-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PVGyQmLe3sISfr6Eo/9dnPQpSwdxhzzlf+DX4AW8oqAWvmafDDJKZQEObPOTIo4Z mvSiKUm0RvG/QHt06KN8aw== 0000091882-98-000001.txt : 19980319 0000091882-98-000001.hdr.sgml : 19980319 ACCESSION NUMBER: 0000091882-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980318 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 586353075 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-03375 FILM NUMBER: 98568295 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8037483000 MAIL ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-3375 SOUTH CAROLINA ELECTRIC & GAS COMPANY (Exact name of registrant as specified in its charter) SOUTH CAROLINA 57-0248695 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 1426 MAIN STREET, COLUMBIA, SOUTH CAROLINA 29201 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (803) 748-3000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered 5% Cumulative Preferred Stock par value $50 per share New York Stock Exchange 7.55% Trust Preferred Securities, Series A liquidation value $25 per Trust Preferred Security New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Title of Class None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . 1 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing. (See definition of affiliate in Rule 405.) Note. If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this form. The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of February 27, 1997 was zero. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of February 27, 1998 there were issued and outstanding 40,296,147 shares of the registrant's common stock, $4.50 par value, all of which were held, beneficially and of record, by SCANA Corporation. DOCUMENTS INCORPORATED BY REFERENCE. List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security-holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security-holders for fiscal year ended December 24, 1980). NONE 2 TABLE OF CONTENTS Page DEFINITIONS ....................................................... 4 PART I Item 1. Business ............................................ 5 Item 2. Properties .......................................... 20 Item 3. Legal Proceedings ................................... 22 Item 4. Submission of Matters to a Vote of Security Holders ................................... 22 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................... 22 Item 6. Selected Financial Data ............................. 23 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk......................................... 33 Item 8. Financial Statements and Supplementary Data ......... 33 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................ 60 PART III Item 10. Directors and Executive Officers of the Registrant ......................................... 60 Item 11. Executive Compensation .............................. 64 Item 12. Security Ownership of Certain Beneficial Owners and Management .............................. 71 Item 13. Certain Relationships and Related Transactions ...... 71 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................ 71 SIGNATURES ........................................................ 72 3 DEFINITIONS The following abbreviations used in the text have the meaning set forth below unless the context requires otherwise: ABBREVIATION TERM AFC......................... Allowance for Funds Used During Construction BTU......................... British Thermal Unit Circuit Court............... South Carolina Circuit Court Clean Air Act............... Clean Air Act Amendments of 1990 Company..................... South Carolina Electric & Gas Company Consumer Advocate........... Consumer Advocate of South Carolina Dekatherm................... One Million BTUs DHEC........................ South Carolina Department of Health and Environmental Control DOE......................... United States Department of Energy EPA......................... United States Environmental Protection Agency FERC........................ United States Federal Energy Regulatory Commission Fuel Company................ South Carolina Fuel Company, Inc., an affiliate GENCO....................... South Carolina Generating Company, Inc., an affiliate KVA......................... Kilovolt-ampere KW.......................... Kilowatt KWH......................... Kilowatt-hour LLC......................... Limited Liability Company LNG......................... Liquefied Natural Gas MCF......................... Thousand Cubic Feet MW.......................... Megawatt NEPA........................ National Energy Policy Act of 1992 NRC......................... United States Nuclear Regulatory Commission Pipeline Corporation........ South Carolina Pipeline Corporation, an affiliate PRP......................... Potentially Responsible Party PSA......................... The South Carolina Public Service Authority PSC......................... The Public Service Commission of South Carolina PUHCA....................... Public Utility Holding Company Act of 1935, as amended SCANA....................... SCANA Corporation and its subsidiaries Southern Natural............ Southern Natural Gas Company Summer Station.............. V. C. Summer Nuclear Station Supreme Court............... South Carolina Supreme Court Transco..................... Transcontinental Gas Pipeline Corporation USEC........................ United States Enrichment Corporation Westinghouse................ Westinghouse Electric Corporation Williams Station............ A. M. Williams Coal-Fired, Electric Generating Station Owned by GENCO 4 PART I ITEM 1. BUSINESS THE COMPANY ORGANIZATION The Company, a wholly owned subsidiary of SCANA, is a South Carolina corporation organized in 1924 and has its principal executive office at 1426 Main Street, Columbia, South Carolina 29201, telephone number (803) 748-3000. The Company had 3,774 full-time, permanent employees as of December 31, 1997 as compared to 3,637 full-time, permanent employees as of December 31, 1996. SCANA, a South Carolina corporation, was organized in 1984 and is a public utility holding company within the meaning of PUHCA but is presently exempt from registration under such Act. SCANA holds all of the issued and outstanding common stock of the Company. (See Note 1A of Notes to Consolidated Financial Statements.) INDUSTRY SEGMENTS The Company is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity and in the purchase and sale, primarily at retail, of natural gas in South Carolina. The Company also renders urban bus service in the metropolitan area of Columbia, South Carolina. The Company's business is subject to seasonal fluctuations. Generally, sales of electricity are higher during the summer and winter months because of air-conditioning and heating requirements, and sales of natural gas are greater in the winter months due to its use for heating requirements. The Company's electric service area extends into 24 counties covering more than 15,000 square miles in the central, southern and southwestern portions of South Carolina. The service area for natural gas encompasses all or part of 30 of the 46 counties in South Carolina and covers more than 21,000 square miles. The total population of the counties representing the Company's combined service area is approximately 2.4 million. The predominant industries in the territories served by the Company include: synthetic fibers; chemicals and allied products; fiberglass and fiberglass products; paper and wood products; metal fabrication; stone, clay and sand mining and processing; and various textile-related products. Information with respect to industry segments for the years ended December 31, 1997, 1996 and 1995 is contained in Note 11 of Notes to Consolidated Financial Statements and all such information is incorporated herein by reference. COMPETITION The electric utility industry has begun a major transition that could lead to expanded market competition and less regulation. Deregulation of electric wholesale and retail markets is creating opportunities to compete for new and existing customers and markets. As a result, profit margins and asset values of some utilities could be adversely affected. Legislative initiatives at the Federal and state levels are being considered and, if enacted, could mandate market deregulation. The pace of deregulation, future prices of electricity, and the regulatory actions which may be taken by the PSC and the FERC in response to the changing environment cannot be predicted. However, the FERC, in issuing Order 888 in April 1996, has accelerated competition among electric utilities by providing for open access to wholesale transmission service. Order 888 requires utilities under FERC jurisdiction that own, control or operate transmission lines to file nondiscriminatory open access tariffs that offer 5 to others the same transmission service they provide themselves. The FERC has also permitted utilities to seek recovery of wholesale stranded costs from departing customers by direct assignment. Approximately two percent of the Company's electric revenue is under FERC jurisdiction for the purpose of setting rates for wholesale service. Legislation is pending in South Carolina that would deregulate the state's retail electric market and enable customers to choose their supplier of electricity. The Company is not able to predict whether the legislation will be enacted and, if it is, the conditions it will impose on utilities that currently operate in the state and future market participants. The Company is aggressively pursuing actions to position itself strategically for the transformed environment. To enhance its flexibility and responsiveness to change, the Company operates Strategic Business Units. Maintaining a competitive cost structure is of paramount importance in the utility's strategic plan. SCE&G has undertaken a variety of initiatives, including reductions in operation and maintenance costs, the accelerated recovery of SCE&G's electric regulatory assets and the shift, for retail ratemaking purposes only, of depreciation reserves from transmission and distribution assets to nuclear production assets. SCE&G has also established open access transmission tariffs and is selling bulk power to wholesale customers at market-based rates. Significant new customer and management information systems will be implemented in 1998. Marketing of services to commercial and industrial customers has been increased significantly. SCE&G has obtained long-term power supply contracts with a significant portion of its industrial customers. The Company believes that these actions as well as numerous others that have been and will be taken demonstrate its ability and commitment to succeed in the new operating environment to come. Regulated public utilities are allowed to record as assets some costs that would be expensed by other enterprises. If deregulation or other changes in the regulatory environment occur, the Company may no longer be eligible to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Although the potential effects of deregulation cannot be determined at present, discontinuation of the accounting treatment could have a material adverse effect on the Company's results of operations in the period the write-off is recorded. It is expected that cash flows and the financial position of the Company would not be materially affected by the discontinuation of the accounting treatment. The Company reported approximately $236 million and $62 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $118 million and $52 million, respectively, on its balance sheet at December 31, 1997. The Company's generation assets are exposed to considerable financial risks in a deregulated electric market. If market prices for electric generation do not produce adequate revenue streams and the enabling legislation or regulatory actions do not provide for recovery of the resulting stranded costs, the Company could be required to write down its investment in these assets. The Company cannot predict whether any write-downs will be necessary and, if they are, the extent to which they would adversely affect the Company's results of operations in the period in which they are recorded. As of December 31, 1997, the Company's net investment in fossil/hydroelectric generation and nuclear generation assets was approximately $977.1 million and $659.1 million, respectively. CAPITAL REQUIREMENTS AND FINANCING PROGRAM Capital Requirements The cash requirements of the Company arise primarily from its operational needs and its construction program. The ability of the Company to replace existing plant investments, as well as to expand to meet future demand for electricity and gas, will depend upon its ability to attract the necessary financial capital on reasonable terms. The Company recovers the costs of providing services through rates charged to customers. Rates for regulated services are generally based on historical costs. As customer growth and inflation occur and the Company continues its ongoing construction program it is necessary to seek increases in rates. As a result the Company's future financial position and results of operations will be affected by its ability to obtain adequate and timely rate and other regulatory relief. 6 On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates of 7.34%, which were designed to produce additional revenues, based on a test year, of approximately $67.5 million annually. The increase has been implemented in two phases. The first phase, an increase in revenues of approximately $59.5 million annually or 6.47%, commenced in January 1996. The second phase, an increase in revenues of approximately $8.0 million annually, based on a test year, or .87%, was implemented in January 1997. The PSC authorized a return on common equity of 12.0%. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate appealed certain issues in the order to the South Carolina Circuit Court, which affirmed the PSC's decisions, and subsequently to the South Carolina Supreme Court which is expected to hear the case and issue a ruling prior to the end of 1998. While the outcome of this proceeding is uncertain, the Company does not believe that any significant adverse changes in the rate order is likely. The PSC's order does not apply to wholesale electric revenues under the FERC's jurisdiction, which constitute approximately two percent of the Company's electric revenues. The FERC rejected the transfer of depreciation reserves for rates subject to its jurisdiction. During 1998 the Company is expected to meet its capital requirements principally through internally generated funds (approximately 92%, after payment of dividends), and the issuance and sale of debt securities and additional equity contributions from SCANA. Short-term liquidity is expected to be provided primarily by issuance of commercial paper. The timing and amount of such sales and the type of securities to be sold will depend upon market conditions and other factors. The Company's revised estimates of its cash requirements for construction and nuclear fuel expenditures, which are subject to continuing review and adjustment, for 1998 and the two-year period 1999-2000 are as follows: Type of Facilities 1999-2000 1998 (Millions of Dollars) Electric Plant: Generation. . . . . . . . . . . . . . . . $ 93 $ 56 Transmission. . . . . . . . . . . . . . . 31 16 Distribution. . . . . . . . . . . . . . . 126 46 Other . . . . . . . . . . . . . . . . . . 22 13 Nuclear Fuel. . . . . . . . . . . . . . . . 33 23 Gas . . . . . . . . . . . . . . . . . . . . 35 13 Common. . . . . . . . . . . . . . . . . . . 27 29 Other . . . . . . . . . . . . . . . . . . . - 1 Total . . . . . . . . . . . . . . $367 $197 The above estimates exclude AFC. During 1997 the Company expended approximately $23.1 million as part of a program to extend the operating lives of certain non- nuclear generating facilities. Additional improvements to be made under the program during 1998, included in the table above, are estimated to cost approximately $57.4 million. 7 In addition to the Company's capital requirements for 1998 described above, approximately $47.7 million will be required for refunding and retiring outstanding securities and obligations. For the years 1999-2002, the Company has an aggregate of $301.8 million of long-term debt maturing (including approximately $69.2 million for sinking fund requirements, of which $68.7 million may be satisfied by deposit and cancellation of bonds issued upon the basis of property additions or bond retirement credits) and $2.2 million of purchase or sinking fund requirements for preferred stock. SCANA and Westvaco Corporation have formed a limited liability company, Cogen South LLC, to build and operate a $170 million cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility will provide industrial process steam for the Westvaco paper mill and shaft horsepower to enable the Company to generate up to 99 megawatts of electricity. Construction financing is being provided to Cogen South LLC by banks. In addition to the cogeneration LLC, Westvaco has entered into a 20-year contract with the Company for all its electricity requirements at the North Charleston mill at the Company's standard industrial rate. Construction of the plant began in September 1996 and it is expected to be operational in the fall of 1998. Financing Program On April 24, 1997 the Company sold $100 million of 6.52% cumulative preferred stock, par value $100 per share. Proceeds from the sale were used to reduce short-term indebtedness incurred for the Company's construction program, to refinance senior securities and for general corporate purposes. On October 28, 1997 SCE&G Trust I (the "Trust"), a Delaware statutory business trust and a subsidiary of the Company, issued $50 million of 7.55% Trust Preferred Securities, Series A. The Trust used the proceeds from the sale to purchase unsecured 7.55% junior subordinated debentures of the Company. The Company will use the funds to redeem certain series of its preferred stock. The financial statements of the Trust will be consolidated with those of the Company. The Company's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage), contains provisions prohibiting the issuance of additional bonds thereunder (Class A Bonds) unless net earnings (as therein defined) for twelve consecutive months out of the fifteen months prior to the month of issuance are at least twice the annual interest requirements on all Class A Bonds to be outstanding (Bond Ratio). For the year ended December 31, 1997 the Bond Ratio was 4.32. The issuance of additional Class A Bonds also is restricted to an additional principal amount equal to (i) 60% of unfunded net property additions (which unfunded net property additions totaled approximately $579 million at December 31, 1997), (ii) retirements of Class A Bonds (which retirement credits totaled $67.5 million at December 31, 1997), and (iii) cash on deposit with the Trustee. The Company has a bond indenture dated April 1, 1993 (New Mortgage) covering substantially all of its electric properties under which its future mortgage-backed debt (New Bonds) will be issued. New Bonds are issued under the New Mortgage on the basis of a like principal amount of Class A Bonds issued under the Old Mortgage which have been deposited with the Trustee of the New Mortgage (of which $185 million were available for such purpose at December 31, 1997), until such time as all presently outstanding Class A Bonds are retired. Thereafter, New Bonds will be issuable on the basis of property additions in a principal amount equal to 70% of the original cost of electric and common plant properties (compared to 60% of value for Class A Bonds under the Old Mortgage), cash deposited with the Trustee, and retirement of New Bonds. New Bonds will be issuable under the New Mortgage only if adjusted net earnings (as therein defined) for twelve consecutive months out of the eighteen months immediately preceding the month of issuance are at least twice the annual interest requirements on all outstanding bonds (including Class A Bonds) and New Bonds to be outstanding (New Bond Ratio). For the year ended December 31, 1997 the New Bond Ratio was 5.87. 8 Without the consent of at least a majority of the total voting power of the Company's preferred stock, the Company may not issue or assume any unsecured indebtedness if, after such issue or assumption, the total principal amount of all such unsecured indebtedness would exceed 10% of the aggregate principal amount of all of the Company's secured indebtedness and capital and surplus; however, no such consent shall be required to enter into agreements for payment of principal, interest and premium for securities issued for pollution control purposes. Pursuant to Section 204 of the Federal Power Act, the Company must obtain the FERC authority to issue short-term debt. The FERC has authorized the Company to issue up to $250 million of unsecured promissory notes or commercial paper with maturity dates of twelve months or less, but not later than December 31, 1999. Commercial paper outstanding at December 31, 1997 was $13.3 million. The Company had $315 million authorized and unused lines of credit at December 31, 1997 including a credit agreement for a maximum of $250 million to support the issuance of commercial paper. Commercial paper outstanding at December 31, 1997 and December 31, 1996 was $13.3 million and $66.1 million, respectively. See "Fuel Financing Agreements" for a discussion of Fuel Company credit agreements. The Company's Restated Articles of Incorporation prohibit issuance of additional shares of preferred stock without consent of the preferred stockholders unless net earnings (as defined therein) for the twelve consecutive months immediately preceding the month of issuance are at least one and one-half times the aggregate of all interest charges and preferred stock dividend requirements (Preferred Stock Ratio). For the year ended December 31, 1997 the Preferred Stock Ratio was 2.69. The ratios of earnings to fixed charges (SEC Method) were 3.85, 3.80, 3.41, 3.46 and 3.57 for the years ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively. During 1997 the Company received $12.1 million in equity contributions from SCANA. These contributions represented proceeds from the sale of common stock through SCANA's Investor Plus Plan and Stock Purchase Savings Program which in 1996 raised $4.4 million and $24.5 million, respectively, in equity capital. Effective February 1, 1997 SCANA converted the Investor Plus Plan from an original issue plan to a market purchase plan. The SPSP converted from an original issue plan to a market purchase plan on July 1, 1997. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next twelve months and for the foreseeable future. Fuel Financing Agreements The Company has assigned to Fuel Company all of its rights and interests in its various contracts relating to the acquisition and ownership of nuclear and fossil fuels. To finance nuclear and fossil fuels and sulfur dioxide emission allowances, Fuel Company issues, from time to time, commercial paper which is supported, up to $125 million, by an irrevocable revolving credit agreement which expires December 19, 2000. Accordingly, the amounts outstanding have been included in long-term debt. This commercial paper and amounts outstanding under the revolving credit agreement, if any, are guaranteed by the Company. The full amount of the credit agreement was available at December 31, 1997. At December 31, 1997 commercial paper outstanding was approximately $80.3 million at a weighted average interest rate of 5.87%. (See Notes 1M and 4 of Notes to Consolidated Financial Statements.) 9 ELECTRIC OPERATIONS Electric Sales In 1997 residential sales of electricity accounted for 41% of electric sales revenues; commercial sales 31%; industrial sales 20%; sales for resale 2%; and all other 6%. KWH sales by classification for the years ended December 31, 1997 and 1996 are presented below: Sales KWH % Classification 1997 1996 Change (thousands) Residential 5,647,185 5,939,703 (4.92) Commercial 5,321,738 5,222,517 1.90 Industrial 5,434,231 5,320,515 2.14 Sale for resale 485,206 1,023,211 (52.58) Other 505,808 505,793 - Total Territorial 17,394,168 18,011,739 (3.43) Negotiated Market Share Tariff 1,459,097 895,016 63.02 Total 18,853,265 18,906,755 (0.28) Sales for resale includes electricity furnished for resale to three municipalities and two electric cooperatives. One electric cooperative has notified the Company of its intent to terminate in the year 2000 its wholesale power contract with the Company and bid out its electric requirements. Sales under the Negotiated Market Sales Tariff during 1997 includes sales to 28 investor-owned utilities, three electric cooperatives, two municipalities and three federal/state electric agencies. During 1996, sales under the Negotiated Market Sales Tariff includes sales to thirteen investor-owned utilities, one electric cooperative and two state electric agencies. The electric sales volume for residential sales decreased for 1997 as a result of milder weather. The decrease in sales for resale and the increase of sales under the Negotiated Market Sales Tariff was a result of a municipality terminating its wholesale power contract and transferring to a Negotiated Market Rate. During 1997 the Company recorded a net increase of 10,583 electric customers, increasing its total customers to 503,929. The all-time peak demand of 3,734 MW was set on August 13, 1997. Electric Interconnections The Company purchases all of the electric generation of Williams Station, owned by GENCO, under a Unit Power Sales Agreement which has been approved by the FERC. Williams Station has a generating capacity of 560 MW. 10 The Company's transmission system is part of the interconnected grid extending over a large part of the southern and eastern portions of the nation. The Company, Virginia Power Company, Duke Power Company, Carolina Power & Light Company, Yadkin, Incorporated and PSA are members of the Virginia-Carolinas Reliability Group, one of the several geographic divisions within the Southeastern Electric Reliability Council. This Council provides for coordinated planning for reliability among bulk power systems in the Southeast. The Company is also interconnected with Georgia Power Company, Savannah Electric & Power Company, Oglethorpe Power Corporation and Southeastern Power Administration's Clark Hill Project. Fuel Costs The following table sets forth the average cost of nuclear fuel and coal and the weighted average cost of all fuels (including oil and natural gas) used by the Company and GENCO for the years 1995-1997. 1997 1996 1995 Nuclear: Per million BTU $ .47 $ .47 $ .48 Coal: Company: Per ton $38.22 $39.27 $40.01 Per million BTU 1.54 1.55 1.57 GENCO: Per ton $44.49 $41.66 $42.21 Per million BTU 1.61 1.62 1.63 Weighted Average Cost of All Fuels: Per million BTU $ 1.52 $ 1.52 $ 1.26 The fuel costs for 1995 shown above exclude the effects of a PSC-approved offsetting of fuel costs through the application of credits carried on the Company's books as a result of a 1980 settlement of certain litigation. Fuel Supply The following table shows the sources and approximate percentages of total for the Company's KWH generation (including Williams Station) by each category of fuel for the years 1995-1997 and the estimates for 1998 and 1999. Percent of Total KWH Generated Estimated Actual 1999 1998 1997 1996 1995 Coal 73% 69% 63% 71% 65% Nuclear 22 26 31 24 27 Hydro 5 5 6 5 5 Natural Gas & Oil - - - - 3 100% 100% 100% 100% 100% Coal is used at all five of the Company's major fossil fuel- fired plants and GENCO's Williams Station. Unit train deliveries are used at all of these plants and truck deliveries are used at three of these plants. On December 31, 1997 the Company had approximately a 41-day supply of coal in inventory and GENCO had approximately a 30-day supply. 11 The supply of coal is obtained through contracts and purchases on the spot market. Spot market purchases are expected to continue for coal requirements in excess of those provided by the Company's existing contracts. Contracts for the purchase of coal represent 96.1% of estimated requirements for 1998 (approximately 5.8 million tons, including requirements of Williams Station). The supply of contract coal is purchased from nine suppliers located in eastern Kentucky, Tennessee and southwest Virginia. Contract commitments, which expire at various times from 1998-2006, approximate 5.5 million tons annually. Sulfur restrictions on the contract coal range from .75% to 2%. The Company believes that its operations are in substantial compliance with all existing regulations relating to the discharge of sulfur dioxide. The Company is unaware that any more stringent sulfur content requirements for existing plants are contemplated at the State level by DHEC. However, the Company will be required to meet the more stringent Federal emissions standards established by the Clean Air Act (see "Environmental Matters"). The Company has adequate supplies of uranium or enriched uranium product under contract to manufacture nuclear fuel for Summer Station through 2005. The following table summarizes all contract commitments for the stages of nuclear fuel assemblies: Remaining Expiration Commitment Contractor Regions(1) Date Enrichment USEC (2) 13-18 2005 Fabrication Westinghouse 13-21 2009 (1) A region represents approximately one-third to one-half of the nuclear core in the reactor at any one time. Region no. 13 was loaded in 1997 and Region no. 14 will be loaded in 1999. (2) Contract provisions for the delivery of enriched uranium product encompass uranium supply and conversion and enrichment services. The Company has on-site spent nuclear fuel storage capability until at least 2009 and expects to be able to expand its storage capacity to accommodate the spent fuel output for the life of the plant through rod consolidation, dry cask storage or other technology as it becomes available. In addition, there is sufficient on-site storage capacity over the life of Summer Station to permit storage of the entire reactor core in the event that complete unloading should become desirable or necessary for any reason. (See "Nuclear Fuel Disposal" under "Environmental Matters" for information regarding the contract with the DOE for disposal of spent fuel.) Decommissioning Decommissioning of Summer Station is presently scheduled to commence when the operating license expires in the year 2022. Based on a 1991 study, the expenditures (on a before-tax basis) related to the Company's share of decommissioning activities are estimated, in 2022 dollars assuming a 4.5% annual rate of inflation, to be $545.3 million including partial reclamation costs. The Company is providing for its share of estimated decommissioning costs of Summer Station over the life of Summer Station. The Company's method of funding decommissioning costs is referred to as COMReP (Cost of Money Reduction Plan). Under this plan, funds collected through rates ($3.2 million in 1997 and 1996) are used to pay premiums on insurance policies on the lives of certain Company personnel. The Company is the beneficiary of these policies. Through these insurance contracts, the 12 Company is able to take advantage of income tax benefits and accrue earnings on the fund on a tax-deferred basis at a rate higher than can be achieved using more traditional funding approaches. Amounts for decommissioning collected through electric rates, insurance proceeds, and interest on proceeds less expenses are transferred by the Company to an external trust fund in compliance with the financial assurance requirements of the NRC. Management intends for the fund, including earnings thereon, to provide for all eventual decommissioning expenditures on an after-tax basis. The trust's sources of decommissioning funds under the COMReP program include investment components of life insurance policy proceeds, return on investment and the cash transfers from the Company described above. The Company records its liability for decommissioning costs in deferred credits. GAS OPERATIONS Gas Sales In 1997 residential sales accounted for 43% of gas sales revenues; commercial sales 31%; industrial sales 26%. Dekatherm sales by classification for the years ended December 31, 1997 and 1996 are presented below: Sales Dekatherms % Classification 1997 1996 Change Residential 11,919,843 14,108,058 (15.5) Commercial 10,904,445 11,027,830 (1.1) Industrial 15,729,424 13,909,258 13.1 Transportation gas 2,677,448 3,108,058 (13.9) Total 41,231,160 42,153,204 (2.2) The gas sales volume decreased for 1997 as a result of milder weather which was offset by increases in contract prices for industrial interruptible customers. During 1997 the Company recorded a net increase of 4,139 gas customers, increasing its total customers to 252,635. The Company purchases all of its natural gas from Pipeline Corporation. The demand for gas is affected by conservation, the weather, the price relationship between gas and alternate fuels and other factors. The deregulation of natural gas prices at the wellhead and the changes in the prices of natural gas that have occurred under Federal regulation have resulted in the development of a spot market for natural gas in the producing areas of the country. Pipeline Corporation has been successful in purchasing lower cost natural gas in the spot market and arranging for its transportation to South Carolina. 13 Gas Cost and Supply Pipeline Corporation purchases natural gas under contracts with producers and marketers on a short-term basis at current price indices and on a long-term basis for reliability assurance at index prices plus a gas inventory charge. The gas is brought to South Carolina through transportation agreements with both Southern Natural and Transco, which expire at various times from 1998 to 2017. The volume of gas which Pipeline Corporation is entitled to transport under these contracts on a firm basis is shown below: Maximum Daily Supplier Contract Demand Capacity (MCF) Southern Natural Firm Transportation 188,000 Transco Firm Transportation 105,000 Total 293,000 Under a contract with Pipeline Corporation, the Company's maximum daily contract demand is 224,270 dekatherms. The contract allows the Company to receive amounts in excess of this demand based on availability. The average cost per MCF of natural gas purchased from Pipeline Corporation was approximately $3.96 in 1997 compared to $4.30 in 1996. To meet the requirements of the Company and its other high priority natural gas customers during periods of maximum demand, Pipeline Corporation supplements its supplies of natural gas from two LNG plants. The LNG plants are capable of storing the lique- fied equivalent of 1,900,000 MCF of natural gas, of which approximately 1,286,570 MCF were in storage at December 31, 1997. On peak days the LNG plants can regasify up to 150,000 MCF per day. Additionally, Pipeline Corporation had contracted for 6,447,214 MCF of natural gas storage space of which 4,197,154 MCF were in storage on December 31, 1997. The Company believes that supplies under contract and available for spot market purchase are adequate to meet existing customer demands and to accommodate growth. Curtailment Plans The FERC has established allocation priorities applicable to firm and interruptible capacities on interstate pipeline companies which require Southern Natural and Transco to allocate capacity to Pipeline Corporation. The FERC allocation priorities are not applicable to deliveries by the Company to its customers, which are governed by a separate curtailment plan approved by the PSC. REGULATION General The Company is subject to the jurisdiction of the PSC as to retail electric, gas and transit rates, service, accounting, issuance of securities (other than short-term promissory notes) and other matters. The Company is subject to regulation under the Federal Power Act, administered by the FERC and the DOE, in the transmission of electric energy in interstate commerce and in the sale of electric energy at wholesale for resale, as well as with respect to licensed hydroelectric projects and certain other matters, including accounting and the issuance of short-term promissory notes. (See "Capital Requirements and Financing Program"). 14 The Company holds licenses under the Federal Water Power Act or the Federal Power Act with respect to all its hydroelectric projects. The expiration dates of the licenses covering the projects are as follows: Project Capability (KW) License Expiration Date Neal Shoals 5,000 2036 Stevens Creek 9,000 2025 Columbia 10,000 2000 Saluda 206,000 2007 Parr Shoals 14,000 2020 Fairfield Pumped Storage 512,000 2020 The Company filed a notice of intent to file an application for a new license for Columbia on June 29, 1995. The application for the new license will be filed by June 30, 1998. At the termination of a license under the Federal Power Act, the United States government may take over the project covered thereby, or the FERC may extend the license or issue a license to another applicant. If the Federal government takes over a project or the FERC issues a license to another applicant, the original licensee is entitled to be paid its net investment in the project, not to exceed fair value, plus severance damages. In May 1996 the FERC approved the Company's application establishing open access transmission tariffs and requesting authorization to sell bulk power to wholesale customers at market- based rates. Nuclear Regulatory Commission The Company is subject to regulation by the NRC with respect to the ownership and operation of Summer Station. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including matters of health and safety, antitrust considerations and environmental impact. In addition, the Federal Emergency Management Agency is responsible for the review, in conjunction with the NRC, of certain aspects of emergency planning relating to the operation of nuclear plants. Summer Station has received a category one rating from the Institute of Nuclear Power Operations (INPO) in the last five out of six evaluations. The category one rating is the highest given by INPO for a nuclear plant's overall operations. In 1997 Summer Station successfully completed its refueling outage ahead of schedule and under budget. In 1996, the NRC completed the Systematic Assessment of Licensee Performance (SALP) for Summer Station. The station was assessed in four functional areas. The results of the assessment identified superior performance in Plant Operations, Maintenance and Engineering and good performance in Plant Support. Superior is the highest assessment given by the NRC. 15 National Energy Policy Act of 1992 and FERC Orders 636 and 888 The Company's regulated business operations were impacted by the NEPA and FERC Orders No. 636 and 888. NEPA was designed to create a more competitive wholesale power supply market by creating "exempt wholesale generators" and by potentially requiring utilities owning transmission facilities to provide transmission access to wholesalers. See "Competition" for a discussion of FERC Order 888. Order No. 636 was intended to deregulate the markets for interstate sales of natural gas by requiring that pipelines provide transportation services that are equal in quality for all gas suppliers whether the customer purchases gas from the pipeline or another supplier. In the opinion of the Company, it continues to be able to meet successfully the challenges of these altered business climates and does not anticipate there to be any material adverse impact on the results of operations, cash flows, financial position or business prospects. RATE MATTERS The following table presents a summary of significant rate activity for the years 1993-1997 based on test years: REQUESTED GRANTED Date of % % of General Rate Application/ Amount Increase Date of Amount Increase Applications Hearing (Millions) Requested Order (Millions) Granted PSC Electric Retail 07/10/95 $ 76.7 8.4% 1/09/96 $67.5 88% Retail 12/07/92 $ 72.0* 11.4% 6/07/93 $60.5 84% * As modified to reflect lowering of rate of return the Company was seeking. On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates of 7.34%, which was designed to produce additional revenues, based on a test year, of approximately $67.5 million annually. The increase has been implemented in two phases. The first phase, an increase in revenues of approximately $59.5 million annually or 6.47%, commenced in January 1996. The second phase, an increase in revenues of approximately $8.0 million annually, or .87%, was implemented in January 1997. The PSC authorized a return on common equity of 12.0%. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate appealed certain issues in the order to the South Carolina Circuit Court, which affirmed the PSC's decisions, and subsequently to the South Carolina Supreme Court which is expected to hear the case and issue a ruling prior to the end of 1998. While the outcome of this proceeding is uncertain, the Company does not believe that any significant adverse changes in the rate order is likely. The PSC's order does not apply to wholesale electric revenues under the FERC's jurisdiction, which constitute approximately two percent of the Company's electric revenues. The FERC rejected the transfer of depreciation reserves for rates subject to its jurisdiction. 16 In 1994 the PSC issued an order approving the Company's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants. The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for the Company's gas operations that had previously been deferred. In October 1997, as a result of the annual review, the PSC approved the Company's request to increase the billing surcharge from $.006 per therm to $.011 per therm which should enable the Company to recover the remaining balance of $29.6 million by December 2002. In September 1992 the PSC issued an order granting the Company a $.25 increase in transit fares from $.50 to $.75 in both Columbia and Charleston, South Carolina; however, the PSC also required $.40 fares for low-income customers and denied the Company's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. The Company appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an Order dated May 9, 1996. In this Order, the Circuit Court upheld its previous Orders and remanded them back to the PSC. During August 1996, the PSC heard oral arguments on the Orders on remand for the Circuit Court. On September 30, 1996, the PSC issued an order affirming its previous orders and denied the Company's request for reconsideration. The Company has appealed these two PSC orders to the Circuit Court where they are awaiting action. Fuel Cost Recovery Procedures The PSC has established a fuel cost recovery procedure which determines the fuel component in the Company's retail electric base rates annually based on projected fuel costs for the ensuing twelve-month period, adjusted for any overcollection or undercollection from the preceding twelve-month period. The Company has the right to request a formal proceeding at any time should circumstances dictate such a review. In the April 1997 annual review of the fuel cost component of electric rates, the PSC decreased the rate from 13.10 mills per KWH to 12.85 mills per KWH, a monthly decrease of $0.25 for an average customer using 1,000 KWH a month. The Company's gas rate schedules and contracts include mechanisms which allow it to recover from its customers changes in the actual cost of gas. The Company's firm gas rates allow for the recovery of a fixed cost of gas, based on projections, as established by the PSC in annual gas cost and gas purchase practice hearings. Any differences between actual and projected gas costs are deferred and included when projecting gas costs during the next annual gas cost recovery hearing. In the October 1997 review the PSC decreased the base cost of gas from 51.260 cents per therm to 48.182 cents per therm which resulted in a monthly decrease of $3.08 (including applicable taxes) based on an average of 100 therms per month on a residential bill during the heating season. 17 ENVIRONMENTAL MATTERS General Federal and state authorities have imposed environmental regulations and standards requirements relating primarily to air emissions, wastewater discharges and solid, toxic and hazardous waste management. Developments in these areas may require that equipment and facilities be modified, supplemented or replaced. The ultimate effect of these regulations and standards upon existing and proposed operations cannot be forecast. Capital Expenditures In the years 1995 through 1997, capital expenditures for environmental control amounted to approximately $48.5 million. In addition, approximately $17.1 million, $12.2 million and $10.4 million of environmental control expenditures were made during 1997, 1996 and 1995, respectively, which was included in "Other operation" and "Maintenance" expenses. It is not possible to estimate all future costs for environmental purposes but forecasts for capitalized expenditures are $48.0 million for 1997 and $91.2 million for the four-year period 1999 through 2002. These expenditures are included in the Company's construction program. Air Quality Control The Clean Air Act requires electric utilities to reduce emissions of sulfur dioxide and nitrogen oxide by the year 2000. These requirements are being phased in over two periods. The first phase had a compliance date of January 1, 1995 and the second, January 1, 2000. The Company's facilities did not require modifications to meet the requirements of Phase I. The Company will most likely meet the Phase II requirements through the burning of natural gas and/or lower sulfur coal in its generating units and the purchase and use of sulfur dioxide emission allowances. Low nitrogen oxide burners are being installed to reduce nitrogen oxide emissions to the levels required by Phase II. Air toxicity regulations for the electric generating industry are likely to be promulgated around the year 2000. The Company filed with DHEC compliance plans related to Phase II sulfur dioxide requirements in 1995, and Phase II nitrogen oxide requirements in December, 1997. The Company currently estimates that air emissions control equipment will require capital expenditures of $90.3 million over the 1998-2002 period to retrofit existing facilities, with increased operation and maintenance cost of approximately $1 million per year. To meet compliance requirements through the year 2007, the Company anticipates total capital expenditures of approximately $185 million. Water Quality Control The Federal Clean Water Act, as amended, provides for the imposition of effluent limitations that require various levels of treatment for each wastewater discharge. Under this Act, compliance with applicable limitations is achieved under a national permit program. Discharge permits have been issued for all and renewed for nearly all of the Company's and GENCO's generating units. Concurrent with renewal of these permits the permitting agency has implemented a more rigorous program in monitoring and controlling thermal discharges and strategies for toxicity reduction in wastewater streams. The Company has been developing compliance plans to meet these initiatives. Amendments to the Clean Water Act proposed in Congress include several provisions which, if passed, could prove costly to the Company. These include, but are not limited to, limitations to mixing zones and the implementation of technology-based standards. 18 Comprehensive Environmental Recovery, Compensation and Liability Act (Superfund) and Environmental Assessment Program The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated an estimate is made of the amount of expenditures, if any, necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated, accrued and actually expended to date for site assessments and cleanup relate primarily to regulated operations; such amounts are deferred and are being amortized and recovered through rates over a five-year period for electric operations and an eight-year period for gas operations. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $32.4 million and $41.4 million at December 31, 1997 and 1996, respectively. The deferral includes the costs estimated to be associated with the matters discussed below. In September 1992, the EPA notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned manufactured gas plants, properties owned by the National Park Service and the City of Charleston and private properties. The site has not been placed on the National Priorities List, but may be added before cleanup is initiated. The PRPs have agreed with the EPA to participate in an innovative approach to site investigation and cleanup called "Superfund Accelerated Cleanup Model," allowing the pre- cleanup site investigation process to be compressed significantly. