 5 List of Holders . . . . . . . . . . . . . . . . . . . . . . . . 5 Majority in Liquidation Amount of the Securities. . . . . . . . 5 Ministerial Action. . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 5 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Preferred Securities Guarantee. . . . . . . . . . . . . . . . . 5 Preferred Security. . . . . . . . . . . . . . . . . . . . . . . 6 Preferred Security Beneficial Owner . . . . . . . . . . . . . . 6 Preferred Security Certificate. . . . . . . . . . . . . . . . . 6 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -i- Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . 6 Property Trustee Account. . . . . . . . . . . . . . . . . . . . 6 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Regular Trustee . . . . . . . . . . . . . . . . . . . . . . . . 6 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . 6 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . 6 Rule 3a-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . 6 66- 2/3% in Liquidation Amount of the Securities. . . . . . . . 6 Special Event . . . . . . . . . . . . . . . . . . . . . . . . . 7 Special Regular Trustee . . . . . . . . . . . . . . . . . . . . 7 Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Entity. . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Securities. . . . . . . . . . . . . . . . . . . . . . 7 Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10% in Liquidation Amount of the Securities . . . . . . . . . . 8 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . 8 Trustee; Trustees . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 8 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . 8 ARTICLE II Trust Indenture Act SECTION 2.1. Trust Indenture Act; Application. . . . . . . . . . . . . . . . 8 SECTION 2.2. Lists of Holders of Securities. . . . . . . . . . . . . . . . . 9 SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . . . . . 9 SECTION 2.4 Periodic Reports to Property Trustee. . . . . . . . . . . . . . 9 SECTION 2.5. Evidence of Compliance with Conditions Precedent. . . . . . . .10 SECTION 2.6. Events of Default; Waiver . . . . . . . . . . . . . . . . . . .10 SECTION 2.7. Event of Default; Notice. . . . . . . . . . . . . . . . . . . .11 ARTICLE III Organization SECTION 3.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.2. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.3. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -ii- SECTION 3.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .13 SECTION 3.5. Title to Property of the Trust. . . . . . . . . . . . . . . . .13 SECTION 3.6. Powers and Duties of the Regular Trustees . . . . . . . . . . .13 SECTION 3.7. Prohibition of Actions by the Trust and the Trustees . . . . . . . . . . . . . . . . . . . . . . . . .16 SECTION 3.8. Powers and Duties of the Property Trustee . . . . . . . . . . .17 SECTION 3.9. Certain Duties and Responsibilities of the Property Trustee . . . . . . . . . . . . . . . . . . . . .19 SECTION 3.10. Certain Rights of Property Trustee. . . . . . . . . . . . . . .21 SECTION 3.11. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.12. Execution of Documents. . . . . . . . . . . . . . . . . . . . .24 SECTION 3.13. Not Responsible for Recitals or Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.14. Duration of Trust . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 ARTICLE IV Sponsor SECTION 4.1. Sponsor's Purchase of Common Securities . . . . . . . . . . . .26 SECTION 4.2. Responsibilities of the Sponsor . . . . . . . . . . . . . . . .27 SECTION 4.3. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .27 ARTICLE V Trustees SECTION 5.1. Number of Trustees. . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.2. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.3. Property Trustee; Eligibility . . . . . . . . . . . . . . . . .29 SECTION 5.4. Qualifications of Regular Trustees and Delaware Trustee Generally . . . . . . . . . . . . . . . .30 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iii- SECTION 5.5. Initial Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.6. Appointment, Removal and Resignation of Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.7. Vacancies Among Trustees. . . . . . . . . . . . . . . . . . . .33 SECTION 5.8. Effect of Vacancies . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.9 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.10. Delegation of Power . . . . . . . . . . . . . . . . . . . . . .33 ARTICLE VI Distributions SECTION 6.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . .34 ARTICLE VII Issuance of Securities SECTION 7.1. General Provisions Regarding Securities . . . . . . . . . . . .34 ARTICLE VIII Termination of Trust SECTION 8.1. Termination of Trust. . . . . . . . . . . . . . . . . . . . . .36 ARTICLE IX Transfer of Securities SECTION 9.1. Transfer of Securities. . . . . . . . . . . . . . . . . . . . .37 SECTION 9.2. Transfer of Certificates. . . . . . . . . . . . . . . . . . . .37 SECTION 9.3. Deemed Security Holders . . . . . . . . . . . . . . . . . . . .38 SECTION 9.4. Book Entry Interests. . . . . . . . . . . . . . . . . . . . . .38 SECTION 9.5. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . .39 SECTION 9.6. Appointment of Successor Clearing Agency. . . . . . . . . . . .39 SECTION 9.7. Definitive Preferred Security Certificates. . . . . . . . . . .39 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iv- SECTION 9.8. Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .40 ARTICLE X Limitation of Liability of Holders of Securities, Trustees and Others SECTION 10.1. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . .40 SECTION 10.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . .41 SECTION 10.3. Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . .42 SECTION 10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .43 SECTION 10.5. Outside Business. . . . . . . . . . . . . . . . . . . . . . . .43 ARTICLE XI Accounting SECTION 11.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .44 SECTION 11.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . .44 SECTION 11.3. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 11.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . .45 ARTICLE XII Amendments and Meetings SECTION 12.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 12.2. Meetings of the Holders of Securities; Action by Written Consent . . . . . . . . . . . . . . . . . . . .47 ARTICLE XIII Representations of Property Trustee SECTION 13.1. Representations and Warranties of Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . .49 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -v- ARTICLE XIV Miscellaneous SECTION 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 SECTION 14.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .50 SECTION 14.3. Intention of the Parties. . . . . . . . . . . . . . . . . . . .51 SECTION 14.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .51 SECTION 14.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.6 Partial Enforceability. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .51 TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 SIGNATURE AND SEALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 EXHIBIT A: Form of Terms of _______% Trust Preferred Capital Securities and _______% Trust Common Capital Securities EXHIBIT B: Specimen of Debenture EXHIBIT C: Underwriting Agreement - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -vi- FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING II AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of _______________, 1995, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Northwestern Public Service Company, a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Business Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of June 19, 1995 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on June 19, 1995, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as defined herein) of the Debenture Issuer (as defined herein). WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 promulgated under the Securities Act or any successor rule thereunder. "Appointment Event" means an event defined in the terms of the Securities, as set forth in Exhibit A, which entitles the Holders of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York, New York are authorized or required by applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. -2- "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Security" has the meaning specified in Section 7.1. "Common Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995 of the Sponsor in respect of the Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex II to Exhibit A. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Northwestern Public Service Company, in its capacity as issuer of the Debentures. "Debenture Trustee" means The Chase Manhattan Bank (N.A.), as trustee under the Indenture, until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of Debentures entitled "___% Junior Subordinated Deferrable Interest Debentures due ____" to be issued to the Property Trustee by the Debenture Issuer under the Indenture, a specimen certificate of which is attached as Exhibit B. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Direction" by a Person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. -3- "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Fiscal Year" has the meaning set forth in Section 11.1. "Global Certificate" has the meaning set forth in Section 9.4. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of __________, 1995, between the Debenture Issuer and The Chase Manhattan Bank (N.A.), as trustee, and the indenture supplemental thereto pursuant to which the Debentures are to be issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act, that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. -4- "Legal Action" has the meaning set forth in Section 3.6(g). "List of Holders" has the meaning set forth in Section 2.2. "Majority in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing a majority of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibit A. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995, of the Sponsor in respect of the Preferred Securities. -5- "Preferred Security" has the meaning specified in Section 7.1. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Annex I to Exhibit A. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 promulgated under the Investment Company Act or any successor rule thereunder. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. -6- "66-2/3% in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing 66 2/3% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Special Event" means an Investment Company Event or a Tax Event. "Special Regular Trustee" means a Regular Trustee appointed by the Holders of a Majority in liquidation amount of the Preferred Securities in accordance with Section 5.6(a)(ii)(B). "Sponsor" means Northwestern Public Service Company, a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Entity" has the meaning set forth in Section 3.15. "Successor Securities" has the meaning set forth in Section 3.15. "Tax Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, -7- (ii) interest payable to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes or (iii) the Trust is or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "10% in liquidation amount of the Securities" means, except as provided in the Terms of Preferred Securities and by the Trust Indenture Act, the vote by Holder(s) of Securities voting together as a single class or, as the context may require, the vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities, voting separately as a class, representing 10% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Preferred Securities in the form of Exhibit C. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) the Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act; -8- (c) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that none of the Sponsor, the Debenture Issuer or the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as -9- required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) which requires the consent or vote of all of the holders of the Debentures to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Preferred Securities . Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. -10- (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration is not waivable; or (ii) which requires the consent or vote of all of the Debentures to be waived under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Common Securities ; provided that, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 Event of Default; Notice. -11- (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein; provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named "NWPS Capital Financing I", as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Northwestern Public Service Company, 33 Third Street, S.E., Huron, South Dakota 57350. On ten Business Days -12- written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would (i) cause the Trust not to be classified for United States federal income tax purposes as a grantor trust or (ii) cause each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures at any time the Securities are outstanding. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. Subject to Section 4.2, any Regular Trustee shall have the power, duty and authority to cause the Trust to engage in the following activities: -13- (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Preferred Securities and Common Securities; (b) in connection with the issue and sale of the Preferred Securities, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Preferred Securities in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Underwriting Agreement providing for the sale of the Preferred Securities; (c) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Holders of Common Securities; (d) to give the Debenture Issuer, the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Debenture Issuer, the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; -14- (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses which are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election (i) to defer payments of interest on the Debentures by extending the interest payment period under the Indenture, or (ii) to extend the scheduled maturity date on the Debentures; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and -15- privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust not to be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but for each Holder of Securities to be treated as owning an undivided beneficial interest in the Debentures; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall not engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not: -16- (i) invest any proceeds received by the Trust from holding the Debentures but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under Section 513 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will be characterized as an association taxable as a corporation or a partnership and that each Holder of Securities will not be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered; -17- (b) the Property Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee); (c) the Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Preferred Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities; (d) the Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities; (e) the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; -18- (f) the Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6; (g) the Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities; (h) the Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee; and (i) subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their -19- exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (b) no provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; -20- (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration, the Trust Indenture Act and Rule 3a-7; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsors with their respective duties under this Declaration, nor shall the Property Trustee be liable for the default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or -21- other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities) (or any rerecording, refiling or registration thereof); (v) the Property Trustee may consult with counsel and the advice or opinion of such counsel and the experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity, which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee, provided that nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property -22- Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same proportion and liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedies, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. -23- (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent, in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. Unless otherwise determined by the Regular Trustees, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.6. Notwithstanding anything to the contrary herein, the Sponsor is authorized to execute on behalf of the Trust any documents referred to in Section 4.2. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for 55 years from the date of the Prospectus Supplement relating to the Debentures. -24- SECTION 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c); (b) the Trust may, with the consent of a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided, that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Preferred Securities; or (B) substitutes for the Preferred Securities other securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and maturity; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity which possesses the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities or any Successor Securities to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of such Holders' interests in the new entity); -25- (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee; and (c) notwithstanding Section 3.15(b), the Trust shall, except with the consent of Holders of 100% in liquidation amount of the Securities, not consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity for United States federal income tax purposes to be classified as an association taxable as a corporation or a partnership and each Holder of the Securities not to be treated as owning an undivided beneficial interest in the Debentures. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On ___________________, 1995 the Sponsor will purchase all the Common Securities issued by the Trust, in an amount equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold. The purchase price paid for the Common -26- Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to engage in the following activities and may execute on behalf of the Trust the documents referred to in subsections (a) through (e) of this Section 4.2: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to take any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Preferred Securities. 4.3 Expenses (a) The Sponsor shall be directly responsible for and pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, including, without limitation, the costs and expenses relating to the organization of the Trust, the issuance of the Preferred Securities, the fees and expenses of any Special Regular Trustee, the Property Trustee and the Delaware Trustee, the costs and expenses related to the operation of the Trust, including, without limitation, the costs and -27- expenses of accountants, attorneys, statistical or bookkeeping services, expenses of printing and engraving, paying agents(s), registrar(s), transfer agent(s), duplicating, travel, telephone and costs and expenses incurred in connection with the disposition of Trust assets. (b) The Sponsor will pay any and all taxes and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The number of Trustees shall initially be three (3), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities: (i) and except as provided in Sections 5.1(b)(ii) and 5.6(a)(ii)(B) with respect to the Special Regular Trustee, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in liquidation amount of the Preferred Securities appoint a Special Regular Trustee in accordance with Section 5.6, provided that in any case, the number of Trustees shall be at least three (3) (the majority of which shall be Regular Trustees), and if there are only three Trustees: (c) the Trustee that acts as the Property Trustee shall also act as the Delaware Trustee pursuant to Section 5.2. SECTION 5.2 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or -28- (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set out in Section 5.6(c) (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all -29- respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. The initial Regular Trustees shall be: Merle D. Lewis 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 Richard R. Hylland 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 The initial Delaware Trustee shall be: Wilmington Trust Company Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 who shall also act as Property Trustee. SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and -30- (ii) after the issuance of any Securities; (A) other than in respect to a Special Regular Trustee by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (B) if an Appointment Event has occurred and is continuing, one (1) additional Regular Trustee (the "Special Regular Trustee") may be appointed by vote of the Holders of a Majority in liquidation amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities and such Special Regular Trustee may only be removed (otherwise than by the operation of Section 5.6(c)), by vote of the Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, provided that a Special Regular Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: -31- (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is not deemed an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Regular Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Regular Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Regular Trustee as provided in this Section 5.6; and (d) the Holders of the Common Securities shall use their best efforts to appoint promptly a Successor Delaware Trustee or successor Property Trustee, as the case may be, if the Delaware Trustee or the Property Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) if no successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after causing such notice to be given, if any, as it may deem proper and prescribe, appoint a successor Property Trustee or Successor Delaware Trustee, as the case may be. -32- SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.10 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her -33- power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture)) and Additional Interest (as defined in the Indenture), premium of and principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are legally available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Preferred Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A (the "Common Securities"). The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. -34- (b) The Certificates shall be signed on behalf of the Trust by any two of the Regular Trustees. Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the Person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such Persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such Person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable, except with respect to the Common Securities as provided in Section 10.1(b) of this Declaration. (e) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration, the Preferred Securities Guarantee and the Indenture. -35- ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Common Securities, the Sponsor or the Debenture Issuer; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities, the Sponsor or the Debenture Issuer, the filing of a certificate of cancellation with respect to the Trust or the revocation of the charter of the Holder of the Common Securities, the Sponsor or the Debenture Issuer and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Debenture Issuer or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor; and (b) as soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware; and (c) the provisions of Article X shall survive the termination of the Trust. -36- ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void; (b) subject to this Article IX, Preferred Securities shall be freely transferable; and (c) subject to this Article IX, to the fullest extent permitted by law, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and each Holder of Securities would not be treated as owning an undivided beneficial interest in the Debentures; and (ii) the Trust or the transferree would be an Investment Company or would be controlled by an Investment Company. SECTION 9.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance -37- of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the documents incorporated by reference herein. SECTION 9.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and -38- receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 9.7 Definitive Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then: (c) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be -39- protected in relying on, said instructions of the Clearing Agency. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof in accordance with Section 7.1(b), and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Preferred Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless. then: In the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee and the Terms of Securities, the Sponsor shall not be: -40- (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise; and (b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities). (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) an Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. -41- SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or -42- (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and -43- the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees; (b) the Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) the Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities any United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust; and -44- (d) the Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return on such form as is required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, to the fullest extent permitted by law, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, -45- a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); provided, however, that: (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to (A) cause the Trust to be characterized for purposes of United States federal income taxation as an association taxable as a corporation or a partnership and each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures; (B) affect the powers, rights, duties, obligations or immunities of the Property Trustee or the Delaware Trustee (unless such amendment is consented to in writing by the Property Trustee or the Delaware Trustee, as the case may be); or (C) cause the Trust to be deemed an Investment Company that is required to be registered under the Investment Company Act; (ii) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would materially adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (iii) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (iv) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (v) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities (except to the extent such amendment relates to the Special Regular Trustee, in which case such amendment may only be made in accordance with the terms of the Preferred Securities). (b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended without the consent of the Holders of the Securities to: -46- (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class, if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met; and (b) except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the -47- Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. -48- ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: -49- (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): NWPS CAPITAL FINANCING II 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (b) if given to the Property Trustee or the Delaware Trustee, at the mailing address set forth below (or such other address as the Property Trustee or the Delaware Trustee may give notice of to the Holders of the Securities): WILMINGTON TRUST COMPANY Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. -50- SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust not be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but rather, the Trust be characterized as a grantor trust or otherwise in a manner that each Holder of Securities be treated as owning an undivided beneficial interest in the Debentures. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. -51- IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. NORTHWESTERN PUBLIC SERVICE COMPANY as Sponsor By: ----------------------------------------------- Name: Title: -------------------------------------------------- Merle D. Lewis, as Regular Trustee -------------------------------------------------- Richard R. Hylland, as Regular Trustee WILMINGTON TRUST COMPANY as Delaware Trustee and Property Trustee By: ----------------------------------------------- Name: Title: -52- EXHIBIT A TERMS OF SECURITIES TERMS OF _____% TRUST PREFERRED CAPITAL SECURITIES _____% TRUST COMMON CAPITAL SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of __________, 1995 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. DESIGNATION AND NUMBER. (a) "Preferred Securities." Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($__________) and a liquidation amount with respect to the assets of the Trust of $25 per Preferred Security, are hereby designated for the purposes of identification only as "_____% Trust Preferred Capital Securities" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. (b) "Common Securities." Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($___________) and a liquidation amount with respect to the assets of the Trust of $25 per Common Security, are hereby designated for the purposes of identification only as "_____% Trust Common Capital Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex II, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. (a) Distributions payable on each Security will be fixed at a rate per annum of _____% (the "Coupon Rate") of the stated liquidation amount of $25 per Security, such rate being the rate of interest payable on the Debentures to A-1 be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed in such a 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from __________, 1995 and will be payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year, commencing on __________, 1995, except as otherwise described below. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such extension, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus Supplement dated A-2 __________, 1995, to the Prospectus dated __________, 1995 (together, the "Prospectus"), of the Trust included in the Registration Statement on Form S-3 of the Sponsor, the Debenture Issuer and the Trust. The relevant record dates for the Common Securities, and, if the Preferred Securities shall not continue to remain in book-entry only form, the relevant record dates for the Preferred Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer having failed to make a payment under the Debentures will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities of creditors of the Trust an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such A-3 Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, winding-up or termination of the Trust, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. REDEMPTION AND DISTRIBUTION. (a) Upon the repayment of the Debentures in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be thereupon applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon at the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Paragraph 4(f)(ii) below. (c) If a Tax Event (as defined below) or an Investment Company Event (as defined below) (each, a "Special Event"), shall occur and be continuing, the Regular Trustees shall dissolve the Trust except in the limited circumstances described below, and, after satisfaction of liabilities to creditors of the Trust, cause Debentures held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90-Day Period"); provided, however, that in the case of the occurrence of a Tax Event, such dissolution and distribution shall be conditioned on the Regular Trustees' receipt of an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the A-4 dissolution of the Trust and the distribution of Debentures; and provided, further, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90-Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution and distribution as described therein. Furthermore, if in the case of the occurrence of a Tax Event, after receipt of a Dissolution Tax Opinion (as defined below) by the Regular Trustees (i) the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even if the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this paragraph 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, the Debenture Issuer shall have the right at any time, upon not less than 30 nor more than 60 days notice, to redeem the Debentures in whole or in part for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Tax Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus Supplement, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the A-5 theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable by the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. On and from the date fixed by the Regular Trustees for any distribution of Debentures and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and (iii) any certificates representing Securities, except for certificates representing Preferred Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions, on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. A-6 (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Debentures are distributed to holders of the Securities, pursuant to the terms of the Indenture, the Debenture Issuer will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) "Redemption or Distribution Procedures." (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Preferred Securities, it being understood that, in respect of Preferred Securities registered in the name of and held of record by the Depository (or any successor Clearing Agency) or any nominee, the distribution of the proceeds of such redemption will be made to such Clearing Agency Participant (or Person on whose behalf such nominee holds such Securities) in accordance with the procedures applied by such offering or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which A-7 notice will be irrevocable), then (A) while the Preferred Securities are in book-entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with the Depositary (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities, and (B) with respect to Preferred Securities issued in definitive form and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/ Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Preferred Securities Guarantee or Common Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. A-8 (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Preferred Securities, the Depositary or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. VOTING RIGHTS -- PREFERRED SECURITIES. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If (i) the Trust fails to pay Distributions in full on the Preferred Securities for six (6) consecutive quarterly Distribution periods, or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee in accordance with Section 5.6(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any Person to be appointed as Special Regular Trustee. For purposes of determining whether the Trust has failed to make Distributions in full for six (6) consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees will convene a meeting for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.2 of the Declaration. The record date for A-9 such meeting will be the close of business on the Business Day that is one Business Day before the day on which notice of the meeting is sent to the Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. A Special Regular Trustee may be removed without cause at any time by vote of the Holders of a Majority in liquidation amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities in accordance with Section 5.6(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Regular Trustee, the Debenture Issuer shall retain all rights under the Indenture, including the right to extend the interest payment period on the Debentures. Subject to the requirements set forth in this paragraph, the Holders of a majority in liquidation amount of the Preferred Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures affected thereby, the Property Trustee may only give such consent at the direction of all holders of the Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the A-10 Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, for the purposes of United States federal income tax the Trust will not fail to be classified as a grantor trust. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Preferred Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. VOTING RIGHTS -- COMMON SECURITIES. (a) Except as provided under paragraphs 6(b), 6(c) and 7, and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any A-11 Trustee or to increase or decrease the number of Trustees, subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Regular Trustee. (c) Subject to Section 2.6 of the Declaration and only after the Event of Default with respect to the Preferred Securities has been cured, waived, or otherwise eliminated, and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Common Securities. Pursuant to this paragraph 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Common Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. A-12 Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities, voting together as a class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66 2/3% in liquidation amount of the Securities affected thereby; provided, however, that, the rights of Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Regular Trustee shall not be amended without the consent of each Holder of Preferred Securities; provided, further however, if any amendment or proposal referred to in clause (i) above would materially adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures and the Preferred Securities Guarantee is required under the A-13 Indenture with respect to any amendment, modification or termination of the Indenture, the Debentures or the Preferred Securities Guarantee, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of all Holders of the Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Debentures ; provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this paragraph 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. 8. PRO RATA. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. RANKING. The Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. A-14 10. LISTING. The Regular Trustees shall use their best efforts to cause the Preferred Securities to be listed for quotation on the New York Stock Exchange Limited. 11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. 13. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration and the Preferred Securities Guarantee and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. These terms and the rights of the parties herewith shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. A-15 ANNEX I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE, INSERT: This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depository or by a nominee of the Depository to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of the Depositary (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Preferred Securities ------------ ------------ CUSIP NO. ---------- Certificate Evidencing Preferred Securities of NWPS CAPITAL FINANCING II Preferred Securities. (liquidation amount $25 per Preferred Security) NWPS CAPITAL FINANCING II, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that _______________ (the "Holder") is the registered owner of ________________ preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Preferred Capital Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. A-16 THE DESIGNATION, RIGHTS,PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE PREFERRED SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of __________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee A-17 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints ------------- agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Preferred Security Certificate) A-18 ANNEX II Certificate Number Number of Common Securities ------------ ------------ Certificate Evidencing Common Securities of NWPS CAPITAL FINANCING II Common Securities. (liquidation amount $25 per Common Security) NWPS CAPITAL FINANCING II, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________ (the "Holder") is the registered owner of ________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Common Capital Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. THE DESIGNATION, RIGHTS, PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE COMMON SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. A-19 Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat for United States federal income tax purposes the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of ___________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints -------------- agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Common Security Certificate) A-20 EXHIBIT B SPECIMEN OF DEBENTURE B-1 EXHIBIT C UNDERWRITING AGREEMENT C-1 EX-4.(A)(28) 7 EXHIBIT 4(A)(28) FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING III NWPS CAPITAL FINANCING III CROSS-REFERENCE TABLE FOR THE AMENDED AND RESTATED DECLARATION OF TRUST SECTION OF SECTION OF TRUST INDENTURE AMENDED AND RESTATED ACT OF 1939, AS AMENDED DECLARATION OF TRUST Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 (a)(4). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3(c) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a) Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4, 3.6(j) (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9, 3.10 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7(a) (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(a) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.9(b) (e) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable Section 317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(2). . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.8(h) Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(c) - ------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Amended and Restated Declaration of Trust. TABLE OF CONTENTS ARTICLE I Interpretation and Definitions SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Appointment Event . . . . . . . . . . . . . . . . . . . . . . . 2 Authorized Officer. . . . . . . . . . . . . . . . . . . . . . . 2 Book Entry Interest . . . . . . . . . . . . . . . . . . . . . . 2 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Trust Act. . . . . . . . . . . . . . . . . . . . . . . 2 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . 2 Clearing Agency Participant . . . . . . . . . . . . . . . . . . 3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Security . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities Guarantee . . . . . . . . . . . . . . . . . . 3 Common Security Certificate . . . . . . . . . . . . . . . . . . 3 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Issuer. . . . . . . . . . . . . . . . . . . . . . . . 3 Debenture Trustee . . . . . . . . . . . . . . . . . . . . . . . 3 Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . . 3 Definitive Preferred Security Certificates. . . . . . . . . . . 3 Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . 4 DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Certificate. . . . . . . . . . . . . . . . . . . . . . . 4 Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indemnified Person. . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company. . . . . . . . . . . . . . . . . . . . . . . 4 Investment Company Act. . . . . . . . . . . . . . . . . . . . . 4 Investment Company Event. . . . . . . . . . . . . . . . . . . . 4 Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . . 5 List of Holders . . . . . . . . . . . . . . . . . . . . . . . . 5 Majority in Liquidation Amount of the Securities. . . . . . . . 5 Ministerial Action. . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 5 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Preferred Securities Guarantee. . . . . . . . . . . . . . . . . 5 Preferred Security. . . . . . . . . . . . . . . . . . . . . . . 6 Preferred Security Beneficial Owner . . . . . . . . . . . . . . 6 Preferred Security Certificate. . . . . . . . . . . . . . . . . 6 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -i- Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . 6 Property Trustee Account. . . . . . . . . . . . . . . . . . . . 6 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Regular Trustee . . . . . . . . . . . . . . . . . . . . . . . . 6 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . 6 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . 6 Rule 3a-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 6 66- 2/3% in Liquidation Amount of the Securities. . . . . . . . 6 Special Event . . . . . . . . . . . . . . . . . . . . . . . . . 7 Special Regular Trustee . . . . . . . . . . . . . . . . . . . . 7 Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Entity. . . . . . . . . . . . . . . . . . . . . . . . 7 Successor Securities. . . . . . . . . . . . . . . . . . . . . . 7 Super Majority. . . . . . . . . . . . . . . . . . . . . . . . . 7 Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10% in Liquidation Amount of the Securities . . . . . . . . . . 8 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . 8 Trustee; Trustees . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 8 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . 8 ARTICLE II Trust Indenture Act SECTION 2.1. Trust Indenture Act; Application. . . . . . . . . . . . . . . . 8 SECTION 2.2. Lists of Holders of Securities. . . . . . . . . . . . . . . . . 9 SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . . . . . 9 SECTION 2.4 Periodic Reports to Property Trustee. . . . . . . . . . . . . . 9 SECTION 2.5. Evidence of Compliance with Conditions Precedent. . . . . . . .10 SECTION 2.6. Events of Default; Waiver . . . . . . . . . . . . . . . . . . .10 SECTION 2.7. Event of Default; Notice. . . . . . . . . . . . . . . . . . . .11 ARTICLE III Organization SECTION 3.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.2. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 SECTION 3.3. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -ii- SECTION 3.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .13 SECTION 3.5. Title to Property of the Trust. . . . . . . . . . . . . . . . .13 SECTION 3.6. Powers and Duties of the Regular Trustees . . . . . . . . . . .13 SECTION 3.7. Prohibition of Actions by the Trust and the Trustees . . . . . . . . . . . . . . . . . . . . . . . . .16 SECTION 3.8. Powers and Duties of the Property Trustee . . . . . . . . . . .17 SECTION 3.9. Certain Duties and Responsibilities of the Property Trustee . . . . . . . . . . . . . . . . . . . . .19 SECTION 3.10. Certain Rights of Property Trustee. . . . . . . . . . . . . . .21 SECTION 3.11. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.12. Execution of Documents. . . . . . . . . . . . . . . . . . . . .24 SECTION 3.13. Not Responsible for Recitals or Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.14. Duration of Trust . . . . . . . . . . . . . . . . . . . . . . .24 SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 ARTICLE IV Sponsor SECTION 4.1. Sponsor's Purchase of Common Securities . . . . . . . . . . . .26 SECTION 4.2. Responsibilities of the Sponsor . . . . . . . . . . . . . . . .27 SECTION 4.3. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .27 ARTICLE V Trustees SECTION 5.1. Number of Trustees. . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.2. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .28 SECTION 5.3. Property Trustee; Eligibility . . . . . . . . . . . . . . . . .29 SECTION 5.4. Qualifications of Regular Trustees and Delaware Trustee Generally . . . . . . . . . . . . . . . .30 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iii- SECTION 5.5. Initial Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.6. Appointment, Removal and Resignation of Trustees. . . . . . . . . . . . . . . . . . . . . . . .30 SECTION 5.7. Vacancies Among Trustees. . . . . . . . . . . . . . . . . . . .33 SECTION 5.8. Effect of Vacancies . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.9 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . .33 SECTION 5.10. Delegation of Power . . . . . . . . . . . . . . . . . . . . . .33 ARTICLE VI Distributions SECTION 6.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . .34 ARTICLE VII Issuance of Securities SECTION 7.1. General Provisions Regarding Securities . . . . . . . . . . . .34 ARTICLE VIII Termination of Trust SECTION 8.1. Termination of Trust. . . . . . . . . . . . . . . . . . . . . .36 ARTICLE IX Transfer of Securities SECTION 9.1. Transfer of Securities. . . . . . . . . . . . . . . . . . . . .37 SECTION 9.2. Transfer of Certificates. . . . . . . . . . . . . . . . . . . .37 SECTION 9.3. Deemed Security Holders . . . . . . . . . . . . . . . . . . . .38 SECTION 9.4. Book Entry Interests. . . . . . . . . . . . . . . . . . . . . .38 SECTION 9.5. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . .39 SECTION 9.6. Appointment of Successor Clearing Agency. . . . . . . . . . . .39 SECTION 9.7. Definitive Preferred Security Certificates. . . . . . . . . . .39 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -iv- SECTION 9.8. Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .40 ARTICLE X Limitation of Liability of Holders of Securities, Trustees and Others SECTION 10.1. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . .40 SECTION 10.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . .41 SECTION 10.3. Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . .42 SECTION 10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .43 SECTION 10.5. Outside Business. . . . . . . . . . . . . . . . . . . . . . . .43 ARTICLE XI Accounting SECTION 11.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .44 SECTION 11.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . .44 SECTION 11.3. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 11.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . .45 ARTICLE XII Amendments and Meetings SECTION 12.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .45 SECTION 12.2. Meetings of the Holders of Securities; Action by Written Consent . . . . . . . . . . . . . . . . . . . .47 ARTICLE XIII Representations of Property Trustee SECTION 13.1. Representations and Warranties of Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . .49 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -v- ARTICLE XIV Miscellaneous SECTION 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 SECTION 14.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .50 SECTION 14.3. Intention of the Parties. . . . . . . . . . . . . . . . . . . .51 SECTION 14.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .51 SECTION 14.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.6 Partial Enforceability. . . . . . . . . . . . . . . . . . . . .51 SECTION 14.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .51 TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 SIGNATURE AND SEALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 EXHIBIT A: Form of Terms of _______% Trust Preferred Capital Securities and _______% Trust Common Capital Securities EXHIBIT B: Specimen of Debenture EXHIBIT C: Underwriting Agreement - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Declaration. -vi- FORM OF AMENDED AND RESTATED DECLARATION OF TRUST OF NWPS CAPITAL FINANCING III AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of _______________, 1995, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Northwestern Public Service Company, a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Business Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of June 19, 1995 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on June 19, 1995, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures (as defined herein) of the Debenture Issuer (as defined herein). WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 promulgated under the Securities Act or any successor rule thereunder. "Appointment Event" means an event defined in the terms of the Securities, as set forth in Exhibit A, which entitles the Holders of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York, New York are authorized or required by applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. -2- "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Security" has the meaning specified in Section 7.1. "Common Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995 of the Sponsor in respect of the Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex II to Exhibit A. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Northwestern Public Service Company, in its capacity as issuer of the Debentures. "Debenture Trustee" means The Chase Manhattan Bank (N.A.), as trustee under the Indenture, until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of Debentures entitled "___% Junior Subordinated Deferrable Interest Debentures due ____" to be issued to the Property Trustee by the Debenture Issuer under the Indenture, a specimen certificate of which is attached as Exhibit B. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Direction" by a Person means a written direction signed: (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. -3- "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Debentures. "Fiscal Year" has the meaning set forth in Section 11.1. "Global Certificate" has the meaning set forth in Section 9.4. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of __________, 1995, between the Debenture Issuer and The Chase Manhattan Bank (N.A.), as trustee, and the indenture supplemental thereto pursuant to which the Debentures are to be issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act, that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. -4- "Legal Action" has the meaning set forth in Section 3.6(g). "List of Holders" has the meaning set forth in Section 2.2. "Majority in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing a majority of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibit A. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities Guarantee" means the guarantee agreement to be dated as of __________, 1995, of the Sponsor in respect of the Preferred Securities. -5- "Preferred Security" has the meaning specified in Section 7.1. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Annex I to Exhibit A. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Trustee Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer in the Corporate Trust Department of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 promulgated under the Investment Company Act or any successor rule thereunder. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. -6- "66-2/3% in liquidation amount of the Securities" means, except as provided in the Terms of Securities and by the Trust Indenture Act, a vote by Holder(s) of Securities voting together as a single class or, as the context may require, a vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities voting separately as a class, representing 66 2/3% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Special Event" means an Investment Company Event or a Tax Event. "Special Regular Trustee" means a Regular Trustee appointed by the Holders of a Majority in liquidation amount of the Preferred Securities in accordance with Section 5.6(a)(ii)(B). "Sponsor" means Northwestern Public Service Company, a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Entity" has the meaning set forth in Section 3.15. "Successor Securities" has the meaning set forth in Section 3.15. "Tax Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, -7- (ii) interest payable to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes or (iii) the Trust is or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "10% in liquidation amount of the Securities" means, except as provided in the Terms of Preferred Securities and by the Trust Indenture Act, the vote by Holder(s) of Securities voting together as a single class or, as the context may require, the vote by Holder(s) of Preferred Securities or Holder(s) of Common Securities, voting separately as a class, representing 10% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Securities of such class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Preferred Securities in the form of Exhibit C. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) the Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act; -8- (c) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that none of the Sponsor, the Debenture Issuer or the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as -9- required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor, the Debenture Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) which requires the consent or vote of all of the holders of the Debentures to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Preferred Securities . Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. -10- (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration is not waivable; or (ii) which requires the consent or vote of all of the Debentures to be waived under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Common Securities ; provided that, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 Event of Default; Notice. -11- (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein; provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures or in the payment of any sinking fund installment established for the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named "NWPS Capital Financing I", as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Northwestern Public Service Company, 33 Third Street, S.E., Huron, South Dakota 57350. On ten Business Days -12- written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Debentures, and (b) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would (i) cause the Trust not to be classified for United States federal income tax purposes as a grantor trust or (ii) cause each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures at any time the Securities are outstanding. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. Subject to Section 4.2, any Regular Trustee shall have the power, duty and authority to cause the Trust to engage in the following activities: -13- (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a one-time, simultaneous issuance of both Preferred Securities and Common Securities; (b) in connection with the issue and sale of the Preferred Securities, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Preferred Securities in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Underwriting Agreement providing for the sale of the Preferred Securities; (c) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Holders of Common Securities; (d) to give the Debenture Issuer, the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Debenture Issuer, the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; -14- (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses which are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election (i) to defer payments of interest on the Debentures by extending the interest payment period under the Indenture, or (ii) to extend the scheduled maturity date on the Debentures; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and -15- privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust not to be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but for each Holder of Securities to be treated as owning an undivided beneficial interest in the Debentures; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall not engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not: -16- (i) invest any proceeds received by the Trust from holding the Debentures but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under Section 513 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will be characterized as an association taxable as a corporation or a partnership and that each Holder of Securities will not be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered; -17- (b) the Property Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee); (c) the Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments to the Holders of the Preferred Securities and Holders of the Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities; (d) the Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities; (e) the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; -18- (f) the Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6; (g) the Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities; (h) the Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee; and (i) subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing or waiver of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their -19- exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (b) no provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; -20- (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration, the Trust Indenture Act and Rule 3a-7; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsors with their respective duties under this Declaration, nor shall the Property Trustee be liable for the default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or -21- other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities) (or any rerecording, refiling or registration thereof); (v) the Property Trustee may consult with counsel and the advice or opinion of such counsel and the experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity, which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee, provided that nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property -22- Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same proportion and liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedies, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. -23- (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent, in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. Unless otherwise determined by the Regular Trustees, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.6. Notwithstanding anything to the contrary herein, the Sponsor is authorized to execute on behalf of the Trust any documents referred to in Section 4.2. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for 55 years from the date of the Prospectus Supplement relating to the Debentures. -24- SECTION 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c); (b) the Trust may, with the consent of a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided, that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Preferred Securities; or (B) substitutes for the Preferred Securities other securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and maturity; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity which possesses the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities or any Successor Securities to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of such Holders' interests in the new entity); -25- (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities or any Successor Securities in any material respect under the documents governing the Preferred Securities or the Successor Securities (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee; and (c) notwithstanding Section 3.15(b), the Trust shall, except with the consent of Holders of 100% in liquidation amount of the Securities, not consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity for United States federal income tax purposes to be classified as an association taxable as a corporation or a partnership and each Holder of the Securities not to be treated as owning an undivided beneficial interest in the Debentures. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On ___________________, 1995 the Sponsor will purchase all the Common Securities issued by the Trust, in an amount equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold. The purchase price paid for the Common -26- Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to engage in the following activities and may execute on behalf of the Trust the documents referred to in subsections (a) through (e) of this Section 4.2: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to take any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Preferred Securities. 4.3 Expenses (a) The Sponsor shall be directly responsible for and pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, including, without limitation, the costs and expenses relating to the organization of the Trust, the issuance of the Preferred Securities, the fees and expenses of any Special Regular Trustee, the Property Trustee and the Delaware Trustee, the costs and expenses related to the operation of the Trust, including, without limitation, the costs and -27- expenses of accountants, attorneys, statistical or bookkeeping services, expenses of printing and engraving, paying agents(s), registrar(s), transfer agent(s), duplicating, travel, telephone and costs and expenses incurred in connection with the disposition of Trust assets. (b) The Sponsor will pay any and all taxes and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The number of Trustees shall initially be three (3), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities: (i) and except as provided in Sections 5.1(b)(ii) and 5.6(a)(ii)(B) with respect to the Special Regular Trustee, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in liquidation amount of the Preferred Securities appoint a Special Regular Trustee in accordance with Section 5.6, provided that in any case, the number of Trustees shall be at least three (3) (the majority of which shall be Regular Trustees), and if there are only three Trustees: (c) the Trustee that acts as the Property Trustee shall also act as the Delaware Trustee pursuant to Section 5.2. SECTION 5.2 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or -28- (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" of the Trust, the Property Trustee shall possess those qualifications. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set out in Section 5.6(c) (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all -29- respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. The initial Regular Trustees shall be: Merle D. Lewis 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 Richard R. Hylland 33 Third Street SE P.O. Box 1318 Huron, South Dakota 57350-1318 The initial Delaware Trustee shall be: Wilmington Trust Company Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 who shall also act as Property Trustee. SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and -30- (ii) after the issuance of any Securities; (A) other than in respect to a Special Regular Trustee by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (B) if an Appointment Event has occurred and is continuing, one (1) additional Regular Trustee (the "Special Regular Trustee") may be appointed by vote of the Holders of a Majority in liquidation amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities and such Special Regular Trustee may only be removed (otherwise than by the operation of Section 5.6(c)), by vote of the Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, provided that a Special Regular Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: -31- (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is not deemed an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Regular Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Regular Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Regular Trustee as provided in this Section 5.6; and (d) the Holders of the Common Securities shall use their best efforts to appoint promptly a Successor Delaware Trustee or successor Property Trustee, as the case may be, if the Delaware Trustee or the Property Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) if no successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after causing such notice to be given, if any, as it may deem proper and prescribe, appoint a successor Property Trustee or Successor Delaware Trustee, as the case may be. -32- SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.10 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her -33- power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture)) and Additional Interest (as defined in the Indenture), premium of and principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are legally available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Preferred Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A (the "Common Securities"). The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. -34- (b) The Certificates shall be signed on behalf of the Trust by any two of the Regular Trustees. Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the Person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such Persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such Person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable, except with respect to the Common Securities as provided in Section 10.1(b) of this Declaration. (e) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration, the Preferred Securities Guarantee and the Indenture. -35- ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Common Securities, the Sponsor or the Debenture Issuer; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities, the Sponsor or the Debenture Issuer, the filing of a certificate of cancellation with respect to the Trust or the revocation of the charter of the Holder of the Common Securities, the Sponsor or the Debenture Issuer and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Debenture Issuer or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor; and (b) as soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware; and (c) the provisions of Article X shall survive the termination of the Trust. -36- ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void; (b) subject to this Article IX, Preferred Securities shall be freely transferable; and (c) subject to this Article IX, to the fullest extent permitted by law, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and each Holder of Securities would not be treated as owning an undivided beneficial interest in the Debentures; and (ii) the Trust or the transferree would be an Investment Company or would be controlled by an Investment Company. SECTION 9.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance -37- of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the documents incorporated by reference herein. SECTION 9.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and -38- receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 9.7 Definitive Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then: (c) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be -39- protected in relying on, said instructions of the Clearing Agency. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof in accordance with Section 7.1(b), and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Preferred Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless. then: In the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES AND OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee and the Terms of Securities, the Sponsor shall not be: -40- (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise; and (b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities). (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) an Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. -41- SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or -42- (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, except as otherwise set forth in Section 3.9) or willful misconduct with respect to such acts or omissions; and (b) to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Debenture Issuer, the Delaware Trustee and -43- the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees; (b) the Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss; (c) the Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities any United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust; and -44- (d) the Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority an annual United States federal income tax return on such form as is required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, to the fullest extent permitted by law, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, -45- a written instrument approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); provided, however, that: (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to (A) cause the Trust to be characterized for purposes of United States federal income taxation as an association taxable as a corporation or a partnership and each Holder of Securities not to be treated as owning an undivided beneficial interest in the Debentures; (B) affect the powers, rights, duties, obligations or immunities of the Property Trustee or the Delaware Trustee (unless such amendment is consented to in writing by the Property Trustee or the Delaware Trustee, as the case may be); or (C) cause the Trust to be deemed an Investment Company that is required to be registered under the Investment Company Act; (ii) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would materially adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (iii) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (iv) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (v) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities (except to the extent such amendment relates to the Special Regular Trustee, in which case such amendment may only be made in accordance with the terms of the Preferred Securities). (b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended without the consent of the Holders of the Securities to: -46- (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class, if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met; and (b) except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the -47- Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. -48- ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: -49- (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): NWPS CAPITAL FINANCING III 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (b) if given to the Property Trustee or the Delaware Trustee, at the mailing address set forth below (or such other address as the Property Trustee or the Delaware Trustee may give notice of to the Holders of the Securities): WILMINGTON TRUST COMPANY Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): NORTHWESTERN PUBLIC SERVICE COMPANY 33 Third Street, S.E. Huron, South Dakota 57350 Attention: __________________ (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. -50- SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust not be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but rather, the Trust be characterized as a grantor trust or otherwise in a manner that each Holder of Securities be treated as owning an undivided beneficial interest in the Debentures. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. -51- IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. NORTHWESTERN PUBLIC SERVICE COMPANY as Sponsor By: ----------------------------------------------- Name: Title: -------------------------------------------------- Merle D. Lewis, as Regular Trustee -------------------------------------------------- Richard R. Hylland, as Regular Trustee WILMINGTON TRUST COMPANY as Delaware Trustee and Property Trustee By: ----------------------------------------------- Name: Title: -52- EXHIBIT A TERMS OF SECURITIES TERMS OF _____% TRUST PREFERRED CAPITAL SECURITIES _____% TRUST COMMON CAPITAL SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of __________, 1995 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. DESIGNATION AND NUMBER. (a) "Preferred Securities." Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($__________) and a liquidation amount with respect to the assets of the Trust of $25 per Preferred Security, are hereby designated for the purposes of identification only as "_____% Trust Preferred Capital Securities" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. (b) "Common Securities." Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $_____ million ($___________) and a liquidation amount with respect to the assets of the Trust of $25 per Common Security, are hereby designated for the purposes of identification only as "_____% Trust Common Capital Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex II, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. (a) Distributions payable on each Security will be fixed at a rate per annum of _____% (the "Coupon Rate") of the stated liquidation amount of $25 per Security, such rate being the rate of interest payable on the Debentures to A-1 be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed in such a 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from __________, 1995 and will be payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year, commencing on __________, 1995, except as otherwise described below. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such extension, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus Supplement dated A-2 __________, 1995, to the Prospectus dated __________, 1995 (together, the "Prospectus"), of the Trust included in the Registration Statement on Form S-3 of the Sponsor, the Debenture Issuer and the Trust. The relevant record dates for the Common Securities, and, if the Preferred Securities shall not continue to remain in book-entry only form, the relevant record dates for the Preferred Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days before the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer having failed to make a payment under the Debentures will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities of creditors of the Trust an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such A-3 Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, winding-up or termination of the Trust, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. REDEMPTION AND DISTRIBUTION. (a) Upon the repayment of the Debentures in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be thereupon applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon at the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Paragraph 4(f)(ii) below. (c) If a Tax Event (as defined below) or an Investment Company Event (as defined below) (each, a "Special Event"), shall occur and be continuing, the Regular Trustees shall dissolve the Trust except in the limited circumstances described below, and, after satisfaction of liabilities to creditors of the Trust, cause Debentures held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90-Day Period"); provided, however, that in the case of the occurrence of a Tax Event, such dissolution and distribution shall be conditioned on the Regular Trustees' receipt of an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the A-4 dissolution of the Trust and the distribution of Debentures; and provided, further, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90-Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution and distribution as described therein. Furthermore, if in the case of the occurrence of a Tax Event, after receipt of a Dissolution Tax Opinion (as defined below) by the Regular Trustees (i) the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even if the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this paragraph 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, the Debenture Issuer shall have the right at any time, upon not less than 30 nor more than 60 days notice, to redeem the Debentures in whole or in part for cash within 90 days following the occurrence of such Tax Event, and, following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Tax Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus Supplement, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the A-5 theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable by the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. In case of any uncertainty regarding an Investment Company Event, the good faith determination of the Regular Trustees, based on the advice of counsel, shall be conclusive. On and from the date fixed by the Regular Trustees for any distribution of Debentures and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and (iii) any certificates representing Securities, except for certificates representing Preferred Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions, on such Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. A-6 (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Debentures are distributed to holders of the Securities, pursuant to the terms of the Indenture, the Debenture Issuer will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) "Redemption or Distribution Procedures." (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Preferred Securities, it being understood that, in respect of Preferred Securities registered in the name of and held of record by the Depository (or any successor Clearing Agency) or any nominee, the distribution of the proceeds of such redemption will be made to such Clearing Agency Participant (or Person on whose behalf such nominee holds such Securities) in accordance with the procedures applied by such offering or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which A-7 notice will be irrevocable), then (A) while the Preferred Securities are in book-entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with the Depositary (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities, and (B) with respect to Preferred Securities issued in definitive form and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/ Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Preferred Securities Guarantee or Common Securities Guarantee, Distributions on such Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. A-8 (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Preferred Securities, the Depositary or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. VOTING RIGHTS -- PREFERRED SECURITIES. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If (i) the Trust fails to pay Distributions in full on the Preferred Securities for six (6) consecutive quarterly Distribution periods, or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee in accordance with Section 5.6(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any Person to be appointed as Special Regular Trustee. For purposes of determining whether the Trust has failed to make Distributions in full for six (6) consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees will convene a meeting for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.2 of the Declaration. The record date for A-9 such meeting will be the close of business on the Business Day that is one Business Day before the day on which notice of the meeting is sent to the Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. A Special Regular Trustee may be removed without cause at any time by vote of the Holders of a Majority in liquidation amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities in accordance with Section 5.6(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Regular Trustee, the Debenture Issuer shall retain all rights under the Indenture, including the right to extend the interest payment period on the Debentures. Subject to the requirements set forth in this paragraph, the Holders of a majority in liquidation amount of the Preferred Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures affected thereby, the Property Trustee may only give such consent at the direction of all holders of the Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the A-10 Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, for the purposes of United States federal income tax the Trust will not fail to be classified as a grantor trust. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Preferred Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. VOTING RIGHTS -- COMMON SECURITIES. (a) Except as provided under paragraphs 6(b), 6(c) and 7, and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any A-11 Trustee or to increase or decrease the number of Trustees, subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Regular Trustee. (c) Subject to Section 2.6 of the Declaration and only after the Event of Default with respect to the Preferred Securities has been cured, waived, or otherwise eliminated, and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or the exercise of any trust or power conferred upon the Property Trustee under the Declaration as holder of the Debentures, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 513 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent under the Indenture would require the consent of all Holders of Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Common Securities. Pursuant to this paragraph 6(c), the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as an association taxable as a corporation or a partnership and that each Holder of the Securities will be treated as owning an undivided beneficial interest in the Debentures on account of such action. If the Property Trustee fails to enforce its rights under the Declaration, to the fullest extent permitted by law, any Holder of Common Securities may, after such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. A-12 Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. AMENDMENTS TO DECLARATION AND INDENTURE. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities, voting together as a class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66 2/3% in liquidation amount of the Securities affected thereby; provided, however, that, the rights of Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Regular Trustee shall not be amended without the consent of each Holder of Preferred Securities; provided, further however, if any amendment or proposal referred to in clause (i) above would materially adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of securities. (b) In the event the consent of the Property Trustee as the holder of the Debentures and the Preferred Securities Guarantee is required under the A-13 Indenture with respect to any amendment, modification or termination of the Indenture, the Debentures or the Preferred Securities Guarantee, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of all Holders of the Debentures, the Property Trustee may only give such consent at the direction of all Holders of the Debentures ; provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this paragraph 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. 8. PRO RATA. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. RANKING. The Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default occurs and is continuing under the Indenture in respect of the Debentures held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. A-14 10. LISTING. The Regular Trustees shall use their best efforts to cause the Preferred Securities to be listed for quotation on the New York Stock Exchange Limited. 11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. 13. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration and the Preferred Securities Guarantee and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. These terms and the rights of the parties herewith shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. A-15 ANNEX I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE, INSERT: This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depository or by a nominee of the Depository to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of the Depositary (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Preferred Securities ------------ ------------ CUSIP NO. ---------- Certificate Evidencing Preferred Securities of NWPS CAPITAL FINANCING III Preferred Securities. (liquidation amount $25 per Preferred Security) NWPS CAPITAL FINANCING III, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that _______________ (the "Holder") is the registered owner of ________________ preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Preferred Capital Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. A-16 THE DESIGNATION, RIGHTS, PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE PREFERRED SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of __________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee A-17 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints ------------- agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Preferred Security Certificate) A-18 ANNEX II Certificate Number Number of Common Securities ------------ ------------ Certificate Evidencing Common Securities of NWPS CAPITAL FINANCING III Common Securities. (liquidation amount $25 per Common Security) NWPS CAPITAL FINANCING III, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________ (the "Holder") is the registered owner of ________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Common Capital Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. THE DESIGNATION, RIGHTS, PRIVILEGES, RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER), PREFERENCES AND OTHER TERMS AND PROVISIONS OF THE COMMON SECURITIES REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE PROVISIONS OF THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST DATED AS OF ___________, 1995, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (THE "DECLARATION"), INCLUDING THE DESIGNATION OF THE TERMS OF THE SECURITIES AS SET FORTH IN EXHIBIT A TO THE DECLARATION. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. A-19 Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat for United States federal income tax purposes the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this day of ___________, 199 . NWPS Capital Financing I By: ------------------------------------- as Trustee By: ------------------------------------- as Trustee ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints -------------- agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------- (Sign exactly as your name appears on the other side of this Common Security Certificate) A-20 EXHIBIT B SPECIMEN OF DEBENTURE B-1 EXHIBIT C UNDERWRITING AGREEMENT C-1 EX-4.(A)(29) 8 EXHIBIT 4(A)(29) Ex. 4(a)(29) FORM OF SUBORDINATED DEBT SECURITIES INDENTURE BETWEEN NORTHWESTERN PUBLIC SERVICE COMPANY AND THE CHASE MANHATTAN BANK (N.A.) AS TRUSTEE CROSS-REFERENCE TABLE FOR THE SUBORDINATED DEBT SECURITIES INDENTURE SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED SECTION OF INDENTURE - ----------------------- -------------------- SECTION 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 607 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 607 (a)(3) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 608 SECTION 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 612 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 612 SECTION 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 701 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 701 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 701 SECTION 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 SECTION 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (b) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (d) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 102 SECTION 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 601, 602 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 602 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . 602 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 514 SECTION 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 502, 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . . . .Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 104(d) SECTION 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . . . . . . .1003 SECTION 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 107 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS PAGE ---- Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Recitals of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE Definitions and Other Provisions of General Application SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Additional Amounts. . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . 2 Authorized Newspaper. . . . . . . . . . . . . . . . . . . . . . 2 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 2 Board Resolution. . . . . . . . . . . . . . . . . . . . . . . . 2 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . 2 CEDEL S.A.. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Common Depositary . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities . . . . . . . . . . . . . . . . . . . . . . . 3 Common Securities Guarantee . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request; Company Order. . . . . . . . . . . . . . . . . 3 Conversion Date . . . . . . . . . . . . . . . . . . . . . . . . 3 Conversion Event. . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . 3 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . 4 Dollar; $ . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Dollar Equivalent of the Currency Unit. . . . . . . . . . . . . 4 Dollar Equivalent of the Foreign Currency . . . . . . . . . . . 4 ECU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Election Date . . . . . . . . . . . . . . . . . . . . . . . . . 4 Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 European Communities. . . . . . . . . . . . . . . . . . . . . . 4 European Monetary System. . . . . . . . . . . . . . . . . . . . 4 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Date . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Rate Agent . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Rate Officer's Certificate . . . . . . . . . . . . . . 4 Federal Bankruptcy Code . . . . . . . . . . . . . . . . . . . . 5 - ------------ Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. -i- PAGE ---- Foreign Currency. . . . . . . . . . . . . . . . . . . . . . . . 5 Government Obligations. . . . . . . . . . . . . . . . . . . . . 5 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Indexed Security. . . . . . . . . . . . . . . . . . . . . . . . 5 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . 6 Market Exchange Rate. . . . . . . . . . . . . . . . . . . . . . 6 Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 NWPS Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 6 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 6 Original Issue Discount Security. . . . . . . . . . . . . . . . 7 Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 8 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Place of Payment. . . . . . . . . . . . . . . . . . . . . . . . 8 Predecessor Security. . . . . . . . . . . . . . . . . . . . . . 8 Preferred Securities. . . . . . . . . . . . . . . . . . . . . . 8 Preferred Securities Guarantee. . . . . . . . . . . . . . . . . 8 Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . 8 Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . 8 Registered Security . . . . . . . . . . . . . . . . . . . . . . 8 Regular Record Date . . . . . . . . . . . . . . . . . . . . . . 9 Repayment Date. . . . . . . . . . . . . . . . . . . . . . . . . 9 Repayment Price . . . . . . . . . . . . . . . . . . . . . . . . 9 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . 9 Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Security Register; Security Registrar . . . . . . . . . . . . . 9 Special Record Date . . . . . . . . . . . . . . . . . . . . . . 9 Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . 9 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 9 Trust Securities. . . . . . . . . . . . . . . . . . . . . . . .10 Trust Securities Guarantees . . . . . . . . . . . . . . . . . .10 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 United States . . . . . . . . . . . . . . . . . . . . . . . . .10 United States Person. . . . . . . . . . . . . . . . . . . . . .10 Valuation Date. . . . . . . . . . . . . . . . . . . . . . . . .10 Vice President. . . . . . . . . . . . . . . . . . . . . . . . .10 Voting Stock. . . . . . . . . . . . . . . . . . . . . . . . . .10 Yield to Maturity . . . . . . . . . . . . . . . . . . . . . . .10 SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . .10 SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . .11 SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . .11 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -ii- PAGE ---- SECTION 105. Notices, etc. to Trustee and Company. . . . . . . . . . . . . .13 SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . .13 SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . .13 SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . .14 SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .14 SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . .14 SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . .14 SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .14 SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . .14 ARTICLE TWO Security Forms SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . .15 SECTION 202. Form of Trustee's Certificate of Authentication . . . . . . . .15 SECTION 203. Securities Issuable in Global Form. . . . . . . . . . . . . . .15 ARTICLE THREE The Securities SECTION 301. Amount Unlimited; Issuable in Series. . . . . . . . . . . . . .16 SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . .19 SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . . .20 SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . . .21 SECTION 305. Registration of Transfer and Exchange . . . . . . . . . . . . .23 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . . .25 SECTION 307. Payment of Interest; Interest Rights Preserved; Optional Interest Reset . . . . . . . . . . . . . . . . . . . .26 SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . .28 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -iii- PAGE ---- SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . .28 SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . .29 SECTION 311. Currency and Manner of Payments in Respect of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .29 SECTION 312. Appointment and Resignation of Successor Exchange Rate Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .32 ARTICLE FOUR Satisfaction and Discharge SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . .33 SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . .34 ARTICLE FIVE Remedies SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . .35 SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . .36 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . .37 SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . .38 SECTION 505. Trustee May Enforce Claims Without Possession of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .39 SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . .39 SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . .39 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . . . . . . . . . . . . . .40 SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . .40 SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . .41 SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . .41 SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . .41 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -iv- PAGE ---- SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . .41 SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . .42 SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . .42 ARTICLE SIX The Trustee SECTION 601. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . .42 SECTION 602. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . .43 SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . .44 SECTION 604. May Hold Securities . . . . . . . . . . . . . . . . . . . . . .44 SECTION 605. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . .44 SECTION 606. Compensation and Reimbursement. . . . . . . . . . . . . . . . .44 SECTION 607. Corporate Trustee Required; Eligibility . . . . . . . . . . . .45 SECTION 608. Resignation and Removal; Appointment of Successor . . . . . . .45 SECTION 609. Acceptance of Appointment by Successor. . . . . . . . . . . . .47 SECTION 610. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . .48 SECTION 611. Appointment of Authenticating Agent . . . . . . . . . . . . . .48 SECTION 612. Preferential Collection of Claims Against Company . . . . . . .50 ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company SECTION 701. Disclosure of Names and Addresses of Holders. . . . . . . . . .50 SECTION 702. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . .50 SECTION 703. Reports by Company. . . . . . . . . . . . . . . . . . . . . . .50 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -v- ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease PAGE ---- SECTION 801. Company May Consolidate, etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 SECTION 802. Successor Person Substituted. . . . . . . . . . . . . . . . . .52 SECTION 803. Assignment of Rights. . . . . . . . . . . . . . . . . . . . . .52 ARTICLE NINE Supplemental Indentures SECTION 901. Supplemental Indentures Without Consent of Holders. . . . . . .52 SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . .53 SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . . .54 SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . .54 SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . .55 SECTION 906. Reference in Securities to Supplemental Indentures. . . . . . .55 SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . . .55 ARTICLE TEN Covenants SECTION 1001. Payment of Principal, Premium, if any, and Interest . . . . . .55 SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . .55 SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . . .56 SECTION 1004. Statement as to Compliance. . . . . . . . . . . . . . . . . . .57 SECTION 1005. Additional Amounts. . . . . . . . . . . . . . . . . . . . . . .57 SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . . . . .58 SECTION 1007. Maintenance of Properties . . . . . . . . . . . . . . . . . . .58 SECTION 1008. Corporate Existence . . . . . . . . . . . . . . . . . . . . . .59 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -vi- PAGE ---- SECTION 1009. Limitation on Dividends; Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . .59 SECTION 1010. Covenants as to NWPS Trusts . . . . . . . . . . . . . . . . . .60 ARTICLE ELEVEN Redemption of Securities SECTION 1101. Applicability of Article. . . . . . . . . . . . . . . . . . . .60 SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . .60 SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . .60 SECTION 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . .61 SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . .61 SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . . .62 SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . .62 ARTICLE TWELVE Sinking Funds SECTION 1201. Applicability of Article. . . . . . . . . . . . . . . . . . . .62 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .63 SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . .63 ARTICLE THIRTEEN Repayment at Option of Holders SECTION 1301. Applicability of Article. . . . . . . . . . . . . . . . . . . .64 SECTION 1302. Repayment of Securities . . . . . . . . . . . . . . . . . . . .64 SECTION 1303. Exercise of Option. . . . . . . . . . . . . . . . . . . . . . .65 SECTION 1304. When Securities Presented for Repayment Become Due and Payable . . . . . . . . . . . . . . . . . . . . . . . . . .65 SECTION 1305. Securities Repaid in Part . . . . . . . . . . . . . . . . . . .66 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -vii- ARTICLE FOURTEEN Defeasance and Covenant Defeasance PAGE ---- SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . .66 SECTION 1402. Defeasance and Discharge. . . . . . . . . . . . . . . . . . . .66 SECTION 1403. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . .66 SECTION 1404. Conditions to Defeasance or Covenant Defeasance . . . . . . . .67 SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions . . . . . . . . .69 SECTION 1406. Reinstatement.. . . . . . . . . . . . . . . . . . . . . . . . .69 TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 SIGNATURES AND SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 - ----------------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -viii- FORM OF SUBORDINATED DEBT SECURITIES INDENTURE BETWEEN NORTHWESTERN PUBLIC SERVICE COMPANY AND THE CHASE MANHATTAN BANK (N.A.) AS TRUSTEE INDENTURE, dated as of _____________ , 1995, between Northwestern Public Service Company, a corporation duly organized and existing under the laws of the State of Delaware (the "Company") having its principal office at 33 Third Street, S.E., Huron, South Dakota 57350, and The Chase Manhattan Bank (N.A.), a national banking association duly organized and existing under the laws of the United States, as Trustee (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series as in this Indenture provided. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Three, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Amounts" has the meaning specified in Section 1005. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" of any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 611 to act on behalf of the Trustee to authenticate Securities. "Authorized Newspaper" means a newspaper, in the English language or in an official language of the country of publication, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place. Where successive publications are required to be made in Authorized Newspapers, such publications may be made in the same or in different newspapers in the same city meeting the foregoing requirements and in each case on any Business Day. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location are authorized or obligated by law or executive order to close. "CEDEL S.A." means Cedel, S.A., or its successor. -2- "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Depositary" has the meaning specified in Section 304. "Common Securities" means undivided beneficial interests in the assets of a NWPS Trust which rank pari passu with Preferred Securities issued by such NWPS Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect to distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Common Securities Guarantee" means any Guarantee that the Company enters into that operates directly or indirectly for the benefit of holders of Common Securities of a NWPS Trust. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Conversion Date" has the meaning specified in Section 312(d). "Conversion Event" means the cessation of use of (i) a Foreign Currency both by the government of the country which issued such Currency and by a central bank or other public institution of or within the international banking community for the settlement of transactions, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit (or composite currency) other than the ECU for the purposes for which it was established. "Corporate Trust Office" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office on the date of execution of this Indenture is located at 4 Chase MetroTech Center, Brooklyn, New York 11245, except that with respect to presentation of Securities for payment or for registration of transfer or exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted. "Corporation" includes corporations, associations, companies and business trusts. "Currency" means any currency or currencies, composite currency or currency unit or currency units, including, without limitation, the ECU, issued by the government of one or more countries or by any recognized confederation or association of such governments. -3- "Debt" means notes, bonds, debentures or other similar evidences of indebtedness for money borrowed. "Declaration" means, in respect of a NWPS Trust, the amended and restated declaration of trust of such NWPS Trust or any other governing instrument of such NWPS Trust. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Dollar" or "$" means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts. "Dollar Equivalent of the Currency Unit" has the meaning specified in Section 312(g). "Dollar Equivalent of the Foreign Currency" has the meaning specified in Section 312(f). "ECU" means the European Currency Unit as defined and revised from time to time by the Council of the European Communities. "Election Date" has the meaning specified in Section 312(h). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels Office, or its successor as operator of the Euroclear System. "European Communities" means the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community. "European Monetary System" means the European Monetary System established by the Resolution of December 5, 1978 of the Council of the European Communities. "Event of Default" has the meaning specified in Section 501. "Exchange Date" has the meaning specified in Section 304. "Exchange Rate Agent" means, with respect to Securities of or within any series, unless otherwise specified with respect to any Securities pursuant to Section 301, a New York Clearing House bank, designated pursuant to Section 301 or Section 313. "Exchange Rate Officer's Certificate" means a tested telex or a certificate setting forth (i) the applicable Market Exchange Rate and (ii) the Dollar or Foreign Currency amounts of principal (and premium, if any) and interest, if any (on an aggregate basis and on the basis of a Security having the lowest denomination principal amount determined in accordance with Section 302 in the relevant Currency), payable with respect to a Security of any series on the basis of such -4- Market Exchange Rate, sent (in the case of a telex) or signed (in the case of a certificate) by the Treasurer, any Vice President or any Assistant Treasurer of the Company. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "Foreign Currency" means any Currency other than Currency of the United States. "Government Obligations" means, unless otherwise specified with respect to any series of Securities pursuant to Section 301, securities which are (i) direct obligations of the government which issued the Currency in which the Securities of a particular series are payable or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the government which issued the Currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed by such government, which, in either case, are full faith and credit obligations of such government payable in such Currency and are not callable or redeemable at the option of the issuer thereof and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest or principal of the Government Obligation evidenced by such depository receipt. "Guarantor" means Northwestern Public Service Company, a Delaware corporation. "Holder" means, in the case of a Registered Security, the Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, "Indenture" shall mean, with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Indexed Security" means a Security the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. -5- "Interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity at the rate prescribed in such Original Issue Discount Security. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Market Exchange Rate" means, unless otherwise specified with respect to any Securities pursuant to Section 301, (i) for any conversion involving a currency unit on the one hand and Dollars or any Foreign Currency on the other, the exchange rate between the relevant currency unit and Dollars or such Foreign Currency calculated by the method specified pursuant to Section 301 for the Securities of the relevant series, (ii) for any conversion of Dollars into any Foreign Currency, the noon (New York City time) buying rate for such Foreign Currency for cable transfers quoted in New York City as certified for customs purposes by the Federal Reserve Bank of New York and (iii) for any conversion of one Foreign Currency into Dollars or another Foreign Currency, the spot rate at noon local time in the relevant market at which, in accordance with normal banking procedures, the Dollars or Foreign Currency into which conversion is being made could be purchased with the Foreign Currency from which conversion is being made from major banks located in either New York City, London or any other principal market for Dollars or such purchased Foreign Currency, in each case determined by the Exchange Rate Agent. Unless otherwise specified with respect to any Securities pursuant to Section 301, in the event of the unavailability of any of the exchange rates provided for in the foregoing clauses (i), (ii) and (iii), the Exchange Rate Agent shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks in New York City, London or another principal market for the Currency in question, or such other quotations as the Exchange Rate Agent shall deem appropriate. Unless otherwise specified by the Exchange Rate Agent, if there is more than one market for dealing in any Currency by reason of foreign exchange regulations or otherwise, the market to be used in respect of such Currency shall be that upon which a non-resident issuer of securities designated in such Currency would purchase such Currency in order to make payments in respect of such securities. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment or otherwise. "NWPS Trust" means each of NWPS Capital Financing I, NWPS Capital Financing II, NWPS Capital Financing III, each a Delaware statutory business trust. "Officers' Certificate" means a certificate signed by the Chairman, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, including an employee of the Company. -6- "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and any coupons appertaining thereto; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities, except to the extent provided in Sections 1402 and 1403, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen; and (iv) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a meeting of Holders for quorum purposes, and for the purpose of making the calculations required by TIA Section 313, (i) the principal amount of an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency that may be counted in making such determination or calculation and that shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined as of the date such Security is originally issued by the Company as set forth in an Exchange Rate Officer's Certificate delivered to the Trustee, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above), of such Security, (iii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed outstanding for such purpose shall be equal to the principal -7- face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (or premium, if any, on) or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" means, when used with respect to the Securities of or within any series, the place or places where the principal of (and premium, if any, on) and interest on such Securities are payable as specified as contemplated by Sections 301 and 1002. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" means undivided beneficial interests in the assets of a NWPS Trust which rank pari passu with Common Securities issued by such NWPS Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Preferred Securities Guarantee" means any Guarantee that the Guarantor may enter into with Wilmington Trust Company, as trustee of a NWPS Trust, or other Persons, that operate directly or indirectly for the benefit of holders of Preferred Securities of such NWPS Capital Trust. "Redemption Date", when used with respect to any Security to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Security" means any Security registered in the Security Register. -8- "Regular Record Date" for the interest payable on any Interest Payment Date on the Registered Securities of or within any series means the date specified for that purpose as contemplated by Section 301. "Repayment Date" means, when used with respect to any Security to be repaid at the option of the Holder, the date fixed for such repayment pursuant to this Indenture. "Repayment Price" means, when used with respect to any Security to be repaid at the option of the Holder, the price at which it is to be repaid pursuant to this Indenture. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, or any vice president, secretary, any assistant secretary, treasurer, any assistant treasurer, cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller within the corporate trust administration division or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture; provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest on the Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable, as such date may be extended pursuant to the provisions of Section 308. "Subsidiary" means any corporation of which at the time of determination the Company, directly and/or indirectly through one or more Subsidiaries, owns 50% or more of the shares of Voting Stock. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was executed, except as provided in Section 905. -9- "Trust Securities" means Common Securities and Preferred Securities. "Trust Securities Guarantees" means the Common Securities Guarantee and the Preferred Securities Guarantee. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean only the Trustee with respect to Securities of that series. "United States" means, unless otherwise specified with respect to any Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "United States person" means, unless otherwise specified with respect to any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. "Valuation Date" has the meaning specified in Section 312(c). "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Yield to Maturity" means the yield to maturity, computed at the time of issuance of a Security (or, if applicable, at the most recent redetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically -10- required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 1004) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such covenant or condition has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient -11- for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The principal amount and serial numbers of Registered Securities held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date thirty (30) days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. -12- SECTION 105. Notices, etc. to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration Division, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. In case, by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impractical to mail notice of any event to Holders of Registered Securities when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice for every purpose hereunder. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. -13- SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in any Security or coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Securities Registrar and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of any Security other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity or Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be. -14- ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Registered Securities, if any, of each series shall be in substantially the form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities. If the forms of Securities of any series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The Trustee's certificate of authentication on all Securities shall be in substantially the form set forth in this Article. The definitive Securities shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Trustee's Certificate of Authentication. Subject to Section 611, the Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. The Chase Manhattan Bank (N.A.), as Trustee By: Authorized Officer SECTION 203. Securities Issuable in Global Form. If Securities of or within a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (10) of Section 301, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon -15- instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or Section 304. Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 303 or Section 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303. Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of and any premium and interest on any Security in permanent global form shall be made to the Person or Persons specified therein. Notwithstanding the provisions of Section 309 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in one or more Board Resolutions or pursuant to authority granted by one or more Board Resolutions and, subject to Section 303, set forth in, or determined in the manner provided in, an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable (each of which (except for the matters set forth in clauses (1), (2) and (19) below), if so provided, may be determined from time to time by the Company with respect to unissued Securities of the series and set forth in such Securities of the series when issued from time to time): (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other series of Securities); (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or 1305); -16- (3) the date or dates, or the method by which such date or dates will be determined or extended, on which the principal of the Securities of the series is payable; (4) the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date or dates shall be determined, and the basis upon which interest shall be calculated if other than on the basis of a 360-day year of twelve 30-day months; (5) the rights, if any, to defer payments of interest on the Securities by extending the interest payment periods and the duration of such extension; (6) the security and subordination terms of the Securities of the series; (7) the place or places, if any, other than or in addition to The City of New York, where the principal of (and premium, if any, on) and any interest on Securities of the series shall be payable, any Registered Securities of the series may be surrendered for registration of transfer, Securities of the series may be surrendered for exchange and, if different than the location specified in Section 106, the place or places where notices or demands to or upon the Company in respect of the Securities of the series and this Indenture may be served; (8) the period or periods within which, the price or prices at which, the Currency in which, and other terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have that option; (9) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which, the price or prices at which, the Currency in which, and other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (10) if other than denominations of $25 and any integral multiple thereof, the denomination or denominations in which any Registered Securities of the series shall be issuable; (11) if other than the Trustee, the identity of each Security Registrar and/or Paying Agent; (12) if other than the principal amount thereof, the portion of the principal amount of Securities of the series that shall be payable upon declaration of acceleration of the -17- Maturity thereof pursuant to Section 502 or the method by which such portion shall be determined; (13) if other than Dollars, the Currency in which payment of the principal of (and premium, if any, on) or interest, if any, on the Securities of the series shall be payable or in which the Securities of the series shall be denominated and the particular provisions applicable thereto in accordance with, in addition to or in lieu of any of the provisions of Section 312; (14) whether the amount of payments of principal of (and premium, if any, on) or interest on the Securities of the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more Currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined; (15) whether the principal of (and premium, if any, on) and interest, if any, on the Securities of the series are to be payable, at the election of the Company or a Holder thereof, in a Currency other than that in which such Securities are denominated or stated to be payable, the period or periods within which (including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of determining the exchange rate between the Currency in which such Securities are denominated or stated to be payable and the Currency in which such Securities are to be so payable, in each case in accordance with, in addition to or in lieu of any of the provisions of Section 312; (16) the designation of the initial Exchange Rate Agent, if any; (17) any provisions in modification of, in addition to or in lieu of the provisions of Article Fourteen that shall be applicable to the Securities of the series; (18) provisions, if any, granting special rights to the Holders of Securities of the series upon the occurrence of such events as may be specified; (19) any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein; (20) whether any Securities of the series are to be issuable initially in temporary global form and whether any Securities of the series are to be issuable in permanent global form and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and if Securities of the series are to be issuable in global form, the identity of any initial depository therefor; provided, that, unless otherwise provided, Securities shall be issued as Registered Securities; -18- (21) the date as of which and any temporary global Security representing Outstanding Securities of the series shall be dated if other than the date of original issuance of the first Security of the series to be issued; (22) the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 304; (23) if Securities of the series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and/or terms of such certificates, documents or conditions; (24) whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1005 on the Securities of the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option); (25) if the Securities of the series are to be convertible into or exchangeable for any securities of any Person (including the Company), the terms and conditions upon which such Securities will be so convertible or exchangeable; and (26) any other terms, conditions, rights and preferences (or limitations on such rights and preferences) relating to the series (which terms shall not be inconsistent with the requirements of the Trust Indenture Act or the provisions of this Indenture). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Board Resolution (subject to Section 303) and set forth in such Officers' Certificate or in any such indenture supplemental hereto. Not all Securities of any one series need be issued at the same time, and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series. If any of the terms of the series are established by action taken pursuant to one or more Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and such Board Resolutions shall be delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. SECTION 302. Denominations. The Securities of each series shall be issuable in such denominations as shall be specified as contemplated by Section 301. With respect to Securities of any series denominated in Dollars, in the absence of any such provisions, the Registered Securities of such series, other than Registered -19- Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $25 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman, its President or a Vice President, under its corporate seal reproduced thereon attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Securities may be the manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities. If not all the Securities of any series are to be issued at one time and if the Board Resolution or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining terms of particular Securities of such series such as interest rate, maturity date, date of issuance and date from which interest shall accrue. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to TIA Sections 315(a) through 315(d)) shall be fully protected in relying upon, an Opinion of Counsel stating: (a) that the form or forms of such Securities have been established in conformity with the provisions of this Indenture; (b) that the terms of such Securities have been established in conformity with the provisions of this Indenture; (c) that such Securities, when completed by appropriate insertions and executed and delivered by the Company to the Trustee for authentication in accordance with this Indenture, authenticated and delivered by the Trustee in accordance with this Indenture and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute the legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting the enforcement of creditors' rights, to general equitable principles and to such other customary qualifications; -20- (d) that all laws and requirements in respect of the execution and delivery by the Company of such Securities, and of the supplemental indentures, if any, have been complied with and that authentication and delivery of such Securities and the execution and delivery of the supplemental indenture, if any, by the Trustee will not violate the terms of the Indenture; (e) that the Company has the corporate power to issue such Securities, and has duly taken all necessary corporate action with respect to such issuance; and (f) that the issuance of such Securities will not contravene the articles of incorporation or by-laws of the Company or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other agreement known to such Counsel by which the Company is bound. Notwithstanding the provisions of Section 301 and of the preceding two paragraphs, if not all the Securities of any series are to be issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to the preceding two paragraphs prior to or at the time of issuance of each Security, but such documents shall be delivered prior to or at the time of issuance of the first Security of such series. The Trustee shall not be required to authenticate and deliver any such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Registered Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 310 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, and with such appropriate insertions, omissions, substitutions and other variations as the -21- officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. Such temporary Securities may be in global form. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with the provisions of the following paragraphs), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series, upon surrender of the temporary securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. If temporary Securities of any series are issued in global form, any such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a depositary or common depositary (the "Common Depositary"), for the benefit of Euroclear and CEDEL S.A., for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct). Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), the Company shall deliver to the Trustee definitive Securities, in aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date such temporary global Security shall be surrendered by the Common Depositary to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in registered form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such temporary global Security, upon such presentation by the Common Depositary, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary global Security held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by CEDEL S.A. as to the portion of such temporary global Security held for its account then to be exchanged, each in such other form as may be established pursuant to Section 301. Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or CEDEL S.A., as the case may be, to request such exchange on his behalf and delivers to Euroclear or CEDEL S.A., as the case may be, a certificate in -22- such form as may be established pursuant to Section 301, dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices of Euroclear and CEDEL S.A., the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like in the event that such Person does not take delivery of such definitive Securities in person at the offices of Euroclear or CEDEL S.A. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear and CEDEL S.A. on such Interest Payment Date upon delivery by Euroclear and CEDEL S.A. to the Trustee of a certificate or certificates in such form as may be established pursuant to Section 301, for credit without further interest on or after such Interest Payment Date to the respective accounts of the Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or CEDEL S.A., as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in such form as may be established pursuant to Section 301. Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section and of the third paragraph of Section 303 of this Indenture and the interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners. Except as otherwise provided in this paragraph, no payments or principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security shall have been exchanged for an interest in a definitive Security. Any interest so received by Euroclear and CEDEL S.A. and not paid as herein provided shall be returned to the Trustee immediately prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company in accordance with Section 1003. SECTION 305. Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register for each series of Securities (the registers maintained in the Corporate Trust Office of the Trustee and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Security Register shall be open to inspection by the Trustee. The Trustee is hereby initially -23- appointed as security registrar (the "Security Registrar") for the purpose of registering Registered Securities and transfers of Registered Securities as herein provided. Upon surrender for registration of transfer of any Registered Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. At the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination and of a like aggregate principal amount, upon surrender of the Registered Securities to be exchanged at such office or agency. Whenever any Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph. If any beneficial owner of an interest in a permanent global Security is entitled to exchange such interest for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security shall have been given, then without unnecessary delay but in any event not later than the earliest date on which such interest may be so exchanged, the Company shall deliver to the Trustee definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner's interest in such permanent global Security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered by the Common Depositary or such other depositary as shall be specified in the Company Order with respect thereto to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver, in exchange for each portion of such permanent global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such permanent global Security to be exchanged which shall be in the form of Registered Securities; provided, however, that no such exchanges may occur during a period beginning at the opening of business 15 days before any selection of Securities to be redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. -24- All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the selection for redemption of Securities of that series under Section 1103 or 1203 and ending at the close of business on the date of the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part, or (iii) to issue, register the transfer of or exchange any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such mutilated Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding, or, in case any such destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other government charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether -25- or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved; Optional Interest Reset. (a) Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest on any Registered Security may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 309, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located in the United States. Any interest on any Registered Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such defaulted interest and, if applicable, interest on such defaulted interest (to the extent lawful) at the rate specified in the Securities of such series (such defaulted interest and, if applicable, interest thereon herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable, as provided in Sections 312(b), 312(d) and 312(e)) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not -26- less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose name the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. (b) The provisions of this Section 307(b) may be made applicable to any series of Securities pursuant to Section 301 (with such modifications, additions or substitutions as may be specified pursuant to such Section 301). The interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) on any Security of such series may be reset by the Company on the date or dates specified on the face of such Security (each an "Optional Reset Date"). The Company may exercise such option with respect to such Security by notifying the Trustee of such exercise at least 50 but not more than 60 days prior to an Optional Reset Date for such Note. Not later than 40 days prior to each Optional Reset Date, the Trustee shall transmit, in the manner provided for in Section 106, to the Holder of any such Security a notice (the "Reset Notice") indicating whether the Company has elected to reset the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable), and if so (i) such new interest rate (or such new spread or spread multiplier, if applicable) and (ii) the provisions, if any, for redemption during the period from such Optional Reset Date to the next Optional Reset Date or if there is no such next Optional Reset Date, to the Stated Maturity Date of such Security (each such period a "Subsequent Interest Period"), including the date or dates on which or the period or periods during which and the price or prices at which such redemption may occur during the Subsequent Interest Period. Notwithstanding the foregoing, not later than 20 days prior to the Optional Reset Date, the Company may, at its option, revoke the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) provided for in the Reset Notice and establish an interest rate (or a spread or spread multiplier used to calculate such interest rate, if applicable) that is higher than the interest rate (or the spread or spread multiplier, if applicable) provided for in the -27- Reset Notice, for the Subsequent Interest Period by causing the Trustee to transmit, in the manner provided for in Section 106, notice of such higher interest rate (or such higher spread or spread multiplier, if applicable) to the Holder of such Security. Such notice shall be irrevocable. All Securities with respect to which the interest rate (or the spread or spread multiplier used to calculate such interest rate, if applicable) is reset on an Optional Reset Date, and with respect to which the Holders of such Securities have not tendered such Securities for repayment (or have validly revoked any such tender) pursuant to the next succeeding paragraph, will bear such higher interest rate (or such higher spread or spread multiplier, if applicable). The Holder of any such Security will have the option to elect repayment by the Company of the principal of such Security on each Optional Reset Date at a price equal to the principal amount thereof plus interest accrued to such Optional Reset Date. In order to obtain repayment on an Optional Reset Date, the Holder must follow the procedures set forth in Article Thirteen for repayment at the Option of Holders except that the period for delivery or notification to the Trustee shall be at least 25 but not more than 35 days prior to such Optional Reset Date and except that, if the Holder has tendered any Security for repayment pursuant to the Reset Notice, the Holder may, by written notice to the Trustee, revoke such tender or repayment until the close of business on the tenth day before such Optional Reset Date. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Registered Security for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depositary, as a Holder, with respect to such global Security or impair, as between such depositary and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depositary (or its nominee) as Holder of such global Security. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any current or future sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered to the Trustee shall be promptly canceled by it. The Company may at any -28- time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Company unless by Company Order the Company shall direct that canceled Securities be returned to it. SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 with respect to any Securities, interest, if any, on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 311. Currency and Manner of Payments in Respect of Securities. (a) With respect to Registered Securities of any series not permitting the election provided for in paragraph (b) below or the Holders of which have not made the election provided for in paragraph (b) below, payment of the principal of (and premium, if any, on) and interest, if any, on any Registered Security of such series will be made in the Currency in which such Registered Security is payable. The provisions of this Section 311 may be modified or superseded with respect to any Securities pursuant to Section 301. (b) It may be provided pursuant to Section 301 with respect to Registered Securities of any series that Holders shall have the option, subject to paragraphs (d) and (e) below, to receive payments of principal of (and premium, if any, on) or interest, if any, on such Registered Securities in any of the Currencies which may be designated for such election by delivering to the Trustee a written election with signature guarantees and in the applicable form established pursuant to Section 301, not later than the close of business on the Election Date immediately preceding the applicable payment date. If a Holder so elects to receive such payments in any such Currency, such election will remain in effect for such Holder or any transferee of such Holder until changed by such Holder or such transferee by written notice to the Trustee (but any such change must be made not later than the close of business on the Election Date immediately preceding the next payment date to be effective for the payment to be made on such payment date and no such change of election may be made with respect to payments to be made on any Registered Security of such series with respect to which an Event of Default has occurred or with respect to which the Company has deposited funds pursuant to Article Four or Fourteen or with respect to which a notice of redemption has been given by the Company or a notice of option to elect repayment has been sent by such Holder or such transferee). Any -29- Holder of any such Registered Security who shall not have delivered any such election to the Trustee not later than the close of business on the applicable Election Date will be paid the amount due on the applicable payment date in the relevant Currency as provided in Section 311(a). The Trustee shall notify the Exchange Rate Agent as soon as practicable after the Election Date of the aggregate principal amount of Registered Securities for which Holders have made such written election. (c) Unless otherwise specified pursuant to Section 301, if the election referred to in paragraph (b) above has been provided for pursuant to Section 301, then, unless otherwise specified pursuant to Section 301, not later than the fourth Business Day after the Election Date for each payment date for Registered Securities of any series, the Exchange Rate Agent will deliver to the Company a written notice specifying, in the Currency in which Registered Securities of such series are payable, the respective aggregate amounts of principal of (and premium, if any, on) and interest, if any, on the Registered Securities to be paid on such payment date, specifying the amounts in such Currency so payable in respect of the Registered Securities as to which the Holders of Registered Securities of such series shall have elected to be paid in another Currency as provided in paragraph (b) above. If the election referred to in paragraph (b) above has been provided for pursuant to Section 301 and if at least one Holder has made such election, then, unless otherwise specified pursuant to Section 301, on the second Business Day preceding such payment date the Company will deliver to the Trustee for such series of Registered Securities an Exchange Rate Officer's Certificate in respect of the Dollar or Foreign Currency payments to be made on such payment date. Unless otherwise specified pursuant to Section 301, the Dollar or Foreign Currency amount receivable by Holders of Registered Securities who have elected payment in a Currency as provided in paragraph (b) above shall be determined by the Company on the basis of the applicable Market Exchange Rate in effect on the third Business Day (the "Valuation Date") immediately preceding each payment date and such determination shall be conclusive and binding for all purposes, absent manifest error. (d) If a Conversion Event occurs with respect to a Foreign Currency in which any of the Securities are denominated or payable other than pursuant to an election provided for pursuant to paragraph (b) above, then with respect to each date for the payment of principal of (and premium, if any, on) and interest, if any, on the applicable Securities denominated or payable in such Foreign Currency occurring after the last date on which such Foreign Currency was used (the "Conversion Date"), the Dollar shall be the Currency of payment for use on each such payment date. Unless otherwise specified pursuant to Section 301, the Dollar amount to be paid by the Company to the Trustee and by the Trustee or any Paying Agent to the Holders of such Securities with respect to such payment date shall be, in the case of a Foreign Currency other than a currency unit, the Dollar Equivalent of the Foreign Currency or, in the case of a currency unit, the Dollar Equivalent of the Currency Unit, in each case as determined by the Exchange Rate Agent in the manner provided in paragraph (f) or (g) below. -30- (e) Unless otherwise specified pursuant to Section 301, if the Holder of a Registered Security denominated in any Currency shall have elected to be paid in another Currency as provided in paragraph (b) above, and a Conversion Event occurs with respect to such elected Currency, such Holder shall receive payment in the Currency in which payment would have been made in the absence of such election; and if a Conversion Event occurs with respect to the Currency in which payment would have been made in the absence of such election, such Holder shall receive payment in Dollars as provided in paragraph (d) above. (f) The "Dollar Equivalent of the Foreign Currency" shall be determined by the Exchange Rate Agent and shall be obtained for each subsequent payment date by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Conversion Date. (g) The "Dollar Equivalent of the Currency Unit" shall be determined by the Exchange Rate Agent and subject to the provisions of paragraph (h) below shall be the sum of each amount obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate for such Component Currency on the Valuation Date with respect to each payment. (h) For purposes of this Section 311 the following terms shall have the following meanings: A "Component Currency" shall mean any Currency which, on the Conversion Date, was a component currency of the relevant currency unit, including, but not limited to, the ECU. A "Specified Amount" of a Component Currency shall mean the number of units of such Component Currency or fractions thereof which were represented in the relevant currency unit, including, but not limited to, the ECU, on the Conversion Date. If after the Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Conversion Date two or more Component Currencies are consolidated into a single currency, the respective Specified Amounts of such Component Currencies shall be replaced by an amount in such single Currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single Currency, and such amount shall thereafter be a Specified Amount and such single Currency shall thereafter be a Component Currency. If after the Conversion Date any Component Currency shall be divided into two or more currencies, the Specified Amount of such Component Currency shall be replaced by amounts of such two or more currencies, having an aggregate Dollar Equivalent value at the Market Exchange Rate on the date of such replacement equal to the Dollar Equivalent value of the Specified Amount of such former Component Currency at the Market Exchange Rate immediately before such division and such amounts shall thereafter be Specified Amounts and such currencies shall thereafter be Component Currencies. If, after the Conversion Date of the relevant currency unit, including, but not limited to, the ECU, a Conversion Event (other than any event referred to above in this definition of "Specified Amount") -31- occurs with respect to any Component Currency of such currency unit and is continuing on the applicable Valuation Date, the Specified Amount of such Component Currency shall, for purposes of calculating the Dollar Equivalent of the Currency Unit, be converted into Dollars at the Market Exchange Rate in effect on the Conversion Date of such Component Currency. "Election Date" shall mean the date for any series of Registered Securities as specified pursuant to clause (13) of Section 301 by which the written election referred to in paragraph (b) above may be made. All decisions and determinations of the Exchange Rate Agent regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the Currency Unit, the Market Exchange Rate and changes in the Specified Amounts as specified above shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Company, the Trustee and all Holders of such Securities denominated or payable in the relevant Currency. The Exchange Rate Agent shall promptly give written notice to the Company and the Trustee of any such decision or determination. In the event that the Company determines in good faith that a Conversion Event has occurred with respect to a Foreign Currency, the Company will immediately give written notice thereof to the Trustee and to the Exchange Rate Agent (and the Trustee will promptly thereafter give notice in the manner provided for in Section 106 to the affected Holders) specifying the Conversion Date. In the event the Company so determines that a Conversion Event has occurred with respect to the ECU or any other currency unit in which Securities are denominated or payable, the Company will immediately give written notice thereof to the Trustee and to the Exchange Rate Agent (and the Trustee will promptly thereafter give notice in the manner provided for in Section 106 to the affected Holders) specifying the Conversion Date and the Specified Amount of each Component Currency on the Conversion Date. In the event the Company determines in good faith that any subsequent change in any Component Currency as set forth in the definition of Specified Amount above has occurred, the Company will similarly give written notice to the Trustee and the Exchange Rate Agent. The Trustee shall be fully justified and protected in relying and acting upon information received by it from the Company and the Exchange Rate Agent and shall not otherwise have any duty or obligation to determine the accuracy or validity of such information independent of the Company or the Exchange Rate Agent. SECTION 312. Appointment and Resignation of Successor Exchange Rate Agent. (a) Unless otherwise specified pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Currency other than Dollars or (ii) may be payable in a Currency other than Dollars, or so long as it is required under any other provision of this Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one Exchange Rate Agent. The Company will cause the Exchange Rate Agent to make the necessary foreign exchange determinations at the time and in the manner specified pursuant to Section 301 for the purpose of determining the applicable rate of exchange and, if applicable, -32- for the purpose of converting the issued Currency into the applicable payment Currency for the payment of principal (and premium, if any) and interest, if any, pursuant to Section 311. (b) No resignation of the Exchange Rate Agent and no appointment of a successor Exchange Rate Agent pursuant to this Section shall become effective until the acceptance of appointment by the successor Exchange Rate Agent as evidenced by a written instrument delivered to the Company and the Trustee. (c) If the Exchange Rate Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Exchange Rate Agent for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Exchange Rate Agent or Exchange Rate Agents with respect to the Securities of that or those series (it being understood that any such successor Exchange Rate Agent may be appointed with respect to the Securities of one or more or all of such series and that, unless otherwise specified pursuant to Section 301, at any time there shall only be one Exchange Rate Agent with respect to the Securities of any particular series that are originally issued by the Company on the same date and that are initially denominated and/or payable in the same Currency). ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and the obligation of the Company to pay any Additional Amounts as contemplated by Section 1005) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when (1) either (A) all Securities of such series theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306, and (ii) Securities of such series for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series not theretofore delivered to the Trustee for cancellation -33- (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the Currency in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606, the obligations of the Trustee to any Authenticating Agent under Section 611 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, and this Indenture, to the payment either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. -34- ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest on any Security of that series when such interest becomes due and payable, and continuance of such default for a period of 30 days; provided, that, if Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such trust, such thirty (30) day period will be replaced by a ten (10) day period; and provided, further, that a valid extension of the interest payment period by the Company in accordance with the terms of any indenture supplemental hereto shall not constitute a default in the payment of interest for this purpose; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; provided, however, that a valid extension of the maturity of such Securities in accordance with the terms of any indenture supplemental hereto shall not constitute a default in the payment of principal or premium, if any; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of the Securities of that series and Article 12; or (4) default in the performance, or breach, of any covenant or agreement of the Company in this Indenture which affects or is applicable to the Securities of that series (other than a default in the performance, or breach of a covenant or agreement which is specifically dealt with elsewhere in this Section or which has expressly been included in this Indenture solely for the benefit of one or more series of Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of all Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under the Federal Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the -35- continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (6) in the event Securities are issued and sold to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, such NWPS Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Securities to holders of Trust Securities in liquidation or redemption of their interests in such NWPS Trust, (ii) the redemption of all of the outstanding Trust Securities of such NWPS Trust or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration of such NWPS Trust. (7) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due; or (8) any other Event of Default provided with respect to Securities of that series. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default described in clause (1), (2), (3), (4) or (7) of Section 501 with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified portion thereof) shall become immediately due and payable. If an Event of Default specified in Section 501(5) or 501(6) occurs and is continuing, then the principal amount of all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration with respect to Securities of any series (or of all series, as the case may be) has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities of that series (or of all series, as the case may be), by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay in the Currency in which the Securities of such series are payable (except as otherwise -36- specified pursuant to Section 301 for the Securities of such series and except, if applicable, as provided in Sections 312(b), 312(d) and 312(e)), (A) all overdue interest on all Outstanding Securities of that series (or of all series, as the case may be), (B) all unpaid principal of (and premium, if any, on) any Outstanding Securities of that series (or of all series, as the case may be) which has become due otherwise than by such declaration of acceleration, and interest on such unpaid principal at the rate or rates prescribed therefor in such Securities, (C) interest on overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series (or of all series, as the case may be), other than the non-payment of amounts of principal of (or premium, if any, on) or interest on Securities of that series (or of all series, as the case may be) which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any installment of interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days or 10 days in the case of Securities issued to a NWPS Trust or a trustee of such trust, or -37- (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, then the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series (or of all series, as the case may be) occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series (or of all series, as the case may be) by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any), or such portion of the principal amount of any series of Original Issue Discount Securities or Indexed Securities as may be specified in the terms of such series, and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; -38- and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: To the payment of all amounts due the Trustee under Section 606; Second: To the payment of the amounts then due and unpaid for principal of (and premium, if any, on) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and Third: The balance, if any, to the Company or any other Person or Persons entitled thereto. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless -39- (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series in the case of any Event of Default described in clause (1), (2), (3), (4) or (7) of Section 501, or, in the case of any Event of Default described in clause (5) or (6) of Section 501, the Holders of not less than 25% in principal amount of all Outstanding Securities, shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority or more in principal amount of the Outstanding Securities of that series in the case of any Event of Default described in clause (1), (2), (3), (4) or (7) of Section 501, or, in the case of any Event of Default described in clause (5) or (6) of Section 501, by the Holders of a majority or more in principal amount of all Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities of the same series, in the case of any Event of Default described in clause (1), (2), (3), (4) or (7) of Section 501, or of Holders of all Securities in the case of any Event of Default described in clause (5) or (6) of Section 501, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Holders of Securities of the same series, in the case of any Event of Default described in clause (1), (2), (3), (4) or (7) of Section 501, or of Holders of all Securities in the case of any Event of Default described in clause (5) or (6) of Section 501. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Fourteen) and in such Security, of the principal of (and premium, if any, on) and (subject to Section 307) interest on, such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. -40- SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. With respect to the Securities of any series, the Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee relating to or arising under clause (1), (2), (3), (4) or (7) of Section 501, and, with respect to all Securities, the Holders of not less than a majority in principal amount of all Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, not relating to or arising under clause (1), (2), (3), (4) or (7) of Section 501, provided that in each case (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders of Securities of such series not consenting. -41- SECTION 513. Waiver of Past Defaults. Subject to Section 502, the Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default described in clause (1), (2), (3), (4) or (7) of Section 501 (or, in the case of a default described in clause (5) or (6) of Section 501, the Holders of not less than a majority in principal amount of all Outstanding Securities may waive any such past default), and its consequences, except a default (1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Security, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest on any Security. SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -42- ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults. Within 90 days after the occurrence of any Default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such default hereunder known to the Trustee, unless such Default shall have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of (or premium, if any, on) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any Default of the character specified in Section 501(3) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses -43- and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 604. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. -44- SECTION 605. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 606. Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Securities. SECTION 607. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of Federal, State, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. -45- SECTION 608. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 609 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of not less than a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee with respect to all Securities, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that -46- at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to the Holders of Securities of such series in the manner provided for in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 609. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable -47- to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Whenever there is a successor Trustee with respect to one or more (but less than all) series of securities issued pursuant to this Indenture, the terms "Indenture" and "Securities" shall have the meanings specified in the provisos to the respective definitions of those terms in Section 101 which contemplate such situation. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 610. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; and in case at that time any of the Securities shall not have been authenticated, any successor Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt -48- the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 611. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series and the Trustee shall give written notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, in the manner provided for in Section 106. Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, and a copy of such instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give written notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, in the manner provided for in Section 106. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named -49- as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 606. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. The Chase Manhattan Bank (N.A.), as Trustee By: Authenticating Agent By: Authorized Officer SECTION 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit to the Holders of Securities, in -50- the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. SECTION 703. Reports by Company. The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit to all Holders, in the manner and to the extent provided in TIA Section 313(c), within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease, or permit one or more of its Subsidiaries to convey, transfer or lease, all or substantially all of the property and assets of the Company and its Subsidiaries on a consolidated basis, to any Person, unless: -51- (1) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company and its Subsidiaries on a consolidated basis (A) shall be a corporation, partnership or trust organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and (B) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the Company's obligation for the due and punctual payment of the principal of (and premium, if any, on) and interest on all the Securities and the performance and observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (3) the Company or such Person shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. This Section shall only apply to a merger or consolidation in which the Company is not the surviving corporation and to conveyances, leases and transfers by the Company as transferor or lessor. SECTION 802. Successor Person Substituted. Upon any consolidation by the Company with or merger by the Company into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company and its Subsidiaries on a consolidated basis to any Person in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and in the event of any such conveyance or transfer, the Company (which term shall for this purpose mean the Person named as the "Company" in the first paragraph of this Indenture or any successor Person which shall theretofore become such in the manner described in Section 801), except in the case of a lease, shall be discharged of all obligations and covenants under this Indenture and the Securities and may be dissolved and liquidated. SECTION 803. Assignment of Rights. The Company will have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary of the Company; provided, that in the event of any such assignment, the Company will remain liable for all of its respective obligations. Subject to the foregoing, this Indenture will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. -52- ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are being included solely for the benefit of such series); or (4) to change or eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (5) to secure the Securities; or (6) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (7) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 609(b); or (8) to close this Indenture with respect to the authentication and delivery of additional series of Securities, to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect. -53- SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities of any series, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture which affect such series of Securities or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security of such series, (1) change the Stated Maturity of the principal of, or any installment of interest on, any Security of such series, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts contemplated by Section 1005 (except as contemplated by Section 801(1) and permitted by Section 901(1)), or reduce the amount of the principal of an Original Issue Discount Security of such series that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504, or change the redemption provisions of any Security, or adversely affect any right of repayment at the option of any Holder of any Security of such series, or change any Place of Payment where, or the Currency in which, any Security of such series or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or Repayment Date, as the case may be), or (2) reduce the percentage in principal amount of the Outstanding Securities of such series required for any such supplemental indenture, for any waiver of compliance with certain provisions of this Indenture which affect such series or certain defaults applicable to such series hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 513, except to increase any such percentage or to provide that certain other provisions of this Indenture which affect such series cannot be modified or waived without the consent of the Holder of each Outstanding Security of such series. Any such supplemental indenture adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture, or modifying in any manner the rights of the Holders of Securities of such series, shall not affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. -54- SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. -55- SECTION 1002. Maintenance of Office or Agency. If the Securities of a series are issuable only as Registered Securities, the Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified with respect to any Securities as contemplated by Section 301 with respect to a series of Securities, the Company hereby designates as a Place of Payment for each series of Securities the office or agency of the Company in The City of New York, and initially appoints the Trustee at its Corporate Trust Office as Paying Agent in such city and as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Currency other than Dollars or (ii) may be payable in a Currency other than Dollars, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one Exchange Rate Agent. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable, as provided in Sections 312(b), 312(d) and 312(e)) sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. -56- Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to or on each due date of the principal of (and premium, if any, on) or interest on any Securities of that series, deposit with a Paying Agent a sum (in the Currency described in the preceding paragraph) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent (other than the Trustee) for any series of Securities to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any, on) and interest on Securities of such series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of such series) in the making of any payment of principal of (or premium, if any, on) or interest on the Securities of such series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Except as provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Security of any series, and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security or coupon shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. -57- SECTION 1004. Statement as to Compliance. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 1004, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. SECTION 1005. Additional Amounts. If any Securities of a series provide for the payment of additional amounts to any Holder who is not a United States person in respect of any tax, assessment or governmental charge ("Additional Amounts"), the Company will pay to the Holder of any Security of such series such Additional Amounts as may be specified as contemplated by Section 301. Whenever in this Indenture there is mentioned, in any context, the payment of the principal (or premium, if any, on) or interest on, or in respect of, any Security of a series or the net proceeds received on the sale or exchange of any Security of a series, such mention shall be deemed to include mention of the payment of Additional Amounts provided for by the terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made. Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment or principal (and premium, if any) is made), and at least 10 days prior to each date of payment of principal (and premium, if any) or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers' Certificate, the Company will furnish the Trustee and the Company's principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers' Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of (and premium, if any, on) or interest on the Securities of that series shall be made to Holders of Securities of that series who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of the series. If any such withholding shall be required, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of that series and the Company will pay to the Trustee or such Paying Agent the Additional Amounts required by the terms of such Securities. In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above-mentioned certificate, then the Trustee or such Paying Agent shall be entitled to (i) assume that no such withholding or deduction is required with respect to any payment of principal (and premium, if any) or interest with respect to any Securities of a series until it shall have received a certificate advising otherwise and (ii) to make all payments of principal (and premium, if any) and interest with respect to the Securities of a series without withholding or deductions until otherwise advised. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions -58- taken or omitted by any of them in reliance on any Officers' Certificate furnished pursuant to this Section. SECTION 1006. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1007. Maintenance of Properties. The Company will cause all property necessary for the operation of the business of the Company and its Subsidiaries as a whole to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent or restrict the sale, abandonment or other disposition of any of such property if such action is, in the judgment of the Company, desirable in the conduct of the business of the Company and its Subsidiaries as a whole and not disadvantageous in any material respect to the Holders. SECTION 1008. Corporate Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the rights (charter and statutory) and franchises of the Company and any Subsidiary; provided, however, that the Company shall not be required to preserve any such right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole. SECTION 1009. Limitation on Dividends; Transactions with Affiliates. (a) If Securities are issued to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust and (i) there shall have occurred any event that would constitute an Event of Default or (ii) the Company shall be in default with respect of its payment or any other obligations under the Preferred Securities Guarantee or Common Securities Guarantee relating to such NWPS Trust, then (A) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, and (B) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to such Securities, provided that the foregoing restriction in paragraph (A) -59- does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. (b) If Securities are issued to a NWPS Trust or a trustee of such a trust in connection with the issuance of Trust Securities by such NWPS Trust and the Company shall have given notice of its election to defer payments of interest on such Securities by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (A) the Company shall not declare or pay any dividend or, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, and (B) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to such Securities, provided that the foregoing restriction in paragraph (A) does not apply to any stock dividends paid by the Company where the dividend stock is the same as that on which the dividend is being paid. SECTION 1010. Covenants as to NWPS Trusts. In the event Securities are issued and sold to a NWPS Trust or a trustee of such trust in connection with the issuance of Trust Securities by such NWPS Trust, for so long as such Trust Securities remain outstanding, the Company will (i) maintain 100% direct or indirect ownership of the Common Securities of such NWPS Trust; provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities, and (ii) use its reasonable efforts to cause such NWPS Trust (a) to remain a statutory business trust, except in connection with a distribution of Securities as provided in the Declaration of such NWPS Trust, the redemption of all of the Trust Securities and in connection with certain mergers, consolidations or amalgamation permitted by the Declaration of such NWPS Trust, and (b) otherwise continue to be treated as a grantor trust for United States federal income tax purposes. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with the terms of such Securities and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed and shall deliver to the Trustee such -60- documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 1103. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Securities of such series; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than the minimum authorized denomination for Securities of such series established pursuant to Section 301. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Except as otherwise specified as contemplated by Section 301, notice of redemption shall be given in the manner provided for in Section 106 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price (together with accrued interest, if any, to the Redemption Date payable as provided in Section 1106) will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, -61- (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable as provided in Sections 312(b), 312(d) and 312(e)) sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable as provided in Sections 312(b), 312(d) and 312(e)) (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall, if the same were interest-bearing, cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption or portion thereof shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and -62- deliver to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. Retirements of Securities of any series pursuant to any sinking fund shall be made in accordance with the terms of such Securities and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. Subject to Section 1203, in lieu of making all or any part of any mandatory sinking fund payment with respect to any Securities of a series in cash, subject to the limitations set forth at Section 1001, the Company may at its option (1) deliver to the Trustee Outstanding Securities of a series (other than any previously called for redemption) theretofore purchased or otherwise acquired by the Company and/or (2) receive credit for the principal amount of Securities of such series which have been previously delivered to the Trustee by the Company or for Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any mandatory sinking fund payment with respect to the Securities of the same series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided, however, that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in the Currency in which the Securities -63- of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable, as provided in Sections 312(b), 312(d) and 312(e)) and the portion thereof, if any, which is to be satisfied by delivering or crediting Securities of that series pursuant to Section 1202 (which Securities will, if not previously delivered, accompany such certificate) and whether the Company intends to exercise its right to make a permitted optional sinking fund payment with respect to such series. Such certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate, the sinking fund payment due on the next succeeding sinking fund payment date for that series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Securities subject to a mandatory sinking fund payment without the option to deliver or credit Securities as provided in Section 1202 and without the right to make any optional sinking fund payment, if any, with respect to such series. Not more than 60 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. Prior to any sinking fund payment date, the Company shall pay to the Trustee or a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1103) in cash a sum equal to any interest that will accrue to the date fixed for redemption of Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 1203. Notwithstanding the foregoing, with respect to a sinking fund for any series of Securities, if at any time the amount of cash to be paid into such sinking fund on the next succeeding sinking fund payment date, together with any unused balance of any preceding sinking fund payment or payments for such series, does not exceed in the aggregate $100,000, the Trustee, unless requested by the Company, shall not give the next succeeding notice of the redemption of Securities of such series through the operation of the sinking fund. Any such unused balance of moneys deposited in such sinking fund shall be added to the sinking fund payment for such series to be made in cash on the next succeeding sinking fund payment date or, at the request of the Company, shall be applied at any time or from time to time to the purchase of Securities of such series, by public or private purchase, in the open market or otherwise, at a purchase price for such Securities (excluding accrued interest and brokerage commissions, for which the Trustee or any Paying Agent will be reimbursed by the Company) not in excess of the principal amount thereof. -64- ARTICLE THIRTEEN REPAYMENT AT OPTION OF HOLDERS SECTION 1301. Applicability of Article. Repayment of Securities of any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1302. Repayment of Securities. Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Company covenants that on or before the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except, if applicable, as provided in Sections 312(b), 312(d) and 312(e)) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date shall be an Interest Payment Date) accrued interest on, all the Securities or portions thereof, as the case may be, to be repaid on such date. SECTION 1303. Exercise of Option. Securities of any series subject to repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. To be repaid at the option of the Holder, any Security so providing for such repayment, with the "Option to Elect Repayment" form on the reverse of such Security duly completed by the Holder (or by the Holder's attorney duly authorized in writing), must be received by the Company at the Place of Payment therefor specified in the terms of such Security (or at such other place or places or which the Company shall from time to time notify the Holders of such Securities) not earlier than 45 days nor later than 30 days prior to the Repayment Date. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered that is not to be repaid, must be specified. The principal amount of any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of the series of which such Security to be repaid is a part. Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company. -65- SECTION 1304. When Securities Presented for Repayment Become Due and Payable. If Securities of any series providing for repayment at the option of the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest. Upon surrender of any such Security for repayment in accordance with such provisions, the principal amount of such Security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that in the case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security. SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered Security which is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid. ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance. Except as otherwise specified as contemplated by Section 301 for Securities of any series of this Section 1401, the provisions of this Article Fourteen shall apply to each series of Securities, and the Company may, at its option, effect (i) defeasance of the Securities of or within a series under Section 1402, except that the Company shall not effect any such defeasance under Section 1402 in respect of any Securities of which a NWPS Trust or a trustee of such trust is the Holder, or (ii) covenant defeasance of or within a series under Section 1403 in accordance with the terms of such Securities and in accordance with this Article. -66- SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities on the date the conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1405 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Outstanding Securities to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any, on) and interest on such Securities (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1005, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Fourteen. Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section 1402 notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities. SECTION 1403. Covenant Defeasance. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Section 803 and Sections 1006 through 1008, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such Securities shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(4) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1402 or Section 1403 to any Outstanding Securities of or within a series: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall -67- agree to comply with the provisions of this Article Fourteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) an amount (in such Currency in which such Securities are then specified as payable at Stated Maturity), or (B) Government Obligations applicable to such Securities (determined on the basis of the Currency in which such Securities are then specified as payable at Stated Maturity) which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal (including any premium) and interest, if any, under such Securities, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of (and premium, if any, on) and interest on such Outstanding Securities on the Stated Maturity (or Redemption Date, if applicable) of such principal (and premium, if any) or installment or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such Government Obligations to said payments with respect to such Securities. Before such a deposit, the Company may give to the Trustee, in accordance with Section 1102 hereof, a notice of its election to redeem all or any portion of such Outstanding Securities at a future date in accordance with the terms of the Securities of such series and Article Eleven hereof, which notice shall be irrevocable. Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing. (2) No Default or Event of Default with respect to such Securities shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs (5) and (7) of Section 501 are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (3) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound. (4) In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of execution of this Indenture, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and will be subject to United States federal income -68- tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (5) In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of such covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (6) Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations in connection therewith pursuant to Section 301. (7) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the deposit contemplated by subsection (1) shall not result in the Company, the Trustee or the defeasance trust being deemed an "investment company" under the Investment Company Act of 1940, as amended. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with. SECTION 1405. Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee -- collectively for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in respect of such Outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(1) has been made, (a) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 312(b) or the terms of such Security to receive payment in a Currency other than that in which the deposit pursuant to Section 1404(1) has been made in respect of such Security, or (b) a Conversion Event occurs as contemplated in Section 312(d) or 312(e) or by the terms of any Security in respect of which the deposit pursuant to Section 1404(1) has been made, the indebtedness represented by such Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of -69- the principal of (premium, if any, on), and interest, if any, on such Security as they become due out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the Currency in which such Security becomes payable as a result of such election or Conversion Event based on the applicable Market Exchange Rate for such Currency in effect on the third Business Day prior to each payment date, except, with respect to a Conversion Event, for such Currency in effect (as nearly as feasible) at the time of the Conversion Event. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of such Outstanding Securities. Anything in this Article Fourteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1406. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 1405 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and such Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1405; provided, however, that if the Company makes any payment of principal of (or premium, if any, on) or interest on any such Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. -70- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Seal NORTHWESTERN PUBLIC SERVICE COMPANY By: ---------------------------------------------------- Name: Title: Attest: ------------ Seal THE CHASE MANHATTAN BANK (N.A.) By: ---------------------------------------------------- Name: Title: Attest: ------------ -71- STATE OF ) COUNTY OF ) ss.: On the day of ______, 1995, before me personally ______________________________ came to be known, who, being by me duly sworn, did depose and say that he is the __________________________________ of Northwestern Public Service Company, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC seal Commission expires STATE OF ) COUNTY OF ) SS.: On the day of __________, 1995, before me personally _________________________ came to be known, who, being by me duly sworn, did depose and say that he is the ____________________ of _________________________, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC seal Commission expires -72- EX-4.(A)(30) 9 EXHIBIT 4(A)(30) FORM OF SUPPLEMENTAL INDENTURE TO BE USED IN CONNECTION WITH THE ISSUANCE OF SUBORDINATED DEBT SECURITIES AND PREFERRED SECURITIES FIRST SUPPLEMENTAL INDENTURE, dated as of ___________________, 1995 (this "First Supplemental Indenture"), between Northwestern Public Service Company, a Delaware corporation (the "Company") and The Chase Manhattan Bank (N.A.), as trustee (the "Trustee") under the Indenture dated as of ________________, 1995 between the Company and the Trustee (the "Indenture"). WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company's subordinated debt securities to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture; WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its ________% Junior Subordinated Deferrable Interest Debentures due __________ (the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this First Supplemental Indenture; WHEREAS, NWPS Capital Financing I, a Delaware statutory business trust (the "Trust"), has offered to the public $___________ aggregate liquidation amount of its _____% Trust Preferred Capital Securities (the "Preferred Securities"), representing undivided beneficial interests in the assets of the Trust, and proposes to invest the proceeds from such offering in $__________ aggregate principal amount of the Debentures; and WHEREAS, the Company has requested that the Trustee execute and deliver this First Supplemental Indenture and all requirements necessary to make this First Supplemental Indenture a valid instrument in accordance with its terms and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company have been performed, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects; NOW THEREFORE, in consideration of the purchase and acceptance of the Debentures by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definition of Terms. Unless the context otherwise requires: (a) a term defined in the Indenture has the same meaning when used in this First Supplemental Indenture; (b) a term defined anywhere in this First Supplemental Indenture has the same meaning throughout; (c) the singular includes the plural and vice versa; (d) a reference to a Section or Article is to a Section or Article of this First Supplemental Indenture; (e) headings are for convenience of reference only and do not affect interpretation; (f) the following terms have the meanings given to them in the Declaration: (i) Business Day; (ii) Clearing Agency; (iii) Delaware Trustee; (iv) Dissolution Tax Opinion; (v) Investment Company Event; (vi) No Recognition Opinion; (vii) Property Trustee; (viii) Preferred Security Certificate; (ix) Regular Trustees; (x) Special Event; and (xi) Tax Event; and (g) the following terms have the meanings given to them in this Section 1.1(g): "Additional Interest" has the meaning specified in Section 2.5(c). "Declaration" means the Amended and Restated Declaration of Trust of NWPS Capital Financing I, a Delaware statutory business trust, dated as of _______________, 1995, as amended or restated from time to time. "Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration, and the Debentures held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Extended Maturity Date" means, if the Company elects to extend the Maturity Date in accordance with Section 2.2(b), the date selected by the Company which is after the Scheduled Maturity Date but before _______________. -2- "Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Scheduled Maturity Date" means _______________. "Senior Indebtedness" means with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of such obligor for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by such obligor, including, without limitation, all obligations under its General Mortgage and Deed of Trust dated as of August 1, 1993 (the "New Mortgage") between the Company and The Chase Manhattan Bank (National Association), and the Indenture dated August 1, 1940 (the "First Mortgage") between the Company and The Chase Manhattan Bank (National Association) and C.J. Heinzelmann; (ii) all capital lease obligations of such obligor; (iii) all obligations of such obligor issued or assumed as the deferred purchase price of property, all conditional sale obligations of such obligor and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such obligor for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other persons for the payment of which such obligor is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of such obligor (whether or not such obligation is assumed by such obligor), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Debentures, as the case may be, and (2) any indebtedness between or among any obligor and its Affiliates, including all other debt securities and guarantees in respect of those debt securities, issued to (a) any other NWPS Trust, or a trustee of such trust, and (b) any other trust or a trustee of such trust, partnership or other entity affiliated with the Company which is a financing vehicle of the Company ("Financing Entity") in connection with an issuance of preferred securities by such Financing Entity of preferred securities or other securities which rank pari passu with or junior to the Preferred Securities. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES SECTION 2.1. Designation and Principal Amount. There is hereby authorized a series of Securities designated the "_____% Junior Subordinated Deferrable Interest Debentures due ___________", limited in aggregate principal amount to $_________ million, which amount shall be as set forth in any written Company Order for the authentication and delivery of Debentures pursuant to Section 303 of the Indenture. -3- SECTION 2.2. Maturity. (a) The Maturity Date will be either: (i) the Scheduled Maturity Date; or (ii) if the Company elects to extend the Maturity Date beyond the Scheduled Maturity Date in accordance with Section 2.2(b), the Extended Maturity Date; (b) the Company may at any time before the day which is 90 days before the Scheduled Maturity Date, elect to extend the Maturity Date only once to the Extended Maturity Date, provided that the following conditions in this Section 2.2(b) are satisfied both at the date the Company gives notice in accordance with Section 2.2(c) of its election to extend the Maturity Date and at the Scheduled Maturity Date: (i) the Company is not in bankruptcy or otherwise insolvent; (ii) the Company is not in default on any Securities issued to the Trust or any trustee of the Trust in connection with the issuance of Trust Securities by the Trust; (iii) the Company has made timely payments on the Debentures for the immediately preceding 18 months without deferrals; (iv) the Trust is not in arrears on payments of Distributions on the Trust Securities issued by it; and (v) the Debentures are rated investment grade or the equivalent by any one of Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization; and (c) if the Company elects to extend the Maturity Date in accordance with Section 2.2(b), the Company shall give notice to Holders of the Debentures, the Property Trustee, the Trust and the Trustee of the extension of the Maturity Date and the Extended Maturity Date at least 90 days before the Scheduled Maturity Date. SECTION 2.3. Form and Payment. Except as provided in Section 2.4, the Debentures shall be issued as Registered Securities in fully registered certificated form without interest coupons. Principal of and interest on -4- the Debentures issued in certificated form will be payable, the transfer of such Debentures will be registrable and such Debentures will be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Debentures held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.4. Global Debenture. (a) In connection with a Dissolution Event: (i) the Debentures in certificated form may be presented to the Trustee by the Property Trustee in exchange for a global Debenture in an aggregate principal amount equal to all Outstanding Debentures (a "Global Debenture"), to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this First Supplemental Indenture. Payments on the Debentures issued as a Global Debenture will be made to the Depository; and (ii) if any Preferred Securities are held in non book- entry certificated form, the Debentures in certificated form may be presented to the Trustee by the Property Trustee and any Preferred Security Certificate which represents Preferred Securities other than Preferred Securities held by the Clearing Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Debentures presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificates presented to the Security Registrar for transfer or reissuance at which time such Preferred Security Certificates will be cancelled and a Debenture registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate cancelled will be executed by the Company and delivered to the Trustee for authentication and -5- delivery in accordance with the Indenture and this First Supplemental Indenture. On issue of such Debentures, Debentures with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been cancelled. (b) A Global Debenture may be transferred, in whole but not in part, only to another nominee of the Depositary, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. (c) If at any time the Depositary notifies the Company that it is unwilling or unable to continue as Depositary or if at any time the Depositary for such series shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and a successor Depositary for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, the Company will execute, and, subject to Article Two of the Indenture, the Trustee will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. In addition, the Company may at any time determine that the Debentures shall no longer be represented by a Global Debenture. In such event the Company will execute and subject to a certificate evidencing such determination by the Company, will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be cancelled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Depositary for delivery to the Persons in whose names such Securities are so registered. SECTION 2.5. Interest. (a) Each Debenture will bear interest at the rate of _____% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, -6- payable (subject to the provisions of Article Four) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing on _______________, 1995, to the Person in whose name such Debenture or any predecessor Debenture is registered, at the close of business on the regular record date for such interest installment, which, in respect of any Debentures of which the Property Trustee is the Holder of or a Global Debenture, shall be the close of business on the Business Day next preceding that Interest Payment Date. Notwithstanding the foregoing sentence, if the Preferred Securities are no longer in book-entry only form or if pursuant to the Indenture the Debentures are not represented by a Global Debenture, the Company may select a regular record date for such interest installment which shall be any date at least one Business Day before an Interest Payment Date. (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest in computed, will be computed on the basis of the actual number of days elapsed in such a 30-day month. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (c) If at any time while the Property Trustee is the Holder of any Debentures, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company will pay as additional interest ("Additional Interest") on the Debentures held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other government charges been imposed. -7- ARTICLE III REDEMPTION OF THE DEBENTURES SECTION 3.1. Special Event Redemption. If a Tax Event has occurred and is continuing and: (a) the Company has received a Redemption Tax Opinion; or (b) after receiving a Dissolution Tax Opinion, the Regular Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No Recognition Opinion cannot be delivered to the Trust, then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the Holders of the Debentures to redeem the Debentures in whole or in part for cash within 90 days following the occurrence of such Tax Event (the "90-Day Period"), provided that, if at the time there is available to the Company the opportunity to eliminate within the 90-Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption; and provided, further, that the Company shall have no right to redeem the Debentures while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m. on the date such Redemption Price is to be paid. SECTION 3.2. Optional Redemption by Company. (a) Subject to the provisions of Section 3.2(b) and to the provisions of Article Eleven of the Indenture, except as otherwise may be specified in this First Supplemental Indenture, the Company shall have the right to redeem the Debentures, in whole or in part, from time to time, on or after _______________, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice to the Holder of the Debentures, at the Optional Redemption Price. If the Debentures are only partially redeemed pursuant to this Section 3.2, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that, if at the time of redemption the Debentures are registered as a Global Debenture, the Depository shall -8- determine by lot the principal amount of such Debentures held by each Holder of Debenture to be redeemed. The Optional Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price by 10:00 a.m. on the date such Optional Redemption Price is to be paid. (b) If a partial redemption of the Debentures would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Debentures in whole. SECTION 3.3. No Sinking Fund. The Debentures are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1. Extension of Interest Payment Period. The Company shall have the right, at any time during the term of the Debentures, from time to time to defer payments of interest by extending the interest payment period of such Debentures for up to 20 consecutive quarters (the "Extended Interest Payment Period"). To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period the Company shall pay all interest accrued and unpaid on the Debentures, including any Additional Interest and Compounded Interest ("Deferred Interest") that shall be payable, to the Holders of the Debentures in whose names the Debentures are registered in the Security Register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. -9- SECTION 4.2. Notice of Extension. (a) If the Property Trustee is the only registered Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Regular Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (a) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, or (b) the date the Trust is required to give notice of the record date or the date such Distributions are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to Holders of the Debentures. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. ARTICLE V EXPENSES SECTION 5.1. Payment of Expenses. In connection with the offering, sale and issuance of the Debentures to the Property Trustee in connection with the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriters payable pursuant to the Underwriting Agreement and the Pricing Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 7.06 of the Indenture; and (b) pay for all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in -10- connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE VI SUBORDINATION SECTION 6.1. Agreement to Subordinate. The Company covenants and agrees, and each Holder of Debentures issued hereunder by such Holder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article Six; and each Holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest on all Debentures issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article Six shall prevent the occurrence of any default or Event of Default hereunder. SECTION 6.2. Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, as the case may be, or in the event that the maturity of any Senior Indebtedness of the Company, as the case may be, has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption and sinking fund payments) of, or premium, if any, or interest on the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the -11- holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 6.3. Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal (and premium, if any) or interest on the Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Debenture or the Trustee would be entitled to receive from the Company, except for the provisions of this Article Six, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of Debentures or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. -12- For purposes of this Article Six, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article Six with respect to the Debentures to the payment of all Senior Indebtedness of the Company, as the case may be, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Eight of the Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Eight of the Indenture. Nothing in Section 6.2 or in this Section 6.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 606 of the Indenture. SECTION 6.4. Subrogation. Subject to the payment in full of all Senior Indebtedness of the Company, the rights of the Holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Holders of the Debentures or the Trustee would be entitled except for the provisions of this Article Six, and no payment over pursuant to the provisions of this Article Six to or for the benefit of the holders of such Senior Indebtedness by Holders of the Debentures or the Trustee, shall, as between the Company, its creditors other than Holders of Senior Indebtedness of the Company, and the holders of the Debentures shall be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article Six are and are intended solely for the purposes of defining the relative rights of the Holders of the Debentures, on the one hand, and the holders of such Senior Indebtedness on the other hand. Nothing contained in this Article Six or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the Holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended -13- to or shall affect the relative rights of the Holders of the Debentures and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness of the Company, as the case may be, nor shall anything herein or therein prevent the Trustee or the Holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, subject to the rights, if any, under this Article Six of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article Six, the Trustee, subject to the provisions of Section 602 of the Indenture, and the Holders of the Debentures shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Debentures, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Six. SECTION 6.5. Trustee to Effectuate Subordination. Each Holder of Debentures by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Six and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. SECTION 6.6. Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article Six. Notwithstanding the provisions of this Article Six or any other provision of the Indenture and this First Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article Six, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 602 of the Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that, if the Trustee shall not have received the notice provided for in this Section 6.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any -14- Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 602 of the Indenture, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company, as the case may be (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article Six, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Six, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 6.7. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Six in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Six, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 602 of the Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Holders of Debentures, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article Six or otherwise. SECTION 6.8. Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the -15- Company, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Debentures, without incurring responsibility to the Holders of the Debentures and without impairing or releasing the subordination provided in this Article Six or the obligations hereunder of the Holders of the Debentures to the holders of such Senior Indebtedness, do any one or more the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, as the case may be, and any other Person. ARTICLE VII COVENANT TO LIST ON EXCHANGE SECTION 7.1. Listing on an Exchange. If the Debentures are to be issued as a Global Debenture in connection with the distribution of the Debentures to the holders of the Preferred Securities issued by the Trust upon a Dissolution Event, the Company will use its best efforts to list such Debentures on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. ARTICLE VIII FORM OF DEBENTURE SECTION 8.1. Form of Debenture. The Debentures and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) [IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT: This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Debenture is exchangeable for Debentures registered in the name of a person other than -16- the Depository or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Debenture (other than a transfer of this Debenture as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] No._________________ $___________________ [CUSIP No.__________] ____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE __________ Northwestern Public Service Company, a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of _______ Dollars on _______________, (or on such later date before _______________, if the Company elects to extend the maturity date as further described herein), and to pay interest on said principal sum from _______________, 1995, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year commencing _______________, 1995, at the rate of _____% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose -17- name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the business day next preceding such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Debenture is the Property Trustee, the payment of the principal of (and premium, if any) and interest on this Debenture will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication hereon has been executed by the Trustee referred to on the reverse side hereof, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. -18- The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated:_______________ NORTHWESTERN PUBLIC SERVICE COMPANY By:__________________________________ Attest: By:___________________ Secretary (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures described in the within-mentioned Indenture. ___________________________ as Trustee or as Authentication Agent By:________________________ By:___________________________ Authorized Signatory Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of _______________, 1995, duly executed and delivered between the Company and ____________________, as Trustee (the "Trustee"), as supplemented by the First -19- Supplemental Indenture dated as of _______________, 1995, between the Company and the Trustee (the Indenture as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Debentures. By the terms of the Indenture, the Debentures are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in said First Supplemental Indenture. Because of the occurrence and continuation of a Tax Event, in certain circumstances, this Debenture will become due and payable at the principal amount together with any interest accrued thereon (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines. The Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at any time on or after _______________, (an "Optional Redemption") or at any time in certain circumstances upon the occurrence of a Tax Event, at a redemption price equal to 100% of the principal amount plus any accrued but unpaid interest, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if, at the time of redemption, the Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Debentures held by each Debentureholder to be redeemed. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Debentures of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the -20- redemption thereof, without the consent of the Holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of Debentures, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Debenture then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Debentures of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Debentures of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Debentures of such series. Any such consent or waiver by the registered Holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Debentures from time to time to extend the interest payment period of such Debentures to up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered Holder hereof on the Security Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. -21- Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations herein and therein set forth, Debentures of this series so issued are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE IX ORIGINAL ISSUE OF DEBENTURES SECTION 9.1. Original Issue of Debentures. Debentures in the aggregate principal amount of $__________ may, upon execution of this First Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. -22- ARTICLE X MISCELLANEOUS SECTION 10.1. Ratification of Indenture. The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 10.2. Trustee Not Responsible for Recitals. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. SECTION 10.3. Governing Law. This First Supplemental Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION 10.4. Separability. In case any one or more of the provisions contained in this First Supplemental Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this First Supplemental Indenture or of the Debentures, but First Supplemental Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 10.5. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. -23- IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, on the date or dates indicated in the acknowledgements and as of the day and year first above written. NORTHWESTERN PUBLIC SERVICE COMPANY By:________________________________ Name: Title: Attest:__________________ Secretary THE CHASE MANHATTAN BANK (N.A.) By:_________________________________ Name: Title: Attest:___________________ Secretary -24- STATE OF ) COUNTY OF ) ss.: On the day of __________, 1995, before me personally ________________________________ came to be known, who, being by me duly sworn, did depose and say that he is the __________________________________ of Northwestern Public Service Company, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC seal Commission expires STATE OF ) COUNTY OF ) SS.: On the day of _______________, 1995, before me personally _____________________________came to be known, who, being by me duly sworn, did depose and say that he is the ____________________ of _________________________, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. NOTARY PUBLIC seal Commission expires -25- EX-4.(A)(35) 10 EXHIBIT 4(A)(35) FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT NWPS CAPITAL FINANCING I Cross-Reference Table for the Guarantee Agreement Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement - ------------------- ---------- Section 310(a) . . . . . . . . . . . . . . . . . . . . . . 4.1(a) 310(b) . . . . . . . . . . . . . . . . . . . .4.1(c), 2.8 310(c) . . . . . . . . . . . . . . . . . . Not Applicable Section 311(a) . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 311(b) . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 311(c) . . . . . . . . . . . . . . . . . . Not Applicable Section 312(a) . . . . . . . . . . . . . . . . . . . . . . 2.2(a) 312(b) . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 313. . . . . . . . . . . . . . . . . . . . . . . . . .2.3 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . .2.4 314(b) . . . . . . . . . . . . . . . . . . Not Applicable 314(c) . . . . . . . . . . . . . . . . . . . . . . . .2.5 314(d) . . . . . . . . . . . . . . . . . . Not Applicable 314(e) . . . . . . . . . . . . . . . . . . . . . 2.5, 3.2 314(f) . . . . . . . . . . . . . . . . . . . . . 2.1, 3.2 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . 3.1(d) 315(b) . . . . . . . . . . . . . . . . . . . . . . . .2.7 315(c) . . . . . . . . . . . . . . . . . . . . . . . .3.1 315(d) . . . . . . . . . . . . . . . . . . . . . . 3.1(d) Section 316(a) . . . . . . . . . . . . . . . . . . . .5.4(a), 2.6 316(b) . . . . . . . . . . . . . . . . . . . . . . . .5.3 316(c) . . . . . . . . . . . . . . . . . . . . . . . .2.2 Section 317(a) . . . . . . . . . . . . . . . . . . Not Applicable 317(b) . . . . . . . . . . . . . . . . . . Not Applicable Section 318(a) . . . . . . . . . . . . . . . . . . . . . . 2.1(b) 318(b) . . . . . . . . . . . . . . . . . . . . . . . .2.1 318(c) . . . . . . . . . . . . . . . . . . . . . . 2.1(a) - ---------- Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Guarantee Agreement. TABLE OF CONTENTS ARTICLE I Definitions and Interpretation Page ---- SECTION 1.1. Definitions and Interpretation . . . . . . . . . . . .2 Affiliate. . . . . . . . . . . . . . . . . . . . . . .2 Common Securities. . . . . . . . . . . . . . . . . . .2 Covered Person . . . . . . . . . . . . . . . . . . . .2 Event of Default . . . . . . . . . . . . . . . . . . .2 Guarantee Payments . . . . . . . . . . . . . . . . . .2 Holder . . . . . . . . . . . . . . . . . . . . . . . .3 Indemnified Person . . . . . . . . . . . . . . . . . .3 Indenture. . . . . . . . . . . . . . . . . . . . . . .3 Majority in Liquidation amount of the Securities . . .3 Officers' Certificate. . . . . . . . . . . . . . . . .3 Person . . . . . . . . . . . . . . . . . . . . . . . .4 Preferred Guarantee Trust. . . . . . . . . . . . . . .4 Responsible Officer. . . . . . . . . . . . . . . . . .4 Successor Preferred Guarantee Trustee. . . . . . . . .4 Trust Indenture Act. . . . . . . . . . . . . . . . . .4 ARTICLE II Trust Indenture Act SECTION 2.1. Trust Indenture Act; Application . . . . . . . . . . .5 SECTION 2.2. Lists of Holders of Securities . . . . . . . . . . . .5 SECTION 2.3. Reports by the Preferred Trust Guarantee . . . . . . .5 SECTION 2.4. Periodic Reports to Preferred Guarantee Trustee. . . .5 SECTION 2.5. Evidence of Compliance with Conditions Precedent . . .6 SECTION 2.6. Event of Default; Waiver . . . . . . . . . . . . . . .6 SECTION 2.7. Event of Default; Notice . . . . . . . . . . . . . . .6 SECTION 2.8. Conflicting Interests. . . . . . . . . . . . . . . . .7 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Guarantee Agreement. -i- ARTICLE III Powers, Duties, Rights of Preferred Guarantee Trustee Page ---- SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee . . . . . . . . . . . . . . . . . . . . .7 SECTION 3.2. Certain Rights of Preferred Guarantee Trustee. . . . .9 SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee . . . . . . . . . . . . . . . . . . . 11 ARTICLE IV Preferred Guarantee Trustee SECTION 4.1. Preferred Guarantee Trustee; Eligibility . . . . . . 11 SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustees. . . . . . . . . . 12 ARTICLE V Guarantee SECTION 5.1. Guarantee. . . . . . . . . . . . . . . . . . . . . . 13 SECTION 5.2. Waiver of Notice and Demand. . . . . . . . . . . . . 13 SECTION 5.3. Obligations Not Affected . . . . . . . . . . . . . . 13 SECTION 5.4. Rights of Holders. . . . . . . . . . . . . . . . . . 14 SECTION 5.5. Guarantee of Payment . . . . . . . . . . . . . . . . 15 SECTION 5.6. Subrogation. . . . . . . . . . . . . . . . . . . . . 15 SECTION 5.7. Independent Obligations. . . . . . . . . . . . . . . 15 ARTICLE VI Limitations of Transactions; Subordination SECTION 6.1. Limitation of Transactions . . . . . . . . . . . . . 15 SECTION 6.2. Ranking. . . . . . . . . . . . . . . . . . . . . . . 16 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Guarantee Agreement. -ii- ARTICLE VII Termination Page ---- SECTION 7.1. Termination. . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VIII Indemnification SECTION 8.1. Exculpation. . . . . . . . . . . . . . . . . . . . . 16 SECTION 8.2. Indemnification. . . . . . . . . . . . . . . . . . . 17 ARTICLE IX Miscellaneous SECTION 9.1. Successors and Assigns . . . . . . . . . . . . . . . 18 SECTION 9.2. Amendments . . . . . . . . . . . . . . . . . . . . . 18 SECTION 9.3. Notices. . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 9.4. Benefit. . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 9.5. Governing Law. . . . . . . . . . . . . . . . . . . . 19 TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Guarantee Agreement. -iii- FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT Dated as of __________, 1995 This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of _______, 1995, is executed and delivered by Northwestern Public Service Company, a Delaware corporation (the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of NWPS Capital Financing I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of _________, 1995, among the trustees of the Issuer named therein, the Guarantor as Sponsor and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof $__________ aggregate stated liquidation amount of Preferred Securities designated the ___% Trust Preferred Capital Securities (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee Agreement") in substantially identical terms to this Guarantee Agreement for the benefit of the holders of the Common Securities (as defined herein) except that if an Event of Default (as defined in the Indenture (as defined herein)), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Guarantee Agreement; NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. Definitions and Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above or otherwise in this Guarantee Agreement have the respective meanings assigned to them in the Declaration as in effect on the date hereof; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 promulgated under the Securities Act of 1933, as amended, or any successor rule thereunder. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Covered Person" means any Holder or beneficial owner of Preferred Securities. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Preferred Securities to the extent the -2- Company has made a payment of interest or principal on the Subordinated Debt Securities (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Company has made a payment of interest or principal on the Subordinated Debt Securities, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration or a redemption of all the Preferred Securities upon the maturity or redemption of the Subordinated Debt Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment to the extent the Issuer has funds legally available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an event of default under the Indenture has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee Agreement are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under the Preferred Securities Guarantee Agreement. "Holder" shall mean any holder, as registered on the books and records of the Issuer of any Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Preferred Guarantee Trustee. "Indenture" means the Indenture dated as of __________, 1995, among the Guarantor (the "Debenture Issuer") and The Chase Manhattan Bank (N.A.), as trustee and any indenture supplemental thereto pursuant to which certain subordinated debt securities of the Debenture Issuer are to be issued to the Property Trustee of the Issuer. "Majority in liquidation amount of the Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Preferred Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: -3- (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee Trustee" means Wilmington Trust Company, in its capacity as trustee hereunder and not in its individual capacity, until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Guarantee Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Corporate Trust Department of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. -4- ARTICLE II TRUST INDENTURE ACT SECTION 2.1. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2. Lists of Holders of Securities. (a) The Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the name and addresses of the Holders of the Preferred Securities ("List of Holders") as of such date, (i) within 14 days after January 1 and June 30 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee, provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Preferred Guarantee Trustee. Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. Periodic Reports to Preferred Guarantee Trustee. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required -5- by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. Events of Default; Waiver. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7. Event of Default; Notice (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Events of Default known to the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided that the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice, of such Event of Default. -6- SECTION 2.8 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Preferred Securities. (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. -7- (d) No provision of this Guarantee Agreement shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Guarantee Agreement; and -8- (iv) no provision of this Guarantee Agreement shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity such risk or liability is not reasonably assured to it. SECTION 3.2. Certain Rights of Preferred Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) the Preferred Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever, in the administration of this Guarantee Agreement, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); (v) the Preferred Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the -9- right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (vi) the Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement; (vii) the Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities, and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action; and -10- (x) whenever in the administration of this Guarantee Agreement the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1. Preferred Guarantee Trustee; Eligibility. (a) There shall at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia -11- authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee Trustees. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Preferred Guarantee Trustee may petition a court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may -12- thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3. Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on -13- the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Guarantee Agreement. (b) If the Preferred Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Preferred Securities may, after such Holder's written request to the Preferred Guarantee Trustee to enforce this Guarantee Agreement, institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other Person. -14- SECTION 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. The Guarantor agrees that this Guarantee Agreement shall not be discharged except by payment of the Guarantee Payments in full and by complete performance of all obligations of the Guarantor contained in this Guarantee Agreement. SECTION 5.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1. Limitation of Transactions. So long as any Preferred Securities remain outstanding, if there shall have occurred an Event of Default, or an Event of Default under the Declaration, or if the Guarantor has given notice of its selection of an Extension Period (as defined in the Indenture) and such period or any extension thereof, is continuing, then, in each case, (a) the Guarantor shall not declare or pay any dividend on, or make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock and (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior to the Debentures; provided that the -15- foregoing restriction in this Section 6.1 (a) shall not apply to any stock dividends paid by the Guarantor where the dividend stock is the same stock as that on which the dividend is being paid or to any payment on this Guarantee. In addition, so long as any Preferred Securities remain outstanding, the Guarantor (i) will remain the sole direct or indirect owner of all the outstanding Common Securities and shall not cause or permit the Common Securities to be transferred except to the extent such transfer is permitted under the Declaration, provided that any permitted successor of the Guarantor under the Indenture may succeed to the Guarantor's ownership of the Common Securities and (ii) will use its reasonable efforts to cause the Trust to continue to be treated as a grantor trust for United States federal income tax purposes except in connection with a distribution of Debentures. SECTION 6.2. Ranking. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, including the Debentures, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Guarantee Agreement shall terminate upon (i) full payment of the Redemption Price of all Securities, (ii) the distribution of the Debentures to the Holders of all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee -16- Agreement and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.2. Indemnification. (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this in accordance with this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). -17- ARTICLE IX MISCELLANEOUS SECTION 9.1. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 9.2. Amendments. Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of at least 66-2/3% in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all the outstanding Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 9.3. Notices. All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): Wilmington Trust Company Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890-0001 Attn: Corporate Trust Administration (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): -18- Northwestern Public Service Company 33 Third Street, S.E. Huron, South Dakota 57350 (c) If given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4. Benefit. This Guarantee Agreement is solely for the benefit of the Holders of the Preferred Securities and the Preferred Guarantee Trustee and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 9.5. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. Northwestern Public Service Company By: --------------------------- Name: Title: Wilmington Trust Company, as Preferred Guarantee Trustee By: --------------------------- Name: Title: -19- EX-5.A 11 EXHIBIT 5(A) Draft: 7/11/95 EXHIBIT 5(A) July 27, 1995 Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 and NWPS Capital Financing I NWPS Capital Financing II NWPS Capital Financing III c/o Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 Re: Registration Statement on Form S-3; Registration No. 33-60423 Ladies and Gentlemen: We have acted as counsel for Northwestern Public Service Company, a Delaware corporation ("Company"), and NWPS Capital Financing I, NWPS Capital Financing II and NWPS Capital Financing III, each a Delaware statutory business trust sponsored by the Company (individually a "Trust" and collectively the "Trusts"), in connection with the preparation and filing with the Securities Exchange Commission ("Commission") of the above-captioned registration statement on Form S-3 ("Registration Statement") to register under the Securities Act of 1933, as amended ("Act"), $200,000,000 of what are therein (and hereinafter) called the Offered Securities, for issuance and sale from time to time. The Offered Securities consist of any one, some or all of the following kinds of securities, namely: (i) common stock, par value $3.50 per share, of the Company ("Common Stock"); (ii) the Company's mortgage bonds ("Mortgage Bonds"), to be issued in one or more series pursuant to the General Mortgage Indenture and Deed of Trust dated as of August 1, 1993 between the Company and The Chase Manhattan Bank (N.A.), as Trustee ("New Mortgage"), as supplemented by a supplemental indenture or indentures in substantially the form filed as Exhibit 4(a)(17) to the Registration Statement ("New Mortgage Supplemental Indenture") providing for the issuance of the series; Northwestern Public Service Company July 27, 1995 Page 2 (iii) the Company's subordinated debt securities ("Subordinated Debt Securities") to be issued in one or more series under the indenture ("Subordinated Debt Securities Indenture") to be entered into between the Company and The Chase Manhattan Bank (N.A.), as Trustee, in substantially the form filed as Exhibit 4(a)(29) to the Registration Statement, as supplemented by a supplemental indenture or indentures in substantially the form filed as Exhibit 4(a)(30) to the Registration Statement ("Subordinated Debt Securities Supplemental Indenture") providing for the issuance of the series; (iv) preferred securities ("Preferred Securities") to be issued by one or more of the Trusts, as described in the Prospectus and in the Prospectus Supplement (hereinafter defined) for the Preferred Securities; and (v) guarantees of the Preferred Securities ("Guarantees") to be issued by the Company in substantially the form filed as Exhibit 4(a)(35) to the Registration Statement. As counsel to the Company and the Trusts, we have examined (i) the Registration Statement and exhibits thereto, including the prospectus in the Registration Statement ("Prospectus") and the separate prospectus supplements therein ("Prospectus Supplements') for the respective Offered Securities and the indentures, as applicable, and forms of other documents relating to the Offered Securities; (ii) the Company's restated certificate of incorporation and bylaws, both as amended; (iii) documents issued by public officials as to the existence of the Company and the Trusts under the laws of the State of Delaware; and (iv) such other documents and records of the Company and the Trusts, and such matters of law, as we considered to be necessary to enable us to render this opinion. Based on the foregoing, we are of the opinion as follows: 1. The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware. 2. Each of the Trusts has been duly created and is validly existing in good standing as a business trust under the Business Trust Act of the State of Delaware. 3. Subject to final approval by the Board of Directors of the Company (or by the committee or person to whom the Board delegates the authority to grant such final approval) of (i) the number of shares of Common Stock to be issued and sold, and the terms of sale thereof (and assuming the sale price is not less than the $3.50 per share par value of the Common Stock); (ii) the aggregate principal amount, rate of interest, maturity date and other terms of each series of the Mortgage Bonds, and the terms of sale thereof and the terms of the New Mortgage Supplemental Indenture; and (iii) the terms of the Preferred Securities, Subordinated Debt Securities and Guarantees, as well as the final terms of the declarations of trust for the Trusts and the terms of sale of the Preferred Securities and the Subordinated Debt Securities, the Company has duly and validly authorized the issuance of the Common Stock, the Mortgage Bonds and the Subordinated Debt Securities, and the execution and delivery of the New Mortgage Supplemental Indenture, the Subordinated Debt Securities Indenture, the Subordinated Debt Securities Supplemental Indenture and the Guarantees. Northwestern Public Service Company July 27, 1995 Page 3 4. Subject to paragraph 3 above, shares of Common Stock, when issued, sold and delivered as contemplated in the Registration Statement and the Prospectus Supplement applicable to the Common Stock and in accordance with the authorization thereof by the Board of Directors of the Company (or by the committee or person to whom the Board delegates such authority), will be legally and validly issued, fully paid and nonassessable. 5. Subject to paragraph 3 above, upon execution and delivery of the New Mortgage Supplemental Indenture and the issuance, sale and delivery by the Company of one or more series of such Mortgage Bonds, as contemplated in the Registration Statement and the Prospectus Supplement applicable to such Mortgage Bonds and in accordance with the authorization thereof by the Board of Directors of the Company (or by the committee or person to whom the Board delegates such authority), such Mortgage Bonds will be valid, legal and binding obligations of the Company, enforceable in accordance with their terms, subject to (i) the due filing of record of the New Mortgage Supplemental Indenture and of any financing statements relating thereto in the manner prescribed by the laws of the states of Iowa, Nebraska, North Dakota and South Dakota in order to give record notice of the New Mortgage Supplemental Indenture with respect to interests in real estate subject thereto and to perfect security interests in personal property subject thereto, (ii) the issuance and sale of the Mortgage Bonds before the intervention of any lien to which the New Mortgage or the New Mortgage Supplemental Indenture is not expressly made subject, or not expressly excepted by the New Mortgage, and (iii) the reservations, encumbrances and restrictions recited in the granting clause of, and as provided in, the New Mortgage or referred to in the Prospectus included in the Registration Statement under the subcaption "Security" under the caption "Description of the Mortgage Bonds," and except as the legality, validity, binding effect or enforceability of the Mortgage Bonds may be limited or otherwise affected by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, or (b) the application of general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law), or (c) the laws of the states where the property subject to the New Mortgage is located that affect the remedies for defaults under, and the enforcement of the lien and security interests provided for in, the New Mortgage. (No opinion is expressed herein with respect to the title of the Company to its properties, or the priority of the lien or security interests of the Mortgage Bonds on such properties now owned or hereafter acquired.) 6. Subject to paragraph 3 above, Subordinated Debt Securities, when issued, sold and delivered as contemplated in the Registration Statement and the Prospectus Supplement applicable to such Subordinated Debt Securities and in accordance with the authorization thereof by the Board of Directors of the Company (or by the committee or person to whom the Board delegates such authority), will be valid, legal and binding obligations of the Company, provided that (i) the Subordinated Debt Securities Indenture and any necessary Subordinated Debt Securities Supplemental Indenture or officer's certificate with respect thereto have been duly executed and delivered by the Company and the Subordinated Debt Securities Trustee, (ii) the terms of such Subordinated Debt Securities have been duly established in accordance with the Subordinated Debt Securities Indenture and any applicable Subordinated Debt Securities Supplemental Indenture or officer's certificate with respect thereto, and (iii) such Subordinated Debt Securities have been duly Northwestern Public Service Company July 27, 1995 Page 4 executed and authenticated in accordance with the Subordinated Debt Securities Indenture and any applicable Subordinated Debt Securities Supplemental Indenture or officer's certificate with respect thereto. Subject to the foregoing, such Subordinated Debt Securities will be enforceable in accordance with their terms against the Company, except as the enforceability thereof may be limited (a) by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and (b) the application of general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 7. Subject to paragraph 3 above, the Preferred Securities will represent valid and, subject to paragraph 8 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust which issued the same when (a) the declaration of trust for such Trust has been duly executed by the Trust's trustees and by the Company as the Trust's sponsor, (b) the Guarantee applicable to such Preferred Securities has been duly executed and delivered by the Company to the Guarantee Trustee of such Guarantee as contemplated in paragraph 9 below, (c) such Preferred Securities have been issued in accordance with the terms and provisions of such declaration of trust and (d) such Preferred Securities have been issued and delivered as contemplated by the Registration Statement and the Prospectus Supplement applicable to the Preferred Securities. 8. Holders of validly issued Preferred Securities, as beneficial owners of the Trust which issued the Preferred Securities, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that holders of Preferred Securities may be obligated to make payments as set forth in the declaration of trust for such Trust. 9. Subject to paragraph 3 above, each Guarantee issued with respect to Preferred Securities will be a valid, legal and binding obligation of the Company, provided (i) such Guarantee has been duly executed and delivered to the Guarantee Trustee of such Guarantee, (ii) such Preferred Securities have been issued as contemplated in paragraph 7 above, and (iii) such Guarantee has been issued and delivered as contemplated in the Registration Statement and the Prospectus Supplement applicable to the Guarantees. Subject to the foregoing, such Guarantee will be enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited (a) by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally and (b) the application of general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). The opinions expressed in paragraphs 4, 5, 6, 7, 8 and 9 are subject to the Registration Statement becoming effective with no stop order with respect thereto having been issued by the Commission, and to the order which has been issued by the Federal Energy Regulatory Commission remaining in effect, authorizing under Section 204 of the Federal Power Act the issuance of the Offered Securities on the terms contemplated in the Registration Statement and the applicable Prospectus Supplements. Northwestern Public Service Company July 27, 1995 Page 5 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Opinions" in the Prospectus and the caption "Legal Matters" in the Prospectus Supplement for the Preferred Securities. In rendering this opinion, we have relied as to all matters governed by the laws of the State of Delaware in paragraphs 2, 7 and 8 above upon the opinions of Richards, Layton & Finger, P.A., special Delaware counsel for the Company and the Trusts, which are being filed as exhibits to the Registration Statement. Very truly yours, SCHIFF HARDIN & WAITE By: /s/ James M. Van Vliet, Jr. --------------------------------------- James M. Van Vliet, Jr. EX-5.BI 12 EXHIBIT 5(B)(I) Exhibit 5(b)(i) WP5.1 #596 NWPSI5.15 PMAltman 07/14/95 11:28am [Letterhead of Richards, Layton & Finger] July 27, 1995 NWPS Capital Financing I c/o Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 Re: NWPS CAPITAL FINANCING I Ladies and Gentlemen: We have acted as special Delaware counsel for Northwestern Public Service Company, a Delaware corporation ("Northwestern"), and NWPS Capital Financing I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated as of June 19, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on June 19, 1995; (b) The Declaration of Trust of the Trust, dated as of June 19, 1995, between Northwestern and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus"), and a preliminary prospectus supplement (the "Prospectus Supplement") relating to the __% Trust Preferred Capital Securities of the Trust NWPS Capital Financing I c/o Northwestern Public Service Company July 27, 1995 Page 2 representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by Northwestern, the Trust and others as set forth therein with the Securities and Exchange Commission on July 27, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into among Northwestern, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated July 27, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in NWPS Capital Financing I c/o Northwestern Public Service Company July 27, 1995 Page 3 paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General NWPS Capital Financing I c/o Northwestern Public Service Company July 27, 1995 Page 4 Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Declaration. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to Schiff Hardin & Waite's relying as to matters of Delaware law upon this opinion in connection with an opinion to be rendered by it in connection with the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger PMA/BJK/lds EX-5.BII 13 EXHIBIT 5(B)(II) Exhibit 5(b)(ii) WP5.1 #596 NWPSII5.15 PMAltman 07/14/95 11:30am [Letterhead of Richards, Layton & Finger] July 27, 1995 NWPS Capital Financing II c/o Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 Re: NWPS CAPITAL FINANCING II Ladies and Gentlemen: We have acted as special Delaware counsel for Northwestern Public Service Company, a Delaware corporation ("Northwestern"), and NWPS Capital Financing II, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated as of June 19, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on June 19, 1995; (b) The Declaration of Trust of the Trust, dated as of June 19, 1995, between Northwestern and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus"), and a preliminary prospectus supplement (the "Prospectus Supplement") relating to the __% Trust Preferred Capital Securities of the Trust NWPS Capital Financing II c/o Northwestern Public Service Company July 27, 1995 Page 2 representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by Northwestern, the Trust and others as set forth therein with the Securities and Exchange Commission on July 27, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into among Northwestern, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated July 27, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in NWPS Capital Financing II c/o Northwestern Public Service Company July 27, 1995 Page 3 paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General NWPS Capital Financing II c/o Northwestern Public Service Company July 27, 1995 Page 4 Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Declaration. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to Schiff Hardin & Waite's relying as to matters of Delaware law upon this opinion in connection with an opinion to be rendered by it in connection with the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger PMA/BJK/lds EX-5.BIII 14 EXHIBIT 5(B)(III) Exhibit 5(b)(iii) WP5.1 #596 NWPSIII5.15 PMAltman 07/14/95 11:32am [Letterhead of Richards, Layton & Finger] July 27, 1995 NWPS Capital Financing III c/o Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 Re: NWPS CAPITAL FINANCING III Ladies and Gentlemen: We have acted as special Delaware counsel for Northwestern Public Service Company, a Delaware corporation ("Northwestern"), and NWPS Capital Financing III, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated as of June 19, 1995 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on June 19, 1995; (b) The Declaration of Trust of the Trust, dated as of June 19, 1995, between Northwestern and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus"), and a preliminary prospectus supplement (the "Prospectus Supplement") relating to the __% Trust Preferred Capital Securities of the Trust NWPS Capital Financing III c/o Northwestern Public Service Company July 27, 1995 Page 2 representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by Northwestern, the Trust and others as set forth therein with the Securities and Exchange Commission on July 27, 1995; (d) A form of Amended and Restated Declaration of Trust of the Trust, to be entered into among Northwestern, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (including Exhibit A thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated July 27, 1995, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declaration. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in NWPS Capital Financing III c/o Northwestern Public Service Company July 27, 1995 Page 3 paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General NWPS Capital Financing III c/o Northwestern Public Service Company July 27, 1995 Page 4 Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Declaration. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to Schiff Hardin & Waite's relying as to matters of Delaware law upon this opinion in connection with an opinion to be rendered by it in connection with the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger PMA/BJK/lds EX-8 15 EXHIBIT 8 7/13/95 EXHIBIT 8 July 27, 1995 Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 and NWPS Capital Financing I c/o Northwestern Public Service Company 33 Third Street S.E. Huron, South Dakota 57350-1318 Re: Registration Statement on Form S-3; Registration No. 33-60423 Ladies and Gentlemen: We have acted as special tax counsel for Northwestern Public Service Company, a Delaware corporation ("Company"), and NWPS Capital Financing I, a Delaware statutory business trust sponsored by the Company (the "Trust"), in connection with the preparation and filing with the Securities and Exchange Commission of the above-captioned registration statement on Form S-3 (the "Registration Statement"), for the purpose of registering, among other things, preferred securities (the "Preferred Securities") of the Trust, junior subordinated deferrable interest debentures of the Company (the "Debentures") and the Company's guarantee of the Preferred Securities. In connection therewith, we have participated in the preparation of, and have reviewed, the Registration Statement, including the prospectus therein (the "Prospectus") and the form of prospectus supplement for the Preferred Securities (the "Prospectus Supplement") included therewith. We have examined and relied upon the Registration Statement and, in each case as filed with the Registration Statement, (i) the form of subordinated debt securities indenture (the "Indenture") between the Company and The Chase Manhattan Bank (N.A.), as trustee, (ii) the form of supplemental indenture to be used in connection with the issuance of the Debentures (the "Supplemental Indenture") which are to be purchased with the proceeds from the sale of the Preferred Securities, which Supplemental Indenture includes the form of the Debentures, (iii) the form of declaration of trust for the Trust (the "Declaration") which includes the form of the Preferred Securities to be issued under the Declaration, (iv) the form of the Company's guarantee with respect to the Preferred Securities, and (v) certain other relevant documents used in connection with the issuance of the Debentures and the Preferred Securities (collectively, the "Operative Documents"). Northwestern Public Service Company July 27, 1995 Page 2 Based on the foregoing and assuming that the Operative Documents are executed and delivered in substantially the form we have examined and that the transactions contemplated to occur under the Operative Documents in fact occur in accordance with the terms thereof, we hereby confirm that, in all material respects, the discussion in the Prospectus Supplement under the heading "United States Federal Income Taxation" is a fair and accurate summary of the matters addressed therein, based upon current law and the assumptions stated or referred to therein. There can be no assurance that contrary positions may not be taken by the Internal Revenue Service. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "United States Federal Income Taxation" in the Prospectus Supplement. Very truly yours, SCHIFF HARDIN & WAITE By: /s/ James M. Van Vliet, Jr. ----------------------------------- James M. Van Vliet, Jr. EX-12 16 EXHIBIT 12 NORTHWESTERN PUBLIC SERVICE COMPANY STATEMENT OF COMPUTATION RATIO OF EARNINGS TO FIXED CHARGES
1994 --------------------------- 1990 1991 1992 1993 Actual Pro Forma ----------- ----------- ----------- ----------- ----------- ----------- EARNINGS AVAILABLE FOR FIXED CHARGES Net Income per Statement of Income $17,506,083 $14,814,596 $13,721,406 $15,191,073 $15,440,208 $17,463,208 Add: Income taxes 6,842,233 7,515,841 5,837,513 7,568,119 7,869,343 7,182,343 Interest on long-term debt 6,562,261 7,008,597 7,812,724 8,404,321 8,823,085 13,280,585 Amortization of debt expense and other interest 289,109 419,498 450,431 590,408 885,742 918,242 One-third of all rentals (estimated to be representative of the interest component) 47,639 36,441 34,489 31,705 39,759 39,759 ----------- ----------- ----------- ----------- ----------- ----------- Earnings available for fixed charges 31,247,325 29,794,973 27,856,563 31,785,626 33,058,137 38,884,137 ----------- ----------- ----------- ----------- ----------- ----------- FIXED CHARGES Interest on long-term debt 6,562,261 7,008,597 7,812,724 8,404,321 8,823,085 13,280,585 Amortization of debt expense and other interest 165,347 246,063 302,294 590,408 885,742 918,242 One-third of all rentals (estimated to be representative of the interest component) 47,639 36,441 34,489 31,705 39,759 39,759 ----------- ----------- ----------- ----------- ----------- ----------- Total fixed charges 6,775,247 7,291,101 8,149,507 9,026,434 9,748,586 14,238,586 ----------- ----------- ----------- ----------- ----------- ----------- Preferred dividends 384,518 370,081 143,267 121,463 119,868 2,162,868 Effective tax rate 28% 34% 30% 33% 34% 29% ----------- ----------- ----------- ----------- ----------- ----------- Pre-tax equivalent preferred dividend requirement 534,053 560,729 204,667 181,288 181,648 3,046,321 ----------- ----------- ----------- ----------- ----------- ----------- Total fixed charges, including preferred dividends 7,309,300 7,851,830 8,354,174 9,207,722 9,930,234 17,284,907 ----------- ----------- ----------- ----------- ----------- ----------- Ratio of earnings to fixed charges 4.61 4.09 3.42 3.52 3.39 2.73 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Ratio of earnings to fixed charges, including preferred dividends 4.28 3.79 3.33 3.45 3.33 2.25 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Three Months Ended March 31, 1995 --------------------------- Actual Pro Forma ----------- ----------- EARNINGS AVAILABLE FOR FIXED CHARGES Net Income per Statement of Income $7,102,634 $13,839,634 Add: Income taxes 3,754,254 3,248,254 Interest on long-term debt 2,211,119 3,325,994 Amortization of debt expense and other interest 433,929 442,054 One-third of all rentals (estimated to be representative of the interest component) 9,036 9,036 ----------- ----------- Earnings available for fixed charges 13,510,972 20,864,972 ----------- ----------- FIXED CHARGES Interest on long-term debt 2,211,119 3,325,994 Amortization of debt expense and other interest 433,929 442,054 One-third of all rentals (estimated to be representative of the interest component) 9,036 9,036 ----------- ----------- Total fixed charges 2,654,084 3,777,084 ----------- ----------- Preferred dividends 29,775 540,775 Effective tax rate 35% 19% ----------- ----------- Pre-tax equivalent preferred dividend requirement 45,808 667,623 ----------- ----------- Total fixed charges, including preferred dividends 2,699,892 4,444,707 ----------- ----------- Ratio of earnings to fixed charges 5.09 5.52 ----------- ----------- ----------- ----------- Ratio of earnings to fixed charges, including preferred dividends 5.00 4.69 ----------- ----------- ----------- -----------
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