SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-4117-1
IES UTILITIES INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0331370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IE Tower, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (319) 398-4411
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
Common Stock, $2.50 par value 13,370,788 shares
<PAGE>
IES UTILITIES INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Financial Statements.
Balance Sheets -
March 31, 1994 and December 31, 1993 3 - 4
Statements of Income -
Three and Twelve Months Ended
March 31, 1994 and 1993 5
Statements of Cash Flows -
Three and Twelve Months Ended
March 31, 1994 and 1993 6
Notes to Financial Statements 7 - 15
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition. 16 - 25
Part II. Other Information. 26 - 28
Signatures. 29
<PAGE>
PART 1. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
BALANCE SHEETS
March 31,
1994 December 31,
ASSETS (Unaudited) 1993
(in thousands)
Utility plant, at original cost:
Plant in service -
Electric $ 1,718,712 $ 1,707,278
Gas 149,187 147,956
Other 75,456 75,845
1,943,355 1,931,079
Less - Accumulated depreciation 832,316 813,312
1,111,039 1,117,767
Leased nuclear fuel, net of
amortization 47,450 51,681
Construction work in progress 47,068 41,937
1,205,557 1,211,385
Current assets:
Cash and temporary cash investments 12,740 18,313
Accounts receivable -
Customer, less reserve 20,814 22,679
Other 8,543 10,330
Income tax refunds receivable 8,805 8,767
Production fuel, at average cost 11,281 14,338
Materials and supplies, at average
cost 27,718 26,861
Regulatory assets 8,623 6,421
Prepayments and other 20,247 31,502
118,771 139,211
Other assets:
Regulatory assets 168,729 149,978
Nuclear decommissioning trust funds 29,946 28,059
Other investments 3,606 2,821
Deferred charges and other 16,952 15,524
219,233 196,382
$ 1,543,561 $ 1,546,978
<PAGE>
BALANCE SHEETS (CONTINUED)
March 31,
1994 December
CAPITALIZATION AND LIABILITIES (Unaudited) 31, 1993
(in thousands)
Capitalization:
Common stock - par value $2.50 per share -
authorized 24,000,000 shares; 13,370,788
shares outstanding $ 33,427 $ 33,427
Paid-in surplus 279,042 279,042
Retained earnings ($18,209,000 restricted
as to payment of cash dividends) 196,577 188,862
Total common equity 509,046 501,331
Cumulative preferred stock - par value $50
per share - authorized 466,406 shares;
366,406 shares outstanding 18,320 18,320
Long-term debt 430,397 480,074
957,763 999,725
Current liabilities:
Short-term borrowings - 24,000
Capital lease obligations 13,831 15,345
Sinking funds and maturities 50,224 224
Accounts payable 40,336 47,179
Dividends payable 229 5,229
Accrued interest 11,118 9,438
Accrued taxes 42,345 39,763
Accumulated refueling outage provision 5,797 2,660
Adjustment clause balances 9,873 5,149
Provision for rate refund liability 9,085 8,670
Other 26,065 27,038
208,903 184,695
Long-term liabilities:
Capital lease obligations 33,619 36,336
Liability under National Energy Policy Act
of 1992 12,065 11,984
Environmental liabilities 18,932 9,130
Other 29,033 25,197
93,649 82,647
Deferred credits:
Accumulated deferred income taxes 241,461 237,464
Accumulated deferred investment tax credits 41,785 42,447
283,246 279,911
Commitments and contingencies (Note 6)
$ 1,543,561 $ 1,546,978
The accompanying Notes to Financial Statements are an integral part of
these statements.
<PAGE>
<TABLE>
STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric $ 123,918 $ 126,627 $ 547,812 $ 474,220
Gas 65,134 64,335 155,117 154,957
Steam 2,961 2,823 9,049 8,377
192,013 193,785 711,978 637,554
Operating expenses:
Fuel for
production 22,344 24,541 85,506 78,396
Purchased power 13,602 22,108 84,944 74,967
Gas purchased for
resale 49,116 48,229 110,010 112,023
Other operating
expenses 30,982 27,781 126,409 118,163
Maintenance 10,895 10,378 46,735 40,233
Depreciation and
amortization 19,160 17,522 71,045 65,613
Property taxes 10,177 8,900 37,703 32,504
Federal and state
income taxes:
Current 10,130 8,781 29,710 31,493
Deferred 1,097 771 16,236 (3,497)
Amortization of
investment tax credits (662) (696) (4,827) (2,781)
Miscellaneous taxes 1,489 1,352 5,023 5,104
168,330 169,667 608,494 552,218
Operating income 23,683 24,118 103,484 85,336
Other income and
deductions:
Allowance for
equity funds
used during
construction 540 114 1,250 1,726
Miscellaneous, net 914 558 2,604 2,630
1,454 672 3,854 4,356
Interest:
Long-term debt 9,490 9,109 35,307 36,384
Other 1,040 1,549 4,734 4,471
Allowance for
debt funds
used during
construction (337) (291) (1,194) (1,353)
10,193 10,367 38,847 39,502
Net income 14,944 14,423 68,491 50,190
Preferred and
preference
dividend requirements 229 229 914 1,456
Net income available
for common stock $ 14,715 $ 14,194 $ 67,577 $ 48,734
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,944 $ 14,423 $ 68,491 $ 50,190
Adjustments to reconcile net income to net cash flows
from operating activities -
Depreciation and amortization 19,160 17,522 71,045 65,613
Principal payments under capital lease obligations 4,427 3,418 12,439 12,976
Deferred taxes and investment tax credits 246 (34) 10,813 (6,174)
Amortization of deferred charges 269 197 1,020 1,040
Refueling outage provision 3,137 2,995 (4,747) 4,721
Allowance for equity funds used during construction (540) (114) (1,250) (1,726)
(Gain) loss on disposition of assets, net - (16) (639) (16)
Other - 26 - 307
Other changes in assets and liabilities -
Accounts receivable 3,652 (8,897) 4,234 (8,818)
Sale of utility accounts receivable - (7,210) 17,700 500
Production fuel 3,057 6,742 1,040 4,142
Accounts payable (5,299) (788) (2,869) (9,003)
Accrued taxes 2,544 (1,189) (6,748) 11,575
Provision for rate refunds 415 1,770 (1,536) 7,324
Adjustment clause balances 4,724 11,495 (405) 1,050
Gas in storage 10,090 11,980 (4,199) (69)
Deferred energy efficiency costs (3,399) (1,201) (11,961) (7,707)
Other (1,912) (1,128) 1,481 (9,468)
Net cash flows from operating activities 55,515 49,991 153,909 116,457
Cash flows from financing activities:
Dividends declared on common stock (7,000) (10,000) (28,300) (21,490)
Dividends declared on preferred and preference stock (229) (229) (914) (1,456)
Dividends payable (5,000) - - 229
Equity infusion from parent company - 50,000 - 50,000
Proceeds from issuance of long-term debt - - 119,400 33,400
Sinking fund requirements and reductions in
long-term debt and preferred and preference stock - - (79,624) (38,673)
Net change in short-term borrowings (24,000) (66,600) (25,960) 25,960
Principal payments under capital lease obligations (3,720) (3,567) (11,429) (11,725)
Other - (1) (1) (559)
Net cash flows from financing activities (39,949) (30,397) (26,828) 35,686
Cash flows from investing activities:
Construction and acquisition expenditures (18,992) (16,876) (115,328) (165,974)
Nuclear decommissioning trust funds (1,383) (1,383) (5,532) (5,532)
Proceeds from disposition of assets - 36 801 36
Other (764) (1,488) 4,092 1,680
Net cash flows from investing activities (21,139) (19,711) (115,967) (169,790)
Net increase (decrease) in cash and temporary cash
investments (5,573) (117) 11,114 (17,647)
Cash and temporary cash investments at beginning of period 18,313 1,743 1,626 19,273
Cash and temporary cash investments at end of period $ 12,740 $ 1,626 $ 12,740 $ 1,626
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 8,899 $ 9,961 $ 38,685 $ 41,247
Income taxes $ (39) $ 3,782 $ 4,690 $ 26,401
Noncash investing and financing activities -
Capital lease obligations incurred $ 196 $ 10,495 $ 4,308 $ 11,510
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1994
(1) GENERAL:
The interim Financial Statements have been prepared by IES Utilities
Inc. (the Company), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The Company is a wholly-owned
subsidiary of IES Industries Inc. (Industries) and was formed as a result of
the merger of Industries' former wholly-owned utility subsidiaries Iowa
Electric Light and Power Company (IE) and Iowa Southern Utilities Company
(IS), effective December 31, 1993. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of the Company, the Financial Statements include all adjustments,
which are normal and recurring in nature, necessary for the fair presentation
of the results of operations and financial position. Certain prior period
amounts have been reclassified on a basis consistent with the 1994
presentation.
It is suggested that these Financial Statements be read in conjunction
with the Financial Statements and the notes thereto included in the Company's
Form 10-K for the year ended December 31, 1993. The accounting and financial
policies relative to the following items have been described in those notes
and have been omitted herein because they have not changed materially through
the date of this report:
General
Summary of significant accounting policies (other than discussed in
Note 2)
Acquisition of Iowa service territory of Union Electric Company
Leases
Income taxes
Benefit plans (other than discussed in Note 2(a))
Preferred and preference stock
Debt (other than discussed in Note 5)
Estimated fair value of financial instruments (other than discussed in
Note 2(b))
Commitments
Jointly-owned electric utility plant
Segments of business
(2) NEW ACCOUNTING STANDARDS:
(a) Accounting for Postemployment Benefits -
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) 112, "Employers' Accounting for
Postemployment Benefits" and its adoption did not have a material effect on
the Company's financial position or results of operations. This statement
requires that benefits offered to former or inactive employees after
termination of employment, but before retirement, be accrued over the service
lives of the employees if all of the following conditions are met: 1) the
obligation relates to services already performed, 2) the employees' rights
vest, 3) the payments are probable, and 4) the amounts are reasonably
determinable. Otherwise, such obligations are to be recognized at the time
they become probable and reasonably determinable. Prior to 1994, the Company
had generally accounted for these obligations as they were paid.
(b) Accounting for Certain Investments in Debt and Equity Securities -
On January 1, 1994, the Company adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." This standard, which
applies to the Company's nuclear decommissioning trust funds at
March 31, 1994, requires that unrealized gains and losses on such investments
be included in the reported balance of such investments. At March 31, 1994,
the balance of the "Nuclear decommissioning trust funds" included in the
Balance Sheets included $0.2 million of unrealized gains on the investments
held in the trust funds. The reserve for decommissioning costs, included in
"Accumulated depreciation" in the Balance Sheets was increased by a
corresponding amount, and there was no effect on net income from adopting this
standard.
(3) RATE MATTERS:
In October 1991, IE applied to the Iowa Utilities Board (IUB) for an
increase in retail electric rates of $18.9 million annually, or 6.0%. The IUB
approved an interim rate increase of $15.6 million, annually, which became
effective in December 1991, subject to refund.
In December 1992, the IUB issued its "Order On Rehearing," which
affirmed its original decision approving an annual electric rate increase of
$7.9 million. IE appealed one issue in the IUB's Order to the Iowa District
Court (Court) and, in December 1993, the Court issued its decision upholding
the IUB's Order. The Company did not appeal the Court's decision to the Iowa
Supreme Court.
As a result of the Court's decision, a refund, including interest, of
$9.1 million is required at March 31, 1994. The refund will be completed in
the second quarter of 1994. There will be no effect on electric revenues and
net income when the refund is made because the Company has been reserving for
the effect of the refund.
(4) UTILITY ACCOUNTS RECEIVABLE:
The Company has entered into two agreements, one with limited recourse,
to sell undivided fractional interests of an aggregate of $65 million in its
pool of utility accounts receivable. At March 31, 1994, $53.2 million was
sold under the agreements. The agreements were scheduled to expire in June
and December 1994. In April 1994, the Company consolidated the agreements
into one agreement. The new agreement provides the Company the ability to
sell, with limited recourse, a maximum of $65 million in its pool of utility
accounts receivable and expires in 1999.
(5) SHORT-TERM DEBT:
At March 31, 1994, the Company had bank lines of credit aggregating
$67.7 million, of which $7.7 million was being used to support pollution
control obligations. Commitment fees are paid to maintain these lines and
there are no conditions which restrict the unused lines of credit. In
addition to the above, the Company has an uncommitted credit facility with a
financial institution whereby it can borrow up to $50 million. Rates are set
at the time of borrowing and no fees are paid to maintain this facility. At
March 31, 1994, there were no outstanding borrowings under this facility. The
Company also has a letter of credit in the amount of $3.4 million supporting
its variable rate pollution control obligations.
(6) CONTINGENCIES:
(a) Nuclear Insurance Programs -
The Price-Anderson Amendments Act of 1988 (1988 Act) provides the
Company with the benefit of $9.3 billion of public liability coverage
consisting of $200 million of insurance and $9.1 billion of potential
retroactive assessments from the owners of nuclear power plants. Based upon
its ownership of the Duane Arnold Energy Center (DAEC), under the 1988 Act the
Company could be assessed a maximum of $79 million per nuclear incident, with
a maximum of $10 million per year (of which the Company's 70% ownership
portion would be $55 million and $7 million, respectively) if losses relating
to the incidents exceeded $200 million. These limits are subject to
adjustments for inflation in future years.
Pursuant to provisions in various nuclear insurance policies, the
Company could be assessed retroactive premiums in connection with a future
accident at a nuclear facility owned by a utility participating in the
particular insurance plan. With respect to excess property damage and
replacement power coverages, the Company could be assessed annually a maximum
of $8.5 million and $1 million, respectively, if the insurer's losses relating
to accidents exceeded its reserves. While assessments may also be made for
losses in certain prior years, the Company is not aware of any losses in such
years that it believes are likely to result in an assessment.
(b) Environmental Liabilities -
At March 31, 1994, the Company's Balance Sheet reflects approximately
$24 million (including $5.2 million as current) of liabilities for
investigation and remediation of environmental issues. The recorded amount
represents the Company's estimate of the minimum aggregate amount that will be
incurred for investigation and remediation of the environmental issues, which
amount is substantially related to clean-up costs associated with certain of
the Company's former manufactured gas plant (FMGP) sites. In April 1994, the
Company received updated investigation reports on a number of sites, which
resulted in the increase in the recorded liability at March 31, 1994. The
physical investigations at some sites indicated a greater volume of
contaminated material needing treatment, and a greater volume of substances
requiring higher cost incineration, than was anticipated in prior estimates.
Prior estimates were based on investigations conducted at what were expected
to be representative sites. It is possible that future cost estimates will be
greater than the current estimates as further investigations are conducted and
as additional facts become known. The Company has not initiated the
investigation on two of the 27 sites of which it has been identified as a
Potentially Responsible Party (PRP), but intends to do so, and is continuing
work on sites requiring remediation.
The Company has been named as a PRP for the FMGP sites by either the
Iowa Department of Natural Resources (IDNR) or the Environmental Protection
Agency (EPA). The Company is working pursuant to the requirements of the IDNR
and EPA to investigate, mitigate, prevent and remediate, where necessary,
damage to property, including damage to natural resources, at and around the
27 sites in order to protect public health and the environment. Such
investigations are expected to be completed by 1999 and site-specific
remediations are anticipated to be completed within three years after the
completion of the investigations of each site. The Company may be required to
monitor these sites for a number of years upon completion of remediation.
Such monitoring costs are not included in the estimates above.