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993 and the EPA conditionally approved a Remedial Investigation Report in March 1997. Although the Company is continuing to investigate cost- effective clean-up methodologies, further work is pending EPA approval of the final draft of the Remedial Investigation Report. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by the Company to the City. The Company is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup as discussed above. As part of the environmental settlement, the Company has agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. Construction is expected to begin in 1998. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The Company owns three other decommissioned manufactured gas plant sites which contain residues of by-product chemicals. The Company is investigating the sites to monitor the nature and extent of the residual contamination. 19 Solid Waste Control The South Carolina Solid Waste Policy and Management Act of 1991 directed the DHEC to promulgate regulations for the disposal of industrial solid waste. DHEC has proposed a regulation, which if adopted as a final regulation in its present form, would significantly increase the Company's costs of construction and operation of existing and future ash management facilities. Nuclear Fuel Disposal The Nuclear Waste Policy Act of 1982 requires that the United States government make available by 1998 a permanent repository for high-level radioactive waste and spent nuclear fuel and imposes a fee of 1.0 mil per KWH of net nuclear generation after April 7, 1983. Payments, which began in 1983, are subject to change and will extend through the operating life of Summer Station. The Company entered into a contract with the DOE on June 29, 1983, providing for permanent disposal of its spent nuclear fuel by the DOE. The DOE presently estimates that the permanent storage facility will not be available until 2010. The Company has on-site spent nuclear fuel storage capability until at least 2009 and expects to be able to expand its storage capacity to accommodate the spent nuclear fuel output for the life of the plant through rod consolidation, dry cask storage or other technology as it becomes available. The Act also imposes on utilities the primary responsibility for storage of their spent nuclear fuel until the repository is available. OTHER MATTERS With regard to the Company's insurance coverage for Summer Station, reference is made to Note 10B of Notes to Consolidated Financial Statements which is incorporated herein by reference. ITEM 2. PROPERTIES The Company's bond indentures, securing the First and Refunding Mortgage Bonds and First Mortgage Bonds issued thereunder, constitute direct mortgage liens on substantially all of its property. 20 ELECTRIC The following table gives information with respect to the Company's electric generating facilities. Net Generating Present Year Capability Facility Fuel Capability Location In-Service (KW)(1) Steam Urquhart Coal/Gas Beech Island, SC 1953 250,000 McMeekin Coal/Gas Irmo, SC 1958 252,000 Canadys Coal/Gas Canadys, SC 1962 430,000 Wateree Coal Eastover, SC 1970 700,000 Summer (2) Nuclear Parr, SC 1984 635,000 D-Area (3) Coal DOE Savannah River Site, SC 1995 35,000 Cope (4) Coal Cope, SC 1996 408,000 Gas Turbines Burton Gas/Oil Burton, SC 1961 28,500 Faber Place Gas Charleston, SC 1961 9,500 Hardeeville Oil Hardeeville, SC 1968 14,000 Urquhart Gas/Oil Beech Island, SC 1969 38,000 Coit Gas/Oil Columbia, SC 1969 30,000 Parr Gas/Oil Parr, SC 1970 60,000 Williams (5) Gas/Oil Goose Creek, SC 1972 49,000 Hagood Gas/Oil Charleston, SC 1991 95,000 Hydro Neal Shoals Carlisle, SC 1905 5,000 Parr Shoals Parr, SC 1914 14,000 Stevens Creek Martinez, GA 1914 9,000 Columbia Columbia, SC 1927 10,000 Saluda Irmo, SC 1930 206,000 Pumped Storage Fairfield Parr, SC 1978 512,000 Total (6) 3,790,000 (1) Summer rating. (2) Represents the Company's two-thirds portion of the Summer Station. (3) This plant is operated under lease from the DOE and is dispatched to DOE's Savannah River Site steam needs. "Net Generating Capability" for this plant is expected average hourly output. The lease expires on October 1, 2005. (4) Plant began commercial operation in January 1996. (5) The two gas turbines at Williams were purchased upon expiration of the lease on June 29, 1997. (6) Excludes Williams Station. 21 The Company owns 428 substations having an aggregate transformer capacity of 21,356,393 KVA. The transmission system consists of 3,122 miles of lines and the distribution system consists of 16,129 pole miles of overhead lines and 3,500 trench miles of underground lines. GAS Natural Gas The Company's gas system consists of approximately 11,728 miles of distribution mains and related service facilities. Propane The Company has propane air peak shaving facilities which can supplement the supply of natural gas by gasifying propane to yield the equivalent of 102,000 MCF per day of natural gas. These facilities can store the equivalent of 430,405 MCF of natural gas. TRANSIT The Company owns 61 motor coaches used in the operation of the Columbia transit system. The Columbia system is comprised of fifteen routes covering 177 miles. Effective October 1, 1996, the Company transferred ownership and operation of the Charleston transit system to the City of Charleston. As part of the transfer, the Company conveyed ownership to the City of Charleston facilities, equipment and four motor coaches used in the operation of the transit system. The City and the Company entered into an interim operating agreement, with provisions for renewing, whereby the Company will operate the system for the City until a Regional Transit Authority is established. The Company and the City have agreed upon a rate structure designed to allow the Company to recover its costs of operating the Charleston transit system. The Charleston system is composed of fourteen routes covering 110 miles. ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see ITEM 1., "BUSINESS - RATE MATTERS" and "BUSINESS - ENVIRONMENTAL MATTERS - Comprehensive Environmental Recovery, Compensation and Liabilities Act (Superfund) and Environmental Assessment Program" and Note 10 of Notes to Consolidated Financial Statements appearing in Item 8., "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS All of the Company's common stock is owned by SCANA and therefore there is no market for such stock. During 1997 and 1996 the Company paid $141.4 million and $132.9 million, respectively, in cash dividends to SCANA. SECURITIES RATINGS (As of December 31, 1997) SOUTH CAROLINA ELECTRIC & GAS COMPANY First First and Trust Rating Mortgage Refunding Preferred Preferred Commercial Agency Bonds Mortgage Bonds Stock Securities Paper Duff & Phelps A+ A+ A - D-1 Moody's A1 A1 a2 a2 P-1 Standard & Poor's A A A- A- A-1 Further reference is made to Note 5 of Notes to Consolidated Financial Statements. The Restated Articles of Incorporation of the Company and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that may limit the payment of cash dividends on common stock. In addition, with respect to hydroelectric projects, the Federal Power Act may require the appropriation of a portion of the earnings therefrom. At December 31, 1997 approximately $21.5 million of retained earnings were restricted as to payment of cash dividends on common stock. 22 ITEM 6. SELECTED FINANCIAL DATA For the Years Ended December 31, 1997 1996 1995 1994 1993 Statement of Income Data (Millions of dollars, except statistics) Operating Revenues $1,338 $1,345 $1,211 $1,181 $1,118 Operating Income 282 286 256 230 219 Other Income 9 4 9 7 7 Net Income 195 190 169 152 146 Earnings Available for Common Stock 186 185 163 146 140 Balance Sheet Data Utility Plant, Net $4,457 $3,197 $3,158 $2,998 $2,687 Total Assets 4,054 3,959 3,802 3,587 3,190 Capitalization: Common equity 1,447 1,413 1,315 1,133 1,051 Preferred Stock (Not subject to purchase or sinking funds) 106 26 26 26 26 Preferred Stock, Net (Subject to purchase or sinking funds) 12 43 46 50 53 Company - Obligated mandatorily redeemable preferred securities of the Company's Subsidiary Trust, SCE&G Trust I, holding solely $50 million, principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027 50 - - - - Long-term debt, net 1,262 1,277 1,279 1,231 1,097 Total Capitalization $2,877 $2,759 $2,666 $2,440 $2,227 Other Statistics Electric: Customers (Year-End) 503,929 493,346 484,381 476,438 468,901 Total sales (Million KWH) 17,395 18,012 17,585 16,840 16,889 Residential: Average annual use per customer (KWH) 13,214 14,149 13,859 13,048 14,077 Average annual rate per KWH $.0799 $.0785 $.0747 $.0743 $.0707 Generating capability - Net MW (Year-End) 4,350 4,316 4,282 3,876 3,864 Territorial peak demand - Net MW 3,734 3,698 3,683 3,444 3,557 Gas: Customers (Year-End) 252,635 248,496 243,342 238,433 221,278 Sales, excluding transportation (Thousand Therms) 385,537 390,451 362,384 322,837 267,335 Residential: Average annual use per customer (Therms) 531 639 570 538 606 Average annual rate per therm $.86 $.74 $.82 $.84 $.76
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements included in this discussion and analysis (or elsewhere in this annual report) which are not statements of historical fact are intended to be, and are hereby identified as, "forward looking statements" for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, (3) changes in the economy in areas served by the Company's subsidiaries, (4) the impact of competition from other energy suppliers, (5) the management of the Company's operations (6) growth opportunities for the Company's regulated and diversified subsidiaries, (7) the results of financing efforts, (8) changes in the Company's accounting policies, (9) weather conditions in areas served by the Company's utility subsidiaries, (10) performance of the telecommunications companies in which the Company has made significant investments, (11) inflation, (12) changes in environmental regulations and (13) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements. COMPETITION The electric utility industry has begun a major transition that could lead to expanded market competition and less regulation. Deregulation of electric wholesale and retail markets is creating opportunities to compete for new and existing customers and markets. As a result, profit margins and asset values of some utilities could be adversely affected. Legislative initiatives at the Federal and state levels are being considered and, if enacted, could mandate market deregulation. The pace of deregulation, the future prices of electricity, and the regulatory actions which may be taken by the PSC and the FERC in response to the changing environment cannot be predicted. However, the FERC, in issuing Order 888 in April 1996, has accelerated competition among electric utilities by providing for open access to wholesale transmission service. Order 888 requires utilities under FERC jurisdiction that own, control or operate transmission lines to file nondiscriminatory open access tariffs that offer to others the same transmission service they provide themselves. The FERC has also permitted utilities to seek recovery of wholesale stranded costs from departing customers by direct assignment. Approximately two percent of the Company's electric revenue is under FERC jurisdiction for the purpose of setting rates for wholesale service. Legislation is pending in South Carolina that would deregulate the state's retail electric market and enable customers to choose their supplier of electricity. The Company is not able to predict whether the legislation will be enacted and, if it is, the conditions it will impose on utilities that currently operate in the state and future market participants. The Company is aggressively pursuing actions to position itself strategically for the transformed environment. To enhance its flexibility and responsiveness to change, the Company operates Strategic Business Units. Maintaining a competitive cost structure is of paramount importance in the Company's strategic plan. The Company has undertaken a variety of initiatives, including reductions in operation and maintenance costs and in staffing levels, the accelerated recovery of the Company's electric regulatory assets and the shift, for retail ratemaking purposes only, of depreciation reserves from transmission and distribution assets to nuclear production assets. The Company has also established open access transmission tariffs and is selling bulk power to wholesale customers at market-based rates. Significant new customer and management information systems will be implemented in 1998. Marketing of services to commercial and industrial customers has been increased significantly. The Company has obtained long term power supply contracts with a significant portion of its industrial customers. The Company believes that these actions as well as numerous others that have been and will be taken demonstrate its ability and commitment to succeed in the new operating environment to come. 24 Regulated public utilities are allowed to record as assets some costs that would be expensed by other enterprises. If deregulation or other changes in the regulatory environment occur, the Company may no longer be eligible to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Although the potential effects of deregulation cannot be determined at present, discontinuation of the accounting treatment could have a material adverse effect on the Company's results of operations in the period the write-off is recorded. It is expected that cash flows and the financial position of the Company would not be materially affected by the discontinuation of the accounting treatment. The Company reported approximately $236 million and $62 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $118 million and $52 million, respectively, on its balance sheet at December 31, 1997. The Company's generation assets are exposed to considerable financial risks in a deregulated electric market. If market prices for electric generation do not produce adequate revenue streams and the enabling legislation or regulatory actions do not provide for recovery of the resulting stranded costs, the Company could be required to write down its investment in these assets. The Company cannot predict whether any write-downs will be necessary and, if they are, the extent to which they would adversely affect the Company's results of operations in the period in which they are recorded. As of December 31, 1997, the Company net investment in fossil\hydroelectric generation and nuclear generation assets was $977.1 million and $659.1 million, respectively. LIQUIDITY AND CAPITAL RESOURCES The cash requirements of the Company arise primarily from its operational needs and its construction program. The ability of the Company to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend upon its ability to attract the necessary financial capital on reasonable terms. The Company recovers the costs of providing services through rates charged to customers. Rates for regulated services are generally based on historical costs. As customer growth and inflation occur and the Company continues its ongoing construction program, it is necessary to seek increases in rates. As a result, the Company's future financial position and results of operations will be affected by its ability to obtain adequate and timely rate and other regulatory relief. SCANA and Westvaco Corporation have formed a limited liability company, Cogen South LLC, to build and operate a $170 million cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility will provide industrial process steam for the Westvaco paper mill and shaft horsepower to enable the Company to generate up to 99 megawatts of electricity. Construction financing is being provided to Cogen South LLC by banks. In addition to the cogeneration LLC, Westvaco has entered into a 20-year contract with the Company for all its electricity requirements at the North Charleston mill at the Company's standard industrial rate. Construction of the plant began in September 1996 and it is expected to be operational in the fall of 1998. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with the Company. In consideration for the electric franchise agreement, the Company is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in- service. In settlement of environmental claims the City may have had against the Company involving the Calhoun Park area, where the Company and its predecessor companies operated a manufactured gas plant until the 1960's, the Company is paying the City $26 million over a four-year period (1996 through 1999). As part of the environmental settlement, the Company has agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. 25 The revised estimated primary cash requirements for 1998, excluding requirements for fuel liabilities and short-term borrowings and including notes payable to affiliated companies, and the actual primary cash requirements for 1997 are as follows: 1998 1997 (Millions of Dollars) Property additions and construction expenditures, net of allowance for funds used during construction $175 $201 Nuclear fuel expenditures 23 31 Maturing obligations, redemptions and sinking and purchase fund requirements 48 78 Total $246 $310 Approximately 69% of total cash requirements (after payment of dividends) was provided from internal sources in 1997 as compared to 65% in 1996. The Company's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage), contains provisions prohibiting the issuance of additional bonds thereunder (Class A Bonds) unless net earnings (as therein defined) for twelve consecutive months out of the fifteen months prior to the month of issuance are at least twice the annual interest requirements on all Class A Bonds to be outstanding (Bond Ratio). For the year ended December 31, 1997 the Bond Ratio was 4.32. The issuance of additional Class A Bonds also is restricted to an additional principal amount equal to (i) 60% of unfunded net property additions (which unfunded net property additions totaled approximately $579 million at December 31, 1997), (ii) retirements of Class A Bonds (which retirement credits totaled $67.5 million at December 31, 1997), and (iii) cash on deposit with the Trustee. The Company has a bond indenture dated April 1, 1993 (New Mortgage) covering substantially all of its electric properties under which its future mortgage-backed debt (New Bonds) will be issued. New Bonds are issued under the New Mortgage on the basis of a like principal amount of Class A Bonds issued under the Old Mortgage which have been deposited with the Trustee of the New Mortgage (of which $185 million were available for such purpose as of December 31, 1997), until such time as all presently outstanding Class A Bonds are retired. Thereafter, New Bonds will be issuable on the basis of property additions in a principal amount equal to 70% of the original cost of electric and common plant properties (compared to 60% of value for Class A Bonds under the Old Mortgage), cash deposited with the Trustee, and retirement of New Bonds. New Bonds will be issuable under the New Mortgage only if adjusted net earnings (as therein defined) for twelve consecutive months out of the eighteen months immediately preceding the month of issuance are at least twice the annual interest requirements on all outstanding bonds (including Class A Bonds) and New Bonds to be outstanding (New Bond Ratio). For the year ended December 31, 1997 the New Bond Ratio was 5.87. On April 24, 1997, the Company sold $100 million of 6.52% cumulative preferred stock, par value $100 per share. Proceeds from the sale were used to reduce short-term indebtedness incurred for the Company's construction program, to refinance senior securities and for general corporate purposes. On October 28, 1997 SCE&G Trust I (the "Trust"), a Delaware statutory business trust and a subsidiary of the Company, issued $50 million of 7.55% Trust Preferred Securities, Series A. The Trust used the proceeds from the sale to purchase unsecured 7.55% Junior Subordinated Debentures of the Company. The financial statements of the Trust are consolidated with those of the Company. Without the consent of at least a majority of the total voting power of the Company's preferred stock, the Company may not issue or assume any unsecured indebtedness if, after such issue or assumption, the total principal amount of all such unsecured indebtedness would exceed 10% of the aggregate principal amount of all of the Company's secured indebtedness and capital and surplus; however, no such consent is required to enter into agreements for payment of principal, interest and premium for securities issued for pollution control purposes. Pursuant to Section 204 of the Federal Power Act, the Company must obtain the FERC authority to issue short-term debt. The FERC has authorized the Company to issue up to $250 million of unsecured promissory notes or commercial paper with maturity dates of twelve months or less, but not later than December 31, 1999. 26 At December 31, 1997 the Company had $315 million of authorized lines of credit which includes a credit agreement for a maximum of $250 million to support the issuance of commercial paper. Unused lines of credit at December 31, 1997 totaled $315 million. The Company's commercial paper outstanding at December 31, 1997 and December 31, 1996 was $13.3 million and $90 million, respectively. In addition, Fuel Company has a credit agreement for a maximum of $125 million with the full amount available at December 31, 1997. The credit agreement supports the issuance of short-term commercial paper for the financing of nuclear and fossil fuels and sulfur dioxide emission allowances. Fuel Company commercial paper outstanding at December 31, 1997 was $80.3 million, The Company's Restated Articles of Incorporation prohibit issuance of additional shares of preferred stock without consent of the preferred stockholders unless net earnings (as defined therein) for the twelve consecutive months immediately preceding the month of issuance are at least one and one-half times the aggregate of all interest charges and preferred stock dividend requirements (Preferred Stock Ratio). For the year ended December 31, 1997 the Preferred Stock Ratio was 2.69. The Company anticipates that its 1998 cash requirements of $389.6 million will be met through internally generated funds (approximately 59%, after payment of dividends), the sales of additional equity securities, additional equity contributions from SCANA and the incurrence of additional short-term and long-term indebtedness. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next twelve months and for the foreseeable future. Environmental Matters The Clean Air Act requires electric utilities to reduce substantially emissions of sulfur dioxide and nitrogen oxide by the year 2000. These requirements are being phased in over two periods. The first phase had a compliance date of January 1, 1995 and the second, January 1, 2000. The Company's facilities did not require modifications to meet the requirements of Phase I. The Company will most likely meet the Phase II requirements through the burning of natural gas and/or lower sulfur coal in its generating units and the purchase and use of sulfur dioxide emission allowances. Low nitrogen oxide burners are being installed to reduce nitrogen oxide emissions to the levels required by Phase II. Air toxicity regulations for the electric generating industry are likely to be promulgated around the year 2000. The Company filed with DHEC compliance plans related to Phase II sulfur dioxide requirements in 1995, and Phase II nitrogen oxide requirements in December, 1997. The Company currently estimates that air emissions control equipment will require capital expenditures of $90.3 million over the 1998-2002 period to retrofit existing facilities, with increased operation and maintenance cost of approximately $1 million per year. To meet compliance requirements through the year 2007, the Company anticipates total capital expenditures of approximately $185 million. The Federal Clean Water Act, as amended, provides for the imposition of effluent limitations that require various levels of treatment for each wastewater discharge. Under this Act, compliance with applicable limitations is achieved under a national permit program. Discharge permits have been issued for all and renewed for nearly all of the Company's and GENCO's generating units. Concurrent with renewal of these permits, the permitting agency has implemented a more rigorous program in monitoring and controlling thermal discharges and strategies for toxicity reduction in wastewater streams. The Company has been developing compliance plans for these initiatives. Amendments to the Clean Water Act proposed in Congress include several provisions which, if passed, could prove costly to the Company. These include, but are not limited to, limitations to mixing zones and the implementation of technology-based standards. The South Carolina Solid Waste Policy and Management Act of 1991 directed DHEC to promulgate regulations for the disposal of industrial solid waste. DHEC has promulgated a proposed regulation which, if adopted as a final regulation in its present form, would significantly increase the Company's and GENCO's costs of construction and operation of existing and future ash management facilities. 27 The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated an estimate is made of the amounts of expenditures, if any, necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated, accrued and actually expended to date for site assessments and cleanup relate primarily to regulated operations; such amounts are deferred and are being amortized and recovered through rates over a five-year period for electric operations and an eight-year period for gas operations. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $32.4 million and $41.4 million at December 31, 1997 and 1996, respectively. The deferral includes the estimated costs associated with the matters discussed below. In September 1992, the EPA notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned manufactured gas plants, properties owned by the National Park Service and the City of Charleston and private properties. The site has not been placed on the National Priorities List, but may be added before cleanup is initiated. The PRPs have agreed with the EPA to participate in an innovative approach to site investigation and cleanup called "Superfund Accelerated Cleanup Model," allowing the pre- cleanup site investigation process to be compressed significantly. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993 and the EPA conditionally approved a Remedial Investigation Report in March 1997. Although the Company is continuing to investigate cost- effective clean-up methodologies, further work is pending EPA approval of the final draft of the Remedial Investigation Report. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996 through 1999) by the Company to the City. The Company is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup as discussed above. As part of the environmental settlement, the Company agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. Construction is expected to begin in 1998. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The Company owns three other decommissioned manufactured gas plant sites which contain residues of by-product chemicals. The Company is investigating the sites to monitor the nature and extent of the residual contamination. Regulatory Matters On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates of 7.34%, which was designed to produce additional revenues, based on a test year, of approximately $67.5 million annually. The increase has been implemented in two phases. The first phase, an increase in revenues of approximately $59.5 million annually or 6.47%, commenced in January 1996. The second phase, an increase in revenues of approximately $8.0 million annually, based on a test year, or .87%, was implemented in January 1997. The PSC authorized a return on common equity of 12.0%. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate appealed certain issues in the order to the South Carolina Circuit Court, which affirmed the PSC's decisions, and subsequently to the South Carolina Supreme Court which is expected to hear the case and issue a ruling prior to the end of 1998. While the outcome of this proceeding is uncertain, the Company does not believe that 28 any significant adverse changes in the rate order is likely. The PSC's order does not apply to wholesale electric revenues under the FERC's jurisdiction, which constitute approximately two percent of the Company's electric revenues. The FERC rejected the transfer of depreciation reserves for rates subject to its jurisdiction. The Company's regulated business operations were impacted by the NEPA and FERC Orders No. 636 and 888. NEPA was designed to create a more competitive wholesale power supply market by creating "exempt wholesale generators" and by potentially requiring utilities owning transmission facilities to provide transmission access to wholesalers. See "Competition" for a discussion of FERC Order 888. Order No. 636 was intended to deregulate the markets for interstate sales of natural gas by requiring that pipelines provide transportation services that are equal in quality for all gas suppliers whether the customer purchases gas from the pipeline or another supplier. In the opinion of the Company, it continues to be able to meet successfully the challenges of these altered business climates and does not anticipate there to be any material adverse impact on the results of operations, cash flows, financial position or business prospects. Other The year 2000 issue could have a material impact on the operations of the Company if required modifications and conversions are not made to ensure that all system software is date code compliant. The Company has formed a steering committee to direct the resolution of this major issue. The steering committee, which reports to the senior officers of the Company and to the board of directors, is chaired by the chief financial officer of the Company and is comprised of officers representing all operational areas. Reporting to the committee are the technical personnel responsible for the evaluation and remediation of system software. The Company has evaluated the impact of the year 2000 on its information systems applications and operating software and is implementing a plan of remediation expected to be completed during the first quarter of 1999. The present estimated cost of the plan of remediation is not material to results of operations, financial position or cash flows. The Company also has begun evaluating embedded processors located in field operations areas for the purpose of identifying those that will have to be modified or replaced. The initial inventory has been completed and impact assessment is expected to be completed by mid-1998. At that time the Company will prepare and implement a plan designed to complete all substantive required modifications and replacements in time to prevent problems with operational systems related to date codes. An estimate of the cost of the required changes is not available. In particular, with regard to the evaluation and remediation of the year 2000 issue at the Company's Summer Station, the Company is closely cooperating with other utility companies, including utilities in the southeast, that own nuclear power plants. The utilities are sharing technical nuclear plant operating and monitoring systems information to ensure the prompt and effective resolution of the year 2000 issue. The Company is communicating with all of its significant suppliers to determine the extent to which the Company is vulnerable to those suppliers' failure to remediate their own year 2000 issue. The extent to which significant customers have resolved the year 2000 issue, and the resulting impact on the demand for the Company's products, is not determinable. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted. A failure to convert by another company, or a conversion that is incompatible with the Company's systems, could have material adverse effect on the results of operations, financial position or cash flows of the Company. 29 RESULTS OF OPERATIONS Net Income Net income and the percent increase (decrease) from the previous year for the years 1997, 1996 and 1995 were as follows: 1997 1996 1995 (Millions of Dollars) Net income $194.7 $190.5 $169.2 Percent increase (decrease) in net income 2.19% 12.59% 11.27% 1997 Net income increased for the year primarily as a result of increases in gas sales margins. 1996 Net income increased for the year primarily as a result of increases in electric and gas sales margins which more than offset increases in operating expenses. The Company's financial statements include AFC. AFC is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. An equity portion of AFC is included in nonoperating income and a debt portion of AFC is included in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC represented approximately 4.0% of income before income taxes in 1997, 3.2% in 1996 and 7.9% in 1995. Electric Operations Electric sales margins for 1997, 1996 and 1995 were as follows: 1997 1996 1995 (Millions of Dollars) Electric revenues $1,103.1 $1,106.7 $1,006.6 Less: Fuel used in electric generation 181.0 187.1 177.6 Purchased power 109.2 106.8 98.2 Margin $ 813.0 $ 812.8 $ 730.8 , 1997 The electric sales margin increased slightly due to the favorable impact of the rate increase placed into effect in January 1997 and economic growth factors which were offset by the effect of milder weather. , 1996 The electric sales margin increased primarily over the prior year primarily as a result of the rate increase received by the Company in January 1996 and economic growth factors. Increases (decreases) from the prior year in megawatt-hour (MWH) sales volume by classes were as follows: Classification 1997 1996 Residential (292,518) 212,888 Commercial 100,324 144,536 Industrial 113,717 110,147 Sales for Resale (excluding interchange) (538,005) (39,853) Other 15 (1,013) Total territorial (616,467) 426,705 Negotiated Market Sales Tariff 564,081 699,425 Total (52,386) 1,126,130 30 The electric sales volume for residential sales decreased for 1997 as a result of milder weather. The decrease in sales for resale and the increase in sales under the Negotiated Market Sales Tariff from 1996 to 1997 were the result of a municipality terminating its wholesale power contract and transferring to a negotiated market sales tariff. Gas Operations Gas sales margins for 1997, 1996 and 1995 were as follows: 1997 1996 1995 (Millions of Dollars) Gas operating revenues $233.6 $234.8 $200.6 Less: Gas purchased for resale 151.9 157.1 125.0 Margin $ 81.7 $ 77.7 $ 75.6 , 1997 The gas sales margin increased over the prior year as a result of higher margins and sales tointerruptible customers. , 1996 The gas sales margin increased over the prior year as a result of increased firm sales. Increases (decreases) from the prior year in dekatherm (DT) sales volume by classes, including transportation gas, were as follows: Classification 1997 1996 Residential (2,188,215) 1,774,289 Commercial (123,385) 590,843 Industrial 1,820,166 441,571 Transportation gas (430,610) (495,256) Total (922,044) 2,311,447 The gas sales volume decreased for 1997 as a result of milder weather which was offset by increases in contract prices for industrial interruptible customers. Other Operating Expenses and Taxes Increases (decreases) in other operating expenses, including taxes, were as follows: Classification 1997 1996 (Millions of Dollars) Other operation and maintenance $ 3.0 $22.3 Depreciation and amortization 4.7 17.4 Income taxes (9.7) 10.8 Other taxes 8.1 3.2 Total $ 6.1 $53.7 , 1997 Other operation and maintenance expenses increased somewhat from 1996 levels. A decrease in transit operating costs resulting from the Company's transfer of the ownership of the Charleston transit system to the City of Charleston in October 1996 largely offset increases in costs at electric generating plants and other operating costs. The increase in depreciation and amortization expenses for 1997 reflects the additions to plant-in-service. The change in income tax expense is primarily due to change in pre-tax operating income and difference between estimated income taxes accrued and actual income tax expense per the tax returns as filed. The increase in other taxes results primarily from the accrual of additional property taxes, beginning in January 1997, related to the Cope plant and other property additions which was partially offset by a reduction in the 1997 property tax assessment. Recovery of the Cope plant property taxes is provided for in a retail electric rate increase that became effective January 1997. 31 , 1996 Other operation and maintenance expenses increased primarily as a result of higher production costs attributable to the Cope plant which became operational in January 1996. The increase in depreciation and amortization expenses reflects the addition of the Cope plant and other additions to plant- in-service. The increase in income tax expense corresponds to the increase in operating income. The increase in other taxes reflects higher property taxes resulting from property additions and higher millages and assessments. Interest Expense Increases (decreases) in interest expense, excluding the debt component of AFC, were as follows: Classification 1997 1996 (Millions of Dollars) Interest on long-term debt, net $(0.1) $(1.2) Other interest expense 2.7 (2.0) Total $ 2.6 $(3.2) There was no material change in interest expense from 1996 to 1997. The decrease in interest expense from 1995 to 1996 was due primarily to reductions in outstanding debt throughout most of the year. 32 PAGE 33 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK All financial instruments held by the Company described below are held for purposes other than trading. Interest rate risk - The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. December 31, 1997 Expected Maturity Date (Millions of Dollars) There- Fair Liabilities 1998 1999 2000 2001 2002 after Total Value Long-Term Debt: Fixed Rate ($) 47.7 27.8 201.5 21.3 51.3 1,052.0 1,371.6 1,384.7 Average Interest Rate 6.33 6.00 5.94 6.00 7.10 7.52 7.19
While a decrease in market interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Independent Auditors' Report....................................... 34 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1997 and 1996... 35 Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1997, 1996 and 1995............. 37 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995............................. 38 Consolidated Statements of Capitalization as of December 31, 1997 and 1996................................... 39 Notes to Consolidated Financial Statements..................... 41 Supplemental financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or in the notes thereto. 33 INDEPENDENT AUDITORS' REPORT South Carolina Electric & Gas Company: We have audited the accompanying Consolidated Balance Sheets and Statements of Capitalization of South Carolina Electric & Gas Company (Company) as of December 31, 1997 and 1996 and the related Consolidated Statements of Income and Retained Earnings and of Cash Flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina February 9, 1998 34 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS December 31, 1997 1996 (Millions of Dollars) ASSETS Utility Plant (Notes 1, 3 and 4): Electric $4,020 $3,871 Gas 353 338 Other 84 86 Total 4,457 4,295 Less accumulated depreciation and amortization 1,421 1,332 Total 3,036 2,963 Construction work in progress 221 193 Nuclear fuel, net of accumulated amortization 53 41 Utility Plant, Net 3,310 3,197 Nonutility Property and Investments, net of accumulated depreciation (Note 8) 17 12 Current Assets: Cash and temporary cash investments (Note 8) 6 5 Receivables - customer and other 165 172 Inventories (At average cost): Fuel (Notes 1, 3 and 4) 23 33 Materials and supplies 48 45 Prepayments 10 9 Deferred income taxes 21 20 Total Current Assets 273 284 Deferred Debits: Emission allowances 31 31 Environmental 32 41 Nuclear plant decommissioning fund (Note 1) 49 42 Pension asset, net (Note 1) 82 58 Other (Note 1) 260 294 Total Deferred Debits 454 466 Total $4,054 $3,959 35 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS December 31, 1997 1996 (Millions of Dollars) CAPITALIZATION AND LIABILITIES Stockholders' Investment: Common equity (Note 5) $1,447 $1,413 Preferred stock (Not subject to purchase or sinking funds) 106 26 Total Stockholders' Investment 1,553 1,439 Preferred Stock, Net (Subject to purchase or sinking funds)(Notes 6 and 8) 12 43 Company - Obligated Mandatorily Redeemable Preferred Securities of the Company's Subsidiary Trust, SCE&G Trust I holding solely $50 million, principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027 50 - Long-Term Debt, Net (Notes 3, 4 and 8) 1,262 1,277 Total Capitalization 2,877 2,759 Current Liabilities: Short-term borrowings (Notes 8 and 9) 13 90 Current portion of long-term debt (Note 3) 48 43 Accounts payable 53 67 Accounts payable - affiliated companies (Notes 1 and 3) 32 32 Customer deposits 16 15 Taxes accrued 45 67 Interest accrued 22 21 Dividends declared 58 36 Other 7 7 Total Current Liabilities 294 378 Deferred Credits: Deferred income taxes (Notes 1 and 7) 539 522 Deferred investment tax credits (Notes 1 and 7) 89 75 Reserve for nuclear plant decommissioning (Note 1) 49 42 Postretirement benefits 61 37 Other (Note 1) 145 146 Total Deferred Credits 883 822 Commitments and Contingencies (Note 10) - - Total $4,054 $3,959 See Notes to Consolidated Financial Statements. 36 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Years Ended December 31, 1997 1996 1995 (Millions of Dollars) Operating Revenues (Notes 1 and 2): Electric $1,103 $1,107 $1,006 Gas 234 235 201 Transit 1 3 4 Total Operating Revenues 1,338 1,345 1,211 Operating Expenses: Fuel used in electric generation 181 187 178 Purchased power (including affiliated purchases)(Note 1) 109 107 98 Gas purchased from affiliate for resale (Note 1) 152 157 125 Other operation 222 222 211 Maintenance 67 64 53 Depreciation and amortization (Note 1) 140 135 118 Income taxes (Notes 1 and 7) 98 108 97 Other taxes 87 79 75 Total Operating Expenses 1,056 1,059 955 Operating Income 282 286 256 Other Income (Note 1): Allowance for equity funds used during construction 6 4 9 Other income (loss), net of income taxes 3 - - Total Other Income 9 4 9 Income Before Interest Charges 291 290 265 Interest Charges (Credits): Interest on long-term debt, net 96 97 98 Other interest expense (Notes 1 and 3) 5 7 9 Allowance for borrowed funds used during construction (Note 1) (6) (5) (11) Total Interest Charges, Net 95 99 96 Income Before Preferred Dividend Requirements on Mandatorily Redeemable Preferred Securities 196 191 169 Preferred Dividend Requirement of Company - Obligated Mandatorily Redeemable Preferred Securities. 1 - - Net Income 195 191 169 Preferred Stock Cash Dividends (At stated rates) (9) (6) (6) Earnings Available for Common Stock 186 185 163 Retained Earnings at Beginning of Year 415 366 324 Common Stock Cash Dividends Declared (Note 5) (163) (136) (121) Retained Earnings at End of Year $ 438 $ 415 $ 366 See Notes to Consolidated Financial Statements. 37 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1997 1996 1995 (Millions of Dollars) Cash Flows From Operating Activities: Net income $ 195 $ 190 $ 169 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 140 135 118 Amortization of nuclear fuel 19 19 20 Deferred income taxes, net 16 32 (18) Pension asset (24) (23) (15) Postretirement benefits 24 16 8 Allowance for funds used during construction (12) (9) (21) Over (under) collections, fuel adjustment clause - (8) 19 Changes in certain current assets and liabilities: (Increase) decrease in receivables 6 (10) (16) (Increase) decrease in inventories 8 1 (5) Increase (decrease) in accounts payable (13) - 3 Increase (decrease) in taxes accrued (22) 3 17 Other, net 31 (19) (25) Net Cash Provided From Operating Activities 368 327 254 Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (232) (209) (273) (Increase) decrease in nonutility property and investments (5) - - Net Cash Used For Investing Activities (237) (209) (273) Cash Flows From Financing Activities: Proceeds: Issuance of mortgage bonds and other long-term debt 1 - 103 Issuance of company - obligated mandatorily redeemable trust preferred securities 49 - - Equity contributions from parent 12 49 140 Issuance of preferred stock 99 - - Repayments: Notes payable - affiliated company - - (19) Mortgage bonds and other long-term debt (15) (23) (78) Preferred stock (53) (3) (3) Repayment of Bank Loans (10) (3) - Dividend Payments: Common stock (141) (133) (117) Preferred stock (9) (5) (6) Short-term borrowings, net (77) 10 (20) Fuel and emission allowance financings, net 14 (11) 26 Net Cash Provided From Financing Activities (130) (119) 26 Net Increase (Decrease) in Cash and Temporary Cash Investments 1 (1) 7 Cash and Temporary Cash Investments, January 1 5 6 - Cash and Temporary Cash Investments, December 31 $ 6 $ 5 $ 7 Supplemental Cash Flows Information: Cash paid for - Interest (includes capitalized interest of $6, $5 and $11) $ 100 $ 103 $ 106 - Income taxes (48) 102 96 Noncash Financing Activities: Charleston Franchise Agreement - 21 - Charleston Environmental Agreement - 20 - See Notes to Consolidated Financial Statements. 38 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1997 1996 Common Equity (Note 5): (Millions of Dollars) Common stock, 4.50 par value, authorized 50,000,000 shares; issued and outstanding, 40,296,147 shares $ 181 $ 181 Premium on common stock 395 395 Other paid-in capital 438 427 Capital stock expense (5) (5) Retained earnings 438 415 Total Common Equity 1,447 50% 1,413 51% Cumulative Preferred Stock (Not subject to purchase or sinking funds): $100 Par Value - Authorized 1,200,000 shares $50 Par Value - Authorized 125,209 shares Shares Outstanding Redemption Price Eventual Series 1997 1996 Current Through Minimum $100 Par 6.52% 1,000,000 - 100.00 - 100.00 100 - $100 Par 8.40% - 197,668 101.00 - 101.00 - 20 $50 Par 5.00% 125,209 125,209 52.50 - 52.50 6 6 Total Preferred Stock (Not subject to purchase or sinking funds) 106 4% 26 1% Cumulative Preferred Stock (Subject to purchase or sinking funds)(Notes 6 and 8): $100 Par Value - Authorized 1,550,000 shares Shares Outstanding Redemption Price Eventual Series 1997 1996 Current Through Minimum 7.70% - 84,000 101.00 - 101.00 - 8 8.12% - 118,812 102.03 - 102.03 - 12 Total 202,812 202,812 $50 Par Value - Authorized 1,591,094 shares Shares Outstanding Redemption Price Eventual Series 1997 1996 Current Through Minimum 4.50% 14,400 16,000 51.00 - 51.00 1 1 4.60% - 87 50.50 - 50.50 - - 4.60%(A) 21,894 24,052 51.00 - 51.00 1 1 4.60%(B) 70,000 71,400 50.50 - 50.50 4 4 5.125% 68,000 71,000 51.00 - 51.00 3 3 6.00% 76,800 80,000 50.50 - 50.50 4 4 8.72% - 64,000 51.00 12-31-98 50.00 - 3 9.40% - 176,751 51.175 - 51.175 - 9 Total 251,094 503,290 $25 Par Value - Authorized 2,000,000 shares; None outstanding in 1997 and 1996 Total Preferred Stock (Subject to purchase or sinking funds) 13 45 Less: Current portion, including sinking fund requirements 1 2 Total Preferred Stock, Net (Subject to purchase or sinking funds) 12 - 43 2% Company - Obligated Mandatorily Redeemable Preferred Securities of the Company's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027. 50 2% - - 39 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1997 1996 (Millions of Dollars) Long-Term Debt (Notes 3, 4 and 8): First Mortgage Bonds: Year of Series Maturity 6% 2000 100 100 6 1/4% 2003 100 100 7.70% 2004 100 100 7 1/8% 2013 150 150 7 1/2% 2023 150 150 7 5/8% 2023 100 100 7 5/8% 2025 100 100 First and Refunding Mortgage Bonds: Year of Series Maturity 6% 1997 - 15 6 1/2% 1998 20 20 7 1/4% 2002 30 30 9% 2006 131 131 8 7/8% 2021 114 114 Pollution Control Facilities Revenue Bonds: Fairfield County Series 1984, due 2014 (6.50%) 57 57 Orangeburg County Series 1994 due 2024 (5.70%) 30 30 Other 16 10 Commercial Paper 80 66 Charleston Franchise Agreement due 1997-2002 18 22 Charleston Environmental Agreement due 1997-1999 13 20 Other 4 1 Total Long-Term Debt 1,313 1,323 Less: Current maturities, including sinking fund requirements 48 43 Unamortized discount 3 3 Total Long-Term Debt, Net 1,262 44% 1,277 46% Total Capitalization $2,877 100% $2,759 100% See Notes to Consolidated Financial Statements.
