SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-K
For the fiscal year ended December 31, 1993 Commission file number 1-3632
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
INTERSTATE POWER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 42-0329500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main St., P.O. Box 769, Dubuque, IA 52004-0769
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 319-582-5421
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock Par Value $3.50 Per Share ) New York Stock Exchange
) Midwest Stock Exchange
) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: N O N E
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
As of March 1, 1994 the aggregate market value of the voting stock held
by non-affiliates of the registrant was $249,110,282.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
Shares Outstanding
March 1, 1994
Common Stock Par Value $3.50 Per Share 9,400,388
Documents incorporated by reference - portions of the Annual Report to
Stockholders for 1993 (Exhibit EX-13) are incorporated by reference in Parts
I, II and IV; portions of the Annual Proxy Statement for 1994 are
incorporated by reference in Part III.
INTERSTATE POWER COMPANY
1993 Form 10-K Annual Report
Table of Contents
Page
Part I
Item 1. Business 1
General 1
Construction Program 1
Electric Operations 1
Sources and Availability of Raw Materials 2
Duration and Effect of Electric Patents and Franchises 3
Electric Seasonal Business 3
Working Capital Items 3
Electric Governmental Regulations 3
Electric Competitive Conditions 5
Other Sources of Power 6
Other Electric Operations 7
Gas Operations 7
Gas Sources and Availability of Raw Materials 7
Duration and Effect of Gas Patents and Franchises 9
Gas Seasonal Business 9
Gas Governmental Regulations 9
Gas Competitive Conditions 10
Dependence of Segment Upon a Single Customer 10
Research and Development 10
Electric and Magnetic Fields 10
Environmental Regulations 11
Employees 14
Accounting Matters 14
Item 2. Properties 15
Electric Properties 15
Generating Stations 16
Gas Properties 17
General Properties 17
Titles 17
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 18
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 18
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 8. Financial Statements and Supplementary Data 19
Item 9. Disagreements on Accounting and Financial Disclosure 19
Part III
Item 10. Executive Officers of the Registrant 20
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management 20
Item 13. Certain Relationships and Related Transactions 21
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 21
PART I
ITEM 1. BUSINESS
(General)
Interstate Power Company, (the company), is an operating public
utility incorporated in 1925 under the laws of the State of Delaware.
The company is engaged in the generation, purchase, transmission,
distribution and sale of electricity. It owns property in portions
of twenty-five counties in the northern and northeastern parts of
Iowa, in portions of twenty-two counties in the southern part of
Minnesota, and in portions of four counties in northwestern Illinois.
The company also engages in the distribution and sale of natural gas
in Albert Lea, Minnesota; Clinton, Mason City and Clear Lake, Iowa;
Fulton and Savanna, Illinois and in a number of smaller Minnesota,
Iowa and Illinois communities, and in the transportation of natural
gas within Iowa, Minnesota and in interstate commerce.
For information pertaining to industry segments and lines of business
please refer to page 27 of Exhibit EX-13 (the Annual Report to
Stockholders).
(Construction Program)
The table below shows actual construction expenditures for 1993 and
estimated expenditures for the period 1994 through 1998:
(Thousands of Dollars)
1993 Actual $33,904
1994 Est. $46,510
1995 Est. $39,012
1996 Est. $31,818
1997 Est. $40,494
1998 Est. $67,166
Refer to (Environmental Regulations) on page 11 for additional
information on construction expenditures related to compliance with
the regulations of the Clean Air Act of 1990.
(Electric Operations)
Of the 234 communities served with electricity, Dubuque, Iowa, is the
largest with a population of approximately 58,000. Other major cities
served are Albert Lea, Minnesota and Clinton and Mason City, Iowa.
The remainder of the communities served are under 15,000 population,
of which 193 or 84% are less than 1,000 population. The company
sells electricity at wholesale to 19 small communities which have
municipal distribution systems, 13 of which are total requirements
customers, and 6 of which are partial requirements customers.
The territory served with electricity at retail by the company is a
residential, agricultural and widely diversified industrial area with
an estimated population of 338,000.
There have been no significant changes since the beginning of the
fiscal year in the kind of products produced, services rendered,
markets or method of distribution.
The facilities owned or operated by the company include facilities
for the transmission of electric energy in interstate commerce or the
sale of electric energy at wholesale in interstate commerce.
(Sources and Availability of Raw Materials)
Electricity generated by the company in 1993 was 93.5% from coal as a
fuel, 0.1% from oil and 6.4% from natural gas. In 1994, the sources
of such generation are estimated to be: 98.2% from coal, 0.2% from
middle distillate oils, and 1.6% from natural gas. In 1993, 80.9% of
the company's coal requirements came from long-term contracts. In
1994, the company anticipates that 83.8% of its coal requirements
will be from long-term contracts. These contracts have expiration
dates ranging from December 31, 1994 through December 31, 1998.
The company in 1990 negotiated the buyout of a 300,000 ton per year
contract for Montana coal. See Note 9 to the Financial Statements of
the Annual Report to Stockholders (EX-13) regarding recovery of
contract cancellation costs.
The company has two 5 year contracts effective January 1, 1990
through December 31, 1994, for a total of 500,000 tons per year of 2%
sulfur Midwestern coal for its Kapp #2, a 217 MW unit at Clinton,
Iowa because of sulfur dioxide restrictions mandated by the State of
Iowa.
The company has a contract for 150,000 tons of coal, 50,000 tons for
Lansing Units #1, #2 and #3 and 100,000 tons for Dubuque, which
expires at December 31, 1994.
The company has a contract for 500,000 tons per year for its 260 MW
Lansing #4 unit. Lansing Unit #4 requires low sulfur coal, which is
being purchased in the Powder River Basin of Wyoming. The company
has this coal shipped by rail and then transloaded to barge, using
facilities near Keokuk, Iowa. A contract with Orba-Johnson
Transshipment Company, Inc., covers rail to barge coal transloading.
Coal required for the company's generation by Neal #4 unit, located
near Sioux City, Iowa is contracted for by the operator, Midwest
Power Systems, under terms of the Unit Participation Agreement.
Similar arrangements prevail with respect to the company's
participation in Louisa #1 located near Muscatine, Iowa and operated
by Iowa-Illinois Gas and Electric Company.
The company owns 120 coal cars, has an undivided ownership (21.528%)
in 372 coal cars in connection with Neal #4. During February 1993,
21 coal cars were damaged or destroyed beyond repair. Nine of these
cars have been repaired and 12 have been replaced. The company was
reimbursed by the railroad carrier for all costs of repair or
replacement. The company has an undivided ownership (4%) in 136 cars
in connection with Louisa #1. Coal requirements in 1994 will require
using leased cars for the Louisa #1 coal supply.
The company burned 665,952 gallons of No. 2 and No. 6 oil in 1993 and
has 6,477,000 gallons of oil storage capacity in which to store
adequate reserves during periods of high demand on refineries. The
company relies on spot purchases of oil.
The company presently has interruptible natural gas available for its
electric generation station at Clinton, Iowa through Natural Gas
Pipeline Company of America. At the Fox Lake and Dubuque plants,
interruptible gas is available through Peoples Natural Gas Company.
There is no assurance that interruptible gas will continue to be
available as fuel for electric generating plants.
(Duration and Effect of Electric Patents and Franchises)
The company owns no patents.
The company has, in the opinion of its legal counsel, all necessary
franchises or other rights from the incorporated communities and
other governmental subdivisions now served, required for the
operation of its properties. With 196 electric franchises in effect
in cities and villages, and with the majority of such franchises
being for a term of 25 years, the renewal of such franchises is a
continuing process. Thirty-two percent (62) of the franchises have
been secured since January 1, 1984.
(Electric Seasonal Business)
The effects of air conditioning in summer and heating in winter have
a seasonal impact on the business of the registrant. The air
conditioning sales in the summer months are primarily related to the
residential and commercial customer classes, however, the company
does not meter air conditioning sales separately. During the past
five years, the highest and lowest average residential consumption in
the peak summer month has been 891 Kwh (July 1991) and 560 Kwh (June
1989), respectively, compared to 811 Kwh (January 1991) and 635 Kwh
(February 1990) during the peak winter month. Refer to the section
(Electric Governmental Regulations) for discussion of Iowa seasonal
rates.
(Working Capital Items)
Three of the company's generating stations are located on the
Mississippi River at Clinton, Dubuque and Lansing, Iowa, with their
coal supply being delivered by barge during the barging season
(approximately April 1st to December 1st). Coal in the stockpile at
December 1st of each year has been sufficient to supply the normal
requirements of these generating stations until the reopening of the
Mississippi River for barge traffic. Coal shipments to the company's
Neal #4 and Louisa #1 generating stations are able to continue
year-round because river transportation is not involved.
(Electric Governmental Regulations)
The company filed an application with the IUB in September 1991 which
requested an electric rate increase of $22.4 million. Interim rates
of $16.2 million were placed in effect in May 1992 subject to refund.
In July 1992, the IUB granted an annual revenue increase of $9.0
million (with an additional $1.4 million over the 12 months beginning
November 1992 to recover costs related to a coal contract buyout).
Revenue collected in excess of the IUB ordered level in the amount of
$3,835,000 plus $236,000 of interest was reserved in 1992 and
refunded in February 1993.
On May 26, 1993, the IUB approved electric tariffs which more closely
track costs incurred by the company. Individual customers experienced
an increase or decrease in their electric bill, but the adoption of
the new tariffs did not change the company's overall revenue. The new
tariffs, which were implemented in August 1993, give greater weight
to the demand component of electric usage, and include a provision
for a higher rate during the summer cooling season (June -
September), and a lower rate during the remainder of the year. Due to
implementation of the seasonal rates, revenue for the third and
fourth quarters of 1993 is not comparable to the corresponding
quarters of prior years.
The company filed an Iowa electric rate increase application on May
14, 1993. The IUB ruled on June 4, 1993 that the company's rate
design docket approved by the IUB on May 26, 1993 constituted a
change in rates. Thus, pursuant to a section of the Iowa Code which
limits a utility to one rate application at a time, the rate filing
was rejected. The company refiled in August 1993. The revised
application requested an annual increase of $11.5 million, including
a return on common equity of 12.35%. Interim rates in an annual
amount of $11.0 million, which include a provision to recover SFAS
106 costs, were placed in effect on October 28, 1993, subject to
refund. A decision on the rate increase is expected by the end of the
second quarter of 1994.
The company filed an application with the MPUC in August 1991. The
application requested an electric rate increase of $8.0 million. The
MPUC allowed an interim increase of $4.2 million effective October
1991. In June 1992, the MPUC issued an order granting an annual
revenue increase of $4.9 million, and a return on common equity of
10.9%. The MPUC order stated that the company has 100 MW of excess
capacity and disallowed recovery of $1.9 million per year applicable
to the excess capacity. In instances where final rates are higher
than interim rates, Minnesota law allows the utility to recover the
difference. Settlement rates, including a temporary increase to
recover the difference between the interim and final rates over a six
month period ending May 1993, were placed into effect in December
1992. In May 1993, the Minnesota Court of Appeals affirmed the MPUC
order.
In June 1992, sixteen municipal wholesale customers filed a Complaint
and Request for Investigation and Hearing with FERC. The complaint
alleges that the company had been imprudent by entering into certain
long-term coal contracts, an associated transloading agreement, and a
rail transportation agreement and seeks recovery in the range of
approximately $3 million to $7 million. The issue will be presented
before an administrative law judge, with hearings currently scheduled
to commence in August 1994. The decision by the administrative law
judge is expected to be presented to the full Commission in 1995.
Under this process an appeal of the FERC decision most likely would
not occur until 1996 or later.
The company's electric rate tariffs provide for recovery of the cost
of fuel through energy adjustment clauses, which clauses are subject
to revision from time to time by the regulatory authority having
jurisdiction. These clauses are designed to pass on to the consumer
the increases or decreases in the cost of fuel without formal rate
proceedings. Purchased capacity costs are not recovered from
customers through energy adjustment clauses, but rather must be
addressed in base rates in a formal rate proceeding. In the
company's 1991 Iowa electric rate case, the IUB required that any
jurisdictional revenue from capacity sales to other utilities be
returned to Iowa customers through the fuel adjustment clause.
(Electric Competitive Conditions)
In 1993 the Illinois Commerce Commission entered an order determining
that Interstate, and not Jo-Carroll Electric Cooperative, had the
right to provide electric service to a large new freezer service
plant near East Dubuque, IL. The company is providing service to
that plant pursuant to Commission order. Jo-Carroll filed for
judicial review of the Commission's action in a proceeding now
pending in the Illinois 15th Judicial Circuit.
The Energy Policy Act of 1992 (Act) allows FERC to order utilities to
grant access to transmission systems by third-party power producers.
The Act specifically prohibits federally-mandated wheeling of power
for retail customers. The company's industrial rates generally
compare favorably with those of neighboring utilities. For the
company's six largest industrial customers, the aggregate 1993 rate
was approximately 3.4 cents per KWH. This rate also compares
favorably with that of potential independent power producers and
electric wholesale generators. The company's favorable rates reduce
any incentive that these customers might otherwise have to relocate,
self-generate or purchase electricity from other suppliers.
The company has no competition from the same type of public utility
service in the sale of electricity in any of the incorporated
communities served by it. Interstate may be subject to competition
in unincorporated areas. In the States of Iowa, Illinois and
Minnesota, territorial laws govern the question of possible service
to customers in such unincorporated areas, and such laws regulate
competition in such areas. Laws and statutory regulations in the
different states in which service is rendered provide, under varying
terms and conditions, for municipal ownership of electric generating
plants and distribution systems. Certain franchises under which
utility service is rendered give the municipality the right to
purchase the system of the company within said municipality upon
certain terms and conditions. However, no such purchase option and
no right of condemnation of the company's properties has been
exercised and no municipal generating plant or municipal distribution
system has been established in the territory now served by the
company during the past twenty-five years.
The Iowa Utilities Board, the Illinois Commerce Commission and the
Minnesota Public Utilities Commission have each approved tariffs that
allow the company to offer interruptible electric service for
qualifying customers. The availability of this service provides
price incentives to those customers having the ability to interrupt
their connected load. The primary objective of the incentives is to
reduce the system peak. The incentives also serve to retain existing
customers and attract new customers.
(Other Sources of Power)
The company has been a participant in the Mid-Continent Area Power
Pool (MAPP) Agreement since March 31, 1972. MAPP had a total
coincident 1993 summer peak of 23,290 MW at which time the net
capacity of the pool was 30,345 MW.
Membership in the pool permits sharing of reserve capacities of the
members which affects reductions in plant facilities investment for
MAPP members. The minimum reserve margin for participants in MAPP
has been established at 15%.
Parties to the MAPP Agreement include, as participants, 29 electric
power suppliers consisting of 10 investor-owned utilities, the United
States Department of Interior (Western Area Power Administration), a
Canadian system, public power districts and rural electric generating
and transmission cooperative associations, municipal electric supply
agencies and, as associate participants, 14 other electric power
suppliers operating in Canada and in the North Central region of the
United States. The pool coordinates planning and operation of power
suppliers in Minnesota, Wisconsin, Montana, Iowa, Nebraska, North
Dakota and South Dakota and provides reliability and economy for the
company's bulk power supply. The MAPP Agreement was filed with the
FERC and accepted as an initial rate filing effective December 1,
1972 and has been in operation since that time.
In addition to MAPP, the company has interchange connections with
certain Missouri and Illinois utilities through 345 KV transmission
systems. Future interconnections are planned to meet transmission
requirements for the next ten years.
The company's total capacity includes three long-term power purchase
contracts with area electric utilities. The contracts provide for
the purchase of 230 to 255 megawatts of capacity over the period from
May 1992 through April 2001. The company is obligated to pay the
capacity charges regardless of the actual electric demand by the
company's customers. Energy is available at the company's option at
approximately 100% to 110% of monthly production costs for the
designated units.
The three power purchase contracts required capacity payments of
approximately $24.1 million in 1993. Over the remaining period of
the contracts, total capacity payments will be approximately $180
million.
Capacity costs are not recovered from customers through energy
adjustment clauses, but rather must be addressed in base rates in a
formal rate proceeding. The IUB order in the company's 1991 rate
case indicated that the capacity purchases were prudent and allowed
recovery of the costs in rates. A 1992 rate order by the MPUC stated
that the company has 100 MW of excess capacity and disallowed
recovery of $1.9 million per year applicable to the excess capacity.
The Minnesota Court of Appeals affirmed the MPUC disallowance in May
1993. The company has not yet filed for rate recovery in the
Illinois and FERC jurisdictions.
The company has contracts with several governmental power agencies
whereby the company provides transmission service to their
customer/members. During 1993, the company received $1,183,588 for
transmission service to customers of the Western Area Power
Administration (WAPA), and $1,233,863 from Cooperative Power
Association (CPA) for wheeling power to nine of its member
distribution cooperatives.
The company's contract with CPA also provides for payment by the
company for needed mutually utilized facilities constructed and owned
by CPA. During 1993, these payments amounted to $330,319.
The company and Southern Minnesota Municipal Power Agency (SMMPA)
have agreed by contract to compensate each other if
over/underinvestment in the shared transmission system occurs.
During 1993, SMMPA made payments to the company in the amount of
$535,342.
The company's contract with Central Iowa Power Cooperative (CIPCO)
provides for compensation to each other if over/underinvestment in
the shared transmission system occurs. During 1993, the company owed
CIPCO $63,259 for underinvestment in the Liberty Substation property.
Also during 1993, CIPCO owed to the company $46,730 for
underinvestment in the Dubuque-Clinton project. The net payment by
the company to CIPCO totalled $16,529.
(Other Electric Operations)
The 1993 peak of 927,366 KW occurred on August 26, 1993 between 3:00
and 4:00 in the afternoon. At the time of its 1993 peak the company
had a net effective electric capability of 1,295,600 KW. Of this net
effective capability at the time of peak, 898,300 KW was in steam
generation, 113,500 KW was in combustion turbine and the balance was
in internal combustion units and purchases. The previous historical
system net peak load for a sixty-minute period, of 919,100 KW, was
reached on August 16, 1988.
(Gas Operations)
The company supplies retail gas service in 39 communities and serves
approximately 48,000 gas customers.
There have been no significant changes since the beginning of the
fiscal year in the kind of products produced, markets or methods of
distribution.
(Gas Sources and Availability of Raw Materials)
The natural gas industry was recently restructured as a result of
Order 636, issued by the Federal Energy Regulatory Commission (FERC)
on April 8, 1992. This Order requires the interstate pipelines to
provide transportation capacity unbundled (separated) from the sales
of gas supply, as well as to provide open access to their storage
facilities. The company no longer purchases a bundled gas supply
from Northern Natural Gas Company (NNG) and Natural Gas Pipeline
Company of America (NGPL). The company purchases pipeline capacity
(space) from these companies to deliver a gas supply purchased from
others. As of November 1, 1993 the company purchased gas from six
non-traditional suppliers, such as producers, brokers, marketers,
etc., at market responsive rates. The FERC continues to approve the
tariffs of NNG and NGPL, but only with regard to capacity and storage
rates, subject to change as rate cases are filed.
A section of the Order permits the interstate pipelines to pass on
industry transition costs to their customers. Transition costs are
comprised of gas supply realignment costs, unrecovered gas cost,
stranded costs and new facilities costs. As a customer of NGPL and
NNG, Interstate will be subject to a share of those costs. The FERC
has approved the Order 636 Settlement between NNG and its customers;
NGPL's Settlement is still being negotiated with its customers.
Gas for the company's Mason City, Albert Lea and Savanna service
areas is transported by NNG under capacity contracts for 36,533 Mcf
daily, and for an additional 15,657 Mcf in the November to March time
frame. The majority, 27,194 Mcf, of the above capacities is from the
producing areas of New Mexico, Oklahoma and Texas, etc. These
contracts expire in October, 1997. Gas is supplied by other
producers, marketers and brokers as well as from storage services to
meet the peak heating season requirements. The company had 20,363
Mcf/d of storage, with the necessary pipeline capacity, available for
the 1993-1994 heating season.
Gas for its Clinton service area is transported by NGPL under
capacity contracts for 19,781 Mcf annually, with expiration dates of
December 1, 1995 (6,949), February 28, 1996 (5,000), and November 30,
1996 (7,832). This gas is supplied by other producers, marketers and
brokers. The company supplements this capacity with storage gas,
which has the pipeline capacity embedded in its FERC approved rate.
The company had 18,613 Mcf of storage available for the 1993-1994
heating season.
During 1993 the company utilized approximately 42.2% of its
annualized daily contract gas available from its firm suppliers. The
Company's total throughput level of 34,008,768 Mcf represents a 5.6%
increase for 1993 as compared to 1992. The total throughput was
composed of sales gas (20.1%), spot gas (9.4%) and customer
transportation gas (70.5%).
During 1993 nineteen of Interstate's customers transported a total of
23,994,891 Mcf of their own gas over the company's pipeline and
distribution systems. This reflects an increase over 1991 and 1992
in the number of customers exercising the transportation option. In
1991, fourteen of Interstate's customers transported a total of
16,055,921 Mcf, and in 1992 sixteen customers transported a total of
23,547,107 Mcf. The customer owned gas was delivered by interstate
pipeline companies for those customers' accounts at Interstate's town
border stations, under terms and conditions in tariffs approved by
respective state commissions. Company policy is to assist any
customer in exploring its options relative to purchasing gas directly
from the producing sector.
The company owns propane-air gas plants at Albert Lea, Minnesota and
Clinton and Mason City, Iowa. The daily output capacities are: 5,500
Mcf, 4,000 Mcf and 9,600 Mcf of propane-air mix gas, respectively.
The requirement for gas on the peak winter day of the 1992-1993
season was 139,877 Mcf, including both firm and interruptible
customers. This peak consisted of 29.0% jurisdictional sales gas,
1.4% spot gas, 51.6% customer purchased gas, 6.4% firm transportation
service and 11.6% storage gas. Propane-air from the company's peak-
shaving plants was not needed to meet demands due to the adequate gas
supply. The maximum daily firm gas sales during the 1992-1993 season
were as follows: Albert Lea 10,611 Mcf; Savanna 2,338 Mcf; Clinton
20,970 Mcf; Mason City 26,494 Mcf, or 43.2% of the peak winter day
throughput.
The direct purchase of approximately 3,408,561 Mcf of natural gas in
the spot market has resulted in a savings of $1,495,860 in the cost
of natural gas during 1993. These savings have been passed on to the
customers through the company's purchased gas adjustment clause.
(Duration and Effect of Gas Patents and Franchises)
The company owns no patents.
The company has, in the opinion of its legal counsel, all necessary
franchises or other rights from the incorporated communities and
other governmental subdivisions now served, required for the opera-
tion of its properties. With 34 gas franchises in effect in cities
and villages, and with the larger majority of such franchises being
for a term of 25 years, the renewal of such franchises is a continu-
ing process. fifty percent (17) of the franchises have been secured
since January 1, 1984.
(Gas Seasonal Business)
The effects of heating sales to the residential and commercial
classes of customers have a significant seasonal impact on the
business of the registrant. The heating sales in the winter months
account for 98% of the total annual sales to these classes of custom-
ers. The average consumption for a residential customer during the
peak winter months is 18.5 Mcf compared to the average of 2.6 Mcf
during the summer. The average consumption for a commercial customer
during the peak winter months is 90.7 Mcf compared to the average of
13.4 Mcf during the summer.
(Gas Governmental Regulations)
In November 1992 the company filed an application with the IUB for an
increase in gas rates in an annual amount of approximately $4.1
million. Interim rates were placed in effect in February 1993.
Additional interim rates in an annual amount of $300,000 were placed
in effect in May 1993 after the IUB approved the company's trust
agreement arrangements for additional postretirement benefits expense
to be recognized under SFAS 106. On August 31, 1993, the IUB issued
a final order allowing an annual increase of $3.3 million. Due to
customers subsequently shifting to alternate tariffs, the company
estimates that it will realize an annual increase of $2.8 million.
(Gas Competitive Conditions)
The company has no competition from the same type of public utility
service in the sale of gas in any of the incorporated communities
service by it. Certain major industrial customers of the company
have taken advantage of Federal and State regulations to purchase
their own gas supply from producers and have that gas transported by
the company as described in the "Gas Sources and Availability of Raw
Materials" section. Laws and statutory regulations in the different
states in which service is rendered provide, under varying terms and
conditions, for municipal ownership of distribution systems. Certain
franchises under which utility service is rendered give the
municipality the right to purchase the system of the company within
said municipality upon certain terms and conditions. However, no
such purchase option and no right of condemnation of the company's
properties has been exercised and no municipal distribution system
has been established in the territory now serviced by the company
during the past twenty-five years.
(Dependence of Segment Upon a Single Customer)
In 1993, 1992 and 1991, the company had no single customer or indus-
try for which electric and/or gas sales accounted for 10% or more of
the company's consolidated revenues. In 1993, the company's three
largest industrial customers accounted for 1,288,415,514 Kwh of
electric sales ($42,000,742) and 21,950,299 Mcf of gas sales and
transportation ($2,905,935).
(Research and Development)
The company has no full-time professional employees engaged in
research activities and had no company-sponsored research programs
during 1993, 1992 and 1991. In the public utility industry, research
is commonly and traditionally done by manufacturers of equipment,
trade organizations to which the company belongs, and university
research programs. In 1993 approximately $1,089,599 was paid for
research activities compared with $1,012,150 in 1992 and $955,862 in
1991.
(Electric and Magnetic Fields)
The possibility that exposure to electric and magnetic fields emanat-
ing from power lines and other electric sources may result in adverse
health effects has been a subject of increased public, governmental
and media attention. A considerable amount of scientific research
has been conducted on this topic with no definitive results. Re-
search is continuing. It is not possible to tell what, if any,
impact these actions may have on the company's financial condition.
(Environmental Regulations)
The company is subject to environmental regulations promulgated and
enforced by federal and state governments. The company believes that
it presently meets existing regulations. The Federal Clean Air Act
Amendments of 1990 will require reductions in sulfur dioxide and
nitrogen oxide emissions from power plants. The legislation sets two
deadlines for compliance, Phase 1 (January 1, 1995) and Phase 2
(January 1, 2000). The most restrictive provisions relate to sulfur
dioxide emissions. During Phase 1, only one of the company's units is
affected. That unit's net effective capacity is 217 MW. Present plans
for the affected unit are to switch to lower sulfur coal and install
low nitrogen oxide burners. Phase 2 compliance will require addition-
al capital, operating and maintenance costs beyond those required for
Phase 1. The Phase 2 regulations will affect approximately 87% of the
company's current generating capacity.
The company's long-range construction forecast (through the year
2000) contains estimated Phase 1 capital expenditures of approximate-
ly $6.5 million and estimated Phase 2 capital expenditures in the
range of $35.0 million. Estimated expenditures for 1994 and 1995
include $10.9 million for facilities necessary to comply with the
Clean Air Act. The estimated expenditures include provisions for low
nox burners, emission monitors, and flue gas conditioning systems.
The company anticipates the costs of compliance with the Clean Air
Act will be recovered through the ratemaking process.
The United States EPA, via the Clean Water Act, and the states have
promulgated discharge limits necessary to meet water quality stan-
dards. A National Pollutant Discharge Elimination System (NPDES)
permit is required for all discharges. The company has current NPDES
permits for all discharges and meets or or falls within the required
discharge limits.
Early this century, various utilities including the company operated
plants which used coal, coke and/or oil to produce manufactured gas
for cooking and lighting. These facilities were abandoned 40 to 60
years ago when natural gas pipelines were extended into the upper
Midwest. Some of the former gasification sites contain waste products
which may present an environmental hazard. Waste remediation costs
can vary significantly, dependent on the disposal method and type of
contaminants. Current estimates range from $75 to $1,200 per ton of
waste material.
In 1957, the company purchased facilities in Mason City, Iowa from
Kansas City Power & Light company (KCPL) which included a parcel of
land previously used for coal gasification. In 1986 and again in
1991, the company entered into Consent Orders with the Environmental
Protection Agency (EPA) which obligate the company to conduct a
Remedial Investigation and Feasibility Study at the Mason City site.
A Remedial Investigation has been completed and has been approved by
the EPA. The company is continuing to perform investigative testing
to determine the limits of potential groundwater contamination at the
Mason City site. The remediation process will not begin until the EPA
has approved the scope of the project and the appropriate process for
cleaning up the site. To-date, a total of 1,200 tons of contaminated
soil has been identified. To-date, all costs have been charged to
expense. The company spent $300,000 on the Mason City project in
1993; it has spent $1.7 million on the site since the discovery of
the tar wastes in 1984. In 1991, the company recorded estimated
future expenditures of $1.4 million for groundwater monitoring,
construction of an interim groundwater treatment facility and design
of site remediation. In addition, the company expensed an additional
$200,000 in 1992 to cover the estimated cost to remediate 1,200 tons
of waste presently in a storage pile. The company is pursuing recov-
ery of response costs from KCPL. The Federal District Court ruled in
the third quarter of 1993 that KCPL is liable to the company regard-
ing the response costs at the Mason City site. (KCPL is a strong A
rated company with total assets in excess of $2 billion.) Additional
court proceedings will be held in 1994 or 1995 to determine the
extent of that liability. In the opinion of the company, presently
accrued liabilities of $800,000 are adequate to cover the company's
share of future expenses at this site.
The company formerly operated a manufactured gas plant in Rochester,
Minnesota. This facility was sold to another utility, which later
demolished the plant. The site is currently owned by a utility and
the City of Rochester. The limits of contaminated soil have been
identified and are estimated to be 50,000 tons. Tentative agreements
have been reached between the Minnesota PCA and all three parties
noted above regarding the clean-up process. The remediation process
will begin in early 1994. The total costs to clean-up this site are
estimated to be $7.8 million. A verbal agreement has been reached
among the parties regarding cost sharing and a written agreement is
expected in the near future. The company has agreed to pay for $4.9
million of the estimated costs ($3.5 million was recorded in 1993,
$1.2 million in 1992, $200,000 in 1991). To-date, all costs have been
charged to expense.
The company owned and operated a manufactured gas facility in Albert
Lea, Minnesota and is solely responsible for the site. Testing for
contaminated soil and groundwater has taken place and additional
testing will take place in 1994. Based on the past testing, contami-
nation is at a low level. All costs have been charged to expense.
$80,000 was spent in 1993 and $243,000 has been spent to-date.
Estimated investigative and remedial expenditures in the amount of
$400,000 were expensed in 1991. The company anticipates that a risk
assessment will be completed by late 1994. Remediation requirements
will not be known until the risk assessment is completed.
The company owned and operated a manufactured gas plant at Clinton,
Iowa. The company believes that the coal gasification waste was
removed subsequent to plant decommissioning, and therefore it is not
necessary to accrue for any future liability. If hazardous wastes are
found at the site, the EPA may name several potentially responsible
parties in addition to the company, as other industrial operations
have been conducted on or adjacent to the site. In September 1992,
the company prepared a consent order (the agreement to investigate
and, if necessary, remediate the site) and forwarded it to the Iowa
Department of Natural Resources - Department of Environmental Quali-
ty. On November 24, 1993, the company was notified that the site was
referred to the Federal EPA.
In addition, the company has identified four other sites in the
Midwest for which the company is potentially responsible. The company
has not conducted an investigation of these sites, nor has the EPA
requested that any investigations be initiated. No environmental
response costs have been recorded for these sites, as no evidence has
been brought forth to indicate that any of these sites contain
hazardous materials. In January 1994, the company was notified by an
Illinois property owner of a site which contains hazardous materials
which may have come from a manufactured gas plant. Investigations
are underway to determine if the company has any responsibility for
the site.
The company has retained an outside law firm to pursue recovery from
insurance carriers of environmental remediation costs applicable to
the coal gasification sites. While the company's insurance carriers
have stated that they are not liable, the company contends that it
has coverage. Neither the company nor its legal counsel is able to
predict the amount or timing of any insurance recovery, and accord-
ingly, no potential recovery has been recorded.
Previous actions by Iowa, Minnesota and Illinois regulators have
permitted utilities to recover prudently incurred remediation and
legal costs. The company anticipates that any unreimbursed costs
applicable to the Iowa, Illinois and Albert Lea, Minnesota jurisdic-
tions should be recovered from gas customers. It is uncertain whether
the company will recover any uninsured costs applicable to the
Rochester, Minnesota site, as the company no longer serves that city,
and no Minnesota precedent has been established for recovery in a
similar situation.
Under the Federal Comprehensive Environmental Response, Compensation
and Liability Act, a past waste generator can be designated by the
EPA as a Potentially Responsible Party (PRP). Certain types of used
transformer oil (primarily those containing polychlorinated bipheny-
ls, or "PCBs") have been designated as hazardous substances by the
EPA. The company has been cited as a PRP by the EPA in 3 instances
which involve used transformer oil.
The company was identified in 1986 by the EPA as a PRP for the
clean-up of the facilities formerly operated by Martha C. Rose
Chemicals, Inc. (Rose) in Holden, Missouri. Rose, pursuant to permits
issued by the EPA, was engaged in decontamination of PCB fluids and
processing of PCB-contaminated electrical equipment for disposal
including equipment sent to them by the company. Rose ceased opera-
tions in 1986, was declared bankrupt, and did not comply with EPA
orders for site clean-up. Final clean-up activities at the site will
not begin until 1994. The Martha Rose Chemical Steering Committee has
estimated that total clean-up cost may be up to $18 million. The
company, along with 14 other steering committee members, has filed
suit against non-participating potentially liable entities to recover
their ratable share of the costs. The company has paid clean-up costs
of $317,000 to-date. The Steering Committee has indicated that it has
adequate funds for clean-up, and the company anticipates that addi-
tional assessments, if any, will not be material.
In 1988, the EPA designated the company a PRP for the clean-up of
former salvage facilities operated by B&B Salvage in Warrensburg,
Missouri. The EPA pursued recovery of costs from several PRPs,
although not from the company. The PRPs sued by the EPA in turn named
the company as a Third Party Defendant in an attempt to recover a
ratable share of the costs. In April 1993, the company paid $69,000
in full settlement of its liability for the claims asserted in that
litigation.
In 1988, the EPA designated the company a PRP for the clean-up of
former salvage facilities operated by the Missouri Electric Works,
Inc. (MEW) in Cape Girardeau, Missouri. A portion of the PCB-contami-
nated equipment found at the site was formerly owned by the company.
The company notified the EPA that it disclaims responsibility for the
site, as the equipment was in proper operating condition when sold by
the company to a third party, which subsequently made arrangements to
transport this equipment to MEW. The EPA has not responded to the
company's disclaimer. The company has not recorded any liability for
the MEW site, and management believes that it will be able to suc-
cessfully defend itself against any claims applicable to the site.
(Employees)
The company has 979 regular employees consisting of 941 full-time and
38 part-time employees.
(Accounting Matters)
The company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes" in 1993. The new
standard requires a deferred tax asset or liability to be recognized
for each temporary book/tax difference, including timing differences
flowed through and items not previously considered timing differences
(primarily Deferred Investment Tax credits and Equity AFUDC).
Corresponding regulatory assets or liabilities, reflecting the
expected future rate treatment, have also been recognized. For this
reason, the new standard did not have a significant effect on the
income statement, but did result in increased regulatory assets and
deferred tax liabilities. The balance sheet as of December 31, 1993
includes additional regulatory assets and deferred tax liabilities of
$27.0 million as a result of the adoption of SFAS 109.
The company adopted SFAS No. 106, "Accounting for Postretirement
Benefits Other Than Pensions" in 1993. Under the provisions of SFAS
106, the estimated future cost of providing these postretirement
benefits is accrued during the employees' service periods. The
postretirement benefit obligation at January 1, 1993 (transition
obligation) was $30.9 million and is being amortized over a 20 year
perod. The annual SFAS 106 cost for 1993 is $4.9 million, compared
to the 1993 pay-as-you-go amount of $1.7 million. The company is
deferring the difference between the SFAS 106 costs and the pay-as-
you-go amount until rate cases are filed to recover the additional
costs. Effective May 1993, the IUB allowed the company to recover
$300,000 annually of additional SFAS 106 expense in gas rates.
Effective November 1993, the IUB allowed recovery of $1.6 million
annually of additional SFAS 106 expense in electric rates, subject to
refund upon final determination. On the basis of generic hearings or
specific rate orders issued to other utilities by the Minnesota
Public Commission (MPUC), FERC and the Illinois Commerce Commission
(ICC), the company believes that amounts deferred meet the criteria
for deferral established by the Financial Accounting Standards Board.
As of December 31, 1993 $2.6 million of SFAS 106 costs in excess of
the pay-as-you-go amount have been deferred.
ITEM 2. PROPERTIES
The principal power plants and other materially important physical
properties of the Company are maintained in accordance with sound
operating practices. Their general character and location are
described below:
(Electric Properties)
The Company has been a participant in the Mid-Continent Area Power
Pool (MAPP) Agreement since March 31, 1972. As a part of this power
network the Company is the owner of a 55.0 mile section of the 345 KV
transmission line extending from St. Louis, Missouri to Minneapolis,
Minnesota; a 15.5 mile section of the 345 KV transmission line
between Minneapolis, Minnesota and Kansas City, Missouri; a 5.0 mile
345 KV transmission line from near Clinton, Iowa to near Cordova,
Illinois; a 49.8 mile 345 KV transmission line from near Clinton,
Iowa to a substation south of Dubuque, Iowa; and three associated
345/161 KV substations.
The Company's electric generating stations at year-end consist of six
steam plants, three combustion turbine stations, and five internal
combustion facilities. Pertinent information regarding each electric
generating station is shown on the following page:
INTERSTATE POWER COMPANY GENERATING STATIONS
Net
Generating Units December 31, 1993 Output
Nameplate Capability in KWH
Unit Capacity Year KW KW (000's)
Location Number KW Installed (Gross) (Net) 1993
STEAM:
Dubuque, IA 2 15,000 1929 82,500 78,000 140,551
3 25,000 1952
4 33,000 1959
Clinton, IA 1 15,000 1947 254,900 235,000 1,146,141
(M.L.Kapp Plt.) 2 212,284 1967
Lansing, IA 1 15,000 1948 337,800 320,000 728,926
2 11,500 1949
3 33,000 1957
4 252,649 1977
Sherburn, MN 1 11,500 1950 113,500 108,000 167,927
(Fox Lake Plt.) 2 11,500 1951
3 75,000 1962
Sioux City, IA 4* 125,924 1979 142,000 134,300 922,780
(Neal Unit #4)
Louisa County, IA 1** 27,400 1983 27,400 26,000 175,595
(Louisa Unit #1)
TOTAL STEAM 958,100 901,300 3,281,920
GAS TURBINE:
Montgomery, MN 1 26,535 1974 22,200 22,200 (87)
Sherburn, MN 4 26,535 1974 21,300 21,300 40
(Fox Lake Plt.)