The Company is investigating the possibility of obtaining monies through
insurance coverage and third party cost sharing for FMGP investigation and
clean-up costs. The amount of shared costs, if any, can not be reasonably
determined and, accordingly, no potential sharing has been recorded at
March 31, 1994. Regulatory assets of approximately $24 million have been
recorded in the Balance Sheets, which reflect the future recovery that is
being provided through rates. Considering the recorded reserves for
environmental liabilities and the past rate treatment allowed by the IUB,
management believes that the clean-up costs incurred for these FMGP sites will
not have a material adverse effect on its financial position or results of
operations.
(c) Clean Air Act -
The Clean Air Act Amendments Act of 1990 (Act) requires emission
reductions of sulfur dioxide and nitrogen oxides to achieve reductions of
atmospheric chemicals believed to cause acid rain. The provisions of the Act
will be implemented in two phases with Phase I affecting two of the Company's
units beginning in 1995 and Phase II affecting all units beginning in the year
2000.
The Company expects to meet the requirements of the Act by switching to
lower sulfur fuels and through capital expenditures primarily related to fuel
burning equipment and boiler modifications. The Company estimates capital
expenditures at approximately $28 million, including $4 million in 1994, in
order to meet these requirements of the Act.
(d) National Energy Policy Act of 1992 -
The National Energy Policy Act of 1992 requires owners of nuclear power
plants to pay a special assessment into a "Uranium Enrichment Decontamination
and Decommissioning Fund." The assessment is based upon prior nuclear fuel
purchases and, for the DAEC, averages $1.4 million annually through 2007, of
which the Company's 70% share is $1.0 million. The Company is recovering the
costs associated with this assessment through its electric fuel adjustment
clauses over the period the costs are assessed. The Company's 70% share of
the future assessment, $13.7 million payable through 2007, has been recorded
as a liability in the Balance Sheets, including $1.6 million included in
"Current liabilities - Other," with a related regulatory asset for the
unrecovered amount.
(e) Federal Energy Regulatory Commission (FERC) Order No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992. Order 636, as
modified on rehearing, (1) requires the Company's pipeline suppliers to
unbundle their services so that gas supplies are obtained separately from
transportation service, and transportation and storage services are operated
and billed as separate and distinct services, (2) requires the pipeline
suppliers to offer "no notice" transportation service under which firm
transporters (such as the Company) can receive delivery of gas up to their
contractual capacity level on any day without prior scheduling, (3) allows
pipelines to abandon long-term (one year or more) transportation service
provided to a customer under an expiring contract whenever the customer fails
to match the highest rate and longest term (up to 20 years) offered to the
pipeline by other customers for the particular capacity, and (4) provides for
a mechanism under which pipelines can recover prudently incurred transition
costs associated with the restructuring process. The Company may benefit from
enhanced access to competitively priced gas supply and more flexible
transportation services as a result of Order 636. However, the Company will
be required to pay certain transition costs incurred and billed by its
pipeline suppliers as Order 636 is implemented.
The Company's three pipeline suppliers have filed tariffs with the FERC
implementing Order 636 and the pipelines have also made filings with the FERC
to begin collecting their respective transition costs. The Company began
paying the transition costs in November 1993, and has recorded a liability of
$5.5 million for such transition costs that have been incurred by the
pipelines to date, including $1.8 million expected to be billed through March
1995. While the magnitude of the total transition costs to be charged to the
Company cannot yet be determined, the Company believes any transition costs
the FERC would allow the pipelines to collect would be recovered from its
customers, based upon past regulatory treatment of similar costs by the IUB.
Accordingly, regulatory assets, in amounts corresponding to the liabilities,
have been recorded to reflect the anticipated recovery.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in the components
of net income and financial condition from the prior periods for IES Utilities
Inc. (the Company).
RESULTS OF OPERATIONS
The Company's net income available for common stock as compared to the
same periods last year increased $0.5 million and $18.8 million during the
three and twelve month periods ended March 31, 1994, respectively. The
Company's operating income decreased $0.4 million for the three month period
and increased $18.1 million during the twelve month period. Reasons for the
changes in the results of operations are explained in the following
discussion.
ELECTRIC REVENUES
Electric revenues decreased $2.7 million during the three month period,
and increased $73.6 million during the twelve month period. Electric Kwh
sales (excluding off-system sales) increased 5% and 19% for the same periods,
respectively. Weather normalized sales increased 4% and 18% during the three
and twelve month periods, respectively.
The twelve month Kwh sales increase is affected by the acquisition of
the Iowa service territory of Union Electric Company (UE), on December 31,
1992. (Excluding the effects of sales to the UE customers, Kwh sales
increased 9% during this period). Industrial sales continue to provide
significant sales growth. Sales to industrial customers increased 9% during
the three month period and 31% (largely related to the acquisition of the UE
territory) during the twelve month period.
The Company's electric tariffs include energy adjustment clauses (EAC)
that are designed to currently recover the costs of fuel and the energy
portion of purchased power billings to customers. The revenue decrease during
the three month period is because of lower recovery of fuel costs through the
EAC and lower off-system sales to other utilities, partially offset by
increased Kwh sales as discussed above. Revenues increased during the twelve
month period primarily because of the increased Kwh sales discussed above, as
well as higher fuel cost recoveries through the EAC. These increases were
partially offset by lower average unit prices resulting from a preponderance
of the Company's Kwh sales increases coming from lower margin industrial
customers, while Kwh sales increases to higher margin customer classes are
much lower than the average sales increase. Increased off-system sales to
other utilities contributed to the revenue increase to a lesser extent for the
twelve month period.
GAS REVENUES
Gas revenues increased $0.8 million and $0.2 million for the three and
twelve month periods ended March 31, 1994, respectively. The Company's
tariffs include purchased gas adjustment clauses (PGA) that are designed to
currently recover the cost of gas sold. Gas revenues increased for the three
month period because of increased gas costs recovered through the PGA,
partially offset by the effect of a sales decrease (including transported
volumes) of 3%. Gas revenues increased for the twelve month period because of
the effect of gas rate increases that became effective in September 1992,
substantially offset by lower gas costs recovered through the PGA and the
effect of a 3% sales decrease.
OPERATING EXPENSES
Fuel for production decreased $2.2 million during the three month period
primarily due to larger under collections of fuel costs through the EAC in
1994 as such under collections are recorded as reductions to fuel for
production expenses. This decrease was partially offset by increased Kwh
generation during the period. Fuel for production increased $7.1 million
during the twelve month period primarily because of increased Kwh generation
at the Company's fossil-fueled generating stations, partially offset by lower
generation at the Company's nuclear generating plant, the Duane Arnold Energy
Center (DAEC).
Purchased power decreased $8.5 million during the three month period
primarily because of a $5.2 million decrease in capacity charges relating to
the expiration, in April 1993, of the purchase power agreement with the City
of Muscatine. Lower energy purchases, primarily because of lower off-system
sales to other utilities, also contributed to the reduction in purchased power
costs during this period. Purchased power increased $10 million during the
twelve month period; energy purchases increased $15.3 million and capacity
charges decreased $5.3 million. The increased energy purchases are because of
increased Kwh sales. Decreased capacity charges relate to the expiration of
the Muscatine purchase power agreement, partially offset by higher capacity
costs relating to contracts associated with the acquisition of the UE
territory.
Gas purchased for resale increased $0.9 million for the three month
period and decreased $2.0 million for the twelve month period. The decrease
for the twelve month period is attributable to the lower dekatherm sales,
partially offset by higher prices.
Other operating expenses increased $3.2 million and $8.2 million for the
three and twelve month periods, respectively. The increase for both periods
is primarily attributable to increased labor and benefit costs and higher
information systems costs.
Maintenance expenditures increased $0.5 million and $6.5 million during
the three and twelve month periods, respectively, primarily because of
increased maintenance activities at the Company's fossil-fueled generating
stations and the DAEC.
Depreciation and amortization increased during both periods primarily
because of increases in utility plant in service. Depreciation and
amortization expenses for both years include a provision for decommissioning
the DAEC ($5.5 million annually), which is collected through rates.
Property taxes increased $1.3 million and $5.2 million during the three
and twelve month periods, respectively. These increases are primarily because
of increased property taxes associated with increases in assessed property
values, and, for the twelve month period, the acquisition of the UE service
territory.
The increase in total Federal and state income taxes for both periods is
because of an increase in pretax income and, for the twelve month period, an
increase of 1% in the statutory Federal income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily attributable to its
construction programs and debt maturities and sinking fund requirements. Cash
and temporary cash investments increased $11.1 million for the twelve month
period. Cash flows from operating activities for the twelve months ended
March 31, 1994 were approximately $154 million and were primarily used for
construction and acquisition expenditures and the payment of dividends.
It is anticipated that the Company's future capital requirements will be
met by both cash flows from operations and external financing. The level of
cash flows from operations is partially dependent upon economic conditions,
legislative activities, environmental matters and timely rate relief. See
Note 3 and Note 6 of the Notes to Financial Statements for a discussion of the
Company's rate cases and contingencies. Access to the long-term and
short-term capital and credit markets is necessary for obtaining funds
externally.
The Company's liquidity and capital resources will be affected by
environmental and legislative issues, including the ultimate disposition of
remediation issues surrounding the former manufactured gas plant (FMGP) issue,
the Clean Air Act as amended, the National Energy Policy Act of 1992, and
Federal Energy Regulatory Commission (FERC) Order 636, as discussed in Note 6
of the Notes to Financial Statements. Consistent with rate making principles,
management believes that the costs incurred for the above matters will not
have a material adverse effect on the financial position or results of
operations of the Company.
The Iowa Utilities Board (IUB) has adopted rules which mandate the
Company to spend 2% of electric and 1.5% of gas gross retail operating
revenues for energy efficiency programs. Energy efficiency costs in excess of
the amount in the most recent electric and gas rate cases are being recorded
as regulatory assets. At March 31, 1994, the Company had $21.9 million of
such costs recorded as regulatory assets. Under this mandate, the Company
will make its initial filing for recovery of these costs in the third quarter
of 1994, but will not likely begin recovering the costs until 1995.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program anticipates
expenditures of $150 million for 1994, of which approximately 44% represents
expenditures for electric transmission and distribution facilities, 18%
represents fossil-fueled generation expenditures and 10% represents nuclear
generation expenditures. The Company had construction and acquisition
expenditures of approximately $19 million for the three months ended
March 31, 1994. Substantial commitments have been made in connection with the
remaining anticipated expenditures.
The Company's levels of construction and acquisition expenditures are
projected to be $149 million in 1995, $144 million in 1996, $149 million in
1997, and $160 million in 1998. It is estimated that approximately 80% of
construction expenditures will be provided by cash from operating activities
(after payment of dividends) for the five year period 1994-1998.
Capital expenditure, investment and financing plans are subject to
continual review and change. The capital expenditure and investment programs
may be revised significantly as a result of many considerations including
changes in economic conditions, variations in actual sales and load growth
compared to forecasts, requirements of environmental, nuclear and other
regulatory authorities, acquisition opportunities, the availability of
alternate energy and purchased power sources, the ability to obtain adequate
and timely rate relief, escalations in construction costs and conservation and
energy efficiency programs.
LONG-TERM FINANCING
Other than periodic sinking fund requirements which the Company intends
to meet by pledging additional property, approximately $124 million of
long-term debt has scheduled maturities prior to December 31, 1998. The
Company intends to refinance the majority of the debt maturities with
long-term debt.
The Indentures pursuant to which the Company issues First Mortgage Bonds
constitute direct first mortgage liens upon substantially all tangible public
utility property and contain covenants that restrict the amount of additional
bonds that may be issued. At March 31, 1994, such restrictions would have
allowed the Company to issue $266 million of additional First Mortgage Bonds.
The Company has received authority from the FERC to issue $250 million of
First Mortgage Bonds and is currently authorized by the SEC to issue
$50 million of long-term debt under an existing registration statement.
The Company's Articles of Incorporation authorize and limit the
aggregate amount of additional shares of Cumulative Preferred Stock and
Cumulative Preference Stock which may be issued. At March 31, 1994, the
Company could have issued 700,000 shares of Cumulative Preference Stock and
100,000 additional shares of Cumulative Preferred Stock.
The Company's capitalization ratios at March 31, 1994 and March 31, 1993
were as follows:
Long-term debt 48%
Preferred stock 2
Common equity 50
100%
The 1994 ratios include $50 million of long-term debt that is due
in less than one year because it is the Company's intention to
refinance the debt with long-term issues.
SHORT-TERM FINANCING
For interim financing, the Company is authorized by the FERC to issue,
through 1994, up to $125 million of short-term notes. This availability of
short-term financing provides flexibility in the issuance of long-term
securities. At March 31, 1994, the Company had no outstanding short-term
borrowings.
The Company had agreements with separate financial institutions to sell
undivided fractional interests aggregating $65 million in its pool of utility
accounts receivable. At March 31, 1994, $53.2 million had been sold under the
agreements. In April 1994, the Company consolidated the agreements into one
agreement. The new agreement provides the Company the ability to sell, with
limited recourse, a maximum of $65 million in its pool of utility accounts
receivable and expires in 1999.
At March 31, 1994, the Company had bank lines of credit aggregating
$67.7 million, of which $7.7 million was being used to support pollution
control obligations. Commitment fees are paid to maintain these lines and
there are no conditions which restrict the unused lines of credit. In
addition to the above, the Company has an uncommitted credit facility with a
financial institution whereby it can borrow up to $50 million. The Company
also has a letter of credit in the amount of $3.4 million supporting its
variable rate pollution control obligations.
ENVIRONMENTAL MATTERS
At March 31, 1994, the Company's Balance Sheet reflects approximately
$24 million of liabilities for investigation and remediation of environmental
issues. The recorded amount represents the Company's estimate of the minimum
aggregate amount that will be incurred for investigation and remediation of
the environmental issues, which amount is substantially related to clean-up
costs associated with certain of the Company's former manufactured gas plant
(FMGP) sites. In April 1994, the Company received updated investigation
reports on a number of sites, which resulted in the increase in the recorded
liability at March 31, 1994. The physical investigations at some sites
indicated a greater volume of contaminated material needing treatment, and a
greater volume of substances requiring higher cost incineration, than was
anticipated in prior estimates. Prior estimates were based on investigations
conducted at what were expected to be representative sites. It is possible
that future cost estimates will be greater than the current estimates as
further investigations are conducted and as additional facts become known.
The Company has not initiated the investigation on two of the 27 sites of
which it has been identified as a Potentially Responsible Party (PRP), but
intends to do so, and is continuing work on sites requiring remediation.
Considering the recorded reserves for environmental liabilities and the
past rate treatment allowed by the IUB, management believes that the clean-up
costs incurred for these FMGP sites will not have a material adverse effect on
its financial position or results of operations.
Refer to Note 6 of the Notes to Financial Statements for information
relating to potential environmental liabilities associated with certain FMGP
sites.
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Notes 3 and 6 of the Notes to Financial Statements
for a discussion of rate matters and environmental matters, respectively.
Item 2. Changes in the Rights of the Company's Security Holders.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Results of Votes of Security Holders.
None.
Item 5. Other Information.
The Company has calculated the ratio of earnings to fixed charges pursuant to
Item 503 of Regulation S-K of the Securities and Exchange Commission as
follows:
For the twelve months ended:
March 31, 1994 3.46
December 31, 1993 3.41
December 31, 1992 2.49
December 31, 1991 2.64
December 31, 1990 2.65
December 31, 1989 2.82
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
10(a) Receivables Purchase and Sale Agreement dated as of
June 30, 1989, as Amended and Restated as of April 15, 1994,
among IES Utilities Inc. (as Seller) and CIESCO L.P. (as the
Investor) and Citicorp North America, Inc. (as Agent).