40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. Organization and Principles of Consolidation The Company, a public utility, is a South Carolina corporation organized in 1924 and a wholly owned subsidiary of SCANA Corporation (SCANA), a South Carolina holding company. The Company is engaged predominately in the generation and sale of electricity to wholesale and retail customers in South Carolina and in the purchase, sale and transportation of natural gas to retail customers in South Carolina. The accompanying Consolidated Financial Statements include the accounts of the Company, South Carolina Fuel Company, Inc. (Fuel Company) and SCE&G Trust I. (See Note 1N.) Intercompany balances and transactions between the Company, Fuel Company and SCE&G Trust I have been eliminated in consolidation. Affiliated Transactions The Company has entered into agreements with certain affiliates to purchase gas for resale to its distribution customers and to purchase electric energy. The Company purchases all of its natural gas requirements from Pipeline Corporation and at December 31, 1997 and 1996 the Company had approximately $22.1 million and $22.3 million, respectively, payable to Pipeline Corporation for such gas purchases. The Company purchases all of the electric generation of Williams Station, which is owned by GENCO, under a unit power sales agreement. At December 31, 1997 and 1996 the Company had approximately $9.1 million and $8.6 million, respectively, payable to GENCO for unit power purchases. Such unit power purchases, which are included in "Purchased power," amounted to approximately $99.8 million, $95.3 million and $83.5 million in 1997, 1996 and 1995, respectively. Total interest income, based on market interest rates, associated with the Company's advances to affiliated companies was approximately $20,000, $36,000 and $174,000 in 1997, 1996 and 1995, respectively. In 1997 and 1996 there were no amounts relating to advances from affiliated companies included in "Other interest expense"; however, for 1995 $114,000 was included. Intercompany interest is calculated at market rates. B. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statements of Financial Accounting Standards No. 71 (SFAS 71). The accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result the Company has recorded, as of December 31, 1997, approximately $236 million and $62 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $118 million and $52 million, respectively. The electric and gas regulatory assets of approximately $71 million and $44 million, respectively (excluding deferred income tax assets) are being recovered through rates and, as discussed in Note 2A, the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $45 million of the electric regulatory assets. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and would be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off is recorded, but it is not expected that cash flows or financial position would be materially affected. C. System of Accounts The accounting records of the Company are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) and as adopted by the PSC. 41 D. Utility Plant Utility plant is stated substantially at original cost. The costs of additions, renewals and betterments to utility plant, including direct labor, material and indirect charges for engineering, supervision and an allowance for funds used during construction, are added to utility plant accounts. The original cost of utility property retired or otherwise disposed of is removed from utility plant accounts and generally charged, along with the cost of removal, less salvage, to accumulated depreciation. The costs of repairs, replacements and renewals of items of property determined to be less than a unit of property are charged to maintenance expense. The Company, operator of the V. C. Summer Nuclear Station (Summer Station), and the South Carolina Public Service Authority (PSA) are joint owners of Summer Station in the proportions of two-thirds and one-third, respectively. The parties share the operating costs and energy output of the plant in these proportions. Each party, however, provides its own financing. Plant-in-service related to the Company's portion of Summer Station was approximately $978.2 million and $937.2 million as of December 31, 1997 and 1996, respectively. Accumulated depreciation associated with the Company's share of Summer Station was approximately $323.6 million and $313.2 million as of December 31, 1997 and 1996, respectively. The Company's share of the direct expenses associated with operating Summer Station is included in "Other operation" and "Maintenance" expenses. E. Allowance for Funds Used During Construction AFC, a noncash item, reflects the period cost of capital devoted to plant under construction. This accounting practice results in the inclusion of, as a component of construction cost, the costs of debt and equity capital dedicated to construction investment. AFC is included in rate base investment and depreciated as a component of plant cost in establishing rates for utility services. The Company has calculated AFC using composite rates of 8.8%, 8.1% and 8.6% for 1997, 1996 and 1995, respectively. These rates do not exceed the maximum allowable rate as calculated under FERC Order No. 561. Interest on nuclear fuel in process and sulfur dioxide emission allowances is capitalized at the actual interest amount. F. Revenue Recognition Customers' meters are read and bills are rendered on a monthly cycle basis. Base revenue is recorded during the accounting period in which the meters are read. Fuel costs for electric generation are collected through the fuel cost component in retail electric rates. The fuel cost component contained in electric rates is established by the PSC during annual fuel cost hearings. Any difference between actual fuel costs and that contained in the fuel cost component is deferred and included when determining the fuel cost component during the next annual fuel cost hearing. The Company had undercollected through the electric fuel cost component approximately $1.3 million and at December 31, 1997 and overcollected approximately $ 1.9 million December 31, 1996 which are included in "Deferred Debits - Other" and "Deferred Credits - Other," respectively. 42 Customers subject to the gas cost adjustment clause are billed based on a fixed cost of gas determined by the PSC during annual gas cost recovery hearings. Any difference between actual gas cost and that contained in the rates is deferred and included when establishing gas costs during the next annual gas cost recovery hearing. At December 31, 1997 and 1996 the Company had undercollected through the gas cost recovery procedure approximately $7.6 million and $10.9 million, respectively, which are included in "Deferred Debits - Other." The Company's gas rate schedules for residential, small commercial and small industrial customers include a weather normalization adjustment, which minimizes fluctuations in gas revenues due to abnormal weather conditions. G. Depreciation and Amortization Provisions for depreciation are recorded using the straight- line method for financial reporting purposes and are based on the estimated service lives of the various classes of property. The composite weighted average depreciation rates were 3.09%, 3.13% and 3.02% for 1997, 1996 and 1995, respectively. Nuclear fuel amortization, which is included in "Fuel used in electric generation" and is recovered through the fuel cost component of the Company's rates, is recorded using the units-of- production method. Provisions for amortization of nuclear fuel include amounts necessary to satisfy obligations to the Department Of Energy (DOE) under a contract for disposal of spent nuclear fuel. The acquisition adjustment relating to the purchase of certain gas properties in 1982 is being amortized over a 40-year period using the straight-line method. H. Nuclear Decommissioning Decommissioning of Summer Station is presently scheduled to commence when the operating license expires in the year 2022. Based on a 1991 study, the expenditures (on a before-tax basis) related to the Company's share of decommissioning activities are estimated, in 2022 dollars assuming a 4.5% annual rate of inflation, to be $545.3 million including partial reclamation costs. The Company is providing for its share of estimated decommissioning costs of Summer Station over the life of Summer Station. The Company's method of funding decommissioning cost is referred to as COMReP (Cost of Money Reduction Plan). Under this plan, funds collected through rates ($3.2 million in 1997 and 1996) are used to pay premiums on insurance policies on the lives of certain Company personnel. The Company is the beneficiary of these policies. Through these insurance contracts, the Company is able to take advantage of income tax benefits and accrue earnings on the fund on a tax-deferred basis at a rate higher than can be achieved using more traditional funding approaches. Amounts for decommissioning collected through electric rates, insurance proceeds, and interest on proceeds less expenses are transferred by the Company to an external trust fund in compliance with the financial assurance requirements of the Nuclear Regulatory Commission. Management intends for the fund, including earnings thereon, to provide for all eventual decommissioning expenditures on an after-tax basis. The trust's sources of decommissioning funds under the COMReP program include investment components of life insurance policy proceeds, return on investment and the cash transfers from the Company described above. The Company records its liability for decommissioning costs in deferred credits. 43 Pursuant to the National Energy Policy Act passed by Congress in 1992 and the requirements of the DOE, the Company has recorded a liability for its estimated share of the DOE's decontamination and decommissioning obligation. The liability, approximately $4.0 million at December 31, 1997, has been included in "Long-Term Debt, Net." The Company is recovering the cost associated with this liability through the fuel cost component of its rates; accordingly, this amount has been deferred and is included in "Deferred Debits - Other." I. Income Taxes Deferred tax assets and liabilities are recorded for the tax effects of temporary differences between the book basis and tax basis of assets and liabilities at currently enacted tax rates. Deferred tax assets and liabilities are adjusted for changes in such rates through charges or credits to regulatory assets or liabilities if they are expected to be recovered from, or passed through to, customers; otherwise, they are charged or credited to income tax expense. J. Pension Expense The Company participates in SCANA's noncontributory defined benefit pension plan, which covers all permanent employees. Benefits are based on years of accredited service and the employee's average annual base earnings received during the last three years of employment. SCANA's policy has been to fund the plan to the extent permitted by the applicable Federal income tax regulations as determined by an independent actuary. Net periodic pension cost for the years ended December 31, 1997, 1996 and 1995 included the following components: 1997 1996 1995 (Millions of Dollars) Service cost--benefits earned during the period $ 6.8 $ 6.5 $ 5.2 Interest cost on projected benefit obligation 23.5 22.0 19.5 Adjustments: Return on plan assets (119.5) (78.6) (103.9) Net amortization and deferral 72.8 40.1 74.8 Amounts contributed by the Company's affiliates (0.6) (0.3) (0.2) Net periodic pension (income) expense $(17.0) $(10.3) $ (4.6) The determination of net periodic pension cost is based upon the following assumptions: 1997 1996 1995 Annual discount rate 7.5% 7.5% 8.0% Expected long-term rate of return on plan assets 8.0% 8.0% 8.0% Annual rate of salary increases 3.0% 3.0% 2.5% 44 The following table sets forth the funded status of the plan at December 31, 1997 and 1996: 1997 1996 (Millions of Dollars) Actuarial present value of benefit obligations: Vested benefit obligation $259.7 $243.9 Nonvested benefit obligation 25.4 23.7 Accumulated benefit obligation $285.1 $267.6 Plan assets at fair value (invested primarily in equity and debt securities) $632.9 $523.5 Projected benefit obligation 344.4 306.9 Plan assets greater than projected benefit obligation 288.5 216.6 Unrecognized net transition liability 7.4 8.2 Unrecognized prior service costs 13.4 8.2 Unrecognized net gain (227.1) (175.1) Pension asset recognized in Consolidated Balance Sheets $ 82.2 $ 57.9 The accumulated benefit obligation is based on the plan's benefit formulas without considering expected future salary increases. The following table sets forth the assumptions used in determining the amounts shown above for the years 1997 and 1996. 1997 1996 Annual discount rate used to determine benefit obligations 7.5% 7.5% Assumed annual rate of future salary increases for projected benefit obligation 4.0% 3.0% In addition to pension benefits, the Company provides certain health care and life insurance benefits to active and retired employees. The costs of postretirement benefits other than pensions are accrued during the years the employees render the service necessary to be eligible for the applicable benefits. The Company expensed approximately $8.1 million, $9.8 million and $8.5 million, net of payments to current retirees, for the years ended December 31, 1997, 1996 and 1995, respectively. Additionally, to accelerate the amortization of the remaining transition obligation for postretirement benefits other than pensions, as authorized by the PSC, the Company expensed approximately $15.6 million and $6.2 million for the years ended December 31, 1997 and 1996, respectively. (See Note 2A.) Net periodic postretirement benefit cost for the years ended December 31, 1997, 1996 and 1995, included the following components: 1997 1996 1995 (Millions of Dollars) Service cost--benefits earned during the period $ 2.5 $ 2.6 $ 2.1 Interest cost on accumulated postretirement benefit obligation 7.8 7.8 7.2 Adjustments: Return on plan assets - - - Amortization of unrecognized transition obligation 18.9 9.5 3.3 Other net amortization and deferral 0.8 1.2 0.7 Amounts contributed by the Company's affiliates (1.1) (0.7) (0.6) Net periodic postretirement benefit cost $28.9 $20.4 $12.7 45 The determination of net periodic postretirement benefit cost is based upon the following assumptions: 1997 1996 1995 Annual discount rate 7.5% 7.5% 8.0% Health care cost trend rate 9.0% 9.5% 11.0% Ultimate health care cost trend rate (to be achieved in 2004) 5.5% 5.5% 6.0% The following table sets forth the funded status of the plan at December 31, 1997 and 1996: 1997 1996 (Millions of Dollars) Accumulated postretirement benefit obligations for: Retirees $ 76.7 $ 74.2 Other fully eligible participants 5.9 6.6 Other active participants 26.2 29.3 Accumulated postretirement benefit obligation 108.8 110.1 Plan assets at fair value - - Accumulated postretirement benefit obligation 108.8 110.1 Plan assets less than accumulated postretirement benefit obligation (108.8) (110.1) Unrecognized net transition liability 29.8 48.7 Unrecognized prior service costs 5.8 6.2 Unrecognized net loss 12.2 17.8 Postretirement benefit liability recognized in Consolidated Balance Sheets $ (61.0) $ (37.4) The accumulated postretirement benefit obligation is based upon the plan's benefit provisions and the following assumptions: 1997 1996 Assumed health care cost trend rate used to measure expected costs 9.0% 9.5% Ultimate health care cost trend rate (to be achieved in 2004) 5.5% 5.5% Annual discount rate 7.5% 7.5% Annual rate of salary increases 4.0% 3.0% The effect of a one percentage-point increase in the assumed health care cost trend rate for each future year on the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 1997 and the accumulated postretirement benefit obligation as of December 31, 1997 would be to increase such amounts by $0.2 million and $3.2 million, respectively. K. Debt Premium, Discount and Expense, Unamortized Loss on Reacquired Debt For regulatory purposes, long-term debt premium, discount and expense are being amortized as components of "Interest on long-term debt, net" over the terms of the respective debt issues. Gains or losses on reacquired debt that is refinanced are deferred and amortized over the term of the replacement debt. 46 L. Environmental The Company has an environmental assessment program to identify and assess current and former operating sites that could require environmental cleanup. As site assessments are initiated an estimate is made of the amount of expenditures, if any, necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated, accrued and actually expended to date for site assessments and cleanup relate primarily to regulated operations; such amounts are deferred and are being amortized and recovered through rates over a five-year period for electric operations and an eight-year period for gas operations. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $32.4 million and $41.4 million at December 31, 1997 and 1996, respectively. The deferral includes the estimated costs to be associated with the matters discussed in Note 10C. M. Fuel Inventories Nuclear fuel and fossil fuel inventories and sulfur dioxide emission allowances are purchased and financed by Fuel Company under a contract which requires the Company to reimburse Fuel Company for all costs and expenses relating to the ownership and financing of fuel inventories and sulfur dioxide emission allowances. Accordingly, such fuel inventories and emission allowances and fuel-related assets and liabilities are included in the Company's consolidated financial statements. (See Note 4.) N. Temporary Cash Investments The Company considers temporary cash investments having original maturities of three months or less to be cash equivalents. Temporary cash investments are generally in the form of commercial paper, certificates of deposit and repurchase agreements. O. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 1997 presentation. P. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. 47 2. RATE MATTERS: A. On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates of 7.34%, which was designed to produce additional revenues, based on a test year, of approximately $67.5 million annually. The increase has been implemented in two phases. The first phase, an increase in revenues of approximately $59.5 million annually or 6.47%, commenced in January 1996. The second phase, an increase in revenues of approximately $8.0 million annually, or .87%, was implemented in January 1997. The PSC authorized a return on common equity of 12.0%. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate appealed certain issues in the order to the South Carolina Circuit Court, which affirmed the PSC's decisions, and subsequently to the South Carolina Supreme Court which is expected to hear the case and issue a ruling prior to the end of 1998. While the outcome of this proceeding is uncertain, the Company does not believe that any significant adverse changes in the rate order is likely. The PSC's order does not apply to wholesale electric revenues under the FERC's jurisdiction, which constitute approximately two percent of the Company's electric revenues. The FERC rejected the transfer of depreciation reserves for rates subject to its jurisdiction. B. In 1994 the PSC issued an order approving the Company's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants. The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for the Company's gas operations that had previously been deferred. In October 1997, as a result of the annual review, the PSC approved the Company's request to increase the billing surcharge from $.006 per therm to $.011 per therm which should enable the Company to recover the remaining balance of $29.6 million by December 2002. C. In September 1992 the PSC issued an order granting the Company a $.25 increase in transit fares from $.50 to $.75 in both Columbia and Charleston, South Carolina; however, the PSC also required $.40 fares for low income customers and denied the Company's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. The Company appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an order dated May 9, 1996. In this order, the Circuit Court upheld its previous orders and remanded them to the PSC. During August 1996, the PSC heard oral arguments on the orders on remand from the Circuit Court. On September 30, 1996, the PSC issued an order affirming its previous orders and denied the Company's request for reconsideration. The Company has appealed these two PSC orders to the Circuit Court where they are awaiting action. 48 3. LONG-TERM DEBT: The annual amounts of long-term debt maturities, including amounts due under nuclear and fossil fuel agreements (see Note 4), and sinking fund requirements for the years 1998 through 2002 are summarized as follows: Year Amount Year Amount (Millions of Dollars) 1998 $ 47.7 2001 $ 21.3 1999 27.8 2002 51.3 2000 201.5 Approximately $17.2 million of the portion of long-term debt payable in 1998 may be satisfied by either deposit and cancellation of bonds issued upon the basis of property additions or bond retirement credits, or by deposit of cash with the Trustee. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with the Company. In consideration for the electric franchise agreement, the Company is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in- service. In settlement of environmental claims the City may have had against the Company involving the Calhoun Park area, where the Company and its predecessor companies operated a manufactured gas plant until the 1960's, the Company is paying the City $26 million over a four-year period (1996 through 1999). Such amount is deferred (see Note 1L). The unpaid balances of these amounts are included in "Long-Term Debt." The Company has three-year revolving lines of credit totaling $75 million, in addition to other lines of credit, that provide liquidity for issuance of commercial paper. The three- year lines of credit provide back-up liquidity when commercial paper outstanding is in excess of $175 million. The long-term nature of the lines of credit allow commercial paper in excess of $175 million to be classified as long-term debt. The Company had outstanding commercial paper of $13.3 million and $90 million at December 31, 1997 and 1996, at weighted average interest rates of 5.90% and 5.53%, respectively. Substantially all utility plant and fuel inventories are pledged as collateral in connection with long-term debt. 4. FUEL FINANCINGS: Nuclear and fossil fuel inventories and sulfur dioxide emission allowances are financed through the issuance by Fuel Company of short-term commercial paper. These short-term borrowings are supported by an irrevocable revolving credit agreement which expires December 19, 2000. Accordingly, the amounts outstanding have been included in long-term debt. The credit agreement provides for a maximum amount of $125 million that may be outstanding at any time. Commercial paper outstanding totaled $80.3 million and $66.1 million at December 31, 1997 and 1996 at weighted average interest rates of 5.87% and 5.62%, respectively. 49 5. COMMON EQUITY: The changes in "Stockholders' Investment" (Including Preferred Stock Not Subject to Purchase or Sinking Funds) during 1997, 1996 and 1995 are summarized as follows: Common Preferred Millions Shares Shares of Dollars Balance December 31, 1994 40,296,147 322,877 $1,159.5 Changes in Retained Earnings: Net Income 169.2 Cash Dividends Declared: Preferred Stock (at stated rates) (5.7) Common Stock (121.4) Equity Contributions from Parent 139.5 Balance December 31, 1995 40,296,147 322,877 1,341.1 Changes in Retained Earnings: Net Income 190.5 Cash Dividends Declared: Preferred Stock (at stated rates) (5.4) Common Stock (135.8) Equity Contributions from Parent including transfer of assets 49.1 Balance December 31, 1996 40,296,147 322,877 1,439.5 Changes in Retained Earnings: Net Income 194.6 Cash Dividends Declared: Preferred Stock (at stated rates) (9.3) Common Stock (162.6) Equity Contributions from Parent 12.1 Issuance of Preferred Stock 1,000,000 100.0 Redemption of Preferred Stock (197,668) (19.8) Changes in Capital Stock Expense 0.1 Changes in Loss on Resale of Reacquired Stock (1.6) Balance December 31, 1997 40,296,147 1,125,209 $1,553.0 The Restated Articles of Incorporation of the Company and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that under certain circumstances could limit the payment of cash dividends on common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of the earnings therefrom. At December 31, 1997 approximately $21.5 million of retained earnings were restricted by this requirement as to payment of cash dividends on common stock. 6. PREFERRED STOCK: The call premium of the respective series of preferred stock in no case exceeds the amount of the annual dividend. Retirements under sinking fund requirements are at par values. The aggregate annual amount of purchase fund or sinking fund requirements for preferred stock for the years 1998 through 2002 is $0.6 million. 50 The changes in "Total Preferred Stock (Subject to Purchase or Sinking Funds)" during 1997, 1996 and 1995 are summarized as follows: Number Millions of Shares of Dollars Balance December 31, 1994 822,094 $ 51.9 Shares Redeemed: $100 par value (6,809) (0.7) $50 par value (51,666) (2.5) Balance December 31, 1995 763,619 48.7 Shares Redeemed: $100 par value (7,198) (0.7) $50 par value (50,319) (2.6) Balance December 31, 1996 706,102 45.4 Shares Redeemed: $100 par value (202,812) (20.3) $50 par value (252,196) (12.6) Balance December 31, 1997 251,094 $ 12.5 On October 28, 1997 SCE&G Trust I (the "Trust"), a wholly- owned subsidiary of the Company, issued $50 million (2,000,000 shares) of 7.55% Trust Preferred Securities, Series A (the "Preferred Securities"). The Company owns all of the Common Securities of the Trust (the "Common Securities"). The Preferred Securities and the Common Securities (the "Trust Securities") represent undivided beneficial ownership interests in the assets of the Trust. The Trust exists for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from the Company its 7.55% Junior Subordinated Debentures due September 30, 2027. The sole asset of the Trust is $50 million of Junior Subordinated Debentures of the Company. Accordingly, no financial statements of the Trust are presented. The Company's obligations under the Guarantee Agreement entered into in connection with the Preferred Securities, when taken together with the Company's obligation to make interest and other payments on the Junior Subordinated Debentures issued to the Trust and the Company's obligations under its Indenture pursuant to which the Junior Subordinated Debentures are issued, provides a full and unconditional guarantee by the Company of the Trust's obligations under the Preferred Securities. Proceeds were used to redeem preferred stock of the Company. The preferred securities of the Trust are redeemable only in conjunction with the redemption of the related 7.55% Junior Subordinated Debentures. The Junior Subordinated Debentures will mature on September 30, 2027 and may be redeemed, in whole or in part, at any time on or after September 30, 2002 or upon the occurrence of a Tax Event. A Tax Event occurs if an opinion is received from counsel experienced in such matters that there is more than an insubstantial risk that: (1) the Trust is or will be subject to Federal income tax, with respect to income received or accrued on the Junior Subordinated Debentures, (2) interest payable by the Company on the Junior Subordinated Debentures will not be deductible, in whole or in part, by the Company for Federal income tax purposes, and (3) the Trust will be subject to more than a de minimis amount of other taxes, duties, or other governmental charges. Upon the redemption of the Junior Subordinated Debentures, payment will simultaneously be applied to redeem Preferred Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The Preferred Securities are redeemable at $25 per preferred security plus accrued distributions. 51 7. INCOME TAXES: Total income tax expense for 1997, 1996 and 1995 is as follows: 1997 1996 1995 (Millions of Dollars) Current taxes: Federal $ 88.0 $ 88.2 $ 94.1 State (6.9) 13.1 14.3 Total current taxes 81.1 101.3 108.4 Deferred taxes, net: Federal 3.7 8.3 (7.3) State 1.5 1.8 (0.6) Total deferred taxes 5.2 10.1 (7.9) Investment tax credits: Deferred - State 19.0 - - Amortization of amounts deferred-State (1.5) - - Amortization of amounts deferred-Federal (3.2) (3.2) (3.2) Total Investment Tax credit 14.3 (3.2) (3.2) Total income tax expense $100.6 $108.2 $ 97.3 The difference in total income tax expense and the amount calculated from the application of the statutory Federal income tax rate (35% for 1997, 1996 and 1995) to pre-tax income is reconciled as follows: 1997 1996 1995 (Millions of Dollars) Net income $194.7 $190.5 $169.2 Total income tax expense: Charged to operating expenses 98.1 107.7 97.0 Charged (credited) to other items 2.5 0.5 0.3 Total pre-tax income $295.3 $298.7 $266.5 Income taxes on above at statutory Federal income tax rate $103.4 $104.5 $ 93.3 Increases (decreases) attributable to: State income taxes (less Federal income tax effect) 7.9 9.7 8.9 Deferred income tax reversal at higher than statutory rates (3.5) (3.4) (3.3) Amortization of Federal investment tax credits (3.2) (3.2) (3.2) Allowance for equity funds used during construction (2.1) (1.4) (3.3) Other differences, net (1.9) 2.0 4.9 Total income tax expense $100.6 $108.2 $ 97.3 52 The tax effects of significant temporary differences comprising the Company's net deferred tax liability of $518.5 million at December 31, 1997 and $501.7 million at December 31, 1996 are as follows: 1997 1996 (Millions of Dollars) Deferred tax assets: Unamortized investment tax credits $ 55.4 $ 46.5 Cycle billing 20.5 19.8 Nuclear operations expenses 3.1 4.7 Deferred compensation 6.7 6.6 Other postretirement benefits 14.6 10.8 Other 8.1 6.6 Total deferred tax assets 108.4 95.0 Deferred tax liabilities: Property plant and equipment 561.2 540.9 Pension expense 27.5 21.8 Reacquired debt 7.5 8.3 Research and experimentation 19.5 12.5 Deferred fuel 3.6 3.7 Other 7.6 9.5 Total deferred tax liabilities 626.9 596.7 Net deferred tax liability $518.5 $501.7 The Internal Revenue Service has examined and closed consolidated Federal income tax returns of SCANA Corporation through 1989, and has examined and proposed adjustments to SCANA's Federal returns for 1990 through 1995. The Company does not anticipate that any adjustments which might result from these examinations will have a significant impact on the results of operations, cash flows or financial position of the Company. 8. FINANCIAL INSTRUMENTS: The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1997 and 1996 are as follows: 1997 1996 Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value (Millions of Dollars) Assets: Cash and temporary cash investments $ 6.0 $ 6.0 $ 5.4 $ 5.4 Investments 5.3 5.3 0.6 0.6 Liabilities: Short-term borrowings 13.3 13.3 90.0 90.0 Long-term debt 1,309.5 1,384.7 1,319.5 1,352.9 Preferred stock (subject to purchase or sinking funds) 12.5 11.3 45.4 44.3
53 The information presented herein is based on pertinent information available to the Company as of December 31, 1997 and 1996. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such financial instruments have not been comprehensively revalued since December 31, 1997, and the current estimated fair value may differ significantly from the estimated fair value at that date. The following methods and assumptions were used to estimate the fair value of the above classes of financial instruments: Cash and temporary cash investments, including commercial paper, repurchase agreements, treasury bills and notes, are valued at their carrying amount. Fair values of investments and long-term debt are based on quoted market prices of the instruments or similar instruments, or for those instruments for which there are no quoted market prices available, fair values are based on net present value calculations. Investments which are not considered to be financial instruments have been excluded from the carrying amount and estimated fair value. Settlement of long term debt may not be possible or may not be a prudent management decision. Short-term borrowings are valued at their carrying amount. The fair value of preferred stock (subject to purchase or sinking funds) is estimated on the basis of market prices. Potential taxes and other expenses that would be incurred in an actual sale or settlement have not been taken into consideration. 9. SHORT-TERM BORROWINGS: The Company pays fees to banks as compensation for its committed lines of credit. Commercial paper borrowings are for 270 days or less. Details of lines of credit (including uncommitted lines of credit) and short-term borrowings, excluding amounts classified as long-term (Notes 3 and 4), at December 31, 1997 and 1996 and for the years then ended are as follows: 1997 1996 (Millions of dollars) Authorized lines of credit at year-end $315 $145.0 Unused lines of credit at year-end $315 $145.0 Short-term borrowings outstanding at year-end: Commercial paper $13.3 $ 90.0 Weighted average interest rate 5.90% 5.53% 54 10. COMMITMENTS AND CONTINGENCIES: A. Construction SCANA and Westvaco Corporation have formed a limited liability company, Cogen South LLC, to build and operate a $170 million cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. SCANA and Westvaco each own a 50% interest in LLC. The facility will provide industrial process steam for the Westvaco paper mill and shaft horsepower to enable the Company to generate up to 99 megawatts of electricity. In addition to the cogeneration LLC, Westvaco has entered into a 20-year contract with the Company for all its electricity requirements at the North Charleston mill at the Company's standard industrial rate. Construction of the plant began in September 1996 and it is expected to be operational in the fall of 1998. B. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $8.9 billion. Each reactor licensee is currently liable for up to $79.3 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. The Company's maximum assessment, based on its two-thirds ownership of Summer Station, would be approximately $52.9 million per incident, but not more than $6.7 million per year. The Company currently maintains policies (for itself and on behalf of the PSA) with Nuclear Electric Insurance Limited (NEIL) and American Nuclear Insurers (ANI) providing combined property and decontamination insurance coverage of $2.0 billion for any losses at Summer Station. The Company pays annual premiums and, in addition, could be assessed a retroactive premium not to exceed five times its annual premium in the event of property damage loss to any nuclear generating facilities covered under the NEIL program. Based on the current annual premium, this retroactive premium would not exceed $5.1 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that the Company's rates would not recover the cost of any purchased replacement power, the Company will retain the risk of loss as a self-insurer. The Company has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. C. Environmental In September 1992, the EPA notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned manufactured gas plants, properties owned by the National Park Service and the City of Charleston and private properties. The site has not been placed on the National Priorities List, but may be added before cleanup is initiated. The PRPs have agreed with the EPA to participate in an 55 innovative approach to site investigation and cleanup called "Superfund Accelerated Cleanup Model," allowing the pre-cleanup site investigation process to be compressed significantly. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993 and the EPA conditionally approved a Remedial Investigation Report in March 1997. Although the Company is continuing to investigate cost-effective clean-up methodologies, further work is pending EPA approval of the final draft of the Remedial Investigation Report. See Note 1L. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996 through 1999) by the Company to the City. The Company is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup as discussed above. See Note 1L. As part of the environmental settlement, the Company has agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. Construction is expected to begin in 1998. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The Company owns three other decommissioned manufactured gas plant sites which contain residues of by-product chemicals. The Company is investigating the sites to monitor the nature and extent of the residual contamination. D. Franchise Agreements See Note 3 for a discussion of an electric franchise agreement between the Company and the City of Charleston. E. Claims and Litigation The Company is engaged in various claims and litigation incidental to its business operations which management anticipates will be resolved without material loss to the Company. No estimate of the range of loss from these matters can currently be determined. 56 11. SEGMENT OF BUSINESS INFORMATION: Segment information at December 31, 1997, 1996 and 1995 and for the years then ended is as follows: 1997 Electric Gas Transit Total (Millions of Dollars) Operating revenues $1,103 $234 $ 1 $1,338 Operating expenses, excluding depreciation and amortization 710 201 5 916 Depreciation and amortization 129 11 - 140 Total operating expenses 839 212 5 1,056 Operating income (loss) $ 264 $ 22 $(4) 282 Add - Other income, net 9 Less - Interest charges, net 95 Less - Preferred Dividend Requirements, including the Company - Obligated Mandatorily Redeemable Preferred Securities 10 Net income $ 186 Capital expenditures: Identifiable $218 $ 15 $ - $ 233 Utilized for overall Company operations 32 Total $ 265 Identifiable assets at December 31, 1997: Utility plant, net $2,951 $221 $ 2 $3,174 Inventories 69 2 - 71 Total $3,020 $223 $ - 3,245 Other assets 809 Total assets $4,054 57 1996 Electric Gas Transit Total (Millions of Dollars) Operating revenues $1,107 $ 235 $ 3 $1,345 Operating expenses, excluding depreciation and amortization 711 204 9 924 Depreciation and amortization 123 12 - 135 Total operating expenses 834 216 9 1,059 Operating income (loss) $ 273 $ 19 $(6) 286 Add - Other income, net 4 Less - Interest charges, net 9 Less - Preferred stock dividends 6 Net income $ 185 Capital expenditures: Identifiable $ 197 $ 19 $ - $ 216 Utilized for overall Company operations 24 Total 240 Identifiable assets at December 31, 1996: Utility plant, net $2,870 $ 217 $ 2 $3,089 Inventories 76 2 - 78 Total $2,946 $ 219 $ 2 3,167 Other assets 792 Total assets $3,959 1995 Electric Gas Transit Total (Thousands of Dollars) Operating revenues $1,006 $ 201 $ 4 $1,211 Operating expenses, excluding depreciation and amortization 657 170 10 837 Depreciation and amortization 104 13 1 118 Total operating expenses 761 183 11 955 Operating income (loss) $ 245 $ 18 $(7) 256 Add - Other income, net 9 Less - Interest charges, net 96 Less - Preferred stock dividends 6 Net income $ 163 Capital expenditures: Identifiable $ 245 $ 20 $ - $ 265 Utilized for overall Company operations 28 Total $ 293 Identifiable assets at December 31, 1995: Utility plant, net $2,851 $ 210 $ 2 $3,063 Inventories 77 2 - 79 Total $2,928 $ 212 $ 2 3,142 Other assets 661 Total assets $3,803 58 12. QUARTERLY FINANCIAL DATA (UNAUDITED): 1997 (Millions of Dollars) First Second Third Fourth Quarter Quarter Quarter Quarter Annual Total operating revenues $337 $289 $377 $335 $1,338 Operating income 74 52 93 63 282 Net Income 50 30 73 42 195 1996 (Millions of Dollars) First Second Third Fourth Quarter Quarter Quarter Quarter Annual Total operating revenues $354 $311 $365 $315 $1,345 Operating income 79 59 90 57 285 Net Income 56 35 66 33 190 59 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The directors listed below were elected April 24, 1997 to hold office until the next annual meeting of the Company's stockholders on April 23, 1998. Name and Year First Became Director Age Principal Occupation; Directorships Bill L. Amick 54 For more than five years, Chairman of the (1990) Board and Chief Executive Officer of Amick Farms, Inc., Batesburg, SC (vertically integrated broiler operation). For more than five years, Chairman and Chief Executive Officer of Amick Processing, Inc. and Amick Broilers, Inc. Director, SCANA Corporation, Columbia, SC. James A. Bennett 37 Since December 1994, Senior Vice President (1997) and Director of Community Banking of First Citizens Bank, Columbia, SC. From March 1991 to December 1994, President of Victory Savings Bank, Columbia, SC. Director, SCANA Corporation William B. Bookhart, Jr. 56 For more than five years, a partner in (1979) Bookhart Farms, Elloree, SC (general farming). Director, SCANA Corporation, Columbia, SC. William T. Cassels, Jr. 68 For more than five years, Chairman of the (1990) Board, Southeastern Freight Lines, Inc., Columbia, SC (trucking business). Director, SCANA Corporation, Columbia, SC; Member, Advisory Board of Liberty Mutual Insurance Group. Hugh M. Chapman 65 Since June 30, 1997, retired from (1988) NationsBank South, Atlanta, GA (a division of NationsBank Corporation, bank holding company). For more than five years prior to June 30, 1997 Chairman of NationsBank South, Atlanta, GA Director, SCANA Corporation, Columbia, SC; West Point-Stevens. 60 Name and Year First Became Director Age Principal Occupation; Directorships Elaine T. Freeman 62 For more than five years, Executive Director (1992) of ETV Endowment of South Carolina, Inc. (non-profit organization), Spartanburg, SC. Director, National Bank of South Carolina, Columbia, SC; SCANA Corporation, Columbia, SC. Lawrence M. Gressette, Jr. 66 Since February 28, 1997, Chairman Emeritus (1987) of SCANA Corporation. For more than five years prior to February 28, 1997, Chairman of the Board and Chief Executive Officer of SCANA Corporation and Chairman of the Board and Chief Executive Officer of all SCANA subsidiaries, including the Company. For more than five years prior to December 13, 1995, President of SCANA Corporation. Director, Wachovia Corporation, Winston- Salem, NC; Powertel, Inc., West Point, GA; SCANA Corporation, Columbia, SC. W. Hayne Hipp 58 For more than five years, President and (1983) Chief Executive Officer, The Liberty Corporation, Greenville, SC (insurance and broadcasting holding company). Director, The Liberty Corporation, Greenville, SC; Wachovia Corporation, Winston-Salem, NC; SCANA Corporation, Columbia, SC. F. Creighton McMaster 68 For more than five years, President and (1974) Manager, Winnsboro Petroleum Company, Winnsboro, SC (wholesale distributor of petroleum products). Director, First Union South Carolina, Greenville, SC; SCANA Corporation, Columbia, SC. Lynne M. Miller 46 For more than five years, President of (1997) Environmental Strategies Corporation, Reston, VA (environmental consulting and engineering firm). Director, SCANA Corporation, Columbia, SC. John B. Rhodes 67 For more than five years, Chairman and (1967) Chief Executive Officer, Rhodes Oil Company, Inc., Walterboro, SC (distributor of petroleum products). Director, SCANA Corporation, Columbia, SC. 61 Name and Year First Became Director Age Principal Occupation; Directorships Maceo K. Sloan 48 For more than five years, Chairman, (1997) President and CEO of Sloan Financial Group, Inc. and Chairman, President and CEO of NCM Capital Management Group, Inc. Director, SCANA Corporation, Columbia, SC. William B. Timmerman 51 Since March 1, 1997, Chairman and Chief (1991) Executive Officer of SCANA Corporation. From August 21, 1996 to March 1, 1997, Chief Operating Officer of SCANA Corporation. Since December 13, 1995, President of SCANA Corporation. From May 1, 1994 to December 13, 1995, Executive Vice President of SCANA Corporation. Since August 25, 1993, Assistant Secretary of SCANA Corporation and all of its subsidiaries, including the Company. From August 28, 1991 to February 20, 1996, Chief Financial Officer of the Company. For more than five years prior to May 1, 1994, Senior Vice President of SCANA Corporation. For more than five years prior to February 20, 1996, Controller of SCANA Corporation. Director, SCANA Corporation, Columbia, SC; Powertel, Inc., West Point, GA, ITC^DeltaCom Board Member, West Point, GA. and Wachovia Bank, N. A., Columbia, S. C. 62 EXECUTIVE OFFICERS OF THE COMPANY The Company's officers are elected at the annual organizational meeting of the Board of Directors and hold office until the next such organizational meeting, unless the Board of Directors shall otherwise determine, or unless a resignation is submitted. Positions Held During Name Age Past Five Years Dates W.B. Timmerman 51 Chairman of the Board and Chief Executive Officer 1997-present Chief Operating Officer of SCANA 1996-1997 President of SCANA 1995-present President of SCANA Communications, Inc., an affiliate 1996-1997 Executive Vice President, 1994-1995 SCANA Assistant Secretary 1993-1996 Chief Financial Officer, *-1996 SCANA Controller, SCANA *-1996 Senior Vice President, *-1994 SCANA J. L. Skolds 47 SCANA Executive - Electric Group 1997-present President and Chief Operating Officer 1996-present Senior Vice President - Generation 1994-1996 Vice President - Nuclear Operations *-1994 G.J. Bullwinkel, Jr. 49 President of SCANA Communications, Inc. 1997-present Senior Vice President- Retail Electric 1995-present Senior Vice President- Fossil & Hydro Production *-1994 W.A. Darby 52 Senior Vice President - Gas, SCANA Gas Group 1996-present Vice President-Gas Operations *-1996 President and Treasurer of ServiceCare 1996-present General Manager of ServiceCare, Inc., an affiliate 1994-1996 K. B. Marsh 42 Vice President - Finance, Chief Financial Officer and Controller - SCANA 1996-present Vice President - Finance, Treasurer and Secretary, SCANA *-1996 Vice President 1996-present *Indicates position held at least since March 1, 1993
63 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE All of the Company's common stock is held by its parent, SCANA Corporation. The required forms indicate that no equity securities of the Company are owned by its directors and executive officers. Based solely on a review of the copies of such forms and amendments furnished to the Company and written representations from the executive officers and directors, the Company believes that during 1997 all Section 16(a) filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were complied with. ITEM 11. EXECUTIVE COMPENSATION The following table contains information with respect to compensation paid or accrued during the years 1997, 1996 and 1995 to the Chief Executive Officer of the Company, to each of the other four most highly compensated executive officers of the Company during 1997, who were serving as executive officers of the Company at the end of 1997 and to L. M. Gressette, Jr., the Company's former Chief Executive Officer, who retired in February 1997. SUMMARY COMPENSATION TABLE Name and Principal Year Annual Compensation Long-Term Position Compensation (1) (2) (3) (4) Salary Bonus Other Payouts ($) ($) Annual LTIP (5) Compensation Payouts All Other ($) ($) Compensation ($) W. B. Timmerman Chairman, President 1997 400,634 318,815 12,220 88,338 24,038 and Chief Executive 1996 335,266 196,832 6,399 109,819 20,116 Officer and Director 1995 254,214 101,588 987 150,353 15,127 - - SCANA Corporation J. L. Skolds SCANA Executive - 1997 277,132 161,677 5,777 70,283 16,628 Electric Group, 1996 215,708 114,099 2,453 55,513 12,943 President and Chief 1995 176,156 74,151 54 76,128 10,569 Operating Officer - South Carolina Electric and Gas Company G. J. Bullwinkel 1997 219,273 92,796 7,776 70,283 13,156 Senior Vice President 1996 205,980 90,370 3,710 66,374 12,359 - - Retail Electric 1995 189,097 70,904 487 90,402 11,346 K. B. Marsh 1997 199,845 104,276 2,947 44,491 11,991 Vice President, Chief 1996 166,616 75,667 1,189 46,462 9,997 Financial Officer and 1995 133,768 63,757 51,390 8,026 Controller - SCANA Corp. W. A. Darby 1997 169,606 73,800 7,025 44,491 10,176 Senior Vice President, 1996 157,659 54,090 3,566 46,462 9,460 Gas Operations and 1995 147,729 44,195 16 63,757 8,864 President of ServiceCare L. M. Gressette, Jr. 1997 132,584 79,704 167,003 399,950 Chairman Emeritus and 1996 483,952 274,320 5,998 285,408 29,037 Chairman of the Executive 1995 449,246 197,500 65,779 390,156 26,955 Committee - SCANA Corp. - ----------------- (1) Reflects actual salary paid in 1997 from SCANA and its subsidiaries. (2) Payments under the Performance Incentive Plan described hereafter. (3) For 1997, other annual compensation consists of life insurance premiums on policies owned by named executive officers and payments to cover taxes on benefits of $9,521 and $2,699 for Mr. Timmerman; $4,694 and $1,083 for Mr. Skolds; $7,151 and $625 for Mr. Bullwinkel; $2,683 and $264 for Mr. Marsh; and $6,886 and $139 for Mr. Darby. (4) Payments under the Performance Share Plan described hereafter. (5) All other compensation for all named executive officers except Mr. Gressette, consists solely of SCANA contributions to defined contribution plans based on the funding formula applicable to all Company employees. For Mr. Gressette, all other compensation for 1997 consists of payments under SCANA and its subsidiaries' retirement plans of $378,681 and Company contributions to defined contribution plans of $21,269. 64 The following table shows the target awards made in 1997, for potential payment in 2000, under the Performance Share Plan for officers of SCANA and its subsidiaries', and estimated future payouts under that plan at threshold, target and maximum levels for the named executive officers named in the Summary Compensation Table on the preceding page. LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR TARGET AWARDS FOR 1997 TO BE PAID IN 2000 Number of Performance Estimated Future Payouts Under Shares, or Other Non-Stock Price-Based Plans Units or Period Until Other Maturation Name Rights (#) or Payout Threshold Target Maximum ($ or #) ($ or #) ($ or #) W. B. Timmerman 11,030 1997-1999 4,412 11,030 16,545 J. L. Skolds 5,560 1997-1999 2,224 5,560 8,340 G. J. Bullwinkel 3,010 1997-1999 1,204 3,010 4,515 K. B. Marsh 3,010 1997-1999 1,204 3,010 4,515 W. A. Darby 2,040 1997-1999 820 2,040 3,060 L. M. Gressette, Jr. 282 1997-1999 112 282 423
Payouts will occur when SCANA's Total Shareholder Return ("TSR") is in the top two-thirds of a peer group of utilities, and will vary based on SCANA's ranking against the peer group. Executives earn threshold payouts at the 33rd percentile of three-year performance. Target payouts will be made at the 50th percentile of three-year performance. Maximum payouts will be made when the TSR is at or above the 75th percentile of the peer group. Payments will be made on a sliding scale for performance between threshold and target and target and maximum. No payouts will be earned if performance is at less than the 33rd percentile. Awards are denominated in shares of SCANA Common Stock and may be paid in either stock or cash or a combination of both. DEFINED BENEFIT PLANS In addition to the qualified Retirement Plan for all employees, SCANA has Supplemental Executive Retirement Plans ("SERPs") for certain eligible employees, including officers of its subsidiaries. A SERP is an unfunded plan which provides for benefit payments in addition to those payable under a qualified retirement plan. It maintains uniform application of the Retirement Plan benefit formula and would provide, among other benefits, payment of Retirement Plan formula pension benefits, if any, which exceed those payable under the Internal Revenue Code ("IRC") maximum benefit limitations. 65 The following table illustrates the estimated maximum annual benefits payable upon retirement at normal retirement date under the Retirement Plan and the SERPs. Pension Plan Table Final Service Years Average Pay 15 20 25 30 35 $150,000 $ 41,965 $ 55,953 $ 69,942 $ 83,930 $ 86,668 200,000 56,965 75,953 94,942 113,930 117,918 250,000 71,965 95,953 119,942 143,930 149,168 300,000 86,965 115,953 144,942 173,930 180,418 350,000 101,965 135,953 169,942 203,930 211,668 400,000 116,965 155,953 194,942 233,930 242,918 450,000 131,965 175,953 219,942 263,930 274,168 500,000 146,965 195,953 244,942 293,930 305,418 550,000 161,965 215,953 269,942 323,930 336,668 600,000 176,965 235,953 294,942 353,930 367,918 650,000 191,965 255,953 319,942 383,930 399,168 700,000 206,965 275,953 344,942 413,930 430,418 750,000 221,965 295,953 369,942 443,930 461,668 800,000 236,965 315,953 394,942 473,930 492,918 For all the executive officers named in the Summary Compensation Table for 1997, the compensation shown in the column labeled "Salary" of the Summary Compensation Table is covered by the Retirement Plan and/or a SERP. As of December 31, 1997, Messrs. Timmerman, Skolds, Bullwinkel, Marsh and Darby had credited service under the Retirement Plan (or its equivalent under the SERP) of 19, 11, 26, 13 and 29 years, respectively. Mr. Gressette currently is receiving a monthly benefit of $28,380 under the Retirement Plan and a SERP. Benefits are computed based on a straight-life annuity with an unreduced 60% surviving spouse benefit. The amounts in this table assume continuation of the primary Social Security benefits in effect at January 1, 1998, and are not subject to any deduction for Social Security or other offset amounts. The Company also has a Key Employee Retention Plan (the "Key Employee Retention Plan") covering officers and certain other executive employees that provides supplemental retirement and/or death benefits for participants. Under the plan, each participant may elect to receive either (i) a monthly retirement benefit for 180 months upon retirement at or after age 65, equal to 25% of the average monthly salary of the participant over his final 36 months of employment prior to age 65, or (ii) an optional death benefit payable monthly to a participant's designated beneficiary for 180 months, in an amount equal to 35% of the average monthly salary of the participant over his final 36 months of employment prior to age 65. In the event of the participant's death prior to age 65, the Company will pay to the participant's designated beneficiary for 180 months, a monthly benefit equal to 50% of such participant's base monthly salary in effect at death. All of the executive officers named in the Summary Compensation Table are participating in the plan. Mr. Gressette is receiving an annual benefit of $113,854 under the Key Employee Retention Plan. The estimated annual retirement benefits payable at age 65, based on projected eligible compensation (assuming increases of 4% per year) to the other persons named in the Summary Compensation Table are as follows: Mr. Timmerman-$170,199; Mr. Skolds-$135,858; Mr. Bullwinkel-$96,589 ; Mr. Marsh-$119,695 and Mr. Darby-$67,006. 66 TERMINATION, SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS Since its approval by the Board on December 18, 1996, SCANA Corporation has maintained an Executive Benefit Plan Trust (the "Trust"). The purpose of the Trust and the related plans is to help retain and attract quality leadership in key company positions in the current transitional environment of the electric utility industry. The Trust is used to receive contributions which may be used to pay the deferred compensation benefits of certain directors, executives and other key employees of SCANA and its subsidiaries' in the event of a Change in Control (as defined in the Trust). All the executive officers named in the Summary Compensation Table participate in certain of the plans listed below (the "Plans") which are covered by the Trust. (1) SCANA Corporation Voluntary Deferral Plan (2) SCANA Corporation Supplementary Voluntary Deferral Plan (3) SCANA Corporation Key Employee Retention Plan (4) SCANA Corporation Supplemental Executive Retirement Plan (5) SCANA Corporation Performance Share Plan (6) SCANA Corporation Annual Incentive Plan (7) SCANA Corporation Key Executive Severance Benefits Plan (8) SCANA Corporation Supplementary Key Executive Severance Benefits Plan The Trust and the Plans provide flexibility to the Company in responding to a Potential Change in Control (as defined in the Trust) depending upon whether the Change in Control would be viewed as being "hostile" or "friendly". This flexibility includes the ability to deposit and withdraw Company contributions up to the point of a Change in Control, and to affect the number of plan participants who may be eligible for benefit distributions upon, or following, a Change in Control. The Plans listed above at items (7) and (8) cover all the named executive officers (except Mr. Gressette). The Key Executive Severance Benefits Plan is operative as a "single trigger" plan, meaning that upon the occurrence of a "hostile" Change in Control, benefits provided under plans (1) through (6) above would be distributed in a lump sum. Under the terms of the Trust, in the event of a Change in Control that would trigger operation of the Key Executive Severance Benefits Plan, Mr. Gressette would receive immediate payout of all benefits under any of the Plans in which he is then participating. In contrast, the Supplementary Key Executive Severance Benefits Plan (the "Supplementary Plan") is operative for a period of twenty-four months following a Change in Control which prior to its occurrence is viewed as being "friendly". In this circumstance, the Key Executive Severance Benefits Plan is inoperative. The Supplementary Plan is a "double trigger" plan that would pay benefits in lieu of those otherwise provided under plans (1) through (6) in either of two circumstances: (a) the participant's involuntary termination of employment without "Just Cause", or (b) the participant's voluntary termination of employment for "Good Reason" (as these terms are defined in the Supplementary Plan). Benefit distributions relative to a Change in Control, as to which either the Key Executive Severance Benefits Plan or the Supplementary Plan is operative, will be grossed up to include estimated federal, state and local income taxes and any applicable excise taxes owed by Plan participants on those benefits, and paid in a lump sum. The benefit distributions would also be calculated so as to include, in addition to other benefits: 67 (a) Three times the sum of: (1) the officer's annual base salary in effect as of the Change in Control and (2) the larger of (i) the officer's full targeted annual incentive opportunity in effect as of the Change in Control under the Annual Incentive Plan, or (ii) the officer's average of actual annual incentive bonuses received during the prior three years under the Annual Incentive Plan; and (b) an amount equal to the projected cost for coverage for three full years following the Change in Control as though the officer had continued to be a Company employee with respect to medical coverage, long-term disability coverage and either Life Plus (a special life insurance program combining whole life and term coverages) or group term life coverage in accordance with the officer's actual election, in each case so as to provide substantially the same level of coverage and benefits as the officer enjoyed as of the date of the Change in Control. Benefit distributions pertaining to the Voluntary Deferral Plan would be calculated as of the date of the Change in Control inclusive of interest provided under the plan through such date, and benefits pertaining to the Supplementary Voluntary Deferral Plan would be calculated to include any implied dividends accruable under the plan through the date of the Change in Control. Benefit distributions pertaining to the Key Employee Retention Plan would be calculated inclusive of projected increases to each participant's base salary using a fixed, market competitive rate as though the participant had reached the earlier of age 65 or completed 35 years of service. Benefit distributions pertaining to the Supplemental Executive Retirement Plan would be calculated as an actuarial equivalent through the date of the Change in Control with three additional years of compensation at the participant's rate then in effect as though the participant had attained age 65 and completed 35 years of benefit service as of the date of the Change in Control and without any early retirement or other actuarial reductions, which benefit would then be reduced by the actuarial equivalent of the participant's qualified plan benefit amount under the Retirement Plan. Benefit distributions pertaining to the Performance Share Plan would be equal to 100% of the targeted award as granted for all performance periods which are not yet completed as of the date of the Change in Control. Benefit distributions pertaining to the Annual Incentive Plan would be equal to 100% of the target award. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1997, no officer, employee or former officer of SCANA or any of its subsidiaries served as a member of the Long-Term Compensation Committee or the Performance Committee, except Mr. Gressette who served as an ex-officio, non-voting member of the Performance Committee until his retirement in February 1997 and as a member of the Long-Term Compensation Committee following his retirement, and Mr. Timmerman who has been an ex-officio, non- voting member of the Performance Committee since March 1, 1997. Although Mr. Gressette and Mr. Timmerman served as members of the Performance Committee during 1997, neither participated in any of its decisions concerning executive officer compensation. As a member of the Long-Term Compensation Committee following his retirement, Mr. Gressette participated in the decisions regarding target awards made in 1997 under the Performance Share Plan. 68 Since January 1, 1997, SCANA and its subsidiaries including the Company have engaged in business transactions with entities with which Mr. Amick (a member of the Performance Committee and the Long-Term Compensation Committee), Mr. Chapman (Chairman of both the Performance Committee and the Long-Term Compensation Committee) and Mr. McMaster (a member of the Long-Term Compensation Committee) are related. Mr. Amick is the owner of Team Amick Motor Sports, a business that owns and operates a NASCAR sanctioned racing car. This car participates in the Busch Grand National Racing Series. SCANA has entered into a shared sponsorship agreement with Team Amick Motor Sports pursuant to which SCANA will receive promotional considerations associated with NASCAR racing for an annual fee of $500,000. Mr. Chapman was Chairman of NationsBank South, a division of NationsBank Corporation until his retirement on June 30, 1997. Since January 1, 1997, SCANA has engaged in various transactions in which affiliates of NationsBank Corporation acted as lender or provider of lines of credit or credit support to SCANA and its subsidiaries. The amount paid during 1997, by SCANA and its subsidiaries to NationsBank Corporation affiliates on account of such transactions was $361,870. In addition, during 1997, a NationsBank Corporation affiliate and a SCANA subsidiary have engaged in options and futures transactions and forward contracts relating to forecasted natural gas production. The amount paid during 1997, by a SCANA subsidiary to NationsBank Corporation affiliates on account of such transactions was $7,602,582. It is anticipated that similar transactions will continue in the future. Mr. McMaster is the President and Manager of Winnsboro Petroleum Company. Purchases from Winnsboro Petroleum Company totaling $61,819 for petroleum products were made during 1997, by the Company and its subsidiaries. It is anticipated that similar transactions will continue. Compensation of Directors Fees. During 1997, directors who were not employees of the Company were paid $17,600 annually for services rendered as directors of SCANA and its subsidiaries, including the Company, $1,800 for each Board meeting attended and $850 for attendance at a committee meeting which is not held on the same day as a regular meeting of the Board. The fee for attendance at a telephone conference meeting is $200. The fee for attendance at a conference is $850. In addition, directors are paid, as part of their compensation, travel, lodging and incidental expenses related to attendance at meetings and conferences. The Board of Directors approved a plan effective January 1, 1997, whereby non-employee directors receive on a quarterly basis, 41% of their retainer in shares of SCANA common stock. The purpose of the plan is to promote the achievement of long-term objectives of SCANA by linking the personal interests of the non-employee directors to those of SCANA's shareholders by paying a portion of director compensation in stock. The Company believes this linkage will further promote the achievement of its long-term objectives. Directors who are employees of SCANA or its subsidiaries receive no compensation for serving as directors or attending meetings. In addition to regular director fees which he began to receive following his retirement, Mr. Gressette, as a Company retiree, received the retirement benefits described in the Summary Compensation Table on page 64. 69 Deferral Plan. SCANA has a plan (the "Voluntary Deferral Plan") pursuant to which directors may defer all or a portion of their fees paid to them in cash for services rendered and meeting attendance. Interest is earned on the deferred amounts at a rate set by the Management Development and Corporate Committee (the Performance Committee). Since January 1, 1997, the rate has been set at the announced prime rate of Wachovia Bank, N. A. Mr. Cassels and Mr. Rhodes were the only directors participating in the plan during 1997. Mr. Cassels became a participant in January 1994, and Mr. Rhodes in July 1987. Interest credited to their deferral accounts during 1997, was $8,609 and $27,228, respectively. Endowment Plan. Upon election to a second term, each director becomes eligible to participate in the Directors' Endowment Plan, which provides for the Company to make a tax deductible, charitable contribution totaling $500,000 to institutions of higher education designated by the SCANA director. A portion is contributed upon retirement of the director and the remainder upon the director's death. The plan is funded in part through insurance on the lives of the directors. Designated in-state institutions of higher education must be approved by the Chief Executive Officer. Any out-of-state designation must be approved by the Performance Committee. The designated institutions are reviewed on an annual basis by the Chief Executive Officer to assure compliance with the intent of the program. The plan is intended to reinforce the commitment to quality higher education and is intended to enhance the ability to attract and retain qualified board members. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table set forth below indicates the shares of SCANA's common stock beneficially owned as of March 10, 1998 by each director, each of the persons named in the Summary Compensation Table on page 64 (the "Named Executive Officer"), the directors and current executive officers of the Company as a group. SECURITY OWNERSHIP OF MANAGEMENT Name of Beneficial Amount and Nature Name of Beneficial Amount and Nature Owner of Ownership 1 Owner of Ownership 1 B. L. Amick 3,355 W. Hayne Hipp 3,145 J. A. Bennett 669 K. M. Marsh 9,760 W. B. Bookhart, Jr. 17,973 F. C. McMaster 5,975 G. J. Bullwinkel 20,167 L. M. Miller 1,281 W. T. Cassels, Jr. 2,355 J. B. Rhodes 9,052 H. M. Chapman 6,345 J. L. Skolds 9,473 W. A. Darby 23,336 M. K. Sloan 581 E. T. Freeman 4,675 W. B. Timmerman 28,567 L. M. Gressette, Jr. 59,352 All directors and executive officers as a group (17 persons) TOTAL 206,061. TOTAL PERCENT OF CLASS 0.2% - ---------- 1 Includes shares owned by close relatives, the beneficial ownership of which is disclaimed by the director, nominee or Named Executive Officers, as follows: Mr. Amick - 480; Mr. Bookhart - 5,029; Mr. Gressette - 1,060; and Mr. McMaster - 2,000; and by all directors, nominees and current executive officers - 8,569 in total. Includes shares purchased through December 31, 1997, but not thereafter, by the Trustee under the Company's Stock Purchase- Savings Plan (the Savings Plan). The information set forth above as to the security ownership of common stock has been furnished to the Company by such persons. 70 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS For information regarding certain relationships and related transactions, see Item 11, "Compensation Committee Interlocks and Insider Participation." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Financial Statements and Schedules See Index to Consolidated Financial Statements and Supplementary Data on page 33. Exhibits Filed Exhibits required to be filed with this Annual Report on Form 10-K are listed in the Exhibit Index following the signature page. Certain of such exhibits which have heretofore been filed with the Securities and Exchange Commission and which are designated by reference to their exhibit number in prior filings are hereby incorporated herein by reference and made a part hereof. As permitted under Item 601(b)(4)(iii), instruments defining the rights of holders of long-term debt of less than 10 percent of the total consolidated assets of the Company and its subsidiaries, have been omitted and the Company agrees to furnish a copy of such instruments to the Commission upon request. Reports on Form 8-K None 71 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (REGISTRANT) SOUTH CAROLINA ELECTRIC & GAS COMPANY BY (SIGNATURE) s/J. L. Skolds (NAME AND TITLE) J. L. Skolds, President and Chief Operating Officer DATE February 17, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. (i) Principal executive officer: BY (SIGNATURE) s/W. B. Timmerman (NAME AND TITLE) W. B. Timmerman Chairman of the Board, Chief Executive Officer and Director DATE February 17, 1998 (ii) Principal financial officer: BY (SIGNATURE) s/K. B. Marsh (NAME AND TITLE) K. B. Marsh, Chief Financial Officer DATE February 17, 1998 (iii) Principal accounting officer: BY (SIGNATURE) s/J. E. Addison (NAME AND TITLE) J. E. Addison, Vice President and Controller DATE February 17, 1998 BY (SIGNATURE) s/B. L. Amick (NAME AND TITLE) B. L. Amick, Director DATE February 17, 1998 BY (SIGNATURE) s/J. A. Bennett (NAME AND TITLE) J. A. Bennett, Director DATE February 17, 1998 72 BY (SIGNATURE) s/W. B. Bookhart, Jr. (NAME AND TITLE) W. B. Bookhart, Jr., Director DATE February 17, 1998 BY (SIGNATURE) s/W. T. Cassels, Jr. (NAME AND TITLE) W. T. Cassels, Jr., Director DATE February 17, 1998 BY (SIGNATURE) s/H. M. Chapman (NAME AND TITLE) H. M. Chapman, Director DATE February 17, 1998 BY (SIGNATURE) s/E. T. Freeman (NAME AND TITLE) E. T. Freeman, Director DATE February 17, 1998 BY (SIGNATURE) s/L. M. Gressette, Jr. (NAME AND TITLE) L. M. Gressette, Jr., Director DATE February 17, 1998 BY (SIGNATURE) s/W. Hayne Hipp (NAME AND TITLE) W. Hayne Hipp, Director DATE February 17, 1998 BY (SIGNATURE) s/F. C. McMaster (NAME AND TITLE) F. C. McMaster, Director DATE February 17, 1998 BY (SIGNATURE) s/L. M. Miller (NAME AND TITLE) L. M. Miller, Director DATE February 17, 1998 BY (SIGNATURE) s/J. B. Rhodes (NAME AND TITLE) J. B. Rhodes, Director DATE February 17, 1998 BY (SIGNATURE) s/M. K. Sloan (NAME AND TITLE) M. K. Sloan, Director DATE February 17, 1998 73 SOUTH CAROLINA ELECTRIC & GAS COMPANY Sequentially EXHIBIT INDEX Numbered Number Pages 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession Not Applicable 3. Articles of Incorporation and By-Laws A. Restated Articles of Incorporation of the Company as adopted on December 15, 1993 (Exhibit 3-A to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3375).................... # B. Articles of Amendment, dated June 7, 1994, filed June 9, 1994 (Exhibit 3-B to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3375).... # C. Articles of Amendment, dated November 9, 1994 (Exhibit 3-C to Form 10-K for the year ended December 31, 1994, File No. 1-3375)...................... # D. Articles of Amendment, dated December 9, 1994 (Exhibit 3-D to Form 10-K for the year ended December 31, 1994, File No. 1-3375)...................... # E. Articles of Correction, dated January 17, 1995 (Exhibit 3-E to Form 10-K for the year ended December 31, 1994, File No. 1-3375)...................... # F. Articles of Amendment, dated January 13, 1995 and filed January 17, 1995 (Exhibit 3-F to Form 10-K for the year ended December 31, 1994, File No. 1-3375)......................................... # G. Articles of Amendment dated March 31, 1995 (Exhibit 3-G to Form 10-Q for the quarter ended March 31, 1995, File No. 1-3375)................... # H. Articles of Correction - Amendment to Statement filed March 31, 1995, dated December 13, 1995 (Exhibit 3-H to Form 10-K for the year ended December 31. 1995, File No. 1-3375)...................... # I. Articles of Amendment dated December 13, 1995 (Exhibit 3-I to Form 10-K for the year ended December 31, 1995, File No. 1-3375)...................... # J. Copy of By-Laws of the Company as revised and amended on December 17, 1997 (Filed herewith)............ 77 K. Articles of Amendment dated February 18, 1997 (Exhibit 3-L to Registration Statement No. 333-24919).... # L. Articles of Amendment dated February 21, 1997 (Exhibit 3-L to Form 10-Q for the quarter ended March 31, 1997).......................................... # M. Articles of Amendment dated April 22, 1997 (Exhibit 3-M to Form 10-Q for the quarter ended June 30, 1997)..................................... # 4. Instruments Defining the Rights of Security Holders, Including Indentures A. Indenture dated as of January 1, 1945, from the South Carolina Power Company (the "Power Company") to Central Hanover Bank and Trust Company, as Trustee, as supplemented by three Supplemental Indentures dated respectively as of May 1, 1946, May 1, 1947 and July 1, 1949 (Exhibit 2-B to Registration No. 2-26459)................................ # B. Fourth Supplemental Indenture dated as of April 1, 1950, to Indenture referred to in Exhibit 4A, pursuant to which the Company assumed said Indenture (Exhibit 2-C to Registration No. 2-26459)...... # # Incorporated herein by reference as indicated. 74 SOUTH CAROLINA ELECTRIC & GAS COMPANY Exhibit Index (Continued) Sequentially Numbered Number Pages 4. (continued) C. Fifth through Fifty-second Supplemental Indentures to Indenture referred to in Exhibit 4A dated as of the dates indicated below and filed as exhibits to the Registration Statements and 1934 Act reports whose file numbers are set forth below..................................................... # December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 June 1, 1955 Exhibit 2-G to Registration No. 2-26459 November 1, 1957 Exhibit 2-H to Registration No. 2-26459 September 1, 1958 Exhibit 2-I to Registration No. 2-26459 September 1, 1960 Exhibit 2-J to Registration No. 2-26459 June 1, 1961 Exhibit 2-K to Registration No. 2-26459 December 1, 1965 Exhibit 2-L to Registration No. 2-26459 June 1, 1966 Exhibit 2-M to Registration No. 2-26459 June 1, 1967 Exhibit 2-N to Registration No. 2-29693 September 1, 1968 Exhibit 4-O to Registration No. 2-31569 June 1, 1969 Exhibit 4-C to Registration No. 33-38580 December 1, 1969 Exhibit 4-Q to Registration No. 2-35388 June 1, 1970 Exhibit 4-R to Registration No. 2-37363 March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324 January 1, 1972 Exhibit 4-C to Registration No. 33-38580 July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291 May 1, 1975 Exhibit 4-C to Registration No. 33-38580 July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908 February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304 December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936 March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662 May 1, 1977 Exhibit 4-C to Registration No. 33-38580 February 1, 1978 Exhibit 4-C to Registration No. 33-38580 June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653 April 1, 1979 Exhibit 4-C to Registration No. 33-38580 June 1, 1979 Exhibit 4-C to Registration No. 33-38580 April 1, 1980 Exhibit 4-C to Registration No. 33-38580 June 1, 1980 Exhibit 4-C to Registration No. 33-38580 December 1, 1980 Exhibit 4-C to Registration No. 33-38580 April 1, 1981 Exhibit 4-D to Registration No. 33-49421 June 1, 1981 Exhibit 4-D to Registration No. 2-73321 March 1, 1982 Exhibit 4-D to Registration No. 33-49421 April 15, 1982 Exhibit 4-D to Registration No. 33-49421 May 1, 1982 Exhibit 4-D to Registration No. 33-49421 December 1, 1984 Exhibit 4-D to Registration No. 33-49421 December 1, 1985 Exhibit 4-D to Registration No. 33-49421 June 1, 1986 Exhibit 4-D to Registration No. 33-49421 February 1, 1987 Exhibit 4-D to Registration No. 33-49421 September 1, 1987 Exhibit 4-D to Registration No. 33-49421 January 1, 1989 Exhibit 4-D to Registration No. 33-49421 January 1, 1991 Exhibit 4-D to Registration No. 33-49421 February 1, 1991 Exhibit 4-D to Registration No. 33-49421 July 15, 1991 Exhibit 4-D to Registration No. 33-49421 August 15, 1991 Exhibit 4-D to Registration No. 33-49421 April 1, 1993 Exhibit 4-E to Registration No. 33-49421 July 1, 1993 Exhibit 4-D to Registration No. 33-57955 D. Indenture dated as of April 1, 1993 from South Carolina Electric & Gas Company to NationsBank of Georgia, National Association (Filed as Exhibit 4-F to Registration Statement No. 33-49421)......................................... # E. First Supplemental Indenture to Indenture referred to in 4-D dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421)......................... # # Incorporated herein by reference as indicated. 75 SOUTH CAROLINA ELECTRIC & GAS COMPANY EXHIBIT INDEX Exhibit Index (Continued) Sequentially Numbered Number Pages F. Second Supplemental Indenture to Indenture referred to in 4-D dated as of June 15, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-57955)......................... # G. Trust Agreement for SCE&G Trust I (Filed herewith).............. 93 H. Certificate of Trust for SCE&G Trust I (Filed herewith)......... 96 I. Form of Junior Subordinated Indenture for SCE&G Trust I (Filed herewith)................................................ 97 J. Form of Guarantee Agreement for SCE&G Trust I (Filed herewith)....................................................... 177 K. Form of Amended & Restated Trust Agreement for SCE&G Trust I (Filed herewith)........................................ 198 9. Voting Trust Agreement Not Applicable 10. Material Contracts A. Copy of Supplemental Executive Retirement Plan (Exhibit 10-A to Form 10-K for the year ended December 31, 1980)............................................ 276 11. Statement Re Computation of Per Share Earnings Not Applicable 12. Statement re Computation of Ratios (Filed herewith)................ 295 13. Annual Report to Security Holders, Form 10-Q or Quarterly Report to Security Holders Not Applicable 16. Letter Re Change in Certifying Accountant Not Applicable 18. Letter Re Change in Accounting Principles Not Applicable 21. Subsidiaries of the Registrant Not Applicable 22. Published Report Regarding Matters Submitted to Vote of Security Holders Not Applicable 23. Consents of Experts and Counsel Consent of Deloitte & Touche LLP................................... 299 24. EX-1 2 EXHIBIT 3-J BY-LAWS OF SOUTH CAROLINA ELECTRIC & GAS COMPANY AS AMENDED AND ADOPTED December 17, 1997 77 ARTICLE I OFFICES Section 1. The principal office of the Corporation, which shall also be designated as its registered office, shall be located in the City of Columbia, County of Richland, State of South Carolina. Section 2. The Corporation may also have offices and places of business at such other places, within or without the State of South Carolina, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SEAL Section 1. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "South Carolina". If authorized by the Board of Directors, the corporate seal may be affixed to any certificates of stock, bonds, debentures, notes or other engraved, lithographed or printed instruments, by engraving, lithographing or printing thereon such seal or a facsimile thereof, and such seal or facsimile thereof so engraved, lithographed or printed thereon shall have the same force and effect, for all purposes, as if such corporate seal had been affixed thereto by indentation. ARTICLE III STOCKHOLDERS' MEETINGS Section 1. Written or printed notices for annual or special meetings of stockholders shall state the place, day and hour of such meetings and, in case of special meetings, the purpose or purposes for which the meetings are called. Section 2. Annual meetings of shareholders shall be held on a date selected by the Board of Directors at its last regularly scheduled meeting in a calendar year. The Board will select a date at said meeting for the following year with the date occurring between April 16 and April 30 of said year, when they shall elect members of the Board of Directors in accordance with the provisions of the Corporation's Articles of Incorporation and transact such other business as may properly be brought before the meeting. Section 3. Except as otherwise provided by law, by the Articles of Incorporation as the same may be amended from time to time, or by these By-Laws as they may be amended from time to time, the holders of a majority of the shares of stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at such meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power, by a majority vote of those present, to adjourn the meeting from time to time without notice (unless otherwise provided in Section 8 of this Article III) other than by announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which may have been transacted at the meeting as originally noticed provided notice of such adjourned meeting, when required by Section 8 of this Article III, shall have been given or waived. 78 Section 4. At each meeting of the stockholders each stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by written or printed instrument executed by such stockholder or by his duly authorized attorney or by telegram or cablegram appearing to have been transmitted by such stockholder but, except as otherwise provided by statute, no proxy shall be valid after expiration of eleven months from the date of its execution. Every proxy shall be dated as of its execution and no proxy shall be undated or postdated. Every holder of record of stock having voting power shall be entitled to one vote for every share of stock standing in his name on the books of the Corporation. The vote for directors and, upon the demand of any stockholder or his duly authorized proxy, the vote upon any question before the meeting shall be by ballot. All elections shall be decided by a plurality of the votes cast by the holders of the shares entitled to vote at the meeting of stockholders and except as otherwise provided by statute or by the Articles of Incorporation all other questions by a majority of the votes cast by holders of shares entitled to vote on such question at such meeting. Section 5. The Secretary or the agent of the Corporation having charge of its stock transfer books shall, in advance of each meeting of stockholders, prepare a complete list of the stockholders entitled to vote at such meeting of stockholders or adjournment thereof, which list shall be arranged in alphabetical order with the address of and the number of shares held by each stockholder. Unless the record of stockholders kept by the Secretary or agent of the Corporation having charge of its stock transfer books readily shows, in alphabetical order or by alphabetical index, the information required to appear on such a list of stockholders, such list of stockholders shall, for a period commencing upon the date when notice of such meeting is given, and in no event less than 10 days prior to the date of such meeting, be kept on file at the registered office of the Corporation or at its principal place of business or at the office of its transfer agent or registrar, and shall be subject to inspection by any stockholder at any time during usual business hours. In any event, such list shall be produced and kept open at the time and place of such meeting and shall be subject to the inspection of any stockholder during the whole time of such meeting. Section 6. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, by the Vice Chairman of the Board or by the President, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of holders of ten per cent or more of the shares of stock of the Corporation issued and outstanding and entitled to vote at the proposed meeting. Such request shall state the purpose or purposes of the proposed meeting. Section 7. Business transacted at all special meetings shall be confined to the objects stated in the call; provided, however, that if all the stockholders of the Corporation entitled to vote shall be present in person or by proxy, any business pertaining to the affairs of the Corporation may be transacted. 79 Section 8. Notice of annual meetings of stockholders and notice of any special meeting of stockholders for the election of directors or for any other purpose, unless otherwise provided by statute, shall be delivered personally or mailed, not less than ten nor more than fifty days before the meeting, to each person who appears on the books of the Corporation as a stockholder entitled to vote at said meeting. In the event of the adjournment of any meeting of stockholders, for whatever reason, for 30 days or more, notice of the adjourned meeting shall be delivered personally or mailed not less than ten nor more than fifty days before the date for such adjourned meeting to each person whose name appears on the books of the Corporation as a stockholder entitled to vote at said adjourned meeting. Any such notice may be either written or printed, or partly written and partly printed, and if mailed it shall be directed to the stockholder at his address as it appears on the books of the Corporation. Such notice shall briefly state the business which it is proposed to present or to submit to such meeting. ARTICLE IV DIRECTORS Section 1. The property and business of the Corporation shall be managed by its Board of Directors. The number of directors shall be not more than twenty (20). The directors shall be elected at the annual meeting of the stockholders or at a special meeting called for that purpose. Each director shall be elected to serve until the next annual meeting of stockholders and thereafter until his successor shall be elected and shall qualify. Any director may be removed with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors, provided, however, such removal shall be subject to the following: (1) Whenever the shares of a class of stock are entitled to elect one or more directors, any director so elected may be removed only by the vote of the holders of the outstanding shares of that class voting separately as a class, and (2) No director who has been elected by cumulative voting may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. Section 2. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board may exercise all such power of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. A director or officer of this Corporation shall not be disqualified by his office from dealing or contracting with the Corporation either as a vendor, purchaser or otherwise, nor shall any transaction or contract of this Corporation be void or voidable solely by reason of the fact that any director or officer or any firm of which any director or officer is a member or employee, or any corporation of which any director or officer is a shareholder, director, officer or employee, is in any way interested in such transaction or contract, provided that the material facts as to such interest and as to such transaction or contract are disclosed or known to the Board of Directors or the Executive Committee and noted in their respective minutes, or to the stockholders entitled to vote with respect thereto, as the case may be, and that such transaction or contract is or shall be authorized, ratified or approved either (1) by the vote of a majority of a quorum of the 80 Board of Directors or of the Executive Committee, or (2) by a majority of the votes cast by holders of shares of stock entitled to vote with respect thereto, without counting (except for quorum purposes) the vote of or shares held or controlled and voted by, as the case may be, any director so interested or member or employee of a firm so interested or a shareholder, director, officer or employee of a corporation so interested; nor shall any director or officer be liable to account to the Corporation for any profits realized by and from or through any such transaction, or contract of this Corporation authorized, ratified or approved as aforesaid by reason of the fact that he or any firm of which he is a member or employee, or any corporation of which he is a shareholder, director, officer or employee was interested in such transaction or contract. ARTICLE V MEETINGS OF THE BOARD Section 1. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of South Carolina. If so authorized by law, members of the Board of Directors may participate in a meeting of the Board by means of telephone conference call or similar communications by which all persons participating in the meeting may hear each other at the same time. Section 2. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be designated by the Board. Section 3. Special meetings of the Board may be called by the Chairman of the Board, or the Vice Chairman of the Board, if any, or the President or any two directors and may be held at the time and place designated in the call and notice of the meeting. The Secretary or other officer performing his duties shall give notice either personally or by mail or telegram not less than twenty-four hours before the meeting. Meetings may be held at any time and place without notice if all the directors are present or if those not present sign waivers of notice either before or after the meeting. Section 4. At all meetings of the Board a majority of the total number of directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these By-Laws. Section 5. Any regular or special meeting of the Board may be adjourned to any other time at the same or any other place by a majority of the directors present at the meeting, whether or not a quorum shall be present at such meeting, and no notice of the adjourned meeting shall be required other than announcement at the meeting. Section 6. Whenever, by any provision of law, the vote of directors at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of directors may be dispensed with, if all the directors shall consent in writing to such corporate action being taken. Such consents shall be filed with the minutes of meetings of the Board of Directors. 81 Section 7. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed fee and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board (or of any committee of the Board), provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 8. Directors who are salaried officers or employees of the Corporation or of any affiliated Company and who are members of the Executive Committee shall receive no compensation for their services as such members in addition to such compensation as may be paid to them as officers or directors, but shall be reimbursed for their reasonable expenses, if any, in attending meetings of the Executive Committee, or otherwise performing their duties as members of the Executive Committee. ARTICLE VI EXECUTIVE AND OTHER COMMITTEES Section 1. The Board of Directors may, by vote of a majority of the full Board, designate three or more of their number to constitute an Executive Committee, to hold office for one year and until their respective successors shall be designated. Such Executive Committee shall advise with and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and shall, between sessions of the Board, except as otherwise provided by law, have all the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not at the time of such action in session. The Board of Directors may, by vote of a majority of the full Board, appoint from among their number, one or more additional committees, consisting of three or more directors, which shall have such powers and duties as may be fixed by the resolution of the Board of Directors appointing such Committee. Section 2. The Executive Committee shall cause to be kept regular minutes of its proceedings, which may be transcribed in the regular minute book of the Corporation, and all such proceedings shall be reported to the Board of Directors at its next succeeding meeting, and shall be subject to revision or alteration by the Board, provided that no rights of third persons shall be affected by such revision or alteration. A majority of the Executive Committee shall constitute a quorum at any meeting. The Executive Committee may take action without a meeting on the written approval of such action by all the members of the Committee. The Board of Directors may by vote of a majority of the full Board fill any vacancies in the Executive Committee. The Executive Committee may, from time to time, subject to the approval of the Board of Directors, prescribe rules and regulations for the calling and conduct of meetings of the Committee, and other matters relating to its procedure and the exercise of its powers. Section 3. Other committees appointed by the Board shall cause to be kept regular minutes of their proceedings and in general the provisions as to procedure for such committees shall be that set forth above with respect to the Executive Committee. 82 ARTICLE VII OFFICERS Section 1. The officers of the Corporation shall be elected by the Board of Directors. They shall include a President, one or more Vice Presidents, a Secretary, a Treasurer and a Controller and may include a Chairman of the Board and a Vice Chairman of the Board. In the event there shall be a Chairman of the Board and a Vice Chairman of the Board, the Board of Directors shall designate which of the Chairman of the Board, the Vice Chairman of the Board or the President shall be the Chief Executive Officer of the Corporation. If there shall be no Chairman of the Board or Vice Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation. Any two or more of such offices, except those of Treasurer and Controller, may be occupied by the same person; provided, however, the same person may not act in more than one capacity where action by two or more officers is required. Section 2. The Board of Directors, at its first meeting after the election of directors by the stockholders, shall elect from among its members, if it deems proper, a Chairman of the Board and a Vice Chairman of the Board. It shall also elect a President and one or more Vice Presidents, a Secretary, a Treasurer and a Controller, none of whom need be members of the Board. The Board of Directors, at any meeting, may elect such additional Vice Presidents, and such Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers, as it shall deem necessary, none of whom need be members of the Board. Section 3. The Board of Directors, at any meeting, may elect or appoint such other officers and agents as it shall deem necessary. The tenure and duties of such officers and agents shall be fixed by the Board of Directors or, in the absence of any action by the Board of Directors so fixing such tenure and duties, the tenure and duties shall be fixed by the Chief Executive Officer of the Corporation, or by such officers or department heads to whom he shall delegate such authority. Section 4. The salaries and compensation of the officers of the Corporation and of agents of the Corporation appointed by the Board shall be fixed by the Board of Directors. The salaries and compensation of all other employees of the Corporation shall, in the absence of any action by the Board of Directors, be fixed by the Chief Executive Officer of the Corporation. No officer receiving compensation from any affiliated company shall at the same time be compensated by the Corporation. Section 5. The officers of the Corporation elected pursuant to Section 2 of this Article VII shall hold office until the first meeting of the Board of Directors after the next succeeding annual meeting of stockholders and until their successors are elected and qualify in their stead. The Chief Executive Officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the total number of directors then in office. Any other officer or employee of the Corporation may be removed at any time, with or without cause, either (a) by vote of a majority of the directors present at any meeting of the Board of Directors at which a quorum is present, or (b) by vote of a majority of the members of the Executive Committee, or (c) by the Chief Executive Officer of the Corporation or by any officer who shall be exercising the powers of the Chief Executive 83 Officer of the Corporation, or by any superior of such employee to whom such power of removal shall be delegated by the Chief Executive Officer of the Corporation or the officer exercising the powers of the Chief Executive Officers of the Corporation. ARTICLE VIII CHIEF EXECUTIVE OFFICER Section 1. The Chief Executive Officer of the Corporation shall supervise, direct and control the conduct of the business of the Corporation subject, however, to the general policies determined by the Board of Directors and the Executive Committee, if there be one. He shall be a member of the Executive Committee and all committees appointed by the Board of Directors, except the Audit Committee, shall have the general powers and duties usually vested in the chief executive officer of a corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the By-Laws, or by the Board of Directors. He shall, whenever it may in his opinion be necessary, prescribe the duties of officers and employees of the Corporation whose duties are not otherwise defined. He shall have power to remove at any time, with or without cause, any employee or officer of the Corporation. He may, in accordance with Section 5 of Article VII of these By-Laws, delegate such power of removal. ARTICLE IX CHAIRMAN OF THE BOARD Section 1. The Chairman of the Board, if there be one, shall preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer pursuant to Section 1 of Article VII of these By-Laws, have all the powers and duties granted and delegated to the Chief Executive Officer by Section 1 of Article VIII of these By-Laws. In such event he may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the By-Laws or by the Board of Directors. ARTICLE X THE VICE CHAIRMAN OF THE BOARD The Vice Chairman of the Board, if there be one, shall perform necessary duties of the Chairman in case of the absence or temporary incapacity of the Chairman. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the By-Laws or by the Board of Directors. 84 ARTICLE XI THE PRESIDENT Section 1. The President shall, in the absence of the Chairman and Vice Chairman of the Board, or if there shall be no Chairman or Vice Chairman of the Board, preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer of the Corporation pursuant to Section 1 of Article VII of these By- Laws, have all the powers and duties granted and delegated to the Chief Executive Officer by Section 1 of Article VIII of these By- Laws. In the event there shall be a Chairman of the Board or a Vice Chairman of the Board who shall have been designated as Chief Executive Officer of the Corporation pursuant to Section 1 of Article VII of these By-Laws, then the President shall have such powers and duties as may be assigned to him by the Chief Executive Officer. In addition, he shall be a member of the Executive Committee, and, in the absence or disability of the Chairman of the Board or the Vice Chairman of the Board, he shall have all the powers and duties of the Chairman of the Board or the Vice Chairman of the Board. He may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the By- Laws or by the Board of Directors. ARTICLE XII THE VICE PRESIDENT Section 1. The Vice President shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors may prescribe. The Vice President may sign in the name of and on behalf of the Corporation contracts, agreements, or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation, except in cases where the signing thereof shall be expressly delegated by the Board of Directors or the Executive Committee to some other officer or agent of the Corporation. If authorized by the Board of Directors or the Executive Committee, he may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the By-Laws, or by the Board of Directors. If there be more than one Vice President, the Board of Directors or the Chief Executive Officer of the Corporation shall assign to such Vice Presidents their respective duties, and the Board may designate any of such Vice Presidents as Executive Vice Presidents and Senior Vice Presidents. 85 ARTICLE XIII THE SECRETARY Section 1. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the committees appointed by the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. Any records kept by him shall be the property of the Corporation and shall be restored to the Corporation in case of his death, resignation, retirement or removal from office. He or his agent shall be the custodian of the seal of the Corporation, the stock ledger, stock certificate book and minute books of the Corporation, and its committees, and other formal records and documents relating to the corporate affairs of the Corporation. Section 2. The Assistant Secretary or Assistant Secretaries shall assist the Secretary in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. ARTICLE XIV THE TREASURER Section 1. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or as may be designated by persons to whom the Board of Directors delegates such authority. He shall disburse the funds of the Corporation in such manner as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall give the Corporation a bond if required by the Board of Directors in a sum, and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 2. The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. 86 ARTICLE XV THE CONTROLLER Section 1. The Controller of the Corporation shall be the principal accounting officer of the Corporation. He shall have full control of all the books of the Corporation and keep a true and accurate record of all property owned by it, of its debts and of its revenues and expenses, and shall keep all accounting records of the Corporation other than the record of receipts and disbursements and those relating to deposit or custody of money and securities of the Corporation, which shall be kept by the Treasurer, and shall also make reports to the directors and others of or relating to the financial condition of the Corporation. He shall exhibit at all reasonable times his books of account and records to any director of the Corporation upon application during business hours at the office of the Corporation where such books of accounts and records are kept. He shall perform all duties generally incident to the office of Controller and shall have such other powers and duties as, from time to time, may be prescribed by law, by the By-Laws, or by the Board of Directors. Section 2. The Assistant Controller or Assistant Controllers shall assist the Controller in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board of Directors. ARTICLE XVI VACANCIES Section 1. If the office of any director becomes vacant by reason of death, resignation, retirement, disqualification, or otherwise, the directors then in office, although less than a quorum, by a majority vote, may elect a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. Notwithstanding anything contained in the preceding sentence, if a vacancy occurs with respect to a director elected by the votes of a particular class of stock such vacancy shall be filled by the remaining director or directors elected by that class, or by the stockholders of that class, and any vacancy created by an increase in the number of directors of the Corporation shall be filled only by election by the stockholders entitled to vote with respect thereto at an annual meeting or a special meeting of stockholders called for that purpose. If the office of any officer of the Company shall become vacant for any reason, the Board of Directors, by a majority vote of those present at any meeting at which a quorum is present, may elect a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. ARTICLE XVII RESIGNATIONS Section 1. Any officer or any director of the Corporation may resign at any time, such resignation to be made in writing and to take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. A vacancy shall be deemed to exist upon receipt by the Corporation of such written resignation, and a successor may, then or thereafter, be elected to take office when such resignation becomes effective. 87 ARTICLE XVIII DUTIES OF OFFICERS MAY BE DELEGATED Section 1. In case of the absence of any officer of the Corporation, or for any other reason the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director. ARTICLE XIX STOCK OF OTHER CORPORATIONS Section 1. The Board of Directors shall have the right to authorize any officer or other person on behalf of the Corporation to attend, act and vote at meetings, of the stockholders of any corporation in which the Corporation shall hold stock, and to exercise thereat any and all the rights and powers incident to the ownership of such stock and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board. In the event that the Board shall fail to give such authority it may be exercised by the Chief Executive Officer of the Corporation in person or by proxy appointed by him on behalf of the Corporation. ARTICLE XX CERTIFICATES OF STOCK Section 1. The certificates of stock of the Corporation shall be entered in the books of the Corporation as they are issued. No fractional shares of stock shall be issued. Certificates of stock shall be signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President and by the Secretary, or an Assistant Secretary, and the seal of the Corporation shall be affixed thereto. Such seal may be facsimile, engraved or printed. Where any certificate of stock is signed by a transfer agent or transfer clerk or by a registrar, the signatures of any such Chairman of the Board, Vice Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, upon such stock certificate may be facsimiles, engraved or printed. In case any such officer who has signed, or whose facsimile signature has been placed upon, such certificate of stock, shall have ceased to be such officer before such certificate of stock is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. ARTICLE XXI TRANSFERS OF STOCK Section 1. Transfer of stock shall be made on the books of the Corporation only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor. 88 ARTICLE XXII FIXING OF RECORD DATE Section 1. The Board of Directors is hereby authorized to fix a time, not less than ten (10) days nor more than fifty (50) days preceding the date of any meeting of stockholders or the date fixed for the payment of any dividend or the making of any distribution, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of shares of stock, as a record date for the determination of the stockholders entitled to notice of and to vote at such meeting or entitled to receive any such dividend, distribution, rights or interests, as the case may be; and all persons who are holders of record of shares of stock at the date so fixed and no others, shall be entitled to notice of and to vote at such meeting, and only stockholders of record at such date shall be entitled to receive any such notice, dividend, distribution, rights or interests; and the stock transfer books shall not be closed during any such period. ARTICLE XXIII REGISTERED STOCKHOLDERS Section 1. The Corporation shall be entitled to treat the holders of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of South Carolina. ARTICLE XXIV LOST CERTIFICATES Section 1. Whenever any stockholder shall desire a new certificate of stock to replace an original certificate of stock which has been lost, destroyed or wrongfully taken, he shall make application to the Corporation for the issuance of a new certificate or certificates in replacement of the certificate or certificates which were lost, destroyed or wrongfully taken, and 88 shall file with the Corporation a good and sufficient indemnity bond, together with an affidavit stating that the applicant is the bona fide owner of such share(s) of stock and specifying the number(s) of the certificate or certificates which were lost, destroyed or wrongfully taken, the particular circumstances of such loss, destruction or wrongful taking (including a statement that the share(s) represented by such certificate or certificates has or have not been transferred or otherwise disposed of by such applicant in any manner.) Upon completion by a stockholder of the requirements set forth in the preceding paragraph, the Corporation shall issue a certificate or certificates in replacement of the certificate or certificates referred to in such stockholder's application if such application is received by the Corporation before it has notice that such certificate or certificates has or have been acquired by a bona fide purchaser. 89 ARTICLE XXV INSPECTION OF BOOKS Section 1. The Board of Directors shall have power to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (other than the books required by statute to be open to the inspection of stockholders), or any of them, shall be open to the inspection of stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as such right may be conferred by the statutes of the State of South Carolina or by resolution of the directors or of the stockholders. ARTICLE XXVI CHECKS, NOTES, BONDS AND OTHER INSTRUMENTS Section 1. All checks or demands for money and notes of the Corporation shall be signed by such person or persons (who may but need not be an officer or officers of the Corporation) as the Board of Directors may from time to time designate or as may be designated by persons to whom the Board of Directors delegates such authority. The Board of Directors shall have authority to make provision, with proper safeguards, for the signatures to appear on all checks, including, but not by way of limitation, payroll checks, to be made by facsimile, whether engraved or printed. Whenever the seal of this Corporation is to be affixed to any instrument being executed on behalf of this Corporation, such seal shall be affixed thereto by the Secretary or an Assistant Secretary and the fact of such affixation shall be attested to by the person so affixing the seal. ARTICLE XXVII RECEIPT FOR SECURITIES Section 1. All receipts for stocks, bonds or other securities received by the Corporation shall be signed by the Treasurer or an Assistant Treasurer, or by such other person or persons as the Board of Directors or Executive Committee shall designate. ARTICLE XXVIII FISCAL YEAR Section 1. The fiscal year shall begin the first day of January in each year. ARTICLE XXIX RESERVES Section 1. The Board of Directors shall have power to fix and determine, and from time to time to vary, the amount to be reserved as working capital; to determine whether any, or if any, what part of any, surplus shall be declared and paid as dividends, to determine the date or dates for the declaration or payment of dividends and to direct and determine the use and disposition of any surplus, and before payment of any dividend or making any distribution of surplus there may be set aside out of the surplus of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation. 90 ARTICLE XXX NOTICES Section 1. In addition to the telegraphic notice permitted by Section 3 of Article V of these By-Laws, whenever under the provisions of these By-Laws notice is required to be given to any director, officer or stockholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail, by depositing a copy of the same in a post office, letter box or mail chute, maintained by the Post Office Department, in a postpaid sealed wrapper, addressed to such stockholder, officer or director, at his address as the same appears on the books of the Corporation. A stockholder, director or officer may waive any notice required to be given to him under these By-Laws. ARTICLE XXXI INSPECTORS OF ELECTION Section 1. Prior to every meeting of the stockholders the Board of Directors may appoint any odd number of inspectors of election to act as inspectors at such meeting. In the event that inspectors shall not be so appointed, they shall be appointed by the person presiding at such meeting and if any inspector shall refuse to serve, or neglect to attend such meeting or his office becomes vacant, the person presiding at the meeting may appoint another inspector in his place. The inspectors appointed to act at any meeting of the stockholders shall, before entering upon the discharge of their duties, be sworn faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. ARTICLE XXXII DIRECTOR, OFFICER AND EMPLOYEE INDEMNIFICATION Section 1. The Corporation shall indemnify any and all of its employees, officers, or directors, or former officers or directors (including their heirs, executors, and administrators), or any person who may have served at its request or by its election, designation, or request as a member, agent, employee, director or officer of any other corporation or partner, trustee or otherwise, of any organization against expenses actually and necessarily incurred by them in connection with the defense or settlement of any action, suit or proceeding (which shall include any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or arbitrative) in which they, or any of them, are made parties, or a party, by reason of being or having been agents, employees, directors or officers of the Corporation, or of such other organization, except in relation to matters as to which any such agent, employee, director or officer or former employee, director or officer or person shall be adjudged in such action, suit or proceeding to be liable for willful misconduct in the performance of duty and to such matters, as shall be settled by agreement predicated on the existence of such liability. Such indemnity shall be in accordance with a written plan adopted by the Board of Directors, which plan shall be in accordance with the law of South Carolina. The indemnification provided hereby shall not be deemed exclusive of any other right to which anyone seeking indemnification hereunder may be entitled under any By-Law, agreement, or otherwise. The Corporation may purchase and maintain insurance on the behalf of any director, officer, agent, employee or former employee, director or officer or other person, against any liability asserted against them and incurred by them. 91 ARTICLE XXXIII AMENDMENTS Section 1. Any of these By-Laws may be altered, amended or repealed, and/or one or more new By-Laws may be adopted, at a meeting of the stockholders, by a vote of the holders of a majority of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, provided that written notice of such proposed alteration, amendment, repeal and/or adoption, as the case may be, shall have been given to all such stockholders at least ten days before such meeting. Any of these By-Laws may also be altered, amended or repealed, and/or one or more new By-Laws may be adopted, by the vote of a majority of all directors then in office, at a meeting of the Board of Directors, provided that the notice of such meeting includes therein notice of such alteration, amendment, repeal and/or adoption, as the case may be. At a meeting thereof, the stockholders, by the vote of the holders of a majority or by written consent of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, may repeal any alteration or amendment of these By-Laws made by the Board of Directors and/or reinstate any of these By-Laws repealed by the Board of Directors, and/or repeal any new B EX-2 3 Exhibit 4-G TRUST AGREEMENT TRUST AGREEMENT dated as of October 8, 1997, by and between South Carolina Electric & Gas Company, a South Carolina corporation, as "Depositor," and The Bank of New York (Delaware), as trustee (the "Delaware Trustee"), and M. R. Cannon, as trustee (the "Administrative Trustee" and together with the Delaware Trustee, the "Trustees"). The Depositor and the Trustees hereby agree as follows: Section 1. The Trust. The trust created hereby shall be known as "SCE&G Trust I" (the "Trust"), in which name the Trustees, or the Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. Section 2. The Trust Estate. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. Such amount shall constitute the initial trust estate. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in accordance with the provisions of the Business Trust Act. Section 3. Amended and Restated Trust Agreement. The Depositor, the Trustees and certain other parties will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form to be included as an exhibit to the 1933 Act Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities (as defined below) and common securities of the Trust to be referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery and licenses, consents or approvals required by applicable law or otherwise. 93 Section 4. Certain Authorizations. The Depositor, as the sponsor of the Trust, is hereby authorized, (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to such 1933 Act Registration Statement (including the prospectus and the exhibits contained therein), relating to the registration under the Securities Act of 1933, as amended, of the preferred securities of the Trust (the "Preferred Securities") and certain other securities of the Depositor and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12 of the Securities Exchange Act of 1934, as amended; (ii) to file with one or more national securities exchanges (each, an "Exchange") or the National Association of Securities Dealers ("NASD") and execute on behalf of the Trust a listing application or applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on any such Exchange or the NASD's Nasdaq National Market; (iii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as the Depositor on behalf of the Trust, may deem necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws; and (iv) to execute on behalf of the Trust such Underwriting Agreements with one or more underwriters relating to the offering of the Preferred Securities as the Depositor, on behalf of the Trust, may deem necessary or desirable. In the event that any filing referred to in clauses (i), (ii) or (iii) above is required by the rules and regulations of the Commission, any Exchange, the NASD or state securities or "Blue Sky" laws, to be executed on behalf of the Trust by a Trustee, the Depositor and any Trustee are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing; it being understood that The Bank of New York (Delaware), in its capacity as a trustee of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by any such law, rule or regulation. Section 5. Counterparts. This Trust Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 94 Section 6. Trustees. The number of Trustees initially shall be two (2) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor, which may increase or decrease the number of Trustees; provided, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, 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 Delaware law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. Any Trustee may resign upon thirty days' prior notice to the Depositor, provided, however, such notice shall not be required if it is waived by the Depositor. Section 7. Limitation. The Bank of New York (Delaware), in its capacity as a Trustee, shall not have any of the powers or duties of the Trustees set forth herein, except as expressly required by the Business Trust Act, and shall be a trustee of the Trust for the sole purpose of satisfying the requirements of Section 3807 of the Business Trust Act. Section 8. Governing Law. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflicts of law principles). IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. SOUTH CAROLINA ELECTRIC & GAS COMPANY, as Depositor By: s/M. R. Cannon Name: M. R. Cannon EX-3 4 Exhibit 4-H CERTIFICATE OF TRUST OF SCE&G TRUST I This Certificate of Trust of SCE&G Trust I (the "Trust"), dated October 8, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.) 1. Name. The name of the business trust being formed hereby is SCE&G Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is The Bank of New York (Delaware), whose business address is White Clay Center, Route 273, Newark, Delaware 19711. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF EX-4 5 Exhibit 4-I ======================================= SOUTH CAROLINA ELECTRIC & GAS COMPANY as Issuer to THE BANK OF NEW YORK, as Trustee --------------------------- JUNIOR SUBORDINATED INDENTURE Dated as of October 28, 1997 --------------------------- =========================================== SOUTH CAROLINA ELECTRIC & GAS COMPANY Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of October 28, 1997. 97 TRUST INDENTURE INDENTURE ACT SECTION SECTION Section 310 (a) (1), (2) and (5) 6.9 (a) (3) Not Applicable (a) (4) Not Applicable (b) 6.8, 6.10(d) (c) Not Applicable Section 311 (a) 6.13 (b) 6.13 (c) Not Applicable Section 312 (a) 7.1, 7.2(a) (b) 7.2(b) (c) 7.2(c) Section 313 (a) 7.3(a), (b) (b) 7.3(a) (c) 7.3(a) (d) 7.3(c) Section 314 (a) (1), (2) and (3) 7.4 (a) (4) 10.4 (b) Not Applicable (c) (1) 1.2 (c) (2) 1.2 (c) (3) Not Applicable (d) Not Applicable (e) 1.2 (f) Not Applicable Section 315 (a) 6.1(a) (b) 6.2 (c) 6.1(b) (d) 6.1(c) (d) (1) 6.1(c)(i) (d) (2) 6.1(c)(ii) (d) (3) 6.1(c) (iii) (e) 5.14 Section 316 (a) 1.1 (a) (1) (A) 5.12 (a) (1) (B) 5.13 (a) (2) Not Applicable (b) 5.7, 5.8 (c) 1.4(f) Section 317 (a) (1) 5.3 (a) (2) 5.4 (b) 10.3 Section 318 (a) 1.7 Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Junior Subordinated Indenture. 98 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 8 SECTION 1.1. Definitions 8 SECTION 1.2. Compliance Certificate and Opinions 18 SECTION 1.3. Forms of Documents Delivered to Trustee 19 SECTION 1.4. Acts of Holders 20 SECTION 1.5. Notices, Etc. to the Trustee and the Corporation 22 SECTION 1.6. Notice to Holders; Waiver 23 SECTION 1.7. Conflict with Trust Indenture Act 23 SECTION 1.8. Effect of Headings and Table of Contents 23 SECTION 1.9. Successors and Assigns 23 SECTION 1.10. Separability Clause 24 SECTION 1.11. Benefits of Indenture 24 SECTION 1.12. Governing Law 24 SECTION 1.13. Non-Business Days 24 ARTICLE II SECURITY FORMS 24 SECTION 2.1. Forms Generally 24 SECTION 2.2. Form of Face of Security 25 SECTION 2.3. Form of Reverse of Security 29 SECTION 2.4. Additional Provisions Required in Global Security 33 SECTION 2.5. Form of Trustee's Certificate of Authentication 33 ARTICLE III THE SECURITIES 33 SECTION 3.1. Title and Terms 33 SECTION 3.2. Denominations 37 SECTION 3.3. Execution, Authentication, Delivery and Dating 37 SECTION 3.4. Temporary Securities 39 SECTION 3.5. Global Securities 39 SECTION 3.6. Registration, Transfer and Exchange Generally 41 SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities 42 SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved 43 SECTION 3.9. Persons Deemed Owners 45 SECTION 3.10. Cancellation 45 SECTION 3.11. Computation of Interest 45 SECTION 3.12. Deferrals of Interest Payment Dates 46 SECTION 3.13. Right of Setoff 47 SECTION 3.14. Agreed Tax Treatment 47 SECTION 3.15. Shortening or Extension of Stated Maturity 47 SECTION 3.16. CUSIP Numbers 48 99 ARTICLE IV SATISFACTION AND DISCHARGE 48 SECTION 4.1. Satisfaction and Discharge of Indenture 48 SECTION 4.2. Application of Trust Money 49 ARTICLE V REMEDIES 50 SECTION 5.1. Events of Default 50 SECTION 5.2. Acceleration of Maturity; Rescission and Annulment 51 SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 53 SECTION 5.4. Trustee May File Proofs of Claim 53 SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities 55 SECTION 5.6. Application of Money Collected 55 SECTION 5.7. Limitation on Suits 55 SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Trust Preferred Securities 56 SECTION 5.9. Restoration of Rights and Remedies 57 SECTION 5.10. Rights and Remedies Cumulative 57 SECTION 5.11. Delay or Omission Not Waiver 57 SECTION 5.12. Control by Holders 58 SECTION 5.13. Waiver of Past Defaults 58 SECTION 5.14. Undertaking for Costs 59 SECTION 5.15. Waiver of Usury, Stay or Extension Laws 59 ARTICLE VI THE TRUSTEE 60 SECTION 6.1. Certain Duties and Responsibilities 60 SECTION 6.2. Notice of Defaults 61 SECTION 6.3. Certain Rights of Trustee 61 SECTION 6.4. Not Responsible for Recitals or Issuance of Securities 62 SECTION 6.5. May Hold Securities 63 SECTION 6.6. Money Held in Trust 63 SECTION 6.7. Compensation and Reimbursement 63 SECTION 6.8. Disqualification; Conflicting Interests 64 SECTION 6.9. Corporate Trustee Required; Eligibility 64 SECTION 6.10. Resignation and Removal; Appointment of Successor 65 SECTION 6.11. Acceptance of Appointment by Successor 66 SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business 67 SECTION 6.13. Preferential Collection of Claims Against Corporation 68 SECTION 6.14. Appointment of Authenticating Agent 68 100 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION 70 SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders 70 SECTION 7.2. Preservation of Information, Communications to Holders 70 SECTION 7.3. Reports by Trustee 71 SECTION 7.4. Reports by Corporation 71 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 71 SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms 71 SECTION 8.2. Successor Corporation Substituted 72 ARTICLE IX SUPPLEMENTAL INDENTURES 73 SECTION 9.1. Supplemental Indentures without Consent of Holders 73 SECTION 9.2. Supplemental Indentures with Consent of Holders 74 SECTION 9.3. Execution of Supplemental Indentures 76 SECTION 9.4. Effect of Supplemental Indentures 76 SECTION 9.5. Conformity with Trust Indenture Act 76 SECTION 9.6. Reference in Securities to Supplemental Indentures 76 ARTICLE X COVENANTS 77 SECTION 10.1. Payment of Principal, Premium and Interest 77 SECTION 10.2. Maintenance of Office or Agency 77 SECTION 10.3. Money for Security Payments to be Held in Trust 79 SECTION 10.4. Statement as to Compliance 79 SECTION 10.5. Waiver of Certain Covenants 79 SECTION 10.6. Additional Sums 80 SECTION 10.7. Additional Covenants 80 SECTION 10.8. Original Issue Discount 82 ARTICLE XI REDEMPTION OF SECURITIES 82 SECTION 11.1 Applicability of This Article 82 SECTION 11.2. Election to Redeem; Notice to Trustee 82 SECTION 11.3. Selection of Securities to be Redeemed 83 SECTION 11.4. Notice of Redemption 83 SECTION 11.5. Deposit of Redemption Price 84 SECTION 11.6. Payment of Securities Called for Redemption 84 101 SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust 85 ARTICLE XII SINKING FUNDS 86 SECTION 12.1. Applicability of Article 86 SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities 86 SECTION 12.3. Redemption of Securities for Sinking Fund 86 ARTICLE XIII SUBORDINATION OF SECURITIES 88 SECTION 13.1. Securities Subordinate to Senior Debt 88 SECTION 13.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc 88 SECTION 13.3. Payment Permitted If No Default 90 SECTION 13.4. Subrogation to Rights of Holders of Senior Debt 91 SECTION 13.5. Provisions Solely to Define Relative Rights 91 SECTION 13.6. Trustee to Effectuate Subordination 92 SECTION 13.7. No Waiver of Subordination Provisions 92 SECTION 13.8. Notice to Trustee 93 SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent 93 SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Debt 94 SECTION 13.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights 94 SECTION 13.12. Article Applicable to Paying Agents 94 102 JUNIOR SUBORDINATED INDENTURE, dated as of October 28, 1997, between South Carolina Electric & Gas Company, a South Carolina corporation (the "Corporation"), and The Bank of New York, a New York banking corporation, as Trustee (the "Trustee"). RECITALS WHEREAS, the Corporation has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured junior subordinated debt securities in series (hereinafter called the "Securities") of substantially the tenor hereinafter provided, including Securities issued to evidence loans made to the Corporation of the proceeds from the issuance from time to time by one or more business trusts (each an "Issuer Trust") of preferred undivided beneficial interests in the assets of such Issuer Trusts (the "Trust Preferred Securities") and common undivided beneficial interests in the assets of such Issuer Trusts (the "Common Securities" and, collectively with the Trust Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Corporation 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 I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; (e) Whenever the context may require, any gender shall be deemed to include the others; 103 (f) Unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (g) The words "hereby," "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. "Act" when used with respect to any Holder has the meaning specified in Section 1.4. "Additional Interest" means the interest, if any, that shall accrue on any interest on the Securities of any series the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security. "Additional Sums" has the meaning specified in Section 10.6. "Additional Taxes" means any additional taxes, duties and other governmental charges to which an Issuer Trust has become subject from time to time as a result of a Tax Event. "Administrative Trustees" means, in respect of any Issuer Trust, each Person identified as an "Administrative Trustee" in the related Trust Agreement, solely in such Person's capacity as Administrative Trustee of such Issuer Trust under such Trust Agreement and not in such Person's individual capacity, or any successor administrative trustee appointed as therein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" means any member of, or participant in, the Depositary. "Allocable Amounts," when used with respect to any Senior Subordinated Indebtedness of the Corporation means the amount necessary to pay all principal of (and premium, if any) and interest, if any, on such Senior Subordinated Indebtedness of the Corporation, in full less, if applicable, any portion of such amounts which would have been paid to, and retained by, the holders of such Senior Subordinated Indebtedness (whether as a result of the receipt of payments by the holders of such Senior Subordinated Indebtedness from the Corporation or any other obligor thereon or from any holders of, or trustee in respect of, other indebtedness that is subordinate and junior in right of payment to such Senior Subordinated Indebtedness pursuant to any provision of such indebtedness for the payment over of amounts received on account of such indebtedness to the holders of such Senior Subordinated Indebtedness) but for the fact that such Senior Subordinated Indebtedness is subordinate or junior in right of payment to trade accounts payable or accrued liabilities arising in the ordinary course of business. 104 "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities of one or more series. "Bankruptcy Code" means Title 11 of the United States Code or any successor statute thereto, in each case as amended from time to time. "Board of Directors" means the board of directors of the Corporation or the Executive Committee of the board of directors of the Corporation (or any other committee of the board of directors of the Corporation performing similar functions) or a committee designated by the board of directors of the Corporation (or such committee), comprised of two or more members of the board of directors or officers, or both, of the Corporation in each case as the context requires. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors, or officers of the Corporation to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (c) a day on which the Corporate Trust Office of the Trustee, or, with respect to the Securities of a series initially issued to an Issuer Trust for so long as such Securities are held by such Issuer Trust, the "Corporate Trust Office" (as defined in the related Trust Agreement) of the Property Trustee under the related Trust Agreement, is closed for business. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Common Securities" has the meaning specified in the first recital of this Indenture. "Common Stock" means the common stock of the Corporation. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered. "Corporation" includes a corporation, association, company, limited liability company, joint-stock company or business trust. 105 "Corporation" means the Person named as the "Corporation" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Corporation" shall mean such successor corporation. "Corporation Request" and "Corporation Order" mean, respectively, the written request or order signed in the name of the Corporation by the Chairman of the Board of Directors, its Chief Executive Officer, its President, its Chief Financial Officer, a Vice President or its Treasurer, and by its Secretary or an Assistant Secretary, and delivered to the Trustee. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of the Corporation, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; and (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise. "Defaulted Interest" has the meaning specified in Section 3.8. "Delaware Trustee" means, with respect to any Issuer Trust, the Person identified as the "Delaware Trustee" in the related Trust Agreement, solely in its capacity as Delaware Trustee of such Issuer Trust under such Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware trustee appointed as therein provided. "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Corporation pursuant to Section 3.1 with respect to such series (or any successor thereto). "Discount Security" means any security that 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 5.2. 