Mason City, IA 1 37,520 1991 70,400 70,000 597
(Lime Creek Plt.) 2 37,520 1991
TOTAL GAS TURBINE 113,900 113,500 550
INTERNAL COMBUSTION:
Dubuque, IA 1 2,000 1966 4,600 4,600 (110)
2 2,000 1966
Hills, MN 2 2,000 1960 2,000 2,000 (62)
Lansing, IA 1 1,000 1970 2,000 2,000 4
2 1,000 1971
New Albin, IA 1 685 1970 700 700 (50)
Rushford, MN 1 2,000 1961 2,000 2,000 (91)
TOTAL INTERNAL COMBUSTION 11,300 11,300 (309)
TOTAL COMPANY 1,083,300 1,026,100 3,282,161
* Interstate owns 21.528% of a 584,931 KW unit operated by Midwest Re-
sources.
** Interstate owns 4.0% of a 685,000 KW unit operated by Iowa-Illinois
Gas and Electric Company.
(Gas Properties)
The company owns and operates natural gas distributing systems in
Albert Lea, Minnesota; Savanna, Illinois; Clinton, Mason City and
Clear Lake, Iowa and in a number of smaller Minnesota, Illinois and
Iowa communities. At Albert Lea, the company owns 14 tanks with a
liquid propane storage capacity of 357,000 gallons; at Clinton there
are 12 tanks with 306,000 gallons capacity and at Mason City 22 tanks
with 561,000 gallons capacity.
The company also owns 110 gas regulating stations and approximately
965 miles of gas distribution mains.
(General Properties)
The company owns numerous miscellaneous properties in various parts
of its territory which are used for office, service and other purpos-
es. The most important of these are three General Office buildings
in Dubuque and the district office buildings at Clinton, Decorah,
Dubuque, Mason City and Oelwein, Iowa and Albert Lea, and Winnebago,
Minnesota and the distribution service buildings in each of those
locations. The company, as lessee, leases office space at various
locations. The company also leases a few small parcels of land for
storage of poles and miscellaneous temporary uses.
(Titles)
In the opinion of legal counsel for the company, the company has
satisfactory title to its properties for use in its utility business-
es subject only to permitted liens as defined in the Bond Indenture
and to minor defects and encumbrances customarily found in cases of
like size and character and which do not materially interfere with
the use of such properties.
Properties such as electric transmission and electric and gas distri-
bution lines are constructed principally on rights-of-way which are
maintained under franchise or held by easement only.
All properties of the company, other than "excepted property" as
defined in the Bond Indenture, are subject to the lien of the compan-
y's Bond Indenture dated as of January 1, 1948, as supplemented,
securing the company's outstanding First Mortgage Bonds.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to "Electric Governmental Regulations", "Electric
Competitive Conditions" and "Environmental Regulations" under "Item
1. Business" for certain pending legal proceedings and proceedings
known to be contemplated by governmental authorities. Reference is
also made to Note 9 to Financial Statements of the Annual Report to
Stockholders, included herein as EX-13. Other than these items,
there are no material pending legal proceedings, or proceedings known
to be contemplated by governmental authorities, other than ordinary
routine litigation incidental to the business, to which the company
is a party or of which any of the company's property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no submission of matters to a vote of security holders
during the fourth quarter of the 1993 year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
For information pertaining to common stock market data required by
Item 201 of Regulation S-K please refer to page 33 of Exhibit EX-13
(the Annual Report to Stockholders).
ITEM 6. SELECTED FINANCIAL DATA
On March 11, 1993, the company filed a shelf registration with the
Securities and Exchange Commission for $125 million of first mortgage
bonds and 745,000 shares of $50 par value preferred stock. On May
26, 1993 the company issued $94 million of 7 5/8% first mortgage
bonds due in 2023. The proceeds from the sale of the bonds were used
to retire higher cost bonds due in 1999, 2001, 2002 and 2008. Also,
on May 26, 1993 the company issued 545,000 shares of 6.40% preferred
stock. The proceeds from the issuance of the stock were used to
redeem higher cost series preferred and preference stock.
Below is set forth the ratio of earnings to fixed charges for each of
the years in the period 1989 through 1993.
December 31, 1989................. 3.69
December 31, 1990................. 3.84
December 31, 1991................. 3.77
December 31, 1992................. 2.69
December 31, 1993................. 2.68
Below is set forth the ratio of earnings to fixed charges and pre-
ferred stock dividends for each of the years in the period 1989
through 1993.
December 31, 1989................. 3.03
December 31, 1990................. 3.11
December 31, 1991................. 3.13
December 31, 1992................. 2.28
December 31, 1993................. 2.21
See Exhibit EX-12 for the computation of the above ratios.
For information pertaining to selected financial data required by
Item 301 of Regulation S-K please refer to page 32 of Exhibit EX-13
(the Annual Report to Stockholders).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For information pertaining to management's discussion and analysis
required by Item 303 of Regulation S-K please refer to pages 1
through 11 of Exhibit EX-13 (the Annual Report to Stockholders).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data incorporated by reference
to Exhibit EX-13 (the Annual Report to Stockholders for 1993):
Statements of Income and Retained Earnings Page 12
Balance Sheets Pages 13 & 14
Statements of Cash Flows Page 15
Statements of Capitalization Page 16
Notes to Financial Statements Pages 17 - 29
Independent Auditors' Report Page 30
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Offices Held Past 5 Years
W. H. Stoppelmoor 60 1-1-87 - President and Chief Executive
Officer
5-1-90 - President, Chief Executive Officer
and Chairman of the Board
M. R. Chase 55 1-1-91 - Vice President - Production
5-7-91 - Vice President - Power Production
A. D. Cordes 62 1-1-86 - Vice President - District Adminis-
tration
5-1-90 - Vice President - District Adminis-
tration and Public Affairs
R. R. Ewers 49 5-1-90 - Vice President - Administrative
Services
D. E. Hamill 57 9-1-80 - Vice President - Budgets and Regu-
latory Affairs
G. L. Kopischke 62 9-1-80 - Vice President - Electric Opera-
tions
J. C. McGowan 56 5-1-86 - Assistant Secretary and Assistant
Treasurer
2-1-89 - Secretary and Treasurer
R. P. Richards 57 1-1-91 - Vice President - Gas Operations
W. C. Troy 55 5-1-86 - Controller
All officers are elected and serve as such until the next annual
meeting of directors. There are no arrangements or understandings
with respect to election of any person as an officer.
For information pertaining to directors, and other data required by
Items 401 and 405 of Regulation S-K, refer to pages 3 through 6 of
the company's Official Proxy Statement filed with the Securities and
Exchange Commission on March 18, 1994.
ITEM 11. EXECUTIVE COMPENSATION
Refer to information on pages 8, 9, 10, 11 and 12 of the company's
Official Proxy Statement filed with the Securities and Exchange
Commission on March 18, 1994 for data required by Item 402 of
Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to information on pages 6 and 7 of the company's Official Proxy
Statement filed with the Securities and Exchange Commission on
March 18, 1994 for data required by Item 403 of Regulation S-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others:
In 1993 there were no transactions and there are presently proposed
no transactions with management, to which the company or its subsid-
iary was or is to be a party, of the character as to which answer is
called for in response to Item 404(a) of Regulation S-K.
Indebtedness of Management:
No director or officer, or nominee for election as a director, or any
associate of any thereof, was indebted to the company or its subsid-
iary during 1993, as to which answer is called for in response to
Item 404(b) of Regulation S-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. The financial statements, including supporting schedules,
are listed in the Index to Financial Statements, Schedules
and Exhibits filed as part of this Annual Report.
2. Exhibits which are filed herewith, including those incor-
porated by reference are listed in the Index to Financial
Statements, Schedules and Exhibits filed as part of this
Annual Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the last quarter of 1993.
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
The 1993, 1992 and 1991 financial statements, together with the Indepen-
dent Auditors' Report thereon of Deloitte & Touche dated
February 3, 1994, appearing on pages 12 through 30 of Exhibit EX-13
(the 1993 Annual Report to Stockholders), are incorporated in this
Form 10-K Annual Report. The following additional data, as attached
on EX-23.a, EX-23.b, EX-23.c, S-1, S-2, S-3 and S-4, should be read in
conjunction with the financial statements in such Exhibit EX-13.
Schedules and other historical financial information not included with
this additional financial data have been omitted because they are not
applicable or the required information is shown in the financial state-
ments or notes thereto.
Page or Exhibit Reference
Exhibit EX-13
Form (Annual Report to
10-K Stockholders)
Report of Independent Auditors EX-23.a
Consent of Independent Auditors EX-23.b
Consent of Independent Auditors EX-23.c
Financial Statements:
Statements of Income and Retained Earnings
for the years ended December 31, 1993,
1992 and 1991 12
Balance Sheets, December 31, 1993 and 1992 13 & 14
Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 15
Statements of Capitalization, December 31,
1993 and 1992 16
Notes to Financial Statements 27 - 29
Selected Financial Data 32
Common Stock Market Data 33
Management's Discussion and Analysis 1 - 11
Schedules:
V. Property, Plant and Equipment S-1
VI. Accumulated Provision for
Depreciation of Property,
Plant and Equipment S-2
VIII. Valuation and Qualifying Accounts
and Provisions S-3
X. Supplementary Profit and Loss
Information S-4
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS (CONT'D.)
Exhibits filed as part of this report:
EX-3.a Restated Certificate of Incorporation of Interstate Power
Company as originally filed April 18, 1925 and as amended
effective through October 21, 1993.
EX-12 Statement re computation of ratios.
EX-13 The Company's 1993 Annual Report to Stockholders.
EX-23.a Report of Independent Auditors
EX-23.b Consent of Independent Auditors
EX-23.c Consent of Independent Auditors
EX-99.a Listing of current material contracts, indentures and other
exhibits and identified as having been previously filed with the
Commission.
EX-99.b Form 11-K. Interstate Power Company 401(k) Plan for the year
ended December 31, 1993.
EX-99.c Summary Plan Description for the Interstate Power Company 401(k)
Plan dated November 30, 1993.
EX-99.d Interstate Power Company Supplemental Retirement Plan dated
October 8, 1990.
EX-99.e Interstate Power Company Amended Deferred Compensation Plan as
amended through January 30, 1990.
EX-99.f Interstate Power Company Irrevocable Trust Agreement dated
April 30, 1990.
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.
INTERSTATE POWER COMPANY
Date March 17, 1994 By /s/ W. H. STOPPELMOOR
(W. H. Stoppelmoor,
President and Chief
Executive Officer)
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 date indicated.
Signature Title
/s/ W. H. STOPPELMOOR President and Chief Executive
(W. H. Stoppelmoor) Officer (Principal Executive
Officer and Principal
Financial Officer)
/s/ W. C. TROY Controller (Principal
(W. C. Troy) Accounting Officer)
/s/ A. B. ARENDS Director
(A. B. Arends)
/s/ J. E. BYRNS Director
(J. E. Byrns)
/s/ A. D. CORDES Director
(A. D. Cordes)
/s/ J. L. HANES Director
(J. L. Hanes)
/s/ G. L. KOPISCHKE Director
(G. L. Kopischke)
/s/ N. J. SCHRUP Director
(N. J. Schrup)
Date March 17, 1994
SCHEDULE V
Page 1 of 3
INTERSTATE POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
OTHER
BALANCE CHARGES
AT ADD BALANCE
BEGINNING ADDITIONS RETIRE- (DEDUCT) AT END
DESCRIPTION OF YEAR AT COST MENTS(a) (b) OF YEAR
YEAR ENDED DEC. 31, 1993
Utility Plant:
Electric:
Production $363,006 $ 4,313 $1,804 $ 1 $365,516
Transmission 167,423 7,293 1,348 2 173,370
Distribution 191,433 10,895 2,502 (52) 199,774
General 40,834 6,692 3,156 (6) 44,364
Land held for future
use 587 0 0 0 587
C.W.I.P. 3,281 (117) 0 (1) 3,163
Total 766,564 29,076 8,810 (56) 786,774
Gas:
Production 1,828 0 0 0 1,828
Distribution 50,378 4,896 490 0 54,784
General 2,727 399 216 (2) 2,908
C.W.I.P. 206 (207) 0 1 0
Total 55,139 5,088 706 (1) 59,520
TOTAL $821,703 $34,164 $9,516 $(57) $846,294
Property held by
subsidiary $ 450 $ 297 $ 102 $ 0 $ 645
(a) Gross values of property, plant and equipment retired are summarized
as follows:
1993
Charges to reserves for depreciation $9,465
Property, plant and equipment in retirement
work in progress at:
End of year 0
Beginning of year 0
Total (see Schedule VI) 9,465
Retirements not charged to reserve 51
TOTAL $9,516
(b) Denotes reclassifications between accounts and reduction of property
due to contributions in aid of construction.
S-1
SCHEDULE V
Page 2 of 3
INTERSTATE POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
OTHER
BALANCE CHARGES
AT ADD BALANCE
BEGINNING ADDITIONS RETIRE- (DEDUCT) AT END
DESCRIPTION OF YEAR AT COST MENTS(a) (b) OF YEAR
YEAR ENDED DEC. 31, 1992
Utility Plant:
Electric:
Production $358,421 $ 5,916 $1,339 $ 8 $363,006
Transmission 163,858 6,555 2,931 (59) 167,423
Distribution 182,638 11,051 2,338 82 191,433
General 38,098 3,658 927 5 40,834
Land held for future
use 610 0 0 (23) 587
C.W.I.P. 4,207 (926) 0 0 3,281
Total 747,832 26,254 7,535 13 766,564
Gas:
Production 1,740 197 87 (22) 1,828
Distribution 43,957 6,914 491 (2) 50,378
General 2,567 248 86 (2) 2,727
C.W.I.P. 1,341 (1,135) 0 0 206
Total 49,605 6,224 664 (26) 55,139
TOTAL $797,437 $32,478 $8,199 $(13) $821,703
Property held by
subsidiary $ 317 $ 308 $ 175 $ 0 $ 450
(a) Gross values of property, plant and equipment retired are summarized
as follows:
1992
Charges to reserves for depreciation $8,056
Property, plant and equipment in retirement
work in progress at:
End of year 0
Beginning of year 0
Total (see Schedule VI) 8,056
Retirements not charged to reserve 143
TOTAL $8,199
(b) Denotes reclassifications between accounts and reduction of property
due to contributions in aid of construction.
S-1
SCHEDULE V
Page 3 of 3
INTERSTATE POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
OTHER
BALANCE CHARGES
AT ADD BALANCE
BEGINNING ADDITIONS RETIRE- (DEDUCT) AT END
DESCRIPTION OF YEAR AT COST MENTS(a) (b) OF YEAR
YEAR ENDED DEC. 31, 1991
Utility Plant:
Electric:
Production $333,095 $26,226 $ 897 $ (3) $358,421
Transmission 134,357 31,548 2,047 0 163,858
Distribution 176,155 8,923 2,402 (38) 182,638
General 36,651 2,232 784 (1) 38,098
Land held for future
use 610 0 0 0 610
C.W.I.P. 41,982 (37,775) 0 0 4,207
Total 722,850 31,154 6,130 (42) 747,832
Gas:
Production 1,694 47 1 0 1,740
Distribution 41,575 2,846 461 (3) 43,957
General 2,433 282 148 0 2,567
C.W.I.P. 54 1,287 0 0 1,341
Total 45,756 4,462 610 (3) 49,605
TOTAL $768,606 $35,616 $6,740 $(45) $797,437
Property held by
subsidiary $ 379 $ 157 $ 219 $ 0 $ 317
(a) Gross values of property, plant and equipment retired are summarized
as follows:
1991
Charges to reserves for depreciation $6,672
Property, plant and equipment in retirement
work in progress at:
End of year 0
Beginning of year 0
Total (see Schedule VI) 6,672
Retirements not charged to reserve 68
TOTAL $6,740
(b) Denotes reclassifications between accounts and reduction of property
due to contributions in aid of construction.
S-1
SCHEDULE VI
INTERSTATE POWER COMPANY
ACCUMULATED PROVISION FOR DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
ADDITIONS OTHER
CHARGED CHARGES
BALANCE AT TO COSTS ADD BALANCE
BEGINNING AND RETIRE- (DEDUCT) AT END
DESCRIPTION OF YEAR EXPENSE MENTS(a) (b) OF YEAR
YEAR ENDED DEC. 31, 1993
Utility Plant:
Electric $320,183 $24,705 $8,759 $1,214 $337,343
Gas 19,464 2,223 706 6 20,987
TOTAL $339,647 $26,928 $9,465 $1,220 $358,330
YEAR ENDED DEC. 31, 1992
Utility Plant:
Electric $301,689 $23,817 $7,392 $2,069 $320,183
Gas 18,005 2,044 664 79 19,464
TOTAL $319,694 $25,861 $8,056 $2,148 $339,647
YEAR ENDED DEC. 31, 1991
Utility Plant:
Electric $283,118 $22,509 $6,062 $2,124 $301,689
Gas 16,703 1,951 610 (39) 18,005
TOTAL $299,821 $24,460 $6,672 $2,085 $319,694
(a) See note (a) to Schedule V for reconciliation of retirements with
this schedule.
(b) Other charges - additions (deductions) are summarized below:
1993 1992 1991
Salvage and amounts realized from sales $1,806 $2,522 $2,535
Depreciation charged to asset accounts 685 713 893
Depreciation charged to other expense
accounts 624 571 528
Cost of removal (1,895) (1,658) (1,871)
$1,220 $2,148 $2,085
S-2
SCHEDULE VIII
INTERSTATE POWER COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND PROVISIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGED CHARGED DEDUCTION BALANCE
BEGINNING TO TO OTHER FROM AT END
DESCRIPTION OF YEAR INCOME ACCOUNTS RESERVES OF YEAR
YEAR ENDED DEC. 31, 1993
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $206 $225 $134 (a) $362 (b) $203
Provision for medical
benefits, injuries
and damages $1,506 $4,302 $3,521 $5,224 (c) $4,105
YEAR ENDED DEC. 31, 1992
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $206 $152 $115 (a) $267 (b) $206
Provision for medical
benefits, injuries
and damages $1,655 $4,103 $838 $5,090 (c) $1,506
YEAR ENDED DEC. 31, 1991
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $202 $202 $116 (a) $314 (b) $206
Provision for medical
benefits, injuries
and damages $783 $4,113 $946 $4,187 (c) $1,655
(a) Recoveries on accounts previously written off.
(b) Accounts written off.
(c) Claims and damages paid and expenses in connection therewith.
S-3
SCHEDULE X
INTERSTATE POWER COMPANY
SUPPLEMENTARY PROFIT AND LOSS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
In addition to the amounts of maintenance and depreciation shown separate-
ly in the statement of income, there are insignificant amounts for such
items applicable to unit train coal cars charged to the coal inventory
account and vehicles charged to construction work in progress.
Taxes, other than income taxes, were as follows:
Year Ended December 31
1993 1992 1991
(Thousands of Dollars)
Real estate and personal property taxes $14,481 $14,054 $12,853
Franchise taxes 160 160 148
Payroll taxes 2,809 2,696 2,613
Miscellaneous 201 169 195
Total $17,651 $17,079 $15,809
The above amounts were charged to accounts:
Year Ended December 31
1993 1992 1991
(Thousands of Dollars)
Tax expense $17,080 $16,533 $15,315
Clearing accounts 206 187 171
Construction work in progress 296 290 258
Retirement work in progress 69 69 65
Total $17,651 $17,079 $15,809
There were no royalties paid or incurred during 1993, 1992 or 1991. Rent
and advertising costs were not material.
S-4
INDEX OF EXHIBITS
EX-3.a Restated Certificate of Incorporation of Interstate Power
Company as originally filed April 18, 1925 and as amended
effective through October 21, 1993.
EX-12 Statement re computation of ratios.
EX-13 The Company's 1993 Annual Report to Stockholders.
EX-23.a Report of Independent Auditors
EX-23.b Consent of Independent Auditors
EX-23.c Consent of Independent Auditors
EX-99.a Listing of current material contracts, indentures and other
exhibits and identified as having been previously filed with the
Commission.
EX-99.b Form 11-K. Interstate Power Company 401(k) Plan for the year
ended December 31, 1993.
EX-99.c Summary Plan Description for the Interstate Power Company 401(k)
Plan dated November 30, 1993.
EX-99.d Interstate Power Company Supplemental Retirement Plan dated
October 8, 1990.
EX-99.e Interstate Power Company Amended Deferred Compensation Plan as
amended through January 30, 1990.
EX-99.f Interstate Power Company Irrevocable Trust Agreement dated
April 30, 1990.
EX-3.a
RESTATED CERTIFICATE OF INCORPORATION
OF INTERSTATE POWER COMPANY
Interstate Power Company, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation") does hereby
certify as follows:
The original Certificate of Incorporation was filed with the
Secretary of State of Delaware on April 18, 1925. The first Restated
Certificate of Incorporation was duly adopted by the Board of Directors
of Interstate Power Company on December 8, 1988, in accordance with
Section 245 of the General Corporation Law of the State of Delaware and
was filed on March 16, 1989. The first Restated Certificate of
Incorporation restated, integrated and further amended the Certificate
of Incorporation of this Corporation by deleting Article SIXTH of the
Certificate of Incorporation, deleting the second paragraph of Article
SIXTEENTH of the Certificate of Incorporation, renumbering all Articles
following Article FIFTH, so Article SEVENTH became Article SIXTH, etc.,
through Article SEVENTEENTH, which became SIXTEENTH, and changed the
reference in what was Article SEVENTEENTH to read "Article SIXTEENTH",
in lieu of "Article SEVENTEENTH", deleted the signature lines of
original subscribers, and original attestation and original acknowledg-
ment and substituted then current signature references and acknowledge-
ment, and attestation, and eliminated and integrated all Certificates
described in Section 104 of the Delaware Corporation Law, which amended
the Certificate of Incorporation through July 5, 1988.
Pursuant to the provisions of Sections 242 and 245 of Title 8 of
the Delaware Code Annotated, the stockholders of the Corporation duly
adopted the second Restated Certificate of Incorporation. The second
Restated Certificate of Incorporation, adopted May 7, 1991, (i) under
Article FOURTH, increased the number of authorized shares of Common
Stock to 30,000,000, par value $3.50, from 15,000,000; (ii) under
Article FOURTH, increased the total shares of all classes from
19,000,000 to 34,000,000; (iii) made inapplicable cumulative voting
provisions in paragraph D of Article FOURTH; (iv) deleted from Article
FIFTH a minimum number of shares requirement; added a "fair price"
provision to insure fairness to all stockholders in the event of
unsolicited takeover actions, including provision for an 80% shareholder
vote for approval of a Business Combination; (v) amended Article EIGHTH
to allow removal of directors by stockholders (and not by directors) and
only for cause; to add provisions for filling of vacancies and newly
created directorships, and to adopt a staggered board of directors,
divided into three classes and serving three year terms with only one
class of directors to be elected at each annual meeting of stockholders
(subject to a possible shortening of the elected term upon attainment of
retirement age or relocation from the Company's service area).
Pursuant to the provisions of Section 245 of Title 8 of the
Delaware Code Annotated, the Board of Directors of the Corporation have
duly adopted the following third Restated Certificate of Incorporation.
The third Restated Certificate of Incorporation restates and integrates
the provisions of the second Restated Certificate of Incorporation of
May 7, 1991 as heretofore amended or supplemented and effects the
following further amendments thereto:
The provisions of Article FOURTH have been amended to add the
designation of 6.40% Preferred Stock, $50 par value, created May 18,
1993, and to delete therefrom the designations of the 8%, 9% and 9%
Series A Preferred Stocks, and the designation of the $2.28 Preference
Stock, since the remaining shares of the entire 140,000 shares of 8%
Preferred Stock, of the entire 137,228 shares of 9% Preferred Stock, of
the entire 200,000 shares of 9% Series A Preferred Stock, all $50 par
value, and all of the 400,000 shares of the $2.28 Preference Stock, $1
par value, were redeemed effective June 30, 1993. In addition, the
references to Paragraphs VIII and X in designations of the 4.36%, 4.68%,
and 7.76% Preferred Stock have been changed to read Paragraphs XX and
XXIII, respectively, and appropriate references to Restated Certificate
of Incorporation, in lieu of Certificate of Incorporation, have been
made, where applicable.
The text of the Restated Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes, except as noted in this Restated Certificate of Incorporation
above, to read as follows:
FIRST: The name of this Corporation is
INTERSTATE POWER COMPANY
SECOND: Its registered office in the State of Delaware is located
at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent at
such address is The Corporation Trust Company.
THIRD: The nature of the business or objects or purposes proposed
to be transacted, promoted or carried on by this Corporation are as
follows:--
(a) To purchase or otherwise acquire, own, operate and dispose
of all or any part of the business and properties of Interstate
Power Company, a Wisconsin corporation; to make payment therefor by
the issuance of preferred and common stock of this Corporation or
in any other manner permitted by law, and in connection therewith
to assume any or all the bonds, mortgages, franchises, leases,
contracts, indebtedness, liabilities and obligations of said
corporation.
(b) To generate, produce, buy, or in any manner acquire, and
to sell, dispose of and distribute electricity for light, heat,
power and other purposes and to carry on the business of
furnishing, supplying and vending light, heat, power and water and
any and all businesses incident thereto, and to build, construct,
develop, improve, acquire, hold, own, lease, maintain and operate
plants, facilities and works for the manufacture, generation,
production, accumulation, transmission and distribution of electric
energy, gas and steam, for light, heat, power and other purposes,
and to acquire, construct, maintain and operate systems of water
works for the supply of water.
(c) To build, construct, develop, improve, acquire, hold, own,
lease, maintain and operate, by electricity, or other power, street
railways and interurban railways for the transportation of
passengers, mail, express, merchandise or other freight in any part
of the world, except that this Corporation shall not have power to
construct, maintain or operate railroads or railways within the
State of Delaware.
(d) To produce, mine, buy, sell, store, market, deal in and
prospect for coal and minerals of all kinds and the products and
by-products thereof.
(e) To organize, incorporate, reorganize, finance and to aid
and assist financially or otherwise, companies, corporations, joint
stock companies, syndicates, partnerships and associations of all
kinds, particularly those engaged in operating public utilities,
and to underwrite, subscribe for and endorse the bonds, stocks,
securities, debentures, notes or undertakings of any such company,
corporation, joint stock company, syndicate, partnership or
association, and to make any guaranty in connection therewith or
otherwise for the payment of money or for the performance of any
obligation or undertaking, and to do any and all things necessary
or convenient to carry any of such purposes into effect.
(f) To carry on the business of engineering and contracting in
all of its branches; to appraise, value, design, build, construct,
enlarge, develop, improve, extend and repair light, heat, power,
transmission and hydraulic plants, electrical works, machinery and
appliances, telegraph and telephone lines, dams, reservoirs,
canals, bridges, piers, docks, mines, shafts, tunnels, wells, water
works, street railways, interurban railways, railways and
buildings.
(g) To purchase and acquire securities, assets and property of
every kind and description at judicial, judiciary, trustee's,
pledgee's, mortgagee's, or liquidating or public or private sales,
and to carry on a general salvage, liquidation and realization
business; and also to do a general commission and brokerage busi-
ness.
(h) To hold in trust, issue on commission, make advances upon
or sell, lease, license, transfer, organize, reorganize, incor-
porate or dispose of any of the undertakings or resulting
investments aforesaid, or the stock or securities thereof; to act
as agent, or depositary for any of the above or like purposes, or
any purpose herein mentioned, and to act as fiscal agent of any
other person, firm or corporation.
(i) To obtain the grant of, purchase, lease, or otherwise
acquire any concessions, rights, options, patents, privileges,
lands, rights of way, sites, properties, undertakings or busi-
nesses, or any right, option or contract in relation thereto, and
to perform, carry out and fulfill the terms and conditions thereof,
and to carry the same into effect, and to develop, maintain, lease,
sell, transfer, dispose of and otherwise deal with the same.
(j) From time to time to apply for, purchase or acquire by
assignment, transfer or otherwise, and to exercise, carry out and
enjoy any license, power, authority, franchise, ordinance, order,
right or privilege, which any government or authority, supreme,
municipal or local, or any corporation or other public body shall
enact, make or grant.
(k) To issue shares of the capital stock (of any class),
bonds, debentures, debenture stock, notes and other obligations of
this Corporation for cash, for labor done, for property, real or
personal, or leases thereof, or for any combination of any of the
foregoing, or in exchange for the stock, debentures, debenture
stock, bonds, securities or obligations of any person, firm,
association, corporation or other organization.
(l) To purchase, acquire and lease, and to sell, lease and
dispose of water, water rights, water records, power privileges and
appropriations for power, light, heat, mining, milling, irrigation,
agricultural, domestic or any other use or purpose.
(m) To acquire by purchase, lease, own, hold, sell, mortgage
and encumber both improved and unimproved real estate wherever
situated; to survey, subdivide, plat, colonize and improve the same
for purposes of sale or otherwise; and to construct and erect
thereon factories, works, plants, stores, mills, hotels, houses and
buildings.
(n) To subscribe for, or cause to be subscribed for, buy, own,
hold, purchase, receive, or acquire, and to sell, negotiate,
guarantee, assign, deal in, exchange, transfer, mortgage, pledge or
otherwise dispose of, shares of the capital stock, scrip, bonds,
coupons, mortgages, debentures, debenture stock, securities, notes,
acceptances, drafts and evidences of indebtedness issued or created
by other corporations, joint stock companies or associations,
whether public, private or municipal, or any corporate body, and
while the owner thereof, to possess and to exercise in respect
thereof all the rights, powers and privileges of ownership, includ-
ing the right to vote thereon; to guarantee the payment of
dividends on any shares of the capital stock of any of the corpora-
tions, joint stock companies or associations in which this Corpora-
tion has or may at any time have an interest, and to become surety
in respect of, endorse or otherwise guarantee the payment of the
principal of or interest on any scrip, bonds, coupons, mortgages,
debentures, debenture stock, securities, notes, drafts, bills of
exchange or evidences of indebtedness, issued or created by any
such corporations, joint stock companies or associations; to become
surety for or guarantee the carrying out and performance of any and
all contracts, leases and obligations of every kind of any corpora-
tions, joint stock companies or associations, and in particular of
any corporation, joint stock company or association any of whose
shares, scrip, bonds, coupons, mortgages, debentures, debenture
stock, securities, notes, drafts, bills of exchange or evidences of
indebtedness, are at any time held by or for this Corporation, and
to do any acts or things designed to protect, preserve, improve, or
enhance the value of any such shares, scrip, bonds, coupons,
mortgages, debentures, debenture stock, securities, notes, drafts,
bills of exchange or evidences of indebtedness.
(o) To manufacture, buy, sell and generally deal in goods,
wares, merchandise, property and commodities of any and every class
and description, and all articles used or useful in connection
therewith, insofar as may be permitted by the laws of the State of
Delaware; to engage in any business, whether manufacturing or
otherwise which this Corporation may deem advantageous or useful in
connection with any or all of the foregoing, and to purchase,
acquire, manufacture, market or prepare for market, sell and
otherwise dispose of any article, commodity or thing which this
Corporation may use in connection with its business.
(p) To secure, purchase, acquire, apply for, register, own,
hold, sell or dispose of any and all copyrights, trademarks and
other trade rights.
(q) To organize, or cause to be organized, under the laws of
the State of Delaware, or of any other state, territory or country,
or the District of Columbia, a corporation or corporations, for the
purpose of accomplishing any or all of the objects for which this
Corporation is organized, and to dissolve, wind up, liquidate,
merge or consolidate any such corporation or corporations, or to
cause the same to be dissolved, wound up, liquidated, merged or
consolidated.
(r) To purchase, apply for, obtain or otherwise acquire any
and all letters patent, licenses, patent rights, patented processes
and similar rights granted by the United States or any other
government or country, or any interest therein, or any inventions
which may seem capable of being used for or in connection with any
of the objects or purposes of this Corporation, and to use, exer-
cise, develop, sell, dispose of, lease, grant licenses in respect
to, or other interests in the same, and otherwise turn the same to
account, and to carry on any business, manufacturing or otherwise,
which may be deemed to directly or indirectly aid, effectuate or
develop the objects or any of them of this Corporation.
(s) To borrow money for any of the purposes of this Corpora-
tion, and to issue bonds, debentures, debenture stock, notes and
other obligations therefor, and to secure the same by pledge or
mortgage of the whole or any part of the property of this Corpora-
tion, either real or personal, or to issue bonds, debentures,
debenture stock, notes or other obligations without any such
security.
(t) To enter into, make, perform and carry out contracts of
every kind for any lawful purpose, without limit as to amount, with
any person, firm, association or corporation.
(u) To draw, make, accept, endorse, discount, guarantee,
execute and issue promissory notes, bills of exchange, drafts,
warrants, and all kinds of obligations and certificates and negoti-
able or transferable instruments.
(v) To purchase, hold, sell and transfer shares of its own
capital stock (of any class), bonds and other obligations of this
Corporation from time to time to such extent and in such manner and
upon such terms as its Board of Directors shall determine; provided
that this Corporation shall not use any of its funds or property
for the purchase of its own shares of capital stock when such use
would cause any impairment of the capital of this Corporation; and
provided further that shares of its own capital stock belonging to
this Corporation shall not be voted upon directly or indirectly.
(w) To have one or more offices, to carry on any or all of its
operations and business, and, without restriction or limit as to
amount, to purchase, lease, or otherwise acquire, hold and own, and
to mortgage, sell, convey, lease or otherwise dispose of, real and
personal property of every class and description, in any of the
states or territories of the United States and in the District of
Columbia, and in any and all foreign countries, subject to the laws
of such state, district, territory or country.
(x) To do any and all things herein set forth, and in addition
such other acts and things as are necessary or convenient to the
attainment of the purposes of this Corporation, or any of them, to
the same extent as natural persons lawfully might or could do in
any part of the world, insofar as such acts are permitted to be
done by a corporation organized under the General Corporation Laws
of the State of Delaware.
The forgoing clauses shall be construed, both as objects and
powers, and it is hereby expressly provided that the foregoing enumer-
ation of specific powers shall not be held to limit or restrict in any
manner the powers of this Corporation, and are in furtherance of, and in
addition to, and not in limitation of the general powers conferred by
the laws of the State of Delaware.
It is the intention that the purposes, objects and powers specified
in this Article THIRD and all subdivisions thereof shall, except as
otherwise expressly provided, in nowise be limited or restricted by
reference to or inference from the terms of any other clause or
paragraph of this Article, and that each of the purposes, objects and
powers specified in this Article THIRD shall be regarded as independent
purposes, objects and powers.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is thirty-four million
(34,000,000), of which two million (2,000,000) shares of the par value
of Fifty Dollars ($50) each are to be of a class designated Preferred
Stock, two million (2,000,000) shares of the par value of One Dollar
($1) each are to be of a class designated Preference Stock, and thirty
million (30,000,000) shares of the par value of Three Dollars and Fifty
Cents ($3.50) each are to be of a class designated Common Stock.
The designations and the voting powers, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the classes of stock of the
Corporation which are fixed by the Certificate of Incorporation, and the
express grant of authority to the Board of Directors of the Corporation
(hereinafter referred to as the Board of Directors) to fix by resolution
or resolutions the designations and the voting powers, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of the Preferred
Stock and of the Preference Stock, respectively, which are not fixed by
the Certificate of Incorporation, are as follows:
A. Preferred Stock
I. The Preferred Stock may be issued at any time or from time to
time in any amount, not exceeding in the aggregate (including all shares
of any and all series thereof theretofore issued) the total number of
shares of Preferred Stock hereinabove authorized, as Preferred Stock of
one or more series, as hereinafter provided. All Shares of any one
series of Preferred Stock shall be alike in every particular, each
series thereof shall be distinctly designated by letter or descriptive
words, and all series of Preferred Stock shall rank equally and be
identical in all respects except as permitted by the provisions of
Paragraph II of this Article FOURTH.
II. Authority is hereby expressly granted to and vested in the
Board of Directors at any time or from time to time to issue the
Preferred Stock as Preferred Stock of any series, and in connection with
the creation of each such series to fix by the resolution or resolutions
providing for the issue of shares thereof, the designations and the
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of such
series, to the full extent now or hereafter permitted by the laws of the
State of Delaware, in respect to the matters set forth in the following
subparagraphs (a) to (g), inclusive:
(a) The distinctive designation of such series and the number
of shares which shall constitute such series, which number may be
increased or decreased (but not below the number of shares thereof
then outstanding) from time to time by resolution of the Board of
Directors;
(b) The dividend rate per annum of such series, the quarterly
payment dates for dividends on shares of such series, and the date
from which dividends on shares of such series shall be cumulative
(hereinafter called the "date of cumulation"), which date of
cumulation shall be identical for all shares of such series;
(c) The price or prices at which, and the terms and conditions
on which, the shares of such series may be redeemed at the option
of the Corporation (hereinafter called the "optional redemption
price");
(d) The amount or amounts payable upon the shares of such
series in the event of voluntary liquidation, dissolution or
winding up of the Corporation;
(e) Whether or not the shares of such series shall be entitled
to the benefit of a sinking fund or a purchase fund to be applied
to the purchase or redemption of shares of such series, and if so
entitled, the amount of such fund and the manner of its applica-
tion, including the price or prices at which the shares of such
series may be redeemed or purchased through the application of such
fund;
(f) Whether or not the shares of such series shall be made
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any class or classes
of stock of the Corporation and, if made so convertible or exchan-
geable, the conversion price or prices, or the rates of exchange,
and the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such
conversion or exchange; and
(g) Whether or not the issue of any additional shares of such
series, or any future series in addition to such series, or of any
shares of any other class of stock (except junior stock, as herein-
after in this Article FOURTH defined) of the Corporation shall be
subject to restrictions and, if so, the nature thereof.