12 Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K -
Items Financial
Reported Statements Date of Report File No.
2,5,7 None January 7, 1994 0-4117-1 (1)
2,7 None January 7, 1994 0-849 (1)
7 (2) March 2, 1994 0-4117-1 (2)
(1) Form 8-K filed by IES Utilities Inc. subsequent to the
merger of Iowa Electric Light and Power Company and
Iowa Southern Utilities Company, effective
December 31, 1993.
(2) Form 8-K/A filed by IES Utilities Inc. amending Form
8-K filed on January 7, 1994, File No. 0-4117-1,
providing the audited financial statements of the
Company for the year ended December 31, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
IES UTILITIES INC.
(Registrant)
Date May 12, 1994 By /s/ Dr. Robert J. Latham
(Signature)
Dr. Robert J. Latham
Senior Vice President, Finance
and Corporate Affairs, & Treasurer
By /s/ Richard A. Gabbianelli
(Signature)
Richard A. Gabbianelli
Controller & Chief
Accounting Officer
[EXECUTION COPY]
U.S. $65,000,000
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
As AMENDED and RESTATED as of APRIL 15, 1994
Among
IES UTILITIES INC.
as Seller
and
CIESCO L.P.
as the Investor
and
CITICORP NORTH AMERICA, INC.
as Agent
TABLE OF CONTENTS
Section Page
Preliminary Statements . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . 2
Section 1.02. Other Terms . . . . . . . . . . . . . . . . . 19
Section 1.03. Computation of Time Periods . . . . . . . . . 20
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
Section 2.01. Facility . . . . . . . . . . . . . . . . . . . 20
Section 2.02. Making Purchases . . . . . . . . . . . . . . . 20
Section 2.03. Termination or Reduction of the Purchase
Limit . . . . . . . . . . . . . . . . . . . . 21
Section 2.04. Eligible Asset . . . . . . . . . . . . . . . . 21
Section 2.05 Non-Liquidation Settlement Procedures . . . . 22
Section 2.06. Liquidation Settlement Procedures . . . . . . 23
Section 2.07. General Settlement Procedures . . . . . . . . 23
Section 2.08. Payments and Computations, Etc. . . . . . . . 24
Section 2.09. Dividing or Combining of Eligible Assets . . . 25
Section 2.10. Fees . . . . . . . . . . . . . . . . . . . . . 25
Section 2.11. Recourse for Defaulted Receivables . . . . . . 26
Section 2.12. Eurodollar Increased Costs . . . . . . . . . . 27
Section 2.13. Additional Yield on Eligible Assets
Bearing a Eurodollar Rate . . . . . . . . 27
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.01. Condition Precedent to Initial Purchase . . . 28
Section 3.02. Conditions Precedent to the Effectiveness
of the Amendment and Restatement of the
Original Agreement . . . . . . . . . . . . . . 29
Section 3.03. Conditions Precedent to All Purchases and
Reinvestments . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.01. Affirmative Covenants of the Seller . . . . . 34
Section 5.02. Reporting Requirements of the Seller . . . . . 35
Section 5.03. Negative Covenants of the Seller . . . . . . . 36
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.01. Designation of Collection Agent . . . . . . . 37
Section 6.02. Duties of Collection Agent . . . . . . . . . . 38
Section 6.03. Rights of the Agent . . . . . . . . . . . . . 39
Section 6.04. Responsibilities of the Seller . . . . . . . . 40
Section 6.05. Further Action Evidencing Purchases . . . . . 40
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
Section 7.01. Events of Investment Ineligibility . . . . . . 41
ARTICLE VIII
THE AGENT
Section 8.01. Authorization and Action . . . . . . . . . . . 43
Section 8.02. Agent's Reliance, Etc. . . . . . . . . . . . . 44
Section 8.03. CNAI and Affiliates . . . . . . . . . . . . . 44
Section 8.04. Investor's Purchase Decision . . . . . . . . . 44
ARTICLE IX
ASSIGNMENT OF ELIGIBLE ASSETS
Section 9.01. Assignment . . . . . . . . . . . . . . . . . . 45
Section 9.02. Annotation of Certificate . . . . . . . . . . 45
ARTICLE X
INDEMNIFICATION
Section 10.01. Indemnities by the Seller . . . . . . . . . . 45
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendments, Etc. . . . . . . . . . . . . . . 47
Section 11.02. Notices, Etc. . . . . . . . . . . . . . . . . 47
Section 11.03. No Waiver; Remedies . . . . . . . . . . . . . 48
Section 11.04. Binding Effect; Assignability . . . . . . . . 48
Section 11.05. Governing Law . . . . . . . . . . . . . . . . 48
Section 11.06. Costs, Expenses and Taxes . . . . . . . . . . 48
Section 11.07. No Proceedings . . . . . . . . . . . . . . . 50
Section 11.08. Confidentiality . . . . . . . . . . . . . . . 50
Section 11.09. Execution in Counterparts . . . . . . . . . . 50
Section 11.10. Amendment of Original Certificate . . . . . . 50
EXHIBITS
EXHIBIT A Form of Certificate
EXHIBIT B Form of Investor Report
EXHIBIT C Form of Opinion of Counsel for the Seller
EXHIBIT D Notice of Purchase of an Eligible Asset at a Fixed
Rate
SCHEDULE I List of Special Account Banks
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
as Amended and Restated as of April 15, 1994
IES UTILITIES INC. (formerly known as Iowa Electric
Light and Power Company), an Iowa corporation (the "Seller"),
CIESCO L.P., a New York limited partnership (the "Investor"), and
CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNAI"), as
agent (the "Agent") for the Owner (as defined below), agree as
follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are
capitalized and used throughout this Agreement (in addition to
those defined above) are defined in Article I of this Agreement.
(2) The Seller has, and expects to have, Pool
Receivables in which the Seller intends to sell interests
referred to herein as Eligible Assets.
(3) The Investor desires to purchase Eligible Assets
from the Seller.
(4) In consideration of the reinvestment in Pool
Receivables of daily Collections (other than with regard to
accrued Yield and Collection Agent Fee) attributable to an
Eligible Asset, the Seller will sell to the Owner of such
Eligible Asset additional interests in the Pool Receivables as
part of such Eligible Asset until such reinvestment is
terminated. It is intended that such daily reinvestment of
Collections be effected by an automatic daily adjustment to each
Owner's Eligible Assets.
(5) CNAI has been requested and is willing to act as
Agent.
(6) The Seller, the Investor and CNAI, as Agent,
entered into a Receivables Purchase and Sale Agreement, dated as
of June 30, 1989, and an Amendment No. 1 thereto, dated as of
September 27, 1991 (collectively, the "Original Agreement").
(7) The Seller, the Investor and CNAI, as Agent,
desire to amend and restate the Original Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adverse Claim" means a lien, security interest or
other charge or encumbrance, or other type of preferential
arrangement.
"Affiliate" means, as to any Person, any other Person,
that, directly or indirectly, is in control of, is controlled by
or is under common control with such Person or is a director or
officer of such Person.
"Affiliated Obligor" means any Obligor which is an
Affiliate of another Obligor.
"Agent's Account" means the special account (account
number 4051-9819) of the Agent maintained at the office of
Citibank at 399 Park Avenue, New York, New York.
"Alternate Base Rate" means, for any period, a
fluctuating interest rate per annum as shall be in effect from
time to time, which rate per annum shall at all times be equal to
the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate; or
(b) 1/2 of one percent above the latest three-week
moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of
major United States money market banks, such three-week
moving average being determined weekly on each Monday (or,
if such day is not a Business Day, on the next succeeding
Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis
of quotations for such rates received by Citibank from three
New York certificate of deposit dealers of recognized
standing selected by Citibank, in either case adjusted to
the nearest 1/4 of one percent or, if there is no nearest
1/4 of one percent, to the next higher 1/4 of one percent.
"Assessment Rate" for any Fixed Period means the annual
assessment rate per annum estimated by Citibank on the first day
of such Fixed Period for determining the then current annual
assessment payable by Citibank to the Federal Deposit Insurance
Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank in the United States.
"Assignee Rate" for any Fixed Period for any Eligible
Asset means an interest rate per annum equal to
(x) the sum of:
(a) the rate per annum obtained by dividing (i)
the consensus bid rate determined by Citibank (rounded
upward to the nearest whole multiple of 1/100 of 1% per
annum, if such consensus bid rate is not such a
multiple) for the bid rates per annum, at 9:00 A.M.
(New York City time) (or as soon thereafter as
practicable) on the Business Day immediately preceding
the first day of such Fixed Period of New York
certificate of deposit dealers of recognized standing
selected by Citibank for the purchase at face value of
certificates of deposit of Citibank in New York City in
an amount approximately equal or comparable to the
Capital of such Eligible Asset on such first day and
with a maturity equal to such Fixed Period, by (ii) a
percentage equal to 100% minus the CD Reserve
Percentage for such Fixed Period, plus
(b) in the event that the Seller's long term
public senior debt securities are not rated at least
BBB- by Standard & Poor's Corporation and Baa3 by
Moody's Investors Services, Inc. (or, if none of the
Seller's long-term public senior debt securities are
publicly rated at such time, the Agent shall have
determined, in its sole discretion, that any of such
securities would not receive at least the specified
ratings if they were publicly rated), 1%, plus
(c) the Assessment Rate for such Fixed Period;
or, at the option of the Agent, upon notice to the Seller,
(y) the sum of:
(a) 0.175% per annum above the Eurodollar Rate
for such Fixed Period, plus
(b) in the event that the Seller's long-term
public senior debt securities are not rated at least
BBB-by Standard & Poor's Corporation and Baa3 by
Moody's Investors Services, Inc. (or, if none of the
Seller's long-term public senior debt securities are
publicly rated at such time, the Agent shall have
determined, in its sole discretion, that any of such
securities would not receive at least the specified
ratings if they were publicly rated), 1%;
provided that
(i) for any Fixed Period on or prior to the first day
on which the Owner shall have notified the Agent that the
introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful,
for the Owner to fund such Eligible Asset at the Assignee
Rate set forth above (and the Owner shall not have
subsequently notified the Agent that such circumstances no
longer exist),
(ii) in the case of any Fixed Period of one to (and
including) 29 days,
(iii) in the case of any Fixed Period as to which the
Agent does not receive notice by 12:00 noon (New York City
time) on the third Business Day preceding the first day of
such Fixed Period, that the related Eligible Asset will not
be funded by issuance of commercial paper, and
(iv) in the case of any Fixed Period for an Eligible
Asset the Capital of which allocated to the Owner is less
than $500,000,
the "Assignee Rate" for such Fixed Period shall be an interest
rate per annum equal to the Alternate Base Rate in effect on the
first day of such Fixed Period; provided further that the Agent
and the Seller may agree in writing from time to time upon a
different "Assignee Rate".
"Average Maturity" means, on any day, that period
(expressed in days) equal to the average maturity of the Pool
Receivables as shall be calculated by the Collection Agent as set
forth in the most recent Investor Report in accordance with the
provisions thereof; provided that, if the Agent shall disagree
with any such calculation, the Agent may recalculate the Average
Maturity for such day.
"Business Day" means any day on which (i) banks are not
authorized or required to close in New York City and (ii) if this
definition of "Business Day" is utilized in connection with the
Eurodollar Rate, dealings are carried out in the London interbank
market.
"Capital" of any Eligible Asset means the original
amount paid to the Seller for such Eligible Asset at the time of
its acquisition by the Investor pursuant to Sections 2.01 and
2.02, or such amount divided or combined by any dividing or
combining of such Eligible Asset pursuant to Section 2.09, in
each case reduced from time to time by Collections received and
distributed on account of such Capital pursuant to Section 2.06;
provided that, if such Capital of such Eligible Asset shall have
been reduced by any distribution of any portion of Collections
and thereafter such distribution is rescinded or must otherwise
be returned for any reason, such Capital of such Eligible Asset
shall be increased by the amount of such distribution, all as
though such distribution had not been made.
"CD Reserve Percentage" for any Fixed Period means the
reserve percentage applicable on the first day of such Fixed
Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank with respect to liabilities consisting
of or including (among other liabilities) U.S. dollar nonpersonal
time deposits in the United States with a maturity equal to such
Fixed Period.
"Certificate" means the Original Certificate, as
amended by the amendment and restatement of the Original
Agreement.
"Citibank" means Citibank, N.A., a national banking
association.
"Citibank Agreement" means the Receivables Purchase and
Sale Agreement, dated as of June 30, 1989, as amended and
restated as of April 15, 1994, among the Seller, Citibank and
CNAI, individually and as Agent, as the same may, from time to
time, be amended, modified or supplemented.
"Collection Agent" means at any time the Person
(including the Agent) then authorized pursuant to Article VI to
service, administer and collect Pool Receivables.
"Collection Agent Fee" has the meaning specified in
Section 2.10.
"Collection Agent Fee Reserve" for any Eligible Asset
at any time means the sum of (i) the Liquidation Collection Agent
Fee for such Eligible Asset at such time plus (ii) the unpaid
Collection Agent Fee relating to such Eligible Asset accrued to
such time.
"Collections" means, with respect to any Pool
Receivable, all cash collections and other cash proceeds of such
Pool Receivable, including, without limitation, all cash proceeds
of Related Security with respect to such Pool Receivable, and any
Collection of such Pool Receivable deemed to have been received
pursuant to Section 2.07.
"Concentration Account" means the special account
(account number 110-00010-6) of the Seller maintained at the
office of Firstar Bank of Cedar Rapids, N.A., at Second Avenue
and Third Street, Cedar Rapids, Iowa.
"Concentration Limit" for any Obligor means at any time
3%, or such other percentage ("Special Concentration Limit") for
such Obligor designated by the Agent in a writing delivered to
the Seller; provided that, in the case of an Obligor with any
Affiliated Obligor, the Concentration Limit shall be calculated
as if such Obligor and such Affiliated Obligor are one Obligor;
provided further that the Agent may cancel any Special
Concentration Limit upon three Business Days' notice to the
Seller.
"Contract" means any of the Tariffs.
"CP Fixed Period Date" means, for any Eligible Asset,
the date of Purchase of such Eligible Asset and thereafter the
last day of each calendar month (or, if such day is not a
Business Day, the immediately succeeding Business Day) or any
other day as shall have been agreed to in writing by the Agent
and the Seller prior to the first day of the preceding Fixed
Period for such Eligible Asset or, if there is no preceding Fixed
Period, prior to the first day of such Fixed Period.
"Credit and Collection Policy" means those credit and
collection policies and practices in effect on the date hereof
relating to Contracts and Receivables described in Schedule II to
the Original Agreement, as modified in compliance with Section
5.03(c).
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred
purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles,
recorded as capital leases, (v) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i)
through (iv) above, and (vi) liabilities in respect of unfunded
vested benefits under plans covered by Title IV of ERISA.
"Default Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Defaulted Receivables on such date or would
have been Defaulted Receivables on such date had they not been
written off the books of the Seller during such month by (ii) the
aggregate Outstanding Balance of all Pool Receivables on such
date.
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for 90 days or more from the original due date for
such payment;
(ii) as to which the Obligor thereof has taken any
action, or suffered any event to occur, of the type
described in Section 7.01(g); or
(iii) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as
uncollectible.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Delinquent Receivables at the end of such
month by (ii) the aggregate Outstanding Balance of all Pool
Receivables on such date.