106 "Distributions," with respect to the Trust Securities issued by an Issuer Trust, means amounts payable in respect of such Trust Securities as provided in the related Trust Agreement and referred to therein as "Distributions." "Dollar" or "$" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts. "Event of Default," unless otherwise specified with respect to a series of Securities as contemplated by Section 3.1, has the meaning specified in Article V. "Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 1.4. "Extension Period" has the meaning specified in Section 3.12. "Global Security" means a Security in the form prescribed in Section 2.4 evidencing all or part of a series of Securities, issued to the Depositary or its nominee for such series, and registered in the name of such Depositary or its nominee. "Guarantee Agreement" means, with respect to any Issuer Trust, the Guarantee Agreement executed by the Corporation for the benefit of the Holders of the Trust Preferred Securities issued by such Issuer Trust as modified, amended or supplemented from time to time. "Holder" means a Person in whose name a Security is registered in the Securities Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of each particular series of Securities established as contemplated by Section 3.1. "Interest Payment Date" means, as to each series of Securities, the Stated Maturity of an installment of interest on such Securities. "Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time. "Issuer Trust" has the meaning specified in the first recital of this Indenture. "Maturity" when used with respect to any Security means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Notice of Default" means a written notice of the kind specified in Section 6.2. 107 "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, a Vice President, the Chief Financial Officer or the Treasurer, and by the Secretary or an Assistant Secretary, of the Corporation and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Corporation or any Affiliate of the Corporation. "Original Issue Date" means the date of issuance specified as such in each Security. "Outstanding" means, when used in reference to the Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities for whose payment money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; and (c) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or that have been paid pursuant to Section 3.7, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Corporation; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Corporation or any other obligor upon the Securities or any Affiliate of the Corporation or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that the Trustee knows to be so owned shall be so disregarded. Securities so owned that 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 Corporation or any other obligor upon the Securities or any Affiliate of the Corporation or such other obligor. Upon the written request of the Trustee, the Corporation shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Corporation to be owned or held by or for the account of the Corporation, or any other obligor on the Securities or any Affiliate of the Corporation or such obligor, and subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. Notwithstanding anything herein to the contrary, Securities of any series initially issued to an Issuer Trust that are owned by such Issuer Trust shall be deemed to be Outstanding notwithstanding the ownership by the Corporation or an Affiliate of any beneficial interest in such Issuer Trust. 108 "Paying Agent" means the Trustee or any Person authorized by the Corporation to pay the principal of (or premium, if any) or interest on, or other amounts in respect of, any Securities on behalf of the Corporation. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Place of Payment" means, with respect to the Securities of any series, the place or places where the principal of (and premium, if any) and interest on the Securities of such series are payable pursuant to Section 3.1. "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. For the purposes of this definition, any security authenticated and delivered under Section 3.7 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. "Proceeding" has the meaning specified in Section 13.2. "Property Trustee" means, with respect to any Issuer Trust, the Person identified as the "Property Trustee" in the related Trust Agreement, solely in its capacity as Property Trustee of such Issuer Trust under such Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor Property Trustee appointed as therein provided. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture or the terms of such Security. "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. "Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities of a series means, unless otherwise provided pursuant to Section 3.1 with respect to Securities of such series, the date that is 15 days next preceding such Interest Payment Date (whether or not a Business Day). "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, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller 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. 109 "Rights Plan" means a plan of the Corporation providing for the issuance by the Corporation to all holders of its Common Stock of rights entitling the holders thereof to subscribe for or purchase shares of any class or series of capital stock of the Corporation which rights (i) are deemed to be transferred with such shares of such Common Stock and (ii) are also issued in respect of future issuances of such Common Stock, in each case until the occurrence of a specified event or events. "Securities" or "Security" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.6. "Senior Debt" of the Corporation means (i) Senior Indebtedness of the Corporation (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business) and (ii) the Allocable Amounts of Senior Subordinated Indebtedness of the Corporation. "Senior Indebtedness" means any obligation of the Corporation to its creditors, whether now outstanding or subsequently incurred, other than any obligation as to which, in the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding, it is provided that such obligation is not Senior Indebtedness. Senior Indebtedness does not include Senior Subordinated Indebtedness or the Securities. "Senior Subordinated Indebtedness" means any obligation of the Corporation to its creditors, whether now outstanding or subsequently incurred, where the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding provides that it is subordinate and junior in right of payment to Senior Indebtedness. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity," when used with respect to any Security or any installment of principal thereof (or premium, if any) or interest (including any Additional Interest) thereon, means the date specified pursuant to the terms of such Security as the fixed date on which the principal of such Security or such installment of principal (or premium, if any) or interest (including any Additional Interest) is due and payable, as such date may, in the case of the stated maturity of the principal on any security, be shortened or extended as provided pursuant to the terms of such Security and this Indenture and, in the case of any installment of interest, subject to the deferral of any such date in the case of any Extension Period. 110 "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Corporation or by one or more other Subsidiaries, or by the Corporation and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Successor Security" of any particular Security means every Security issued after, and 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 3.7 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. "Tax Event" means the receipt by an Issuer Trust of an Opinion of Counsel (as defined in the relevant Trust Agreement) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Trust Preferred Securities of such Issuer Trust, there is more than an insubstantial risk that (i) such Issuer Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the corresponding series of Securities issued by the Corporation to such Issuer Trust, (ii) interest payable by the Corporation on such corresponding series of Securities is not, or within 90 days of the delivery of such Opinion of Counsel will not be, deductible by the Corporation, in whole or in part, for United States federal income tax purposes or (iii) such Issuer Trust is, or will be within 90 days of the delivery of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust Agreement" means, with respect to any Issuer Trust, the trust agreement or other governing instrument of such Issuer Trust. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder and, if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture, except as provided in Section 9.5. "Trust Preferred Securities" has the meaning specified in the first recital of this Indenture. 111 "Trust Securities" has the meaning specified in the first recital of this Indenture. "Vice President" means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president," of the Corporation. SECTION 1.2. Compliance Certificate and Opinions. Upon any application or request by the Corporation to the Trustee to take any action under any provision of this Indenture, the Corporation shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.4) shall include: (a) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based; (c) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her 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 such individual, such condition or covenant has been complied with. SECTION 1.3. Forms 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. 112 Any certificate or opinion of an officer of the Corporation 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 matters upon which his or her 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 Corporation stating that the information with respect to such factual matters is in the possession of the Corporation 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 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Corporation. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Corporation 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 the certificate of any 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 or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. (c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. 113 (e) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Corporation in reliance thereon, whether or not notation of such action is made upon such Security. (f) The Corporation may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Corporation may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next succeeding paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined below) by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Corporation from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Corporation, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 1.6. The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any direction referred to in Section 5.12, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and 114 of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Corporation's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Corporation in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 1.6. With respect to any record date set pursuant to this Section, the party that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day, provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto that set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. (g) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. SECTION 1.5. Notices, Etc. to the Trustee and the Corporation. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder, any holder of Trust Preferred Securities or the Corporation 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, or (b) the Corporation by the Trustee, any Holder or any holder of Trust Preferred Securities shall be sufficient for every purpose (except as otherwise provided in Section 6.2) hereunder if in writing and mailed, first class, postage prepaid, to the Corporation addressed to it at the address of its principal office specified adjacent to the Corporation's signature to this instrument or at any other address previously furnished in writing to the Trustee by the Corporation. 115 SECTION 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture or of the relevant Securities, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. 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 1.7. Conflict with Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to and including 317 of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which 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. SECTION 1.8. 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 1.9. Successors and Assigns. All covenants and agreements in this Indenture by the Corporation shall bind its successors and assigns, whether so expressed or not. SECTION 1.10. Separability Clause. If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and, to the extent expressly provided in Sections 5.1, 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and 9.2, the holders of Trust Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. 116 SECTION 1.12. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 1.13. Non-Business Days. If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) or other amounts in respect of such Security need not be made on such date, but may be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day) except that, if such Business Day falls 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 the Interest Payment Date or Redemption Date or at the Stated Maturity). ARTICLE II SECURITY FORMS SECTION 2.1. Forms Generally. The Securities of each series and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, or in such other form or forms 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 applicable tax laws or the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Corporation and delivered to the Trustee at or prior to the delivery of the Corporation Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. 117 SECTION 2.2. Form of Face of Security. SOUTH CAROLINA ELECTRIC & GAS COMPANY [TITLE OF SECURITY] CUSIP NO. No. $ SOUTH CAROLINA ELECTRIC & GAS COMPANY, a corporation organized and existing under the laws of South Carolina (hereinafter called the "Corporation," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________, or registered assigns, the principal sum of __________ Dollars on __________ __, [if the Security is a Global Security, then insert, if applicable--, or such other principal amount represented hereby as may be set forth in the records of the Securities Registrar hereinafter referred to in accordance with the Indenture]. The Corporation further promises to pay interest on said principal sum from _______________________, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [monthly] [quarterly] [semi-annually] [if applicable, insert-- (subject to deferral as set forth herein)] in arrears on [insert applicable Interest Payment Dates] of each year, commencing , at the rate of % per annum, [if applicable insert--together with Additional Sums, if any, as provided in Section 10.6 of the Indenture] until the principal hereof is paid or duly provided for or made available for payment [if applicable, insert-- ; provided that any overdue principal, premium or Additional Sums and any overdue installment of interest shall bear Additional Interest at the rate of ________% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded [monthly] [quarterly] [semi-annually], from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand]. The amount of interest payable for any period less than a full interest period shall be computed on the basis of a 360- day year of twelve 30-day months and the actual days elapsed in a partial month in such period. The amount of interest payable for any full interest period shall be computed by dividing the applicable rate per annum by [twelve/four/two]. The interest 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 name this Security (or one or more Predecessor Securities) is registered at the close of business on the regular record date (the "Regular Record Date") for such interest installment [if applicable insert--, which shall be the [____________ or ____________] (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date]. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. 118 [If applicable, insert--So long as no Event of Default has occurred and is continuing, the Corporation shall have the right, at any time during the term of this Security, from time to time to defer the payment of interest on this Security for up to [_______] consecutive [monthly] [quarterly] [semi-annual] interest payment periods with respect to each deferral period (each an "Extension Period") [If applicable, insert--, during which Extension Periods the Corporation shall have the right to make partial payments of interest on any Interest Payment Date, and] at the end of which the Corporation shall pay all interest then accrued and unpaid including any Additional Interest, as provided below; provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security [If Stated Maturity can be shortened or extended, insert--, as then in effect,] and no such Extension Period may end on a date other than an Interest Payment Date. Prior to the termination of any such Extension Period, the Corporation may further defer the payment of interest, provided that no Extension Period shall exceed -- consecutive [monthly] [quarterly] [semi-annual] interest payment periods, extend beyond the Stated Maturity of the principal of this Security or end on a date other than an Interest Payment Date. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Corporation may elect to begin a new Extension Period, subject to the above conditions. No interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension shall bear Additional Interest (to the extent that the payment of such interest shall be legally enforceable) at the rate of ____% per annum, compounded [monthly] [quarterly] [semi-annually] and calculated as set forth in the first paragraph of this Security, from the dates on which amounts would otherwise have been due and payable until paid or made available for payment. The Corporation shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral [if applicable, insert--or so long as such Securities are held by [insert name of applicable Issuer Trust], at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Trust Preferred Securities of such Issuer Trust would be payable but for such deferral and (ii) the date on which the Property Trustee of such Issuer Trust is required to give notice to any securities exchange or other applicable self- regulatory organization or to holders of such Trust Preferred Securities of the record date or the date such Distributions are payable]. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Corporation maintained for that purpose in the [insert Place of Payment], in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [if applicable, insert--; provided, however, that at the option of the Corporation payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Securities Register]. 119 The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (i) agrees to and shall be bound by such provisions, (ii) authorizes and directs the Trustee on his or her behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (iii) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, 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. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal. SOUTH CAROLINA ELECTRIC & GAS COMPANY By: Name: Title: Attest: - ---------------------------------- [Secretary or Assistant Secretary] SECTION 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Corporation (herein called the "Securities"), issued and to be issued in one or more series under the Junior Subordinated Indenture, dated as of October 28, 1997 (herein called the "Indenture"), between the Corporation and , as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Corporation, the Trustee, the holders of Senior Debt and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [if applicable, insert--, limited in aggregate principal amount to $ ]. 120 All terms used in this Security that are defined in the Indenture [if applicable, insert--or in the Amended and Restated Trust Agreement, dated as of October 28, 1997 (as modified, amended or supplemented from time to time, the "Trust Agreement"), relating to [insert name of Issuer Trust] (the "Issuer Trust") among the Corporation, as Depositor, the Trustees named therein and the Holders from time to time of the Trust Securities issued pursuant thereto, shall have the meanings assigned to them in the Indenture [if applicable, insert--or the Trust Agreement, as the case may be]. [If applicable, insert--The Corporation may at any time, at its option, on or after _________, ____, and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time, at the following Redemption Prices (expressed as percentages of the principal amount hereof): If redeemed during the 12-month period beginning _____________, Redemption Year Price and thereafter at a Redemption Price equal to 100% of the principal amount hereof, together, in the case of any such redemption, with accrued interest [if applicable, insert--, including any Additional Interest,] to but excluding the date fixed for redemption.] [If applicable, insert--In addition, upon the occurrence and during the continuation of a Tax Event in respect of the Issuer Trust, the Corporation may, at its option, at any time within 90 days of the occurrence and during the continuation of such Tax Event redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture, at a redemption price equal to [insert formula]]. [If the Security is subject to redemption of any kind, insert- - -In the event of redemption of this Security in part only, a new Security or Securities of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Corporation with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Corporation and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Corporation and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Corporation with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 121 [If the Security is not a Discount Security, insert--As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of this series may declare the principal amount of all the Securities of this series to be due and payable immediately, by a notice in writing to the Corporation (and to the Trustee if given by Holders) [if applicable, insert--, provided that, if upon an Event of Default, the Trustee or such Holders fail to declare the principal of all the Outstanding Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Trust Preferred Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Corporation and the Trustee]; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture.] [If the Security is a Discount Security, insert--As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of this series may declare an amount of principal of the Securities of this series to be due and payable immediately, by a notice in writing to the Corporation (and to the Trustee if given by Holders) [if applicable, insert--, provided that, if upon an Event of Default, the Trustee or such Holders fail to declare such principal amount of the Outstanding Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Trust Preferred Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Corporation and the Trustee]. The principal amount payable upon such acceleration shall be equal to--insert formula for determining the amount]. Upon any such declaration, such amount of the principal of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of such principal and interest (including any Additional Interest) on all the Securities of this series shall remain subordinated to the extent provided in Article XIII of the Indenture. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal, premium and interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Corporation's obligations in respect of the payment of the principal of and premium and interest, if any, on this Security shall terminate.] No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest [insert if applicable--including any Additional Interest)] on this Security at the times, place and rate, and in the coin or currency, herein prescribed. 122 As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Corporation maintained under Section 10.2 of the Indenture for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Securities Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities of this series, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple of $25 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Corporation, the Trustee and any agent of the Corporation or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Corporation, the Trustee nor any such agent shall be affected by notice to the contrary. The Corporation and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States federal, state and local tax purposes it is intended that this Security constitute indebtedness. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 2.4. Additional Provisions Required in Global Security. Unless otherwise specified as contemplated by Section 3.1, any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 123 SECTION 2.5. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: THE BANK OF NEW YORK, as Trustee By: ___________________________________ Authorized Signatory ARTICLE III THE SECURITIES SECTION 3.1. Title and Terms. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 3.3, set forth or determined in the manner provided in an Officers' Certificate or established in one or more indentures supplemental hereto, prior to the issuance of Securities of a series: (a) the title of the securities of such series, which shall distinguish the Securities of the series from all other Securities; (b) the limit, if any, upon the aggregate principal amount of the Securities of such 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 3.4, 3.6, 3.7, 9.6 or 11.6 and except for any Securities that, pursuant to Section 3.3, are deemed never to have been authenticated and delivered hereunder); provided, however, that the authorized aggregate principal amount of such series may be increased above such amount by a Board Resolution to such effect; (c) the Person to whom any interest on a 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; (d) the Stated Maturity or Maturities on which the principal of the Securities of such series is payable or the method of determination thereof and any dates on which or circumstances under which, the Corporation shall have the right to extend or shorten such Stated Maturity or Maturities; 124 (e) the rate or rates, if any, at which the Securities of such series shall bear interest, if any, the rate or rates and extent to which Additional Interest, if any, shall be payable in respect of any Securities of such series, the date or dates from which any such interest or Additional Interest shall accrue, the Interest Payment Dates on which such interest shall be payable, the right, pursuant to Section 3.12 or as otherwise set forth therein, of the Corporation to defer or extend an Interest Payment Date and the Regular Record Date for the interest payable on any Interest Payment Date or the method by which any of the foregoing shall be determined; (f) the place or places where the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities of such series shall be payable, the place or places where the Securities of such series may be presented for registration of transfer or exchange, any restrictions that may be applicable to any such transfer or exchange in addition to or in lieu of those set forth herein and, if other than set forth in this Indenture, the place or places where notices and demands to or upon the Corporation in respect of the Securities of such series may be made; (g) the period or periods within or the date or dates on which, if any, the price or prices at which and the terms and conditions upon which the Securities of such series may be redeemed, in whole or in part, at the option of the Corporation, and if other than by a Board Resolution, the manner in which any election by the Corporation to redeem such Securities shall be evidenced; (h) the obligation or the right, if any, of the Corporation to redeem, repay or purchase the Securities of such series pursuant to any sinking fund, amortization or analogous provisions, or at the option of a Holder thereof, and the period or periods within which, the price or prices at which, the currency or currencies (including currency unit or units) in which and the 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; (i) the denominations in which any Securities of such series shall be issuable, if other than denominations of $25 and any integral multiple thereof; (j) if other than Dollars, the currency or currencies (including any currency unit or units) in which the principal of (and premium, if any) and interest and Additional 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 manner of determining the equivalent thereof in Dollars for purposes of the definition of Outstanding; (k) the additions, modifications or deletions, if any, in the Events of Default or covenants of the Corporation set forth herein with respect to the Securities of such series; (l) if other than the principal amount thereof, the portion of the principal amount of Securities of such series that shall be payable upon declaration of acceleration of the Maturity thereof; 125 (m) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined); (n) the additions or changes, if any, to this Indenture with respect to the Securities of such series as shall be necessary to permit or facilitate the issuance of the Securities of such series in bearer form, registrable or not registrable as to principal, and with or without interest coupons; (o) any index or indices used to determine the amount of payments of principal of and premium, if any, on the Securities of such series or the manner in which such amounts will be determined; (p) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositaries for such Global Securities, the form of any legend or legends that shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 2.4 and any circumstances in addition to or in lieu of those set forth in Section 3.6 in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof; (q) the appointment of any Paying Agent or agents for the Securities of such series; (r) the terms of any right to convert or exchange Securities of such series into any other securities or property of the Corporation, and the additions or changes, if any, to this Indenture with respect to the Securities of such series to permit or facilitate such conversion or exchange; (s) if such Securities are to be issued to an Issuer Trust, the form or forms of the Trust Agreement and Guarantee Agreement relating thereto; (t) if other than as set forth herein, the relative degree, if any, to which the Securities of the series shall be senior to or be subordinated to other series of Securities in right of payment, whether such other series of Securities are Outstanding or not; (u) any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 5.2; (v) any addition to or change in the covenants set forth in Article X which applies to Securities of the series; and 126 (w) any other terms of the Securities of such series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 9.1(f)). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided herein or in or pursuant to such Board Resolution and set forth, or determined in the manner provided, in such Officers' Certificate or in any indenture supplemental hereto. If any of the terms of the 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 Corporation and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. The Securities shall be subordinated in right of payment to Senior Debt as provided in Article XIII. SECTION 3.2. Denominations. The Securities of each series shall be in registered form without coupons and shall be issuable in denominations of $25 and any integral multiple thereof, unless otherwise specified as contemplated by Section 3.1. SECTION 3.3. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Corporation by its Chairman of the Board, its Chief Executive Officer, its President, its Chief Financial Officer, one of its Vice Presidents or its Treasurer, under its corporate seal reproduced or impressed thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Corporation shall bind the Corporation, 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 Corporation may deliver Securities of any series executed by the Corporation to the Trustee for authentication, together with a Corporation Order for the authentication and delivery of such Securities and the Trustee in accordance with the Corporation Order shall authenticate and make available for delivery such Securities. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating: (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture; 127 (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; and (c) that such Securities, when authenticated and made available for deliverey by the Trustee and issued by the Corporation in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 3.1 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 3.1 or the Corporation Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Corporation and the Corporation shall deliver such Security to the Trustee for cancellation as provided in Section 3.10, then 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 3.4. Temporary Securities. Pending the preparation of definitive Securities of any series, the Corporation may execute, and upon Corporation Order the Trustee shall authenticate and make available for delivery, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities of such series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. 128 If temporary Securities of any series are issued, the Corporation will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Corporation designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Corporation shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor one or more definitive Securities of the same series of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. 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. SECTION 3.5. Global Securities. (a) Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Corporation for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Security and the Corporation is unable to locate a qualified successor, (ii) the Corporation executes and delivers to the Trustee a Corporation Order stating that the Corporation elects to terminate the book- entry system through the Depositary or (iii) there shall have occurred and be continuing an Event of Default. (c) If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Securities Registrar for exchange or cancellation as provided in this Article III. If any Global Security is to be exchanged for other Securities or cancelled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced, subject to Section 3.5(b), or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Trustee shall, subject to Section 3.5(b) and as otherwise provided in this Article III, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the 129 Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) Securities distributed to holders of Book-Entry Trust Preferred Securities (as defined in the applicable Trust Agreement) upon the dissolution of an Issuer Trust shall be distributed in the form of one or more Global Securities registered in the name of a Depositary or its nominee, and deposited with the Securities Registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Securities distributed to holders of Trust Preferred Securities other than Book-Entry Trust Preferred Securities upon the dissolution of an Issuer Trust shall not be issued in the form of a Global Security or any other form intended to facilitate book-entry trading in beneficial interests in such Securities. (f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary. (g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Agent Members. SECTION 3.6. Registration, Transfer and Exchange Generally. The Corporation shall cause to be kept at the Corporate Trust Office of the Trustee a register in which, subject to such reasonable regulations as it may prescribe, the Corporation shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the offices or agencies of the Corporation designated for that purpose the Corporation shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Securities of the same series of any authorized denominations of like tenor and aggregate principal amount. 130 At the option of the Holder, Securities may be exchanged for other Securities of the same series of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any securities are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Corporation evidencing the same debt and guarantee thereon, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. Every Security presented or surrendered for transfer or exchange shall (if so required by the Corporation or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities. Neither the Corporation nor the Trustee shall be required, pursuant to the provisions of this Section, (i) to issue, register the transfer of or exchange any Security of any series during a period beginning at the opening of business 15 days before the day of selection for redemption of Securities of that series pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed. SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Corporation or the Trustee to save each of them harmless, the Corporation shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security of the same series of like tenor and aggregate principal amount, and bearing a number not contemporaneously outstanding. If there shall be delivered to the Corporation 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 any of them harmless, then, in the absence of notice to the Corporation or the Trustee that such Security has been acquired by a bona fide purchaser, the Corporation shall execute and upon its request the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. 131 If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Corporation in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Corporation may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Corporation whether 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 the same 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 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved. Interest and Additional Interest on any Security of any series that is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest in respect of Securities of such series, except that, unless otherwise provided in the Securities of such series, interest and any Additional Interest payable on the Stated Maturity of the principal of a Security shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security of any series that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security or in the Board Resolution pursuant to Section 3.1 with respect to the related series of Securities. Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities of such series (herein called "Defaulted Interest"), shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Corporation, at its election in each case, as provided in Clause (a) or (b) below: (a) The Corporation may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series in respect of which interest is in default (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 Corporation shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Corporation shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in 132 respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than 15 days and not less than ten days prior to the date of the proposed payment and not less than ten days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Corporation of such Special Record Date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security of such series at the address of such Holder as it appears in the Securities Register not less than ten days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Corporation, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Clause (b). (b) The Corporation may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of the series in respect of which interest is in default may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Corporation to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security. SECTION 3.9. Persons Deemed Owners. The Corporation, the Trustee and any agent of the Corporation or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 3.8) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Corporation or the Trustee nor any agent of the Corporation or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Corporation, the Trustee and any agent of the Corporation or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the 133 foregoing, nothing herein shall prevent the Corporation, the Trustee or any agent of the Corporation or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security. SECTION 3.10. Cancellation. All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Corporation may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Corporation may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. 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 shall be destroyed by the Trustee and the Trustee shall deliver to the Corporation a certificate of such destruction. SECTION 3.11. Computation of Interest. Except as otherwise specified as contemplated by Section 3.1 for Securities of any series, interest on the Securities of each series for any partial period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any partial month in such period, and interest on the Securities of each series for a full period shall be computed by dividing the rate per annum by the number of interest periods that together constitute a full twelve months. SECTION 3.12. Deferrals of Interest Payment Dates. If specified as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a particular series, so long as no Event of Default has occurred and is continuing, the Corporation shall have the right, at any time during the term of such series, from time to time to defer the payment of interest on such Securities for such period or periods as may be specified as contemplated by Section 3.1 (each, an "Extension Period"), during which Extension Periods the Corporation shall, if so specified as contemplated by Section 3.1, have the right to make partial payments of interest on any Interest Payment Date. No Extension Period shall end on a date other than an Interest Payment Date. At the end of any such Extension Period the Corporation shall pay all interest then accrued and unpaid on the Securities (together with Additional Interest thereon, if any, at the rate specified for the Securities of such series to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities of such series. Prior to the termination of any such Extension Period, the Corporation may further defer the payment of interest, provided that no Extension Period shall exceed the period or periods specified in such Securities, extend beyond the Stated Maturity of the principal of such Securities or end on a date other than an Interest Payment Date. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional 134 Interest then due on any Interest Payment Date, the Corporation may elect to begin a new Extension Period, subject to the above conditions. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest as and to the extent as may be specified as contemplated by Section 3.1. The Corporation shall give the Holders of the Securities of such series and the Trustee notice of its election to begin any such Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on Securities of such series would be payable but for such deferral or, with respect to any Securities of a series issued to an Issuer Trust, so long as any such Securities are held by such Issuer Trust, at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Trust Preferred Securities of such Issuer Trust would be payable but for such deferral and (ii) the date on which the Property Trustee of such Issuer Trust is required to give notice to any securities exchange or other applicable self- regulatory organization or to holders of such Trust Preferred Securities of the record date or the date such Distributions are payable. The Trustee shall promptly give notice of the Corporation's election to begin any such Extension Period to the Holders of the Outstanding Securities of such series. SECTION 3.13. Right of Setoff. With respect to the Securities of a series initially issued to an Issuer Trust, notwithstanding anything to the contrary herein, the Corporation shall have the right to setoff any payment it is otherwise required to make in respect of any such Security to the extent the Corporation has theretofore made,or is concurrently on the date of such payment making, a payment under the Guarantee Agreement relating to such Security or to a holder of Trust Preferred Securities pursuant to an action undertaken under Section 5.8 of this Indenture. SECTION 3.14. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Corporation and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for United States federal, state and local tax purposes it is intended that such Security constitutes indebtedness. SECTION 3.15. Shortening or Extension of Stated Maturity. If specified as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a particular series, the Corporation shall have the right to (i) shorten the Stated Maturity of the principal of the Securities of such series at any time to any date not earlier than the first date on which the Company has the right to redeem the Securities of such series and (ii) extend the Stated Maturity of the principal of the Securities of such series at any time at its election for one or more periods, but in no event to a date later than the 49th anniversary of the first Interest Payment Date following the Original Issue Date of the Securities of such series; provided that, if the Company elects to exercise its right to extend the Stated Maturity of the principal of the Securities of such series pursuant to clause (ii), above, at the time such election is made 135 and at the time of extension (A) the Company is not in bankruptcy, otherwise insolvent or in liquidation, (B) the Company is not in default in the payment of any interest or principal on such Securities, (C) if the Issuer Trust has not been liquidated, such Issuer Trust is not in arrears on payments of Distributions on the Trust Preferred Securities issued by such Issuer Trust and no deferred Distributions are accumulated, (D) such Securities are rated not less than BBB- by S&P or Baa3 by Moody's or the equivalent by any other nationally recognized statistical rating organization and (E) after such extension, the Securities shall not have a remaining term to maturity of more than 30 years. In the event the Company elects to shorten or extend the Stated Maturity of the Securities of such series, it shall give notice to the Trustee, and the Trustee shall give notice of such shortening or extension to the Holders, not less than 30 and not more than 60 days prior to the effectiveness thereof. SECTION 3.16. CUSIP Numbers. The Corporation in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall, upon Corporation Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on demand of and at the expense of the Corporation, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (i) Securities that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.7 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Corporation and thereafter repaid to the Corporation or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or 136 (B) will become due and payable at their Stated Maturity within one year of the date of deposit, or (C) 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 Corporation,and the Corporation, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies 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 (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Corporation has paid or caused to be paid, or made provision satisfactory to the Trustee for the payment of, all other sums payable hereunder by the Corporation; and (c) the Corporation 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 have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Corporation to the Trustee under Section 6.7, the obligations of the Trustee to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of Clause (a) of this Section, the obligations of the Trustee under Sections 3.10 and 4.2 and the last paragraph of Section 10.3, and the obligations of the Corporation and the Trustee under Sections 3.5, 3.6, 3.10 and 9.6, shall survive. SECTION 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Corporation 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 (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee. 137 ARTICLE V REMEDIES SECTION 5.1. Events of Default. "Event of Default," wherever used herein with respect to the 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) except as may be specified pursuant to Section 3.1: (a) default in the payment of any interest upon any Security of that series, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period); or (b) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (c) failure on the part of the Corporation duly to observe or perform any other of the covenants or agreements on the part of the Corporation in the Securities of that series or in this Indenture for a period of 90 days after the date on which written notice of such failure, requiring the Corporation to remedy the same, shall have been give to the Corporation by the Trustee by registered or certified mail or to the Corporation and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series; or (d) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Corporation a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Corporation under the Bankruptcy Code or any other similar applicable federal or state law, which decree or order shall have continued undischarged and unstayed for a period of 60 days; or the entry of a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Corporation or of its property, or for the winding up or liquidation of its affairs, which decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the commencement by the Corporation of voluntary proceedings to be adjudicated a bankrupt, or consent by the Corporation to the filing of a bankruptcy proceeding against it, or the filing by the Corporation of a petition or answer or consent seeking reorganization under the Bankruptcy Code or any other similar federal or state law, or consent by the Corporation to the filing of any such petition, or the consent by the Corporation to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or the making by the Corporation of an assignment for the benefit of creditors, or the admission by the Corporation in writing of its inability to pay its debts generally as they become due; or (f) any other Event of Default provided with respect to Securities of that series. 138 SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 5.1(d) or 5.1(e)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Securities of that series are Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Corporation (and to the Trustee if given by Holders), provided that, in the case of the Securities of a series issued to an Issuer Trust, if, upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of such series fail to declare the principal of all the Outstanding Securities of such series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount (as defined in the related Trust Agreement) of the related series of Trust Preferred Securities issued by such Issuer Trust then outstanding shall have the right to make such declaration by a notice in writing to the Corporation and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities of such series shall become immediately due and payable. If an Event of Default specified in Section 5.1(d) or 5.1(e) with respect to Securities of any series at the time Outstanding occurs, the principal amount of all the Securities of such series (or, if the Securities of such series are Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms of that series) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. Payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII notwithstanding that such amount shall become immediately due and payable as herein provided. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Corporation and the Trustee, may rescind and annul such declaration and its consequences if: (a) the Corporation has paid or deposited with the Trustee a sum sufficient to pay: (i) all overdue installments of interest on all Securities of such series, (ii) any accrued Additional Interest on all Securities of such series, (iii) the principal of (and premium, if any, on) any Securities of such series that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Securities, and 139 (iv) 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 (b) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13. In the case of Securities of a series initially issued to an Issuer Trust, if the Holders of such Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount (as defined in the related Trust Agreement) of the related series of Trust Preferred Securities issued by such Issuer Trust then outstanding shall also have the right to rescind and annul such declaration and its consequences by written notice to the Corporation and the Trustee, subject to the satisfaction of the conditions set forth in Clauses (a) and (b) above of this Section 5.2. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Corporation covenants that if: (a) default is made in the payment of any installment of interest (including any Additional Interest) on any Security of any series when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof, the Corporation 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, including any sinking fund payment or analogous obligations (and premium, if any) and interest (including any Additional Interest), and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Corporation fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Corporation 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 Corporation or any other obligor upon the Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series 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. 140 SECTION 5.4. Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Corporation (or any other obligor upon the Securities), or the property of the Corporation or of such other obligor or their creditors, (a) the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Corporation for the payment of overdue principal (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 allowed in any such judicial proceedings; and (ii) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and (b) 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 for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. 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; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 5.5. Trustee May Enforce Claim 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, subject to Article XIII and after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee 144 under Section 6.7, 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 5.6. Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to a series of Securities 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 or property on account of principal (or premium, if any) or interest (including any Additional 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 and any predecessor Trustee under Section 6.7; SECOND: Subject to Article XIII, to the payment of the amounts then due and unpaid upon Securities of such series for principal (and premium, if any) and interest (including any Additional Interest) 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 series of Securities for principal (and premium, if any) and interest (including any Additional Interest), respectively; THIRD: The balance, if any, to the Person or Persons (other than the Company) entitled thereto; and FOURTH: To the Company SECTION 5.7. Limitation on Suits. Subject to Section 5.8, no Holder of any Securities 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, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (b) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) 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; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and 142 (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Trust Preferred Securities. Notwithstanding any other provision in this Indenture, the Holder of any Security of any series shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional 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 right shall not be impaired without the consent of such Holder. In the case of Securities of a series issued to an Issuer Trust, any registered holder of the series of Trust Preferred Securities issued by such Issuer Trust shall have the right, upon the occurrence of an Event of Default described in Section 5.1(a) or 5.1(b), to institute a suit directly against the Corporation for enforcement of payment to such holder of principal of (premium, if any) and (subject to Sections 3.8 and 3.12) interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount (as defined in the related Trust Agreement) of such Trust Preferred Securities held by such holder. SECTION 5.9. Restoration of Rights and Remedies. If the Trustee, any Holder or any holder of Trust Preferred Securities issued by any Issuer Trust 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, such Holder or such holder of Trust Preferred Securities, then and in every such case the Corporation, Trustee, such Holders and such holder of Trust Preferred Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee, such Holder and such holder of Trust Preferred Securities shall continue as though no such proceeding had been instituted. SECTION 5.10. Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.7, no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every 143 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 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee, any Holder of any Security with respect to the Securities of the related series or any holder of any Trust Preferred Security to exercise any right or remedy accruing upon any Event of Default with respect to the Securities of the related series 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 and the right and remedy given to the holders of Trust Preferred Securities by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Trust Preferred Securities, as the case may be. SECTION 5.12. Control by Holders. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that: (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and (c) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series affected thereby and, in the case of any Securities of a series initially issued to an Issuer Trust, the holders of a majority in aggregate Liquidation Amount (as defined in the related Trust Agreement) of the Trust Preferred Securities issued by such Issuer Trust may waive any past default hereunder and its consequences with respect to such series except a default: (a) in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security of such series (unless such default has been cured and the Corporation has paid to or deposited with the Trustee a sum sufficient to pay all matured installments of interest (including any Additional Interest) and all principal of (and premium, if any, on) all Securities of that series due otherwise than by acceleration), or 144 (b) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security of such series affected. Any such waiver shall be deemed to be on behalf of the Holders of all the Securities of such series or, in the case of a waiver by holders of Trust Preferred Securities issued by such Issuer Trust, by all holders of Trust Preferred Securities issued by such Issuer Trust. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent in aggregate principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security on or after the respective Stated Maturities expressed in such Security. SECTION 5.15. Waiver of Usury, Stay or Extension Laws. The Corporation 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 usury, 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 Corporation (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. 145 ARTICLE VI THE TRUSTEE SECTION 6.1. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of a series. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 146 (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 6.2. Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Securities Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of Securities of such series; and provided, further, that, in the case of any default of the character specified in Section 5.1(c), no such notice to Holders of Securities of such series shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. SECTION 6.3. Certain Rights of Trustee. Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Corporation mentioned herein shall be sufficiently evidenced by a Corporation Request or Corporation Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; 147 (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, Security or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Corporation, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and 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. SECTION 6.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Corporation 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. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Corporation of the Securities or the proceeds thereof. SECTION 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Corporation in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Corporation with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent. SECTION 6.6. 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 Corporation. SECTION 6.7. Compensation and Reimbursement. The Corporation agrees (a) to pay to the Trustee from time to time compensation for all services rendered by it hereunder in such amounts as the Corporation and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); 148 (b) 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 (c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties 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. This indemnification shall survive the termination of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(d) or 5.1(e) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute. SECTION 6.8. Disqualification; Conflicting Interests. (a) The Trustee for the Securities of any series issued hereunder shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of said Section 310(b). (b) The Trust Agreement and the Guarantee Agreement with respect to each Issuer Trust shall be deemed to be specifically described in this Indenture for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be: (a) a corporation organized and doing business under the laws of the United States of America or of any State or Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal, state, territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state authority. If such corporation or other Person publishes reports of condition at least annually, pursuant to law or to the 149 requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section 6.9, the combined capital and surplus of such corporation or other Person 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 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. Neither the Corporation nor any Person directly or indirectly controlling, controlled by or under common control with the Corporation shall serve as Trustee for the Securities of any series issued hereunder. SECTION 6.10. 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 VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (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 Corporation. If an instrument of acceptance by a successor Trustee 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 a majority in aggregate principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Corporation. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after such Act of the Holders, the Trustee to be removed may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (d) If at any time: (i) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Corporation or by any Holder who has been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Corporation or by any such Holder, or (iii) 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, any such case, (A) the Corporation, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to the Securities of all series issued hereunder or (B) subject to Section 5.14, any Holder who has been a bona fide 150 Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to the Securities of all series issued hereunder 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 Corporation, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of that or those 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 aggregate principal amount of the Outstanding Securities of such series delivered to the Corporation 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 supersede the successor Trustee appointed by the Corporation. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Corporation 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, subject to Section 5.14, on behalf of such Holder 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 Corporation shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities of such series as their names and addresses appear in the Securities Register. 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 6.11. 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 Corporation 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 Corporation 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. 151 (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 Corporation, 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 (i) 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, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (iii) 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 Corporation or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee and the Corporation 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 Clause (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 6.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities 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 152 deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. SECTION 6.13. Preferential Collection of Claims Against Corporation. If and when the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Corporation (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of Sections 311(a) and 311(b) of the Trust Indenture Act. SECTION 6.14. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. 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. Each Authenticating Agent shall be acceptable to the Corporation and shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or territory 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 Authenticating Agent 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 Authenticating Agent 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, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, 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. 