The designations and separate terms of the four separate series of
the Preferred Stock authorized as of the date of this Restated
Certificate of Incorporation are as follows:
(i) 4.36% Preferred Stock
Created December 9, 1954
The Company has established a "4.36% Preferred Stock", consisting
initially of 200,000 authorized shares of the par value of $50 per
share.
The terms of the "4.36% Preferred Stock", in the respects in which
the shares of such series may vary from shares of other series of the
Preferred Stock (in addition to the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, set
forth elsewhere in the Restated Certificate of Incorporation, which are
applicable to the Preferred Stock of the par value of $50 per share of
all series) shall be as follows:
(a) The dividend rate of the 4.36% Preferred Stock shall be
4.36% per share per annum upon the par value thereof payable
quarterly on the first days of January, April, July and October in
each year (the quarterly periods ending on the first days of such
months, respectively, to be designated as dividend periods) and the
date from which dividends on shares of the 4.36% Preferred Stock
shall be cumulative shall be December 1, 1954.
(b) The prices at which the 4.36% Preferred Stock may be
redeemed at the option of the Corporation, on the terms and condi-
tions specified in Paragraph XXIII of Article FOURTH of the
Restated Certificate of Incorporation shall be $53.30 per share, if
redeemed on or before December 1, 1959, $52.80 per share if
redeemed thereafter and on or before December 1, 1964, and $52.30
per share if redeemed after December 1, 1964, plus, as provided in
said Paragraph XXIII, an amount equal to full cumulative dividends
thereon to the redemption date.
(c) The amounts payable upon the shares of 4.36% Preferred
Stock in the event of any voluntary liquidation or dissolution or
winding up of the Corporation shall be an amount equal to the
redemption price (exclusive of dividends) specified in paragraph
(b) hereof above, then in effect, plus, as provided in Paragraph XX
of Article FOURTH of the Restated Certificate of Incorporation, an
amount equal to full cumulative dividends thereon to the date of
final distribution to the holders of the Preferred Stock.
(ii) 4.68% Preferred Stock
Created May 20, 1965
The Company has established a "4.68% Preferred Stock" consisting
initially of 166,000 authorized shares of the par value of $50 per
share.
The terms of the "4.68% Preferred Stock", in the respects in which
the shares of such series may vary from shares of other series of the
Preferred Stock (in addition to the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, set
forth elsewhere in the Restated Certificate of Incorporation, which are
applicable to the Preferred Stock of the par value of $50 per share of
all series) shall be as follows:
(a) The dividend rate of the 4.68% Preferred Stock shall be
4.68% per share per annum upon the par value thereof payable
quarterly on the first days of January, April, July and October in
each year (the quarterly periods ending on the first days of such
months respectively, to be designated as dividend periods) and the
date from which dividends on shares of the 4.68% Preferred Stock
shall be cumulative shall be May 26, 1965.
(b) The prices at which the 4.68% Preferred Stock may be
redeemed at the option of the Corporation, on the terms and condi-
tions specified in Paragraph XXIII of Article FOURTH of the
Restated Certificate of Incorporation shall be $53.22 per share, if
redeemed on or before May 1, 1970, $52.37 per share if redeemed
thereafter and on or before May 1, 1975, and $51.62 per share if
redeemed after May 1, 1975, plus, as provided in said Paragraph
XXIII, an amount equal to full cumulative dividends thereon to the
redemption date.
(c) The amounts payable upon the shares of 4.68% Preferred
Stock in the event of any voluntary liquidation or dissolution or
winding up of the Corporation shall be an amount equal to the
redemption price (exclusive of dividends) specified in paragraph
(b) hereof above, then in effect, plus, as provided in Paragraph XX
of Article FOURTH of the Restated Certificate of Incorporation, an
amount equal to full cumulative dividends thereon to the date of
final distribution to the holders of the Preferred Stock.
(iii) 7.76% Preferred Stock
Created May 21, 1969
The Company has established a "7.76% Preferred Stock", consisting
initially of 100,000 authorized shares of the par value of $50 per
share.
The terms of the "7.76% Preferred Stock", in the respects in which
the shares of such series may vary from shares of other series of the
Preferred Stock (in addition to the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, set
forth elsewhere in the Restated Certificate of Incorporation, which are
applicable to the Preferred Stock of the par value of $50 per share of
all series) shall be as follows:
(a) The dividend rate of the 7.76% Preferred Stock shall be
7.76% per share per annum upon the par value thereof payable
quarterly on the first days of January, April, July and October in
each year (the quarterly periods ending on the first days of such
months, respectively, to be designated as dividend periods) and the
date from which dividends on shares of the 7.76% Preferred Stock
shall be cumulative shall be May 28, 1969.
(b) The prices at which the 7.76% Preferred Stock may be
redeemed at the option of the Corporation, on the terms and condi-
tions specified in Paragraph XXIII of Article FOURTH of the
Restated Certificate of Incorporation shall be $58.82 per share, if
redeemed on or before May 1, 1974, $53.97 per share if redeemed
thereafter and on or before May 1, 1979, $53.00 per share, if
redeemed thereafter and on or before May 1, 1984, and $52.03 per
share if redeemed after May 1, 1984, plus, as provided in said
Paragraph XXIII, an amount equal to full cumulative dividends
thereon to the redemption date.
(c) The amounts payable upon the shares of 7.76% Preferred
Stock in the event of any voluntary liquidation or dissolution or
winding up of the Corporation shall be an amount equal to the
redemption price (exclusive of dividends) specified in paragraph
(b) hereof above, then in effect, plus, as provided in Paragraph XX
of Article FOURTH of the Restated Certificate of Incorporation, an
amount equal to full cumulative dividends thereon to the date of
final distribution to the holders of the Preferred Stock.
(iv) 6.40% Preferred Stock
Created May 18, 1993
The Company has established a "6.40% Preferred Stock", consisting
initially of 545,000 authorized shares of the par value of $50 per
share.
The terms of the "6.40% Preferred Stock", in the respects in which
the shares of such series may vary from shares of other series of the
Preferred Stock (in addition to the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, set
forth elsewhere in the Restated Certificate of Incorporation, which are
applicable to the Preferred Stock of the par value of $50 per share of
all series) shall be as follows:
(a) The dividend rate of the 6.40% Preferred Stock shall be
6.40% per share per annum upon the par value thereof payable
quarterly on the first days of January, April, July and October in
each year (the quarterly periods ending on the first days of such
months, respectively, to be designated as dividend periods) and the
date from which dividends on shares of the 6.40% Preferred Stock
shall be cumulative shall be May 26, 1993.
(b) The prices at which the 6.40% Preferred Stock may be
redeemed at the option of the Corporation, otherwise than for
sinking fund purposes, on the terms and conditions specified in
Paragraph XXIII of Article FOURTH of the Restated Certificate of
Incorporation shall be $53.20 per share, if redeemed on or before
May 1, 2003, $51.60 per share if redeemed thereafter and on or
before May 1, 2009, $50.80 per share, if redeemed thereafter and on
or before May 1, 2014, and $50 per share, if redeemed after May 1,
2014, plus, as provided in said Paragraph XXIII, an amount equal to
full cumulative dividends thereon to the redemption date; except
$50 per share if redeemed at any time for the sinking fund, plus,
in each case, accrued dividends to the date of redemption; provide-
d, however, that prior to May 1, 2003, none of the shares may be
redeemed pursuant to this paragraph (b) if such redemption is for
the purpose or in anticipation of refunding any such shares through
the use, directly or indirectly, of funds borrowed by the Company,
or through the use, directly or indirectly, of funds derived
through the issuance by the Company of stock ranking prior to or on
a parity with the 6.40% Preferred Stock, as to dividends or assets,
if such borrowed funds have an interest rate or an effective
interest cost to the Company (computed in accordance with generally
accepted financial practice) or such stock has a dividend rate or
cost (so computed) of less than 6.40% per annum.
(c) The amounts payable upon the shares of 6.40% Preferred
Stock, in the event of any voluntary liquidation or dissolution or
winding up of the Corporation shall be an amount equal to the
redemption price (exclusive of dividends) specified in paragraph
(b) hereof above, then in effect, plus, as provided in Paragraph XX
of Article FOURTH of the Restated Certificate of Incorporation, an
amount equal to full cumulative dividends thereon to the date of
final distribution to the holders of the Preferred Stock.
(d) The holders of shares of 6.40% Preferred Stock shall be
entitled to the benefit of a sinking fund as follows: on May 1,
2003, and on each May 1 (except that the final redemption shall be
on May 1, 2022) thereafter the Corporation shall redeem out of
funds legally available therefor 27,250 shares of this series (or
the number of shares then outstanding if less than 27,250) at a
sinking fund redemption price equal to $50.00 per share plus
accrued and unpaid dividends to the redemption date; on May 1,
2008, and on each May 1 thereafter the Corporation shall have the
non-cumulative option to redeem up to an additional 27,250 shares
of this series at a sinking fund redemption price equal to $50.00
per share plus accrued and unpaid dividends to the redemption date;
all shares redeemed by the Corporation pursuant to the foregoing
provisions shall be cancelled; in the event that the Corporation
shall at any time be in default in the performance of its
obligations under the foregoing provisions of this paragraph (d),
no dividends (other than dividends payable in Common Stock) shall
be paid or any other distribution of assets made, by purchase of
shares or otherwise, on Common Stock or any other stock of the
Company over which the Preferred Stock has preference as to the
payment of dividends or as to assets.
III. Out of the net profits or net assets of the Corporation legally
available for dividends the holders of Preferred Stock of each series
shall be entitled to receive, when and as declared by the Board of
Directors, dividends at the per annum rate for such series fixed by the
Board of Directors pursuant to the foregoing Paragraph II, and no more,
payable quarterly on the dates fixed by the Board of Directors pursuant
to said Paragraph II for such series, in each case from the date of
cumulation of such series; and such dividends shall be cumulative
(whether or not in any dividend period or periods there shall be net
profits or net assets of the Corporation legally available for the
payment of such dividends), so that, if at any time full cumulative
dividends, as hereinafter in this Article FOURTH defined, to the end of
the then current dividend period upon the outstanding Preferred Stock of
all series shall not have been paid or declared and set apart for
payment, the amount of the deficiency shall be fully paid, but without
interest, or dividends in such amount declared on each such series and
set apart for payment, before any sum or sums shall be set aside for or
applied to the purchase or redemption of Preferred Stock of any series
and before any dividend shall be declared or paid upon or set apart for,
or any other distribution shall be ordered or made in respect of, any
junior stock and before any shares of junior stock shall be purchased,
redeemed or otherwise acquired for value (except in exchange for or with
the proceeds of the issue of other junior stock) by the Corporation.
All dividends declared on the Preferred Stock shall be declared pro
rata so that the amounts of dividends per share declared on the
Preferred Stock of different series shall in all cases bear to each
other the same proportions that the respective dividend rates of such
respective series bear to each other.
IV. After full cumulative dividends to the end of the then current
dividend period upon the outstanding Preferred Stock of all series shall
have been paid or declared and set apart for payment, the Corporation
shall set aside as a sinking fund or purchase fund, when and as
required, out of any funds legally available for that purpose, in
respect of each series of Preferred Stock any shares of which shall at
the time be outstanding and in respect of which a sinking fund or
purchase fund for the purchase or redemption thereof has been provided
for in the resolution or resolutions referred to in the foregoing
Paragraph II, the sum or sums required by the terms of such resolution
or resolutions as a sinking fund or purchase fund to be applied in the
manner specified therein.
V. Out of any net profits or net assets of the Corporation legally
available for dividends remaining after full cumulative dividends to the
end of the then current dividend period upon the outstanding Preferred
Stock of all series shall have been paid or declared and set apart for
payment and after the Corporation shall have complied or made provision
for compliance with the provisions of the foregoing Paragraph IV in
respect of any and all amounts then or theretofore required to be set
aside or applied in respect of any sinking fund or purchase fund
mentioned in said Paragraph IV, then and not otherwise, the holders of
any junior stock shall, subject to the provisions hereof and of any
resolution or resolutions of the Board of Directors with respect to any
series of Preferred Stock adopted pursuant to the foregoing Paragraph
II, be entitled to receive such dividends as may from time to time be
declared by the Board of Directors.
In the event of the issue of additional Preferred Stock of any then
existing series all dividends paid on Preferred Stock of such series
prior to the issue of such additional Preferred Stock and all dividends
declared and payable to holders of record of Preferred Stock of such
series on any date prior to such additional issue shall be deemed to
have been paid on the additional Preferred Stock so issued.
VI. So long as any shares of the Preferred Stock of any series
shall be outstanding, the right of the Corporation to make any dis-
tribution on junior stock, as hereinafter in this Article FOURTH
defined, shall be subject to the following limitations:
(a) If and so long as the junior stock equity ratio, as
hereinafter in this Article FOURTH defined, is 20% or more but less
than 25%, the Corporation shall not make, during the twelve months'
period ending with and including the date of any proposed distribu-
tion on junior stock, distributions on junior stock (including the
proposed distribution on junior stock) exceeding in aggregate
amount 75% of the consolidated net income of the Corporation and
its subsidiaries, as hereinafter in this Article FOURTH defined,
for the twelve months' period ending with and including the second
calendar month preceding the date on which the Board of Directors
shall authorize such proposed distribution on junior stock; and
(b) If and so long as the junior stock equity ratio is less
than 20%, the Corporation shall not make, during the twelve months'
period ending with and including the date of any proposed distribu-
tion on junior stock, distributions on junior stock (including the
proposed distribution on junior stock) exceeding in aggregate
amount 50% of the consolidated net income of the Corporation and
its subsidiaries for the twelve months' period ending with and
including the second calendar month preceding the date on which the
Board of Directors shall authorize such proposed distribution on
junior stock.
B. Preference Stock
VII. The Preference Stock shall be stock subordinate to the
Preferred Stock both as to dividends and upon any liquidation, dis-
solution or winding up of the Corporation and shall be subject to the
prior rights and preferences of the Preferred Stock as defined in this
Article FOURTH.
The Preference Stock may be issued at any time or from time to time
in any amount, not exceeding in the aggregate (including all shares of
any and all series thereof theretofore issued) the total number of
shares of Preference Stock hereinabove authorized, as Preference Stock
of one or more series, as hereinafter provided. All consideration
received by the Corporation from the issuance and sale of shares of any
series of Preference Stock in excess of its par value shall be entered
on its books as premium for such stock. All Shares of any one series of
Preference Stock shall be alike in every particular, each series thereof
shall be distinctly designated by letter or descriptive words, and all
series of Preference Stock shall rank equally and be identical in all
respects except as permitted by the provisions of Paragraph VIII of this
Article FOURTH.
VIII. Authority is hereby expressly granted to and vested in the
Board of Directors at any time or from time to time to issue the
Preference Stock as Preference Stock of any series, and in connection
with the creation of each such series to fix by the resolution or
resolutions providing for the issue of shares thereof, the designations
and the preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof
to the full extent now or hereafter permitted by the laws of the State
of Delaware, in respect of the matters set forth in the following
subparagraphs (a) to (g), inclusive:
(a) The distinctive designation of such series and the number
of shares which shall constitute such series, which number may be
increased or decreased (but not below the number of shares thereof
then outstanding) from time to time by resolution of the Board of
Directors;
(b) The dividend rate per annum of such series, the quarterly
payment dates for dividends on shares of such series, and the date
from which dividends on shares of such series shall be cumulative
(hereinafter called the "date of cumulation"), which date of
cumulation shall be identical for all shares of such series;
(c) The price or prices at which, and the terms and conditions
on which, the shares of such series may be redeemed at the option
of the Corporation (hereinafter called the "optional redemption
price");
(d) The amount or amounts payable upon the shares of such
series in the event of voluntary liquidation, dissolution or
winding up of the Corporation;
(e) Whether or not the shares of such series shall be entitled
to the benefit of a sinking fund or a purchase fund to be applied
to the purchase or redemption of shares of such series, and if so
entitled, the amount of such fund and the manner of its applica-
tion, including the price or prices at which the shares of such
series may be redeemed or purchased through the application of such
fund;
(f) Whether or not the shares of such series shall be made
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the Corporation and, if made so convertible or
exchangeable, the conversion price or prices, or the rates of ex-
change, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and condi-
tions of such conversion or exchange; and
(g) Whether or not the issue of any additional shares of such
series, or any future series in addition to such series, of the
Corporation shall be subject to restrictions and, if so, the nature
thereof.
Any shares of Preference Stock redeemed or purchased pursuant to
any redemption or sinking fund provision, or converted pursuant to a
convertible provision, established by the Board of Directors shall be
cancelled and shall not thereafter be issued as shares of the same
series of Preference Stock but shall revert to the status of authorized
but unissued shares of Preference Stock undesignated as to series, or
any rights or preferences thereof, and may thereafter be issued by
appropriate action of the Board of Directors just as if such stock had
never been issued, redeemed or purchased and cancelled.
IX. Subject to the prior rights and preferences of the Preferred
Stock, out of the net profits or net assets of the Corporation legally
available for dividends the holders of Preference Stock of each series
shall be entitled to receive, when and as declared by the Board of
Directors, dividends at the per annum rate for such series fixed by the
Board of Directors pursuant to the foregoing Paragraph VIII and no more,
payable quarterly on the dates fixed by the Board of Directors pursuant
to said Paragraph VIII for such series, in each case from the date of
cumulation of such series; and such dividends shall be cumulative
(whether or not in any dividend period or periods there shall be net
profits or net assets of the Corporation legally available for the
payment of such dividends), so that, if at any time full cumulative
dividends, as hereinafter in this Article FOURTH defined, to the end of
the then current dividend period upon the outstanding Preference Stock
of all series shall not have been paid or declared and set apart for
payment, the amount of the deficiency shall be fully paid, but without
interest, or dividends in such amount declared on each such series and
set apart for payment, before any sum or sums shall be set aside for or
applied to the purchase or redemption of Preference Stock of any series
and before any dividend shall be declared or paid upon or set apart for,
or any other distribution shall be ordered or made in respect of, any
stock junior to the Preference Stock either as to dividends, or upon
liquidation, dissolution or winding up and before any shares of such
stock junior to the Preference Stock shall be purchased, redeemed or
otherwise acquired for value (except in exchange for or with the
proceeds of the issue of other such stock junior to the Preference
Stock) by the Corporation.
All dividends declared on the Preference Stock shall be declared
pro rata so that the amounts of dividends per share declared on the
Preference Stock of different series shall in all cases bear to each
other the same proportions that the respective dividend rates of such
respective series bear to each other.
X. Subject to the prior rights and preferences of the Preferred
Stock, after full cumulative dividends to the end of the then current
dividend period upon the outstanding Preference Stock of all series
shall have been paid or declared and set apart for payment, the
Corporation shall set aside as a sinking fund or purchase fund, when and
as required, out of any funds legally available for that purpose, in
respect of each series of Preference Stock any shares of which shall at
the time be outstanding and in respect of which a sinking fund or
purchase fund for the purchase or redemption thereof has been provided
for in the resolution or resolutions referred to in the foregoing
Paragraph VIII, the sum or sums required by the terms of such resolution
or resolutions as a sinking fund or purchase fund to be applied in the
manner specified therein.
XI. Subject to the prior rights and preferences of the Preferred
Stock, out of any net profits or net assets of the Corporation legally
available for dividends remaining after full cumulative dividends to the
end of the then current dividend period upon the outstanding Preference
Stock of all series shall have been paid or declared and set apart for
payment and after the Corporation shall have complied or made provision
for compliance with the provisions of the foregoing Paragraph X in
respect of any and all amounts then or theretofore required to be set
aside or applied in respect of any sinking fund or purchase fund
mentioned in said Paragraph X, then and not otherwise, the holders of
the Common Stock shall, subject to the provisions hereof and of any
resolution or resolutions of the Board of Directors with respect to any
series of Preference Stock adopted pursuant to the foregoing Paragraph
VIII, be entitled to receive such dividends as may from time to time be
declared by the Board of Directors.
C. Exclusive Voting Rights of
Common Stock--Certain Voting Rights of
Preferred Stock and Preference Stock as to Directors
XII. Except as otherwise required by the statutes of the State of
Delaware and as otherwise provided in this Article FOURTH, and subject
to the provisions of the By-Laws of the Corporation, as from time to
time amended, with respect to the closing of the transfer books and the
fixing of a record date for the determination of stockholders entitled
to vote, the holders of the Common Stock shall exclusively possess all
voting power for the election of directors and for all other purposes,
and the holders of the Preferred Stock and of the Preference Stock shall
have no voting power and shall not be entitled to any notice of or to
attend any meeting of stockholders; provided, however, that (a) if and
whenever full cumulative dividends for four (4) quarterly dividend
periods upon any series of Preferred Stock shall be unpaid, the holders
of the Preferred Stock as a class, subject to any rights of the holders
of the Preference Stock, if any, and without regard to series shall
thereafter at all elections of directors have the exclusive right to
elect the smallest number of directors of the Corporation that shall
constitute a majority of the Board of Directors as then constituted, and
the holders of the Common Stock of the Corporation as a class shall have
the exclusive right to elect the remaining number of directors of the
Corporation, which right of the holders of the Preferred Stock, shall
however, cease when full cumulative dividends upon the Preferred Stock
of all series then outstanding shall have been paid or declared and set
apart for payment (and such full cumulative dividends shall be declared
and paid out of any funds legally available therefor as soon as
reasonably practicable), and/or (b) if and whenever full cumulative
dividends for six (6) quarterly dividend periods (whether or not
consecutive) upon any series of Preference Stock shall be unpaid, in
whole or in part, the number of directors then constituting the full
Board of Directors shall be increased by two (said two being referred to
as the "additional two directors") and the holders of the Preference
Stock as a class and without regard to series shall thereafter at all
elections of directors have the exclusive right to elect said
"additional two directors"' and the holders of the Common Stock of the
Corporation as a class, subject to any rights of the holders of the
Preferred Stock, if any, shall have the exclusive right to elect the
remaining number of directors of the Corporation, which right of the
holders of the Preference Stock shall, however, cease when full
cumulative dividends upon the Preference Stock of all series then
outstanding shall have been paid or declared and set apart for payment
(and such full cumulative dividends shall be declared and paid out of
any funds legally available therefor as soon as reasonably practicable).
The terms of office of all persons who may be directors of the
Corporation at the time when such right to elect a majority of the
directors shall accrue to holders of Preferred Stock and/or right to
elect such additional two directors shall accrue to holders of Prefer-
ence Stock shall terminate upon the election of the successors of such
majority directors and/or such additional two directors at the next
annual meeting of the stockholders or (unless under the provisions of
the By-Laws of the Corporation, as then in effect, an annual meeting of
the stockholders is to be held within ninety (90) days after such right
to elect a majority of directors and/or such additional two directors
shall have so accrued) at an earlier special meeting of the stockholders
held as hereinafter in this Paragraph XII provided. A special meeting of
the stockholders shall be held at any time after such right to elect a
majority of the directors shall accrue to holders of Preferred Stock
and/or such right to elect such two additional directors shall accrue to
holders of Preference Stock upon notice similar to that provided in the
By-Laws for an annual meeting, which notice shall be given not more than
fifteen (15) days after the accrual of such rights by the President, a
Vice-President, or the Secretary, of the Corporation, such meeting to be
held not less than sixty (60) nor more than ninety (90) days after the
accrual of such rights.
At the first meeting of stockholders held for the purpose of
electing directors during such time as the holders of the Preferred
Stock and/or Preference Stock shall have the special rights voting as
separate classes to elect directors, the presence in person or by proxy
of the holders of a majority of the outstanding Common Stock shall be
required to constitute a quorum of such class for the election of
directors, and the presence in person or by proxy of the holders of a
majority of the outstanding Preferred Stock and/or Preference Stock
shall be required to constitute a quorum of each such class for the
election of directors; provided, however, that in the absence of a
quorum of the holders of the Preferred Stock and/or Preference Stock, no
election of directors shall be held, but a majority of the holders of
the Preferred Stock and/or Preference Stock who are present in person or
by proxy shall have power to adjourn the election of the directors to a
date not less than fifteen nor more than fifty days from the giving of
the notice of such adjourned meeting hereinafter provided for; and
provided, further, that at such adjourned meeting, the presence in
person or by proxy of the holders of 35% of the outstanding Preferred
Stock and/or Preference Stock shall be required to constitute a quorum
of each such class for the election of directors. In the event such
first meeting of stockholders shall be so adjourned, it shall be the
duty of the President, a Vice-President or the Secretary of the
Corporation, within ten days from the date on which such first meeting
shall have been adjourned, to cause notice of such adjourned meeting to
be given to the stockholders entitled to vote thereat, such adjourned
meeting to be held not less than fifteen days nor more than fifty days
from the giving of such second notice. Such second notice shall be given
in the form and manner hereinabove provided for with respect to the
notice required to be given of such first meeting of stockholders, and
shall further set forth that a quorum was not present at such first
meeting and that the holders of 35% of the outstanding Preferred Stock
and/or Preference Stock shall be required to constitute a quorum of each
such class for the election of directors at such adjourned meeting. If
the requisite quorum of holders of the Preferred Stock and/or Preference
Stock shall not be present at said adjourned meeting, then the directors
of the Corporation then in office shall remain in office until the next
annual meeting of the Corporation, or special meeting in lieu thereof
and until their successors shall have been elected and qualify. Neither
such first meeting nor such adjourned meeting need be held on a date
within sixty days of the next annual meeting of the Corporation or
special meeting in lieu thereof. At each annual meeting of the
Corporation, or special meeting in lieu thereof, held during such time
as the holders of the Preferred Stock and/or Preference Stock, voting as
separate classes shall have the right to elect Directors, the foregoing
provisions of this paragraph shall govern each annual meeting, or
special meeting in lieu thereof, as if said annual meeting or special
meeting were the first meeting of stockholders held for the purpose of
electing directors after the right of the holders of the Preferred Stock
and/or Preference Stock, voting as separate classes, to elect Directors,
should have accrued with the exception, that if, at any adjourned annual
meeting, or special meeting in lieu thereof, the holders of 35% of the
outstanding Preferred Stock and/or Preference Stock are not present in
person or by proxy, all the directors shall be elected by a vote of the
holders of a majority of the Common Stock of the Corporation present or
represented at the meeting; provided, however, that notwithstanding the
provisions of this paragraph so long as any shares of the Preferred
Stock and/or Preference Stock of the Corporation shall be outstanding,
the holders of a majority of the Preferred Stock and/or Preference Stock
shall be sufficient to constitute a quorum of the outstanding Preferred
Stock and/or Preference Stock for the election of directors.
No delay or failure by the holders of the Preferred Stock and/or
Preference Stock to elect the members of the Board of Directors which
such holders are entitled to elect shall invalidate the election of the
members of the Board of Directors elected by the holders of the Common
Stock. Upon the termination of such right of the holders of the
Preferred Stock to elect a majority of directors, the terms of office of
all the directors of the Corporation shall terminate upon the election
of the successors of such directors at the next annual meeting of the
stockholders or at an earlier special meeting of the stockholders called
in like manner and subject to similar conditions as hereinbefore in this
Paragraph XII provided with respect to the call of a special meeting of
stockholders for the election of directors by the holders of the
Preferred Stock.
If and when all dividends then in default on the Preference Stock
of each series then outstanding shall have been paid, the Preference
Stock shall be divested of such voting powers and the terms of office of
the additional two directors (whether elected by vote of the holders of
Preference Stock or to fill a vacancy) shall forthwith terminate and the
number of directors constituting the full Board of Directors shall be
reduced accordingly.
Whenever the Preferred Stock and/or Preference Stock shall be
entitled to elect Directors, any holder of such stock shall have the
right, during regular business hours, in person or by a duly authorized
representative, to examine and to make transcripts of the stock records
of the Corporation for the Preferred Stock and/or Preference Stock for
the purpose of communicating with other holders of such stock with
respect to the exercise of such right of election.
D. No Cumulative Voting
XIII. At all elections of directors by stockholders of the
Corporation, each holder of Common Stock, and each holder of Preferred
Stock and/or Preference Stock, if entitled to vote at such election,
shall be entitled to one vote for each share. The principle of
cumulative voting shall not apply.
E. Certain Voting Rights of Preferred Stock
XIV. So long as any shares of the Preferred Stock of any series
shall be outstanding, the Corporation shall not, without the consent by
vote or in writing of the holders of a majority of the shares of the
Preferred Stock of all series at the time outstanding, considered as a
class without regard to series,
(a) Sell all or substantially all its assets or consolidate or
merge with or into any other corporation or corporations, except
that no such consent or vote shall be required if such sale,
consolidation or merger or the issuance or assumption of all
securities to be issued or assumed in connection with such sale,
consolidation or merger shall have been approved, permitted or
ordered by the Securities and Exchange Commission or by any succes-
sor commission or by any regulatory authority of the United States
of America having jurisdiction over such sale, consolidation or
merger or the issuance or assumption of securities in connection
therewith; provided, however, that the provisions of this sub-
paragraph (a) shall not apply to (i) a consolidation of the Cor-
poration with, or a merger into the Corporation of, any subsidiary
of the Corporation, or (ii) the purchase or other acquisition by
the Corporation of the franchises or assets of another corporation
in any manner which does not involve a consolidation or merger
under the laws of the State of Delaware; the term "subsidiary" as
used in this subparagraph (a) shall mean any corporation all of the
outstanding shares of stock of which (except directors' qualifying
shares) at the time shall be owned directly or indirectly by the
Corporation or by a wholly-owned subsidiary of the Corporation; or
(b) Increase the total authorized amount of Preferred Stock,
or authorized any other preferred stock on a parity therewith with
respect to the payment of dividends or the distribution of assets
upon the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary; or
(c) Issue any additional shares of Preferred Stock (including
the reissuance of reacquired Preferred Stock) ranking on a parity
with the outstanding shares of Preferred Stock either as to the
payment of dividends or as to the distribution of assets unless (i)
the consolidated gross income of the Corporation and its subsidiar-
ies (after all taxes including taxes based on income) for 12
consecutive calendar months within a period of 15 calendar months
immediately preceding the date of such issuance is equal to at
least one and one-half times the aggregate of all interest charges
on indebtedness of the Corporation and its subsidiaries on a
consolidated basis (excluding interest charges on indebtedness to
be retired by the application of the proceeds from the issuance of
such Preferred Stock) and the annual dividend requirements on all
Preferred Stock of the Corporation and its subsidiaries on a
consolidated basis (including dividend requirements on all
Preferred Stock ranking as to dividends or assets prior to or on a
parity with the Preferred Stock to be issued) which will be
outstanding immediately after the issuance of such Preferred Stock;
and unless (ii) the aggregate par value, or stated capital represe-
nted by the outstanding shares of the junior stock of the Corpora-
tion, including premiums thereon plus any surplus of the Corpora-
tion is equal to at least the aggregate amount payable in connec-
tion with an involuntary liquidation of the Corporation with
respect to all shares of the Preferred Stock and all shares of
stock, if any, ranking prior thereto or on a parity therewith as to
dividends or assets, which will be outstanding immediately after
the issuance of such Preferred Stock. If for the purpose of meeting
the requirements of clause (c)(ii) immediately preceding it shall
have been necessary to take into consideration any earned surplus
of the Corporation, the Corporation shall not thereafter pay any
dividends on, or make any distributions in respect of, or purchase
or otherwise acquire, junior stock which would result in reducing
the junior stock equity to an amount less than the amount payable
on involuntary liquidation of the Corporation with respect to all
shares of the Preferred Stock and all shares ranking prior to or on
a parity with the Preferred Stock as to dividends and assets at the
time outstanding. If, during the period for which gross income is
to be determined for the purpose set forth in clause (c)(i) above,
the amount required to be expended by the Corporation pursuant to
a maintenance fund or similar fund established under its mortgage
indenture shall exceed the amount deducted in the determination of
gross income on account of depreciation and maintenance, such
excess shall also be deducted in determining gross income; or
(d) Issue or assume any unsecured notes, debentures or other
securities representing unsecured indebtedness for any purpose
other than
(i) the refunding of unsecured indebtedness theretofore
created or assumed by the Corporation and then outstanding;
(ii) the reacquisition, redemption or other retirement of
any indebtedness, whether secured or unsecured, which reac-
quisition, redemption or other retirement has been authorized
by any state or federal regulatory authority; or
(iii) the reacquisition, redemption or other retirement
of outstanding shares of one or more series of the Preferred
Stock;
if immediately after such issue or assumption the total principal
amount of all unsecured notes, debentures or other securities
representing unsecured indebtedness issued or assumed by the Cor-
poration (including unsecured indebtedness then to be issued or
assumed) would exceed twenty per centum (20%) of the aggregate of
(1) the total principal amount of all bonds or other securities
representing secured indebtedness issued or assumed by the
Corporation and then to be outstanding and (2) the par value of, or
stated capital represented by, the shares of all classes of stock
of the Corporation then to be outstanding in the hands of the
public, plus premium on such stock, plus capital surplus, earned
surplus and any other surplus of the Corporation as then to be
stated on the books of account of the Corporation.
XV. So long as any shares of the Preferred Stock of any series
shall be outstanding, the Corporation shall not, without the consent by
vote or in writing of the holders of two-thirds of the number of shares
of the Preferred Stock of all series at the time outstanding considered
as a class without regard to series, authorize any class of stock
ranking prior to the Preferred Stock with respect to the payment of
dividends or the distribution of assets upon the dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary.
XVI. So long as any shares of the Preferred Stock of any series
shall be outstanding, the Corporation shall not change the express terms
and provisions of the Preferred Stock as such series so as to affect
such series adversely, without the consent by vote or in writing of the
holders of two-thirds of the number of shares of Preferred Stock of all
series so affected, considered as a class without regard to series.
F. Certain Voting Rights of Preference Stock
XVII. So long as any shares of the Preference Stock of any series
shall be outstanding, the Corporation shall not, without the consent by
vote or in writing of the holders of two-thirds of the number of shares
of Preference Stock of all series at the time outstanding considered as
a class without regard to series, authorize or increase the authorized
amount of any class of stock, other than shares of the Preferred Stock
(whether now or hereafter authorized or increased) ranking prior to the
Preference Stock with respect to the payment of dividends or the
distribution of assets upon the dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary.
XVIII. So long as any shares of the Preference Stock of any series
shall be outstanding, the Corporation shall not change the express terms
and provisions of the Preference Stock of such series so as to affect
such series adversely, without the consent by vote or in writing of the
holders of two-thirds of the number of shares of Preference Stock of all
series so affected, considered as a class without regard to series.
XIX. So long as shares of the Preference Stock of any series shall
be outstanding, the Corporation shall not, without the consent by vote
or in writing of the holders of a majority of the shares of Preference
Stock of all series at the time outstanding considered as a class
without regard to series, either (a) increase the authorized amount of
Preference Stock, or (b) authorize or create, or increase the authorized
amount of, any class of stock, which is entitled to dividends or assets
on a parity with the Preference Stock, (c) sell all or substantially all
its assets or consolidate or merge with or into any other corporation or
corporations, except that no such consent or vote shall be required if
such sale, consolidation or merger or the issuance or assumption of all
securities to be issued or assumed in connection with such sale,
consolidation or merger shall have been approved, permitted or ordered
by the Securities and Exchange Commission or by any successor commission
or by any regulatory authority of the United States of America having
jurisdiction over such sale, consolidation or merger or the issuance or
assumption of securities in connection therewith; provided, however,
that the provisions of this subparagraph (c) shall not apply to (i) a
consolidation of the Corporation with, or a merger into the Corporation
of, any subsidiary of the Corporation, or (ii) the purchase or other
acquisition by the Corporation of the franchises or assets of another
corporation in any manner which does not involve a consolidation or
merger under the laws of the State of Delaware; the term "subsidiary" as
used in this subparagraph (c) shall mean any corporation all of the
outstanding shares of stock of which (except directors' qualifying
shares) at the time shall be owned directly or indirectly by the
Corporation or by a wholly-owned subsidiary of the Corporation, or (d)
purchase, otherwise than upon tenders, or redeem less than all of the
outstanding Preference Stock, unless all past and current dividends on
the Preference Stock shall have been paid or provided for.