"Delinquent Receivable" means a Receivable that is not
a Defaulted Receivable and:
(i) as to which any payment, or part thereof, remains
unpaid for thirty days or more from the original due date of
such payment; or
(ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Seller.
"Designated Account" means an account in the name of,
and owned by, CNAI, as Agent, designated by the Agent for the
purpose of receiving Collections of Pool Receivables.
"Designated Obligor" means, at any time, each Obligor;
provided that any Obligor shall cease to be a Designated Obligor
upon three Business Days' notice by the Agent to the Seller.
"Eligible Asset" means, at any time, an undivided
percentage ownership interest at such time in (i) all then
outstanding Pool Receivables arising prior to the time of the
most recent computation or recomputation of such undivided
percentage interest pursuant to Section 2.04, (ii) all Related
Security with respect to such Pool Receivables and (iii) all
Collections with respect to, and other proceeds of, such Pool
Receivables. Such undivided percentage interest for such
Eligible Asset shall be computed as
C + YR + CAFR
NRPB
where:
C = the Capital of such Eligible Asset at the time of
such computation;
YR = the Yield Reserve of such Eligible Asset at the
time of such computation;
CAFR = the Collection Agent Fee Reserve of such Eligible
Asset at the time of such computation; and
NRPB = the Net Receivables Pool Balance at the time of
such computation.
Each Eligible Asset shall be determined from time to time
pursuant to the provisions of Section 2.04.
"Eligible Receivable" means, at any time and with
respect to any Eligible Asset, a Receivable:
(i) the Obligor of which (A) is a United States
resident, (B) is not an Affiliate of any of the parties
hereto (except in the case of this clause (B) for such
Receivables as shall not, in the aggregate for all Obligors
that are Affiliates of parties hereto, have an Outstanding
Balance exceeding 5% of the Capital of such Eligible Asset
at such time), and (C) is not a government or a governmental
subdivision or agency (except in the case of this clause (C)
for such Receivables as shall not, in the aggregate for all
Obligors that are governments or governmental subdivisions
or agencies, have an Outstanding Balance exceeding 10% of
the Capital of such Eligible Asset at such time);
(ii) the Obligor of which at the time of the initial
creation of an interest therein hereunder is a Designated
Obligor;
(iii) the Obligor of which at the time of the
initial creation of an interest therein hereunder is not the
Obligor of any Defaulted Receivables in the aggregate amount
of 5% or more of the aggregate Outstanding Balance of all
Pool Receivables of such Obligor;
(iv) which at the time of the initial creation of an
interest therein hereunder is not a Defaulted or Delinquent
Receivable;
(v) which, according to the Contract related thereto,
is required to be paid in full within 30 days of the
original billing date therefor;
(vi) which is an account receivable representing all or
part of the sales price of merchandise, insurance and
services within the meaning of Section 3(c) (5) of the
Investment Company Act of 1940, as amended;
(vii) a purchase of which with the proceeds of
notes would constitute a "current transaction" within the
meaning of Section 3(a) (3) of the Securities Act of 1933,
as amended;
(viii) which is an "account" within the meaning of
Section 9-106 of the UCC of the jurisdiction the law of
which governs the perfection of the interest created by an
Eligible Asset;
(ix) which is denominated and payable only in United
States dollars in the United States;
(x) which arises under a Contract which, together with
such Receivable, is in full force and effect and constitutes
the legal, valid and binding obligation of the Obligor of
such Receivable enforceable against such Obligor in
accordance with its terms and is not subject to any dispute,
offset, counter-claim or defense whatsoever (except the
discharge in bankruptcy of such Obligor);
(xi) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules
or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury,
consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which
no party to the Contract related thereto is in violation of
any such law, rule or regulation in any material respect;
(xii) which (A) satisfies all applicable requirements
of the Credit and Collection Policy and (B) complies with
such other criteria and requirements (other than those
relating to the collectibility of such Receivable) as the
Agent may from time to time specify to the Seller upon 30
days' notice; and
(xiii) as to which, at or prior to the time of the
initial creation of an interest therein through a Purchase,
the Agent has not notified the Seller that the Agent has
determined, in its sole discretion, that such Receivable (or
class of Receivables) is not acceptable for purchase by the
Investor hereunder.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to
that term in Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Eurodollar Rate" means, for any Fixed Period, an
interest rate per annum equal to the rate per annum at which
deposits in U. S. dollars are offered by the principal office of
Citibank, N.A., in London, England, to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Fixed Period in an amount
substantially equal to the Capital associated with such Fixed
Period on such first day and for a period equal to such Fixed
Period.
"Eurodollar Rate Reserve Percentage" of any Owner for
any Fixed Period in respect of which Yield is computed by
reference to the Eurodollar Rate means the reserve percentage
applicable two Business Days before the first day of such Fixed
Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if
more than one such percentage shall be applicable, the daily
average of such percentages for those days in such Fixed Period
during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Owner with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or any other
category of liabilities that includes deposits by reference to
which the interest rate on Eurocurrency Liabilities is
determined) having a term equal to such Fixed Period.
"Event of Investment Ineligibility" has the meaning
specified in Section 7.01.
"Event of Purchase Ineligibility" means any failure to
satisfy the condition set forth in Section 3.03(b)(iii) or (iv).
"Facility" means the willingness of the Investor to
consider, in its sole discretion pursuant to Article II, the
purchase from the Seller of Eligible Assets from time to time.
"Facility Termination Date" means the earlier of April
14, 1999, or the date of termination of the Facility pursuant to
Section 2.03 or Section 7.01.
"Fixed Period" means with respect to any Eligible
Asset:
(a) in the case of any Fixed Period in respect of
which Yield is computed by reference to the Investor Rate
referred to in paragraph (a) of the definition of "Investor
Rate", each successive period commencing on each CP Fixed
Period Date for such Eligible Asset and ending on the next
succeeding CP Fixed Period Date for such Eligible Asset; and
(b) in the case of any Fixed Period in respect of
which Yield is computed by reference to the Investor Rate
referred to in paragraph (b) of the definition of "Investor
Rate", each successive period of from one to and including
14 days, or a period of 21, 30, 60, 90 or 180 days, as the
Seller shall select and the Agent may approve on notice by
the Seller received by the Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M.
(New York City time) on the day which occurs three Business
Days before the first day of such Fixed Period, each such
Fixed Period for such Eligible Asset to commence on the last
day of the immediately preceding Fixed Period for such
Eligible Asset (or, if there is no such Fixed Period, on the
date of Purchase of such Eligible Asset), except that if the
Agent shall not have received such notice, or the Agent and
the Seller shall not have so mutually agreed, before 11:00
A.M. (New York City time) on such day, such Fixed Period
shall be one day;
provided that:
(i) Yield with respect to any Fixed Period at a Fixed
Rate shall be computed by reference to a monthly, quarterly,
or semi-annual interest period as the Seller may select and
the Agent shall approve;
(ii) any Fixed Period (other than of one day) which
would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day,
except that, if Yield in respect of such Fixed Period is
computed by reference to the Eurodollar Rate and such
extension would cause the last day of such Fixed Period to
occur in the next succeeding month, the last day of such
Fixed Period shall occur on the immediately preceding
Business Day;
(iii) in the case of any Fixed Period of one day for
such Eligible Asset, (a) if such Fixed Period is such
Eligible Asset's initial Fixed Period, such Fixed Period
shall be the day of the related Purchase; (b) any
subsequently occurring Fixed Period which is one day shall,
if the immediately preceding Fixed Period is more than one
day, be the last day of such immediately preceding Fixed
Period, and, if the immediately preceding Fixed Period is
one day, be the day next following such immediately
preceding Fixed Period; and (c) if such Fixed Period occurs
on a day immediately preceding a day which is not a Business
Day, such Fixed Period shall be extended to the next
succeeding Business Day; and
(iv) in the case of any Fixed Period for such Eligible
Asset which commences before the Termination Date for such
Eligible Asset and would otherwise end on a date occurring
after such Termination Date, such Fixed Period shall end on
such Termination Date, and the duration of each Fixed Period
which commences on or after the Termination Date for such
Eligible Asset shall be of such duration as shall be
selected by the Agent.
"Fixed Rate" means for any Fixed Period the rate per
annum determined by the Agent for funding by the Investor of the
Purchase or maintenance of an Eligible Asset for such Fixed
Period as agreed between the Agent and the Seller; provided that,
if the rate as agreed between the Agent and the Seller and the
Investor with regard to any Fixed Period for any Eligible Asset
is a discount rate, the "Fixed Rate" for such Fixed Period shall
be the rate resulting from converting such discount rate to an
interest-bearing equivalent rate per annum. The Seller
understands that upon the agreement between the Seller and Agent
of a Fixed Rate for a Fixed Period, the Agent on behalf of the
Investor intends to enter into funding arrangements with third
parties on terms and conditions which could result in loss to the
Investor if the Capital with respect to such Fixed Period does
not remain outstanding at the Fixed Rate for the entire Fixed
Period at the amount of Capital paid to the Seller for such
Eligible Asset at the time of its purchase. Therefore, if (i) the
Capital of such Eligible Asset paid to the Seller with respect to
such Eligible Asset at the time of its purchase shall be reduced
prior to the end of such Fixed Period or (ii) the Termination
Date for such Eligible Asset shall occur before the end of such
Fixed Period, the Seller shall indemnify and hold harmless the
Investor or the Agent for all losses, liabilities, costs and
expenses related thereto (including, but not limited to,
attorneys' fees and expenses and the cost of interest rate swaps,
dollars, forward agreements and futures contracts in connection
with the Investor's funding or maintenance of any Eligible Asset
at a Fixed Rate) and shall pay two Business Days after the Fee
Determination Date (as defined below) to the Investor, as
liquidated damages a fee equal to the product of
[CLA x (F-R) x [1 - (1+R/f) -n]
f R/f
where:
CLA = Capital Liquidation Amount, as hereinafter
defined;
F = Fixed Rate for such Eligible Asset for such Fixed
Period;
R = Redeployment Rate, as hereinafter defined;
f = Fixed Rate payment frequency per annum; and
n = Number of interest payment periods remaining from
Fee Determination Date to end of Fixed Period.
The parties hereto acknowledge that the cost of any early
termination of any funding arrangement with third parties prior
to the originally scheduled termination date thereof, including,
without limitation, interest rate swaps, collars, forward
agreement and futures contracts could result in a payment by the
Agent on behalf of the Investor to the third party providing such
funding arrangement. Any such breakage cost will be determined
by such third party providing such funding arrangement in its
sole discretion, and such amount will be included in the losses,
liabilities, costs and expenses payable by the Seller to the
Investor or the Agent in connection with the occurrence of the
events described in the immediately preceding sentence or
otherwise.
"Redeployment Rate" shall mean the rate of interest at which the
Agent is able to reinvest the Capital Liquidation Amount for a
period comparable to the period from the Fee Determination Date
to the last day of such Fixed Period in compliance with the
Investor's investment policy. "Fee Determination Date" means the
date on which the Capital is not so maintained or the date on
which an amount of Capital of such Eligible Asset was paid.
"Capital Liquidation Amount" means, the total amount of Capital
of such Eligible Asset not so maintained or the total amount of
Capital of such Eligible Asset paid. For purposes of this
definition of "Fixed Rate", the Fixed Period shall be computed
without regard to clause (iv) of the definition of "Fixed
Period". The Agent's determination of the Redeployment Rate
shall be conclusive, absent manifest error. The indemnification
provided for herein shall be continuing and shall survive any
termination of the Agreement.
"Indemnified Party" has the meaning specified in
Section 10.01.
"Investor" shall include Ciesco L.P. and any successor
or assign of the Investor that is a receivables investment
company which in the ordinary course of its business issues
commercial paper or other securities to fund its acquisition and
maintenance of receivables.
"Investor Investment Fee" has the meaning specified in
Section 2.10.
"Investor Rate" for any Fixed Period for any Eligible
Asset means:
(a) the per annum equivalent to the weighted average
of the per annum rates paid or payable by the Owner from
time to time as interest on or otherwise (by means of
interest rate hedges or otherwise) in respect of those
promissory notes issued by the Owner that are allocated, in
whole or in part, by CNAI (on behalf of the Owner) to fund
the Purchase or maintenance of such Eligible Asset during
such Fixed Period, as determined by CNAI (on behalf of the
Owner) and reported to the Seller and, if the Collection
Agent is not the Seller, the Collection Agent, which rates
shall reflect and give effect to the commissions of
placement agents and dealers in respect of such promissory
notes, to the extent such commissions are allocated, in
whole or in part, to such promissory notes by CNAI (on
behalf of the Owner); provided that, if any component of
such rate is a discount rate, in calculating the "Investor
Rate" for such Fixed Period CNAI shall for such component
use the rate resulting from converting such discount rate to
an interest bearing equivalent rate per annum; or
(b) the rate equivalent to the Fixed Rate as agreed
between the Agent and the Seller; or
(c) if no Fixed Rate is agreed between the Agent and
the Seller and if such Owner is not able to fund its
Purchase or maintenance of such Eligible Asset for such
Fixed Period by its issuing promissory notes referred to in
paragraph (a) above, a rate equal to the Assignee Rate for
such Fixed Period or such other rate as the Agent and the
Seller shall agree to in writing;
provided that, if such Owner so requests and the Seller consents
thereto, the "Investor Rate" for any Fixed Period of one day
shall be the Assignee Rate for such Fixed Period.
"Investor Report" means a report, in substantially the
form of Exhibit B hereto, furnished by the Collection Agent to
the Agent for each Owner pursuant to Section 2.07.
"Liquidation Collection Agent Fee" means for any
Eligible Asset at any date an amount equal to (i) the Capital of
such Eligible Asset as at such date multiplied by (ii) the
product of (a) the percentage per annum as at such date of the
Collection Agent Fee and (b) a fraction having as its numerator
the Average Maturity and 360 as its denominator.
"Liquidation Day" for any Eligible Asset means either
(i) each day during any Settlement Period for such Eligible Asset
on which the conditions set forth in Section 3.03 are not
satisfied (and such failure of conditions is not waived by the
Agent), provided that such conditions are also not satisfied (and
such failure of conditions is not waived by the Agent) on any
succeeding day during such Settlement Period, or (ii) each day
which occurs on or after the Termination Date for such Eligible
Asset.
"Liquidation Fee" means, for each Eligible Asset for
any Fixed Period (computed without regard to clause (iv) of the
definition of "Fixed Period") during which any Liquidation Day or
Termination Date for such Eligible Asset occurs, the amount, if
any, by which (i) the additional Yield (calculated without taking
into account any Liquidation Fee) which would have accrued on the
reductions of Capital of such Eligible Asset during such Fixed
Period (as so computed) if such reductions had remained as
Capital, exceeds (ii) the income, if any, received by the Owner
of such Eligible Asset from such Owner's investing the proceeds
of such reductions of Capital.
"Liquidation Yield" means, for any Eligible Asset at
any date, an amount equal to the product of (i) the Capital of
such Eligible Asset as at such date and (ii) the product of (a)
the Assignee Rate for such Eligible Asset for a Fixed Period
deemed to commence at such time for a period of 30 days and (b) a
fraction having as its numerator the Average Maturity and 360 as
its denominator.