153 An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Corporation. 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 Corporation. 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 Corporation and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision 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 6.7. 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 alternative 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. Dated: As Trustee By: ____________________________________ As Authenticating Agent By:_____________________________________ Authorized Officer ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders. The Corporation will furnish or cause to be furnished to the Trustee: (a) semi-annually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the delivery thereof, and 154 (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Corporation of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Corporation and has not otherwise been received by the Trustee in its capacity as Securities Registrar. SECTION 7.2. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in Section 312(b) of the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Corporation and the Trustee that none of the Corporation nor the Trustee nor any agent of any of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. SECTION 7.3. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to Section 313 of the Trust Indenture Act, at the times and in the manner provided pursuant thereto. (b) Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than January 31 in each calendar year. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which any Securities are listed and also with the Commission. The Corporation will notify the Trustee when any Securities are listed on any securities exchange. SECTION 7.4. Reports by Corporation. The Corporation shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. The Corporation also shall comply with the other provisions of Trust Indenture Act Section 314(a). 155 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms. The Corporation shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Corporation or convey, transfer or lease its properties and assets substantially as an entirety to the Corporation, unless: (a) if the Corporation shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Corporation formed by such consolidation or into which the corporation is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Corporation substantially as an entirety shall be a corporation, partnership or trust organized and existing under the laws of the United States of America or any State or Territory thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, expressly assume the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities of every series and the performance of every covenant of this Indenture on the part of the Corporation to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and (c) the Corporation has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. SECTION 8.2. Successor Corporation Substituted. Upon any consolidation or merger by the Corporation, as the case may be, with or into any other Person, or any conveyance, transfer or lease by the Corporation of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1, the successor corporation formed by such consolidation or into which the Corporation 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 Corporation under this Indenture with the same effect as if such successor Person had been named as the Corporation herein; and in the event of any such conveyance, transfer or lease the Corporation shall be discharged from all obligations and covenants under this Indenture and the Securities. 156 Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Corporation, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Corporation and delivered to the Trustee; and, upon the order of such successor Person instead of the Corporation and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall make available for delivery any Securities that previously shall have been signed and delivered by the officers of the Corporation to the Trustee for authentication pursuant to such provisions and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Corporation, when authorized by Board Resolutions, 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: (a) to evidence the succession of another Person to the Corporation and the assumption by any such successor of the covenants of the Corporation herein and in the Securities contained; or (b) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Corporation; or (c) to provide for the issuance of and establish the form or terms of Securities of any series as permitted by Sections 2.1 or 3.1; or (d) to add to the covenants of the Corporation for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of the series specified) or to surrender any right or power herein conferred upon the Corporation; or (e) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of the series specified); or 157 (f) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall (i) become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture that is entitled to the benefit of such provision or (ii) not apply to any Outstanding Securities; or (g) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this Clause (g) shall not adversely affect the interest of the Holders of Securities of any series in any material respect or, in the case of the Securities of a series issued to an Issuer Trust and for so long as any of the corresponding series of Trust Preferred Securities issued by such Issuer Trust shall remain outstanding, the holders of such Trust Preferred Securities; or (h) 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 6.11(b); or (i) to comply with the requirements of the Commission in order to effect or maintain qualification of this Indenture under the Trust Indenture Act. SECTION 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Corporation and the Trustee, the Corporation, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security of each series affected thereby, (a) change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or change the place of payment where, or the coin or currency in which, any Security 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, on or after the Redemption Date), or 158 (b) reduce the percentage in aggregate principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section, Section 5.13 or Section 10.5, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; provided, further, that, in the case of the Securities of a series issued to an Issuer Trust, so long as any of the corresponding series of Trust Preferred Securities issued by such Issuer Trust remains outstanding, (i) no such amendment shall be made that adversely affects the holders of such Trust Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount (as defined in the related Trust Agreement) of such Trust Preferred Securities then outstanding unless and until the principal of (and premium, if any, on) the Securities of such series and all accrued and (subject to Section 3.8) unpaid interest (including any Additional Interest) thereon have been paid in full and (ii) no amendment shall be made to Section 5.8 of this Indenture that would impair the rights of the holders of Trust Preferred Securities issued by any Issuer Trust provided therein without the prior consent of the holders of each such Trust Preferred Security then outstanding unless and until the principal of (and premium, if any, on) the Securities of such series and all accrued and (subject to Section 3.12) unpaid interest (including any Additional Interest) thereon have been paid in full. A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one or more particular series of Securities or any corresponding series of Trust Preferred Securities of an Issuer Trust that holds the Securities of any series, or that modifies the rights of the Holders of Securities of such series or holders of such Trust Preferred Securities of such corresponding series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series or holders of Trust Preferred Securities of any other such corresponding 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. SECTION 9.3. 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 (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution 159 of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.4. 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 9.5. 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 9.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Corporation, bear a notation in form approved by the Corporation as to any matter provided for in such supplemental indenture. If the Corporation shall so determine, new Securities of any series so modified as to conform, in the opinion of the Corporation, to any such supplemental indenture may be prepared and executed by the Corporation and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium and Interest. The Corporation covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities of that series in accordance with the terms of such Securities and this Indenture. SECTION 10.2. Maintenance of Office or Agency. The Corporation 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 Corporation in respect of the Securities of that series and this Indenture may be served. The Corporation initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Corporation will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Corporation shall fail to maintain such 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, and the Corporation hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. 160 The Corporation may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Corporation will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency. SECTION 10.3. Money for Security Payments to be Held in Trust. If the Corporation 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 such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest 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 failure so to act. Whenever the Corporation shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of (or premium, if any) or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest (including any Additional Interest) so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal (and premium, if any) or interest (including any Additional Interest), and (unless such Paying Agent is the Trustee) the Corporation will promptly notify the Trustee of its failure so to act. The Corporation will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities of a 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; (b) give the Trustee notice of any default by the Corporation (or any other obligor upon such Securities) in the making of any payment of principal (and premium, if any) or interest (including any Additional Interest) in respect of any Security of any Series; (c) at any time during the continuance of any default with respect to a series of Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent with respect to such series; and (d) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. 161 The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Corporation Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation 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 money. Any money deposited with the Trustee or any Paying Agent, or then held by the Corporation in trust for the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Corporation Request to the Corporation, or (if then held by the Corporation) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Corporation for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation 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 Corporation cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, 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 Corporation. SECTION 10.4. Statement as to Compliance. The Corporation shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Corporation ending after the date hereof, an Officers' Certificate covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Corporation is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Corporation shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. SECTION 10.5. Waiver of Certain Covenants. Subject to the rights of holders of Trust Preferred Securities specified in Section 9.2, if any, the Corporation may omit in any particular instance to comply with any covenant or condition provided pursuant to Section 3.1, 9.1(d) or 9.1(e) with respect to the Securities of any series, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such 162 compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Corporation in respect of any such covenant or condition shall remain in full force and effect. SECTION 10.6. Additional Sums. In the case of the Securities of a series initially issued to an Issuer Trust, so long as no Event of Default has occurred and is continuing and except as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) an Issuer Trust is the Holder of all of the Outstanding Securities of such series and (ii) a Tax Event has occurred and is continuing in respect of such Issuer Trust, the Corporation shall pay to such Issuer Trust (and its permitted successors or assigns under the related Trust Agreement) for so long as such Issuer Trust (or its permitted successor or assignee) is the registered holder of the Outstanding Securities of such series, such additional sums as may be necessary in order that the amount of Distributions (including any Additional Amounts (as defined in such Trust Agreement)) then due and payable by such Issuer Trust on the related Trust Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event (the "Additional Sums"). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest pursuant to Section 3.12 or the Securities shall not defer the payment of any Additional Sums that may be due and payable. SECTION 10.7. Additional Covenants. The Corporation covenants and agrees with each Holder of Securities of each series that it shall not (i) declare or pay any dividends or distributions on, or redeem purchase, acquire or make a liquidation payment with respect to, any shares of the Corporation's capital stock or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Corporation (including other Securities) that rank pari passu in all respects with or junior in interest to the Securities of such series (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Corporation in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Corporation (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of an exchange or conversion of any class or series of the Corporation's capital stock (or any capital stock of a Subsidiary of the Corporation for any class or series of the Corporation's 163 capital stock or of any class or series of the Corporation's indebtedness for any class or series of the Corporation's capital stock, (c) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, or the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock) if at such time (1) there shall have occurred any event of which the Corporation has actual knowledge that with the giving of notice or the lapse of time, or both, would constitute an Event of Default with respect to the Securities of such series, and which the Corporation shall not have taken reasonable steps to cure, (2) if the Securities of such series are held by an Issuer Trust or the Corporation shall be in default with respect to its payment of any obligations under the Guarantee Agreement relating to the Trust Preferred Securities issued by such Issuer Trust or (3) the Corporation shall have given notice of its election to begin an Extension Period with respect to the Securities of such series as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. The Corporation also covenants with each Holder of Securities of a series issued to an Issuer Trust (i) to hold, directly or indirectly, 100% of the Common Securities of such Issuer Trust, provided that any permitted successor of the Corporation hereunder may succeed to the Corporation's ownership of such Common Securities, (ii) as holder of such Common Securities, not to voluntarily terminate, wind-up or liquidate such Issuer Trust, other than (a) in connection with a distribution of the Securities of such series to the holders of the related Trust Preferred Securities in liquidation of such Issuer Trust or (b) in connection with certain mergers, consolidations or amalgamations permitted by the related Trust Agreement and (iii) to use its reasonable efforts, consistent with the terms and provisions of such Trust Agreement, to cause such Issuer Trust to continue not to be taxable as a corporation for United States federal income tax purposes. SECTION 10.8. Original Issue Discount. For each year during which any Securities that were issued with original issue discount are Outstanding, the Corporation shall furnish to each Paying Agent in a timely fashion such information as may be reasonably requested by each Paying Agent in order that each Paying Agent may prepare the information which it is required to report for such year on Internal Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as amended. Such information shall include the amount of original issue discount includible in income for each increment of principal amount at Stated Maturity of outstanding Securities during such year. 164 ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1 Applicability of This Article. Redemption of Securities of any series (whether by operation of a sinking fund or otherwise) as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of such form of Security shall govern. Except as otherwise set forth in the form of Security for such series, each Security of a series shall be subject to partial redemption only in the minimum specified denomination for the Securities of such series or any integral multiples thereof. SECTION 11.2. Election to Redeem; Notice to Trustee. The election of the Corporation to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Corporation, the Corporation shall, at least 45 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee and, in the case of Securities of a series held by an Issuer Trust, the Property Trustee under the related Trust Agreement, of such date and of the principal amount of Securities of the applicable series to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.4; provided that in the case of any series of Securities initially issued to an Issuer Trust, for so long as such Securities are held by such Issuer Trust, such notice shall be given not less than 45 nor more than 75 days prior to such Redemption Date (unless a shorter notice shall be satisfactory to the Property Trustee under the related Trust Agreement). 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, the Corporation shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction. SECTION 11.3. Selection 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 a portion of the principal amount of any Security of such series, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. The Trustee shall promptly notify the Corporation in writing of the Securities selected for partial redemption and 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 that has been or is to be redeemed. 165 SECTION 11.4. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register, provided that in the case of any series of Securities initially issued to an Issuer Trust, for so long as such Securities are held by such Issuer Trust, such notice shall be given not less than 45 nor more than 75 days prior to such Redemption Date (unless a shorter notice shall be satisfactory to the Property Trustee under the related Trust Agreement). With respect to Securities of each series to be redeemed, each notice of redemption shall include the CUSIP number of Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (c) if less than all Outstanding Securities of such particular series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed; (d) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest (including any Additional Interest) thereon, if any, shall cease to accrue on and after said date; (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (f) that the redemption is for a sinking fund, if such is the case; (g) such other provisions as may be required in respect of the terms of a particular series of Securities. Notice of redemption of Securities to be redeemed at the election of the Corporation shall be given by the Corporation or, at the Corporation's request, by the Trustee in the name and at the expense of the Corporation and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. 166 SECTION 11.5. Deposit of Redemption Price. Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Corporation will deposit with the Trustee or with one or more Paying Agents (or if the Corporation is acting as its own Paying Agent, the Corporation will segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date. SECTION 11.6. Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 11.4, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment in said notice specified, the said Securities or the specified portions thereof shall be paid and redeemed by the Corporation at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 3.1, installments of interest (including any Additional Interest) whose Stated Maturity is on or prior to the Redemption Date will 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 3.8. Upon presentation of any Security redeemed in part only, the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Corporation, a new Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust. In the case of the Securities of a series initially issued to an Issuer Trust, except as otherwise specified as contemplated by Section 3.1, the Corporation, at its option, may redeem such Securities (i) on or after the date specified in such Security, in whole at any time or in part from time to time or (ii) upon the occurrence and during the continuation of a Tax Event at any time within 90 days following the occurrence and during the continuation of such Tax Event, in whole (but not in part), in each case at a Redemption Price of 100% unless specified in such Security, together with accrued interest (including any Additional Interest) to the Redemption Date. 167 If less than all the Securities of any such series are to be redeemed, the aggregate principal amount of such Securities remaining Outstanding after giving effect to such redemption shall be sufficient to satisfy any provisions of the Trust Agreement related to the Issuer Trust to which such Securities were issued, including any requirement in such Trust Agreement as to the minimum Liquidation Amount (as defined in such Trust Agreement) of Trust Preferred Securities that may be held by a holder of Trust Preferred Securities thereunder. ARTICLE XII SINKING FUNDS SECTION 12.1. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of any series except as otherwise specified as contemplated by Section 3.1 for such Securities. The minimum amount of any sinking fund payment provided for by the terms of any Securities of any series is herein referred to as a "mandatory sinking fund payment," and any sinking fund payment in excess of such minimum amount that is permitted to be made by the terms of such Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of any Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 12.2. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of such Securities. SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities. In lieu of making all or any part of a mandatory sinking fund payment with respect to any Securities of a series in cash, the Corporation may at its option, at any time no more than 16 months and no less than 45 days prior to the date on which such sinking fund payment is due, deliver to the Trustee Securities of such series (together with the unmatured coupons, if any, appertaining thereto) theretofore purchased or otherwise acquired by the Corporation, except Securities of such series that have been redeemed through the application of mandatory or optional sinking fund payments pursuant to the terms of the Securities of such series, accompanied by a Corporation Order instructing the Trustee to credit such obligations and stating that the Securities of such series were originally issued by the Corporation by way of bona fide sale or other negotiation for value; provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the Redemption Price for such Securities, as specified in the Securities so to be redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 12.3. Redemption of Securities for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Corporation will deliver to the Trustee an Officers' Certificate specifying the amount of 168 the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash in the currency in which the Securities of such series are payable (except as provided pursuant to Section 3.1) and the portion thereof, if any, that is to be satisfied by delivering and crediting Securities pursuant to Section 12.2 and will also deliver (to the extent not previously delivered) to the Trustee any Securities to be so delivered. Such Officers' Certificate shall be irrevocable and upon its delivery the Corporation shall be obligated to make the cash payment or payments therein referred to, if any, on or before the succeeding sinking fund payment date. In the case of the failure of the Corporation to deliver such Officers' Certificate (or, as required by this Indenture, the Securities and coupons, if any, specified in such Officers' Certificate) by the due date therefor, the sinking fund payment due on the succeeding sinking fund payment date for such series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of the Securities of such series subject to a mandatory sinking fund payment without the right to deliver or credit securities as provided in Section 12.2 and without the right to make the optional sinking fund payment with respect to such series at such time. Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance of any preceding sinking fund payments made with respect to the Securities of any particular series shall be applied by the Trustee (or by the Corporation if the Corporation is acting as its own Paying Agent) on the sinking fund payment date on which such payment is made (or, if such payment is made before a sinking fund payment date, on the sinking fund payment date immediately following the date of such payment) to the redemption of Securities of such series at the Redemption Price specified in such Securities with respect to the sinking fund. Any and all sinking fund moneys with respect to the Securities of any particular series held by the Trustee (or if the Corporation is acting as its own Paying Agent, segregated and held in trust as provided in Section 10.3) on the last sinking fund payment date with respect to Securities of such series and not held for the payment or redemption of particular Securities of such series shall be applied by the Trustee (or by the Corporation if the Corporation is acting as its own Paying Agent), together with other moneys, if necessary, to be deposited (or segregated) sufficient for the purpose, to the payment of the principal of the Securities of such series at Maturity. The Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 11.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Corporation in the manner provided in Section 11.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Section 11.6. On or before each sinking fund payment date, the Corporation shall pay to the Trustee (or, if the Corporation is acting as its own Paying Agent, the Corporation shall segregate and hold in trust as provided in Section 10.3) in cash a sum in the currency in which Securities of such series are payable (except as provided pursuant to Section 3.1) equal to the principal (and premium, if any) and any interest (including any Additional Interest) accrued to the Redemption Date for Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 12.3. 169 Neither the Trustee nor the Corporation shall redeem any Securities of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund for such series during the continuance of a default in payment of interest, if any, on any Securities of such series or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to the Securities of such series, except that if the notice of redemption shall have been provided in accordance with the provisions hereof, the Trustee (or the Corporation, if the Corporation is then acting as its own Paying Agent) shall redeem such Securities if cash sufficient for that purpose shall be deposited with the Trustee (or segregated by the Corporation) for that purpose in accordance with the terms of this Article XII. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of the Securities and coupons, if any, of such series; provided, however, that in case such default or Event of Default shall have been cured or waived herein, such moneys shall thereafter be applied on the next sinking fund payment date for the Securities of such series on which such moneys may be applied pursuant to the provisions of this Section 12.3. ARTICLE XIII SUBORDINATION OF SECURITIES SECTION 13.1. Securities Subordinate to Senior Debt. The Corporation covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Securities of each and every series are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Corporation. SECTION 13.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc. If the Corporation shall default in the payment of any principal of (or premium, if any) or interest on any of its Senior Debt when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Corporation by the holders of Senior Debt or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set off or otherwise) shall be made or agreed to be made on account of the principal of (or premium, if any) or interest (including any Additional Interest) on any of the Securities or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities. 170 In the event of (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceedings relating to the Corporation, its creditors or its property, (ii) any proceeding for the liquidation, dissolution or other winding up of the Corporation, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (iii) any assignment by the Corporation for the benefit of creditors or (iv) any other marshalling of the assets of the Corporation (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt of the Corporation (including any interest thereon accruing after the commencement of any such proceedings), shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Corporation or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities to the payment of all Senior Debt of the Corporation at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities of any series shall be paid or delivered directly to the holders of Senior Debt of the Corporation in accordance with the priorities then existing among such holders until all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full. In the event of any Proceeding, after payment in full of all sums owing with respect to the Corporation's Senior Debt the Holders of the Securities together with the holders of any obligations of the Corporation ranking on a parity with the Securities (which for this purpose only shall include the Allocable Amounts of Senior Subordinated Indebtedness), shall be entitled to be paid from the remaining assets of the Corporation the amounts at the time due and owing on account of unpaid principal of (and premium, if any) and interest on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Corporation ranking junior to the Securities and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Corporation or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities to the payment of all Senior Debt of the Corporation at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt of the Corporation shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt of the Corporation at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Debt of the Corporation remaining unpaid, to the extent necessary to pay all such Senior Debt of the Corporation 171 remaining unpaid, to the extent necessary to pay all such Senior Debt of the Corporation in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt of the Corporation is hereby irrevocably authorized to endorse or assign the same. The Trustee and the Holders shall take such action (including, without limitation, the delivery of this Indenture to an agent for the holders of Senior Debt of the Corporation or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt of the Corporation at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions. The provisions of this Section 13.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Corporation in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. The securing of any obligations of the Corporation otherwise ranking on a parity with the Securities or ranking junior to the Securities shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities. SECTION 13.3. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (i) the Corporation at any time, except during the pendency of the conditions described in the first paragraph of Section 13.2 or of any Proceeding referred to in Section 13.2, from making payments at any time of principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or (ii) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 13.4. Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all amounts due or to become due on all Senior Debt of the Corporation or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt of the Corporation as the case may be, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Corporation that by its express terms is subordinated to Senior Debt of the Corporation to substantially the same extent as the Securities are subordinated to the Senior Debt of the Corporation and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and 172 distributions of cash, property and securities applicable to the Senior Debt of the Corporation until the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of the Corporation of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt of the Corporation by Holders of the Securities or the Trustee, shall, as among the Corporation, its creditors other than holders of its Senior Debt and the Holders of the Securities be deemed to be a payment or distribution by the Corporation to or on account of its Senior Debt. SECTION 13.5. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt of the Corporation on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (i) impair, as between the Corporation and the Holders of the Securities the obligations of the Corporation which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms, (ii) affect the relative rights against the Corporation of the Holders of the Securities and creditors of the Corporation other than their rights in relation to the holders of Senior Debt of the Corporation or (iii) prevent the Trustee or the Holder of any Security (or to the extent expressly provided herein, the holder of any Trust Preferred Security) from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt of the Corporation to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 13.6. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof 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 provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 13.7. No Waiver of Subordination Provisions. No right of any present or future holder of any of the Corporation's Senior Debt 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 Corporation or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Corporation with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. 173 Without in any way limiting the generality of the immediately preceding paragraph, the holders of the Corporation's Senior Debt may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of the Securities of any series without incurring responsibility to such Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of such Holders of the Securities to the holders of the Corporation's Senior Debt do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt of the Corporation or otherwise amend or supplement in any manner such Senior Debt or any instrument evidencing the same or any agreement under which such Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt of the Corporation; (iii) release any Person liable in any manner for the collection of Senior Debt of the Corporation; and (iv) exercise or refrain from exercising any rights against the Corporation and any other Person. SECTION 13.8. Notice to Trustee. The Corporation shall give prompt written notice to the Trustee of any fact known to the Corporation that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Securities unless and until the Trustee shall have received written notice thereof from the Corporation or a holder of the Corporation's Senior Debt, as the case may be, or from any trustee, agent or representative therefor; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any moneys may become payable for any purpose (including, the payment of the principal of (and premium, if any, on) or interest (including any Additional Interest) on any Security) then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such moneys and to apply the same to the purpose 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. Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt of the Corporation (or a trustee or attorney-in-fact therefor), to establish that such notice has been given by a holder of Senior Debt of the Corporation (or a trustee or attorney-in-fact therefor). 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 Senior Debt of the Corporation to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt of the Corporation 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, and if 174 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 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Corporation referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Corporation the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of the Corporation's Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Corporation or to any other Person cash, property or securities to which any holders of Corporation's Senior Debt shall be entitled by virtue of this Article or otherwise. SECTION 13.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt of the Corporation that may at any time be held by it, to the same extent as any other holder of Senior Debt of the Corporation and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. SECTION 13.12. Article Applicable to Paying Agents. If at any time any Paying Agent other than the Trustee shall have been appointed by the Corporation and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 175 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. SOUTH CAROLINA ELECTRIC & GAS COMPANY By: s/ M. R. Cannon Name: M. R. Cannon Title: Treasurer Address: South Carolina Electric & Gas Company EX-5 6 Exhibit 4-J GUARANTEE AGREEMENT BY AND BETWEEN SOUTH CAROLINA ELECTRIC & GAS COMPANY as Guarantor and THE BANK OF NEW YORK, as Guarantee Trustee RELATING TO SCE&G TRUST I --------------------------- Dated as of October 28, 1997 --------------------------- 177 CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Guarantee Agreement 310(a) 4.1(a) 310(b) 4.1(c), 2.8 310(c) Inapplicable 311(a) 2.2(b) 311(b) 2.2(b) 311(c) Inapplicable 312(a) 2.2(a) 312(b) 2.2(b) 312(c) Inapplicable 313 2.3 314(a) 2.4 314(b) Inapplicable 314(c) 2.5 314(d) Inapplicable 314(e) 1.1, 2.5, 3.2(a) 314(f) 2.1, 3.2 315(a) 3.1(d)(i) 315(b) 2.7 315(c) 3.1(c) 315(d) 3.1(d) 315(e) Inapplicable 316(a) 1.1, 2.6, 5.4 316(b) 5.5 316(c) 8.3 317(a) 2.7(c) 317(b) Inapplicable 318(a) 2.1 318(b) 2.1 318(c) 2.1 ____________________ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. 178 TABLE OF CONTENTS ARTICLE I DEFINITIONS 6 SECTION 1.1. Definitions 6 ARTICLE II TRUST INDENTURE ACT 9 SECTION 2.1. Trust Indenture Act; Application 9 SECTION 2.2. List of Holders 10 SECTION 2.3. Reports by the Guarantee Trustee 10 SECTION 2.4. Periodic Reports to the Guarantee Trustee 10 SECTION 2.5. Evidence of Compliance with Conditions Precedent 10 SECTION 2.6. Events of Default; Waiver 11 SECTION 2.7. Event of Default; Notice 11 SECTION 2.8. Conflicting Interests 12 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE 12 SECTION 3.1. Powers and Duties of the Guarantee Trustee 12 SECTION 3.2. Certain Rights of Guarantee Trustee 14 SECTION 3.3. Compensation; Indemnity; Fees 15 ARTICLE IV GUARANTEE TRUSTEE 16 SECTION 4.1. Guarantee Trustee; Eligibility 16 SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee 17 ARTICLE V GUARANTEE 18 SECTION 5.1. Guarantee 18 SECTION 5.2. Waiver of Notice and Demand 18 SECTION 5.3. Obligations Not Affected 18 SECTION 5.4. Rights of Holders 19 SECTION 5.5. Unconditional Right of Holders to Payment 20 SECTION 5.6. Guarantee of Payment 20 SECTION 5.7. Subrogation 20 SECTION 5.8. Independent Obligations 20 ARTICLE VI COVENANTS AND SUBORDINATION 21 SECTION 6.1. Subordination 21 SECTION 6.2. Pari Passu Guarantees 21 179 ARTICLE VII TERMINATION 21 SECTION 7.1. Termination 21 ARTICLE VIII MISCELLANEOUS 22 SECTION 8.1. Successors and Assigns 22 SECTION 8.2. Amendments 22 SECTION 8.3. Record Date 22 SECTION 8.4. Notices 22 SECTION 8.5. Benefit 23 SECTION 8.6. Governing Law 23 SECTION 8.7. Counterparts 23 180 GUARANTEE AGREEMENT, dated as of October 28, 1997, by and between South Carolina Electric & Gas Company, a South Carolina corporation (the "Guarantor"), and The Bank of New York, a New York banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Trust Preferred Securities (as defined herein) of SCE&G TRUST I, a Delaware statutory business trust (the "Issuer Trust"). RECITALS OF THE CORPORATION WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of October 28, 1997 (the "Trust Agreement," as more particularly defined herein), among South Carolina Electric & Gas Company, as Depositor, the Property Trustee, the Delaware Trustee, the Administrative Trustees (as such terms are defined in the Trust Agreement), the Holders and the holders of the Common Securities the Issuer Trust is issuing $50,000,000 aggregate Liquidation Amount (as defined in the Trust Agreement) of its 7.55% Trust Preferred Securities, Series A (liquidation amount $25 per Trust Preferred Security) (the "Trust Preferred Securities"), representing preferred undivided beneficial interests in the assets of the Issuer Trust and having the terms set forth in the Trust Agreement; and WHEREAS, the Trust Preferred Securities will be issued by the Issuer Trust and the proceeds thereof, together with the proceeds from the issuance of the Issuer Trust's Common Securities (as defined herein), will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor, which Debentures will be deposited with the Property Trustee under the Trust Agreement, as trust assets; and WHEREAS, as an incentive for the Holders to purchase Trust Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Trust Preferred Securities the Guarantee Payments (as defined herein), as the case may be, and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase of Trust Preferred Securities by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time. 181 ARTICLE I DEFINITIONS SECTION 1.1. Definitions. For all purposes of this Guarantee Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Guarantee Agreement; and (f) The words "hereby," "herein," "hereof" and "hereunder" and other words of similar import refer to this Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means, as the context requires, the board of directors of the Guarantor or the Executive Committee of the board of directors of the Guarantor (or any other committee of the board of directors of the Guarantor performing similar functions) or a committee designated by the board of directors of the Guarantor (or such committee), comprised of two or more members of the board of directors of the Guarantor or officers of the Guarantor, or both. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer Trust. "Event of Default" means (i) a default by the Guarantor in any of its payment obligations under this Guarantee Agreement or (ii) a default by the Guarantor in any other obligation hereunder that remains unremedied for 30 days. 182 "Guarantee Agreement" means this Guarantee Agreement, as modified, amended or supplemented from time to time. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Trust Preferred Securities, to the extent not paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Trust Preferred Securities, to the extent the Issuer Trust shall have funds on hand available therefor at such time; (ii) the Redemption Price (as defined in the Trust Agreement) with respect to any Trust Preferred Securities called for redemption by the Issuer Trust, to the extent the Issuer Trust shall have funds on hand available therefor at such time; and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer Trust, unless Debentures are distributed to the Holders, the lesser of (a) the Liquidation Distribution (as defined in the Trust Agreement) with respect to the Trust Preferred Securities, to the extent that the Issuer Trust shall have funds on hand available therefor at such time, and (b) the amount of assets of the Issuer Trust remaining available for distribution to Holders on liquidation of the Issuer. "Guarantee Trustee" means The Bank of New York, solely in its capacity as Guarantee Trustee and not in its individual capacity, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Guarantor" has the meaning specified in the preamble of this Guarantee Agreement. "Holder" means any Holder (as defined in the Trust Agreement) of any Trust Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Trust Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Junior Subordinated Indenture, dated as of October 28, 1997, among the Guarantor and The Bank of New York, as trustee, as the same may be modified, amended or supplemented from time to time. "Issuer Trust" has the meaning specified in the preamble of this Guarantee Agreement. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in Liquidation Amount of the Trust Preferred Securities" means, except as provided by the Trust Indenture Act, Trust Preferred Securities representing more than 50% of the aggregate Liquidation Amount (as defined in the Trust Agreement) of all Trust Preferred Securities then Outstanding (as defined in the Trust Agreement). 183 "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman of the Board of Directors of such Person or the Chief Executive Officer, the President, the Chief Financial Officer, a Vice President or the Treasurer of such Person, and by the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that 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 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, company, limited liability company, trust, business trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, 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 Guarantee Trustee and also means, with respect to a particular matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Agreement" means the Amended and Restated Trust Agreement of the Issuer Trust referred to in the recitals to this Guarantee Agreement, as modified, amended or supplemented from time to time. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Guarantee Agreement was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Preferred Securities" has the meaning specified in the recitals to this Guarantee Agreement. 184 "Vice President," when used with respect to the Guarantor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 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. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to and including 317, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or to be excluded, as the case may be. SECTION 2.2. List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (a) semi-annually, on or before March 31 and September 30 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders (a "List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantors of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with the requirements of Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Guarantee Trustee. Not later than January 31 of each year, the Guarantee Trustee shall provide to the Holders 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 Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. Periodic Reports to the Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance 185 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. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such 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 of the Guarantor 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 at least a Majority in Liquidation Amount of the Trust Preferred Securities may, by vote, on behalf of the Holders of all the Trust Preferred Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or 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 Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notice of any such Event of Default known to the Guarantee Trustee, unless such Event of Default has been cured before the giving of such notice, provided that, except in the case of a default in the payment of a Guarantee Payment, the 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 Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained actual knowledge, of such Event of Default. (c) Subject to the provisions of Section 5.4 hereof, in the case of a default by the Guarantor in any of its payment obligations under this Guarantee Agreement, when and as the same shall become due and payable, the Guarantee Trustee shall have the right, subject to the rights of the Holders hereunder, to recover judgment against the Guarantor for the whole amount of such payments remaining unpaid. SECTION 2.8. Conflicting Interests. The Trust Agreement and the Indenture 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. 186 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE SECTION 3.1. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee hereunder. The right, title and interest of the Guarantee Trustee, as such, hereunder shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The 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 Guarantee Trustee. The 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. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful 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 Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the 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 (B) in the absence of bad faith on the part of the Guarantee Trustee, the 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 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 or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement. 187 (ii) The Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made. (iii) The 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 Trust Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement. (iv) No provision of this Guarantee Agreement shall require the 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 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 against such risk or liability is not reasonably assured to it. SECTION 3.2. Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The 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 reasonably 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 either of the Guarantors contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the 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 from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel of its selection, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel 188 to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The 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 Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the 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 Guarantee Trustee; provided that nothing contained in this Section 3.2(a)(v) shall be taken to relieve the 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. (vi) The 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 Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) 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 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 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 Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. 189 SECTION 3.3. Compensation; Indemnity; Fees. The Guarantor agrees: (a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as may be agreed by the Guarantor and the Guarantee Trustee from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (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 (c) to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, wilful misconduct or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, 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 Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1. Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, 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 Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. 190 (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and the 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 the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor 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 Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor 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 or on behalf of the Issuer Trust), as and when due, regardless of any defense, right of setoff or counterclaim that the Issuer Trust may have or assert, except the defense of payment. 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 Trust 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 Guarantee Trustee, the Issuer Trust or any other Person before proceeding against either of the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 191 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 Trust of any express or implied agreement, covenant, term or condition relating to the Trust Preferred Securities to be performed or observed by the Issuer Trust; (b) the extension of time for the payment by the Issuer Trust of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures as provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Trust Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Trust Preferred Securities; (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 Trust Preferred Securities, or any action on the part of the Issuer Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer Trust or any of the assets of the Issuer Trust; (e) any invalidity of, or defect or deficiency in, the Trust 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 (other than payment of the underlying obligation), 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 the consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in Liquidation Amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting any 192 proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement without first instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust or any other Person. SECTION 5.5. Unconditional Right of Holders to Payment. Notwithstanding any other provision of this Guarantee Agreement, each Holder shall have the right, which is absolute and unconditional, to receive Guarantee Payments when due, and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.6. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer Trust) or upon the distribution of Debentures to Holders as provided in the Trust Agreement. SECTION 5.7. Subrogation. The Guarantor shall be subrogated to all rights (if any) of the Holders against the Issuer Trust in respect of any amounts paid to the 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 rights which 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 the amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.8. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer Trust with respect to the Trust Preferred Securities and that it 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. 193 ARTICLE VI COVENANTS AND SUBORDINATION SECTION 6.1. Subordination. The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Guarantor, to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XIII of the Indenture will apply, mutatis mutandis, to the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of the Guarantor. SECTION 6.2. Pari Passu Guarantees. The obligations of the Guarantor under this Guarantee Agreement rank pari passu with the obligations of the Guarantor under (i) any similar guarantee agreements issued by the Guarantor on behalf of the holders of preferred or capital securities issued by any Issuer Trust (as defined in the Indenture), (ii) the Indenture and the Securities (as defined therein) issued thereunder and (iii) any other security, guarantee or other agreement or obligation that is expressly stated to rank pari passu with the obligations of the Guarantor under this Guarantee Agreement or with any obligation that ranks pari passu with the obligations of the Guarantor under this Guarantee Agreement. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price (as defined in the Trust Agreement) of all Trust Preferred Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Trust Preferred Securities or (iii) full payment of the amounts payable in accordance with Article IX of the Trust Agreement upon liquidation of the Issuer Trust. 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 is required to repay any sums paid with respect to Trust Preferred Securities or this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.1. 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 Trust Preferred Securities then outstanding. Except in connection with a consolidation, merger or 194 sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the successor or assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder, and any purported assignment other than in accordance with this provision shall be void. SECTION 8.2. Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Amount of the Trust Preferred Securities. SECTION 8.3. Record Date. For purposes of any action to be taken by Holders pursuant to Sections 2.6, 5.4 or 8.2 hereof, the provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply. SECTION 8.4. Notices. Any notice, request or other communication required or permitted to be given hereunder be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address or telecopy number set forth below or such other address or telecopy number as the Guarantor may give notice to the Guarantee Trustee and the Holders: South Carolina Electric & Gas Company 1426 Main Street Columbia, South Carolina 29201 Attention: Treasurer Telecopy: (803) 933-7037 (b) if given to the Guarantee Trustee, at the address or telecopy number set forth below or such other address or telecopy number as the Guarantee Trustee may give notice to the Guarantor and Holders: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Administration Telecopy: (212) 815-5915 with a copy to: SCE&G Trust I c/o South Carolina Electric & Gas Company 1426 Main Street Columbia, South Carolina 29201 Attention: Treasurer Telecopy: (803) 933-7037 195 (c) if given to any Holder, at the address set forth on the books and records of the Issuer Trust. All notices hereunder 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 8.5. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Trust Preferred Securities. SECTION 8.6. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 8.7. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts together shall constitute but one and the same instrument. 196 IN WITNESS WHEREOF, the parties hereto have executed this Guarantee Agreement as of the day and year first above written. SOUTH CAROLINA ELECTRIC & GAS COMPANY By: s/M. R. Cannon Name: M. R. Cannon Title: Treasurer EX-6 7 Exhibit 4-K ========================================== AMENDED AND RESTATED TRUST AGREEMENT AMONG SOUTH CAROLINA ELECTRIC & GAS COMPANY, as Depositor THE BANK OF NEW YORK, as Property Trustee THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee THE ADMINISTRATIVE TRUSTEES NAMED HEREIN and THE SEVERAL HOLDERS (as defined herein) --------------------- Dated as of October 28, 1997 --------------------- SCE&G TRUST I ========================================== 198 SCE&G TRUST I Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Trust Agreement Act Section Section Section 310 (a)(1) 8.7 (a)(2) 8.7 (a)(3) 8.9 (a)(4) 2.7(a)(ii) (a)(5) 8.7(a)(5) (b) 8.8 (c) Not Applicable Section 311 (a) 8.13 (b) 8.13 (c) Not Applicable Section 312 (a) 5.8 (b) 5.8 (c) 5.8 Section 313 (a) 8.15(a) (b) 8.15(b) (c) 10.8 (d) 8.15(c) Section 314 (a) 8.16 (b) Not Applicable (c)(1) 8.17 (c)(2) 8.17 (c)(3) Not Applicable (d) Not Applicable (e) 1.1, 8.17 Section 315 (a) 8.1(d)(i) (b) 8.2, 10.8 (c) 8.1(c) (d) 8.1, 8.3 (e) Not Applicable Section 316 (a) Not Applicable (a)(1)(A) Not Applicable (a)(1)(B) Not Applicable (a)(2) Not Applicable (b) 5.13(c) (c) 6.7 Section 317 (a)(1)Not Applicable (a)(2)Not Applicable (b)5.10 Section 318 (a)10.10 Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. 199 TABLE OF CONTENTS ARTICLE I DEFINED TERMS 8 SECTION 1.1. Definitions. 8 ARTICLE II CONTINUATION OF THE ISSUER TRUST 18 SECTION 2.1. Name. 18 SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business 18 SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses 18 SECTION 2.4. Issuance of the Trust Preferred Securities 19 SECTION 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures 19 SECTION 2.6. Continuation of Trust 19 SECTION 2.7. Authorization to Enter into Certain Transactions 20 SECTION 2.8. Assets of Trust 24 SECTION 2.9. Title to Trust Property 24 ARTICLE III PAYMENT ACCOUNT 24 SECTION 3.1. Payment Account 24 ARTICLE IV REDEMPTION 25 SECTION 4.1. Distributions 25 SECTION 4.2. Redemption 26 SECTION 4.3. Subordination of Common Securities 28 SECTION 4.4. Payment Procedures 29 SECTION 4.5. Tax Returns and Reports 29 SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust 29 SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions 30 ARTICLE V TRUST SECURITIES CERTIFICATES 30 SECTION 5.1. Initial Ownership 30 SECTION 5.2. The Trust Securities Certificates 30 SECTION 5.3. Execution and Delivery of Trust Securities Certificates 31 SECTION 5.4. Book-Entry Trust Preferred Securities 31 SECTION 5.5. Registration of Transfer and Exchange of Trust Preferred Securities Certificates 33 SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates 35 SECTION 5.7. Persons Deemed Holders 36 SECTION 5.8. Access to List of Holders' Names and Addresses 36 200 SECTION 5.9. Maintenance of Office or Agency 36 SECTION 5.10. Appointment of Paying Agent 36 SECTION 5.11. Ownership of Common Securities by Depositor 37 SECTION 5.12. Notices to Clearing Agency 37 SECTION 5.13. Rights of Holders; Waivers of Past Defaults 38 ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING 40 SECTION 6.1. Limitations on Voting Rights 40 SECTION 6.2. Notice of Meetings 42 SECTION 6.3. Meetings of Holders of the Trust Preferred Securities 42 SECTION 6.4. Voting Rights 42 SECTION 6.5. Proxies, etc 43 SECTION 6.6. Holder Action by Written Consent 43 SECTION 6.7. Record Date for Voting and Other Purposes 43 SECTION 6.8. Acts of Holders 44 SECTION 6.9. Inspection of Records 45 ARTICLE VII REPRESENTATIONS AND WARRANTIES 45 SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee 45 SECTION 7.2. Representations and Warranties of Depositor 46 ARTICLE VIII THE ISSUER TRUSTEES 47 SECTION 8.1. Certain Duties and Responsibilities 47 SECTION 8.2. Certain Notices 50 SECTION 8.3. Certain Rights of Property Trustee 50 SECTION 8.4. Not Responsible for Recitals or Issuance of Securities 52 SECTION 8.5. May Hold Securities 53 SECTION 8.6. Compensation; Indemnity; Fees 53 SECTION 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees 54 SECTION 8.8. Conflicting Interests 54 SECTION 8.9. Co-Trustees and Separate Trustee 55 SECTION 8.10. Resignation and Removal; Appointment of Successor 56 SECTION 8.11. Acceptance of Appointment by Successor 58 SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business 59 SECTION 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust 59 SECTION 8.14. Property Trustee May File Proofs of Claim 59 SECTION 8.15. Reports by Property Trustee 60 SECTION 8.16. Reports to the Property Trustee 61 SECTION 8.17. Evidence of Compliance with Conditions Precedent 61 SECTION 8.18. Number of Issuer Trustees 61 SECTION 8.19. Delegation of Power 61 SECTION 8.20. Appointment of Administrative Trustees 62 201 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER 63 SECTION 9.1. Dissolution Upon Expiration Date 63 SECTION 9.2. Early Dissolution 63 SECTION 9.3. Termination 63 SECTION 9.4. Liquidation 64 SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust 65 ARTICLE X MISCELLANEOUS PROVISIONS 67 SECTION 10.1. Limitation of Rights of Holders 67 SECTION 10.2. Amendment 67 SECTION 10.3. Separability 68 SECTION 10.4. Governing Law 68 SECTION 10.5. Payments Due on Non-Business Day 69 SECTION 10.6. Successors 69 SECTION 10.7. Headings 69 SECTION 10.8. Reports, Notices and Demands 69 SECTION 10.9. Agreement Not to Petition 70 SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act 70 SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture 71 Exhibit A Certificate of Trust Exhibit B Form of Letter of Representations Exhibit C Form of Common Securities Certificate Exhibit D Form of Trust Preferred Securities Certificate 202 AMENDED AND RESTATED TRUST AGREEMENT, dated as of October 28, 1997, among (i) South Carolina Electric & Gas Company, a South Carolina corporation (including any successors or assigns, the "Depositor"), (ii) The Bank of New York, a New York banking corporation, as property trustee (in such capacity, the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) The Bank of New York (Delaware), a Delaware banking corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv) M. R. Cannon, an individual, K. B. Marsh, an individual, and H. T. Arthur, an individual, each of whose address is c/o South Carolina Electric & Gas Company, 1426 Main Street, Columbia, South Carolina 29201 (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees being referred to collectively as the "Issuer Trustees") and (iv) the several Holders, as hereinafter defined. WITNESSETH WHEREAS, the Depositor, Delaware Trustee and an Administrative Trustee have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act (as defined herein) by entering into the Trust Agreement, dated as of October 8, 1997 (the "Original Trust Agreement") and by the execution and filing with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on October 8, 1997, attached as Exhibit A; and WHEREAS, the Depositor and the Issuer Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Issuer Trust to the Depositor, (ii) the issuance and sale of the Trust Preferred Securities (as defined herein) by the Issuer Trust pursuant to the Underwriting Agreement (as defined herein), (iii) the acquisition by the Issuer Trust from the Depositor of all of the right, title and interest in the Debentures (as defined herein) and (iv) the appointment of the Property Trustee and the Administrative Trustees; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I DEFINED TERMS SECTION 1.1. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) All other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; 203 (c) The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) All accounting terms used but not defined herein have the meanings assigned to them in accordance with United States generally accepted accounting principles; (e) Unless the context otherwise requires, any reference to an "Article," a "Section" or an "Exhibit" refers to an Article, a Section or an Exhibit, as the case may be, of or to this Trust Agreement; and (f) The words "hereby," "herein," "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of Debentures for such period. "Additional Sums" has the meaning specified in Section 10.6 of the Indenture. "Administrative Trustee" means each of the Persons appointed in accordance with Section 8.20 solely in such Person's capacity as Administrative Trustee of the Issuer Trust heretofore formed and continued hereunder and not in such Person's individual capacity, or any successor Administrative Trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Book-Entry Trust Preferred Security, the rules and procedures of the Clearing Agency for such Book-Entry Trust Preferred Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: 204 (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person 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 any applicable federal or state bankruptcy, insolvency, reorganization or other similar 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 similar official) of such Person 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 and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.9. "Board of Directors" means the board of directors of the Depositor or the Executive Committee of the board of directors of the Depositor (or any other committee of the board of directors of the Depositor performing similar functions) or a committee designated by the board of directors of the Depositor (or any such committee), comprised of two or more members of the board of directors of the Depositor or officers of the Depositor, or both. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated and to be in full force and effect on the date of such certification, and delivered to the Issuer Trustees. "Book-Entry Trust Preferred Securities Certificate" means a Trust Preferred Securities Certificate evidencing ownership of Book-Entry Trust Preferred Securities. "Book-Entry Trust Preferred Security" means a Trust Preferred Security, the ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.4. "Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. 205 "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. DTC will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Common Security" means a common undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. "Corporate Trust Office" means (i) when used with respect to the Property Trustee, the principal office of the Property Trustee located in New York, New York, and (ii) when used with respect to the Debenture Trustee, the principal office of the Debenture Trustee located in Wilmington, Delaware. "Debenture Event of Default" means any "Event of Default" specified in Section 5.1 of the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption of such Debentures under the Indenture. "Debenture Tax Event" means a "Tax Event" as defined in the Indenture. "Debenture Trustee" means the Person identified as the "Trustee" in the Indenture, solely in its capacity as Trustee pursuant to the Indenture and not in its individual capacity, or its successor in interest in such capacity, or any successor Trustee appointed as provided in the Indenture. "Debentures" means the Depositor's 7.55% Junior Subordinated Deferrable Interest Debentures, Series A, issued pursuant to the Indenture. 206 "Definitive Trust Preferred Securities Certificates" means either or both (as the context requires) of (i) Trust Preferred Securities Certificates issued as Book-Entry Trust Preferred Securities Certificates as provided in Section 5.2 or 5.4 and (ii) Trust Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.2, 5.4 or 5.5. "Delaware 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. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee of the trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware Trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "DTC" means The Depository Trust Company. "Early Termination Event" has the meaning specified in Section 9.2. "Event of Default" means any one of the following events (whatever the reason for such event 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): (a) the occurrence of a Debenture Event of Default; or (b) default by the Issuer Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default by the Issuer Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trustees in this Trust Agreement (other than those specified in clause (b) or (c) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer Trustees and to the Depositor by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Trust Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. 207 "Exchange Act" means the Securities Exchange Act of 1934, and any successor statute thereto, in each case as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee Agreement" means the Guarantee Agreement executed and delivered by the Depositor and The Bank of New York, as guarantee trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Trust Preferred Securities, as amended from time to time. "Holder" means a Person in whose name a Trust Security or Trust Securities are registered in the Securities Register; any such Person shall be a beneficial owner within the meaning of the Delaware Business Trust Act. "Indenture" means the Junior Subordinated Indenture, dated as of October 28, 1997, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Investment Company Act" means the Investment Company Act of 1940, or any successor statute thereto, in each case as amended from time to time. "Issuer Trust" means the Delaware business trust known as "SCE&G Trust I" which was formed on October 8, 1997 under the Delaware Business Trust Act pursuant to the Original Trust Agreement and the filing of the Certificate of Trust, and continued pursuant to this Trust Agreement. "Issuer Trustees" has the meaning specified in the preamble to this Trust Agreement. "Letter of Representations" means the agreement among the Issuer Trust, the Property Trustee and DTC, as the initial Clearing Agency, dated as of the Closing Date, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (i) with respect to a redemption of any Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture, the proceeds of which will be used to pay the Redemption Price of such Trust Securities, (ii) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Issuer Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed and (iii) with respect to any distribution of Additional Amounts to Holders of Trust Securities, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities in respect of which such distribution is made. "Liquidation Amount" means the stated amount of $25 per Trust Security. 208 "Liquidation Date" means the date of the dissolution, winding-up or termination of the Issuer Trust pursuant to Section 9.4. "Liquidation Distribution" has the meaning specified in Section 9.4(d). "Majority in Liquidation Amount of the Trust Preferred Securities" or "Majority in Liquidation Amount of the Common Securities" means, except as provided by the Trust Indenture Act, Trust Preferred Securities or Common Securities, as the case may be, representing more than 50% of the aggregate Liquidation Amount of all then Outstanding Trust Preferred Securities or Common Securities, as the case may be. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, the Chief Executive Officer, the Chief Financial Officer, any Vice President or the Treasurer and by the Secretary or an Assistant Secretary of the Depositor and delivered to the Issuer Trustees. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement by each officer signing the Officers' Certificate that such officer has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by such officer in rendering the Officers' Certificate; (c) a statement that 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 such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Depositor or any Affiliate of the Depositor. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding," when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore cancelled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Trust Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent; provided that, if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and 209 (c) Trust Securities that have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Sections 5.4, 5.5, 5.6 and 5.11; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Trust Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Trust Preferred Securities owned by the Depositor, any Issuer Trustee or any Affiliate of the Depositor or of any Issuer Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Issuer Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Trust Preferred Securities that such Issuer Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Trust Preferred Securities are owned by the Depositor, one or more of the Issuer Trustees and/or any such Affiliate. Trust Preferred Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Trust Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Owner" means each Person who is the beneficial owner of Book-Entry Trust Preferred Securities as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.10 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee for the benefit of the Holders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Holders in accordance with Sections 4.1 and 4.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement, solely in its capacity as Property Trustee of the trust heretofore formed and continued hereunder and not in its individual capacity, and its successor in interest in such capacity, or any successor Property Trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. 210 "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures. "Relevant Trustee" has the meaning specified in Section 8.10. "Responsible Officer," when used with respect to the Property Trustee or the Delaware 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, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Property Trustee or the Delaware 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 Act" means the Securities Act of 1933, and any successor statute thereto, in each case as amended from time to time. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.5. "Successor Trust Preferred Securities" of any particular Trust Preferred Securities Certificate means every Trust Preferred Securities Certificate issued after, and evidencing all or a portion of the same beneficial interest in the Issuer Trust as that evidenced by, such particular Trust Preferred Securities Certificate; and, for the purposes of this definition, any Trust Preferred Securities Certificate executed and delivered under Section 5.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Trust Preferred Securities Certificate shall be deemed to evidence the same beneficial interest in the Issuer Trust as the mutilated, destroyed, lost or stolen Trust Preferred Securities Certificate. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including (i) all exhibits and (ii) for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Preferred Securities Certificate" means a certificate evidencing ownership of Trust Preferred Securities, substantially in the form attached as Exhibit D. 211 "Trust Preferred Security" means a preferred undivided beneficial interest in the assets of the Issuer Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution to the extent provided herein. "Trust Property" means (i) the Debentures, (ii) any cash on deposit in, or owing to, the Payment Account, and (iii) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Trust Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Trust Preferred Securities Certificates. "Underwriters" means Credit Suisse First Boston and PaineWebber Incorporated as the underwriters under the Underwriting Agreement. "Underwriting Agreement" means the Underwriting Agreement, dated October 22, 1997, among the Issuer Trust, the Depositor and the underwriter or underwriters named therein, as the same may be amended from time to time. "Vice President," when used with respect to the Depositor, means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." ARTICLE II CONTINUATION OF THE ISSUER TRUST SECTION 2.1. Name. The trust continued hereby shall be known as "SCE&G Trust I," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Issuer Trustees, in which name the Issuer Trustees may conduct the business of the Issuer Trust, make and execute contracts and other instruments on behalf of the Issuer Trust and sue and be sued. SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is White Clay Center, Rte 273, Newark, Delaware 19711, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Holders, the Depositor, the Property Trustee and the Administrative Trustees. The principal executive office of the Issuer Trust is South Carolina Electric & Gas Company, 1426 Main Street, Columbia, South Carolina 29201, Attention: Chief Financial Officer. 212 SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Issuer Trust as they arise or shall, upon request of any Issuer Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by such Issuer Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 2.4. Issuance of the Trust Preferred Securities. The Depositor, both on its own behalf and on behalf of the Issuer Trust pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall manually execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Underwriters, Trust Preferred Securities Certificates, registered in the names requested by the Underwriters, evidencing an aggregate of 2,000,000 Trust Preferred Securities having an aggregate Liquidation Amount of $50,000,000, against receipt of the aggregate purchase price of such Trust Preferred Securities of $50,000,000, by the Property Trustee. SECTION 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall execute in accordance with Sections 5.2, 5.3 and 8.9(a) and the Property Trustee shall deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, evidencing an aggregate of 61,856 Common Securities having an aggregate Liquidation Amount of $1,546,400, against receipt of the aggregate purchase price of such Common Securities of $1,546,400, to the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of the Issuer Trust, shall subscribe for and purchase from the Depositor the Debentures, registered in the name of the Property Trustee on behalf of the Issuer Trust and having an aggregate principal amount equal to $51,546,400, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Issuer Trust, shall deliver to the Depositor the sum of $51,546,400 (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first sentence of this Section 2.5). SECTION 2.6. Continuation of Trust. The exclusive purposes and functions of the Issuer Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures and (b) to engage in those activities necessary or incidental thereto. The Depositor hereby reaffirms the appointment of the Delaware Trustee and appoints and reaffirms the appointment of, as the case may be, the Administrative Trustees as trustees of the Issuer Trust, to have all the rights, powers and duties to the extent set forth herein, and the respective Issuer Trustees hereby accept such appointment. The Property Trustee hereby 213 declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Issuer Trust and the Holders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Issuer Trust. 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 Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the trustees of the Issuer Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the Delaware Business Trust Act. SECTION 2.7. Authorization to Enter into Certain Transactions. (a) The Issuer Trustees shall conduct the affairs of the Issuer Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section and in accordance with the following provisions (i) and (ii), the Issuer Trustees shall have the authority to enter into all transactions and agreements determined by the Issuer Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Issuer Trustees, as the case may be, under this Trust Agreement and to perform all acts in furtherance thereof, including, without limitation, the following: (i) As among the Issuer Trustees, each Administrative Trustee, acting singly or collectively, shall have the power and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) effecting the issuance and sale of the Trust Securities; (B) causing the Issuer Trust to enter into, and to execute, deliver and perform, the Letter of Representations and such other agreements as may be necessary or desirable in connection with the purposes and function of the Issuer Trust; (C) assisting in the registration of the Trust Preferred Securities under the Securities Act, and under applicable state securities or blue sky laws and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Trust Preferred Securities upon such securities exchange or exchanges as shall be determined by the Depositor, with the registration of the Trust Preferred Securities under the Exchange Act and with the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) assisting in the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Holders in accordance with this Trust Agreement; 214 (F) consenting to the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Trust Agreement (which consent shall not be unreasonably withheld); (G) executing the Trust Securities on behalf of the Issuer Trust in accordance with this Trust Agreement; (H) executing and delivering closing certificates, if any, pursuant to the Underwriting Agreement and applying for a taxpayer identification number for the Issuer Trust; and (I) taking any action incidental to the foregoing as the Issuer Trustees may from time to time determine to be necessary or advisable to give effect to the terms of this Trust Agreement. (ii) As among the Issuer Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Issuer Trust with respect to the following matters: (A) establishing the Payment Account; (B) receiving the Debentures; (C) collecting interest, principal and any other payments made in respect of the Debentures and holding such amounts in the Payment Account; (D) distributing through the Paying Agent of amounts distributable to the Holders in respect of the Trust Securities; (E) exercising all of the rights, powers and privileges of a holder of the Debentures; (F) sending notices of default and other information regarding the Trust Securities and the Debentures to theHolders in accordance with this Trust Agreement; (G) distributing the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, winding up the affairs of and liquidation of the Issuer Trust and the preparing, executing and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (I) performing the duties of the Property Trustee set forth in this Trust Agreement; 215 (J) after an Event of Default (other than under paragraph (b), (c), (d) or (e) of the definition of such term if such Event of Default is by or with respect to the Property Trustee) taking any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and (K) exercising any of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 2.7(a)(i)(E) and (I) herein; and in the event of a conflict between the action of the Administrative Trustees and the action of the Property Trustee, the action of the Property Trustee shall prevail. (b) So long as this Trust Agreement remains in effect, the Issuer Trust (or the Issuer Trustees acting on behalf of the Issuer Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Issuer Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected to cause the Issuer Trust to become taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Issuer Trust or the Holders in their capacity as Holders. (c) In connection with the issue and sale of the Trust Preferred Securities, the Depositor shall have the right and responsibility to assist the Issuer Trust with respect to, or effect on behalf of, the Issuer Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on the appropriate form in relation to the Trust Preferred Securities, including any amendments thereto and the taking of any action necessary or desirable to sell the Trust Preferred Securities in a transaction or a series of transactions pursuant thereto; (ii) the determination of the jurisdictions in which to take appropriate action to qualify or register for sale all or part of the Trust Preferred Securities and the taking of any and all such acts, other than actions that must be taken by or on behalf of the Issuer Trust, and advice to the Issuer Trust of 216 actions that must be taken by or on behalf of the Issuer Trust, and the preparation for execution and filing of any documents to be executed and filed by the Issuer Trust or on behalf of the Issuer Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such states in connection with the sale of the Trust Preferred Securities; (iii) the preparation for filing by the Issuer Trust and execution on behalf of the Issuer Trust of an application or applications to such securities exchange or exchanges as shall be determined by Depositor for listing upon notice of issuance of any Trust Preferred Securities; (iv) the preparation for filing by the Issuer Trust with the Commission and the execution on behalf of the Issuer Trust of a registration statement on Form 8-A relating to the registration of the Trust Preferred Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; (v) the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Trust Preferred Securities; and (vi) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Property Trustee and the Administrative Trustees are authorized and directed to conduct the affairs of the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act, and will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, each Administrative Trustee, the Property Trustee and the Holders of at least a Majority in Liquidation Amount of the Common Securities are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that such Administrative Trustee, the Property Trustee or Holders of Common Securities determine in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Outstanding Trust Preferred Securities. In no event shall the Issuer Trustees be liable to the Issuer Trust or the Holders for any failure to comply with this section that results from a change in law or regulation or in the interpretation thereof. SECTION 2.8. Assets of Trust. The assets of the Issuer Trust shall consist of the Trust Property. SECTION 2.9. Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee in trust for the benefit of the Issuer Trust and the Holders in accordance with this Trust Agreement. 217 ARTICLE III PAYMENT ACCOUNT SECTION 3.1. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and its agents shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All moneys and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Holders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV REDEMPTION SECTION 4.1. Distributions. (a) The Trust Securities represent undivided beneficial interests in the Trust Property, and Distributions (including of Additional Amounts) will be made on the Trust Securities at the rate and on the dates that payments of interest (including of Additional Interest, as defined in the Indenture) are made on the Debentures. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Issuer Trust available for the payment of Distributions. Distributions shall accumulate from October 28, 1997, and, except in the event (and to the extent) that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to the Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1997. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall 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, the payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date on which such payment was originally payable (each date on which distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (ii) The Trust Securities shall be entitled to Distributions payable at a rate of 7.55% per annum of the Liquidation Amount of the Trust Securities. The amount of 218 Distributions payable for any period less than a full Distribution period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in a partial month in a period. Distributions payable for each full Distribution period will be computed by dividing the rate per annum by four. The amount of Distributions payable for any period shall include any Additional Amounts in respect of such period. (iii) Distributions on the Trust Securities shall be made by the Property Trustee from the Payment Account and shall be payable on each Distribution Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be at the close of business on the fifteenth day (whether or not a Business Day) next preceding the relevant Distribution Date. SECTION 4.2. Redemption. (a) On each Debenture Redemption Date and on the stated maturity of the Debentures, the Issuer Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price or if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, an estimate of the Redemption Price together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the third Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated); (iii) the CUSIP number or CUSIP numbers of the Trust Preferred Securities affected (if applicable); (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after said date, except as provided in Section 4.2(d) below; and (vi) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price. 219 The Issuer Trust in issuing the Trust Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall indicate the "CUSIP" numbers of the Trust Securities in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Trust Securities or as contained in any notice of redemption and related materials. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Issuer Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Trust Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, with respect to Book-Entry Trust Preferred Securities, irrevocably deposit with the Clearing Agency for such Book- Entry Trust Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Holders of the Trust Preferred Securities. With respect to Trust Preferred Securities that are not Book-Entry Trust Preferred Securities, the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Trust Preferred Securities upon surrender of their Trust Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Holders holding Trust Securities so called for redemption will cease, except the right of such Holders to receive the Redemption Price and any Distribution payable in respect of the Trust Securities on or prior to the Redemption Date, but without interest, and such Securities will cease to be outstanding. In the event that any date on which any Redemption Price is payable 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 each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Issuer Trust or by the Depositor pursuant to the Guarantee Agreement, Distributions on such Trust Securities will continue to accumulate, as set forth in Section 4.1, from the Redemption Date originally established by the Issuer Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. 220 (e) Subject to the priority provisions of Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Trust Preferred Securities based upon the relative Liquidation Amounts of such classes. The particular Trust Preferred Securities to be redeemed shall be selected on a pro rata basis based upon their respective Liquidation Amounts not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Trust Preferred Securities not previously called for redemption, provided that so long as the Trust Preferred Securities are in book-entry-only form, such selection shall be made in accordance with the customary procedures for the Clearing Agency for the Trust Preferred Securities. The Property Trustee shall promptly notify the Securities Registrar in writing of the Trust Preferred Securities selected for redemption and, in the case of any Trust Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Trust Preferred Securities shall relate, in the case of any Trust Preferred Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Trust Preferred Securities that has been or is to be redeemed. SECTION 4.3. Subordination of Common Securities. (a) Payment of Distributions (including any Additional Amounts) on, the Redemption Price of, and the Liquidation Distribution in respect of the Trust Securities, as applicable, shall be made, subject to the allocation provisions of Section 4.2(e), pro rata among the Common Securities and the Trust Preferred Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date, Redemption Date or Liquidation Date any Event of Default resulting from a Debenture Event of Default specified in Section 5.1(a) or 5.1(b) of the Indenture shall have occurred and be continuing, no payment of any Distribution (including any Additional Amounts) on, Redemption Price of, or Liquidation Distribution in respect of any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including any Additional Amounts) on all Outstanding Trust Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Trust Preferred Securities then called for redemption, or in the case of payment of the Liquidation Distribution the full amount of such Liquidation Distribution on all Outstanding Trust Preferred Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including any Additional Amounts) on, or the Redemption Price of, the Trust Preferred Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from any Debenture Event of Default, the Holders of the Common Securities shall have no right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated. Until all such Events 221 of Default under this Trust Agreement with respect to the Trust Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Trust Preferred Securities and not on behalf of the Holders of the Common Securities, and only the Holders of the Trust Preferred Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.4. Payment Procedures. Payments of Distributions (including any Additional Amounts) in respect of the Trust Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Trust Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holders of the Common Securities. SECTION 4.5. Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Issuer Trust. In this regard, the Administrative Trustees shall (i) prepare and file (or cause to be prepared and filed) all Internal Revenue Service forms required to be filed in respect of the Issuer Trust in each taxable year of the Issuer Trust and (ii) prepare and furnish (or cause to be prepared and furnished) to each Holder all Internal Revenue Service forms required to be provided by the Issuer Trust. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Issuer Trustees shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Holders under the Trust Securities. SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Issuer Trust by the United States or any other taxing authority, which were included in such Additional Sums. SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Trust Preferred Securities with respect thereto shall be reduced by the amount of any corresponding payment such Holder (or any Owner) has directly received pursuant to Section 5.8 of the Indenture or Section 5.13 of this Trust Agreement. 222 ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 5.1. Initial Ownership. Upon the creation of the Issuer Trust and the contribution by the Depositor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Issuer Trust. SECTION 5.2. The Trust Securities Certificates. (a) The Trust Preferred Securities Certificates shall be issued in minimum denominations of $25 Liquidation Amount and integral multiples of $25 in excess thereof and the Common Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Issuer Trust by manual signature of at least one Administrative Trustee. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuer Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Holder and shall be entitled to the rights and subject to the obligations of a Holder hereunder upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.5. (b) Upon their original issuance, Trust Preferred Securities Certificates shall be issued in the form of one or more Book-Entry Trust Preferred Securities Certificates registered in the name of DTC, as Clearing Agency, or its nominee and deposited with DTC or a custodian for DTC for credit by DTC to the respective accounts of the Owners thereof (or such other accounts as they may direct). (c) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 5.3. Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered to or upon the written order of the Depositor, executed by one authorized officer thereof, without further corporate action by the Depositor, in authorized denominations. 223 SECTION 5.4. Book-Entry Trust Preferred Securities. (a) Each Book-Entry Trust Preferred Securities Certificate issued under this Trust Agreement shall be registered in the name of the Clearing Agency or a nominee thereof and delivered to such Clearing Agency or a nominee thereof or custodian therefor and each such Book- Entry Trust Preferred Securities Certificate shall constitute a single Trust Preferred Securities Certificate for all purposes of this Agreement. (b) Notwithstanding any other provision in this Trust Agreement, no Book-Entry Trust Preferred Securities Certificate may be exchanged in whole or in part for Trust Preferred Securities Certificates registered, and no transfer of a Book-Entry Trust Preferred Securities Certificate in whole or in part may be registered, in the name of any Person other than the Clearing Agency for such Book-Entry Trust Preferred Securities Certificates or a nominee thereof unless (i) the Clearing Agency advises the Issuer Trust in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Trust Preferred Securities Certificates, and is unable to locate a qualified successor or a qualified successor shall not have been appointed, or the Clearing Agency ceases to be a clearing agency registered under the Exchange Act at a time when it is required to be so registered to act as such clearing agent, (ii) the Issuer Trust at its option determines that a Book Entry Trust Preferred Securities Certificate shall be so exchangeable or (iii) a Debenture Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii) or (iii) above, the Property Trustee shall notify the Clearing Agency and instruct the Clearing Agency to notify all Owners of Book- Entry Trust Preferred Securities, the Delaware Trustee and the Administrative Trustees of the occurrence of such event and of the availability of the Definitive Trust Preferred Securities Certificates to Owners of such class or classes, as applicable, requesting the same. (c) If any Book-Entry Trust Preferred Securities Certificate is to be exchanged for other Trust Preferred Securities Certificates or cancelled in part, or if any other Trust Preferred Securities Certificate is to be exchanged in whole or in part for Book-Entry Trust Preferred Securities represented by a Book-Entry Trust Preferred Securities Certificate, then either (i) such Book-Entry Trust Preferred Securities Certificate shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the aggregate Liquidation Amount represented by such Book-Entry Trust Preferred Securities Certificate shall be reduced, subject to Section 5.2, or increased by an amount equal to the Liquidation Amount represented by that portion of the Book-Entry Trust Preferred Securities Certificate to be so exchanged or cancelled, or equal to the Liquidation Amount represented by such other Trust Preferred Securities Certificates to be so exchanged for Book-Entry Trust Preferred Securities represented thereby, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon surrender to the Administrative Trustees or the Securities Registrar of the Book-Entry Trust Preferred Securities Certificate or Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative 224 Trustees, or any one of them, shall execute the Definitive Trust Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. None of the Securities Registrar, the Issuer Trustees or the Administrative Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Trust Preferred Securities Certificates, the Issuer Trustees shall recognize the Holders of the Definitive Trust Preferred Securities Certificates as Holders. The Definitive Trust Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them. (d) Every Trust Preferred Securities Certificate executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Book-Entry Trust Preferred Securities Certificate or any portion thereof, whether pursuant to this Article V or Article IV or otherwise, shall be executed and delivered in the form of, and shall be, a Book-Entry Trust Preferred Securities Certificate, unless such Trust Preferred Securities Certificate is registered in the name of a Person other than the Clearing Agency for such Book-Entry Trust Preferred Securities Certificate or a nominee thereof. (e) The Clearing Agency or its nominee, as registered owner of a Book-Entry Trust Preferred Securities Certificate, shall be the Holder of such Book-Entry Trust Preferred Securities Certificate for all purposes under this Agreement and the Book-Entry Trust Preferred Securities Certificate and Owners with respect to a Book-Entry Trust Preferred Securities Certificate shall hold such interests pursuant to the Applicable Procedures. The Securities Registrar and the Issuer Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Trust Agreement relating to the Book-Entry Trust Preferred Securities Certificates (including the payment of the Liquidation Amount of and Distributions on the Book-Entry Trust Preferred Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Trust Preferred Securities represented thereby) as the sole Holder of the Book-Entry Trust Preferred Securities represented thereby and shall have no obligations to the Owners thereof. None of the Issuer Trustees nor the Securities Registrar shall have any liability in respect of any transfers effected by the Clearing Agency. The rights of the Owners of the Book-Entry Trust Preferred Securities shall be exercised only through the Clearing Agency and shall be limited to those established by law, the Applicable Procedures and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Trust Preferred Securities Certificates are issued pursuant to Section 5.4(b), the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Trust Preferred Securities to such Clearing Agency Participants and none of the Depositor or the Issuer Trustees shall have any responsibility or obligation with respect thereto. 225 SECTION 5.5. Registration of Transfer and Exchange of Trust Preferred Securities Certificates. (a) The Property Trustee shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.9, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Trust Securities Certificates (the "Securities Register") in which the registrar and transfer agent with respect to the Trust Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Trust Preferred Securities Certificates and Common Securities Certificates (subject to Section 5.11 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Trust Preferred Securities Certificates as herein provided. The Person acting as the Property Trustee shall at all times also be the Securities Registrar. Upon surrender for registration of transfer of any Trust Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.9, the Administrative Trustees or any one of them shall execute and deliver to the Property Trustee, and the Property Trustee shall deliver, in the name of the designated transferee or transferees, one or more new Trust Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required (i) to issue, register the transfer of or exchange any Trust Preferred Security during a period beginning at the opening of business 15 days before the day of selection for redemption of such Trust Preferred Securities pursuant to Article IV and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Trust Preferred Security so selected for redemption in whole or in part, except, in the case of any such Trust Preferred Security to be redeemed in part, any portion thereof not to be redeemed. Every Trust Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to an Administrative Trustee and the Securities Registrar duly executed by the Holder or its attorney duly authorized in writing. Each Trust Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Property Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Trust Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Trust Preferred Securities Certificates. (b) Notwithstanding any other provision of this Agreement, transfers and exchanges of Trust Preferred Securities Certificates and beneficial interests in a Book-Entry Trust Preferred Securities Certificate of the kinds specified in this Section 5.5(b) shall be made only in accordance with this Section 5.5(b). 226 (i) Non-Book-Entry Trust Preferred Securities Certificate to Book-Entry Trust Preferred Securities Certificate. If the Holder of a Trust Preferred Securities Certificate (other than a Book- Entry Trust Preferred Securities Certificate) wishes at any time to transfer all or any portion of such Trust Preferred Securities Certificate to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Book-Entry Trust Preferred Securities Certificate, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and subject to the Applicable Procedures. Upon receipt by the Securities Registrar of such Trust Preferred Securities Certificate as provided in Section 5.5(a) and instructions satisfactory to the Securities Registrar directing that a beneficial interest in the Book-Entry Trust Preferred Securities Certificate of a specified number of Trust Preferred Securities not greater than the number of Trust Preferred Securities represented by such Trust Preferred Securities Certificate be credited to a specified Clearing Agency Participant's account, then the Securities Registrar shall cancel such Trust Preferred Securities Certificate (and issue a new Trust Preferred Securities Certificate in respect of any untransferred portion thereof) as provided in Section 5.5(a) and increase the aggregate Liquidation Amount of the Book-Entry Trust Preferred Securities Certificate by the Liquidation Amount represented by such Trust Preferred Securities so transferred as provided in Section 5.4(c). (ii) Non-Book-Entry Trust Preferred Securities Certificate to Non-Book-Entry Trust Preferred Securities Certificate. A Trust Preferred Securities Certificate that is not a Book-Entry Trust Preferred Securities Certificate may be transferred, in whole or in part, to a Person who takes delivery in the form of another Trust Preferred Securities Certificate that is not a Book-Entry Trust Preferred Securities Certificate as provided in Section 5.5(a). (iii) Exchanges between Book-Entry Trust Preferred Securities Certificate and Non-Book-Entry Trust Preferred Securities Certificate. A beneficial interest in a Book-Entry Trust Preferred Securities Certificate may be exchanged for a Trust Preferred Securities Certificate that is not a Book-Entry Trust Preferred Securities Certificate as provided in Section 5.4. SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (i) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (ii) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Issuer Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities 227 Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 5.6, the Administrative Trustees or the Securities Registrar 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 Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Issuer Trust corresponding to that evidenced by the lost, stolen or destroyed Trust Securities Certificate, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 5.7. Persons Deemed Holders. The Issuer Trustees and the Securities Registrar shall each treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Issuer Trustees and the Securities Registrar shall be bound by any notice to the contrary. SECTION 5.8. Access to List of Holders' Names and Addresses. Each Holder and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee, the Delaware Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 5.9. Maintenance of Office or Agency. The Property Trustee shall designate, with the consent of the Administrative Trustees, which consent shall not be unreasonably withheld, an office or offices or agency or agencies where Trust Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate South Carolina Electric & Gas Company, 1426 Main Street, Columbia, South Carolina 29201 Attention: Treasurer, as its office and agency for such purposes. The Property Trustee shall give prompt written notice to the Depositor, the Administrative Trustees and to the Holders of any change in the location of the Securities Register or any such office or agency. SECTION 5.10. Appointment of Paying Agent. The Paying Agent shall make Distributions to Holders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account solely for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent in their sole discretion. The Paying Agent shall initially be the Bank. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees and the Property Trustee. If the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company) to act as Paying Agent. 228 Such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees shall execute and deliver to the Issuer Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Issuer Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Holders in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co- paying agent unless the context requires otherwise. SECTION 5.11. Ownership of Common Securities by Depositor. On the Closing Date, the Depositor shall acquire, and thereafter shall retain, beneficial and record ownership of the Common Securities. The Depositor may not transfer the Common Securities except (i) in connection with a consolidation or merger of the Depositor into another Person or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person pursuant to Section 8.1 of the Indenture or (ii) to the Depositor or an Affiliate thereof in compliance with applicable law (including the Securities Act, and applicable state securities and blue sky laws). To the fullest extent permitted by law, any attempted transfer of the Common Securities other than as set forth in the next proceeding sentence shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT." SECTION 5.12. Notices to Clearing Agency. To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Trust Preferred Securities are represented by a Book-Entry Trust Preferred Securities Certificate, the Issuer Trustees shall give all such notices and communications specified herein to be given to the Clearing Agency and shall have no obligations to the Owners. SECTION 5.13. Rights of Holders; Waivers of Past Defaults. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9 and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Issuer Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Issuer Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Holders against payment of the purchase price 229 therefor will be fully paid and nonassessable by the Issuer Trust. The Holders of the Trust Securities, in their capacities as such, 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. (b) For so long as any Trust Preferred Securities remain Outstanding, if, upon a Debenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Trust Preferred Securities then Outstanding shall have the right to make such declaration by a notice in writing to the Property Trustee, the Depositor and the Debenture Trustee. At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as in the Indenture provided, if the Property Trustee fails to annul any such declaration and waive such default, the Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities, by written notice to the Property Trustee, the Depositor and the Debenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor has paid or deposited with the Debenture Trustee a sum sufficient to pay (A) all overdue installments of interest on all of the Debentures, (B) any accrued Additional Interest on all of the Debentures, (C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and (D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Property Trustee, their agents and counsel; and (ii) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture. The Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities may, on behalf of the Holders of all the Trust Preferred Securities, waive any past default under the Indenture, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a 230 default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Property Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Trust Preferred Securities a record date shall be established for determining Holders of Outstanding Trust Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Property Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder or a proxy of a Holder from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.13(b). (c) For so long as any Trust Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Debenture Event of Default specified in Section 5.1(a) or 5.1(b) of the Indenture, any Holder of Trust Preferred Securities shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of any amounts payable in respect of Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Trust Preferred Securities of such Holder (a "Direct Action"). Except as set forth in Section 5.13(b) and this Section 5.13(c), the Holders of Trust Preferred Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Debentures. (d) Except as otherwise provided in clauses (a), (b) and (c) of this Section 5.13, the Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities may, on behalf of the Holders of all the Trust Preferred Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist and any default or Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 231 ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING SECTION 6.1. Limitations on Voting Rights. (a) Except as expressly provided in this Trust Agreement and in the Indenture and as otherwise required by law, no Holder of Trust Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Issuer Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Holders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee on behalf of the Issuer Trust, the Property Trustee shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or execute any trust or power conferred on the Property Trustee with respect to the Debentures, (ii) waive any past default that may be waived under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each Holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Trust Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Trust Preferred Securities, except by a subsequent vote of the Holders of the Trust Preferred Securities. The Property Trustee shall notify all Holders of the Trust Preferred Securities of any notice of default received with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Trust Preferred Securities, prior to taking any of the foregoing actions, the Property Trustee shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. (c) If any proposed amendment to the Trust Agreement provides for, or the Issuer Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Trust Preferred Securities, whether by way of amendment to this Trust Agreement or otherwise or (ii) the dissolution, winding-up or termination of the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Trust Preferred Securities as a 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 the Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities. Notwithstanding any other provision of this Trust Agreement, no amendment to this Trust Agreement may be made if, 232 as a result of such amendment, it would cause the Issuer Trust to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. SECTION 6.2. Notice of Meetings. Notice of all meetings of the Holders of the Trust Preferred Securities, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to each Holder of Trust Preferred Securities, at such Holder's registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.3. Meetings of Holders of the Trust Preferred Securities. No annual meeting of Holders is required to be held. The Administrative Trustees, however, shall call a meeting of the Holders of the Trust Preferred Securities to vote on any matter upon the written request of the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Trust Preferred Securities and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of the Trust Preferred Securities to vote on any matters as to which such Holders are entitled to vote. The Holders of at least a Majority in Liquidation Amount of the Trust Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of the Holders of the Trust Preferred Securities. If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding Trust Preferred Securities representing at least a Majority in aggregate Liquidation Amount of the Trust Preferred Securities held by the Holders present, either in person or by proxy, at such meeting shall constitute the action of the Holders of the Trust Preferred Securities, unless this Trust Agreement requires a greater number of affirmative votes. SECTION 6.4. Voting Rights. Holders shall be entitled to one vote for each $25 of Liquidation Amount represented by their Outstanding Trust Securities in respect of any matter as to which such Holders are entitled to vote. SECTION 6.5. Proxies, etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Issuer Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Holders of record shall be 233 entitled to vote. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.6. Holder Action by Written Consent. Any action that may be taken by Holders at a meeting may be taken without a meeting if Holders holding at least a Majority in Liquidation Amount of all Trust Preferred Securities entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any other provision of this Trust Agreement) shall consent to the action in writing. SECTION 6.7. Record Date for Voting and Other Purposes. For the purposes of determining the Holders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees or Property Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Holders or the payment of a distribution or other action, as the case may be, as a record date for the determination of the identity of the Holders of record for such purposes. SECTION 6.8. Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor of the Issuer Trustees, if made in the manner provided in this Section. 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 234 affidavit shall also constitute sufficient proof of his 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 that any Issuer Trustee receiving the same deems sufficient. The ownership of Trust Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder of every Trust 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 Issuer Trustees or the Issuer Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise among the Holders or the Issuer Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Holder or Issuer Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. SECTION 6.9. Inspection of Records. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Issuer Trust shall be open to inspection by Holders during normal business hours for any purpose reasonably related to such Holder's interest as a Holder. ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Holders that: (a) the Property Trustee is a corporation, duly organized, validly existing and in good standing under the laws of the State of New York; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; 235 (c) the Delaware Trustee is a Delaware banking corporation; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (f) the execution, delivery and performance of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and does not require any approval of stockholders of the Property Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate the Charter or By-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Delaware Trustee is a party or by which it is bound or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee (as appropriate in context) contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing law of the United States or the State of Delaware governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee, as the case may be; and (h) there are no proceedings pending or, to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal that, individually or in the aggregate, would materially and adversely affect the Issuer Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Issuer Trustees under this Trust Agreement. 236 SECTION 7.2. Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Holders that: (a) the Trust Securities Certificates issued on behalf of the Issuer Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Issuer Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Holders will be, as of each such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. ARTICLE VIII THE ISSUER TRUSTEES SECTION 8.1. Certain Duties and Responsibilities. (a) The duties and responsibilities of the Issuer Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Issuer Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Issuer Trustees shall be subject to the provisions of this Section 8.1. Nothing in this Trust Agreement shall be construed to release an Administrative Trustee from liability for his or her own grossly negligent action, his or her own negligent failure to act, or his or her own willful misconduct. To the extent that, at law or in equity, an Issuer Trustee has duties and liabilities relating to the Issuer Trust or to the Holders, such Issuer Trustee shall not be liable to the Issuer Trust or to any Holder for such Issuer Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Issuer Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Holders to replace such other duties and liabilities of the Issuer Trustees. 237 (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Issuer Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) The Property 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 Trust Agreement (including pursuant to Section 10.10), and no implied covenants shall be read into this Trust Agreement against the Property Trustee. If an Event of Default has occurred (that has not been cured or waived pursuant to Section 5.13, the Property Trustee shall exercise such of the rights and powers vested in it by this Trust 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. (d) No provision of this Trust Agreement shall be construed to relieve the Property Trustee or the Delaware 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 Property Trustee shall be determined solely by the express provisions of this Trust Agreement (including pursuant to Section 10.10), and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement (including pursuant to Section 10.10); 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 Trust Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act 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 Trust Agreement. 238 (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized 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 at least a Majority in Liquidation Amount of the Trust Preferred Securities 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 Trust Agreement; (iv) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment 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 Trust Agreement and the Trust Indenture Act; (v) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; (vi) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of any other Issuer Trustee or the Depositor; and (vii) No provision of this Trust Agreement 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 the Property 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 Trust Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (e) The Administrative Trustees shall not be responsible for monitoring the compliance by the other Issuer Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall either Administrative Trustee be liable for the default or misconduct of any other Administrative Trustee, the other Issuer Trustees or the Depositor. SECTION 8.2. Certain Notices. 239 Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Event of Default to the Holders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. Within five Business Days after the receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Indenture, the Administrative Trustees shall transmit, in the manner and to the extent provided in Section 10.8, notice of such exercise to the Holders, unless such exercise shall have been revoked. The Property Trustee shall not be deemed to have knowledge of any Event of Default unless the Property Trustee shall have received written notice or a Responsible Officer of the Property Trustee charged with the administration of this Trust Agreement shall have obtained actual knowledge of such Event of Default. SECTION 8.3. Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of the Trust Preferred Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting the Depositor's opinion as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Holders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; 240 (d) any direction or act of an Administrative Trustee contemplated by this Trust Agreement shall be sufficiently evidenced by a certificate executed by such Administrative Trustee and setting forth such direction or act; (e) 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 filing under tax or securities laws) or any rerecording, refiling or re-registration thereof; (f) the Property Trustee may consult with counsel of its selection (which counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such 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 and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; provided that, nothing contained in this Section 8.3(g) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Trust Agreement; (h) 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, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall be responsible for its own negligence or misconduct with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement 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 (which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, 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 241 (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on any Issuer 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 such Person 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 any Issuer Trustee shall be construed to be a duty. SECTION 8.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Issuer Trust and the Depositor, and the Issuer Trustees do not assume any responsibility for their correctness. The Issuer Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. The Property Trustee may conclusively assume that any funds held by it hereunder are legally available unless an officer of the Property Trustee assigned to its Corporate Trust Administration department shall have received written notice from the Depositor, any Holder or any other Issuer Trustee that such funds are not legally available. SECTION 8.5. May Hold Securities. Any Issuer Trustee or any other agent of any Issuer Trustee or the Issuer Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13 and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Issuer Trust with the same rights it would have if it were not an Issuer Trustee or such other agent. SECTION 8.6. Compensation; Indemnity; Fees. The Depositor agrees: (a) to pay to the Issuer Trustees from time to time such compensation as the parties shall agree from time to time for all services rendered by them hereunder as may be agreed by the Depositor and the Issuer Trustees from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); 242 (b) except as otherwise expressly provided herein, to reimburse the Issuer Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Issuer Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to their negligence, bad faith or wilful misconduct; and (c) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Issuer Trustee, (ii) any Affiliate of any Issuer Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Issuer Trustee and (iv) any employee or agent of the Issuer Trust (referred to herein as an "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 Issuer Trust or any act or omission performed or omitted by such Indemnified Person on behalf of the Issuer Trust, 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, bad faith or wilful misconduct with respect to such acts or omissions. The provisions of this Section 8.6 shall survive the termination of this Trust Agreement and the removal or resignation of any Issuer Trustee. No Issuer Trustee may claim any Lien on any Trust Property as a result of any amount due pursuant to this Section 8.6. SECTION 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is a national or state chartered bank and eligible pursuant to Section 310 of the Trust Indenture Act to act as such and that has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person 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 Property Trustee with respect to the Trust Securities 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. At the time of appointment, the Property Trustee must have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative 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 persons authorized to bind that entity. 243 (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware, or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law and that shall act through one or more persons authorized to bind such entity. SECTION 8.8. Conflicting Interests. (a) If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. (b) The Guarantee Agreement and the Indenture shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 8.9. Co-Trustees and Separate Trustee. Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor and the Administrative Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States, or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. In case an Event of Default under the Indenture shall have occurred and be continuing, the Property Trustee alone shall have the power to make such appointment. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: 244 (a) The Trust Securities shall be executed by one or more Administrative Trustees and delivered by the Property Trustee and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Property Trustee specified hereunder shall be exercised solely by the Property Trustee and not by such co-trustee or separate trustee. (b) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigning or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 8.10. Resignation and Removal; Appointment of Successor. No resignation or removal of any Issuer Trustee (the "Relevant Trustee") and no appointment of a successor Issuer Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Issuer Trustee in accordance with the applicable requirements of Section 8.11. 