G. Rights of Preferred Stock on
Liquidation, Dissolution or Winding Up
XX. In the event of any liquidation or dissolution or winding up of
the Corporation the holders of the Preferred Stock of each series shall
be entitled to receive, out of the assets of the Corporation available
for distribution to its stockholders, before any distribution of assets
shall be made to the holders of any class of junior stock, (i) if such
liquidation, dissolution or winding up shall be involuntary, the sum of
fifty dollars ($50) per share plus full cumulative dividends thereon to
the date of final distribution to the holders of the Preferred Stock and
(ii) if such liquidation, dissolution or winding up shall be voluntary,
the amount per share fixed by the Board of Directors pursuant to the
foregoing Paragraph II plus full cumulative dividends thereon to the
date of final distribution to the holders of the Preferred Stock; and
the holders of the junior stock shall be entitled, to the exclusion of
the holders of the Preferred Stock of any and all series, to share
ratably in all the assets of the Corporation then remaining according to
the number of shares of the junior stock held by them respectively. If
upon any liquidation or dissolution or winding up of the Corporation the
net assets of the Corporation shall be insufficient to pay the holders
of all outstanding shares of Preferred Stock the full amounts to which
they respectively shall be entitled, the holders of shares of Preferred
Stock of all series shall share ratably in any distribution of assets
according to the respective amounts payable in respect of the shares
held by them upon such distribution if all amounts payable on or with
respect to the Preferred Stock of all series were paid in full. Neither
the merger nor consolidation of the Corporation into or with other
corporation, nor the merger or consolidation of any other corporation
into or with the Corporation, nor a sale, transfer or lease of all or
any part of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
H. Rights of Preference Stock on
Liquidation, Dissolution or Winding Up
XXI. The shares of Preference Stock shall be subordinate to the
Preferred Stock but in preference to the Common Stock upon any dis-
solution, liquidation or winding up of the Corporation, whether
voluntary or involuntary. Upon any such dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, the
holders of Preference Stock of each series, without any preference of
the shares of any series of Preference Stock over the shares of any
other series of Preference Stock, shall be entitled to receive out of
the assets of the Corporation, whether capital, surplus or other, before
any distribution of the assets to be distributed shall be made to the
holders of Common Stock or of any other stock not having preference as
to assets over the Preference Stock, the amount determined to be payable
on the shares of such series in the event of voluntary liquidation, or
the amount of consideration originally received by the Corporation for
the shares of such series in the event of involuntary liquidation, as
the case may be. In the case the assets shall not be sufficient to pay
in full the amounts determined to be payable on all the shares of
Preference Stock in the event of voluntary or involuntary liquidation,
as the case may be, then the assets available for such payment shall be
distributed ratably among the holders of the Preference Stock of all
series in accordance with the amounts determined to be payable on the
shares of each series, in the event of voluntary or involuntary
liquidation, as the case may be, in proportion to the full preferential
amounts to which they are respectively entitled. After payment to the
holders of the Preference Stock of the full preferential amounts
hereinbefore provided for, the holders of the Preference Stock as such
shall have no right or claim to any of the remaining assets of the
Corporation, either upon any distribution of such assets or upon
dissolution, liquidation or winding up, and the remaining assets to be
distributed, if any, upon a distribution of such assets or upon
dissolution, liquidation or winding up, may be distributed among the
holders of the Common Stock or of any other stock over which the
Preference Stock has preference as to assets. Without limiting the right
of the Corporation to distribute its assets or to dissolve, liquidate or
wind up in connection with any sale, merger, or consolidation, neither
the merger nor consolidation of the Corporation into or with any other
corporation, nor the merger or consolidation of any other corporation
into or with the Corporation, nor a sale, transfer or lease of all or
any part of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
I. Certain Definitions
XXII. The term "consolidated net income of the Corporation and its
subsidiaries" shall mean the consolidated gross earnings of the
Corporation and its subsidiaries from all sources less all proper
deductions for operating expenses, taxes (including income, excess
profits and other taxes based on or measured by income or undistributed
earnings or income), interest charges and other appropriate items,
including provision for maintenance and depreciation, and less all
dividends paid or accrued on the Preferred Stock of the Corporation
which are applicable to the periods in question, and otherwise deter-
mined in accordance with sound accounting practice in use at the time,
or, at the option of the Corporation, in use at the date of this
Certificate Amendment, but determined without deducting any losses,
expenses or provisions charged directly to surplus in accordance with
the Uniform Systems of Accounts prescribed by regulatory commissions
having jurisdiction over the Corporation and its subsidiaries. The
amount deducted for maintenance and depreciation of property of the
Corporation and its subsidiaries shall be at least equal to the
aggregate amount spent for maintenance and provided for depreciation by
the Corporation and its subsidiaries.
The term "consolidated surplus of the Corporation and its sub-
sidiaries" shall include capital surplus, earned surplus and any other
surplus of the Corporation and its subsidiaries, consolidated in
accordance with sound accounting practice.
The term "distribution on junior stock" shall mean a dividend
(other than a dividend payable in junior stock) or other distribution on
junior stock, a purchase or redemption of junior stock and any other
acquisition for value of junior stock (except in exchange for or with
the proceeds of the issue of other junior stock).
The term "full cumulative dividends" whenever used in this Article
FOURTH with reference to any share of any series of the Preferred Stock
or Preference Stock shall be deemed to mean (whether or not in any
dividend period or any part thereof in respect of which such term is
used there shall have been net profits or net assets of the Corporation
legally available for the payment of such dividends) that amount which
shall be equal to dividends at the rate per share fixed for such series
by the Board of Directors pursuant to Paragraphs II or VIII of this
Article FOURTH, for the period of time elapsed from the date of
cumulation of such series to the date as of which full cumulative
dividends are to be computed (including an amount equal to a dividend at
such rate for the elapsed portion of the current dividend period) less,
in each case, the amount of all dividends paid, or deemed paid, upon
such stock.
The term "junior stock", whenever used in this Article FOURTH,
shall mean the Common Stock, Preference Stock and any other class or
classes of stock of the Corporation over which the Preferred Stock has
preference or priority with respect to the payment of dividends and the
distribution of assets upon the dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary.
The term "junior stock equity", whenever used in this Article
FOURTH, shall mean the aggregate par value of, or stated capital
represented by, the outstanding shares of the junior stock of the
Corporation including premiums thereon plus any surplus of the Cor-
poration.
The term "junior stock equity ratio" shall mean the ratio, computed
as of the end of the second calendar month preceding the date of the
authorization by the Board of Directors of the proposed distribution on
junior stock and adjusted to reflect the proposed distribution on junior
stock, of
(i) the aggregate par value of, or stated capital represented
by, the outstanding shares of the junior stock, including premiums
on junior stock, plus the consolidated surplus of the Corporation
and its subsidiaries, as hereinafter in this Article FOURTH defin-
ed,
to
(ii) the total capitalization of the Corporation and its
subsidiaries, as hereinafter in this Article FOURTH defined, plus
the consolidated surplus of the Corporation and its subsidiaries.
The term "total Capitalization of the Corporation and its sub-
sidiaries" shall mean the aggregate of the principal amount of all
indebtedness of the Corporation and its subsidiaries outstanding in the
hands of the public maturing more than twelve (12) months from the date
of determination of total capitalization of the Corporation and its
subsidiaries, plus the par value of, or stated capital represented by,
the shares of all classes of stock of the Corporation and its
subsidiaries outstanding in the hands of the public, plus premium on
such stock plus, in the case of such stock of subsidiaries, any surplus
applicable thereto.
J. Redemption of Preferred
Stock and/or Preference Stock
XXIII. The Preferred Stock and/or Preference Stock of all series,
or of any series thereof, or any part of any series thereof, at any time
outstanding, may be redeemed by the Corporation, at its election
expressed by resolution of the Board of Directors, at any time or from
time to time (which time, when fixed in each case, is herein after
called the "redemption date"), upon not less than thirty (30) days'
previous notice to the holders of record of the Preferred Stock and/or
Preference Stock to be redeemed, given by mail and by publication in a
newspaper of general circulation in the Borough of Manhattan, City and
State of New York, in such manner as may be prescribed by resolution or
resolutions of the Board of Directors, at the optional redemption price
or prices fixed by the Board of Directors pursuant to the foregoing
Paragraph II and/or Paragraph VIII, as the case may be, then applicable
to the Preferred Stock and/or Preference Stock to be redeemed, plus an
amount equal to full cumulative dividends thereon to the redemption date
(the aggregate of which amounts is hereinafter in this Paragraph XXIII
called the "redemption price"). If less than all the outstanding shares
of the Preferred Stock and/or Preference Stock of any series are to be
redeemed, the redemption may be made either by lot or pro rata in such
manner as may be prescribed by resolution of the Board of Directors. The
Corporation may, if it so elects, provide moneys for the payment of the
redemption price by depositing the amount thereof for the account of the
holders of Preferred Stock and/or Preference Stock entitled thereto,
with a bank or trust company doing business in the Borough of Manhattan,
in the City of New York, and having capital and surplus of at least Five
Million Dollars ($5,000,000), at any time prior to the redemption date
(the date of any such deposit being hereinafter called the "date of
deposit"). In such event, the notice of redemption shall include a
statement of the intention of the Corporation to deposit such amount
prior to the redemption date and the name and address of the bank or
trust company with which the deposit will be made. On and after the
redemption date (unless default shall be made by the Corporation in
providing moneys for the payment of the redemption price), or, if the
Corporation shall make such deposit on or before the date specified
therefor in the notice, then on and after the date of deposit, all
dividends on the Preferred Stock and/or Preference Stock thereby called
for redemption shall cease to accrue and, notwithstanding that any
certificate for shares of Preferred Stock and/or Preference Stock so
called for redemption shall not have been surrendered for cancellation;
the shares represented thereby shall no longer be deemed to be
outstanding and all rights of the holders thereof as stockholders of the
Corporation shall cease and terminate, except the right to receive the
redemption price as hereinafter provided and except any conversion or
exchange rights not theretofore expired. Such conversion or exchange
rights, however, in any event shall cease and terminate upon the
redemption date or upon any earlier date fixed by the Board of Directors
pursuant to the foregoing Paragraph II and/or Paragraph VIII for the
termination of such rights. The Corporation may pay in regular course
any dividends reflected in the redemption price either to the holders of
record on the record date fixed for determination of stockholders
entitled to receive such dividends (in which event, anything herein to
the contrary notwithstanding, the amount so deposited need not include
any dividends so paid or to be paid) or as a part of the redemption
price upon surrender of the certificates for the shares redeemed. On and
after the redemption date or, if the Corporation shall elect to deposit
the moneys for such redemption as herein provided, then on and after the
date of deposit, the holders of record of the Preferred Stock and/or
Preference Stock to be redeemed shall be entitled to receive the
redemption price upon actual delivery to the Corporation or, in the
event of such a deposit, to the bank or trust company with which such
deposit is made, of certificates for the shares to be redeemed (such
certificates, if required, to be properly stamped for transfer and duly
endorsed in blank or accompanied by proper instruments of assignment and
transfer thereof duly endorsed in blank). Any moneys so deposited which
shall remain unclaimed by the holders of such Preferred Stock and/or
Preference Stock at the end of six (6) years after the redemption date
shall be paid by such bank or trust company to the Corporation;
provided, however, that all moneys so deposited, which shall not be
required for such redemption because of the exercise of any right of
conversion or exchange, shall be returned to the Corporation forthwith.
Any interest accrued on moneys so deposited shall be paid to the
Corporation from time to time.
K. Purchase of Preferred and/or Preference Stock
XXIV. The Corporation may, from time to time, subject to the
provisions of Paragraph III and/or Paragraph IX, as the case may be, of
this Article FOURTH, purchase the whole of the Preferred Stock and/or
Preference Stock or any series thereof, or any part of any series
thereof, upon the best terms reasonably obtainable, but in no event at
a price greater than the then current redemption of the shares so
purchased.
L. Preemptive Rights
XXV. No holder of stock of the Corporation shall be entitled as
such as a matter of right to subscribe for or purchase any part of any
new or additional issue of stock of the Corporation of any class or of
securities convertible into stock of any class, whether now or hereafter
authorized or whether issued for money, for consideration other than
money or by way of dividend; provided, however, that if the Board of
Directors shall determine to offer any new or additional shares of
Common Stock, or any security convertible into Common Stock, for money,
other than: (a) by a public offering or an offering of such shares of
Common Stock or such security to or through underwriters or investment
bankers who shall have agreed to make a public offering thereof; (b)
pursuant to a plan offered to any one or more classes of security
holders of the Corporation or of any subsidiary of the Corporation under
which such holders can invest dividends paid on stock of the Corporation
or of any such subsidiary and/or amounts of cash in any of such shares
or securities; or (c) pursuant to a thrift, savings, employee stock
ownership, pension or other employee benefit plan under which an
employee of the Corporation or of any subsidiary of the Corporation or
a trust for the benefit of any such employee can purchase or acquire any
of such shares or securities; the same shall first be offered pro rata
to the holders of the then outstanding shares of Common Stock of the
Corporation upon terms not less favorable to the purchaser (without
deduction of such reasonable compensation, allowance or discount for the
sale, underwriting or purchase as may be fixed by the Board of
Directors) than those on which the Board of Directors issues and
disposes of stock or securities to others than such holders of Common
Stock; and provided further that the time within which such preemptive
rights shall be exercised may be limited by the Board of Directors to
such time as said Board may deem proper, not less, however, than ten
(10) days after the mailing of notice that such preemptive rights are
available and may be exercised. For the purposes of this Paragraph XXV,
the term "subsidiary" shall mean any corporation at least a majority of
whose outstanding voting stock shall at the time be owned by the
Corporation or by one or more subsidiaries or by the Corporation and one
or more subsidiaries, and the term "voting stock" shall mean stock of
any class or classes, however designated, having ordinary voting power
for the election of a majority of the directors of such corporation,
other than stock having such power only by reason of the happening of a
contingency.
M. Scrip
XXVI. The Board of Directors may from time to time by resolution or
resolutions provide for the issue of scrip in lieu of fractional shares
of Common Stock, disregarding balances of less the l/100 of a share.
Such scrip shall not confer upon the holder any right to dividends or
any voting or other rights of a stockholder of the Corporation, but the
Corporation shall from time to time, within such period as may be
limited by resolution or resolutions of the Board of Directors, issue
one or more whole shares of Common Stock upon the surrender of scrip for
fractional shares aggregating the number of whole shares issuable in
respect of the scrip so surrendered, provided that the scrip so
surrendered shall be properly endorsed for transfer if in registered
form. All scrip certificates not so exchanged within such period as may
be limited by resolution or resolutions of the Board of Directors shall
be and become null and void and of no further force and effect.
FIFTH:A. Higher Vote for Certain Business Transactions. In
addition to any affirmative vote required by law or this Restated
Certificate of Incorporation or the By-Laws of the Corporation, and
except as otherwise expressly provided in Section C of this Article
FIFTH:
(1) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Stockholder (as hereinafter defined) or (b) any other company
(whether or not itself an Interested Stockholder) which is or after
such merger or consolidation would be an Affiliate (as hereinafter
defined) or Associate (as hereinafter defined) of an Interested
Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder, involving any assets or securities
of the Corporation, any Subsidiary or any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder, having an
aggregate Fair Market Value (as hereinafter defined) in excess of
$25,000,000; or
(3) the adoption of any plan or proposal for the termination,
liquidation or dissolution of the Corporation proposed by or on
behalf of an Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder; or
(4) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation or any merger
or consolidation of the Corporation with any Subsidiary of the
Corporation or any other transaction (whether or not with or
otherwise involving an Interested Stockholder) that has the effect,
directly or indirectly, of increasing the proportionate share of
any class or series of Common Stock (as hereinafter defined), or
any securities convertible into Common Stock or into equity
securities of the Corporation or any Subsidiary, that is
beneficially owned by an Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(5) any tender offer or exchange offer made by the Corporation
for shares of Common Stock which may have the effect of increasing
an Interested Stockholder's percentage beneficial ownership (as
hereinafter defined) so that following the completion of the tender
offer or exchange offer the Interested Stockholder's percentage
beneficial ownership of the outstanding Common Stock may exceed
100% of the Interested Stockholder's percentage beneficial
ownership immediately prior to the commencement of such tender
offer or exchange offer; or
(6) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder having
an aggregate Fair Market Value in excess of $25,000,000; or
(7) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses
(1) to (6) shall require: (1) the affirmative vote of the holders
of Voting Stock (as hereinafter defined) representing shares equal
to at least eighty percent (80%) of the then issued and outstanding
Voting Stock of the Corporation authorized to be issued from time
to time under Article FOURTH of this Restated Certificate of
Incorporation; and (2) the affirmative vote of a majority of the
then issued and outstanding Voting Stock of the Corporation,
excluding any shares of Voting Stock beneficially owned by such
Interested Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or any agreement with
any national securities exchange or otherwise.
B. Definition of "Business Combination". For the purposes of this
Article FIFTH the term "Business Combination" shall mean any transaction
that is referred to in any one or more of clauses (1) through (6) of
Section A of this Article FIFTH.
C. When Higher Vote is Not Required. The provisions of the
preceding Paragraph A shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such
affirmative vote, if any, as is required by law or by any other
provision of this Restated Certificate of Incorporation or the By-Laws
of the Corporation or any agreement with any national securities
exchange, if all of the conditions specified in either of the following
Paragraphs (1) or (2) are met or, in the case of a Business Combination
not involving the payment of consideration to the holders of the
Corporation's outstanding Common Stock, if the condition specified in
the following Paragraph (1) is met:
(1) The Business Combination shall have been approved by a
majority (whether such approval is made prior to or subsequent to
the acquisition of beneficial ownership of the Voting Stock that
caused the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter defined).
(2) All of the following conditions shall have been met with
respect to the outstanding Common Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership
of any shares of the Common Stock:
(a) The aggregate amount of cash and the Fair Market Value, as
of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders
of the Common Stock in such Business Combination shall be at least
equal to the highest amount determined under clauses (i), (ii),
(iii), and (iv) below:
(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of the Common Stock in connection
with the acquisition by the Interested Stockholder of
beneficial ownership of shares of the Common Stock (x) within
the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the
"Announcement Date") or (y) in the transaction in which it
became an Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to the
Common Stock;
(ii) the Fair Market Value per share of the Common Stock on
the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher, as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock;
(iii) (if applicable) the price per share equal to the Fair
Market Value per share of the Common Stock determined pursuant
to the immediately preceding clause (ii), multiplied by the
ratio of (x) the highest price per share (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for
any share of the Common Stock in connection with the
acquisition by the Interested Stockholder of beneficial
ownership of shares of the Common Stock within the two-year
period immediately prior to the Announcement Date, as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock to (y) the
Fair Market Value per share of the Common Stock on the first
day in such two-year period on which the Interested
Stockholder acquired beneficial ownership of any shares of the
Common Stock, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect
to Common Stock; and
(iv) the Corporation's net income per share of the Common
Stock for the four full consecutive fiscal quarters
immediately preceding the Announcement Date, multiplied by the
higher of the then price/earnings multiple (if any) of such
Interested Stockholder or the highest price/earnings multiple
of the Corporation within the two-year period immediately
preceding the Announcement Date (such price/earnings multiples
being determined by dividing (x) an amount equal to the
highest price per share during a day as reported in The Wall
Street Journal from the Composite Tape for the New York Stock
Exchange by (y) the immediately preceding publicly reported
twelve-months earnings per share).
(b) The consideration to be received by holders of the Common
Stock shall be in cash or in the same form as previously has been
paid by or on behalf of the Interested Stockholder in connection
with its direct or indirect acquisition of beneficial ownership of
shares of such Common Stock. If the consideration previously paid
by the Interested Stockholder to acquire Common Stock varied among
the recipients thereof as to form, the form of consideration to be
paid for such Common Stock in connection with the Business
Combination shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such Common
Stock previously acquired by the Interested Stockholder.
(c) After the Determination Date and prior to the consummation
of such Business Combination: (i) there shall have been no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any stock split, stock dividend or
subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors; (ii) there shall have been an increase
in the annual rate of dividends paid on the Common Stock as
necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of
outstanding shares of Common Stock, unless the failure so to
increase such annual rate is approved by a majority of Continuing
Directors; and (iii) such Interested Stockholder shall not have
become the beneficial owner of any additional shares of Common
Stock except as part of the transaction that results in such
Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would
not result in any increase in the Interested Stockholder's
percentage of beneficial ownership of Common Stock.
(d) After the Determination Date, such Interested Stockholder
shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(e) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Act") (or any subsequent provisions
amending or replacing such Act, rules or regulations) shall be
mailed to all stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in
a prominent place, any statement as to the advisability of the
Business Combination that the Continuing Directors, or any of them,
may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm
selected by a majority of the Continuing Directors as to the
fairness (or not) of the terms of the Business Combination from a
financial point of view to the holders of the outstanding shares of
the Common Stock other than the Interested Stockholder and its
Affiliates or Associates (as hereinafter defined), such investment
banking firm to be paid a reasonable fee for its services by the
Corporation.
(f) Such Interested Stockholder shall not have made any major
change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
D. Certain Definitions. The following definitions shall apply with
respect to this Article FIFTH.
(1) The term "Common Stock" or "Voting Stock" shall mean all
common stock of the Corporation authorized to be issued from time
to time under Article FOURTH of the Restated Certificate of
Incorporation that by its terms may be voted on all matters
submitted to stockholders of the Corporation generally.
(2) The term "person" shall mean any individual, firm, company
or other entity and shall include any group comprised of any person
and any other person with whom such person or any Affiliate or
Associate of such person has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of the Common Stock.
(3) The term "Interested Stockholder" shall mean any person
(other than the corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit
or dividend reinvestment plan of the Corporation or any Subsidiary
or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (a) is the beneficial owner of Voting
Stock representing five percent (5%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of Voting
Stock; or (b) is an Affiliate or Associate of the Corporation and
at any time within the two-year period immediately prior to the
Announcement Date was the beneficial owner of Voting Stock
representing five percent (5%) or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock.
(4) A person shall be a "beneficial owner" of any Common Stock
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly, (b) which such person or
any of its Affiliates or Associates has, directly or indirectly,
(i) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding; or (c) which is beneficially owned,
directly or indirectly, by any other person with which such person
or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Common Stock. For purposes of
determining whether a person is an Interested Stockholder pursuant
to Paragraph 4 of this Section D, the number of shares of Common
Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of Paragraph
5 of this Section D, but shall not include any other shares of
Common Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, warrants, or options, or otherwise.
(5) An "Affiliate" of a specified person is a person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified. The term "Associate", used to indicate a
relationship with any person, means (a) any company (other than the
Corporation or any Subsidiary) of which such person is an officer
or partner or is, directly or indirectly, the beneficial owner of
ten percent (10%) or more of any class of equity securities, (b)
any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (c) any relative or spouse of
such person, or any relative of such spouse, who has the same house
as such person or who is a director or officer of the Corporation
or of any parent or Subsidiary of the Corporation.
(6) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by
the Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in Paragraph (3) of
this Section D, the term "Subsidiary" shall mean only a company of
which a majority of each class of equity security is beneficially
owned by the Corporation.
(7) The term "Continuing Director" means any member of the
Board of Directors of the Corporation (the "Board of Directors"),
who, while such person is a member of the Board of Directors, is
not an Affiliate or Associate or representative of any Interested
Stockholder and who was a member of the Board of Directors prior to
the time than any Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director, who, while
such successor is a member of the Board of Directors, is not an
Affiliate or Associate or representative of any Interested
Stockholder and who is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors.
(8) The term "Fair Market Value" means (a) in the case of
cash, the amount of such cash; (b) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or if
such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under
the Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding
the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system
then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good faith;
and (c) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined
in good faith by a majority of the Continuing Directors.
(9) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to
be received" as used in Paragraphs 2(a) and 2(b) of Section C of
this Article FIFTH shall include the shares of Common Stock and/or
the shares of any other class of Voting Stock retained by the
holders of such shares.
E. Powers of the Continuing Directors. A majority of the
Continuing Directors shall have the power and duty to determine for
purposes of this Article FIFTH, on the basis of information known to
them after reasonable inquiry, (1) whether a person is an Interested
Stockholder, (2) the number of shares of Common Stock or other
securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, and (4) whether the assets that are
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation
or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value in excess of the amounts set forth in clauses (2) and (6)
of Section A of this Article FIFTH.
Any such determination made in good faith by a majority of the
Continuing Directors shall be binding and conclusive for all the
purposes of this Article FIFTH.
F. No Effect of Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article FIFTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
G. No Effect on Fiduciary Obligations of Directors. The fact that
any Business Combination complies with the provisions of Section C,
Paragraph 2 of this Article FIFTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors,
or any member thereof, to approve such Business Combination or recommend
its adoption or approval to the stockholders of the Corporation, nor
shall such compliance limit, prohibit or otherwise restrict in any
manner the Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to such
Business Combination.
SIXTH: The existence of this Corporation is to be perpetual.
SEVENTH: The private property of the stockholders of this
Corporation shall not be subject to the payment of corporate debts to
any extent whatever.
EIGHTH: (1) The number of directors of this Corporation shall be
fixed and may be altered from time to time as may be provided in the By-
Laws. Vacancies on the Board of Directors and newly created
directorships resulting from any increase in the authorized number of
directors may be filled by a majority vote of the directors then in
office, though less than a quorum or by a sole remaining director at any
meeting of the Board of Directors and the directors so chosen shall hold
office until the next election of the Class for which such directors
shall have been chosen and until their successors shall have been duly
elected and qualified, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or
any newly created directorship, the directors then in office shall
constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office. Subject to
the provisions of Paragraph XII of Article FOURTH hereof, any director
may be removed by the stockholders at any annual or special meeting
thereof only for cause. Directors of this Corporation need not be
stockholders therein.
(2) At each annual meeting of stockholders, directors of the
Corporation shall be elected to hold office until the expiration of the
term for which they are elected, and until their successors have been
duly elected and qualified; except that if any such election shall not
be so held, such election shall take place at a stockholders' meeting
called and held in accordance with the Delaware General Corporation Law.
The directors of the Corporation shall be divided into three classes as
nearly equal in size as is practicable, hereby designated Class I, Class
II and Class III. The term of office of the initial Class I directors
shall expire at the next succeeding annual meeting of stockholders, the
term of office of the initial Class II directors shall expire at the
second succeeding annual meeting of stockholders and the term of office
of the initial Class III directors shall expire at the third succeeding
annual meeting of the stockholders. For the purposes hereof, the initial
Class I, Class II and Class III directors shall be those directors
elected at the May 7, 1991 annual meeting and designated as members of
such Class. At each annual meeting after the May 7, 1991 annual meeting,
directors to replace those of a Class whose terms expire at such annual
meeting shall be elected to hold office until the third succeeding
annual meeting and until their respective successors shall have been
duly elected and shall qualify. If the number of directors is hereafter
changed, any newly created directorships or decrease in directorships
shall be so apportioned among the classes as to make all classes as
nearly equal in number as is practicable.
Anything to the contrary notwithstanding, after May 7, 1991, any
director's term shall be subject to being mandatorily shortened to a
period of less than the term for which he or she was elected, depending
upon the attainment of a particular age of the director or upon
relocation of the director from the Company's service area, subject to
short-term extensions for a period no longer than the term for which he
or she was elected, based on the judgment of the directors as to what is
in the best interests of the Company, as may be provided by By-Laws
implementing these provisions.
The foregoing provisions relating to the classification of the
Board are subject to the provisions of Paragraph XII of Article FOURTH
hereof.
NINTH: In furtherance and not in limitation of the powers conferred
by statute the Board of Directors is expressly authorized:
(a) To fix, determine and vary from time to time the amount to
be maintained as surplus and the amount or amounts to be set apart
as working capital.
(b) To make, amend, alter, change, add to or repeal By-Laws
for this Corporation, without any action on the part of the stock-
holders. The By-Laws made by the directors may be amended, altered,
changed, added to or repealed by the stockholders.
(c) By resolution passed by a majority of the whole Board, to
designate three or more directors to constitute an Executive
Committee which committee shall have and exercise (except when the
Board of Directors shall be in session) such powers and rights of
the Board of Directors in the management of the business and
affairs of this Corporation as may be provided in the By-Laws or in
said resolution, and shall have power to authorize the seal of this
Corporation to be affixed to all papers which may require it.
(d) To authorize and cause to be executed mortgages and liens,
without limit as to amount, upon the real and personal property of
this Corporation.
(e) From time to time to determine whether and to what extent,
at what time and place, and under what conditions and regulations
the accounts and books of this Corporation or any of them, shall be
open to the inspection of any stockholder; and no stockholder shall
have any right to inspect any account or book or document of this
Corporation except as conferred by statute or the By-Laws or as
authorized by a resolution of the stockholders or Board of
Directors.
(f) To sell, assign, convey and otherwise dispose of a part of
the property, assets and effects of this Corporation less than the
whole or less than substantially the whole thereof, on such terms
and conditions as they shall deem advisable, without the assent of
the stockholders in writing or otherwise; and also to sell, assign,
transfer, convey and otherwise dispose of the whole or
substantially the whole of the property, assets, effects,
franchises and good-will of this Corporation on such terms and
conditions as they shall deem advisable, but only with the assent
in writing or pursuant to the affirmative vote of the holders of
not less than a majority in interest of the Common Stock then out-
standing, but in any event not less than the amount required by
law.
(g) All of the powers of this Corporation, in so far as the
same lawfully may be vested by this certificate in the Board of
Directors, are hereby conferred upon the Board of Directors of this
Corporation.
TENTH: In the absence of fraud, no contract or transaction between
this Corporation and any other association or corporation shall be
affected by the fact that any of the directors or officers of this
Corporation are interested in or are directors or officers of such other
association or corporation, and any director or officer of this
Corporation individually may be a party to, or may be interested in any
such contract or transaction of this Corporation; and no such contract
or transaction of this Corporation with any person or persons, firm,
association or corporation, shall be affected by the fact that any
director or officer of this Corporation is a party to, or interested in
such contract or transaction, or in any way connected with such person
or persons, firm, association or corporation; and each and every person
who may become a director or officer of this Corporation is hereby
relieved from any liability that might otherwise exist from thus
contracting with this Corporation for the benefit of himself or any
person, firm, association or corporation in which he may be in any way
interested.
ELEVENTH: This Corporation may in its By-Laws fix the number (not
less than the number required by law or in this certificate) of shares,
the holders of which must consent to, or which must be voted in favor
of, any specific act or acts by this Corporation, or its Board of
Directors or Executive Committee, and during the period for which such
number remains so fixed, such specified act or acts shall not and may
not be performed or carried out by this Corporation, or its Board of
Directors or Executive Committee without the consent or affirmative vote
of the holders of at least the number of shares so fixed.
TWELFTH: Except where other notice is specifically required by
statute written notice only of any stockholders' meeting given as
provided in the By-Laws shall be sufficient without publication or other
form of notice.
THIRTEENTH: Any officer or agent elected or appointed by the Board
of Directors, or by the Executive Committee, or by the stockholders, or
any member of the Executive Committee, or of any other committee, may be
removed at any time, with or without cause, in such manner as shall be
provided in the By-Laws of this Corporation.
FOURTEENTH: This Corporation may in its By-Laws make any other
provisions or requirements for the management or conduct of the business
of this Corporation, provided the same be not inconsistent with the
provisions of this certificate, or contrary to the laws of the State of
Delaware or of the United States.
FIFTEENTH: This Corporation reserves the right to amend, alter,
change, add to or repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by statute, and
all rights conferred on officers, directors and stockholders herein are
granted subject to this reservation.
SIXTEENTH: To the full extent permitted by the General Corporation
Law of the State of Delaware or any other applicable laws as presently
or hereafter in effect, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties
as a director of the Corporation. No amendment to or repeal of this
Article SIXTEENTH shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect
to any acts or omissions of such director occurring prior to such
amendment.
IN WITNESS WHEREOF, said INTERSTATE POWER COMPANY has caused this
certificate to be signed by W. H. STOPPELMOOR, its President and
attested by J. C. McGowan, its Secretary, this 21st day of October,
1993.
INTERSTATE POWER COMPANY
Attest: By /s/ W. H. Stoppelmoor
J.C. McGowan, W. H. STOPPELMOOR
Secretary President
________________________
INTERSTATE POWER COMPANY
1925
CORPORATE SEAL
DELAWARE
/s/ J. C. McGowan
STATE OF IOWA }ss.:
COUNTY OF DUBUQUE }
BE IT REMEMBERED that on October 21, 1993, personally came before
me DONNA KLEIN, a Notary Public in and for the County and State
aforesaid, W. H. STOPPELMOOR, President of INTERSTATE POWER COMPANY, a
Delaware corporation, the corporation described in and which executed,
and on behalf of which was made, the foregoing Certificate, known to me
to be such President, and said W. H. STOPPELMOOR as such President duly
signed said Certificate before me and acknowledged said Certificate to
be his act and deed and the act and deed of said Corporation, and he
further acknowledged to me that the signatures affixed to said
Certificate are in the handwriting of, and are the genuine signatures of
W. H. STOPPELMOOR, as President, and J. C. McGowan, as Secretary, of
said Corporation, respectively; that the seal affixed to said
Certificate is the corporate seal of said Corporation; that said
Certificate was sealed, executed, acknowledged and delivered pursuant
to due authority from the Board of Directors of said Corporation.
Given under my hand and seal the day and year first in this
Certificate written.
DONNA KLEIN,
Notary Public
/s/ Donna Klein
DONNA KLEIN
(NOTARIAL SEAL) Notary Public, Dubuque County, Iowa
My Commission Expires January 30, 1994
STATE OF DELAWARE
OFFICE OF SECRETARY OF sTATE
I, William T. Quillen, Secretary of State of the State of Delaware
do hereby certify the attached is a true and correct copy of the
Certificate of the Restated Certificate of Incorporation of Interstate
Power Company, filed in this Office on the Twenty-seventh day of
October, A.D., 199389 at 10:00 o'clock A.M.
/s/ William T. Quillen
William T. Quillen
Secretary of State
STATE OF DELAWARE
NEW CASTLE COUNTY ss:
I, Paulette Sullivan-Moore, Recorder of Deeds for New Castle
County, Delaware, do hereby certify that Certified Copy of Restated
Certificate of Incorporation of INTERSTATE POWER COMPANY, was received
for record in this office on November 5, 1993 and the same appears of
record in the Recorder's Office for said County in Record-Volume 1526
Page 647 Ec.
Witness my hand and Official Seal this Twenty-Fourth day of
November, A.D. 1993.
/s/ P. S. Moore
(OFFICIAL SEAL) Recorder
EX-12
Computation of Ratio of Earnings to Fixed Charges
1989 1990 1991 1992 1993
(Thousands of Dollars)
Fixed Charges, as defined:
Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166
Other interest 2,301 860 1,605 586 596
Interest component of rents
charged to operating expenses 274 262 232 214 183
Total Fixed Charges, as defined $ 17,626 16,035 16,957 17,092 16,945
Earnings, as defined:
Net income $ 28,627 27,026 29,510 19,217 18,987
Add:
Income taxes 18,726 18,527 17,382 9,698 9,464
Fixed charges 17,626 16,035 16,957 17,092 16,945
Total Earnings, as defined $ 64,979 61,588 63,849 46,007 45,396
Ratio of Earnings to Fixed Charges 3.69x 3.84x 3.77x 2.69x 2.68x
Computation of Ratio of Earnings to Fixed Charges & Preferred Dividends
1989 1990 1991 1992 1993
(Thousands of Dollars)
Fixed Charges, as defined:
Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166
Other interest 2,301 860 1,605 586 596
Interest component of rents
charged to operating expenses 274 262 232 214 183
Total Fixed Charges, as defined $ 17,626 16,035 16,957 17,092 16,945
Preferred Dividends, as defined (a) 3,851 3,785 3,438 3,104 3,604
Fixed Charges & Preferred
Dividends, as defined $ 21,477 19,820 20,395 20,196 20,549
Earnings, as defined:
Net income $ 28,627 27,026 29,510 19,217 18,987
Add:
Income taxes 18,726 18,527 17,382 9,698 9,464
Fixed charges 17,626 16,035 16,957 17,092 16,945
Total Earnings, as defined $ 64,979 61,588 63,849 46,007 45,396
Ratio of Earnings to Fixed Charges &
Preferred Dividends, as defined 3.03x 3.11x 3.13x 2.28x 2.21x
(a) Preferred dividends, as defined (not including preference dividends), have
been adjusted by multiplying the requirement by the ratio that income
before income taxes bears to net income. Such ratios were as follows: 165%
in 1989, 169% in 1990, 159% in 1991, 151% in 1992 and 150% in 1993.
EX-13
INTERSTATE POWER COMPANY
Annual Report to Stockholders
1993
MANAGEMENT'S DISCUSSION AND ANALYSIS
The company's results of operations and financial condition are affected by
numerous factors, including weather, sales, and the amount of changes in
customer rates. The following comments are designed to explain the financial
statements on pages 12 - 29 and the financial and stock market data on pages
32 and 33.
LIQUIDITY AND CAPITAL RESOURCES
The company's primary capital requirements include construction activities,
payment of dividends, and the funding of debt retirements. It is
management's opinion that the company has adequate access to capital markets
and will have sufficient internal and external capital resources to meet
anticipated capital requirements.
Construction expenditures were $34 million in 1993, $32 million in 1992, and
$33 million in 1991. The 1994 construction program is estimated to be $46.5
million, and 1995 is estimated to be $39.0 million. The company anticipates
that 54% of the construction funds for years 1994 and 1995 will be generated
internally. For the five year period from 1994 through 1998, total
construction expenditures are estimated to be $225 million. Expenditures for
1994 and 1995 include $10.9 million for pollution control equipment
necessary to comply with the Clean Air Act.
In the second quarter of 1993, the company filed registration statements
with the Securities and Exchange Commission (SEC) for $125 million of first
mortgage bonds and 745,000 shares of $50 par value preferred stock. In May
1993, the company issued $94 million of 7 5/8% first mortgage bonds and
545,000 shares of 6.40% $50 par value preferred stock. The proceeds were
used to redeem higher-rate debt and preferred and preference stock. The
refinancing lowered the embedded cost of first mortgage bonds from 8.3% to
8.0%. A further advantage of the refinancing was to extend the final
maturity dates for a significant portion of the company's capitalization.
The new bonds have a maturity date of 2023, while the new preferred stock
has a final maturity date of 2022. While the company does not currently plan
to issue the remainder of the securities registered with the SEC ($31
million of bonds and 200,000 shares of preferred stock), the shelf
registration does provide the company additional flexibility. If interest
rates remain favorable, the company anticipates refinancing $13.25 million
of outstanding pollution control revenue bonds in 1994. The pollution
control revenue bonds for which refinancing is contemplated have coupon
rates from 7 1/8% to 7 1/4%.
The company amended its Common Stock Dividend Reinvestment and Stock
Purchase Plan in 1993. The amended plan allows the company's residential and
farm customers to participate in the plan, and gives the company the option
of issuing new common stock as an alternative to purchasing shares on the
open market. The company received $2.8 million for 92,093 shares of new
common stock issued in the third and fourth quarters of 1993 under the
amended plan.
At December 31, 1993, based upon the most restrictive earnings test
contained in the company's Indenture pursuant to which first mortgage bonds
are issued, the company could issue in excess of $100 million of additional
first mortgage bonds. The company's ratio of earnings before income taxes to
interest charges (fixed charge coverage) was 2.7 times for 1993 and 1992,
and 3.8 times for 1991. The primary reason for the reduced ratio is lower
net income. As discussed later, the lower net income was caused by the
accrual of future environmental clean-up costs and additional payments for
electric capacity purchases.
At December 31, 1993, the ratio of common equity to total capitalization was
44.4%. The company's long-term goal is to increase common equity to
approximately 50% of total capitalization. The increase in common equity is
expected to be accomplished primarily through issuance of additional shares
through the amended Dividend Reinvestment Plan and through a common stock
public offering of approximately $30 million in 1995.