"Loss Percentage" means, for any Eligible Asset at any
date, the greater of (i) three times the highest Default Ratio as
of the last day of the three months ended immediately preceding
such date, and (ii) 9%.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of the Eligible Receivables in the
Receivables Pool at such time reduced by the sum of (i) the
aggregate Outstanding Balance of the Defaulted Receivables in the
Receivables Pool at such time and (ii) the aggregate amount by
which the then Outstanding Balance of all Pool Receivables (other
than Defaulted Receivables) of each Obligor exceeds the product
of (A) the Concentration Limit for such Obligor at such time
multiplied by (B) the Outstanding Balance of the Eligible
Receivables in the Receivables Pool at such time.
"Obligor" means a Person obligated to make payments
pursuant to a Contract.
"Original Certificate" means the certificate of
assignment by the Seller to the Agent, dated as of June 30, 1989,
pursuant to the Original Agreement.
"Outstanding Balance" of any Receivable at any time
means the then outstanding principal balance thereof.
"Owner" shall include the Investor and all other owners
by assignment or otherwise of an Eligible Asset and, to the
extent of the undivided interests so purchased, shall include any
participants.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Pool Receivable" means a Receivable in the Receivables
Pool.
"Provisional Liquidation Day" means any day which could
be a Liquidation Day but for the proviso in clause (i) of the
definition of "Liquidation Day".
"Purchase" means a purchase by the Investor of an
Eligible Asset from the Seller pursuant to Article II.
"Purchase Limit" means $65,000,000, as such amount may
be reduced pursuant to Section 2.03.
"Receivable" means the indebtedness of any Obligor
under a Contract arising from a sale of gas or electricity or
steam by the Seller, and includes the right to payment of any
interest or finance charges and other obligations of such Obligor
with respect thereto.
"Receivables Pool" means at any time the aggregation of
each then outstanding Receivable in respect of which the Obligor
is a Designated Obligor or, as to any Receivable in existence on
such date, was a Designated Obligor on the date of any Purchase
or reinvestment pursuant to Section 2.05.
"Reinvestment Termination Date" for any Eligible Asset
means that Business Day which the Seller designates or, if the
conditions precedent in Section 3.03 are not satisfied, such
Business Day which the Agent designates, as the Reinvestment
Termination Date for such Eligible Asset by notice to the Agent
(if the Seller so designates) or to the Seller (if the Agent so
designates) at least one Business Day prior to such Business Day.
"Related Security" means with respect to any
Receivable:
(i) all security interests or liens and property
subject thereto from time to time purporting to secure
payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any
collateral securing such Receivable; and
(ii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or
otherwise.
"Settlement Period" for any Eligible Asset means each
period commencing on the first day of each Fixed Period for such
Eligible Asset and ending on the last day of such Fixed Period or
in the case of a Fixed Period for a Fixed Rate on such other day
as the Investor and the Agent may mutually agree, and, on and
after the Termination Date for such Eligible Asset, such period
(including, without limitation, a period of one day) as shall be
selected from time to time by the Agent or, in the absence of any
such selection, each period of thirty days from the last day of
the immediately preceding Settlement Period.
"Special Account" means an account maintained at a
Special Account Bank for the purpose of receiving Collections.
"Special Account Bank" means any of the banks holding
one or more Special Accounts.
"Tariff" means each of the Seller's tariffs pursuant to
which the Seller shall provide electricity or gas or steam to
certain Obligors from time to time and pursuant to which such
Obligors shall be obligated to pay for such electricity or gas or
steam from time to time, each in the form delivered to the Agent.
"Termination Date" for any Eligible Asset means the
earlier of (i) the Reinvestment Termination Date for such
Eligible Asset and (ii) the Facility Termination Date.
"UCC" means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
"Yield" means:
(i) for each Eligible Asset for any Fixed Period to
the extent the Investor will be funding such Eligible Asset
on the first day of such Fixed Period through the issuance
of commercial paper or through the issuance of notes at a
Fixed Rate,
IR x C x ED + LF
360
(ii) for each Eligible Asset for any Fixed Period to
the extent the Owner will not be funding such Eligible Asset
on the first day of such Fixed Period through the issuance
of commercial paper or notes,
AR x C x ED + LF
360
where:
AR = the Assignee Rate for such Eligible Asset for such
Fixed Period;
C = the Capital of such Eligible Asset during such
Fixed Period;
IR = the Investor Rate for such Eligible Asset for such
Fixed Period;
ED = the actual number of days elapsed during such
Fixed Period, provided that, in the case of Fixed
Period at a Fixed Rate, the fraction shall be
adjusted to correspond to the calculation of
interest on any note the proceeds of which fund or
maintain the Capital of such Eligible Asset; and
LF = the Liquidation Fee, if any, for such Eligible
Asset for such Fixed Period;
provided that, with respect to any Fixed Period in respect of
which Yield is computed by reference to a Fixed Rate, Yield shall
be the aggregate of all such computations for such Fixed Period
for the applicable monthly, quarterly, or semi-annual interest
period as the Seller may have selected and the Agent shall have
approved; and provided further that no provision of this
Agreement or the Certificate shall require the payment or permit
the collection of Yield in excess of the maximum permitted by
applicable law; and provided further that Yield for any Eligible
Asset shall not be considered paid by any distribution if at any
time such distribution is rescinded or must otherwise be returned
for any reason.
"Yield Reserve" for any Eligible Asset at any time
means the sum of (i) the Liquidation Yield at such time for such
Eligible Asset, and (ii) the accrued and unpaid Yield for such
Eligible Asset.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.
SECTION 1.03. Computation of Time Periods. Unless
otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility. On the terms and conditions
hereinafter set forth, the Investor may, in its sole discretion,
make Purchases from time to time during the period from the date
hereof to the Facility Termination Date. Under no circumstances
shall the Investor make any Purchase if, after giving effect to
such Purchase, the aggregate outstanding Capital of Eligible
Assets, together with the aggregate outstanding "Capital" of
"Eligible Assets" under the Citibank Agreement, would exceed the
Purchase Limit. The Owner of each Eligible Asset shall, with the
proceeds of Collections attributable to such Eligible Asset,
reinvest pursuant to Section 2.05 in additional undivided
percentage interests in the Pool Receivables by making an
appropriate readjustment of such Eligible Asset. Nothing in this
Agreement shall be deemed to be or construed as a commitment by
the Investor to purchase any Eligible Asset at any time.
SECTION 2.02. Making Purchases. Each Purchase shall
be made on at least three Business Days' notice (and, in the case
of a Fixed Period at a Fixed Rate, seven Business Days' written
notice) from the Seller to the Agent. Each such notice of a
Purchase for a Fixed Period at a Fixed Rate shall be by
telecopier, telex or cable and confirmed in writing and each such
notice shall be substantially in the form of Exhibit D hereto.
Each such notice of a proposed Purchase shall specify the desired
amount to be paid to the Seller, and the date and duration of the
initial Fixed Period for the Eligible Asset to be purchased. The
Investor shall promptly notify the Agent whether it has
determined to make such Purchase. The Agent shall promptly
thereafter notify the Seller whether the Investor has determined
to make such Purchase and whether the desired duration of the
initial Fixed Period for the Eligible Asset to be purchased is
acceptable. On the date of each Purchase, the Investor shall,
upon satisfaction of the applicable conditions set forth in
Article III, make available to the Agent the amount of its
Purchase by deposit of such amount in same day funds to the
Agent's Account, and, after receipt by the Agent of such funds,
the Agent will cause such funds to be made immediately available
to the Seller at Citibank's office at 399 Park Avenue, New York,
New York. The Investor shall on the date of each Purchase, and
the Owner of each Eligible Asset shall on the first day of each
Fixed Period (other than the initial Fixed Period) for such
Eligible Asset, notify the Agent of the Investor Rate for such
Fixed Period.
SECTION 2.03. Termination or Reduction of the Purchase
Limit. (a) Optional. The Seller may, upon at least two Business
Days' notice to the Agent, terminate in whole or reduce in part
the unused portion of the Purchase Limit; provided that, for
purposes of this Section 2.03(a), the unused portion of the
Purchase Limit shall be computed as the excess of (A) the
Purchase Limit immediately prior to giving effect to such
termination or reduction over (B) the sum of (i) the aggregate
Capital of Eligible Assets outstanding at the time of such
computation and (ii) the aggregate "Capital" of "Eligible Assets"
outstanding under the Citibank Agreement at such time; provided
further that each partial reduction shall be in an amount equal
to $1,000,000 or an integral multiple thereof.
(b) Mandatory. On each day on which the Seller shall,
pursuant to Section 2.03(a) of the Citibank Agreement, reduce in
part the unused portion of the Commitment (as defined in the
Citibank Agreement), the Purchase Limit shall automatically
reduce by an equal amount. The Purchase Limit shall
automatically terminate in whole on any day on which the Seller
shall terminate in whole the Commitment pursuant to Section
2.03(a) of the Citibank Agreement.
SECTION 2.04. Eligible Asset. (a) Each Eligible
Asset shall be initially computed as of the opening of business
of the Collection Agent on the date of Purchase of such Eligible
Asset. Thereafter until the Termination Date for such Eligible
Asset, such Eligible Asset shall be automatically recomputed as
of the
close of business of the Collection Agent on each day (other than
a Liquidation Day). Such Eligible Asset shall remain constant
from the time as of which any such computation or recomputation
is made until the time as of which the next such recomputation,
if any, shall be made. Any Eligible Asset, as computed as of the
day immediately preceding the Termination Date for such Eligible
Asset, shall remain constant at all times on and after such
Termination Date. Such Eligible Asset shall become zero at such
time as the Owner of such Eligible Asset shall have received the
accrued Yield for such Eligible Asset and shall have recovered
the Capital of such Eligible Asset, and the Collection Agent
shall have received the accrued Collection Agent Fee for such
Eligible Asset.
(b) If any Eligible Asset would otherwise be reduced on
any day on account of Receivables arising as or becoming Pool
Receivables, the Owner of such Eligible Asset may prevent such
reduction by giving notice to the Collection Agent, before the
close of business of the Collection Agent on such day, that such
Eligible Asset's interest in such Receivables is to be limited so
as to prevent such reduction. If such notice is given for any
day for any Eligible Asset, the Receivables Pool for such
Eligible Asset and the Net Receivables Pool Balance for such
Eligible Asset, will include, with respect to Receivables arising
as or becoming Pool Receivables on such day, only such number of
such Receivables or such portion of such Receivables as shall
cause such Eligible Asset to remain constant, such Receivables or
portion thereof being included in the Receivables Pool for such
Eligible Asset in the order of the Seller's account numbers for
such Receivables up to an aggregate amount so as to cause such
Eligible Asset to remain constant, and the remainder of such
Receivables or portion thereof shall be treated as Receivables
arising on the next succeeding Business Day.
SECTION 2.05. Non-Liquidation Settlement Procedures.
On each day (other than a Liquidation Day or a Provisional
Liquidation Day) during each Settlement Period for each Eligible
Asset, the Collection Agent shall: (i) out of Collections of Pool
Receivables attributable to such Eligible Asset received on such
day, set aside and hold in trust for the Owner of such Eligible
Asset an amount equal to the Yield and Collection Agent Fee
accrued through such day for such Eligible Asset and not so
previously set aside and (ii) reinvest the remainder of such
Collections, for the benefit of such Owner, by recomputation of
such Eligible Asset pursuant to Section 2.04 as of the end of
such day and the payment of such remainder to the Seller;
provided that, to the extent that the Agent or any Owner shall be
required for any reason to pay over any amount of Collections
which shall have been previously reinvested for the account of
such Owner pursuant hereto, such amount shall be deemed not to
have been so applied but rather to have been retained by the
Seller and paid over for the account of such Owner and,
notwithstanding any provision hereof to the contrary, such Owner
shall have a claim for such amount. On the last day of each
Settlement Period for each Eligible Asset, the Collection Agent
shall deposit to the Agent's Account for the account of the Owner
of such Eligible Asset the amounts set aside as described in
clause (i) of the first sentence of this Section 2.05. Upon
receipt of such funds by the Agent, the Agent shall distribute
them to the Owner of such Eligible Asset in payment of the
accrued Yield for such Eligible Asset and to the Collection Agent
in payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset. If there shall be insufficient
funds on deposit for the Agent to distribute funds in payment in
full of the aforementioned amounts, the Agent shall distribute
funds, first, in payment of the accrued Yield for such Eligible
Asset, and second, in payment of the accrued Collection Agent Fee
payable with respect to such Eligible Asset.
SECTION 2.06. Liquidation Settlement Procedures. On
each Liquidation Day and on each Provisional Liquidation Day
during each Settlement Period for each Eligible Asset, the
Collection Agent shall set aside and hold in escrow for the Owner
of such Eligible Asset the Collections of Pool Receivables
attributable to such Eligible Asset received on such day. On the
last day of each Settlement Period for each Eligible Asset, the
Collection Agent shall deposit to the Agent's Account for the
account of the Owner of such Eligible Asset the amounts set aside
pursuant to the preceding sentence but not to exceed the sum of
(i) the accrued Yield for such Eligible Asset, (ii) the Capital
of such Eligible Asset, (iii) the accrued Collection Agent Fee
payable with respect to such Eligible Asset and (iv) the
aggregate amount of other amounts owed hereunder by the Seller to
the Owner of such Eligible Asset. Any amounts set aside pursuant
to the first sentence of this Section 2.06 and not required to be
deposited to the Agent's Account pursuant to the preceding
sentence shall be paid to the Seller by the Collection Agent;
provided that, if amounts are set aside pursuant to the first
sentence of this Section 2.06 on any Provisional Liquidation Day
which is subsequently determined not to be a Liquidation Day,
such amounts shall be applied pursuant to the first sentence of
Section 2.05 on the day of such subsequent determination. Upon
receipt of funds deposited to the Agent's Account pursuant to the
second sentence of this Section 2.06, the Agent shall distribute
them (A) to the Owner of such Eligible Asset (x) in payment of
the accrued Yield for such Eligible Asset, (y) in reduction (to
zero) of the Capital of such Eligible Asset and (z) in payment of
any other amounts owed by the Seller hereunder to such Owner and
(B) to the Collection Agent in payment of the accrued Collection
Agent Fee payable with respect to such Eligible Asset. If there
shall be insufficient funds on deposit for the Agent to
distribute funds in payment in full of the aforementioned
amounts, the Agent shall distribute funds, first, in payment of
the accrued Yield for such Eligible Asset, second, in reduction
of Capital of such Eligible Asset, third, in payment of other
amounts payable to such Owner, and fourth, in payment of the
accrued Collection Agent Fee payable with respect to such
Eligible Asset.
SECTION 2.07. General Settlement Procedures. If on
any day the Outstanding Balance of a Pool Receivable is either
(i) reduced as a result of any defective, rejected or returned
merchandise, insurance or services, any cash discount, or any
adjustment by the Seller, or (ii) reduced or canceled as a result
of a setoff in respect of any claim by the Obligor thereof
against the Seller (whether such claim arises out of the same or
a related transaction or an unrelated transaction), the Seller
shall be deemed to have received on such day a Collection of such
Receivable in the amount of such reduction or cancellation. If
on any day any of the representations or warranties in Section
4.01(h) is no longer true with respect to a Pool Receivable, the
Seller shall be deemed to have received on such day a Collection
in full of such Pool Receivable. Except as stated in the
preceding sentences of this Section 2.07 or as otherwise required
by law or the underlying Contract, all Collections received from
an Obligor of any Receivable shall be applied to Receivables then
outstanding of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, except if
payment is designated by such Obligor for application to specific
Receivables. Prior to the 15th Business Day of each month, the
Collection Agent shall prepare and forward to the Agent for each
Owner of an Eligible Asset (A) an Investor Report, relating to
each Eligible Asset, as of the close of business of the
Collection Agent on the last day of the immediately preceding
month, and (B) a listing by Obligor of all Pool Receivables,
together with an analysis as to the aging of such Receivables, as
of such last day. On or prior to the day the Collection Agent is
required to make a deposit with respect to a Settlement Period
pursuant to Section 2.05 or 2.06, the Seller will advise the
Agent of each Liquidation Day and each Provisional Liquidation
Day occurring during such Settlement Period and of the allocation
of the amount of such deposit to each outstanding Eligible Asset;
provided that, if the Seller is not the Collection Agent, the
Seller shall advise the Collection Agent of the occurrence of
each such Liquidation Day and each Provisional Liquidation Day
occurring during such Settlement Period on or prior to such day.