245 Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Holders. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Debenture Event of Default shall have occurred and be continuing, any Issuer Trustee may be removed at any time by Act of the Holders of Common Securities. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Trust Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Holders of Common Securities at any time. In no event will the Holders of the Trust Preferred Securities have a right to vote to appoint, remove or replace the Administrative Trustees. If any Issuer Trustee shall resign, be removed or become incapable of acting as Issuer Trustee, or if a vacancy shall occur in the office of any Issuer Trustee for any reason, at a time when no Debenture Event of Default shall have occurred and be continuing, the Holders of Common Securities, by Act of the Holders of Common Securities, shall promptly appoint a successor Issuer Trustee or Issuer Trustees and the retiring Issuer Trustee shall comply with the applicable requirements of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and be continuing, the Holders of Trust Preferred Securities, by Act of the Holders of a majority in Liquidation Amount of the Trust Preferred Securities then Outstanding, shall promptly appoint a successor Relevant Trustee or Trustees and such successor Trustee shall comply with the applicable requirements of Section 8.11. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Holders of Common Securities by Act of the Holders of Common Securities shall promptly appoint a successor Administrative Trustee or Administrative Trustees and such successor Administrative Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Holders of Common Securities or the Holders of Trust Preferred Securities and accepted appointment in the manner required by Section 8.11, any Holder who has been a Holder of Trust Securities 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 Relevant Trustee. The Property Trustee shall give notice of each resignation and each removal of an Issuer Trustee and each appointment of a successor Issuer Trustee to all Holders in the manner provided in Section 10.8 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. 246 Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). SECTION 8.11. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Issuer Trust and (b) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the Issuer Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Issuer Trust. Upon request of any such successor Relevant Trustee, the Issuer Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural Person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided that such Person 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. 247 SECTION 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust. If and when the Property Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Depositor or the Issuer Trust (or any other obligor upon the Trust Preferred Securities), the Property Trustee shall be subject to the provisions of Section 311 of the Trust Indenture Act regarding the collection of claims against the Depositor or the Issuer Trust (or any such other obligor). SECTION 8.14. Property Trustee May File Proofs of Claim. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Issuer Trust or any other obligor upon the Trust Securities or the property of the Issuer Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable and irrespective of whether the Property Trustee shall have made any demand on the Issuer Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 8.15. Reports by Property Trustee. (a) Not later than January 31 of each year, the Property Trustee shall transmit to all Holders in accordance with Section 10.8 and to the Depositor a brief report dated as of the immediately preceding December 31 with respect to: 248 (i) its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; (ii) a statement that the Property Trustee has complied with all of its obligations under this Trust Agreement during the 12-month period (or, in the case of the initial report, the period since the Closing Date) ending with such December 31 or, if the Property Trustee has not complied in any material respect with such obligations, a description of such noncompliance; and (iii) any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (b) In addition the Property Trustee shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each national stock exchange, the Nasdaq National Market or such other interdealer quotation system or self-regulatory organization upon which the Trust Securities are listed or traded, with the Commission and with the Depositor. SECTION 8.16. Reports to the Property Trustee. Each of the Depositor and the Administrative Trustees shall provide to the Property Trustee, the Commission and the Holders such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. The Depositor and the Administrative Trustees shall annually file with the Property Trustee a certificate specifying whether such Person is in compliance with all of the terms and covenants applicable to such Person hereunder. SECTION 8.17. Evidence of Compliance with Conditions Precedent. Each of the Depositor and the Administrative Trustees shall provide to the Property Trustee such evidence of compliance with the conditions precedent, if any, provided for in this Trust 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) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 8.18. Number of Issuer Trustees. (a) The number of Issuer Trustees shall be five, provided that the Property Trustee and the Delaware Trustee may be the same Person. 249 (b) If an Issuer Trustee ceases to hold office for any reason, a vacancy shall occur. The vacancy shall be filled with an Issuer Trustee appointed in accordance with Section 8.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of an Issuer Trustee shall not operate to annul, dissolve or terminate the Issuer Trust. SECTION 8.19. Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Issuer Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement. SECTION 8.20. Appointment of Administrative Trustees. (a) The Administrative Trustees shall initially be K. B. Marsh, an individual, M. R. Cannon, an individual, and H. T. Arthur, an individual, and their successors shall be appointed by the Holders of a Majority in Liquidation Amount of the Common Securities and may resign or may be removed by the Holders of a Majority in Liquidation Amount of the Common Securities at any time. Upon any resignation or removal, the Depositor shall appoint a successor Administrative Trustee. Each Administrative Trustee shall sign an agreement agreeing to comply with the terms of this Trust Agreement. If at any time there is no Administrative Trustee, the Property Trustee or any Holder who has been a Holder of Trust Securities for at least six months may petition any court of competent jurisdiction for the appointment of one or more Administrative Trustees. (b) Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with this Section 8.20, the Administrative Trustees in office, regardless of their number (and not withstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. (c) Notwithstanding the foregoing or any other provision of this Trust Agreement, if any Administrative Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the unanimous acts of the remaining Administrative Trustees, if there were at least two of them prior to such vacancy, and by the Depositor, if there were not two such Administrative Trustees immediately prior to such vacancy (with the successor being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 8.7). 250 ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER SECTION 9.1. Dissolution Upon Expiration Date. Unless earlier dissolved, the Issuer Trust shall automatically dissolve on October 1, 2052 (the "Expiration Date"). SECTION 9.2. Early Dissolution. The first to occur of any of the following events is an "Early Dissolution Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (b) the written direction to the Property Trustee from all of the Holders of the Common Securities at any time to dissolve the Issuer Trust and to distribute the Debentures to Holders in exchange for the Trust Preferred Securities (which direction is optional and wholly within the discretion of the Holders of the Common Securities); (c) the redemption of all of the Trust Preferred Securities in connection with the redemption of all the Debentures; (d) the entry of an order for dissolution of the Issuer Trust by a court of competent jurisdiction; and (e) the expiration of the term as provided in Section 9.1. SECTION 9.3. Termination. The respective obligations and responsibilities of the Issuer Trustees and the Issuer Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Holders of all amounts required to be distributed hereunder upon the liquidation of the Issuer Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2; (b) the payment of any expenses owed by the Issuer Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Issuer Trust or the Holders. 251 SECTION 9.4. Liquidation. (a) If an Early Termination Event specified in clause (a), (b) or (d) of Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, to each Holder a Like Amount of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid mailed not less than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All such notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the procedures by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Issuer Trust and distribution of the Debentures to Holders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish a record date for such distribution (which shall be not more than 30 days prior to the Liquidation Date) and, establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such Certificates to the exchange agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the national stock exchange, the Nasdaq National Market or on such other exchange, interdealer quotation system or self-regulatory organization as the Trust Preferred Securities are then listed, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (v) all rights of Holders holding Trust Securities will cease, except the right of such Holders to receive Debentures upon surrender of Trust Securities Certificates. 252 (d) If, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, or if an Early Termination Event specified in Section 9.2(c) occurs, the Trust Property shall be liquidated and the Issuer Trust shall be wound-up or terminated by the Property Trustee in such manner as the Property Trustee determines. In such event, Holders will be entitled to receive out of the assets of the Issuer Trust available for distribution to Holders, after satisfaction of liabilities to creditors of the Issuer Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such winding up or termination, the Liquidation Distribution can be paid only in part because the Issuer Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Issuer Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holders of the Common Securities will be entitled to receive Liquidation Distributions upon any such winding-up or termination pro rata (determined as aforesaid) with Holders of Trust Preferred Securities, except that, if a Debenture Event of Default specified in Section 5.1(a) or 5.1(b) of the Indenture has occurred and is continuing, the Trust Preferred Securities shall have a priority over the Common Securities as provided in Section 4.3. SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust. The Issuer Trust may not merge with or into, consolidate, amalgamate or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Sections 9.4 or 9.5. At the request of the Holders of the Common Securities, with the consent of the Administrative Trustees, the Issuer Trust may merge with or into, consolidate, amalgamate or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any state; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Issuer Trust with respect to the Trust Preferred Securities or (b) substitutes for the Trust Preferred Securities other securities having substantially the same terms as the Trust Preferred Securities (the "Successor Securities") so long as the Successor Securities have the same priority as the Trust Preferred Securities with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) a trustee of such successor entity possessing the same powers and duties as the Property Trustee is appointed to hold the Debentures, (iii) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Trust Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization which assigns ratings to the Trust Preferred Securities, (iv) the Successor Securities are listed, or any Successor Securities will be listed upon notice of issuance, on the national securities exchange, the Nasdaq National Market or on such other exchange, interdealer quotation system or self-regulatory organization as the Trust Preferred Securities are then listed, if any, (v) such merger, consolidation, 253 amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Issuer Trust, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Trust Preferred Securities (including any Successor Securities) in any material respect and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Issuer Trust nor such successor entity will be required to register as an "investment company" under the Investment Company Act and (viii) the Depositor or its permitted transferee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee Agreement. Notwithstanding the foregoing, the Issuer Trust shall not, except with the consent of Holders of all of the Trust Preferred Securities, 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 other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Issuer Trust or the successor entity to be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Limitation of Rights of Holders. Except as set forth in Section 9.2, the death, incapacity, bankruptcy, dissolution or termination of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, or dissolve, terminate or annul the Issuer Trust, nor entitle the legal representatives or heirs of such Person or any Holder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 10.2. Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees and the Holders of all of the Common Securities, without the consent of any Holder of the Trust Preferred Securities, (i) to cure any ambiguity, correct or supplement any provision herein that may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Trust Agreement which shall not be inconsistent with the other provisions of this Trust Agreement or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the 254 Issuer Trust will not be taxable as a corporation or classified as other than a grantor trust for United States federal income tax purposes at all times that any Trust Securities are outstanding or to ensure that the Issuer Trust will not be required to register as an "investment company" under the Investment Company Act, provided, however, that in the case of either clause (i) or clause (ii) such action shall not adversely affect in any material respect the interests of any Holder, and any such amendment of this Trust Agreement shall become effective when notice thereof is given to the Holders. (b) Except as provided in Section 10.2(c), any provision of this Trust Agreement may be amended by the Issuer Trustees and the Holders of all of the Common Securities and with (i) the consent of Holders of at least a Majority in Liquidation Amount of the Trust Securities and (ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees in accordance with such amendment will not cause the Issuer Trust to be taxable as a corporation or as other than a grantor trust for United States federal income tax purposes or affect the Issuer Trust's exemption from status as an "investment company" under the Investment Company Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Holder (such consent being obtained in accordance with Section 6.3 or 6.6), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date; and notwithstanding any other provision herein, without the unanimous consent of the Holders (such consent being obtained in accordance with Section 6.3 or 6.6), this Section 10.2(e) may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Issuer Trustee shall enter into or consent to any amendment to this Trust Agreement that would cause the Issuer Trust to fail or cease to qualify for the exemption from status as an "investment company" under the Investment Company Act or to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor and the Administrative Trustees, this Trust Agreement may not be amended in a manner that imposes any additional obligation on the Depositor or the Administrative Trustees. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees or the Property Trustee shall promptly provide to the Depositor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement that affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. 255 SECTION 10.3. Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates 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 10.4. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, AND THE ISSUER TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS. SECTION 10.5. Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no Distributions shall accumulate on such unpaid amount for the period after such date. SECTION 10.6. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Issuer Trust and any Issuer Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article Eight of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.7. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 10.8. Reports, Notices and Demands. Any report, notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Holder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed (i) in the case of a Holder of Trust Preferred Securities to such Holder as such Holder's name and address may appear on the Securities Register and (ii) in the case of the Holder of the Common Securities, the Depositor, to South Carolina Electric & Gas Company, 1426 Main Street, Columbia, South Carolina, 29201, Attention: Treasurer, facsimile no.: (803) 933-7037, or to such other address as may be specified in a written notice by the Holder of the Common Securities or the Depositor, as the case may be to the Property Trustee. Such notice, demand or other communication to or upon a Holder shall be deemed to have been sufficiently given or made, for 256 all purposes, upon hand delivery, mailing or transmission. Such notice, demand or other communication to or upon the Depositor shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Depositor. Any notice, demand or other communication that by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or the Issuer Trust shall be given in writing addressed to such Person as follows: (i) with respect to the Property Trustee to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Administration; (ii) with respect to the Delaware Trustee, The Bank of New York (Delaware), White Clay Center, Rte 273, Newark, Delaware 19711, Attention: Corporate Trust Administration; (iii) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of SCE&G Trust I"; and (iv) with respect to the Issuer Trust, to its principal office specified in Section 2.1, with a copy to the Property Trustee. Such notice, demand or other communication to or upon the Issuer Trust, the Property Trustee or the Administrative Trustees shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Issuer Trust, the Property Trustee or such Administrative Trustee. SECTION 10.9. Agreement Not to Petition. Each of the Issuer Trustees and the Depositor agree for the benefit of the Holders that, until at least one year and one day after the Issuer Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Issuer Trust under any bankruptcy, insolvency, reorganization or other similar law (including the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Issuer Trust under any Bankruptcy Law. If the Depositor takes action in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Holders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Issuer Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Issuer Trustees or the Issuer Trust may assert. SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Issuer Trustee that is a trustee for the purposes of the Trust Indenture Act. 257 (c) If any provision hereof limits, qualifies or conflicts with the duties imposed by Sections 310 to and including 317 of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Issuer Trust. SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS. 258 IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Trust Agreement. SOUTH CAROLINA ELECTRIC & GAS COMPANY, as Depositor By: s/M. R. Cannon Name: M. R. Cannon Title: Treasurer THE BANK OF NEW YORK, as Property Trustee By: s/Van K. Brown Name: Van K. Brown Title: Assistant Vice President THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee By: s/Betty A. Cocozza Name: Betty A. Cocozza Title: s/K. B. Marsh Name: K. B. Marsh, as Administrative Trustee s/M. R. Cannon Name: M. R. Cannon, as Administrative Trustee s/ H. T. Arthur Name: H. T. Arthur, as Administrative Trustee 259 Exhibit A CERTIFICATE OF TRUST OF SCE&G TRUST I This Certificate of Trust of SCE&G Trust I (the "Trust"), dated October 8, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.) 1. Name. The name of the business trust being formed hereby is SCE&G Trust I. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is The Bank of New York (Delaware), whose business address is White Clay Center, Route 273, Newark, Delaware 19711. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK (Delaware), as Delaware Trustee By: s/WALTER N. GITLIN Name: WALTER N. GITLIN Title: Authorized Signatory s/M. R. Cannon M. R. Cannon, as Administrative Trustee 260 Exhibit B BOOK-ENTRY-ONLY CORPORATE EQUITY ISSUES Letter of Representations [To be Completed by Issuer and Agent] SCE&G TRUST I [Name of Issuer] The Bank of New York [Name of Agent] OCTOBER 23, 1997 [Date] Attention: General Counsel's Office The Depository Trust Company 55 Water Street; 49th Floor New York, NY 10041-0099 Re: 7.55% Trust Preferred Securities, Series A (Liquidation Amount $25 per Trust Preferred Security) CUSIP No. 78389A203 [Issue Description, including CUSIP number] Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the above-referenced issue (the "Securities"). Issuer is selling the Securities to Credit Suisse First Boston Corporation and PaineWebber Incorporated (the "Initial Purchaser") pursuant to a Underwriting Agreement dated October 22 , 1997 (the "Document"). Initial Purchaser will take delivery of the Securities through The Depository Trust Company ("DTC"). The Bank of New York is acting as transfer agent, paying agent, and registrar with respect to the Securities (the "Agent"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, Issuer and Agent make the following representations to DTC. 1. Prior to closing on the Securities on October 28 , 1997 , there shall be deposited with DTC one Security certificate registered in the name of DTC's nominee, Cede & Co., for each of the Securities with the offering value set forth on Schedule A hereto, the total of which represents 100% of the offering value of such Securities. If, however, the offering value of any Security exceeds $200 million, one certificate will be issued with respect to each $200 million of offering value and an additional certificate will be issued with respect to any remaining offering value. Each Security certificate shall bear the following legend: 261 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. If the Securities will be held by Agent, as custodian for DTC, such Security certificate shall remain in Agent's custody pursuant to the provisions of the FAST Balance Certificate Agreement currently in effect between Agent and DTC. 2. Issuer: (a) understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s) by virtue of submission of such certificate(s) to DTC. 3. In the event of any solicitation of consents from or voting by holders of the Securities, Issuer or Agent shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall send notice of such record date to DTC not less shall 15 calendar days in advance of such record date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to DTC's Reorganization Department as indicated in Paragraph 7. 4. In the event of a stock split, recapitalization, conversion, or any similar transaction resulting in the cancellation of all or any part of the Securities represented thereby, the Agent shall send DTC a notice of such event as soon as practicable, but in no event less than five business days prior to the effective date of such transaction. 5. In the event of a full or partial redemption, Issuer or Agent shall send a notice to DTC specifying: (a) the amount of the redemption or refunding; (b) in the case of a refunding, the maturity date(s) established under the refunding; and (c) the date such notice is to be distributed to Security holders or published (the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the 262 Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 days nor more than 60 days prior to the redemption date or, in the case of an advance refunding, the date that the proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice does not receive a telecopy receipt from DTC confining that the notice has been received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to: Manager; Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530-4719 6. In the event of an offering or issuance of rights with respect to the Securities outstanding, Agent shall send DTC's Dividend and Reorganization Departments a notice specifying: (a) the amount of and conditions, if any, applicable to such rights offering or issuance; (b) any applicable expiration or deadline date, or any date by which any action on the part of holders of such Securities is required; and (c) the Publication Date of such notice. The Publication Date will be as soon as practicable after the announcement by the Company of any such offering or issuance of rights with respect to the Securities represented thereby. DTC requires that the Publication Date be not less than 30 days nor more than 60 days prior to the related payment date, distribution date, or issuance date, respectively. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Dividend Department at (212) 709-1623, and receipt of such notices shall be confirmed by telephoning (212) 709-1282. Notices to DTC pursuant to the above by mail or any other means shall be sent to: Supervisor; Stock Dividends Dividend Department 7 Hanover Square; 24th Floor New York, NY 10004-2695 Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-1093, and receipt of such fax shall be confirmed by telephoning (2l2) 709-- 1063. Notices to DTC pursuant to the above by mail or any other means shall be sent to Supervisor; Rights Offerings Reorganization Department 7 Hanover Square; 23rd Floor New York, NY 10004-2695 263 7. In the event of an invitation to tender the Securities (including mandatory tenders, exchanges, and capital changes), notice by Issuer or Agent to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in Paragraph 5. Notices to DTC pursuant to this Paragraph and notices of other corporate actions by telecopy shall be sent to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square; 23rd Floor New York NY 10004-2695 8. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities (listed on Schedule A hereto) and the accompanying description of such Securities, which, as of the date of this letter, is " 78389A203 ." 9. Issuer or Agent shall provide written notice of dividend payment information to a standard dividend announcement service subscribed to by DTC as soon as the information is available. In the event that no such service exists, Issuer or Agent shall provide such notice directly to DTC electronically, as previously arranged by Issuer or Agent and DTC, as soon as the payment information is available. If electronic transmission has not been arranged, absent any other arrangements between Issuer or Agent and DTC, such information should be sent by telecopy to DTC's Dividend Department at (212) 709-1723 or (212) 709-1686, and receipt of such notices shall be confirmed by telephoning (212) 709-1270. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Announcements Dividend Department The Depository Trust Company 7 Hanover Square; 22nd Floor New York NY 10004-2695 After establishing the amount of payment to be made on the Securities in question, Issuer or Agent will notify DTC's Dividend Department of the payment and payment date preferably five, but not less than two, business days prior to the effective date for such transaction. 10. Issuer or Agent shall provide CUSIP-level detail for dividend payments to DTC no later than noon (Eastern Time) on the payment date. 264 11. Dividend payments and cash distributions shall be received by Cede & Co. as nominee of DTC, or its registered assigns, in same-day funds no later shall 2:30 p.m. (Eastern Time) on each payment date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Dividend Deposit Account # O66-026776 12. Redemption payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns; in same-day funds no later than 2:30 p.m. (Eastern Time) on payment date. Absent any other arrangements between Agent and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Redemption Deposit Account # 066-027306 13. Reorganization payments resulting from corporate actions (such as tender offers or mergers) shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no later shall 2:30 p.m. (Eastern Time) on payment date. Absent any other arrangements between Agent and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Reorganization Deposit Account # O66-0276O8 14. DTC may direct Issuer or Agent to use any other number or address as the number or address to which notices or payments of dividends, distributions, or redemption proceeds may be sent. 15. In the event of a redemption, acceleration, or any other similar transaction (e.g., tender made and accepted in response to Issuer's or Agent's invitation) necessitating a reduction in the aggregate principal amount of Securities outstanding or an advance refunding of part of the Securities outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in the number of Securities outstanding, except in the case of final redemption, in which case the certificate will be presented to Issuer or Agent prior to payment, if required. 16. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Agent shall notify DTC of the 265 availability of certificates. In such event, Issuer or Agent shall transfer and exchange certificates in appropriate amounts, as required by DTC and others. 17. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent (at which time DTC will confirm with Issuer or Agent the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request Issuer and Agent shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts. 18. Nothing herein shall be deemed to require Agent to advance funds on behalf of Issuer. 19. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts together shall constitute but one and the same instrument. 20. This Letter of Representations is governed by, and shall be construed in accordance with, the laws of the State of New York without giving effect to principles of conflicts of Law. 21. The following riders, attached hereto, are hereby incorporated into this Letter of Representations: Notes: A. If there is an Agent (as defined in this Letter of Representations), Agent as well as Issuer must sign this Letter. If there is no Agent, in signing this Letter Issuer itself undertakes to perform all of the obligations set forth herein Very truly yours, B. Schedule B contains statements that DTC believes accurately describe DTC, the method of effecting book-entry transfers of securities distributed through DTC, and certain related matters. SCE&G Trust I (Issuer) By: s/M. R. Cannon (Authorized Officer's Signature) M. R. Cannon Administrative Trustee The Bank of New York (Agent) By: (Authorized Office's Signature) Received and Accepted: THE DEPOSITORY TRUST COMPANY By: CC: Underwriter Underwriter's Counsel 266 SCHEDULE A 2,000,000 Trust Preferred Securities. Series A (Liquidation Amount $25 per Trust Preferred Security) (Describe Issue) CUSIP Number Share Total Offering ($) Value 78389A 203 2,000,000 50,000,000 267 SCHEDULE B SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC--bracketed material may be applicable only to certain issues) 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. 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. 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. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., 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 through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each 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 purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be 268 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of 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 Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such 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. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividends to Cede & Co. is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of Cede & Co., and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. 269 [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered securities to [Tender/Remarketing] Agents DTC account.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book-entry system has been obtaine EX-7 8 Exhibit 10-A SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN as amended and restated effective as of October 21, 1997 276 SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS Page SECTION 1. ESTABLISHMENT OF THE PLAN 1 1.1 Establishment of the Plan 1 1.2 Description of the Plan 1 1.3 Purpose of the Plan 1 SECTION 2. DEFINITIONS 2 2.1 Definitions 2 2.2 Gender and Number 4 SECTION 3. ELIGIBILITY AND PARTICIPATION 5 3.1 Eligibility 5 3.2 Termination of Participation 5 3.3 Reemployment of Former Participant 5 SECTION 4. BENEFITS 6 4.1 Eligibility for Benefits 6 4.2 Amount of Retirement Benefit 6 4.3 Commencement, Form and Duration of Payment 6 4.4 Pre-retirement Spouse Benefit 7 4.5 Documentation 7 SECTION 5. FINANCING 8 5.1 Financing of Benefits 8 5.2 "Rabbi" Trust 8 277 SECTION 6. GENERAL PROVISIONS 9 6.1 Employment/Participation Rights 9 6.2 Nonalienation of Benefits 9 6.3 Severability 9 6.4 No Individual Liability 10 6.5 Applicable Law 10 SECTION 7. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION 11 7.1 In General 11 7.2 Claims Procedure 11 7.3 Finality of Determination 11 7.4 Delegation of Authority 11 7.5 Expenses 11 7.6 Tax Withholding 11 7.7 Incompetency 11 7.8 Action by Corporation 12 7.9 Notice of Address 12 7.10 Amendment and Termination 12 SECTION 8. CHANGE IN CONTROL PROVISIONS 13 8.1 Accelerated Distributions Upon Change in Control 13 8.2 Tax Computation 13 8.3 No Subsequent Recalculation of Tax Liability 13 8.4 Successors 14 8.5 Amendment and Termination after Change in Control 14 SECTION 10 EXECUTION 15 278 SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN SECTION 1. ESTABLISHMENT OF THE PLAN 1.1 Establishment of the Plan. SCANA CORPORATION (the "Corporation") established the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Supplemental Plan") effective as of January 1, 1994. The Supplemental Plan was amended and restated, effective December 18, 1996, and is hereby further amended and restated effective as of October 21, 1997. 1.2 Description of the Plan. This Supplemental Plan is intended to constitute a nonqualified deferred compensation plan which, in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), is unfunded and established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 1.3 Purpose of the Plan. In addition to the description of the Supplemental Plan as set forth in subsection 1.2 above, the primary objective of the Corporation in establishing this Supplemental Plan is to provide supplemental retirement income to certain employees of the Company whose benefits under the SCANA Corporation Retirement Plan are limited in accordance with the limitations imposed by Code Section 415 on the amount of annual retirement benefits payable to employees from qualified pension plans, by Code Section 401(a)(17) on the amount of annual compensation that may be taken into account for all qualified plan purposes, or by certain other design limitations on determining compensation under the Qualified Plan. 279 SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used in the Supplemental Plan, the following terms shall have the respective meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized. Capitalized terms not defined herein shall have the respective meanings set forth in the Qualified Plan. (a) "Actuarial Equivalent" shall mean the actuarial equivalent factors applied under the Qualified Plan. In applying Actuarial Equivalent factors under this Supplemental Plan, the same procedures shall apply as would apply under the Qualified Plan under similar circumstances. (b) "Agreement" means a contract between an Eligible Employee and the Company permitting the Eligible Employee to participate in the Supplemental Plan and delineating the benefits (if any) that are to be provided to the Eligible Employee in lieu of or in addition to the benefits described under the terms of this Supplemental Plan. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Beneficiary" means the individual designated by the Participant (on such form as prescribed by the Committee) to receive the Participant's benefits under Section 8 if the Participant shall have died prior to receipt thereof. In the absence of an effective Beneficiary designation, such amounts shall be paid to the Participant's Beneficiary determined under the Qualified Plan. (e) "Board" means the Board of Directors of the Corporation. (f) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: i) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of twenty five percent (25%) or more of the combined voting power of the outstanding shares of capital stock of the Corporation; 280 ii) During any period of two (2) consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; iii) The issuance of an Order by the Securities and Exchange Commission (SEC), under Section 9(a)(2) of the Public Utility Holding Company Act of 1935 as amended (the "1935 Act"), authorizing a third party to acquire five percent (5%) or more of the Corporation's voting shares of capital stock; iv) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or v) The shareholders of the Corporation approve a plan of complete liquidation, or the sale or disposition of South Carolina Electric & Gas Company (hereinafter SCE&G), South Carolina Pipeline Corporation, or any subsidiary of SCANA designated by the Board as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been exclusively assigned to SCE&G, South Carolina Pipeline Corporation, or the affected Material Subsidiary. (g) "Code" means the Internal Revenue Code of 1986, as amended. (h) "Code Limitations" means the limitations imposed by Code Section 415 on the amount of annual retirement benefits payable to employees from qualified pension plans and by Code Section 401(a)(17) on the amount of annual compensation that may be taken into account for all qualified plan purposes. (i) "Committee" means the Management Development and Corporate Performance Committee of the Board. 281 (j) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Supplemental Plan through execution of Agreements with any of their Employees or otherwise. (k) "Compensation" means "Compensation" as determined under the Qualified Plan, without regard to the limitation under Section 401(a)(17) of the Code and including any amounts deferred under any non-qualified deferred compensation plan of the Corporation (excluding the Supplemental Plan). (l) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (m) "Effective Date" means December 18, 1996. (n) "Eligible Employee" means an Employee who is employed by the Company in a high-level management or administrative position, including employees who also serve as officers and/or directors of the Company. (o) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship. (p) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (q) "Participant" means any Eligible Employee who is participating in the Supplemental Plan in accordance with the provisions herein set forth. (r) "Qualified Plan" means the SCANA Corporation Retirement Plan, as in effect on the Effective Date, and as may be further amended and in effect from time to time. (s) "Supplemental Plan" means this plan, the SCANA Corporation Supplemental Executive Retirement Plan. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein shall also include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. 282 SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. An Eligible Employee shall become a Participant in the Supplemental Plan on the first day on which: (a) his accrued benefit calculated under the Qualified Plan is limited in accordance with either of the Code Limitations or due to his participation in a non-qualified deferred compensation plan of the Corporation (other than this Supplemental Plan); and (b) he enters into an Agreement with the Company regarding his participation in the Supplemental Plan. 3.2 Termination of Participation. An Eligible Employee who is eligible to participate in this Supplemental Plan under subsection 3.1 above shall remain covered hereunder until the date upon which his employment terminates for any reason and, thereafter, so long as any benefits are payable from this Supplemental Plan. Unless the terms of the Participant's Agreement provide to the contrary, if the Participant is not eligible for benefits in accordance with the provisions of Section 4.1 at the time his employment terminates, the Participant shall terminate his participation in the Supplemental Plan when his employment with the Company terminates. 3.3 Reemployment of Former Participant. Notwithstanding any provision of the Supplemental Plan or an Agreement to the contrary, any person reemployed as an Employee who previously participated in and received benefits under the Supplemental Plan shall not be eligible to participate again in the Supplemental Plan, and any payments or future rights to payments under the Supplemental Plan made or to be made with respect to such Participant shall not be discontinued on account of such reemployment. 283 SECTION 4. BENEFITS 4.1 Eligibility for Benefits. A Participant shall be eligible to commence receipt of a benefit under the Supplemental Plan in accordance with and subject to the provisions of the Supplemental Plan, upon the later of the Participant's termination of employment with the Company or the Participant's Earliest Retirement Date or in an Agreement; provided, however, that, except as provided in the following sentence or as may otherwise be provided by an Agreement, no benefit shall be payable under this Supplemental Plan with respect to a Participant who terminates employment with the Company prior to becoming vested in his accrued benefit under the Qualified Plan. Notwithstanding the foregoing, if a Participant is involuntarily terminated following or incident to a Change in Control and prior to becoming fully vested in his accrued benefit under the Qualified Plan, a benefit will be paid under this Supplemental Plan, based on the Participant's Compensation and Years of Benefit Service at the time of the Participant's termination of employment. 4.2 Amount of Retirement Benefit. Unless otherwise provided in an Agreement, the amount of any retirement benefit payable to a Participant pursuant to this Supplemental Plan shall be determined at the time the Participant first becomes eligible to receive benefits under the Supplemental Plan and shall be equal to the excess, if any, of: i) The monthly pension amount that would have been payable at Normal Retirement Age or, if applicable, Delayed Retirement Age under the Qualified Plan to the Participant determined based on Compensation as defined under this Supplemental Plan and disregarding the Code Limitations and any reductions due to the Participant's deferral of compensation under any nonqualified deferred compensation plan of the Company (other than this Supplemental Plan); over ii) The monthly pension amount payable at Normal Retirement Age or, if applicable, Delayed Retirement Age under the Qualified Plan to the Participant. If such benefit is scheduled to commence prior to a Participant's Normal Retirement Date, the benefit to be paid under this Plan shall be reduced in accordance with the Early Retirement reduction factors and Actuarial Equivalent factors under the Qualified Plan as of the date of determination. 4.3 Commencement, Form and Duration of Payment. Unless the terms of the Participant's Agreement provide to the contrary: 284 (a) Participant's Benefit. Monthly benefit payments for a Participant shall begin as of the first day of the calendar month next following the later of the date the Participant's employment with the Company terminates or the Participant's Earliest Retirement Date under the Qualified Plan and shall be paid under the normal form of benefit payment under the Qualified Plan; and (b) Post-Retirement Spouse Benefit. If the Participant dies after benefit payments have commenced, and he has an eligible Spouse, such Spouse will then receive monthly benefits equal to 60 percent of the Participant's benefit for the rest of the Spouse's lifetime. 4.4 Pre-retirement Spouse Benefit. Unless the terms of the Participant's Agreement provide to the contrary, if a Participant dies on or after the Effective Date, and satisfies the following conditions: (a) on the date of his death, he was legally married and had been so married to the same spouse for at least one year; and (b) on the date of his death, he was entitled to a benefit pursuant to Section 4.1; and (c) he had not begun to receive payments under this Supplemental Plan, his Spouse shall be eligible for a pre-retirement Spouse benefit under this Supplemental Plan. The Participant's surviving Spouse shall be entitled to receive monthly benefits beginning on the first of the month next following the Participant's death and continuing for the remainder of the Spouse's lifetime. The surviving Spouse's Pre- retirement Spouse Benefit shall be equal to the excess, if any, of: i)The monthly pension amount that would have been payable under the Qualified Plan to the surviving Spouse (as a 60 percent survivor annuity) determined based on the Participant's Compensation as defined under this Supplemental Plan and disregarding the Code Limitations and any reductions due to the Participant's deferral of compensation under any nonqualified deferred compensation plan of the Company (other than this Supplemental Plan); over ii)The actual monthly pension amount payable to the surviving Spouse under the Qualified Plan. 4.5 Documentation. Each person eligible for a benefit under the Supplemental Plan shall furnish the Corporation with such documents, evidence, data or information in support of such application as the Corporation considers necessary or desirabl 285 SECTION 5. FINANCING 5.1 Financing of Benefits. Participants shall not be required or permitted to make any contribution under the Supplemental Plan. Benefits shall be payable, when due, by the Corporation, out of its current operating revenue to the extent not paid from a trust created pursuant to Section 5.2. The Corporation's obligation to make payments to the recipient when due shall be contractual in nature only, and participation in the Supplemental Plan will not create in favor of any Participant any right or lien against the assets of the Corporation. No benefits under the Supplemental Plan shall be required to be funded by a trust fund or insurance contracts or otherwise. Prior to benefits becoming due, the Corporation shall expense the calculated liabilities in accordance with policies determined appropriate by the Corporation and its auditors. 5.2 "Rabbi" Trust. In connection with this Plan, the Board shall establish a grantor trust (known as the "SCANA Corporation Executive Benefit Plan Trust") for the purpose of accumulating funds to satisfy the obligations incurred by the Corporation under this Plan (and such other plans and arrangements as determined from time to time by the Corporation). At any time prior to a Change in Control, as that term is defined in such Trust, the Corporation may transfer assets to the Trust to satisfy all or part of the obligations incurred by the Corporation under this Plan, as determined in the sole discretion of the Committee or its designee, subject to the return of such assets to the Corporation at such time as determined in accordance with the terms of such Trust. Any assets of such Trust shall remain at all times subject to the claims of creditors of the Corporation in the event of the Corporation's insolvency; and no asset or other funding medium used to pay benefits accrued under the Plan shall result in the Plan being considered as other than "unfunded" under ERISA. Notwithstanding the establishment of the Trust, the right of any Participant to receive future payments under the Plan shall remain an unsecured claim against the general assets of the Corporation. 286 SECTION 6. GENERAL PROVISIONS 6.1 Employment/Participation Rights. (a) Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. (b) Nothing in the Plan shall be construed to be evidence of any agreement or understanding, express or implied, that the Company will continue to employ a Participant in any particular position or at any particular rate of remuneration. (c) No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. (d) Nothing in this Supplemental Plan shall affect the right of a recipient to participate in and receive benefits under and in accordance with any pension, profit-sharing, deferred compensation or other benefit plan or program of the Company. 6.2 Nonalienation of Benefits. (a) No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or change, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or change the same shall be void; nor shall any such disposition be compelled by operation of law, except as may be applicable in the circumstance of death of a Participant under South Carolina law. (b) No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to benefits under the Plan. (c) If any Participant or Beneficiary hereunder should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or change any right or benefit hereunder, then such right or benefit shall, in the discretion of the Committee, cease, and the Committee shall direct in such event that the Corporation hold or apply the same or any part thereof for the benefit of the Participant or Beneficiary in such manner and in such proportion as the Committee may deem proper. 287 6.3 Severability. If any particular provision of the Supplemental Plan shall be found to be illegal or unenforceable for any reason, the illegality or lack of enforceability of such provision shall not affect the remaining provisions of the Supplemental Plan, and the Supplemental Plan shall be construed and enforced as if the illegal or unenforceable provision had not been included. 6.4 No Individual Liability. It is declared to be the express purpose and intention of the Supplemental Plan that no liability whatsoever shall attach to or be incurred by the shareholders, officers, or directors of the Corporation or any representative appointed hereunder by the Corporation, under or by reason of any of the terms or conditions of the Supplemental Plan. 6.5 Applicable Law. The Supplemental Plan shall be governed by and construed in accordance with the laws of the State of South Carolina except to the extent governed by applicable Federal law. 288 SECTION 7. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION 7.1 In General. The Supplemental Plan shall be administered by the Committee, which shall have the sole authority to construe and interpret the terms and provisions of the Supplemental Plan and determine the amount, manner and time of payment of any benefits hereunder. The Committee shall maintain records, make the requisite calculations and disburse payments hereunder, and its interpretations, determinations, regulations and calculations shall be final and binding on all persons and parties concerned. The Committee may adopt such rules as it deems necessary, desirable or appropriate in administering the Supplemental Plan and the Committee may act at a meeting, in a writing without a meeting, or by having actions otherwise taken by a member of the Committee pursuant to a delegation of duties from the Committee. 7.2 Claims Procedure. Any person dissatisfied with the Committee's determination of a claim for benefits hereunder must file a written request for reconsideration with the Committee. This request must include a written explanation setting forth the specific reasons for such reconsideration. The Committee shall review its determination promptly and render a written decision with respect to the claim, setting forth the specific reasons for such denial written in a manner calculated to be understood by the claimant. Such claimant shall be given a reasonable time within which to comment, in writing, to the Committee with respect to such explanation. The Committee shall review its determination promptly and render a written decision with respect to the claim. Such decision upon matters within the scope of the authority of the Committee shall be conclusive, binding, and final upon all claimants under this Plan. 7.3 Finality of Determination. The determination of the Committee as to any disputed questions arising under this Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all persons. 7.4 Delegation of Authority. The Committee may, in its discretion, delegate its duties to an officer or other employee of the Company, or to a committee composed of officers or employees of the Company. 7.5 Expenses. The cost of payment from this Plan and the expenses of administering the Supplemental Plan shall be borne by the Corporation. 7.6 Tax Withholding. The Corporation shall have the right to deduct from all payments made from the Supplemental Plan any federal, state, or local taxes required by law to be withheld with respect to such payments. 289 7.7 Incompetency. Any person receiving or claiming benefits under the Supplemental Plan shall be conclusively presumed to be mentally competent and of age until the Corporation receives written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, statutory committee under the South Carolina Code of Laws, or other person legally vested with the care of his estate has been appointed. In the event that the Corporation finds that any person to whom a benefit is payable under the Supplemental Plan is unable to properly care for his affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Corporation to have incurred expense for the care of such person otherwise entitled to payment. In the event a guardian or conservator or statutory committee of the estate of any person receiving or claiming benefits under the Supplemental Plan shall be appointed by a court of competent jurisdiction, payments shall be made to such guardian or conservator or statutory committee provided that proper proof of appointment is furnished in a form and manner suitable to the Corporation. Any payment made under the provisions of this Section 7.7 shall be a complete discharge of liability therefor under the Supplemental Plan. 7.8 Action by Corporation. Any action required or permitted to be taken hereunder by the Corporation or its Board shall be taken by the Board, or by any person or persons authorized by the Board. 7.9 Notice of Address. Any payment made to a Participant or to his surviving Spouse at the last known post office address of the distributee on file with the Corporation, shall constitute a complete acquittance and discharge to the Corporation and any director or officer with respect thereto, unless the Corporation shall have received prior written notice of any change in the condition or status of the distributee. Neither the Corporation nor any director or officer shall have any duty or obligation to search for or ascertain the whereabouts of the Participant or his Spouse. 7.10 Amendment and Termination. The Corporation expects the Supplemental Plan to be permanent, but since future conditions affecting the Corporation cannot be anticipated or foreseen, the Corporation reserves the right to amend, modify, or terminate the Supplemental Plan at any time by action of its Board; provided, however, that if the Supplemental Plan is amended to discontinue or reduce the amount of Supplemental Plan benefit payments (except as may be required pursuant to any plan arising from insolvency or bankruptcy proceedings): (a) Participants who have retired under the Supplemental Plan or their surviving Spouses shall continue to be paid in the amount and manner (as provided under Section 4 hereof) as they 290 were being paid at the time of the amendment or discontinuance of the Supplemental Plan, and (b) the accrued benefits under the Supplemental Plan of any future retirees shall not be reduced below the level accrued as of the date of amendment. If the Board amends the Supplemental Plan to cease future accruals hereunder or terminates the Supplemental Plan, the Board may, in its sole discretion, direct that the actuarial equivalent present value of each Participant's accrued benefits be paid to each Participant (or surviving Spouse, if applicable) in an immediate lump sum payment (with such Actuarial Equivalent present value being determined in the manner indicated in Section 4); in the absence of any such direction from the Board, the Supplemental Plan shall continue as a "frozen" plan under which no future accruals will be recognized and each Participant's benefits shall be paid in accordance with Section 4. SECTION 8. CHANGE IN CONTROL PROVISIONS 8.1 Accelerated Distributions Upon Change in Control. Notwithstanding anything in this Supplemental Plan to the contrary, and subject to the terms of any Agreement, upon the occurrence of a Change in Control where there has not been a termination of the SCANA Corporation Key Employee Severance Benefits Plan prior thereto, the Present Value of all amounts (or remaining amounts) owed under this Supplemental Plan and each underlying Agreement as of the date of such Change in Control (referred to as each Participant's "SERP Benefit") shall become immediately due and payable. All SERP Benefits payable under this Section 8.1 shall be paid to each Participant (and his or her Beneficiary) in the form of a single lump sum payment of the Actuarial Equivalent present value of all such amounts owed, together with an amount (the "Gross-Up Payment") such that the net amount retained by each Participant after deduction of any excise tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed) on such benefits (the "Excise Tax") and any Federal, state, and local income tax and Excise Tax upon the SERP Benefit and the Gross-Up Payment provided for by this Section 8 shall be equal to the Actuarial Equivalent present value of the Participant's SERP Benefit. Such payment shall be made by the Corporation (or to the extent assets are transferred to a "rabbi trust" for such purpose, by the trustee of such trust in accordance with the trust's terms) to the Participant (or his or her Beneficiary) as soon as practicable following the Change in Control, but in no event later than the date specified by the terms of the SCANA Corporation Executive Benefit Plan Trust. In all events, if the Key Employee Severance Benefits Plan was terminated prior to such Change in Control, then the provisions of this Section shall not apply and Participants' benefits shall be determined under the other applicable provisions of this Supplemental Plan and/or any Agreement. 291 8.2 Tax Computation. For purposes of determining the amount of the Gross-Up Payment referred to in Section 8.1, whether any of a Participant's SERP Benefit will be subject to the Excise Tax, and the amounts of such Excise Tax: (i) there shall be taken into account all other payments or benefits received or to be received by a Participant in connection with a Change in Control of the Corporation (whether pursuant to the terms of this Supplemental Plan or any other plan, arrangement, or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person); and (ii) the amount of any Gross-Up Payment payable with respect to any Participant (or his or her Beneficiary) by reason of such payment shall be determined in accordance with a customary "gross-up formula," as determined by the Committee it its sole discretion. 8.3 No Subsequent Recalculation of Tax Liability. The Gross-Up Payments described in the foregoing provisions of this Section 8 are intended and hereby deemed to be a reasonably accurate calculation of each Participant's actual income tax and Excise Tax liability under the circumstances (or such tax liability of his or her Beneficiary), the payment of which is to be made by the Corporation or any "rabbi trust" established by the Corporation for such purposes. All such calculations of tax liability shall not be subject to subsequent recalculation or adjustment in either an underpayment or overpayment context with respect to the actual tax liability of the Participant (or his or her Beneficiary) ultimately determined as owed. 8.4 Successors. Notwithstanding anything in this Supplemental Plan to the contrary, and subject to the terms of an Agreement, upon the occurrence of a Change in Control, and only if the SCANA Corporation Key Employee Severance Benefits Plan ("KESBP") was terminated prior to such Change in Control, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform this Supplemental Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place, subject to the remaining provisions of this Section 8.4. In the event of such a Change in Control where the KESBP is terminated, Participants shall become entitled to benefits hereunder in accordance with the terms of this Supplemental Plan, and/or any Agreement, based on benefits earned to the date of such Change in Control, with no requirement for a successor to provide for accruals of benefits beyond the date of such Change in Control. In addition, and notwithstanding Section 8.5 to the contrary, if there is a Change in Control and the KESBP is 292 terminated prior to such Change in Control, a successor to the Company may amend this Supplemental Plan to provide for an automatic lump sum distribution of the Actuarial Equivalent of Participants' benefits hereunder without such amendment being treated as an amendment reducing any benefits earned. 8.5 Amendment and Termination After Change in Control. Notwithstanding the foregoing, and subject to Section 8, no amendment, modification or termination of the Supplemental Plan may be made, and no Participants may be added to the Supplemental Plan, upon or following a Change in Control if it would have the effect of reducing any benefits earned (including optional forms of distribution) prior to such Change in Control without the written consent of all of the Supplemental Plan's Participants covered by the Supplemental Plan at such time. In all events, however, the Corporation reserves the right to amend, modify or delete the provisions of this Section 8 at any time prior to a Change in Control, pursuant to a Board resolution adopted by a vote of two-thirds (2/3) of the Board members then serving on the Board. 293 IN WITNESS WHEREOF, SCANA Corporation has caused this instrument to be executed by its duly authorized officers and its corporate seal to be hereunto affixed, this 11th day of December, 1997, effective as of October 21, 1997. SCANA CORPORATION By: s/William B. Timmerman William B. Timmerman Title: Chairman, President and Chief Executive Officer ATTEST: By: s/Lynn M. Williams Lynn M. Williams Secretary 294 EX-12 9 Exhibit 12 SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1997 (Millions of Dollars) Net earnings(1) $399.8 Divide by annualized interest charges on: Bonds authenticated under the Company's First and Refunding Mortgage Bond Indenture $35.4 Other indebtedness(1) $57.2 Total annualized interest charges $92.6 Bond ratio 4.32 (1) As defined under the Company's First and Refunding Mortgage Bond Indenture (Old Mortgage). 295 SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF NEW BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1997 (Millions of Dollars) Net earnings(1) $543.6 Divide by annualized interest charges on: Bonds authenticated under the Company's First Mortgage Bond Indenture $57.2 Other indebtedness(1) $35.4 Total annualized interest charges $92.6 New Bond Ratio 5.87 (1) As defined under the Company's Collateral Trust Mortgage Indenture (New Mortgage). 296 SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF PREFERRED STOCK RATIO FOR THE YEAR ENDED DECEMBER 31, 1997 (Millions of Dollars) Net Earnings (1) $285.2 Divide by annualized interest charges on: Bonds authenticated under the Company's mortgage bond indentures $92.6 Other indebtedness(1) $ 2.0 Preferred Dividend Requirements $11.3 Total annualized interest charges $105.9 Preferred stock ratio 2.69 (1) As defined under the Company's Restated Articles of Incorporation. 297 SOUTH CAROLINA ELECTRIC & GAS COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES For Each of the Five Years Ended December 31, 1997 (Millions of Dollars) Year Ended December 31, 1997 1996 1995 1994 1993 Fixed Charges as defined: Interest on long-term debt.................. $ 94.7 $ 94.8 $ 96.2 $ 85.4 $ 78.0 Amortization of debt premium, discount and expense (net).............................. 2.3 2.3 2.2 2.0 1.5 Interest on debt to affiliate............... - - - - - Other interest expense...................... 4.9 7.4 9.2 5.1 5.8 Interest component of rentals............... 1.8 2.3 2.8 2.7 2.8 Total Fixed Charges (A)................. $103.7 $106.8 $110.4 $ 95.2 $ 88.1 Earnings, as defined: Income...................................... $194.7 $190.5 $169.2 $152.0 $146.0 Income taxes................................ 100.6 108.1 97.3 82.7 80.7 Total fixed charges above................... 103.7 106.8 110.4 95.2 88.1 Total Earnings (B)...................... $399.0 $405.4 $376.9 $329.9 $314.8 Ratio of Earnings to fixed charges (B/A)...... 3.85 3.80 3.41 3.46 3.57
298 EX-23 10 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-57955 of South Carolina Electric & Gas Company on Form S-3 of our report dated February 9, 1998 appearing in this Annual Report on Form 10-K of South Carolina Electric & Gas Company for the year ended December 31, 1997. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina March 13, 1998 299 EX-27 11
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 1,000,000 12-MOS DEC-31-1997 DEC-31-1997 PER-BOOK 3,310 17 273 454 0 4,054 181 828 438 1,447 62 106 1,262 13 0 0 48 0 0 0 1,116 4,054 1,338 98 958 1,056 282 9 291 95 195 9 186 163 93 368 0 0
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