Standard and Poor's rating agency (S&P) recently announced more stringent
guidelines for analyzing utilities' credit quality and financial strength,
while Moody's Investors Service (Moody's) has indicated that ratings for
utilities "will come under growing pressure over the next three to five
years as a result of changes in the business environment." The rating
agencies cite industry-wide factors such as a slow-growth period in terms of
demand, growing cost pressures and the fact that competition will provide
customers additional options for electric supply in succeeding years. In
addition, the rating agencies will consider the utility's service territory,
the regulatory climate in which the utility operates, its competitive
position, fuel mix, and operating reliability. In the second quarter of
1993, S&P and Moody's reaffirmed their previous ratings of the company's
first mortgage bonds. The company's bonds are rated A+ by S&P and A1 by
Moody's.
The company has authorization from the Federal Energy Regulatory Commission
(FERC) to issue up to $60 million in short-term debt. At year-end 1993, a
$39.6 million line of credit was available. Lines of credit are generally
used in support of commercial paper, which represents a primary source of
short-term financing. At year-end 1993, the company had $20.1 million of
short-term commercial paper payable. The company anticipates that, due to
its construction program, short-term debt will increase to approximately $36
million by year-end 1994. The company plans to retire the short-term debt
with the proceeds from the planned 1995 common stock financing.
Electric and gas rates include a fuel adjustment clause and a purchased gas
adjustment clause whereby increases or decreases in fuel and purchased gas
costs are included in current revenue without having changes in base rates
approved in formal hearings. Capacity costs are not recovered from customers
through energy adjustment clauses, but rather must be addressed in base
rates in a formal rate proceeding. In the company's 1991 Iowa electric rate
case, the Iowa Utilities Board (IUB) required that any jurisdictional
revenue from capacity sales to other utilities be returned to Iowa
customers through the fuel adjustment clause.
The company is subject to regulation which recognizes only original cost
rate base. This may result in economic losses when the effects of inflation
are not recovered from customers on a timely basis.
NEW ACCOUNTING STANDARDS
The company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", in 1993. The new standard requires a
deferred tax asset or liability to be recognized for each temporary book/tax
difference, including timing differences flowed through and items not
previously considered timing differences (primarily Deferred Investment Tax
Credits and Equity AFUDC). Corresponding regulatory assets or liabilities,
reflecting the expected future rate treatment, have also been recognized.
For this reason, the new standard did not have a significant effect on the
income statement, but did result in increased regulatory assets and deferred
tax liabilities. The balance sheet as of December 31, 1993 includes
additional regulatory assets and deferred tax liabilities of $27.0 million
as a result of the adoption of SFAS 109.
The company adopted SFAS No. 106, "Accounting for Postretirement Benefits
Other Than Pensions" in 1993. Under the provisions of SFAS 106, the
estimated future cost of providing these postretirement benefits is accrued
during the employees' service periods. The postretirement benefit obligation
at January 1, 1993 (transition obligation) was $30.9 million and is being
amortized over a 20 year period. The annual SFAS 106 cost for 1993 is $4.9
million, compared to the 1993 pay-as-you-go amount of $1.7 million. The
company is deferring the difference between the SFAS 106 costs and the pay-
as-you-go amount until rate cases are filed to recover the additional costs.
Effective May 1993, the IUB allowed the company to recover $300,000 annually
of additional SFAS 106 expense in gas rates. Effective November 1993, the
IUB allowed recovery of $1.6 million annually of additional SFAS 106 expense
in electric rates, subject to refund upon final determination. On the basis
of generic hearings or specific rate orders issued to other utilities by the
Minnesota Public Utilities Commission (MPUC), FERC and the Illinois Commerce
Commission (ICC), the company believes that amounts deferred meet the
criteria for deferral established by the Financial Accounting Standards
Board. As of December 31, 1993, $2.6 million of SFAS 106 costs in excess of
the pay-as-you-go amount have been deferred.
GENERATING CAPABILITY & PROJECTED DEMAND
The company established a new system peak of 927 MW in August 1993. This
compares to the prior peak of 919 MW which occurred in August 1988. The
company's net effective capability at the time of the 1993 system peak was
1,296 MW. Forecast peak demand for the year 2000 is 1,117 MW (not including
a 15% reserve of 168 MW required by the Mid-Continent Area Power Pool).
The company's total capacity includes three long-term power purchase
contracts with other electric utilities. The contracts provide for the
purchase of 230 to 255 MW of capacity over the period from May 1992 through
April 2001. Energy is available at the company's option at approximately
100% to 110% of monthly production costs for the designated units. The three
power purchase contracts required capacity payments of $24.1 million in 1993
and $16.3 million in 1992. Over the remaining life of the contracts, total
capacity payments will be approximately $180 million. The purchased power
contract payments are not for debt service requirements of the selling
utility, nor do they transfer risk or rewards of ownership.
A portion of the purchased power payments is not being recovered through
rates. The company has not yet filed for rate recovery in the Illinois and
FERC jurisdictions. A 1992 rate order by the MPUC held that the company's
total capacity exceeded, by 100 MW, what they considered reasonably
necessary for the efficient and reliable provision of utility service and
disallowed recovery of $1.9 million per year. The Minnesota Court of Appeals
affirmed the MPUC disallowance in May 1993. Such amount is being expensed as
incurred.
The company's 1991 Iowa electric rate case requested recovery of $17.4
million of the new purchased power capacity costs applicable to the Iowa
jurisdiction. The IUB order held that the capacity purchases were prudent
and allowed recovery of the costs in rates. In order to match the capacity
costs with the associated revenues, however, the IUB projected Iowa electric
retail jurisdiction sales for the twelve month period ending April 1993. A
comparison to 1992 and 1993 actual sales indicates an overprojection by the
IUB. To the extent that projected sales have not been met, the company has
experienced reduced electric margins. The company filed a new Iowa electric
rate application on August 4, 1993. Interim rates in an annual amount of
$11.0 million were placed in effect October 28, 1993, subject to refund.
Through December 31, 1993, approximately $1.7 million has been collected
subject to refund. A decision is expected by June 1994.
CLEAN AIR ACT
The company is subject to environmental regulations promulgated and enforced
by federal and state governments. The company believes that it presently
meets existing regulations. The Federal Clean Air Act Amendments of 1990
will require reductions in sulfur dioxide and nitrogen oxide emissions from
power plants. The legislation sets two deadlines for compliance, Phase 1
(January 1, 1995) and Phase 2 (January 1, 2000). The most restrictive
provisions relate to sulfur dioxide emissions. During Phase I, only one of
the company's units is affected. That unit's net effective capacity is 217
MW. Present plans for the affected unit are to switch to lower sulfur coal
and install low nitrogen oxide burners. Phase 2 compliance will require
additional capital, operating and maintenance costs beyond those required
for Phase 1. The Phase 2 regulations will affect approximately 87% of the
company's current generating capacity. The company's long-range construction
forecast (through the year 2000) contains estimated Phase 1 capital
expenditures of approximately $6.5 million and estimated Phase 2 capital
expenditures in the range of $35.0 million. Estimated expenditures for 1994
and 1995 include $10.9 million for facilities necessary to comply with the
Clean Air Act. The estimated expenditures include provisions for low nox
burners, emission monitors, and flue gas conditioning systems. The company
anticipates the costs of compliance with the Clean Air Act will be recovered
through the ratemaking process.
COAL TAR DEPOSITS
Early this century, various utilities including the company operated plants
which used coal, coke and/or oil to produce manufactured gas for cooking and
lighting. These facilities were abandoned 40 to 60 years ago when natural
gas pipelines were extended into the upper Midwest. Some of the former
gasification sites contain waste products which may present an environmental
hazard. Waste remediation costs can vary significantly, dependent on the
disposal method and type of contaminants. Current estimates range from $75
to $1,200 per ton of waste material.
In 1957, the company purchased facilities in Mason City, Iowa from Kansas
City Power & Light Company (KCPL) which included a parcel of land previously
used for coal gasification. In 1986 and again in 1991, the company entered
into Consent Orders with the Environmental Protection Agency (EPA) which
obligate the company to conduct a Remedial Investigation and Feasibility
Study at the Mason City site. A Remedial Investigation has been completed
and has been approved by the EPA. The company is continuing to perform
investigative testing to determine the limits of potential groundwater
contamination at the Mason City site. The remediation process will not begin
until the EPA has approved the scope of the project and the appropriate
process for cleaning up the site. To-date, a total of 1,200 tons of
contaminated soil has been identified. To-date, all costs have been charged
to expense. The company spent $300,000 on the Mason City project in 1993; it
has spent $1.7 million on the site since the discovery of the tar wastes in
1984. In 1991, the company recorded estimated future expenditures of $1.4
million for groundwater monitoring, construction of an interim groundwater
treatment facility and design of site remediation. In addition, the company
expensed an additional $200,000 in 1992 to cover the estimated cost to
remediate 1,200 tons of waste presently in a storage pile. The company is
pursuing recovery of response costs from KCPL. The Federal District Court
ruled in the third quarter of 1993 that KCPL is liable to the company
regarding the response costs at the Mason City site. (KCPL is a strong A
rated company with total assets in excess of $2 billion.) Additional court
proceedings will be held in 1994 or 1995 to determine the extent of that
liability. In the opinion of the company, presently accrued liabilities of
$800,000 are adequate to cover the company's share of future expenses at
this site.
The company formerly operated a manufactured gas plant in Rochester,
Minnesota. This facility was sold to another utility, which later demolished
the plant. The site is currently owned by a utility and the City of
Rochester. The limits of contaminated soil have been identified and are
estimated to be 50,000 tons. Tentative agreements have been reached between
the Minnesota PCA and all three parties noted above regarding the clean-up
process. The remediation process will begin in early 1994. The total costs
to clean-up this site are estimated to be $7.8 million. A verbal agreement
has been reached among the parties regarding cost sharing and a written
agreement is expected in the near future. The company has agreed to pay for
$4.9 million of the estimated costs ($3.5 million was recorded in 1993, $1.2
million in 1992, $200,000 in 1991). To-date, all costs have been charged to
expense.
The company owned and operated a manufactured gas facility in Albert Lea,
Minnesota and is solely responsible for the site. Testing for contaminated
soil and groundwater has taken place and additional testing will take place
in 1994. Based on the past testing, contamination is at a low level. All
costs have been charged to expense. $80,000 was spent in 1993 and $243,000
has been spent to-date. Estimated investigative and remedial expenditures in
the amount of $400,000 were expensed in 1991. The company anticipates that
a risk assessment will be completed by late 1994. Remediation requirements
will not be known until the risk assessment is completed.
The company owned and operated a manufactured gas plant at Clinton, Iowa.
The company believes that the coal gasification waste was removed subsequent
to plant decommissioning, and therefore it is not necessary to accrue for
any future liability. If hazardous wastes are found at the site, the EPA may
name several potentially responsible parties in addition to the company, as
other industrial operations have been conducted on or adjacent to the site.
In September 1992, the company prepared a consent order (the agreement to
investigate and, if necessary, remediate the site) and forwarded it to the
Iowa Department of Natural Resources - Department of Environmental Quality.
On November 24, 1993, the company was notified that the site was referred to
the Federal EPA.
In addition, the company has identified four other sites in the Midwest for
which the company is potentially responsible. The company has not conducted
an investigation of these sites, nor has the EPA requested that any
investigations be initiated. No environmental response costs have been
recorded for these sites, as no evidence has been brought forth to indicate
that any of these sites contain hazardous materials. In January 1994, the
company was notified by an Illinois property owner of a site which contains
hazardous materials which may have come from a former manufactured gas
plant. Investigations are underway to determine if the company has any
responsibility for the site.
The company has retained an outside law firm to pursue recovery from
insurance carriers of environmental remediation costs applicable to the coal
gasification sites. While the company's insurance carriers have stated that
they are not liable, the company believes that it has coverage. Neither the
company nor its legal counsel is able to predict the amount or timing of any
insurance recovery, and accordingly, no potential recovery has been
recorded.
Previous actions by Iowa, Minnesota and Illinois regulators have permitted
utilities to recover prudently incurred remediation and legal costs
(response cost). The company anticipates that any unreimbursed costs
applicable to the Iowa, Illinois and Albert Lea, Minnesota jurisdictions
should be recovered from gas customers. It is uncertain whether the company
will recover any uninsured costs applicable to the Rochester, Minnesota
site, as the company no longer serves that city, and no Minnesota precedent
has been established for recovery in a similar situation.
POTENTIALLY RESPONSIBLE PARTY DESIGNATION
Under the Federal Comprehensive Environmental Response, Compensation and
Liability Act, a past waste generator can be designated by the EPA as a
Potentially Responsible Party (PRP). Certain types of used transformer oil
(primarily those containing polychlorinated biphenyls, or "PCBs") have been
designated as hazardous substances by the EPA. The company has been cited as
a PRP by the EPA in three instances which involve used transformer oil.
The company was identified in 1986 by the EPA as a PRP for the clean-up of
the facilities formerly operated by Martha C. Rose Chemicals, Inc. (Rose) in
Holden, Missouri. Rose, pursuant to permits issued by the EPA, was engaged
in decontamination of PCB fluids and processing of PCB-contaminated
electrical equipment for disposal including equipment sent to them by the
company. Rose ceased operations in 1986, was declared bankrupt, and did not
comply with EPA orders for site clean-up. Final clean-up activities at the
site will not begin until 1994. The Martha Rose Chemical Steering Committee
has estimated that total clean-up cost may be up to $18 million. The
company, along with 14 other steering committee members, has filed suit
against non-participating potentially liable entities to recover their
ratable share of the costs. The company has paid clean-up costs of $317,000
to-date. The Steering Committee has indicated that it has adequate funds for
clean-up, and the company anticipates that additional assessments, if any,
will not be material.
In 1988, the EPA designated the company a PRP for the clean-up of former
salvage facilities operated by B&B Salvage in Warrensburg, Missouri. The EPA
pursued recovery of costs from several PRPs, although not from the company.
The PRPs sued by the EPA in turn named the company as a Third Party
Defendant in an attempt to recover a ratable share of the costs. In April
1993, the company paid $69,000 in full settlement of its liability for the
claims asserted in that litigation.
In 1988, the EPA designated the company a PRP for the clean-up of former
salvage facilities operated by the Missouri Electric Works, Inc. (MEW) in
Cape Girardeau, Missouri. A portion of the PCB-contaminated equipment found
at the site was formerly owned by the company. The company notified the EPA
that it disclaims responsibility for the site, as the equipment was in
proper operating condition when sold by the company to a third party, which
subsequently made arrangements to transport this equipment to MEW. The EPA
has not responded to the company's disclaimer. The company has not recorded
any liability for the MEW site, and management believes that it will be able
to successfully defend itself against any claims applicable to the site.
DEFERRED ENERGY EFFICIENCY COSTS
Regulations in Iowa and Minnesota mandate utilities to conduct energy
efficiency programs. The company's long-term forecast anticipates that these
programs may offset the need for approximately 100 MW of generating capacity
by the year 2000. Program costs as well as an appropriate carrying cost are
deferred. The company's Minnesota rates currently recover jurisdictional
energy efficiency expenditures. Other operating expenses for 1993, 1992 and
1991 include $543,000, $604,000 and $74,000, respectively, for the
amortization of Minnesota energy efficiency costs. In July 1993, the company
filed an application with the IUB to recover energy efficiency costs through
December 31, 1992 and related costs incurred in an aggregate amount of $6.0
million. A March 1994 IUB Order allows recovery of these costs over a four-
year period. As of December 31, 1993 and 1992, amounts deferred were $9.7
million and $4.7 million, respectively. Management believes that amounts
deferred meet the criteria established by the respective commissions for
recovery as energy efficiency costs.
COMPETITION IN THE ELECTRIC INDUSTRY
The Energy Policy Act of 1992 (Act) allows FERC to order utilities to grant
access to transmission systems by third-party power producers. The Act
specifically prohibits federally-mandated wheeling of power for retail
customers. The company's industrial rates generally compare favorably with
those of neighboring utilities. For the company's six largest industrial
customers, the aggregate 1993 rate was approximately 3.4 cents per KWH. This
rate also compares favorably with that of potential independent power
producers. The company's favorable rates reduce any incentive that these
customers might otherwise have to relocate, self-generate or purchase
electricity from other suppliers.
LARGE ELECTRIC CUSTOMERS
The company's six largest electric customers consumed a total of 1,621,952
MWH of electricity in 1993, which accounts for over 30 percent of total KWH
sales. These customers are involved in the production of agricultural,
chemical, and cement products and usage is generally not affected by weather
variations. Electric consumption by these customers in 1993 was 6.5 percent
over 1992, while 1992 consumption was 1.7 percent over 1991.
ORDER 636
FERC Order 636, effective in late 1993, shifted primary responsibility for
gas acquisition, transportation and peak day supply from pipelines to local
distribution companies such as the company. Although pipelines continue to
transport gas, they no longer provide sales service. The company believes it
has taken appropriate steps to ensure the continued acquisition of adequate
gas supplies at reasonable prices.
Order 636 eliminates FERC's regulation of the pipeline gas acquisition
function. Accordingly, the company anticipates increased regulatory scrutiny
at the state level. State regulators may require detailed analyses to
justify capacity and gas supply arrangements, and may perform additional
prudency reviews.
Order 636 also provides a mechanism under which pipelines can recover
prudently incurred transition costs associated with the restructuring
process. The company's pipeline suppliers have filed with FERC to recover
transition costs from the local distribution companies. The company
estimates its portion of transition costs will aggregate approximately $5.8
million and will be payable in declining annual installments from 1994 to
2005. The company anticipates that under customary ratemaking practices,
such transition costs will be recovered from customers.
LARGE GAS CUSTOMERS
The mix of gas firm retail sales, interruptible retail sales, firm
transportation service and interruptible transportation service has changed
significantly over the past several years. The deregulation of the gas
industry allows large industrial and commercial customers to purchase their
gas supply directly from producers and use the company's facilities
transport the gas. Transportation customers pay the company a fee equivalent
to the margin on a retail sale. Acting as a gas transporter, rather than as
a merchant, reduces the risk applicable to taking ownership of the gas.
Nineteen large customers currently purchase a majority of their gas
requirements from producers and and use the company's facilities to
transport the gas. Consumption for the three largest gas customers was 5.6%
over 1992, and currently accounts for approximately 65% of total system MCF
throughput. Their usage is primarily dependent on the overall strength of
the economy and other market factors, and is generally not affected by
weather variations.
RATE MATTERS
The company filed an application with the IUB in September 1991 which
requested an electric rate increase of $22.4 million. Interim rates of $16.2
million were placed in effect in May 1992 subject to refund. In July 1992,
the IUB granted an annual revenue increase of $9.0 million. Revenue
collected in excess of the IUB ordered level in the amount of $3,835,000
plus $236,000 of interest was reserved in 1992 and refunded in February
1993.
On May 26, 1993, the IUB approved electric tariffs which more closely track
costs incurred by the company. Individual customers experienced an increase
or decrease in their electric bill, but the adoption of the new tariffs did
no change the company's overall revenue. The new tariffs, which were
implemented in August 1993, give greater weight to the demand component of
electric usage, and include a provision for a higher rate during the summer
cooling season (June - September), and a lower rate during the remainder of
the year. Due to implementation of the seasonal rates, revenue for the third
and fourth quarters of 1993 is not comparable to the corresponding quarters
of prior years.
The company filed an Iowa electric rate increase application on May 14,
1993. The IUB ruled on June 4, 1993 that the company's rate design docket
approved by the IUB on May 26, 1993 constituted a change in rates. Thus,
pursuant to a section of the Iowa Code which limits a utility to one rate
application at a time, the rate filing was rejected. The company refiled in
August 1993. The revised application requested an annual increase of $11.5
million, including a return on common equity of 12.35%. Interim rates in an
annual amount of $11.0 million, which include a provision to recover SFAS
106 costs, were placed in effect on October 28, 1993, subject to refund. A
decision on the rate increase is expected by the end of the second quarter
of 1994.
The company filed an application with the MPUC in August 1991. The
application requested an electric rate increase of $8.0 million. The MPUC
allowed an interim increase of $4.2 million effective October 1991. In June
1992, the MPUC issued an order granting an annual revenue increase of $4.9
million, and a return on common equity of 10.9%. The MPUC order stated that
the company has 100 MW of excess capacity and disallowed recovery of $1.9
million per year applicable to the excess capacity. In instances where final
rates are higher than interim rates, Minnesota law allows the utility to
recover the difference. Settlement rates, including a temporary increase to
recover the difference between the interim and final rates over a six month
period ending May 1993, were placed into effect in December 1992. In May
1993, the Minnesota Court of Appeals affirmed the MPUC order.
In June 1992, sixteen municipal wholesale customers filed a Complaint and
Request for Investigation and Hearing with FERC. The complaint alleges that
the company had been imprudent by entering into certain long-term coal
contracts, an associated transloading agreement, and a rail transportation
agreement and seeks recovery of $4 million. The issue will be presented
before an administrative law judge, with hearings currently scheduled to
commence in August 1994. The decision by the administrative law judge is
expected to be presented to the full Commission in 1995. Under this process
an appeal of the FERC decision most likely would not occur until 1996 or
later.
In November 1992, the company filed an application with the IUB for an
increase in gas rates in an annual amount of $4.1 million. Increased interim
rates were placed in effect in February 1993. Additional interim rates in an
annual amount of $263,000 were placed in effect in May 1993 after the IUB
approved the company's trust agreement arrangements for additional
postretirement benefits expense to be recognized under SFAS 106. On August
31, 1993, the IUB issued a final order allowing an annual increase of $3.3
million. Due to customers subsequently shifting to alternate tariffs, the
company estimates that it will realize an annual increase of $2.8 million.
The company anticipates filing for rate increases in 1994 in its Illinois
electric and gas jurisdictions. Such applications will seek to recover SFAS
106 costs, the costs associated with the new purchased power contracts, and
attrition due to inflation.
RESULTS OF OPERATIONS
Earnings per share of common stock were $1.73 for 1993, compared with $1.74
for 1992 and $2.84 for 1991. The return on common equity for 1993 was 8.5%,
compared with 8.4% in 1992 and 13.9% in 1991. Earnings for 1993 were
depressed by accrual of environmental clean-up costs and additional payments
to other utilities to transport electricity.
Electric sales for the past two years have been below expectations due to
relatively cool summer weather. KWH use per residential customer was 7,816;
7,341 and 8,145 for years 1993, 1992, and 1991, respectively.
Electric Sales
1993
Average 1993 1993 1992
Revenue % of Total vs. 1992 vs. 1991
per KWH KWH Sales % Change % Change
Six Largest Industrial 3.4 cents 31.9% 6.5% 1.7%
All Other Industrial 4.3 cents 25.7 5.0 4.4
Residential (Non-Heat) 7.4 cents 16.7 8.1 (9.4)
General Service (Commercial) 6.3 cents 11.9 1.3 (2.2)
Sales for Resale 3.5 cents 6.1 15.5 (12.2)
Farm 7.1 cents 3.1 (0.6) (1.0)
Residential (Electric Heat) 6.2 cents 2.2 6.6 (9.8)
All Other Categories 7.1 cents 2.4 (1.1) (4.4)
Total Company 4.9 cents 100.0% 5.8% (1.5)%
The electric "margin" is defined as revenue from all sales, less the cost of
fuel and power purchased. Electric margins for years 1993, 1992, and 1991
were $137.8 million, $135.4 million, and $143.5 million, respectively.
Electric margins for years 1993 and 1992 were negatively impacted by new
purchased power contracts which are not being completely recovered in rates
and by cool summer weather. An interim Iowa electric rate increase of $11.0
million partially offset the negative factors, but was placed in effect too
late in the year (October 28, 1993) to have a significant impact.
Gas "margin" is defined as the revenue from all sales, less purchased gas
cost. The gas margins for 1993, 1992, and 1991 were $15.4 million, $10.9
million, and $17.3 million, respectively. Major factors contributing to the
higher gas margin were the Iowa gas rate increase and heating season
temperatures. The gas margin for 1992 was depressed due to abnormally warm
weather during the heating season and the completion in January 1992 of a
gas feeder line which allowed a major customer to contract for greater
volumes of gas at a substantially lower rate.
Other operating expenses were $48.6 million, $42.4 million, and $41.8
million for 1993, 1992, and 1991, respectively. Most of the variation can be
attributed to environmental response costs and the joint use of transmission
lines. As discussed in the section entitled "Coal Tar Deposits", other
operating expenses for the years 1993, 1992, and 1991, respectively, include
$3.5 million, $1.4 million, and $2.0 million for estimated environmental
clean-up costs.
The company paid other utilities $3.0 million, $1.3 million, and $1.0
million for the joint use of transmission lines in years 1993, 1992, and
1991, respectively. The increased use of transmission lines is attributable
to capacity purchase contracts which became effective in May 1992.
Other operating expenses also include $600,000 of additional costs
applicable to the adoption of SFAS 106, "Accounting for Postretirement
Benefits Other Than Pensions". While the adoption of SFAS 106 increased
other operating expenses, it had no significant impact on net income, as the
company does not recognize the additional costs associated with SFAS 106
until rate recovery is granted for the applicable jurisdiction.
Depreciation expense was $26.3 million, $25.2 million, and $23.8 million,
for 1993, 1992, and 1991, respectively. The increase is due to increased
investment in utility plant and the approval of new depreciation rates by
the MPUC.
Property taxes were $14.5 million, $14.1 million, and $12.9 million, for
1993, 1992, and 1991, respectively. The majority of the increase is due to
an increase in Minnesota property taxes.
Allowance for Funds Used During Construction (AFUDC) was 2 cents per share
in 1993 versus 4 cents per share in 1992 and 23 cents per share in 1991.
Year-end Construction Work in Progress (CWIP) balances for 1993, 1992, and
1991 were $3.2 million, $3.5 million, and $5.5 million, respectively.
The company's investment in coal stockpiles was $17.3 million, $22.6 million
and $22.9 million at December 31, 1993, 1992 and 1991, respectively. Company
practice is to build up coal stockpiles during the summer shipping season,
and to draw down the stockpiles during the winter. Coal inventories are
lower than usual due to record Mississippi river flooding last summer, but
management anticipates that the current stockpiles will be adequate.
The natural gas industry purchases gas during off-peak periods and injects
it into underground storage. This gas is then withdrawn during peak usage
periods when gas purchases are more costly and interstate pipeline capacity
may be restricted. As a result of FERC Order 636, the company now purchases
and holds title to a greater quantity of gas. The company's investment in
gas stored underground was $4.6 million, $2.7 million and $2.2 million at
December 31, 1993, 1992 and 1991, respectively.
The Internal Revenue Service has completed audits of the company for years
through 1987. An audit of tax years through 1990 is expected to be completed
in early 1994. The company anticipates that the tax audit will not have an
adverse impact on the financial statements.
Statements of Income and Retained Earnings
For the years ended December 31
1993 1992 1991
(Thousands of Dollars)
OPERATING REVENUES (Notes 1 and 9):
Electric $255,759 $239,193 $237,231
Gas 53,709 46,105 54,574
Total operating revenues 309,468 285,298 291,805
OPERATING EXPENSES:
Operation:
Fuel for electric generation 64,059 58,283 67,911
Power purchased 53,936 45,497 25,704
Cost of gas sold 38,309 35,221 37,312
Other operating expenses 48,567 42,390 41,782
Maintenance 16,771 16,966 17,567
Depreciation and amortization 26,955 25,887 25,303
Income taxes (Note 8):
Federal currently payable 4,694 6,174 12,401
State currently payable 1,445 1,923 3,866
Deferred taxes - net 3,856 2,268 1,874
Investment tax credit amortization (1,028) (1,028) (1,028)
Property and other taxes 17,080 16,533 15,315
Total operating expenses 274,644 250,114 248,007
OPERATING INCOME 34,824 35,184 43,798
OTHER INCOME AND DEDUCTIONS:
Equity funds used during construction 68 184 926
Interest income 718 527 472
Miscellaneous 491 374 140
Income taxes (Note 8) (497) (361) (269)
Total other income and deductions 780 724 1,269
INCOME BEFORE INTEREST CHARGES 35,604 35,908 45,067
INTEREST CHARGES:
Long-term debt (Note 1) 16,166 16,292 15,120
Other interest charges 596 586 1,605
Borrowed funds used during construction (145) (187) (1,168)
Total interest charges 16,617 16,691 15,557
NET INCOME 18,987 19,217 29,510
PREFERRED AND PREFERENCE STOCK DIVIDENDS (2,861) (2,975) (3,075)
INCOME AVAILABLE FOR COMMON STOCK 16,126 16,242 26,435
RETAINED EARNINGS BEGINNING OF YEAR 60,648 63,745 56,277
DIVIDENDS ON COMMON STOCK (19,377) (19,339) (18,967)
RETAINED EARNINGS END OF YEAR $ 57,397 $ 60,648 $ 63,745
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING
based on 9,316,387; 9,297,748
and 9,297,748 shares, respectively $ 1.73 $ 1.74 $ 2.84
DIVIDENDS PAID PER COMMON SHARE $ 2.08 $ 2.08 $ 2.04
The accompanying notes are an integral part of these financial statements.
Balance Sheets
ASSETS
As of December 31
1993 1992
(Thousands of Dollars)
UTILITY PLANT (Note 1):
In Service:
Electric $783,024 $762,696
Gas 59,520 54,933
842,544 817,629
Less - accumulated depreciation 358,330 339,647
484,214 477,982
Held for future use 587 587
Construction work in progress 3,163 3,487
Net utility plant 487,964 482,056
OTHER PROPERTY AND INVESTMENTS 825 645
CURRENT ASSETS:
Cash and cash equivalents 3,083 2,306
Accounts receivable, less reserves of $200 26,060 24,062
Inventories - at average cost:
Fuel 22,985 26,550
Materials and supplies 4,720 4,448
Prepaid pension cost (Note 7) 4,818 4,006
Prepaid income tax (Note 8) 7,994 3,749
Other prepayments and current assets 480 1,043
Total current assets 70,140 66,164
DEFERRED DEBITS:
Regulatory assets (Notes 7 and 8) 29,731 84
Unamortized debt expense (Note 1) 5,941 2,516
Coal contract buyout (Note 9) - 1,305
Deferred energy efficiency (Note 12) 9,665 4,660
Other 95 670
Total deferred debits 45,432 9,235
TOTAL $604,361 $558,100
The accompanying notes are an integral part of these financial statements.
Balance Sheets
CAPITALIZATION AND LIABILITIES
As of December 31
1993 1992
(Thousands of Dollars)
CAPITALIZATION, per accompanying statements:
Common stock, par value $3.50 per share;
authorized - 30,000,000 shares; issued
and outstanding - 9,389,841 in 1993 and
9,297,748 in 1992 (Note 4) $ 32,865 $ 32,542
Additional paid-in capital 99,547 97,134
Retained earnings 57,397 60,648
Total common equity 189,809 190,324
Preference stock (Note 4) - 10,092
Preferred stock (optional sinking fund) 10,819 10,819
Preferred stock (mandatory sinking fund)
(Note 4) 23,837 14,426
Long-term debt (Note 5) 203,170 193,532
Total capitalization 427,635 419,193
CURRENT LIABILITIES:
Commercial paper (Note 6) 20,100 9,000
Long-term debt maturing within one year - 6,000
Preferred stock redeemable within one year - 956
Accounts payable 11,733 12,108
Rate refund payable (Note 9) - 4,071
Dividends payable - preferred stock 599 729
Payrolls accrued 2,181 1,941
Taxes accrued 16,586 17,784
Interest accrued 3,090 4,151
Environmental clean-up cost accrued (Note 2) 5,754 2,977
Other 4,580 3,944
Total current liabilities 64,623 63,661
DEFERRED CREDITS AND OTHER NON-CURRENT
LIABILITIES:
Accumulated deferred income taxes (Note 8) 82,438 47,311
Accumulated deferred investment tax credits 20,097 21,126
Deferred pension cost (Note 7) 4,818 4,006
Accrued postretirement benefit cost (Note 7) 2,516 -
Other 2,234 2,803
Total deferred credits and other non-current
liabilities 112,103 75,246
COMMITMENTS AND CONTINGENCIES (Notes 2, 9, 10,
11 and 15)
TOTAL $604,361 $558,100
Statements of Cash Flows
For the years ended December 31
1993 1992 1991
(Thousands of Dollars)
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES:
Net Income $18,987 $19,217 $29,510
Adjustment for non-cash items:
Depreciation and amortization 26,955 25,887 25,303
Prepaid income taxes 5,259 5,170 2,721
Investment tax credit amortization (1,028) (1,028) (1,028)
Equity funds used during construction (AFUDC) (68) (184) (926)
Prepaid pension cost 812 322 232
Changes in assets and liabilities:
Accounts receivable - net (1,998) 806 (2,459)
Inventories 3,751 884 7,168
Accounts payable and other current liabilities 3,686 2,985 448
Accrued and prepaid taxes (2,602) 381 (1,049)
Interest accrued (1,061) 230 557
Other prepayments and current assets (249) 2,788 (4,245)
Rate refund payable (4,064) 4,071 (52)
Deferred energy efficiency costs (5,005) (3,313) (1,228)
Other operating activities 1,930 1,884 1,713
Cash flows from operating activities 45,305 60,100 56,665
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (33,904) (32,104) (33,488)
Borrowed funds used during construction (AFUDC) (145) (187) (1,168)
Other (231) 925 827
Cash flows from investing activities (34,280) (31,366) (33,829)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,786 - -
Issuance of preferred stock 27,250 - -
Issuance of long-term debt 94,000 25,000 25,000
Retirement of long-term debt (88,784) (30,261) (9,464)
Redemption of preferred and preference stock (25,474) (1,356) (956)
Debt and stock discount and financing expenses (8,795) (1,965) (1,059)
Dividends on common, preferred and preference
stock (22,331) (22,343) (22,063)
Sale of commercial paper - net 11,100 1,800 (13,600)
Cash flows from financing activities (10,248) (29,125) (22,142)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 777 $ (391) $ 694
CASH AND CASH EQUIVALENTS:
Beginning of year $ 2,306 $ 2,697 $ 2,003
End of year $ 3,083 $ 2,306 $ 2,697
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of interest capitalized) $17,588 $15,941 $14,742
Income taxes $8,863 $6,438 $17,592
The accompanying notes are an integral part of these financial statements.
Statements of Capitalization
As of December 31 1993 1992
(Thousands of Dollars)
COMMON EQUITY (Note 4): $189,809 44.4% $190,324 45.4%
CUMULATIVE PREFERENCE STOCK (Note 4):
Authorized 2,000,000 shares at $1.00 par
value; issued and outstanding:
$2.28 series - par value $ - $ 400
Premium on $2.28 series - 9,692
$ - -% $ 10,092 2.4%
CUMULATIVE PREFERRED STOCK (Note 4):
Authorized 2,000,000 shares at $50.00 par
value; issued and outstanding: (A)
12/31/93 Redemption
Series Shares Price
Optional sinking fund provisions:
4.36% 60,455 $52.30 $ 3,023 $ 3,023
4.68% 55,926 $51.62 2,796 2,796
7.76% 100,000 $52.03 5,000 5,000
$ 10,819 2.5% $ 10,819 2.6%
Mandatory sinking fund provisions:
8.00% - $ - $ 2,800
9.00% - - 5,626
9.00-A% - - 6,000
6.40% 545,000 $53.20 27,250 -
Unamortized Discount on 6.40% Preferred Stock (2,113) -
Unamortized Issuance Expense on 6.40%
Preferred Stock (111) -
Unamortized Call Premiums on Preferred Stock (1,189) -
$ 23,837 5.6% $ 14,426 3.4%
LONG-TERM DEBT (Note 5):
First Mortgage Bonds:
4 5/8% Series due 1995 $ 14,000 $ 14,000
6 1/8% Series due 1997 17,000 17,000
7 3/4% Series due 1999 - 8,000
8 5/8% Series due 2001 - 25,000
8 3/8% Series due 2002 - 13,000
8 % Series due 2007 25,000 25,000
9 % Series due 2008 - 35,000
8 5/8% Series due 2021 25,000 25,000
7 5/8% Series due 2023 94,000 -
$175,000 $162,000
Pollution Control Revenue Bonds (Due Serially):
1993 5.7 % $ - $ 225
1994 to 1998 5.95 % 6,750 6,750
1997 to 2006 7 1/4% 6,600 6,600
1998 to 2007 6 3/8% 11,400 11,400
2001 to 2009 7 1/8% 6,650 6,650
$ 31,400 $ 31,625
Other Long-Term Debt $ 127 $ 1,686
Unamortized Discount on Long-Term Debt $ (3,357) $ (1,779)
Total Long-Term Debt - net $203,170 47.5% $193,532 46.2%
TOTAL CAPITALIZATION $427,635 100.0% $419,193 100.0%
(A) Redeemable at the option of the company upon 30 days notice at the
current prices shown.
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Accounting Policies
GENERAL
The financial statements are based on generally accepted accounting
principles, which give recognition to the ratemaking and accounting
practices of the Federal Energy Regulatory Commission (FERC) and state
commissions having regulatory jurisdiction over the company.
UTILITY PLANT
Utility plant is recorded at original cost. The cost of additions to utility
plant and replacement of units of property includes contracted labor,
company labor, materials, allowance for funds used during construction and
overheads. Repairs of property and replacement of items less than units of
property are charged to maintenance expense. The original cost of units
retired, plus removal costs, less salvage is charged to accumulated
depreciation. Substantially all property is subject to the lien of the First
Mortgage Bond Indenture.
DEPRECIATION
Depreciation is computed on the straight-line method based on net salvage
values and the estimated remaining service lives of depreciable property.
The provision for book depreciation as a percentage of the average balance
of depreciable property in service was 3.4% in 1993 and 1992, and 3.5% in
1991.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
AFUDC includes the net cost of borrowed funds and a reasonable rate on
equity funds used for construction or deferred energy-efficiency purposes.