SECTION 2.08. Payments and Computations, Etc. All
amounts to be paid or deposited by the Seller hereunder shall be
paid or deposited in accordance with the terms hereof no later
than 11:00 A.M. (New York City time) on the day when due in
lawful money of the United States of America in same day funds to
the Agent's Account. The Seller shall, to the extent permitted
by law, pay to the Agent interest on all amounts not paid or
deposited when due hereunder at the Alternate Base Rate, payable
on demand, provided that such interest rate shall not at any time
exceed the maximum rate permitted by applicable law. Such
interest shall be retained by the Agent except to the extent that
such failure to make a timely payment or deposit has continued
beyond the date for distribution by the Agent of such overdue
amount to an Owner of an Eligible Asset, in which case such
interest accruing after such date shall be for the account of,
and distributed by the Agent to, the Owners ratably in accordance
with their respective interests in such overdue amount. All
computations of interest and all computations of Yield,
Liquidation Yield and fees hereunder shall be made on the basis
of a year of 360 days for the actual number of days (including
the first but excluding the last day) elapsed.
SECTION 2.09. Dividing or Combining of Eligible
Assets. The Seller may, on notice received by the Agent not
later than 11:00 A.M. (New York City time) three Business Days
before the last day of any Fixed Period for any then existing
Eligible Asset (an "Existing Eligible Asset"), divide such
Existing Eligible Asset on such last day into two or more new
Eligible Assets, each such new Eligible Asset having Capital as
designated in such notice and all such new Eligible Assets
collectively having aggregate Capital equal to the Capital of
such Existing Eligible Asset. The Seller may, on notice received
by the Agent not later than 11:00 A.M. (New York City time) three
Business Days before the last day of any Fixed Periods ending on
the same day for two or more Existing Eligible Assets owned by
the same Owner or the date of any proposed Purchase (if the last
day of such Fixed Period is the date of such proposed Purchase),
either (i) combine such Existing Eligible Assets or (ii) combine
such Existing Eligible Asset or Eligible Assets, if owned by the
Investor, and such proposed Eligible Asset to be purchased, on
such last day into one new Eligible Asset, such new Eligible
Asset having Capital equal to the aggregate Capital of such
Existing Eligible Assets, or such Existing Eligible Asset or
Eligible Assets and such proposed Eligible Asset, as the case may
be. On and after any division or combination of Eligible Assets
as described above, each of the new Eligible Assets resulting
from such division, or the new Eligible Asset resulting from such
combination, as the case may be, shall be a separate Eligible
Asset having Capital as set forth above, and shall take the place
of such Existing Eligible Asset or Eligible Assets or proposed
Eligible Asset, as the case may be, in each case under and for
all purposes of this Agreement, and the Agent shall annotate the
Certificate accordingly.
SECTION 2.10. Fees. (a) The Seller shall pay certain
fees to the Agent as more fully set forth in a letter agreement.
(b) Each Owner shall pay to the Collection Agent a
collection fee (the "Collection Agent Fee") of 1/4 of 1% per
annum on the average daily amount of Capital of each Eligible
Asset owned by such Owner, from the date of the initial Purchase
hereunder until the later of the Facility Termination Date or the
date on which such Capital is reduced to zero, payable on the
last day of each Settlement Period for such Eligible Asset;
provided that, upon three Business Days' notice to the Agent, the
Collection Agent may (if not the Seller) elect to be paid, as
such fee, another percentage per annum on the average daily
amount of Capital of each such Eligible Asset, but in no event in
excess of 110% of the costs and expenses referred to in Section
6.02(b); and provided further that such fee shall be payable only
from Collections pursuant to, and subject to the priority of
payment set forth in, Sections 2.05 and 2.06.
SECTION 2.11. Recourse for Defaulted Receivables.
(a) To the extent of the Default Recourse Limit (as
defined below) then available, on the last day of each Settlement
Period for each Eligible Asset in which a Liquidation Day has
occurred for such Eligible Asset, the Seller shall be obligated
to pay to the Agent for the account of the Owner of such Eligible
Asset, without prejudice to any other rights that any Owner may
have hereunder or under applicable law, an amount equal to the
interest of such Eligible Asset in the Outstanding Balance of any
Pool Receivable that at such time is a Defaulted Receivable (but
without duplication of amounts previously paid under this
subsection (a) with respect to such interest in such Defaulted
Receivable).
(b) "Default Recourse Limit" means at any time an
amount equal to:
(i) the applicable Loss Percentage multiplied by the
Capital of such Eligible Asset at such time, provided that
the foregoing amount shall not be recomputed (and shall
remain fixed) on any day that is a Liquidation Day for such
Eligible Asset, provided further that such amount shall
again be recomputed (and no longer shall remain fixed) on
any day that is no longer a Liquidation Day for such
Eligible Asset;
(ii) plus an amount equal to the interest of such
Eligible Asset in any Collections with respect to each
Defaulted Receivable in respect of which payments shall have
been made prior to such time by the Seller under Section
2.11(a) above, provided that the Default Recourse Limit for
any Eligible Asset shall not at any time by reason of this
clause (ii) exceed the Default Recourse Limit that was in
effect as of the then most recent date of recomputation in
accordance with clause (i) above.
(c) The proceeds of any payment made pursuant to
Section 2.11(a) above shall be deemed to be a Collection in
respect of each Receivable in respect of which such payments are
made by the Seller, and the amount of each such Collection shall
be applied as provided in Section 2.05 or 2.06, as applicable at
the time of payment.
SECTION 2.12. Eurodollar Increased Costs. If, due to
either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve requirements
referred to in Section 2.13) in or in the interpretation of any
law or regulation or (ii) the compliance with any guideline or
request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any
increase in the cost to the Owner of agreeing to purchase or
purchasing, or maintaining the ownership of, Eligible Assets in
respect of which Yield is computed by reference to the Eurodollar
Rate, then, upon demand by the Owner (with a copy to the Agent),
the Seller shall immediately pay to the Agent, for the account of
the Owner (as a third-party beneficiary), from time to time as
specified, additional amounts sufficient to compensate the Owner
for such increased costs; provided that (a) such costs of the
Owner shall not be reimbursed to the extent that they relate to
the amount of capital required or expected to be maintained by
the Owner based upon the existence of any such commitment or any
such purchases, and (b) the Seller shall have no obligation to
comply with any demand for reimbursement to the extent that any
such demand relates to any period more than ninety days prior to
the date on which the Owner initially made demand for
reimbursement. A certificate as to such amounts submitted to the
Seller and the Agent by the Owner shall be conclusive and binding
for all purposes, absent manifest error.
SECTION 2.13. Additional Yield on Eligible Assets
Bearing a Eurodollar Rate. The Seller shall pay to the Owner, so
long as the Owner shall be required under regulations of the
Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional Yield on the
unpaid Capital of each Eligible Asset of the Owner during each
Fixed Period in respect of which Yield is computed by reference
to the Eurodollar Rate, for such Fixed Period, at a rate per
annum equal at all times during such Fixed Period to the
remainder obtained by subtracting (i) the Eurodollar Rate for
such Fixed Period from (ii) the rate obtained by dividing such
Eurodollar Rate referred to in clause (i) above by that
percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of the Owner for such Fixed Period, payable on each
date on which Yield is payable on such Eligible Asset. Such
additional Yield shall be determined by the Owner and notified to
the Seller through the Agent within 30 days after any Yield
payment is made with respect to which such additional Yield is
requested. A certificate as to such additional Yield submitted to
the Seller and the Agent by the Owner shall be conclusive and
binding for all purposes, absent manifest error.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Condition Precedent to Initial Purchase.
The initial Purchase hereunder was subject to the condition
precedent that the Agent received on or before the date of such
Purchase the following, each (unless otherwise
indicated) to be dated such date, in form and substance
satisfactory to the Agent:
(a) The Original Certificate.
(b) Certified copies of the resolutions of the Board
of Directors of the Seller approving the Original Agreement and
the Original Certificate, and of all documents evidencing other
necessary corporate action and governmental approvals, if any,
with respect to the Original Agreement and the Original
Certificate.
(c) A certificate of the Secretary or Assistant
Secretary or General Counsel of the Seller certifying the names
and true signatures of the officers of the Seller authorized to
sign the Original Agreement and the Original Certificate and the
other documents to be delivered by it thereunder.
(d) Acknowledgment copies or stamped receipt copies of
proper financing statements, duly filed on or before the date of
the initial Purchase, under the UCC of all jurisdictions that the
Agent deemed necessary or desirable in order to perfect the
ownership interests created by the Original Agreement.
(e) Acknowledgment copies or stamped receipt copies of
proper financing statements, if any, necessary to release all
security interests and other rights of any Person in the
Receivables, Contracts or Related Security previously granted by
the Seller.
(f) Completed requests for information, dated on or
before the date of the initial Purchase, listing the financing
statements referred to in subsection (d) above and all other
effective financing statements filed in the jurisdictions
referred to in subsection (d) above that named the Seller as
debtor, together with copies of such other financing statements
(none of which were to cover any Receivables, Contracts or
Related Security).
(g) A favorable opinion of Thomas J. Pitner, Esq.,
Vice President and General Counsel for the Seller.
(h) A favorable opinion of Kaye, Scholer, Fierman,
Hays & Handler, counsel for the Agent.
(i) A favorable opinion of Kaye, Scholer, Fierman,
Hays & Handler, counsel for the Agent, addressed to the Investor
and the dealer for the commercial paper of the Investor, as to
the correctness of the representation and warranty of the Seller
set forth in Section 4.01(m).
(j) Certified copies of the Tariffs.
SECTION 3.02. Conditions Precedent to the
Effectiveness of the Amendment and Restatement of the Original
Agreement. The effectiveness of the amendment and restatement of
the Original Agreement is subject to the conditions precedent
that the Agent shall have received on or before the date hereof
the following, each (unless otherwise indicated) dated the date
hereof, in form and substance satisfactory to the Agent:
(a) Certified copies of the resolutions adopted by the
Board of Directors of the Seller approving this Agreement,
and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to
this Agreement.
(b) A certificate of the Secretary or Assistant
Secretary or General Counsel of the Seller certifying the
names and true signatures of the officers authorized to sign
this Agreement and the other documents to be delivered by it
hereunder;
(c) Acknowledgment copies or stamped receipt copies of
proper financing statements or financing statement
amendments (amending the financing statements referred to in
Section 3.01(d)), duly filed on or before the date of the
amendment and restatement of the Original Agreement, under
the UCC of all jurisdictions that the Agent deems necessary
or desirable in order to perfect the ownership interests
created hereby;
(d) Completed requests for information (Form UCC-
11)(or a similar search report certified by a party
acceptable to the Agent), dated a date reasonably near to
the date of the amendment and restatement of the Original
Agreement, listing the financing statements referred to in
Section 3.01(d) and the financing statements or financing
statement amendments referred to in subsection (c) above and
all other effective financing statements filed in the
jurisdictions referred to in subsection (c) above that name
the Seller (under its present name and any previous name) as
debtor, together with copies of such other financing
statements (none of which shall cover any Receivables,
Contracts or Related Security).
(e) A favorable opinion of Caroline D. Giddings, Esq.,
Attorney for the Seller, substantially in the form of
Exhibit C hereto and as to such other matters as the Agent
may reasonably request.
(f) A favorable opinion of D'Amato & Lynch, counsel
for the Agent, as to such matters as the Agent may
reasonably request.
(g) An executed copy of the Parallel Purchase
Commitment.
(h) Certified copies of the Tariffs (to the extent not
previously delivered).
SECTION 3.03. Conditions Precedent to All Purchases
and Reinvestments. Each Purchase (including the initial
Purchase) hereunder and the right of the Collection Agent to
reinvest in Pool Receivables those Collections attributable to an
Eligible Asset pursuant to Sections 2.05 or 2.06 shall be subject
to the further conditions precedent that (a) with respect to any
such Purchase, on or prior to the date of such Purchase, the
Collection Agent shall have delivered to the Agent, in form and
substance satisfactory to the Agent, a completed Investor Report,
dated within 5 days prior to the date of such Purchase, together
with a listing by Obligor of all Pool Receivables and such
additional information as may be reasonably requested by the
Agent, and (b) on the date of such Purchase or reinvestment the
following statements shall be true (and the acceptance by the
Seller of the proceeds of such Purchase or reinvestment shall
constitute a representation and warranty by the Seller that on
the date of such Purchase or reinvestment such statements are
true):
(i) The representations and warranties contained in
Section 4.01 of this Agreement are correct on and as of the
date of such Purchase or reinvestment, before and after
giving effect to such Purchase or reinvestment and to the
application of the proceeds therefrom, as though made on and
as of such date,
(ii) No event has occurred and is continuing, or would
result from such Purchase or reinvestment or from the
application of the proceeds therefrom, which constitutes an
Event of Investment Ineligibility or would constitute an
Event of Investment Ineligibility but for the requirement
that notice be given or time elapse or both,
(iii) The Agent shall not have delivered to the Seller
a notice that the Investor shall not make any further
Purchases hereunder and/or that the Collection Agent shall
not reinvest in any Pool Receivables on behalf of the Owner,
and
(iv) On such date, all of the Seller's long-term
public senior debt securities are rated at least BBB- by
Standard & Poor's Corporation and Baa3 by Moody's Investors
Service, Inc.,
and (c) the Agent shall have received such other approvals,
opinions or documents as the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction indicated at the beginning of this Agreement.
(b) The execution, delivery and performance by the
Seller of this Agreement and the Certificate, and the
Seller's use of the proceeds of Purchases and reinvestments,
are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, do not
contravene (i) the Seller's charter or by-laws or (ii) law
or any contractual restriction binding on or affecting the
Seller, and do not result in or require the creation of any
Adverse Claim (other than pursuant hereto) upon or with
respect to any of its properties; and no transaction
contemplated hereby requires compliance with any bulk sales
act or similar law.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Seller of this Agreement or
the Certificate, or for the perfection of or the exercise by
the Agent or any Owner of their respective rights and
remedies under this Agreement and the Certificate, except
for the filings of the financing statements referred to in
Article III, all of which, on or prior to the date of the
effectiveness of the amendment and restatement of the
Original Agreement, will have been duly made and be in full
force and effect.
(d) This Agreement and the Certificate are the legal,
valid and binding obligations of the Seller enforceable
against the Seller in accordance with their respective
terms.
(e) The balance sheets of the Seller and its
subsidiaries as at December 31, 1993, and the related
statements of income and retained earnings of the Seller and
its subsidiaries for the fiscal year then ended, copies of
which have been furnished to the Agent, fairly present the
financial condition of the Seller and its subsidiaries as at
such date and the results of the operations of the Seller
and its subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied, and since December 31, 1993, there has
been no material adverse change in such condition or
operations.