It was capitalized at gross rates of 6.0% for 1993, 7.4% for 1992 and 8.5%
for 1991. Gross AFUDC rates are computed in accordance with FERC
regulations, including approval to incorporate deferred energy-efficiency
costs in the calculation of the debt component of the formula. AFUDC does
not contribute to the current cash flow of the company. Under normal
regulatory practices, the company anticipates earning a fair rate of return
on such capitalized costs and recover them in customer rates after
completion of the related construction.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, the company considers all
liquid investments with a maturity of three months or less to be cash
equivalents.
REVENUES AND FUEL COSTS
Annual revenues do not include unbilled revenues for service rendered from
the date of the last meter reading to year-end. The company's electric and
gas tariffs contain energy adjustment clauses whereby increases or decreases
in fuel costs are included in current revenue without having changes in base
rates approved in formal hearings. Purchased capacity costs are not
recovered from customers through energy adjustment clauses, but rather must
be addressed in base rates in a formal rate proceeding.
DEBT REACQUISITION PREMIUM
In accordance with normal regulatory practices, the company defers debt
redemption premiums and amortizes such costs over the life of the
replacement bonds.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years financial
statements to conform with the presentation for 1993. Such reclassifications
had no impact on net income and stockholders' equity.
2. Environmental Regulations
The company is subject to various federal and state government environmental
regulations. While the company believes that it presently meets existing air
and water regulations, the Federal Clean Air Act Amendments of 1990 will
require reductions in certain emissions from power plants. The legislation
sets two deadlines for compliance, Phase 1 (January 1, 1995) and Phase 2
(January 1, 2000). The company plans to switch to a lower sulfur coal and
install low nitrogen oxide burners at the 217 MW plant affected by Phase 1.
Additional capital expenditures of $10.9 million will be required in 1994
and 1995 to comply with emission standards. Management anticipates that
additional costs incurred will be recovered through customer rates.
The company has identified eight former coal gasification sites which may
contain hazardous waste. Four of these sites are in the investigative stage.
Cash outlays for investigative costs were $0.7 million, $0.6 million and
$0.5 million for 1993, 1992 and 1991, respectively, and $2.3 million to-
date. Estimated investigative costs of $2.0 million were expensed in 1991.
An additional $3.5 million and $1.4 million was expensed in 1993 and 1992,
respectively, for future remediation costs. There are no indications to-date
that the other four sites contain any hazardous materials and no
investigations have been conducted or ordered by the Environmental
Protection Agency. The company has recorded a liability for all known
expenses applicable to the eight sites. In January 1994, the company was
notified by an Illinois property owner of a site which contains hazardous
materials which may have come from a former manufactured gas plant.
Investigations are underway to determine if the company has any
responsibility for the site.
The company has retained an outside law firm to pursue recovery from
insurance companies of environmental remediation costs applicable to the
coal gasification sites. Neither the company nor its legal counsel is able
to predict the amount or timing of any insurance recovery, and accordingly,
no potential recovery has been recorded.
Previous actions by regulators indicate that the company will be allowed to
recover prudently incurred remediation and legal costs. It is uncertain
whether the company will recover any uninsured costs applicable to the
Rochester, Minnesota site as the company no longer serves that city.
3. Fair Value of Financial Instruments
The estimated fair values of the company's financial instruments as of
December 31, 1993 and 1992 are shown in the table below. The estimated fair
values were determined based on quoted market prices for the same or similar
issues or on the current rates for debt of the same remaining maturities.
The preferred stock carrying amount for 1993 excludes $1.3 million of
unamortized call premium and issuance expense.
1993 1992
(Millions of Dollars)
Carrying Fair Carrying Fair
Amount Value Amount Value
Long-term debt $203.2 $215.4 $193.5 $197.3
Preferred stock
(mandatory sinking fund) $ 25.1 $ 25.3 $ 14.4 $ 14.7
4. Preferred, Preference and Common Stock
On May 15, 1993, the company issued 545,000 shares of 6.40% $50 par value
preferred stock with a final redemption date of May 1, 2022. Under the
provisions of the mandatory sinking fund, beginning in 2003 the company is
required to redeem annually $1.4 million of 6.40% preferred stock (27,250
shares). The discount and other issuance expenses in an aggregate amount of
$2.2 million as of December 31, 1993 are reflected as an offset to preferred
stock and are being amortized to common equity. Such amortization transfers
the discount and other issuance expenses from preferred stock to common
stock over the life of the issue, but does not affect net income.
Call premiums related to the 1993 retirement of the preferred and preference
stock in the amount of $1.2 million as of December 31, 1993 are reflected as
an offset to preferred stock, and are being amortized to common equity. The
amortization transfers the amount of the call premiums from preferred stock
to common stock over the life of the refunding 6.40% issue, but has no
effect on net income.
On June 30, 1993, the company retired certain preferred and preference stock
as detailed below:
Number of
Shares Total Redemption
Issue Retired Price (Thousands)
8% Preferred, $50 par 63,000 $ 3,206
9% Preferred, $50 par 116,643 $ 6,113
9%-A Preferred, $50 par 128,000 $ 6,652
$2.28 Preference, $1 par 400,000 $10,712
In 1992 and 1991, the company retired the following preferred stock through
the provisions of the sinking fund:
1992 1991
Total Total
Number Redemption Number Redemption
Shares Price Shares Price
Issue Retired (Thousands) Retired (Thousands)
8.00% 7,000 $350 7,000 $350
9.00% 4,117 $206 4,117 $206
9.00%-A 16,000 $800 8,000 $400
The Dividend Reinvestment Plan acquired 60,299; 113,735 and 104,659 shares
of common stock on the open market during 1993, 1992 and 1991, respectively.
The company amended its Common Stock Dividend Reinvestment and Stock
Purchase Plan in mid-1993. The updated plan gives the company the option of
issuing new stock. The company received $2.8 million for 92,093 shares of
new common stock issued in the third and fourth quarters of 1993 under the
amended plan.
None of the authorized shares of preferred or common stock are reserved for
officers and employees, or for options, warrants, conversions, and other
rights.
5. Long-Term Debt Sinking Fund Requirements
Annual sinking fund requirements are $0.6, $0.8, $2.0, $1.8 and $1.8 million
for the years 1994 through 1998, respectively. Such sinking fund
requirements for first mortgage bonds may be satisfied with property
additions at the rate of 167% of such requirements. Total debt maturities
for the years 1994 through 1998 are $0.2, $14.2, $0.2, $17.4 and $6.5
million, respectively.
6. Short-Term Borrowings
The company had available bank lines of credit aggregating $39.6 million at
December 31, 1993. There are no compensating balances required, but some of
the banks require commitment fees; such fees were not significant. The
maximum amount of short-term borrowing at any month--end in 1993, 1992 and
1991 was $20.1, $12.2 and $30.3 million, respectively, all in commercial
paper, with the average outstanding borrowing during the year of $9.4, $4.2
and $13.6 million, respectively. The average interest rate on borrowings was
3.29%, 3.56% and 6.13% for the years 1993, 1992 and 1991, respectively. At
December 31, 1993, 1992, and 1991 the interest rate was 3.36%, 3.79% and
4.58%, respectively.
7. Employee/Retiree Benefits
The company has a non-contributory defined benefit pension plan for all
full-time employees. Plan benefits are based primarily on years of service
and employee compensation. The company uses the "projected unit credit"
actuarial method in computing pension costs for accounting purposes. Plan
assets consist of high-grade bonds, commercial mortgages and other fixed
income investments. Company policy is to fund the plan under the "entry age
normal - frozen initial liability" actuarial method to the extent deductible
under tax regulations. Contributions to the plan for the years ended
December 31, 1993, 1992 and 1991 were $2.8, $0.1 and $5.1 million,
respectively. Contributions in 1991 included $2.6 million applicable to the
1992 plan year.
The company is collecting an annual funding amount in customer rates and
anticipates that it will continue to do so. The $4.8 million cumulative
difference between the higher funded amount and the accounting pension cost
amount is a deferred credit on the balance sheet.
Pension Cost Components: 1993 1992 1991
(Thousands of Dollars)
Service cost $ 1,888 $ 1,894 $ 1,885
Actual return on plan assets (2,214) (4,330) (5,468)
Interest cost on projected benefit
obligation 3,504 3,294 3,135
Net amortization and deferral (1,270) 1,476 2,716
Net pension cost $ 1,908 $ 2,334 $ 2,268
Discount rate for obligation 7% 8% 8%
Discount rate for expense 8% 8% 8%
Assumed rate of compensation increase 5% 6% 6%
Expected long-term rate of return 8% 8% 8%
Reconciliation of Funded Status
as of November 1:
Plan assets at fair value $48,827 $47,365 $46,498
Vested benefit obligation $34,242 $27,127 $25,721
Nonvested benefit obligation 1,728 384 1,593
Accumulated benefit obligation 35,970 27,511 27,314
Additional benefits based on
estimated future salary levels 13,872 17,855 15,233
Projected benefit obligation $49,842 $45,366 $42,547
Plan assets greater or (less) than
the projected benefit obligation $(1,015) $ 1,999 $ 3,951
Unrecognized net obligation at
October 31, 1986 being amortized
over 16.1 years 3,094 3,435 3,776
Unrecognized prior service cost 399 2,126 2,286
Unrecognized net (gain)loss 2,340 (3,554) (3,729)
Prepaid pension cost $ 4,818 $ 4,006 $ 6,284
In addition to providing pension benefits, the company provides life
insurance for retired employees and health care benefits for approximately
900 retirees and spouses. Substantially all of the company's full-time
employees become eligible for these benefits if they reach retirement age
while working for the company. The company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Accounting for Postretirement Benefits
Other Than Pensions" on January 1, 1993. Under the provisions of SFAS 106,
the estimated future cost of providing these postretirement benefits is
accrued during the employees' service periods. The accumulated
postretirement benefit obligation at January 1, 1993 (transition obligation)
was $30.9 million and is being amortized over a 20 year period. The annual
SFAS 106 cost for 1993 is $4.9 million, compared with the pay-as-you-go
amount of $1.7 million in 1993, $1.6 million in 1992, and $1.5 million in
1991. The company is deferring the difference between the SFAS 106 costs and
the pay-as-you-go amount until rate cases are filed to recover the
additional costs. Funding of the benefit obligation will be concurrent with
recovery in customer rates. Effective May 1993, the Iowa Utilities Board
(IUB) allowed the company to recover $0.3 million of additional annual SFAS
106 expense in gas rates. Effective November 1993, the IUB allowed recovery
of $1.6 million of additional annual SFAS 106 expense in electric rates,
subject to refund. On the basis of generic hearings or specific rate orders
issued to other utilities by the Minnesota Public Utilities Commission
(MPUC), FERC and the Illinois Commerce Commission, the company believes that
amounts deferred meet the criteria for deferral established by the Financial
Accounting Standards Board. As of December 31, 1993, $2.6 million of SFAS
106 costs in excess of the pay-as-you-go amount have been deferred.
Assuming a one percent increase in the medical cost trend rate, the
company's 1993 cost of postretirement benefits would have increased by
$396,000 and the accumulated benefit obligation would increase by $3.5
million.
The following table sets forth the plan's accumulated postretirement benefit
obligation (in thousands):
December 31, 1993 January 1, 1993
Retirees $19,414 $18,781
Active plan participants 15,690 12,082
Total accumulated benefit obligation 35,104 30,863
Less fair value of plan assets 814 -
Accumulated postretirement benefit
obligation in excess of plan assets 34,290 30,863
Unrecognized net gain or (loss) (2,454) -
Unrecognized transition obligation (29,320) (30,863)
Accrued postretirement benefit cost $ 2,516 $ -
The components of the estimated cost of postretirement benefits other than
pensions for the twelve months ended December 31, 1993 are as follows (in
thousands):
Service cost $ 979
Interest cost on accrued postretirement
benefit obligation 2,383
Amortization of transition obligation 1,543
Net amortization and deferral -
Net cost $ 4,905
The assumptions used for measurement purposes are as follows:
1994 1993
Discount rate for obligations 7.0% 8.0%
Discount rate for expense 8.0% 8.0%
Initial medical cost trend rate 9.0% 13.5%
Ultimate medical cost trend rate 6.0% 6.0%
Year that the medical cost trend
rate is assumed to decrease to
the ultimate rate 1997 1998
SFAS No. 112, "Employers' Accounting for Postemployment Benefits", was
issued in November 1992. SFAS 112 addresses the treatment by employers of
salary continuation, health care benefits and life insurance to former
employees. The company's estimated SFAS 112 liability is not material.
8. Income Taxes
The company adopted SFAS No. 109, "Accounting for Income Taxes", on January
1, 1993. The new standard requires a deferred tax asset or liability to be
recognized for each temporary book/tax difference, including timing
differences flowed through and items not previously considered timing
differences (primarily Deferred Investment Tax Credits and Equity AFUDC).
Corresponding regulatory assets or liabilities, reflecting the anticipated
future rate treatment, have also been recognized. For this reason, the new
standard did not have a significant effect on the income statement, but did
result in increased regulatory assets and deferred tax liabilities. The
balance sheet as of December 31, 1993 includes additional regulatory assets
and deferred tax liabilities of $27.0 million as a result of the adoption of
SFAS 109. This amount includes approximately $2.5 million resulting from a
one percent increase in the federal income tax rate. Investment tax credits
have been deferred and are credited to operating income over the lives of
the property which gave rise to the credits.
The principal components of the company's deferred tax (assets) liabilities
recognized in the December 31, 1993 balance sheet were as follows:
Item: Thousands of Dollars
Property $76,956
Energy Conservation Costs 2,782
Environmental Clean-up Costs (2,366)
Call Premiums on Reacquired Bonds 1,988
Unbilled Revenue (3,681)
Other (1,235)
Total $74,444
Gross deferred assets $(7,994)
Gross deferred liabilities 82,438
Total $74,444
The total income tax expense produces the overall effective income tax rate
shown in the table. The percentages are computed by dividing total income
tax expense by the sum of such tax expense and net income.
Income Taxes 1993 1992 1991
Federal statutory tax rate 35.0% 34.0% 34.0%
Increases (reductions) in taxes resulting from:
State income taxes net of federal income tax
benefit 4.7% 4.3% 5.5%
Investment tax credit amortization (3.6%) (3.6%) (2.2%)
Additional depreciation deducted for book
purposes 2.0% 2.2% 1.4%
Other (4.8%) (3.4%) (1.6%)
Overall effective income tax rate 33.3% 33.5% 37.1%
The current and deferred tax expense is
comprised of (Thousands):
Federal and state currently payable $ 6,139 $ 8,097 $16,267
Deferred income tax - federal and state:
Additional tax depreciation - net 3,256 3,012 2,474
Coal contract buyout (526) (149) (68)
Energy efficiency costs 1,466 773 543
Environmental clean-up (1,166) (353) (847)
Other 826 (1,015) (228)
Investment tax credit amortization (1,028) (1,028) (1,028)
Federal and state currently payable - other
income and deductions 497 361 269
Total $ 9,464 $ 9,698 $17,382
9. Rate Matters
IOWA
The company filed an application with the IUB in September 1991 which
requested an electric rate increase of $22.4 million. Interim rates of $16.2
million were placed in effect in May 1992, subject to refund. In July 1992,
the IUB granted an annual revenue increase of $9.0 million (with an
additional $1.4 million over the 12 months beginning November 1992 to
recover costs related to a coal contract buyout). Revenue collected in
excess of the IUB ordered level in the amount of $3,835,000 plus $236,000 of
interest was reserved in 1992 and refunded in February 1993.
On May 26, 1993, the IUB approved electric tariffs which more closely track
costs incurred by the company. Individual customers experienced an increase
or decrease in their electric bill, but the adoption of the new tariffs did
not change the company's overall revenue. The new tariffs, which were
implemented in August 1993, include a provision for a higher rate during the
summer cooling season, and a lower rate during the remainder of the year.
The company filed an Iowa electric rate increase application in May 1993.
The IUB ruled on June 4, 1993 that the company's rate design docket approved
by the IUB on May 26, 1993 constituted a change in rates. Thus, pursuant to
a section of the Iowa Code which limits a utility to one rate application at
a time, the rate filing was rejected. The company refiled in August 1993.
The revised application requested an annual increase of $11.5 million,
including a return on common equity of 12.35%. Interim rates in an annual
amount of $11.0 million, which include a provision to recover SFAS 106
costs, were placed in effect on October 28, 1993, subject to refund. A
decision on the rate increase is anticipated by the end of the second
quarter of 1994.
In November 1992, the company filed an application with the IUB for an
increase in gas rates in an annual amount of $4.1 million. Increased interim
rates were placed in effect in February 1993. Additional interim rates in an
annual amount of $263,000 were placed in effect in May 1993 after the IUB
approved the company's trust agreement arrangements for postretirement
benefits expense to be recognized under SFAS 106. On August 31, 1993, the
IUB issued a final order allowing an annual increase of $3.3 million. Due to
customers subsequently shifting to alternate tariffs, the company estimates
that it will realize an annual increase of $2.8 million.
MINNESOTA
The company filed an application with MPUC in August 1991 which requested an
electric rate increase of $8.0 million. The MPUC allowed an interim increase
of $4.2 million effective October 1991. In June 1992, the MPUC issued an
order granting an annual revenue increase of $4.9 million, and a return on
common equity of 10.9%. The MPUC Order held that the company has 100 MW of
excess capacity and disallowed recovery of $1.9 million per year applicable
to the excess capacity. In instances where final rates are higher than
interim rates, Minnesota law allows the utility to recover the difference.
Settlement rates, including a temporary increase to recover the difference
between the interim and final rates over a six month period ending May 1993,
were placed into effect in December 1992. In May 1993, the Minnesota Court
of Appeals affirmed the MPUC order.
FERC
In June 1992, sixteen municipal wholesale customers filed a Complaint and
Request for Investigation and Hearing with FERC. The complaint alleges that
the company had been imprudent by entering into certain long-term coal
contracts, an associated transloading agreement, and a rail transportation
agreement and seeks recovery of approximately $4 million. The issues will be
presented before an administrative law judge, with hearings currently
scheduled to commence in August 1994. The decision by the administrative law
judge is expected to be presented before the full Commission in 1995. Under
this process an appeal of the FERC decision most likely would not occur
until 1996 or later. The company believes that the complaint is without
merit.
FERC Order 636, issued April 1992, provides for nondiscriminatory access to
interstate pipeline capacity. Order 636 includes a mechanism under which gas
pipelines can recover from local distribution companies prudently incurred
transition costs associated with the implementation of the Order. The
company's pipeline suppliers filed with FERC in late 1993 to recover such
transition costs. The company estimates its portion of transition costs will
aggregate approximately $5.8 million and will be payable in declining annual
installments from 1994 to 2005. The company anticipates that under customary
regulatory practices, such transition costs will be recovered from
customers.
10. Jointly-Owned Utility Plant
The company has a 21.528% (134,300 KW) interest in a 624,000 KW coal-fired
unit (Neal #4), completed in 1979; the company provided financing for its
share. Amounts at December 31, 1993 and 1992 included in utility plant were
$81.7 million and $81.4 million, respectively, and the accumulated provision
for depreciation was $36.1 million and $33.5 million, respectively. In
addition, the company has a long-term participation power purchase for
25,000 KW of Neal #4 generating capacity which expires 2003. Minimum future
capacity payments under the participation power purchase agreement are
approximately $20.1 million. The 21.528% ownership share and the long-term
participation purchase provide the company with an aggregate of 159,300 KW
of Neal #4 generating capacity.
The company also has a 4% (26,000 KW) interest in a 650,000 KW coal-fired
unit (Louisa #1), completed in 1983. Amounts at December 31, 1993 and 1992
included in utility plant were $24.8 million and $24.8 million,
respectively, and the accumulated provision for depreciation was $8.1
million and $7.3 million, respectively.
The company's share of direct expenses of Neal #4 and Louisa #1 are included
in the appropriate operating expenses in the Statements of Income and
Retained Earnings.
11. Purchased Power Contracts
The company has three long-term power purchase contracts with other electric
utilities. The contracts provide for the purchase of 230 to 255 megawatts of
capacity over the period from May 1992 through April 2001. The company is
obligated to pay the capacity charges regardless of the actual electric
demand by the company's customers. Energy is available at the company's
option at approximately 100% to 110% of monthly production costs for the
designated units.
The three power purchase contracts required capacity payments of
approximately $24.1 million in 1993 and $16.3 million in 1992. Over the
remaining period of the contracts, total capacity payments will be
approximately $180 million.
The IUB Order in the company's 1991 rate case held that the capacity
purchases were prudent and allowed recovery of the costs in rates. The
company is currently unable to recover a portion of the purchased power
payments in its Minnesota electric jurisdiction as detailed in Note 9.
The purchased power contract payments are not for debt service requirements
of the selling utility, nor do they transfer risk or rewards of ownership.
12. Deferred Energy Efficiency Costs
Iowa and Minnesota regulators have issued rules which mandate utilities to
conduct energy efficiency and demand side management programs. Each utility
anticipates recovery of program costs as well as related carrying costs
subject to a periodic prudency review by the applicable state public utility
commission. Demand side management expenditures applicable to the company's
Minnesota jurisdiction are currently being recovered through rates.
In July 1993, the company filed an application with the IUB to recover
energy efficiency costs incurred through December 31, 1992 and related costs
in an aggregate amount of $6.0 million. A March 1994 IUB Order allows
recovery of these costs over a four-year period.
Management believes that amounts deferred meet the criteria established by
the respective commissions for recovery of demand side management costs. As
of December 31, 1993 and 1992 amounts deferred were $9.7 million and $4.7
million, respectively.
13. Segments of Business
Information about the company's operations in different segments of business
for 1993, 1992 and 1991 are shown in the table below.
Electric Gas Total
(Thousands of Dollars)
1993
Revenue $255,759 $ 53,709 $309,468
Operating income (Before income taxes) $ 44,573 $ (782) $ 43,791
Depreciation and amortization expense $ 24,732 $ 2,223 $ 26,955
Capital expenditures $ 29,030 $ 5,087 $ 34,117
Utility plant - net $449,430 $ 38,534 $487,964
1992
Revenue $239,193 $ 46,105 $285,298
Operating income (Before income taxes) $ 46,854 $ (2,333) $ 44,521
Depreciation and amortization expense $ 23,844 $ 2,043 $ 25,887
Capital expenditures $ 26,276 $ 6,199 $ 32,475
Utility plant - net $446,380 $ 35,676 $482,056
1991
Revenue $237,231 $ 54,574 $291,805
Operating income (Before income taxes) $ 57,719 $ 3,192 $ 60,911
Depreciation and amortization expense $ 23,352 $ 1,951 $ 25,303
Capital expenditures $ 31,122 $ 4,460 $ 35,582
Utility plant - net $446,143 $ 31,600 $477,743
14. Quarterly Information (Unaudited)
The quarterly information has not been audited but, in the opinion of the
company, reflects all adjustments necessary for the fair statement of the
results of operations for each period.
The quarterly data shown below reflects seasonal and timing variations which
are common in the utility industry. Due to the implementation of seasonal
rates in the Iowa electric jurisdiction which provide for a higher tariff
during the summer months and a lower tariff during the remaining months,
revenue for the third and fourth quarters of 1993 is not comparable to the
corresponding quarters of prior years. Because of changes in the number of
shares outstanding, the sum of quarterly earnings per common share may not
equal total earnings per share.
(Thousands of Dollars)
(Except Earnings Per Share)
1993 March 31 June 30 Sept. 30 Dec. 31
Operating revenues $84,989 $70,107 $77,248 $77,124
Operating income 12,417 6,331 7,089 8,987
Net income 8,389 1,980 3,519 5,099
Earnings per share of common stock .82 .11 .31 .47
1992 March 31 June 30 Sept. 30 Dec. 31
Operating revenues $76,943 $68,590 $62,723 $77,042
Operating income 13,279 7,990 5,830 8,085
Net income 9,109 4,155 1,868 4,085
Earnings per share of common stock .89 .36 .12 .36
The electric margin for the fourth quarter of 1993 (revenue minus fuel and
purchased power costs) declined $1.8 million from the same period in 1992.
The fourth quarter 1993 electric margin decreased primarily due to the new
Iowa electric seasonal rates.
The gas margin for the fourth quarter of 1993 (revenue minus cost of gas
sold) was $3.5 million, compared to $2.6 million in 1992. The Iowa gas rate
increase and colder temperatures in the fourth quarter of 1993 contributed
to the improved margin.
Other operating expense for the fourth quarter of 1992 includes the accrual
of $1.4 million of estimated coal tar clean-up costs. The 1993 provisions
for clean-up costs were recorded in the first and third quarters.
Property tax expense for the fourth quarter of 1993 decreased $0.5 million
primarily due to lower assessed values in the State of Iowa.
In the fourth quarter of 1993, the MPUC approved new depreciation rates
retroactive to January 1, 1993. Adoption of the new depreciation rates
resulted in approximately $0.2 million of additional fourth quarter 1993
expense.
15. Commitments and Contingencies
The company has a coal supply contract, a rail transportation contract, and
a coal transloading agreement applicable to its Lansing Unit 4 power plant.
Such contracts, the last of which expires in 1998, require estimated minimum
future payments of $86.0 million.
The company has a natural gas supply contract, two natural gas
transportation contracts, and a natural gas storage contract, which
collectively obligate the company for a minimum annual commitment of
approximately $10.7 million. Such agreements individually expire from 1997
through 2001.
Reference is also made to Notes 2, 9, 10 and 11 for a discussion of
Environmental Matters, Rate Matters and Purchased Power Contracts.
Independent Auditors' Report
DELOITTE & TOUCHE
101 West Second Street
Davenport, Iowa 52801
To the Stockholders and Board of Directors of Interstate Power Company:
We have audited the accompanying balance sheets and statements of
capitalization of Interstate Power Company as of December 31, 1993 and 1992
and the related statements of income and retained earnings and of cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the company at December 31, 1993 and
1992 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in notes 7 and 8 to the financial statements, in 1993 the
company changed its method of accounting for postretirement benefits other
than pensions and for income taxes, respectively.
/s/ Deloitte & Touche
Deloitte & Touche
February 3, 1994
Report of Management on Financial Statement Responsibility
Company management has prepared and is responsible for the integrity and
objectivity of the financial statements and related financial information
included in this Annual Report to Stockholders. These statements have been
prepared in conformity with generally accepted accounting principles and
necessarily include amounts based on informed judgements and estimates with
appropriate consideration to materiality of events pending at year-end.
In meeting its responsibility, management has implemented an internal
accounting system designed to safeguard the assets of the company and assure
that transactions are executed in accordance with its directives. An
organizational structure has been developed that provides for appropriate
functional responsibilities. A qualified internal audit staff is responsible
for monitoring the system of policies, procedures and methods of operation.
The company believes its system of internal controls appropriately balances
the cost/benefit relationship, and that errors or irregularities will be
detected and corrected on a timely basis. The Audit Committee of the Board
of Directors, comprised of three directors who are not employees,
periodically meets with management and with the independent certified public
accountants to discuss and evaluate auditing, internal control and financial
reporting matters.
Management believes that these policies and procedures provide reasonable
assurance that the operations of the company are in accordance with the
standards and responsibilities entrusted to management.
/s/ Wayne H. Stoppelmoor
Wayne H. Stoppelmoor
Chairman of the Board,
President and Chief
Executive Officer
Selected Financial Data
1993 1992 1991 1990 1989
(Thousands of Dollars)
Operating revenues $309,468 $285,298 $291,805 $273,597 $275,550
Operation 204,871 181,391 172,709 160,206 159,564
Maintenance 16,771 16,966 17,567 15,529 16,753
Depreciation and
amortization 26,955 25,887 25,303 24,420 24,435
Income taxes 8,967 9,337 17,113 18,132 17,792
Property and other taxes 17,080 16,533 15,315 14,785 12,677
274,644 250,114 248,007 233,072 231,221
Operating income 34,824 35,184 43,798 40,525 44,329
Other income (deductions) -
net 780 724 1,269 1,429 1,526
Income before interest
charges 35,604 35,908 45,067 41,954 45,855
Interest charges 16,617 16,691 15,557 14,928 17,228
Net income 18,987 19,217 29,510 27,026 28,627
Preferred and preference
dividends 2,861 2,975 3,075 3,158 3,240
Earnings available for
common stock $ 16,126 $ 16,242 $ 26,435 $ 23,868 $ 25,387
Average number of common
shares outstanding 9,316,3879,297,748 9,297,7489,297,748 9,297,748
Earnings per common
share $ 1.73 $ 1.74 $ 2.84 $ 2.56 $ 2.73
Common dividends
declared per share $ 2.08 $ 2.08 $ 2.04 $ 2.00 $ 2.00
Total assets $604,361 $558,100 $550,631 $539,103 $513,607
Long-term debt and
mandatory sinking
fund preferred stock $227,007 $207,958 $220,818 $197,969 $208,326
Common Stock Market Data
The company's common stock (IPW) is listed on the New York, Midwest and
Pacific Stock Exchanges. The company's preferred stock and first mortgage
bonds are traded in the over-the-counter market. The company was reorganized
as of March 31, 1948, and dividends on common stock have been paid each
quarter since September 20, 1948, with the annual payments rising from $0.60
per share to the February 4, 1992 level of $2.08 per share. As of December
31, 1993, there were 17,091 holders of common stock and 217 holders of
preferred stock. Historical quarterly data for the company's common stock is
shown below:
Avg. Shares
Outstanding
Price Range 12 Months
Quarter Ended Dividends Paid High Low Ended
March 31, 1991 $0.51/Share 28 3/4 - 24 7/8 9,297,748
June 30, 1991 $0.51/Share 30 3/8 - 28 3/8 9,297,748
Sept. 30, 1991 $0.51/Share 32 1/8 - 28 1/2 9,297,748
Dec. 31, 1991 $0.51/Share 34 1/4 - 31 3/8 9,297,748
March 31, 1992 $0.52/Share 34 3/4 - 31 5/8 9,297,748
June 30, 1992 $0.52/Share 34 3/8 - 30 5/8 9,297,748
Sept. 30, 1992 $0.52/Share 32 3/8 - 31 9,297,748
Dec. 31, 1992 $0.52/Share 31 7/8 - 28 3/8 9,297,748
March 31, 1993 $0.52/Share 34 1/8 - 30 3/8 9,297,748
June 30, 1993 $0.52/Share 32 3/4 - 29 9,297,748
Sept. 30, 1993 $0.52/Share 31 3/4 - 29 9,301,030
Dec. 31, 1993 $0.52/Share 30 3/4 - 29 1/8 9,316,387
EX-23.a
DELOITTE & TOUCHE
Northwest Bank Building Telephone: (319) 322-4415
101 West Second Street Facsimile: (319) 322-2002
Davenport, Iowa 52801-1813
INDEPENDENT AUDITORS' REPORT
Interstate Power Company:
We have audited the financial statements of Interstate Power
Company as of December 31, 1993 and 1992, and for each of the
three years in the period ended December 31, 1993, and have
issued our report thereon dated February 3, 1994, which report
includes an explanatory paragraph as to a change in accounting
for postretirement benefits other than pensions and for income
taxes; such financial statements and report are included in your
1993 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement
schedules of Interstate Power Company, listed in Item 14. These
financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche
Deloitte & Touche
February 3, 1994
EX-23.b
DELOITTE & TOUCHE
Northwest Bank Building Telephone: (319) 322-4415
101 West Second Street Facsimile: (319) 322-2002
Davenport, Iowa 52801-1813
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration
Statement No. 33-59352 on Form S-3 and Registration Statement No.
33-32529 on Form S-8 of Interstate Power Company of our reports
dated February 3, 1994, appearing in and incorporated by reference
in the Annual Report on Form 10-K of Interstate Power Company for
the year ended December 31, 1993.
/s/ Deloitte & Touche
Deloitte & Touche
March 11, 1994
EX-23.c
MCGLADREY & PULLEN
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
No. 33-32529 on Form S-8 of Interstate Power Company of
our report dated February 22, 1994, appearing in the Annual Report
on Form 11-K of Interstate Power Company for the year ended
December 31, 1993.
/s/ McGladrey & Pullen
March 14, 1994
EX-99.a
ITEM 11(a)(2). EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
Those financial statement schedules required to be filed by Item 8
of this Form and the financial statements required by Regulation S-X
(17 CFR 210) which are excluded from the annual report to stockholders
by Rule 14a-3(b)(1).
Listed below are current documents incorporated by reference and
identified as having been previously filed with the Commission.
The Original through the Nineteenth Supplemental Indentures of
Interstate Power Company to The Chase Manhattan Bank and Carl E.
Buckley and C. J. Heinzelmann, as Trustees, dated January 1, 1948
securing First Mortgage Bonds (physically filed in Registration
Statement No. 33-59352 dated March 11, 1993 under the Securities Act of
1933 as Exhibits (4)(b) through (4)(t)).
Twentieth Supplemental Indenture of Interstate Power Company to
The Chase Manhattan Bank and C. J. Heinzelmann, as Trustees, dated May
15, 1993 (physically filed in Registration Statement No. 33-59352 dated
March 11, 1993 under the Securities Act of 1933 as Exhibit (4)(u)).
Dividend Reinvestment and Stock Purchase Plan filed on Form S-3
covering the registration of 500,000 shares of Common Stock, dated May
11, 1993 (physically filed in Registration Statement No. 33-66244
under the Securities Act of 1933).
Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (City of Dubuque,
Iowa $4,400,000 Pollution Control Revenue Bonds) (physically filed in
Registration Statement No. 2-50685 as EXHIBIT 5-GG.1a).
Security Agreement dated as of December 1, 1973 between Interstate
Power Company (Guarantor) and Commerce Union Bank (Trustee) (City of
Dubuque, Iowa $4,400,000 Pollution Control Revenue Bonds) (physically
filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.1b).
Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (Town of Lansing,
Iowa $3,700,000 Pollution Control Revenue Bonds) (physically filed in
Registration Statement No. 2-50685 as EXHIBIT 5-GG.2a).
Security Agreement dated as of December 1, 1973 between Interstate
Power Company (Guarantor) and Commerce Union Bank (Trustee) (Town of
Lansing, Iowa $3,700,000 Pollution Control Revenue Bonds) (physically
filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.2b).
Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (City of Clinton,
Iowa $900,000 Pollution Control Revenue Bonds) (physically filed in
Registration Statement No. 2-50685 as EXHIBIT 5-GG.3a).
Security Agreement dated as of December 1, 1973 between Interstate
Power Company (Guarantor) and Commerce Union Bank (Trustee) (City of
Clinton, Iowa $900,000 Pollution Control Revenue Bonds) (physically
filed in Registration Statement No. 2-50685 as EXHIBIT 5-GG.3b).
IPC Development Co. Articles of Incorporation, State of Iowa dated
May 24, 1978 (physically filed in Form 10-K for the Year Ended December
31, 1978 as EXHIBIT G).
IPC Development Co. By-Laws adopted May 10, 1978 (physically filed
in Form 10-K for the Year Ended December 31, 1978 as EXHIBIT H).
By-Laws of Interstate Power Company as adopted April 20, 1925 and
as amended May 7, 1991 (physically filed in Form 10-K for the Year
Ended December 31, 1991 as EXHIBIT W).
Adoption Agreement between Dubuque Bank and Trust Company and
Interstate Power Company establishing the Interstate Power Company 401
(k) Plan dated December 30, 1987, effective January 1, 1988 (physically
filed in Form 10-K for the Year Ended December 31, 1988 as EXHIBIT J).
Registration Statement No. 33-32529 on Form S-8 covering the
registration of $10,000,000 of participation interests, including the
registration of up to 402,010 shares of Common Stock, par value $3.50
per share, of Interstate Power Company pursuant to its 401(k) Plan
(filed with the Commission on December 12, 1989).
EX-99.b
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ______________
Commission file number 1-3632
____________________________________________
Interstate Power Company 401(k) Plan
____________________________________________
Interstate Power Company
1000 Main Street, P.O. Box 769
Dubuque, IA 52004-0769
INTERSTATE POWER COMPANY 401(k) PLAN
FINANCIAL STATEMENTS AND SCHEDULES
INCORPORATED BY REFERRENCE TO
FORM SE
FILED ON MARCH 17, 1994
MCGLADREY & PULLEN
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Plan Administrator
Interstate Power Company 401(k) Plan
Dubuque, Iowa
We have audited the accompanying statements of net assets
available for benefits of Interstate Power Company 401(k) Plan as
of December 31, 1993 and 1992, and the related statements of
changes in net assets available for benefits for the years then
ended and the supporting schedules as of and for the year ended
December 31, 1993. These financial statements and schedules are
the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of Interstate Power Company 401(k) Plan as
of December 31, 1993 and 1992, and the changes in net assets
available for benefits for the years then ended, and the
schedules present fairly, in all material respects, the
information required to be included therein, all in conformity
with generally accepted accounting principles.
/s/ McGladrey & Pullen
McGladrey & Pullen
Dubuque, Iowa
February 22, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this annual report to be signed
on behalf of the undersigned, thereunto duly authorized.
INTERSTATE POWER COMPANY 401(K) PLAN
By J. C. McGowan /s/
J. C. McGowan, Secretary-Treasurer
Dated: March 17, 1994
EX-99.c
SUMMARY PLAN DESCRIPTION
FOR THE
INTERSTATE POWER COMPANY 401(k) PLAN
TABLE OF CONTENTS
(1) General 1
(2) Identification of Plan 1
(3) Type of Plan 1
(4) Plan Administrator 1
(5) Trustee/Trust Fund 2
(6) Hours of Service 2
(7) Eligibility to Participate 2
(8) Employer's Contributions 2
(9) Employee Contributions 4
(10) Vesting in Employer Contributions 4
(11) Payments of Benefits After Termination of Employment 5
(12) Payment of Benefits Prior to Termination of Employment 7
(13) Disability Benefits 7
(14) Payment of Benefits Upon Death 7
(15) Disqualification of Participant Status - Loss or Denial
of Benefits 8
(16) Claims Procedure 8
(17) Retired Participant, Separated Participant with Vested
Benefit, Beneficiary Receiving Benefits 8
(18) Participant's Rights under ERISA 9
(19) Federal Income Taxation of Benefits Paid 9
(20) Participant Loans 10
SUMMARY PLAN DESCRIPTION
(1) General. The legal name, address and Federal employer
identification number of the Employer are -
Interstate Power Company 42-0329500
1000 Main Street
P.O. Box 769
Dubuque, IA 52004-0769
The Employer has established a retirement plan ("Plan") to supplement
your income upon retirement. In addition to retirement benefits, the
Plan may provide benefits in the event of your death or disability or in
the event of your termination of employment prior to normal retirement.
If after reading the summary you have any questions, please ask the Plan
Administrator. We emphasize this summary plan description is a highlight
of the more important provisions of the Plan. If there is conflict
between a statement in this summary plan description and in the Plan,
the terms of the Plan control.
(2) Identification of Plan. The Plan is known as -
Interstate Power Company 401(k) Plan
The Employer has assigned 004 as the Plan identification number. The
plan year is the period on which the Plan maintains its records: the 12
consecutive month period ending every December 31.
(3) Type of Plan. The Plan is commonly known as a Code Section 401(k)
Profit Sharing Plan. Section (8), "Employer's Contributions," explains
how you share in the Employer's annual contributions to the trust fund
and the extent to which the Employer has an obligation to make annual
contributions to the trust fund.
Under this Plan, there is no fixed dollar amount of retirement benefits.
Your actual retirement benefit will depend on the amount of your account
balance at the time of retirement. Your account balance will reflect the
annual allocations, the period of time you participate in the Plan and
the success of the Plan in investing and re-investing the assets of the
trust fund. A governmental agency known as the Pension Benefit Guaranty
Corporation (PBGC) insures the benefits payable under plans which
provide for fixed and determinable retirement benefits. This Plan does
not provide a fixed and determinable retirement benefit. Therefore, the
PBGC does not include this Plan within its insurance program.
(4) Plan Administrator. The Employer is the Plan Administrator. The
Employer's telephone number is 319-582-5421. The Employer has designated
Judy Thill to assist the Employer with the duties of Plan Administrator.
You may contact Judy Thill at the Employer's address. The Plan
Administrator is responsible for providing you and other participants
information regarding your rights and benefits under the Plan. The Plan
Administrator also has the primary authority for filing the various
reports, forms and returns with the Department of Labor and the Internal
Revenue Service.
The name of the person designated as agent for service of legal process
and the address where a processor may serve legal process upon the Plan
are -
Joseph McGowan
Interstate Power Company
1000 Main Street
P.O. Box 769
Dubuque, IA 52004-0769
A legal processor also may serve the Trustee of the Plan or the Plan
Administrator.
The Plan permits the Employer to appoint an Advisory Committee to assist
in the administration of the Plan. The Advisory Committee has the
responsibility for making all discretionary determinations under the
Plan and for giving distribution directions to the Trustee. If the
Employer does not appoint an Advisory Committee, the Plan Administrator
assumes these responsibilities. The members of the Advisory Committee
may change from time to time. You may obtain the names of the current
members of the Advisory Committee from the Plan Administrator.
(5) Trustee/Trust Fund. The Employer has appointed -
Dubuque Bank & Trust Co.
1398 Central Avenue
P.O. Box 747
Dubuque, IA 52004-0747
to hold the office of Trustee. The Trustee will hold all amounts the
Employer contributes to it in a trust fund. Upon the direction of the
Advisory Committee, the Trustee will make all distribution and benefit
payments from the trust fund to participants and beneficiaries. The
Trustee will maintain trust fund records on a plan year basis.
(6) Hours of Service. The Plan and this summary plan description
include references to hours of service. To become eligible to
participate in the Plan, to advance on the vesting schedule or to share
in the allocation of Employer contributions for a plan year, the Plan
requires you to complete a minimum number of hours of service during a
specified period. The sections covering eligibility to participate,
vesting and employer contributions explain this aspect of the Plan in
the context of those topics. However, hour of service has the same
meaning for all purposes of the Plan.
The Department of Labor, in its regulations, has prescribed various
methods under which the Employer may credit hours of service. The
Employer has selected the "actual" method for crediting hours of
service. Under the actual method, you will receive credit for each hour
for which the Employer pays you, directly or indirectly, or for which
you are entitled to payment, for the performance of your employment
duties. You also will receive credit for certain hours during which you
do not work if the Employer pays you for those hours, such as paid
vacation.
If an employee's absence from employment is due to maternity or
paternity leave, the employee will receive credit for unpaid hours of
service related to his leave, not to exceed 501 hours. The Advisory
Committee will credit these hours of service to the first period during
which the employee otherwise would incur a 1-year break in service as a
result of the unpaid absence.
(7) Eligibility to Participate. To become a participant, an employee
must complete one year of service. You do not have to complete any form
for entry into the Plan. You will become a participant on the first day
of any calendar quarter following your completion of the service
requirement.
The Plan defines "year of service" as a 12-month eligibility service
period in which you work at least 1,000 hours for the Employer. The
first eligibility service period starts on your first day of employment
with the Employer. For example, if you begin work on February 15 and
work 1,000 hours from that February 15 through the following February
14, you would enter the Plan on the April 1 following the completion of
the one year of service. After the first 12-month eligibility service
period, the Plan will measure your eligibility service period on a plan
year basis. In the prior example, on a plan year basis, the second
12-month period would begin with the first plan year starting after your
February 15 employment date and other 12-month periods would be the
following plan years. The Plan will need to measure more than one
12-month period, for example, if you do not complete a year of service
in the first 12-month period.
If you terminate employment after becoming a participant in the Plan and
later return to employment, you will reenter the plan on your
reemployment date. Also, if you terminate employment after satisfying
the Plan's eligibility conditions but before actually becoming a
participant in the Plan, you will become a participant in the Plan on
the later of your scheduled entry date or your reemployment date.
(8) Employer's Contributions.
401(k) Arrangement. The Plan includes a "401(k) arrangement," under
which you may elect to have the Employer contribute a portion of your
compensation to the Plan. The contributions the Employer makes under
your election are "elective deferrals." The Advisory Committee will
allocate your elective deferrals to a separate account designated by the
Plan as your Deferral Contributions Account.
As a participant in the Plan, you may enter into a salary reduction
agreement with the Employer. The Advisory Committee will give you a
salary reduction agreement form which will explain your salary reduction
options. The Employer will withhold from your pay the amount you have
agreed to have the Employer contribute to the Plan as elective
deferrals.
For any calendar year, your elective deferrals may not exceed a specific
dollar amount determined by the Internal Revenue Service. If your
elective deferrals for a particular calendar year exceed the dollar
limitation in effect for that calendar year, the Plan will refund the
excess amount, plus any earnings (or loss) allocated to that excess
amount. If you participate in another "401(k) arrangement" or in similar
arrangements under which you elect to have an employer contribute on
your behalf, your total elective deferrals may not exceed the dollar
limitation in effect for that calendar year. The Form W-2 you receive
from each employer for the calendar year will report the amount of your
elective deferrals for that calendar year under that employer's plan. If
your total elective deferrals exceed the dollar limitation in effect for
that calendar year you should decide which plan you wish to designate as
the plan with the excess amount. If you designate this Plan as holding
the excess amount for a calendar year, you must notify the Advisory
Committee of that designation by March 1 of the following calendar year.
The Trustee then will distribute the excess amount to you, plus earnings
(or loss) allocated to that excess amount.
Matching contributions. For each quarter in each plan year after
December 31, 1993, the Employer will contribute for each participant a
matching contribution equal to 25% of the participant's "eligible
contributions." A participant's "eligible contributions" equal the
amount of the participant's elective deferrals for the plan year which
does not exceed $1,000. For example, assume your compensation for a
quarter is $6,250 and your eligible contributions total $900. Your
matching contribution would equal $225 for that quarter. The Advisory
Committee allocates these matching contributions to your Matching
Contributions Account.
The Plan limits your matching contributions for the plan year to $250.
If your allocation of the matching contributions would exceed this
limitation, the Advisory Committee will reduce that allocation to the
limited amount.
The Employer will determine the amount of matching contribution as of
each allocation date: March 31, June 30, September 30, and December 31.
As of each allocation date during the plan year, the Advisory Committee
will allocate to your account your share of the matching contributions
made for that allocation period.
Employer's nonelective contributions. Each plan year, the Employer may
make nonelective contributions to the Plan in the amount determined by
the Employer at its discretion. The Employer may choose not to make
nonelective contributions to the Plan for a particular plan year.
For each plan year the Employer makes nonelective contributions to the
Plan, the Advisory Committee will allocate this contribution to the
separate accounts maintained for participants. The Advisory Committee
will base your allocation upon your share of the total compensation paid
during that plan year to all participants in the Plan. For example, if
your compensation for a plan year equals 10% of the total compensation
for all participants for that particular plan year, the Advisory
Committee will allocate 10% of the total Employer nonelective
contribution for the plan year to your separate account.
Allocation of forfeitures. The Plan allocates participant forfeitures as
if the forfeitures were additional Employer contributions. The Plan
treats a forfeiture as a reduction of the Employer contributions
otherwise made for the plan year following the plan year in which the
forfeiture occurs. Before allocating forfeitures to reduce the Employer
contributions, the Advisory Committee first will use the forfeitures to
pay Plan expenses. The Advisory Committee will allocate to reduce the
employer contribution only the forfeitures remaining after payment of
the Plan's administrative expenses for the Plan Year.
Compensation. The Plan defines compensation as the employee's total
amount of earnings reportable as W-2 earnings for Federal income tax
withholding purposes. With limited exceptions, the Plan includes an
employee's compensation only for the part of the plan year in which he
actually is a participant.
Conditions for allocation. With limited exceptions, to be entitled to an
allocation of Employer contributions, you must complete one hour of
service during the plan year. However, you do not have to be employed by
the Employer on the last day of the plan year to be entitled to an
allocation.
The contribution allocations described in this Section (8) may vary for
certain employees if the Plan is top heavy. Generally, the plan is top
heavy if more than 60% of the Plan's assets are allocated to the
accounts of key employees (certain owners and officers). If the Plan is
top heavy, any participant who is not a key employee and who is employed
on the last day of the plan year, may not receive a contribution
allocation which is less than a certain minimum. Usually that minimum is
3%, but if the contribution allocation for the plan year is less than 3%
for all the key employees, the top heavy minimum is the smaller
allocation rate. If you are a participant in the Plan, your allocation
described in this Section (8) in most cases will be equal to or greater
than the top heavy minimum contribution allocation. The Plan also may
vary the definition of the top heavy minimum contribution allocation to
take into account another plan maintained by the Employer.
The law limits the amount of "additions" (other than trust earnings)
which the Plan may allocate to your account under the Plan. Your
additions may never exceed 25% of your compensation for a particular
plan year, but may be less if 25% of your compensation exceeds a dollar
amount announced by the Internal Revenue Service each year. The Plan may
need to reduce this limitation if you participate (or have participated)
in any other plans maintained by the Employer. The discussion of Plan
allocations in this Section (8) is subject to this limitation.
(9) Employee Contributions. The Plan does not permit nor require you to
make employee contributions to the trust fund. "Employee contributions"
are contributions made by an employee for which the employee does not
receive an income tax deduction. The only source of contributions under
the Plan is the annual Employer contribution, including the "elective
deferrals" made at your election under the 401(k) arrangement described
in Section (8). "Elective deferrals" are not "employee contributions"
for purposes of the Plan.
The Trustee may accept rollovers and direct transfers from qualified
retirement plans and Conduit IRAs. The Trustee has accepted direct
transfers of the Employee Contribution Account and Employer Contribution
Account from the now terminated Interstate Power Company Tax Credit
Employee Stock Ownership Plan. All of the above are hereafter referred
to as Rollover Contributions.
Once during each plan year, you may request and receive a return of all
or any part of your Rollover Contributions (as adjusted for gains or
losses). A portion of each withdrawal may be includible in your gross
income and, if you are under age 59 1/2, may be subject to a 10% penalty
on the amount of the distribution you must include in your gross income.
The Trustee will pay you the balance of your Rollover Contribution
Account at the same time it pays you the vested portion of your interest
in the Employer's contributions made to the Plan for your benefit.
(10) Vesting in Employer Contributions. Your interest in the
contributions the employer makes to the Plan for your benefit become
100% vested when you attain normal retirement age (as defined in Section
(11)). Prior to normal retirement age, your interest in the
contributions the employer makes on your behalf become vested in
accordance with the following schedule:
VESTING SCHEDULE
Years of Nonforfeitable
Service Percentage
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
100% vesting for Deferral Contributions Account. The vesting schedule
does not apply to your Deferral Contributions Account described in
Section (8). Instead, you are 100% vested at all times in your Deferral
Contributions Account.
Special vesting rule for death or disability. If you die or become
disabled while still employed by the Employer, your entire Plan interest
becomes 100% vested, even if you otherwise would have a vested interest
less than 100%.
Year of service. To determine your percentage under a vesting schedule,
a year of service means a 12-month vesting service period in which you
complete at least 1,000 hours of service. The Plan measures the vesting
service period as the plan year. If you complete at least 1,000 hours
during a plan year, you will receive credit for a year of service even
though you are not employed by the Employer on the last day of that plan
year. You will receive credit for all years of service with the
Employer, except any service prior to the time you attain age 18.
The Plan provides two methods of vesting forfeiture which may apply
before a participant becomes 100% vested in his entire interest under
the Plan. The primary method of vesting forfeiture is the "forfeiture
break in service" rule. The secondary method of forfeiture is the "cash
out" rule. Also see Section (15) relating to loss or denial of benefits.
Forfeiture Break in Service Rule. Termination of employment alone will
not result in a forfeiture under the Plan unless you do not return to
employment with the Employer before incurring a "forfeiture break in
service." A "forfeiture break in service" is a period of 5 consecutive
vesting service periods in which you do not work more than 500 hours in
each vesting service period comprising the 5 year period.
Example. Assume you are 60% vested in your account balance. After
working less than 500 hours during a particular vesting service period,
you terminate employment and perform no further service for the Employer
during the next 4 vesting service periods. Under this example, you would
have a "forfeiture break in service" during the fourth vesting service
period following the vesting service period in which you terminated
employment because you did not work more than 500 hours during each
vesting service period of 5 consecutive vesting service periods.
Consequently, you would forfeit the 40% non-vested portion of your
account. If you had returned to employment with the Employer at any time
during the 5 consecutive vesting service periods and worked more than
500 hours during any vesting service period within that 5-year period,
you would not incur a forfeiture under the "forfeiture break in service"
rule.
Cash Out Rule. The cash out rule applies if you terminate employment and
receive a total distribution of the vested portion of your account
balance before you incur a forfeiture break in service. For example,
assume you terminated employment during a particular vesting service
period after completing 800 hours of service. Assume further the total
value of your account balance is $6,000 in which you have a 60% vested
interest. Before you incur a forfeiture break in service, you receive a
distribution of the $3,600 vested portion of your account balance. Upon
payment of the $3,600 vested portion of your account balance, you would
forfeit the $2,400 nonvested portion. If you return to employment before
you incur a "forfeiture break in service," you may have the Plan restore
your "cash out" forfeiture by repaying the amount of the distribution
you received attributable to Employer contributions. This repayment
right applies only if you do not incur a "forfeiture break in service."
You must make this repayment no later than the date 5 years after you
return to employment with the Employer. Upon your re-employment with the
Employer, you may request the Advisory Committee to provide you a full
explanation of your rights regarding this repayment option. If the
vested portion of your account balance does not exceed $3,500, the Plan
will distribute that vested portion to you in a lump sum, without your
consent. This involuntary cash-out distribution will result in the
forfeiture of your nonvested account balance, in the same manner as an
employee who voluntarily elects a cash-out distribution. Also, upon
re-employment you would have the same repayment option as an employee
who elected a cash-out distribution, if you return to employment before
incurring a "forfeiture break in service". If you are 0% vested in your
entire interest in the Plan, the Plan will treat you as having received
a cash-out distribution of $0. This "distribution" results in a
forfeiture of your entire Plan interest. Normally, this forfeiture
occurs on the date you terminate employment with the Employer. However,
if you are entitled to an allocation of Employer contributions for the
plan year in which you terminate employment with the Employer, this
forfeiture occurs as of the first day of the next plan year. If you
return to employment before you incur a forfeiture break in service, the
Plan will restore this forfeiture, as if you repayed a cash-out
distribution.
(11) Payment of Benefits After Termination of Employment. After you
terminate employment with the Employer, the time at which the Plan will
commence distribution to you and the form of that distribution depends
on whether or not your vested account balance exceeds $3,500. If you
receive a distribution from the Plan before you attain age 59 1/2, the
law imposes a 10% penalty on the amount of the distribution you must
include in your gross income, unless you qualify for an exception from
this penalty. You should consult a tax advisor regarding this 10%
penalty. This summary makes references to your normal retirement age.
Normal retirement age under the Plan is 65.
If your vested account balance does not exceed $3,500, the Plan will
distribute that portion to you, in lump sum, at the beginning of the
quarter after you terminate employment with the Employer, or as soon as
administratively practicable following that date. If you already have
attained normal retirement age when you terminate employment, the Plan
must make this distribution no later than the 60th day following the
close of the plan year in which your employment terminates, even if the
normal distribution date would occur later. The Plan does not permit you
to receive distribution in any form other than a lump sum if your vested
account balance does not exceed $3,500.
If your vested account balance exceeds $3,500, the Plan will commence
distribution to you at the time you elect to commence distribution. The
Plan permits you to elect distribution as of any distribution date
following your termination of employment with the Employer. A
"distribution date" under the Plan means the first of any calendar
quarter. You may not actually receive distribution on the distribution
date you elect. The Plan provides the Trustee an administratively
reasonable time following a particular distribution date to make actual
distribution to a participant.
No later than 30 days prior to your earliest possible distribution date,
the Advisory Committee will provide you a notice explaining your right
to elect distribution from the Plan and the forms necessary to make your
election. If you do not make a distribution election, the Plan will
commence distribution to you on the 60th day following the close of the
plan year in which the latest of three events occurs: (1) your
attainment of normal retirement age; (2) your attainment of age 62; or
(3) your termination of employment with the Employer. To determine
whether your vested account balance exceeds $3,500, the Plan looks to
the last valuation of your account prior to the scheduled distribution
date.
With limited exceptions, you may not commence distribution of your
vested account balance later than April 1 of the calendar year following
the calendar year in which you attain age 70 1/2, even if you have not
terminated employment with the Employer. This required distribution date
overrides any contrary distribution date described in this summary. If
the Employer terminates the Plan before you receive complete
distribution of your vested benefits, the Plan might make distribution
to you before you otherwise would elect distribution. Upon Plan
termination, if your vested account balance exceeds $3,500, you will
receive an explanation of your distribution rights.
For purposes of making a distribution of any portion of your vested
account balance, the Plan refers to the latest valuation of your account
balance. The Plan requires valuation of the trust fund, and adjustment
of participant accounts, as of the last day of the plan year and every
March 31, June 30, and September 30. The Advisory Committee also may
require a valuation on any other date. You will not receive any
adjustment to your account balance for trust fund earnings after the
latest valuation date. In general, the Plan allocates trust fund
earnings, gains or losses for a valuation period on the basis of each
participant's opening account balance at the beginning of the valuation
period, less any distributions and charges to each participant's account
during the valuation period.
Forms of Benefit Payment. If your vested account balance exceeds $3,500,
the Plan permits you to elect distribution under any one of the
following methods.
(a) Lump sum
(b) Part lump sum and part installments, as described in (c).
(c) Installments payments (annually, quarterly or monthly) over a
specified period of time, not exceeding your life expectancy or the
joint life expectancy of you and your beneficiary.
Under an installment distribution, the Advisory Committee may direct to
have the Plan segregate the amount owed to you in a separate account
apart from other trust fund assets. Your separate account will continue
to draw interest during the period the Plan is making retirement
payments to you. If the Plan does not segregate the amount owed to you
in a separate account, your retirement account will remain a part of the
trust fund and continue to share in trust fund earnings, gains or
losses. Funds to be distributed from the Interstate Power Stock Fund
may, at the request of the participant, be distributed in kind (i.e.,
distribute in a stock certificate).
The benefit payment rules described in Sections (11) through (14)
reflect the current Plan provisions. If an Employer amends its Plan to
change benefit payment options, some options may continue for those
participants or beneficiaries who have account balances at the time of
the change. If an eliminated option continues to apply to you, the
information you receive from the Advisory Committee at the time you
first are eligible for distribution from the Plan will include an
explanation of that option.
(12) Payment of Benefits Prior to Termination of Employment.
Distributions from your Employer Contributions Account and Matching
Contributions Account. Prior to your termination of employment with the
Employer, you may elect to withdraw all or any portion of your Employer
Contributions Account and Matching Contributions Account if: (1) you
have attained age 59 1/2; and (2) you are 100% vested in your account
balance.
Distributions from your Deferral Contributions Account. Prior to your
termination of employment with the Employer, you may elect to withdraw
all or any portion of your Deferral Contributions Account if: (1) you
have attained age 59 1/2; or (2) you incur a hardship. A hardship
distribution is available only from your Deferral Contributions Account.
A hardship distribution must be on account of any of the following: (1)
deductible medical expenses incurred by the participant, by the
participant's spouse, or by any of the participant's dependents; (2) the
purchase (excluding mortgage payments) of a principal residence for the
participant; (3) the payment of post-secondary education tuition, for
the next semester or for the next quarter, for the participant, for the
participant's spouse, or for any of the participant's dependents; or (4)
to prevent the eviction of the participant from his principal residence
or the foreclosure on the mortgage of the participant's principal
residence. To qualify for this hardship distribution, the participant
may not make elective deferrals or employee contributions to the Plan
for the 12-month period following the date of his hardship distribution,
the participant first must obtain all other available distributions and
all nontaxable loans currently available under the Plan and all other
qualified plans maintained by the Employer, and a special limitation may
apply to the participant's elective deferrals in the following taxable
year.
The Advisory Committee will provide you a withdrawal election form.
Other than the withdrawal rights described in this Section (12) and the
post-age 70 1/2 distribution requirement described in Section (11), the
Plan does not permit you to receive payment of any portion of your
account balance for any other reason, unless you terminate employment
with the Employer.
(13) Disability Benefits. If you terminate employment because of
disability, the Plan will pay your vested account balance to you in lump
sum at the same time as it would pay your vested account balance for any
other termination of employment. However, if your vested account balance
exceeds $3,500, the disability distribution rules are subject to any
election requirements described in Section (11). In general, disability
under the Plan means because of a physical or mental disability you are
unable to perform the duties of your customary position of employment
for an indefinite period which, in the opinion of the Advisory
Committee, will be of long continued duration. The Advisory Committee
also considers you disabled if you terminate employment because of a
permanent loss or loss of use of a member or function of your body or a
permanent disfigurement. The Advisory Committee may require a physical
examination in order to confirm the disability.
(14) Payment of Benefits upon Death. If you die prior to receiving all
of your benefits under the Plan, the Plan will pay the balance of your
account to your beneficiary. If the Employer permits the Plan to
purchase life insurance on your life with a portion of your account
balance, your account balance also will receive any life insurance
proceeds payable by reason of your death.
The Advisory Committee will provide you with an appropriate form for
naming a beneficiary. If you are married, your spouse must consent to
the designation of any nonspouse beneficiary. If your vested account
balance payable to your designated beneficiary does not exceed $3,500,
the Plan will pay the benefit, in lump sum, to your designated
beneficiary as soon as administratively practicable after your death. If
your vested account balance payable to your designated beneficiary
exceeds $3,500, the Plan will pay the benefit to your designated
beneficiary, in the form and at the time elected by the beneficiary,
unless, prior to your death, you specify the timing and form of the
beneficiary's distribution. The benefit payment election generally must
complete distribution of your account balance within five years of your
death, unless distribution commences within one year of your death to
your designated beneficiary or unless benefits had commenced prior to
your death under the mandatory post-age 70 1/2 distribution requirements
described in Section (11).
(15) Disqualification of Participant Status - Loss or Denial of
Benefits. There are no specific Plan provisions which disqualify you as
a participant or which cause you to lose plan benefits, except as
provided in Sections (7) and (10). However, if you become disabled and
do not receive compensation from the Employer, you will not receive an
allocation of the Employer's contribution to the Plan during the period
of disability. In addition, if your Plan benefits become payable after
termination of employment and the Advisory Committee is unable to locate
you at your last address of record, you may forfeit your benefits under
the Plan. Therefore, it is very important that you keep the Employer
apprised of your mailing address even after you have terminated
employment. Finally, if the Employer terminates the Plan, which it has
the right to do, you would receive benefits under the Plan based on your
account balance accumulated to the date of the termination of the Plan.
Termination of the Plan could occur before you attain normal retirement
age. If the Employer terminates the Plan, your account will become 100%
vested, if not already 100% vested, unless you forfeited the nonvested
portion prior to the termination date.
The termination of the Plan does not permit you to receive a
distribution from your Deferral Contributions account unless: (1) you
otherwise have the right to a distribution, as described in Sections
(11) and (12); or (2) the Employer does not maintain a successor defined
contribution plan. If you are able to receive a distribution only
because the Employer does not maintain a successor defined contribution
plan, you must agree to take that distribution as part of a lump sum
payment of your entire account balance under the Plan. The Trustee will
transfer to the successor defined contribution plan any portion of your
interest the Plan is unable to distribute to you.
The fact that the Employer has established this Plan does not confer any
right to future employment with the Employer. Furthermore, you may not
assign your interest in the Plan to another person or use your Plan
interest as collateral for a loan from a commercial lender.
(16) Claims Procedure. You need not file a formal claim with the
Advisory Committee in order to receive your benefits under the Plan.
When an event occurs which entitles you to a distribution of your
benefits under the Plan, the Advisory Committee automatically will
notify you regarding your distribution rights. However, if you disagree
with the Advisory Committee's determination of the amount of your
benefits or with any other decision the Advisory Committee may make
regarding your interest in the Plan, the Plan contains the appeal
procedure you should follow. In brief, if the Advisory Committee of the
Plan determines it should deny benefits to you, the Plan Administrator
will give you written notice of the specific reasons for the denial. The
notice will refer you to the pertinent provisions of the Plan supporting
the Advisory Committee's decision. If you disagree with the Advisory
Committee, you, or a duly authorized representative, must appeal the
adverse determination in writing to the Advisory Committee within 75
days after the receipt of the notice of denial of benefits. If you fail
to appeal a denial within the 75-day period, the Advisory Committee's
determination will be final and binding.
If you appeal to the Advisory Committee, you, or your duly authorized
representative, must submit the issues and comments you feel are
pertinent to permit the Advisory Committee to re-examine all facts and
make a final determination with respect to the denial. The Advisory
Committee, in most cases, will make a decision within 60 days of a
request on appeal unless special circumstances would make the rendering
of a decision within the 60-day period unfeasible. In any event, the
Advisory Committee must render a decision within 120 days after its
receipt of a request for review. The same procedures apply if, after
your death, your beneficiary makes a claim for benefits under the Plan.
(17) Retired Participant, Separated Participant with Vested Benefit,
Beneficiary Receiving Benefits. If you are a retired participant or
beneficiary receiving benefits, the benefits you presently are receiving
will continue in the same amount and for the same period provided in the
mode of settlement selected at retirement. If you are a separated
participant with a vested benefit, you may obtain a statement of the
dollar amount of your vested benefit upon request to the Plan
Administrator. There is no Plan provision which reduces, changes,
terminates, forfeits, or suspends the benefits of a retired participant,
a beneficiary receiving benefits or a separated participant's vested
benefit amount, except as provided in Section (15).
(18) Participant's Rights under ERISA. As a participant in this Plan,
you are entitled to certain rights and protections under the Employee
Retirement Income Security Act of 1974 (ERISA). ERISA provides that all
Plan participants are entitled to:
(a) Examine, without charge, at the Plan Administrator's office
and at other specified locations (such as worksites), all Plan
documents, including insurance contracts and copies of all documents
filed by the Plan with the U.S. Department of Labor, such as detailed
annual reports and plan descriptions.
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Plan Administrator
may make a reasonable charge for the copies.
(c) Receive a summary of the Plan's annual financial report. ERISA
requires the Plan Administrator to furnish each participant with a copy
of this summary annual report.
(d) Obtain a statement telling you that you have a right to
receive a retirement benefit at the normal retirement age under the Plan
and what your benefit could be at normal retirement age if you stop
working under the Plan now. If you do not have a right to a retirement
benefit, the statement will advise you of the number of additional years
you must work to receive a retirement benefit. You must request this
statement in writing. The law does not require the Plan Administrator to
give this statement more than once a year. The Plan must provide the
statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the
employee benefit plan. The people who operate this Plan, called
"fiduciaries" of the Plan, have a duty to do so prudently and in the
interest of you and other Plan participants and beneficiaries. No one,
including your Employer, your union or any other person may fire you or
otherwise discriminate against you in any way to prevent you from
obtaining a retirement benefit or from exercising your rights under
ERISA.
If your claim for a retirement benefit is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You
have the right to have the Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive
the materials within 30 days, you may file suit in a Federal court. In
such a case, the court may require the Plan Administrator to provide the
materials and pay you up to $100 a day until you receive the materials,
unless the materials were not sent because of reasons beyond the control
of the Plan Administrator. If you have a claim for benefits which is
denied or ignored, in whole or in part, you may file suit in a state or
Federal court. If it should happen that Plan fiduciaries misuse the
Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or
you may file suit in a Federal court. The court will decide who should
pay court costs and legal fees. If you are successful, the court may
order the person you have sued to pay these costs and fees. If you lose,
the court may order you to pay these costs and fees, for example, if it
finds your claim is frivolous.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about
your rights under ERISA, you should contact the nearest Area Office of
the U.S. Labor-Management Services Administration, Department of Labor.
(19) Federal Income Taxation of Benefits Paid. Existing Federal income
tax laws do not require you to report as income the portion of the
annual Employer contribution allocated to your account. However, when
the Plan later distributes your account balance to you, such as upon
your retirement, you must report as income the Plan distributions you
receive. The Federal tax laws may permit you to report a Plan
distribution under a special averaging provision. Also, it may be
possible for you to defer Federal income taxation of a distribution by
making a "rollover" contribution to your own rollover individual
retirement account or to another qualified plan. We emphasize you should
consult your own tax adviser with respect to the proper method of
reporting any distribution you receive from the Plan.
(20) Participant Loans. This Plan permits the Advisory Committee to
adopt a policy under which the Plan may make loans to participants and
beneficiaries. A copy of the loan policy adopted by the Advisory
Committee is attached to this summary plan description as Exhibit A.
INTERSTATE POWER COMPANY 401(k) PLAN
INVESTMENT POLICY
The Trustee will make available, the following investment funds for
participant directed investments:
* A Money Market Fund which will have as its primary
objective stability of principal.
* A GIC Fund which will have as its primary objective the
stability of principal and as its secondary objective, current
income.
* A Bond Fund which will have as its primary objective the
maximization of current income and as its secondary objective,
stability of principal.
* A Stock Fund which will have as its primary objective
capital appreciation.
An Interstate Power Company Stock Account will have as
its primary objective a high level of current income and as
its secondary objective, moderate capital appreciation.
A participant may direct the investment of his or her account into the
above investment funds in the proportion the participant chooses.
The participant may change his or her investment election to be
effective on the first day of the following calendar quarter, if the
election form has been received by the Plan Administrator (Employer) 10
days in advance of the beginning of the quarter.
Election forms to be used for initial and subsequent investment
elections may be obtained from either the employer or the Trustee.
If a participant fails at any time to have an effective investment
election form on file, then the Trustee will invest that participants
account 100% in the Money Market Fund.
INTERSTATE POWER COMPANY 401(k) PLAN
LOAN POLICY
Exhibit A
The Advisory Committee of the Interstate Power Company 401(k) Plan
adopts the following loan policy pursuant to the terms of the Plan.
1. LOAN APPLICATION. Any Plan participant may apply for a loan
from the Plan. For purposes of this loan policy, the term "participant"
means any participant or beneficiary who is party in interest (as
determined under ERISA Section 3(14)) with respect to the Plan. A
participant must apply for each loan in writing with an application
which specifies the amount of the loan desired, the requested duration
for the loan and the source of security for the loan. The Advisory
Committee will not approve any loan if a participant is not
creditworthy.
In order to be creditworthy, the participant must have established
in his or her community, a reputation which would entitle him or her to
a similar loan from a commercial or business lender. In applying for the
loan from the Plan, each participant must give full authority to
investigate his or her creditworthiness.
2. LIMITATION ON LOAN AMOUNT/PURPOSE OF LOAN. The Advisory
Committee will not approve any loan to a participant in an amount which
exceeds 50% of his or her nonforfeitable accrued benefit (account
balance), as reflected by the books and records of the Plan. The maximum
aggregate dollar amount of loans outstanding to any participant may not
exceed $50,000 as aggregated with all participant loans from other
employer qualified plans, reduced by the excess of the participant's
highest outstanding participant loan balance during the 12-month period
ending on the date of the loan over the participant's current
outstanding participant loan balance on the date of the loan. A
participant may not request a loan for less than $1,000.00.
3. EVIDENCE AND TERMS OF LOAN. The Advisory Committee will
document every loan in the form of a promissory note signed by the
participant for the face amount of the loan, together with a
commercially reasonable rate of interest. The Advisory Committee will
determine the appropriate interest rate by obtaining at least one quote
from a financial institution, as chosen by the Advisory Committee, that
is in the business of lending money. The interest rate quote(s) must
take into account the term of the loan, the security on that loan, the
creditworthiness of the participant, whether the interest rate is
adjustable during the term of the loan, and the intended use of the loan
proceeds, if known, and must reflect a commercially reasonable rate for
the geographical region in which the participant lives. If participants
in the Plan live in different geographical regions, the Advisory
Committee may establish a uniform commercially reasonable interest rate
applicable to all regions based on information obtained from at least
one region in which participants live. The Advisory Committee must
reevaluate interest rates for new loans made more than one month since
the last loan made by the Plan.
A loan may provide a fixed rate of interest or an adjustable rate
of interest, as negotiated between the Advisory Committee and the
participant. The Advisory Committee will determine whether the interest
rate is commercially reasonable at the time it approves the loan and, in
the case of an adjustable rate loan, at the time of each scheduled
adjustment. A loan must provide at least quarterly payments under a
level amortization schedule, however, under this loan policy all loans
must include monthly payments through payroll deduction while the
participant is employed. The policy requires monthly payments if the
borrower is not employed.
The loan may permit a suspension of payments for a period not
exceeding one year which occurs during an approved leave of absence. The
Advisory Committee will fix the term for repayments of any loan,
however, in no instance may the term of repayment be greater than five
years, unless the loan qualifies as a home loan. The Advisory Committee
may fix the term for repayment of a home loan for a period not to exceed
30 years. A "home loan" is a loan used to acquire a dwelling unit which,
within a reasonable time, the participant will use as a principal
residence.
Participants should note the law treats the amount of any loan
(other than a "home loan") not repaid five years after the date of the
loan as a taxable distribution on the last day of the five year period
or, if sooner, at the time the loan is in default. If a participant
extends a non-home loan having a five year or less repayment term beyond
five years, the balance of the loan at the time of the extension is a
taxable distribution to the participant.
Reasonable administrative fees, including application and annual
maintenance fees, will be assessed to the borrowing participant's
account.
4. SECURITY FOR LOAN. A participant must secure each loan with an
irrevocable pledge and assignment of 50% of the nonforfeitable amount of
the borrowing participant's accrued benefit under the Plan or other
security (e.g., principal residence) the Advisory Committee accepts and
finds to be adequate, or both 50% of the participant's accrued benefit
and other security. The Advisory Committee may request the borrowing
participant to secure each loan with additional collateral acceptable to
the Advisory Committee or to substitute collateral given for the loan.
Generally, an irrevocable pledge and assignment of 50% of the
nonforfeitable amount of the borrowing participant's accrued benefit
will be the only security required unless the loan is a home loan.
5. FORM OF PLEDGE. If the participant secures the loan wholly or
partly with 50% of his vested accrued benefit, the pledge and assignment
of that portion of his accrued benefit will be in the form attached to
this Loan Policy.
6. DEFAULT/RISK OF LOSS. The Advisory Committee will treat this
loan in default if:
(a) any scheduled payment remains unpaid more than 90 days;
(b) the making or furnishing of any representation or
statement to the Plan by or on behalf of the participant which
proves to have been false in any material respect when made or
furnished;
(c) loss, theft, damage, destruction, sale or encumbrance to
or of any of the collateral, or the making of any levy seizure or
attachment thereof or thereon;
(d) death, dissolution, insolvency, business failure,
appointment of receiver of any part of the property of, assignment
for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency laws of, by or
against the participant.
The participant will have the opportunity to repay the loan, resume
current status of the loan by paying any missed payment plus interest
or, if distribution is available under the plan, request distribution of
the note. If the loan remains in default, the Advisory Committee has the
option of foreclosing on any other security it holds or, to the extent
a distribution to the participant is permissible under the Plan, offset
the participant's vested account balance by the outstanding balance of
the loan. The Advisory Committee will treat the note as repaid to the
extent of any permissible offset. Pending final disposition of the note,
the participant remains obligated for any unpaid principal and accrued
interest.
The Plan intends this loan program not to place other participants
at risk with respect to their interests in the Plan. In this regard, the
Advisory Committee will administer any participant loan as a participant
directed investment of that portion of the participant's vested account
balance equal to the outstanding principal balance of the loan. The Plan
will credit that portion of the participant's interest with the interest
earned on the note and with principal payments received by the
participant. The Plan also will charge that portion of the participant's
account balance with expenses directly related to the organization,
maintenance and collection of the note.
Dated this 30 day of November , 19 93 .