(f) There is no pending or threatened action or
proceeding affecting the Seller or any of its subsidiaries
before any court, governmental agency or arbitrator which
may materially adversely affect (i) the financial condition
or operations of the Seller or any of its subsidiaries or
(ii) the ability of the Seller to perform its obligations
under this Agreement or the Certificate, or which purports
to affect the legality, validity or enforceability of this
Agreement or the Certificate.
(g) No proceeds of any Purchase or reinvestment will
be used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
(h) The Seller is the legal and beneficial owner of
the Pool Receivables and Related Security free and clear of
any Adverse Claim except as created by this Agreement; upon
each Purchase or reinvestment, the Owner making such
Purchase or reinvestment will acquire a valid and perfected
first priority undivided percentage ownership interest to
the extent of the pertinent Eligible Asset in each Pool
Receivable then existing or thereafter arising and in the
Related Security and Collections with respect thereto free
and clear of any Adverse Claim except as created by this
Agreement. No effective financing statement or other
instrument similar in effect covering any Contract or any
Pool Receivable or the Related Security or Collections with
respect thereto is on file in any recording office, except
those filed in favor of the Agent relating to this
Agreement.
(i) Each Investor Report (if prepared by the Seller,
or to the extent that information contained therein is
supplied by the Seller), information, exhibit, financial
statement, document, book, record or report furnished or to
be furnished at any time by the Seller to the Agent or any
Owner in connection with this Agreement is or will be
accurate in all material respects as of its date or (except
as otherwise disclosed to the Agent or such Owner, as the
case may be, at such time) as of the date so furnished, and
no such document contains or will contain any untrue
statement of a material fact or omits or will omit to state
a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under
which they were made, not misleading.
(j) The chief place of business and chief executive
office of the Seller and the office where the Seller keeps
its records concerning the Pool Receivables are located at
the address specified on the signature page hereof (or at
such other locations, notified to the Agent in accordance
with Section 5.01 (f), in jurisdictions where all action
required by Section 6.05 has been taken and completed).
(k) The names and addresses of all the Special Account
Banks, together with the account numbers of the Special
Accounts of the Seller at such Special Account Banks,
specified in Schedule I hereto (or at such other Special
Account Banks and/or with such other Special Accounts as
have been notified to the Agent in accordance with Section
5.03(e)).
(i) Neither the Seller nor any Affiliate of the Seller
has any direct or indirect ownership or other financial
interest in any Owner.
(m) Each Purchase and each reinvestment of Collections
in Pool Receivables will constitute (i) a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended, and (ii) a purchase or
other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part
or all of the sales price of merchandise, insurance or
services within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller.
Until the later of the Facility Termination Date and the date
upon which no Capital for any Eligible Asset shall be existing,
the Seller will, unless the Agent shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties and
all Pool Receivables and related Contracts, Related Security
and Collections with respect thereto.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely
affect the interests of the Owners or the Agent hereunder or
in the Pool Receivables and Related Security, or the ability
of the Seller or the Collection Agent to perform their
respective obligations hereunder or the ability of the
Seller to perform its obligations under the Contracts.
(c) Audits. At any time and from time to time during
regular business hours, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the
possession or under the control of the Seller relating to
Pool Receivables and the Related Security, including,
without limitation, the related Contracts, and (ii) to visit
the offices and properties of the Seller for the purpose of
examining such materials described in clause (i) above, and
to discuss matters relating to Pool Receivables and the
Related Security or the Seller's performance hereunder or
under the Contracts with any of the officers or employees of
the Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account. Maintain
and implement administrative and operating procedures
(including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and
maintain, all documents, books, records and other
information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily
identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(e) Performance and Compliance with Receivables and
Contracts. At its expense timely and fully perform and
comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts
related to the Pool Receivables.
(f) Location of Records. Keep its chief place of
business and chief executive office and the office where it
keeps its records concerning the Pool Receivables at the
address of the Seller referred to in Section 4.01(j) or,
upon 30 days' prior written notice to the Agent, at any
other locations in a jurisdiction where all action required
by Section 6.05 shall have been taken.
(g) Credit and Collection Policies. Comply in all
material respects with its Credit and Collection Policy in
regard to each Pool Receivable and the related Contract.
(h) Collections. Upon the request of the Agent, (i)
instruct all Obligors to cause all Collections to be
deposited directly either to a Special Account or to the
Concentration Account, (ii) deposit, or cause to be
deposited, all Collections in the Special Accounts to the
Concentration Account, and (iii) deposit, or cause to be
deposited, all Collections in the Concentration Account to
the Designated Account.
SECTION 5.02. Reporting Requirements of the Seller.
Until the later of the Facility Termination Date and the date
upon which no Capital for any Eligible Asset shall be existing,
the Seller will, unless the Agent shall otherwise consent in
writing, furnish to the Agent:
(a) as soon as available and in any event within 60
days after the end of each of the first three quarters of
each fiscal year of the Seller, balance sheets of the Seller
and its subsidiaries as of the end of such quarter and
statements of income and retained earnings of the Seller and
its subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer of the
Seller;
(b) as soon as available and in any event within 120
days after the end of each fiscal year of the Seller, a copy
of the annual report for such year for the Seller and its
subsidiaries, containing financial statements for such year
certified in a manner acceptable to the Agent by Arthur
Andersen & Co. or other independent public accountants
acceptable to the Agent;
(c) as soon as possible and in any event within five
days after the occurrence of each Event of Investment
Ineligibility and each event which, with the giving of
notice or lapse of time, or both, would constitute an Event
of Ineligibility, continuing on the date of such statement,
a statement of the chief financial officer of the Seller
setting forth details of such Event of Investment
Ineligibility or event and the action which the Seller has
taken and proposes to take with respect thereto;
(d) promptly after the sending or filing thereof,
copies of all reports which the Seller sends to any of its
security holders, and copies of all reports and registration
statements which the Seller or any subsidiary files with the
Securities and Exchange Commission or any national
securities exchange;
(e) promptly after the filing or receiving thereof,
copies of all reports and notices which the Seller or any
subsidiary files under ERISA with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation or the
U.S. Department of Labor or which the Seller or any
subsidiary receives from such Corporation; and
(f) such other information, documents, records or
reports respecting the Receivables, the Related Security or
the Contracts or the condition or operations, financial or
otherwise, of the Seller or any of its subsidiaries as the
Agent may from time to time reasonably request.
SECTION 5.03. Negative Covenants of the Seller. Until
the later of the Facility Termination Date and the date upon
which no Capital for any Eligible Asset shall be existing, the
Seller will not, without the written consent of the Agent:
(a) Sales, Liens, Etc. Except as otherwise provided
herein, or pursuant to the Citibank Agreement, sell, assign
(by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, or create or suffer to
exist any Adverse Claim upon or with respect to, the
Seller's undivided interest in any Pool Receivable or
Related Security or Collections in respect thereof, or upon
or with respect to any related Contract or any Lock-Box
Account to which any Collections of any Pool Receivable are
sent, or assign any right to receive income in respect
thereof.
(b) Extension or Amendment of Receivables. Except as
otherwise permitted in Section 6.02, extend, amend or
otherwise modify the terms of any Pool Receivable, or amend,
modify or waive any term or condition of any Contract
related thereto.
(c) Change in Business or Credit and Collection
Policy. Make any change in the character of its business or
in the Credit and Collection Policy, which change would, in
either case, be reasonably likely to impair the
collectibility of any Pool Receivable.
(d) Change in Payment Instruction to Obligors. Add or
terminate any bank as a Special Account Bank from those
listed in Schedule I hereto, or make any change in its
instructions to Obligors regarding payments to be made to
the Seller or payments to be made to any Special Account
Bank or to the Concentration Account, unless the Agent shall
have received notice of such addition, termination or
change.
(e) Deposits to Special Accounts, Concentration
Account and Designated Accounts. Deposit or otherwise
credit, or cause or permit to be so deposited or credited,
to the Designated Account (or, if instructed by the Agent,
to the Special Accounts or the Concentration Accounts) cash
or cash proceeds other than Collections of Pool Receivables.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The
Pool Receivables shall be serviced, administered and collected by
the Person (the "Collection Agent") designated to do so from time
to time in accordance with this Section 6.01. Until the Agent
designates a new Collection Agent, the Seller is hereby
designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms
hereof. The Agent may at any time designate as Collection Agent
any Person (including itself) to succeed the Seller or any
successor Collection Agent, if such Person (other than itself)
shall agree in writing to perform the duties and obligations of
the Collection Agent pursuant to the terms hereof. The
Collection Agent may, with the prior consent of the Agent,
subcontract with any other Person to service, administer or
collect the Pool Receivables, provided that the Collection Agent
shall remain liable for the performance of the duties and
obligations of the Collection Agent pursuant to the terms hereof.
SECTION 6.02. Duties of Collection Agent. (a) The
Collection Agent shall take or cause to be taken all such actions
as may be necessary or advisable to collect each Pool Receivable
from time to time, all in accordance with applicable laws, rules
and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy. Each of the
Seller, the Owner and the Agent hereby appoints as its agent the
Collection Agent, from time to time designated pursuant to
Section 6.01, to enforce its respective rights and interests in
and under the Pool Receivables, the Related Security and the
related Contracts. The Collection Agent shall set aside and hold
in trust for the account of the Seller and each Owner their
respective allocable shares of the Collections of Pool
Receivables in accordance with Sections 2.05 and 2.06 but shall
not be required (unless otherwise requested by the Agent) to
segregate the funds constituting such portion of such Collections
prior to the remittance thereof in accordance with said Sections.
If instructed by the Agent, the Collection Agent shall segregate
and deposit with a bank (which may be Citibank) designated by the
Agent such allocable share of Collections of Pool Receivables set
aside for each Owner on the first Business Day following receipt
by the Collection Agent of such Collections. If no Event of
Investment Ineligibility or Event of Purchase Ineligibility shall
have occurred and be continuing, the Seller, while it is the
Collection Agent, may, in accordance with the Credit and
Collection Policy, extend the maturity or adjust the Outstanding
Balance of any Defaulted Receivable as the Seller may determine
to be appropriate to maximize Collections thereof. The Seller
shall deliver to the Collection Agent, and the Collection Agent
shall hold in trust for the Seller and each Owner in accordance
with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks)
which evidence or relate to Pool Receivables.
(b) The Collection Agent shall as soon as practicable
following receipt turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided
interest therein, less, in the event the Seller is not the
Collection Agent, all reasonable out-of-pocket costs and expenses
of such Collection Agent of servicing, administering and
collecting the Pool Receivables to the extent not covered by the
Collection Agent Fee received by it and (ii) the Collections of
any Receivable which is not a Pool Receivable. The Collection
Agent, if other than the Seller, shall as soon as practicable
upon demand deliver to the Seller all documents, instruments and
records in its possession which evidence or relate to Pool
Receivables. The Collection Agent's authorization under this
Agreement shall terminate, after the Facility Termination Date,
upon receipt by each Owner of an Eligible Asset of an amount
equal to the Capital plus accrued Yield for such Eligible Asset
plus all other amounts owed to the Agent, each Owner and the
Seller and (unless otherwise agreed by the Agent and the
Collection Agent) the Collection Agent under this Agreement.
SECTION 6.03. Rights of the Agent. (a) The Agent is
hereby authorized at any time to instruct the Obligors of Pool
Receivables, or any of them, to make payment of all amounts
payable under any Pool Receivable to a Designated Account. The
Seller shall, promptly at the Agent's request, send notices to
the Obligors of Pool Receivables, or any of them, instructing
them to make payment in the manner requested by the Agent.
Further, the Agent may notify at any time and at the Seller's
expense the Obligors of Pool Receivables, or any of them, of the
ownership of Eligible Assets by the Owners.
(b) At any time following the designation of a Collection
Agent other than the Seller pursuant to Section 6.01:
(i) The Agent may direct the Obligors of Pool
Receivables, or any of them, to make payment of all amounts
due or to become due to the Seller under any Pool Receivable
directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and at
the Seller's expense, give notice of such ownership to such
Obligors and direct them to make such payments directly to
the Agent or its designee.
(iii) The Seller shall, at the Agent's request, (A)
assemble all of the documents, instruments and other records
(including, without limitation, computer tapes and disks)
which evidence the Pool Receivables, and the related
Contracts and Related Security, or which are otherwise
necessary or desirable to collect such Pool Receivables, and
shall make the same available to the Agent at a place
selected by the Agent or its designee, and (B) segregate all
cash, checks and other instruments received by it from time
to time constituting Collections of Pool Receivables in a
manner acceptable to the Agent and shall, promptly upon
receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to
the Agent or its designee.
(iv) The Agent may take any and all steps in the
Seller's name and on behalf of the Seller and the Owners
necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Pool
Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing
Collections, enforcing such Pool Receivables and the related
Contracts, and adjusting, settling or compromising the
amount or payment thereof, in the same manner and to the
same extent as the Seller might have done.
SECTION 6.04. Responsibilities of the Seller.
Anything herein to the contrary notwithstanding:
(a) The Seller shall perform all of its obligations
under the Contracts related to the Pool Receivables to the
same extent as if Eligible Assets had not been sold
hereunder and the exercise by the Agent of its rights
hereunder shall not relieve the Seller from such obligations
or its obligations with respect to Pool Receivables; and
(b) Neither the Agent nor the Owners shall have any
obligation or liability with respect to any Pool Receivables
or related Contracts, nor shall any of them be obligated to
perform any of the obligations of the Seller thereunder.
SECTION 6.05. Further Action Evidencing Purchases.
(a) The Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to
perfect, protect or more fully evidence the Eligible Assets
purchased by the Owners hereunder, or to enable any of them or
the Agent to exercise and enforce any of their respective rights
and remedies hereunder or under the Certificate. Without
limiting the generality of the foregoing, the Seller will upon
the request of the Agent: (i) execute and file such financing or
continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be
necessary or desirable, or as the Agent may request, in order to
perfect, protect or evidence such Eligible Assets; (ii) mark
conspicuously each invoice evidencing each Pool Receivable and
the related Contract with a legend, acceptable to the Agent,
evidencing that such Eligible Assets have been sold in accordance
with this Agreement; and (iii) mark its master data processing
records evidencing such Pool Receivables and related Contracts
with such legend.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto and assignments thereof, relating to all or any of the
Contracts, or Pool Receivables and the Related Security and
Collections with respect thereto now existing or hereafter
arising without the signature of the Seller where permitted by
law. A photocopy or other reproduction of this Agreement or any
financing statement covering all or any of the Contracts, or Pool
Receivables and the Related Security and Collections with respect
thereto shall be sufficient as a financing statement where
permitted by law.
(c) If the Seller fails to perform any agreement
contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent
incurred in connection therewith shall be payable by the Seller
under Section 10.01 or Section 11.06, as applicable.