J. C. McGowan /s/
D. D. Jannette /s/
J. E. Thill /s/
ADVISORY COMMITTEE
EX-99.d
INTERSTATE POWER COMPANY
SUPPLEMENTAL RETIREMENT PLAN
TABLE OF CONTENTS
INTRODUCTION
ARTICLE I - FORMAT AND DEFINITIONS
Section 1.01 ------ Format
Section 1.02 ------ Definitions
ARTICLE II - PARTICIPATION
Section 2.01 ------ Active Participant
Section 2.02 ------ Cessation of Participation
ARTICLE III - BENEFITS
Section 3.01 ------ Normal Retirement Benefit Formula
Section 3.02 ------ Retirement Benefits
Section 3.03 ------ Death Benefits
Section 3.04 ------ Termination of Benefits
Section 3.05 ------ Termination for Cause
Section 3.06 ------ When Benefits Start
ARTICLE IV - PLAN FINANCING
ARTICLE V - DISTRIBUTION OF BENEFITS
Section 5.01 ------ Form of Distribution
Section 5.02 ------ Commercial Annuities
ARTICLE VI - TERMINATION OF PLAN
ARTICLE VII - ADMINISTRATION OF PLAN
Section 7.01 ------ Administration
Section 7.02 ------ Records
Section 7.03 ------ Information Available
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01 ------ Amendments
Section 8.02 ------ Employment Status
Section 8.03 ------ Rights to Plan Amounts
Section 8.04 ------ Nonalienation of Benefits
Section 8.05 ------ Facility of Payment
Section 8.06 ------ Construction
Section 8.07 ------ Word Usage
Section 8.08 ------ Binding Effect on Successor
INTERSTATE POWER COMPANY
SUPPLEMENTAL RETIREMENT PLAN
INTRODUCTION
Interstate Power Company ("Employer") is establishing the
Supplemental Retirement Plan ("Plan") for the purpose of providing
defined benefit retirement income supplement for a select group of
officers of the Employer. The providing of these supplemental benefits
is pursuant to a plan intended to be unfunded under applicable tax
provisions and other laws. The Plan has been designed as, and is
intended to be, an unfunded plan for purposes of the Employee Retirement
Income Security Act of 1974, as amended, and a non-qualified plan for
purposes of Section 401 of the Internal Revenue Code of 1986, as
amended. The Plan shall be effective April 30, 1990.
ARTICLE I
FORMAT AND DEFINITIONS
SECTION 1.01 -- FORMAT
Words and phrases defined in the Definitions section of Article I
shall have that defined meaning when used in this Plan, unless another
meaning is specified below. These words and phrases have an initial
capital letter to aid in identifying them as defined terms.
SECTION 1.02 -- DEFINITIONS
ACTIVE PARTICIPANT means a Participant who is actively partici-
pating in the Plan according to the provisions in the ACTIVE
PARTICIPANT SECTION of Article II.
ACTUARIAL EQUIVALENT means the equivalent value as determined by an
actuary, computed on the basis of reasonable and consistent factors
and assumptions.
AVERAGE PAY means the average of the highest consecutive 48 months
of total Compensation.
BENEFIT STARTING DATE means, for a Participant, the first day of
the first period for which an amount is payable as a stream of
income payments for life.
COMPENSATION means a Participant's wages as reported on IRS Form
W-2 for employment with the employer, and any amounts deferred
pursuant to agreements, separate from this Plan, between the
Participant and Employer.
EARLY RETIREMENT AGE means the date at which the Participant
reaches age 55.
EARLY RETIREMENT BENEFIT ADJUSTMENT FACTOR means the applicable
factor from the table below. This factor is calculated by
counting the number of years the Participant's Retirement Date
precedes his Normal Retirement Date.
Number of Years Retirement
Date precedes Normal
Retirement Date Factor
0 1.0000
1 .9333
2 .8667
3 .8000
4 .7333
5 .6667
6 .6333
7 .6000
8 .5667
9 .5333
10 .5000
More than 10 .0000
The above factors shall be prorated for a partial year (counting a
partial month as a complete month.
EARLY RETIREMENT DATE means the first day of any month before a
Participant's Normal Retirement Date which the Participant selects
for the start of his retirement benefit under both this Plan and
the qualified defined benefit plan (GA 903). This day shall be on
or after the date on which he ceases to be a Participant and the
date he reaches his Early Retirement Age.
EMPLOYER means Interstate Power Company. This will also include
any successor corporation or firm of the Employer which shall, by
written agreement, assume the obligations of this Plan.
EMPLOYMENT COMMENCEMENT DATE means the first day a Participant
begins working for the Employer.
ENTRY DATE means the date a Participant first enters the Plan as an
Active Participant.
FISCAL YEAR means the Employer's taxable year which ends on
December 31.
LATE RETIREMENT DATE means the first day of any month which is
after a Participant's Normal Retirement Date and on which
retirement benefits begin. If a Participant continues to work for
the Employer after his Normal Retirement Date, his Late Retirement
Date shall be the earliest first day of the month on or after he
ceases to be a Participant.
NORMAL FORM means a stream of income payments for life with no
death benefit.
NORMAL RETIREMENT AGE means the age at which the Participant's
right to receive a normal retirement benefit becomes non-
forfeitable. A Participant's Normal Retirement Age is age 65.
NORMAL RETIREMENT DATE means the earliest first day of the month on
or after the date the Participant reaches his Normal Retirement
Age. Unless otherwise provided in this Plan, a Participant's
retirement benefits shall begin on a Participant's Normal
Retirement Date if he has ceased to be an Participant on such date.
PARTICIPANT means any officer of the corporation that the Board of
Directors of the Employer determines by resolution is eligible for
the Plan.
PENSION BENEFIT means the benefit a participant may receive from
this Plan.
PLAN means the Supplemental Retirement Plan of the Employer as set
forth in this instrument, including any later amendments hereto.
PLAN ADMINISTRATOR means the person or persons who administer the
Plan. The Plan Administrator is the Employer.
PLAN YEAR means a period beginning on a Yearly Date and ending on
the day before the next Yearly Date.
REENTRY DATE means the date a former Active Participant reenters
the Plan.
RETIREMENT DATE means the date a retirement benefit will begin and
is a Participant's Early, Normal or Late Retirement Date, as the
case may be.
TRUST means the agreement of trust, called Interstate Power Company
Irrevocable Trust Agreement, 1990, between the Employer and Trustee
established for the purpose of holding and distributing the Trust
Fund under the provisions of the Plan.
TRUST FUND means the total funds held under the Trust for purpose
of providing benefits for the Participants. These funds result
from a transfer of general assets of the Employer made under the
Plan which are forwarded to the Trustee to be deposited in the
Trust Fund. In the event of the Employer's insolvency, assets in
the Trust Fund are subject to the claims of the Employer's general
creditors.
TRUSTEE means the trustee or trustees under the Trust. The term
Trustee as it is used in this Plan is deemed to include the plural
unless the context clearly indicates otherwise.
YEARLY DATE means April 30, 1990, and each following January 1.
ARTICLE I
PARTICIPATION
SECTION 2.01 -- ACTIVE PARTICIPANT
1. All officers of the Employer who meet the definition of
Participant in Section 1.02 above are eligible to participate
in this Plan. The Yearly Date on or after which an
Participant meets this definition is his Entry Date.
2. A former Participant may again become an Active Participant
(resume active participation in the Plan) on the Yearly Date
he again meets the definition of Participant. This date is
his Reentry Date.
There shall be no duplication of benefits for a Participant under this
Plan because of more than one period as an Active Participant.
SECTION 2.02 -- CESSATION OF PARTICIPATION
A Participant shall cease to be a Plan Participant on the date he
is no longer eligible for benefits under this Plan.
ARTICLE III
BENEFITS
SECTION 3.01 -- NORMAL RETIREMENT BENEFIT FORMULA
A Participant's normal monthly retirement benefit shall be one--
twelfth of 5% of Average Pay multiplied by his Early Retirement Benefit
Adjustment Factor.
SECTION 3.02 -- RETIREMENT BENEFITS
On a Participant's Normal Retirement date or Early Retirement Date,
his Pension Benefit under this Plan shall be distributed to him
according to the provisions of the DISTRIBUTION OF BENEFITS SECTION of
Article V.
SECTION 3.03 -- DEATH BENEFITS
There are no death benefits provided for under this plan.
SECTION 3.04 -- TERMINATION BENEFITS
A Participant who becomes inactive by reason of termination of
employment or otherwise prior to Early Retirement Age or death will not
be entitled to any benefits under this Plan.
A Participant who becomes inactive by reason of termination of
employment subsequent to Early Retirement Age and who chooses to receive
an early retirement benefit under the qualified plan will be entitled to
receive an Early Retirement Benefit under this Plan.
A Participant who becomes inactive by reason of termination of
employment subsequent to Early Retirement Age and who chooses to defer
receiving his retirement benefit under the qualified plan will not be
entitled to any benefits under this Plan until benefits under the
qualified plan commence.
SECTION 3.05 -- TERMINATION FOR CAUSE
Any Participant whose employment is terminated for just cause will
not be entitled to any benefits under this Plan. The determination as
to whether the condition of a termination for just cause exists shall be
the responsibility of the Board of Directors. Examples of just cause
include but are not limited to: embezzlement of company funds, fraud,
acts by the employee that cause harm to the company or its reputation.
This section shall not alter in any way the provisions of Section
8.02 of this Plan.
SECTION 3.06 -- WHEN BENEFITS START
Pension Benefits will begin at the Early Retirement Date or Normal
Retirement Date, but no earlier than the effective date of this Plan.
ARTICLE IV
PLAN FINANCING
In establishing this Plan and the Trust, the Employer agrees and
undertakes to make the Trust Fund subject to the claims of the
Employer's general creditors. The right of any Participant to payment
of benefits from the Employer's general assets shall be no greater than
that of any other general unsecured creditor of the Employer.
ARTICLE V
DISTRIBUTION OF BENEFITS
SECTION 5.01 -- FORM OF DISTRIBUTION
The only form of distribution is a stream of income payments for
life without death benefit.
SECTION 5.02 -- COMMERCIAL ANNUITIES
The Employer may, at its option, do one of the following:
(a) Purchase a commercial annuity contract from an insurance
company as a means of providing the pension benefit to the
Participant and transfer the annuity contract to the Trustee;
or
(b) Transfer sufficient cash to the Trustee so that the Trustee
can acquire the annuity contract; or
(c) Instruct the Trustee to use the cash value of any life
insurance contract on a Participant to acquire the annuity
contract.
The Employer, for administrative convenience, may make a
revocable direction to the insurance company to make any payments due
under such contract to the Participant. The existence of such an
annuity contract and payment arrangement does not constitute an
alteration of the fact that the benefit being distributed is being paid
from the general assets of the Employer with the right of any
Participant to receive such payment no greater than that of any other
creditor of the Employer.
ARTICLE VI
TERMINATION OF PLAN
The Employer expects to continue the Plan indefinitely but reserves
the right to terminate the Plan at any time.
Participants receiving Pension Benefits at the time of plan
termination will continue to receive those same benefits.
The Pension Benefit for a Participant not receiving Pension
Benefits at the time of plan termination shall be determined as
described in this Article VI. The single sum Actuarial Equivalent of
each Participant's Pension Benefit shall be calculated as of the
effective date of the Plan termination. Each Participant shall receive
an amount from the remaining Trust Fund, or the Employer at the
Employer's discretion, equal to the total Trust Fund multiplied by the
ratio of his single sum Actuarial Equivalent to the total single sum
Actuarial Equivalent of all Participants
ARTICLE VII
ADMINISTRATION OF PLAN
SECTION 7.01 -- ADMINISTRATION
Subject to the provisions of this article, the Plan Administrator
has complete control of the administration of the Plan. The Plan
Administrator has all the powers necessary for it to properly carry out
its administrative duties. Not in limitation, but in amplification of
the foregoing, the Plan Administrator has the power in its sole and
complete discretion to construe the Plan and to determine all questions
that may arise under the Plan, including all questions relating to the
eligibility of officers to participate in the Plan and the amount of
benefit to which any Participant may become entitled. The Plan
Administrator's decisions upon all matters within the scope of its
authority shall be final.
Unless otherwise set out in the Plan, the Plan Administrator may
delegate recordkeeping and other duties which are necessary to assist it
with the administration of the Plan to any person or firm which agrees
to accept such duties. The Plan Administrator shall be entitled to rely
upon all tables, valuations, certificates and reports furnished by the
consultant or actuary appointed by the Plan Administrator and upon all
opinions given by any counsel selected or approved by the Plan
Administrator.
The Plan Administrator shall receive all claims for benefits by
Participants or former Participants. The Plan Administrator shall
determine all facts necessary to establish the right of any claimant
to benefits and the amount of those benefits under the provisions of the
Plan. The Plan Administrator may establish rules and procedures to be
followed by claimants in filing claims for benefits, in furnishing and
verifying proofs necessary to determine age, and in any other matters
required to administer the Plan.
SECTION 7.02 -- RECORDS
All acts and determinations of the Plan Administrator shall be duly
recorded. All these records, together with other documents necessary
for the administration of the Plan, shall be preserved in the Plan
Administrator's custody.
Writing (handwriting, typing, printing), photostating, photo-
graphing, microfilming, magnetic impulse, mechanical or electrical
recording or other forms of data compilation shall be acceptable means
of keeping records.
SECTION 7.03 -- INFORMATION AVAILABLE
Any Participant in the Plan may examine copies of this Plan. The
Plan Administrator shall maintain the Plan in its office, or in such
other place or places as it may designate. The Plan may be examined
during reasonable business hours. Upon the written request of a
Participant receiving benefits under the Plan, the Plan Administrator
will furnish him with a copy of the Plan.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 -- AMENDMENTS
The Employer may amend this Plan at any time. An amendment may not
diminish or adversely affect any accrued interest or benefit of
Participants.
SECTION 8.02 -- EMPLOYMENT STATUS
Nothing contained in this Plan gives a Participant the right to be
retained in the Employer's employ, nor shall the existence of this Plan
or the operation of its provisions interfere with the Employer's right
to discharge any Participant.
SECTION 8.03 -- RIGHTS TO PLAN AMOUNTS
No Participant shall have any rights to benefits payable under this
Plan upon termination of his employment or otherwise except as
specifically provided under this Plan, and then only to the extent of
the benefits payable to such Participant in accordance with Plan
provisions.
Any final payment or distribution of Pension Benefits under this
Plan to a Participant or his legal representative under the Plan
provisions shall be in full satisfaction of all claims against the Plan,
the Plan Administrator, the Employer, the Trustee, and any and all
persons or entities acting on behalf of them or any of them arising
under, in connection with, or by virtue of the Plan.
SECTION 8.04 -- NON-ALIENATION OF BENEFITS
Benefits payable under the Plan are not subject to the claims of
any creditor of any Participant or spouse. A Participant or spouse does
not have any rights to alienate, anticipate, commute, pledge, encumber
or assign any of such benefits.
SECTION 8.05 -- FACILITY OF PAYMENT
If any Participant is physically or mentally incapable of giving a
valid receipt for any payment due him and no legal representative has
been appointed for such person, the Plan Administrator may direct the
Insurer or the Trustee to make such payment to any person or institution
maintaining such Participant. The payment to such person or institution
shall be a valid and complete discharge of any liability for the making
of such payment under the provisions of the Plan.
SECTION 8.06 -- CONSTRUCTION
The validity of the Plan or any of its provisions is determined
under and construed according to federal law and, to the extent
permissible, according to the laws of the state in which the Employer
has its principal office.
SECTION 8.07 -- WORD USAGE
The masculine gender, where used in this Plan, shall include the
feminine gender and the singular words as used in this Plan may
include the plural, unless the context indicates otherwise.
SECTION 8.08 -- BINDING EFFECT ON SUCCESSOR
The Plan shall be binding upon and inure to the benefit of any
successor to the Employer or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and any
subsequent successor thereto. In no event shall such merger,
consolidation, reorganization, transfer of assets or other similar
transaction suspend or delay the rights of any Participant to receive
benefits hereunder.
INTERSTATE POWER COMPANY
A Delaware Corporation
City, State
Dated 10/08/1990 By W. H. Stoppelmoor /s/
Title President
EX-99.e
INTERSTATE POWER COMPANY
AMENDED DEFERRED COMPENSATION PLAN
ARTICLE I
Purpose
The purpose of this Plan is to provide for deferment of payment
of salaries and director's fees of certain officers and directors of
the Company.
ARTICLE II
Definitions
(a) "Company" means Interstate Power Company.
(b) "Executive Committee" means the committee established by the
Board of Directors of the Company pursuant to Article V of the By-Laws
of the Company.
(c) "Officer" means any person, who is an officer of the Company
as defined in Article VI of the By-Laws of the Company, (whether or
not he is also a director thereof), who is employed by the Company on
a full-time basis, and who is compensated for such employment by a
regular salary.
(d) "Director" means any person duly elected, qualified and
acting as such pursuant to the provisions of Article IV of the By-Laws
of the Company.
(e) "Compensation" shall include whatever salary or director's
fees or other compensation may be payable to a participant for
services rendered to the Company.
(f) "Participant" means an officer or director of the Company a
portion of whose compensation or fees is deferred under this Plan.
(g) "Retirement" means a severance from the Company's employment
upon or after attainment of an officer's "Retirement Date" as said
term is defined in the Company's Restated Retirement Plan, or
Retirement Policy for Directors, or severance for permanent disability
at any age.
(h) "Termination Date" shall mean the date of a Participant's
severance from employment or directorship with the Company by death,
retirement, resignation, discharge, or otherwise.
ARTICLE III
Administration
(a) The Executive Committee appointed by the Board of Directors
of the Company shall administer, construe, and interpret this Plan.
No member of the Executive Committee shall be liable for any act done
or determination made in good faith.
(b) Any officer or director of the Company who elects to have
any portion of his or her compensation or fees deferred in accordance
with the provisions of this Plan shall give written notice of such
election to the Executive Committee not less than sixty days prior to
the start of a regular compensation period (monthly or other period as
applicable) of any year during the period this Plan is in effect,
specifying the portion of his or her salary or fees desired by him or
her to be deferred during the specified regular compensation period.
The Executive Committee shall, before the beginning of said
compensation period following receipt of such notice, determine, in
its absolute discretion, the portion of salary or fees to be deferred
during said period, not exceeding the amount specified in such notice.
After such election by an officer or director and such determination
by the Executive Committee has been made as aforesaid, the amount of
deferred compensation or fees so determined shall thereafter continue
to be deferred, without necessity of any further action by said
officer or director or committee, unless and until said officer or
director or said committee shall give sixty days written notice prior
to the commencement of any such regular compensation period of either
a change in the amount, or discontinuance, of such deferred
compensation, effective with the commencement of said specified
regular compensation period.
(c) The construction and interpretation by the Executive
Committee of any provision of this Plan shall be final and conclusive.
It shall determine, subject to the provisions of this Plan:
(i) The officers or directors of the Company who shall
participate in the Plan from time to time; and
ii) The amount of each Participant's compensation to be
deferred.
(d) The Executive Committee may, in its discretion, delegate its
routine administrative duties to an officer or employee, but may not
delegate its authority to construe and interpret this Plan or make the
determinations specified in Items (i) and (ii) of paragraph (c) of
this Article III.
ARTICLE IV
Establishment of Special Deferred Compensation Ledger
The Company shall set up an appropriate record, hereinafter
called the Special Deferred Compensation Ledger, and thereafter from
time to time enter therein the name of each Participant, the amounts
of salary and fees deferred, the period or periods of such deferral
and computations of interest thereon. Interest on each account shall
be credited monthly.
ARTICLE V
Credits to the Accounts of Participants
The Company shall credit to each Participant's account in the
Special Deferred Compensation Ledger throughout the term of his or her
employment or directorship with the Company, amounts equal to the
amount of his or her compensation which are deferred in accordance
with this Plan, plus interest thereon at the following monthly rates:
Beginning October 1, 1983 and for each month thereafter the monthly
interest rate for the following month shall be the average yield for
the previous two week trading period (as published regularly in the
Wall Street Journal) of the Treasury Bonds, Notes and Bills maturing
30-months forward from the month in which the interest is to be
credited.
ARTICLE VI
Payments of Benefits
(a) Upon severance of any Participant from employment or
directorship with the Company there shall be paid to him or her, or in
the event of his or her death, to the person or persons designated
under the provisions of paragraph (b) of this Article VI, sums of cash
as herein provided for. The aggregate amounts then standing to his or
her credit in the Special Deferred Compensation Ledger, inclusive of
the additional sum equivalent to interest at the monthly rates set
forth in Article V on the unpaid installments, will be paid in one
lump sum payment or over a period of 60 or 120 months, as specified by
the Participant withln the 60-day period immediately preceding the
Participant's termination date. In the event of the Participant's
death, said aggregate amounts will be paid in one lump sum payment or
over a period of 60 or 120 months, under the provisions of paragraph
(b) of this Article VI. The first such payment is to be made within
one month immediately following such death or the Participant's
Termination Date as an officer or director, or in the case of a person
serving in both capacities, the Termination Date of either position,
that is, as an officer or as a director with the Company.
In the event that a Participant or, after the Participant's death,
his or her beneficiary as designated pursuant to paragraph (b) of this
Article VI, incurs a severe financial hardship, the Committee, in its
sole discretion, may revise the payment schedule to the extent
necessary to eliminate the severe financial hardship. The severe
financial hardship must have been caused by an accident, illness, or
event beyond the control of the Participant or, if applicable, his or
her beneficiary.
(b) Each person upon becoming a Participant shall file with the
Secretary of the Company a notice in writing designating one or more
Beneficiaries to whom payments otherwise due the Participant shall be
made in the event of his or her death while in the employment or
directorship of the Company or after severance therefrom.
Furthermore, the notice must specify whether the designated
Beneficiary or Beneficiaries will be paid in one lump sum or over a
period of 60 or 120 months in the event of the Participant's death.
In the event that more than one designated Beneficiary is named, the
Participant must specify the manner in which the payments are to be
divided amongst the Beneficiaries. The Participant shall have the
right to change the Beneficiary or Beneficiaries from time to time;
provided, however, that any change shall not become effective until
received in writing by the Secretary of the Company.
ARTICLE VII
Limitation of Rights
Nothing contained in this Plan can be construed to:
(a) Give any officer or director of the Company any right to
have any salary or director's fees deferred other than in the final
discretion of the Executive Committee;
(b) Limit in any way the right of the Company to terminate a
Participant's employment or directorship with the Company at any time;
or
(c) Be evidence of any agreement or understanding, express or
implied, that the Company will employ or elect a Participant as an
officer or director in any particular position or at any particular
rate or remuneration.
ARTICLE VIII
Non-Alienation of Benefits
No right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge the same shall be void. 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 such
benefit.
If any Participant or Beneficiary hereunder should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge any right or benefit hereunder, then such right or
benefit shall, in the discretion of the Executive Committee, cease and
terminate, and in such event, the Company may hold or apply the same
or any part thereof for the benefit of the Participant or beneficiary,
his or her spouse, children or other dependents, or any of them, in
such manner and in such proportion as the Executive Committee may deem
proper.
ARTICLE IX
Amendment or Termination of Plan
(a) The Board of Directors may amend or terminate this Plan at
any time.
(b) Any amendment or termination of this Plan shall not
adversely affect the rights of Participants or Beneficiaries to
payments in accordance with Article VI hereof of amounts standing to
the credit of Participants in the Special Deferred Compensation Ledger
at the time of such amendment or termination.
ARTICLE X
Effective Date of Plan
This Plan shall become operative and in effect as of November 20,
1969, but only with respect to salaries and director's fees deferred
in accordance with the provisions hereof payable from and after
January 1, 1970.
As amended thru January 30, 1990.
EX-99.f
INTERSTATE POWER COMPANY
IRREVOCABLE TRUST AGREEMENT 1990
THIS TRUST AGREEMENT is effective April 30, 1990, by and between
Interstate Power Company, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), and American Trust and
Savings Bank (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company, by resolution of its Board of Directors, has
adopted the Interstate Power Company General Creditor
Supplemental Retirement Plan (the "Plan", which Plan and all the terms
defined therein are hereby incorporated by reference) for the benefit of
Participants under the Plan and, in order to aid in the proper
execution of the Plan, has authorized the simultaneous adoption of this
Trust Agreement; and
WHEREAS, the Trustee has agreed and does agree to the terms and
conditions of this Trust Agreement;
NOW, THEREFORE, the premises considered, it is agreed by and
between the Company and the Trustee, as follows:
ARTICLE I
Trust and Definitions
1.1 Trust. The Company hereby establishes with the Trustee a trust
(the "Trust") for the benefit of Participants under the Plan, to be
known as the Interstate Power Company Irrevocable Trust
Agreement, consisting of (i) such contributions as have been or
shall be received by the Trustee from the Company, or any successor
to the Company, or any affiliate or subsidiary of the Company that
has adopted the Plan and that adopts the Trust (separately or
jointly known as the "Company"), in accordance with the
provisions of the Plan, and (ii) any net income on such
contributions. The Trust is intended to be a grantor trust as
contemplated under Section 671 of the Internal Revenue Code of
1986, and the Trust Agreement shall be construed accordingly. The
Trustee shall receive such contributions in trust and shall hold
such contributions and the income thereon separate and apart from
other funds of the Company to be used exclusively for the purposes
herein set forth, shall hold and administer the same as a single
Trust Fund, shall invest and reinvest the same without
distinction between principal and income, and shall pay over and
distribute the same in accordance with the provisions of the Trust
Agreement and the Plan.
1.2 Effective Date. The effective date of the Trust is April 30,
1990.
ARTICLE II
Payments to the Trust
Receipt of Payments. The Company may from time to time remit
contributions in cash or annuity or insurance contracts in trust to the
Trustee. Premium payments made by the Company to annuity or insurance
contracts registered in the name of the Trustee shall be considered
cash remitted to the Trustee. Such contributions, together with any
income thereon, shall be held in trust on behalf of Participants under
the Plan. The Trustee shall be accountable therefore to the Company,
but shall have no right or duty to enforce collection of any
contribution from the Company.
ARTICLE III
Powers and Duties of the Trustee
3.1 General. The Trustee shall hold the Trust Fund subject to the
terms and purposes of the Plan and the Trust.
3.2 Standard. The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims.
3.3 Liability. The Trustee shall incur no liability to anyone for any
action taken pursuant to a direction, request or approval by the
Company that is contemplated by and in compliance with the terms of
the Trust Agreement, or for any action or omission of the Company
with respect to the performance of its duties and obligations under
the Plan. The Trustee shall not be required to undertake or defend
any litigation arising in connection with this Trust Agreement,
unless the Trustee be first indemnified by the Company against its
prospective costs, expenses and liabilities, and the Company
hereby agrees to indemnify the Trustee for such costs, expenses and
liabilities. The Trustee shall be indemnified and held harmless by
the Company against liability or losses occurring by reason of any
act or omission of the Trustee under this Trust Agreement, unless
such act or omission is due to the Trustee's own gross
negligence or willful nonfeasance, malfeasance, or misfeasance.
3.4 Taxes and Expenses.
(a) Any federal, state or local taxes which may be imposed upon
the trust fund, or any part thereof, or upon the income
thereon, shall be paid by the Company.
(b) The Company shall pay to the Trustee all reasonable expenses
properly and actually incurred by the Trustee in the
administration of this Trust, including but not limited
to accounting, insurance (including fiduciary insurance
that provides for recourse against the fiduciary),
consulting and legal expenses, and reasonable
compensation for services performed by the Trustee as the
Trustee hereunder as shall be agreed upon from time to time by
the Company and Trustee in writing.
3.5 Tenure in Office. Any Trustee may resign upon giving thirty (30)
days written notice to the Company. Upon thirty (30) days written
notice, unless a shorter period is agreed to, the Company shall
have the power to remove any Trustee for any reason.
3.6 Successor Trustee. The Company shall have the power to appoint
a successor Trustee. The appointment of a successor Trustee
shall become effective upon acceptance in writing of such
appointment by the successor Trustee. The successor Trustee shall
be a corporate Trustee and shall have no liability for events
occurring prior to the time the successor Trustee assumed its
Trustee duties hereunder. Every successor Trustee appointed to
and accepting a trusteeship hereunder shall have all the
rights, title, power, duties, exemptions and limitations of
the original Trustee.
ARTICLE IV
Investment Powers
4.1 Investments. The Trustee shall, as directed by the Company,
invest and reinvest the principal and income of the Trust Fund and
keep the Trust Fund invested, without distinction between principal
and income, in the following:
(a) annuity or insurance contracts applied for by either the
Company or the Trustee, registered in the name of the Trustee
and issued by an insurance and annuity company organized under
the laws of any state, district or commonwealth of the United
States of America.
(b) insured trust money market accounts.
4.2 Additional Powers. The Trustee, when specifically directed by
the Company, shall have the following additional powers and
authority with respect to property constituting a part of the Trust
Fund:
(a) To invest in bonds, notes, bills, or other obligations insured
or guaranteed as to principal and interest by the United
States of America or any agency thereof.
(b) To invest in collective investment funds maintained by the
Trustee .
(c) To sell, exchange or transfer any such property at public or
private sale for cash or on credit.
(d) To commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to
settle, compromise or submit to arbitration, any claims, debts
or damages due or owing to or from the Trust.
(e) To exercise, personally or by general or by limited power of
attorney, any right, including the right to vote, appurtenant
to any securities or other property held by it any time.
(f) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation.
(g) To transfer, convert, terminate, exchange or cash in any
insurance contract or annuity contract.
(h) To exercise, generally, any of the powers which an individual
owner might exercise in connection with property held by the
Trust Fund, and to do all other acts that the Trustee may deem
necessary or proper to carry out any of the powers set forth
herein or otherwise in the best interests of the Trust Fund.
4.3 The Company plans on acquiring an annuity contract for each
participant who is entitled to benefits under the Plan at the time
of the participant's retirement. The size of the annuity contract
will be sufficient to pay the monthly benefit due to the
participant under the Plan. Company will acquire an annuity
contract either directly and then transfer the annuity contract to
the Trustee or transfer sufficient cash to the Trustee so that the
Trustee can acquire the annuity contract or instruct Trustee to use
the cash value of any life insurance contract on participant to
acquire the annuity contract.
ARTICLE V
Accounts and Records
5.1 Records. The Trustee shall keep accurate and detailed records of
all investments, receipts, disbursements, and all other
transactions required with regard to the general account, including
such specific records as shall be agreed upon in writing between
the Company and the Trustee. All such accounts, books and records
shall be open to inspection and audit at all reasonable times by
the Company and by Participants.
5.2 Reports.
(a) Within sixty (60) days after the end of each plan year and
within sixty (60) days after the removal or resignation of the
Trustee, the Trustee shall render a written report to the
Chairman of the Board of Directors of Company containing a
complete accounting showing the total assets in the Trust as
of the latest Valuation Date and the fair market value placed
on each asset as of that date, as well as a statement of
purchases, sales and any investment charges and all income,
expenses, and disbursements since the last such report. Such
report shall be in such form and contain such other
information as shall be required in writing by the Chairman of
the Board of Directors of Company.
(b) The approval of the Chairman of the Board of Directors of the
Company or the lack of written objection within ninety (90)
days after submission of any report or accounting by the
Trustee shall be a complete release and discharge of the
Trustee as to the information contained therein, unless the
Trustee has breached its fiduciary duty in the preparation of
such report or accounting.
5.3 Valuation. The Trustee shall value all assets of the Trust Fund
at least annually on the last day of December each year, or on such
other day as is mutually agreed to by the Company and the Trustee
(the "Valuation Date").
ARTICLE VI
Payments From the Trust Fund
6.1 Payments Generally. The Trustee shall make payments out of the
Trust Fund to Participants in such manner and in such amounts as
are required under the Plan or the Trustee can make a revocable
direction to an annuity company to make payments directly to a
Participant. If the Trustee has authorized an annuity company to
make payments directly, Trustee shall have no liability to Company
or Participant for any payments which should have been made by such
annuity company.
6.2 Payments by Company. If the Trust Fund or any annuity contract is
not sufficient to make payments to Participants in accordance with
the Plan, the Company shall make the balance of each such payment
as it falls due.
6.3 Payments Only Under the Plan. Except as provided in Section 8.1 of
the Trust Agreement, the Company shall have no right or power to
direct the Trustee to return any assets of the Trust to the Company
or to divert any assets of the Trust to any purpose other than the
payment of benefits in accordance with the Plan.
ARTICLE VII
Trust Fund Subject to Creditors
7.1 Trust Assets. All assets of the Trust shall be subject to the
respective claims of the general creditors of the Company but only
under circumstances in which the Company has filed for bankruptcy,
has been placed in bankruptcy by the Company's creditors, or is
considered insolvent for purposes of the laws of the State of
Delaware such that the assets of the Company prove insufficient to
meet its current financial obligations as they become due.
7.2 Insolvency of the Company. The Chairman of the Board of Directors
of the Company shall have the duty to notify the Trustee
immediately in the event the Company reaches the point of
insolvency, files for bankruptcy, or is placed in bankruptcy by the
Company's creditors. The Trustee shall have no duty to determine
whether the company is insolvent or bankrupt and shall only follow
the directions of the Chairman of the Board of Directors of the
Company.
7.3 Distribution of Trust Assets to Creditors. Where the Company has
filed for bankruptcy, is placed in bankruptcy by the Company's
creditors, or is considered insolvent, the Trustee shall
discontinue payments of benefits under the Plan and shall notify
annuity companies to do the same and shall hold for the benefit of
the Company's creditors all cash and other assets then held in the
Trust Fund, after deduction of any fees, expenses or taxes properly
due and payable from the Trust Fund. The Trustee shall deliver
assets of the Trust to satisfy claims of the Company's creditors,
as directed by a court of competent jurisdiction. The Trustee
shall resume or cause to be resumed payments of benefits in
accordance with the Plan only after the Trustee has been notified
by the Chairman of the Board of Directors of the Company that the
Company is no longer insolvent or in bankruptcy.
ARTICLE VIII
Amendment and Termination
8.1 Termination. The Trust shall be irrevocable and shall not
terminate until the date on which no Participant is entitled to any
payment under Article VI hereof. Upon such termination of the
Trust, any assets remaining in the Trust shall be returned to the
Company.
8.2 Amendment. The Company hereby expressly waives all rights and
powers to amend this Trust Agreement or alter the Trust hereby
created in whole or in part, except by a written instrument
executed by the Company and Trustee and consented to by the
Participants. Under no circumstances, however, may the Trust or
Trust Agreement be altered or amended to make the Trust revocable.
The annuity or insurance company shall not be required to look into
the terms of this Trust or question any action of the Trustee, nor
shall it be responsible to see that any action of the Trustee is
authorized. The annuity or insurance company shall act only upon
the written direction of the Trustee and shall be fully discharged
from any and all liability for any amount paid to the Trustee or
paid in accordance with the direction of the Trustee or for any
change made or action taken upon such direction; and shall not be
obligated to see that any money paid by it to the Trustee or to any
person shall be properly distributed or applied. Any instrument
executed by the company shall be without liability in taking,
permitting, or omitting any action on the faith of any such
instrument and shall incur no liability or responsibility for doing
so.
ARTICLE IX
Miscellaneous
9.1 No Assignment. Except to the extent required by the Plan or by
applicable law, the interest of Participants in the Trust shall not
be subject in any way to alienation, sale, transfer, assignment,
pledge, attachment, garnishment, execution or encumbrance of any
kind, or to garnishment, attachment, levy or execution on any kind
for the debts or defaults of the Trustee or of any person, natural
or legal, having an interest in the Trust; any attempt to
accomplish the same shall be void.
9.2 Governing Law and Severability. The validity and construction of
any provision of this Trust shall be governed by the laws of the
State of Iowa, except as provided in Section 7.1. If any provision
of this Trust Agreement shall be declared invalid or unenforceable
by a court of competent jurisdiction, the remaining provisions
hereof shall remain valid and shall continue in effect.
9.3 Binding Effect on Successor. This Trust Agreement shall be binding
upon and inure to the benefit of any successor to the Company or
its business as the result of merger, consolidation,
reorganization, transfer of assets or otherwise and any subsequent
successor thereto. In no event shall any such merger,
consolidation, reorganization, transfer of assets or other similar
transaction suspend or delay the rights of any Participant to
receive benefits hereunder.
9.4 Participant's Rights. A Participant shall have no right, claim, or
other cause of action against the Trustee or the Trust, except to
the extent necessary to enforce the Participant's rights under the
Plan. All assets held in the Trust shall at all times be subject to
the terms of the Trust, and distribution of assets shall be made
solely pursuant to the terms of the Trust.
9.5 Reversion to the Company. No provision of the Plan nor any
amendment shall cause any of the assets of the Trust to revert to
the Company except as follows:
(a) Trustee can assign to Company any insurance contract on the
life of an individual who is no longer a Participant or for
whom a separate annuity contract has been purchased; or
(b) If a Participant dies, any sum received by Trustee on any
annuity contract or insurance contract acquired on the
Participant who died shall be distributed to Company; or
(c) Any other assets remaining after all liabilities to
Participants have been satisfied, shall be distributed to the
Company.
9.6 Treatment of Payments. Any amount distributed from this Trust or
as directed by Trustee shall not be deemed salary or other
compensation to the Participant for the purpose of computing
benefits to which the Participant may be entitled under any
qualified retirement plan or other arrangement of the Company for
the benefit of employees, except as may be otherwise specified in
such plan or arrangement.
9.7 No Right to Participate. No person shall have any claim or right
to become a Participant under the Plan by reason of this Trust
Agreement.
9.8 General Undertaking. All parties to this Trust and all persons
claiming any interest whatsoever hereunder agree to perform any and
all acts and execute any and all documents and papers which may be
necessary or desirable for the carrying out of the Trust or any of
its provisions .
9.9 Masculine, Feminine, Singular and Plural. The masculine shall be
read in the feminine, the singular in the plural, and vice versa,
wherever the context shall so require.
9.10 Notices. Notices, accounting, and reports required to begiven by
the Trustee or the Company may be given by personal delivery or by
certified mail (return receipt requested) addressed to the party
involved at the last address of such party recorded on the general
address files of the Trustee or the company. If given by mail, the date
of mailing shall be deemed to be the date as of which the same was given
or furnished to the addressee. Any notice required under the Trust may
be waived in writing by the person entitled to such notice.
The foregoing instrument may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together
shall be deemed one instrument.
IN WITNESS WHEREOF, the Company has caused this Trust Agreement to be
executed by its duly authorized officer and the Trustee has caused this
Trust Agreement to be executed and accepted by its duly authorized
officer as of the year and day first above written.
INTERSTATE POWER COMPANY
Attest: Judith A. Palm /s/ By W. H. Stoppelmoor /s/
(SEAL) Title: President
TRUSTEE
Attest: Robert J. Donovan /s/ By: Leo J. Meier /s/
Title: Ex. V. Pres.