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. Events of Investment Ineligibility. If
any of the following events ("Events of Investment
Ineligibility") shall occur and 'be continuing:
(a) the Collection Agent (if the Seller or any of its
Affiliates) (i) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to
in clause (ii) of this Section 7.01(a)) and such failure
shall remain unremedied for three Business Days or (ii)
shall fail to make any payment or deposit to be made by it
hereunder when due; or
(b) the Seller shall fail to perform or observe any
term, covenant or agreement contained in Section 5.02(c),
5.03(e) or 6.03(a); or
(c) any representation or warranty or statement made
by the Seller (or any of its officers) under or in
connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(d) the Seller shall fail to perform or observe any
other term, covenant or agreement contained in this
Agreement on its part to be performed or observed and any
such failure shall remain unremedied for 10 days after
written notice thereof shall have been given to the Seller
by the Agent; or
(e) the Seller shall fail to pay any principal of or
premium or interest on any Debt when the same becomes due
and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such
Debt and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the
effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;
or
(f) any Purchase or any reinvestment pursuant to
Section 2.05 shall for any reason (other than pursuant to
the terms hereof) cease to create, or any Eligible Asset
shall for any reason cease to be, a valid and perfected
first priority undivided percentage ownership interest to
the extent of the pertinent Eligible Asset in each
applicable Pool Receivable and the Related Security and
Collections with respect thereto or the Certificate shall
for any reason cease to evidence in the Owner of such
Eligible Asset legal and equitable title to, and ownership
of, an undivided percentage ownership interest in Pool
Receivables and Related Security to the extent of such
Eligible Asset; or
(g) the Seller shall admit in writing its inability to
pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be
instituted by or against the Seller seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period
of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Seller
shall take any corporate action to authorize any of the
actions set forth above in this subsection (g); or
(h) the Default Ratio as at the last day of any
calendar month shall exceed 6% or the Delinquency Ratio as
at the last day of any calendar month shall exceed 20%; or
(i) the sum of the Eligible Assets percentage
hereunder plus the "Eligible Assets" percentage under the
Citibank Agreement shall for a period of five consecutive
Business Days be equal to or exceed 100%; or
(j) there shall have been any material adverse change
in the financial condition or operations of the Seller since
December 31, 1993, or there shall have occurred any event
which materially adversely affects the collectibility of the
Pool Receivables, or there shall have occurred any other
event which materially adversely affects the ability of the
Seller to collect Pool Receivables or the ability of the
Seller to perform hereunder;
then, and in any such event, the Agent may, by notice to the
Seller declare the Facility Termination Date to have occurred,
whereupon the Facility Termination Date shall forthwith occur,
without demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Seller; provided that,
in the event of an actual or deemed entry of an order for relief
with respect to the Seller under the Federal Bankruptcy Code or
the occurrence of any event described above in subsection (f),
the Facility Termination Date shall automatically occur, without
demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Seller. Upon any such termination
of the Facility, the Agent and the Owners shall have, in addition
to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC
of the applicable jurisdiction and other applicable laws, which
rights shall be cumulative. Without limiting the foregoing or
the general applicability of Article IX hereof, any Owner may
elect to assign any Eligible Asset owned by such Owner pursuant
to Section 9.01 following the occurrence of any Event of
Investment Ineligibility.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. The Owner
hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto.
SECTION 8.02. Agent's Reliance, Etc. Neither the
Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it
or them as Agent under or in connection with this Agreement
(including, without limitation, the Agent's servicing,
administering or collecting Pool Receivables as Collection Agent
pursuant to Section 6.01), except for its or their own gross
negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent: (i) may consult with
legal counsel (including counsel for the Seller), independent
public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation
to any Owner and shall not be responsible to any Owner for any
statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iii) shall
not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Seller or to
inspect the property (including the books and records) of the
Seller; (iv) shall not be responsible to any Owner for the due
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Certificate or any
other instrument or document furnished pursuant hereto; and (v)
shall incur no liability under or in respect of this Agreement by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 8.03. CNAI and Affiliates. With respect to
any Eligible Asset owned by it, CNAI shall have the same rights
and powers under this Agreement as any other Owner and may
exercise the same as though it were not the Agent. CNAI and its
Affiliates may generally engage in any kind of business with the
Seller or any Obligor, any of their respective Affiliates and any
Person who may do business with or own securities of the Seller
or any Obligor or any of their respective Affiliates, all as if
CNAI were not the Agent and without any duty to account therefor
to the Owners.
SECTION 8.04. Investor's Purchase Decision. The
Investor acknowledges that it has, independently and without
reliance upon the Agent, any of its Affiliates or any other Owner
and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter
into this Agreement and, if it so determines, to purchase an
undivided ownership interest in Pool Receivables hereunder. The
Owner also acknowledges that it will, independently and without
reliance upon the Agent, any of its Affiliates or any other Owner
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
ARTICLE IX
ASSIGNMENT OF ELIGIBLE ASSETS
SECTION 9.01. Assignability. (a) This Agreement and
the Owner's rights and obligations herein (including ownership of
each Eligible Asset) shall be assignable by the Owner and its
successors and assigns to Citibank, CNAI, any of their
Affiliates, any Person managed by Citibank, CNAI or any of their
Affiliates, or to any financial institution or other entity which
is acceptable to the Agent and approved by the Seller, which
approval shall not be unreasonably withheld.
(b) Each assignor of an Eligible Asset or any interest
therein shall notify the Agent and the Seller of any such
assignment.
SECTION 9.02. Annotation of Certificate. The Agent
shall annotate the Certificate to reflect any assignments made
pursuant to Section 9.01 or otherwise.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller. Without
limiting any other rights which the Agent, any Owner or any
Affiliate of any thereof (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys'
fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") growing out of or resulting from this
Agreement or the use of proceeds of Purchases or reinvestments or
the ownership of Eligible Assets or in respect of any Receivable
or any Contract, excluding, however, (a) Indemnified Amounts to
the extent resulting from gross negligence or willful misconduct
on the part of such Indemnified Party, (b) recourse (except as
otherwise specifically provided in this Agreement) for
uncollectible Receivables or (c) any income taxes incurred by
such Indemnified Party arising out of or as a result of this
Agreement or the ownership of Eligible Assets or in respect of
any Receivable or any Contract. Without limiting or being
limited by the foregoing, the Seller shall pay on demand to each
Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from:
(i) the creation of an undivided percentage ownership
interest in any Receivable which is not at the date of the
creation of such interest an Eligible Receivable or which
thereafter ceases to be an Eligible Receivable;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller (or any of its
officers) under or in connection with this Agreement which
shall have been incorrect in any material respect when made;
(iii) the failure by the Seller to comply with any
applicable law, rule or regulation with respect to any Pool
Receivable or the related Contract, or the nonconformity of
any Pool Receivable or the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest in the Owner of an Eligible
Asset an undivided percentage ownership interest, to the
extent of such Eligible Asset, in the Receivables in, or
purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, free and clear
of any Adverse Claim;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables in, or
purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, whether at the
time of any Purchase or reinvestment or at any subsequent
time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to
the payment of any Receivable in, or purporting to be in,
the Receivables Pool (including, without limitation, a
defense based on such Receivable or the related Contract not
being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vii) any failure of the Seller, as Collection
Agent or otherwise, to perform its duties or obligations in
accordance with the provisions of Article VI or to perform
its duties or obligations under the Contracts;
(viii) any products liability claim arising out of or
in connection with merchandise, insurance or services which
are the subject of any Contract;
(ix) any investigation, litigation or proceeding
related to this Agreement or the use of proceeds of
Purchases or reinvestments or the ownership of Eligible
Assets or in respect of any Receivable, Related Security or
Contract;
(x) the commingling of Collections of Pool Receivables
at any time with other funds; or
(xi) any breakage and other expenses, if any, of the
Investor (including, without limitation, attorneys' fees and
disbursements of the costs, including accrued interest, of
interest rate swaps, collars, forward agreements and future
contracts) in connection with the Investor's funding or
maintenance of any Eligible Asset and the costs and expenses
specifically set forth in the definition of Fixed Rate.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, and no consent to any
departure by the Seller herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Agent as
agent for the Owner, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 11.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered, as to each party
hereto, at its address set forth under its name on the signature
pages hereof or at such other address as shall be designated by
such party in a written notice to the other parties hereto. All
such notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in
the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company,
respectively, except that notices and communications to the Agent
pursuant to Article II shall not be effective until received by
the Agent.
SECTION 11.03. No Waiver; Remedies. No failure on the
part of any Owner or the Agent to exercise, and no delay in
exercising, any right hereunder or under the Certificate shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 11.04. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Seller, the Agent and each Owner and their respective successors
and assigns, except that the Seller shall not have the right to
assign its rights hereunder or any interest herein without the
prior written consent of the Agent. This Agreement shall create
and constitute the continuing obligation of the parties hereto in
accordance with its terms, and shall remain in full force and
effect until such time, after the Facility Termination Date, as
no Capital of any Eligible Asset shall be outstanding; provided
that rights and remedies with respect to the provisions of
Article X and Section 11.06, 11.07 and 11.08 shall be continuing
and shall survive any termination of this Agreement.
SECTION 11.05. Governing Law. This Agreement and the
Certificate shall be governed by, and construed in accordance
with, the laws of the State of New York, except to the extent
that the validity or perfection of the interests of the Owners,
or remedies hereunder, in respect of the Receivables, any Related
Security or any Collections in respect thereof, are governed by
the laws of a jurisdiction other than the State of New York.
SECTION 11.06. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the
Indemnified Parties under Article X hereof, the Seller agrees to
pay on demand all costs and expenses in connection with the
preparation, execution, delivery, administration (including
periodic auditing), modification and amendment of this Agreement,
the Certificate and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent, the Investor,
Citibank, CNAI and their respective Affiliates with respect
thereto and with respect to advising the Agent, the Investor,
Citibank, CNAI and their respective Affiliates as to their rights
and remedies under this Agreement. The Seller further agrees to
pay on demand all costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses) of the Agent,
the Owner, CNAI and their respective Affiliates, in connection
with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Certificate and
the other documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection
with the enforcement of rights under this Section 11.06(a).
(b) In addition, the Seller shall pay any and all
commissions of placement agents and commercial paper dealers in
respect of commercial paper notes of the Investor issued to fund
the Purchase or maintenance of any Eligible Asset and any and all
stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and
recording of this Agreement, the Certificate or the other
documents to be delivered hereunder, and agrees to save each
Indemnified Party harmless from and against any and all
liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees.
(c) In addition, the Seller shall pay on demand all
other costs, expenses and taxes (excluding income taxes) incurred
by the Owner or any shareholder of the Investor ("Other Costs"),
including, without limitation, the cost of auditing the
Investor's books by certified public accountants, the cost of
rating the Investor's commercial paper by independent financial
rating agencies, the taxes (excluding income taxes) resulting
from the Investor's operations, and the reasonable fees and out-
of-pocket expenses of counsel for the Investor or any counsel for
any shareholder of the Investor with respect to (i) advising the
Investor or shareholder as to its rights and remedies under this
Agreement, (ii) the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the
Certificate and the other documents to be delivered hereunder, or
(iii) advising the Investor or such shareholder as to matters
relating to the Investor's operations; provided that, if the
Investor enters into agreements for the purchase of interests in
receivables from one or more other Persons ("Other Sellers"), the
Seller and such Other Sellers shall each be liable for such Other
Costs ratably in accordance with the usage under the respective
facilities of the Investor to purchase receivables or interests
therein from the Seller and each Other Seller; and provided
further that, if such Other Costs are attributable to the Seller
and not attributable to any Other Seller, the Seller shall be
solely liable for such Other Costs.
SECTION 11.07. No Proceedings. Each of the Seller,
the Agent, CNAI and each assignee of an Eligible Asset or any
interest therein and each entity which enters into a commitment
to purchase Eligible Assets or interests therein hereby agrees
that it will not institute against the Investor any proceeding of
the type referred to in Section 7.01(g) so long as any commercial
paper issued by the Owner shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which
any such commercial paper shall have been outstanding.
SECTION 11.08. Confidentiality. Except to the extent
otherwise required by applicable law, the Seller agrees to
maintain the confidentiality of this Agreement (and all drafts
thereof) and not to disclose this Agreement or such drafts to
third parties (other than to its directors, officers, employees,
accountants or counsel); provided that the Agreement may be
disclosed to third parties to the extent such disclosure is (i)
required in connection with a sale of securities of the Seller,
(ii) made solely to persons who are legal counsel for the
purchaser or underwriter of such securities, (iii) limited in
scope to the provisions of Articles V, VII, X and, to the extent
defined terms are used in Articles V, VII and X, such terms
defined in Article I of this Agreement and (iv) made pursuant to
a written agreement of confidentiality in form and substance
reasonably satisfactory to the Agent.
SECTION 11.09. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same
agreement.
SECTION 11.10. Amendment of the Original Certificate.
The Original Certificate is hereby amended in its entirety to
read as set forth in Exhibit A hereto and the Agent is authorized
to endorse on the Original Certificate the changes made pursuant
hereto. Each reference in this Agreement to "the Certificate"
shall mean the Original Certificate as amended by the amendment
and restatement of the Original Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
IES UTILITIES INC.
By /s/ Blake O. Fisher Jr.
Title:
By /s/ Robert J. Latham
Title:
200 First Street, S.E.
Cedar Rapids, IA 52401
CIESCO L.P.
By: CITICORP NORTH
AMERICA, INC.,
as Attorney-in-Fact
By /s/ Arthur Bovino
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Vice President
Facsimile No. (914) 899-7890
CITICORP NORTH AMERICA,
INC.
By /s/ Arthur Bovino
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset
Funding Department
Facsimile No. (914) 899-7890
EXHIBIT A
CERTIFICATE OF ASSIGNMENT
Dated as of June 30, 1989
As amended and restated as of April 15, 1994
Reference is made to the Receivables Purchase and Sale
Agreement dated as of June 30, 1989, as amended and restated as
of April 15, 1994 (the "Agreement") among IES UTILITIES INC.
(formerly known as Iowa Electric Light and Power Company, the
"Seller"), CIESCO L.P. (formerly known as Commercial Industrial
Trade-receivables Investment Company) and Citicorp North America,
Inc., as Agent. Terms defined in the Agreement are used herein
as therein defined.
The Seller hereby sells and assigns to the Agent for
the account of the Owner thereof each Eligible Asset purchased
under the Agreement.
Each Purchase of an Eligible Asset by the Investor from
the Seller, each assignment of such Eligible Asset by its Owner
to an Assignee and each reduction in Capital in respect of each
Eligible Asset evidenced hereby shall be endorsed by the Agent on
the grid attached hereto which is part of this Certificate of
Assignment. Such endorsement shall evidence the ownership of
such Eligible Asset initially by the Investor and upon any
assignment, if any, thereof by the Assignee thereof and the
amount of Capital from time to time.
This Certificate of Assignment is made without recourse
except as otherwise provided in the Agreement.
This Certificate of Assignment shall be governed by,
and construed in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, the undersigned has caused this
Certificate of Assignment to be duly executed and delivered by
its duly authorized officer as of the date first above written.
IES UTILITIES INC.
By
Title:
By
Title:
EXHIBIT B
FORM OF INVESTOR REPORT
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE SELLER
[Date]
CIESCO L.P
450 Mamaroneck Avenue
Harrison, NY 10528
Citicorp North America, Inc.,
as Agent
450 Mamaroneck Avenue
Harrison, NY 10528
IES Utilities Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section
3.02(e) of the amendment and restatement, dated as of April 15,
1994 (the "Agreement"), of the Receivables Purchase and Sale
Agreement, dated as of June 30, 1989, among IES Utilities Inc.
(the "Seller"), CIESCO L.P. and Citicorp North America, Inc., as
Agent. The terms defined in the Agreement are used as defined in
the Agreement.
As Attorney for the Seller, I have acted as counsel in
connection with the preparation, execution and delivery of the
Agreement.
In that connection I have examined:
(1) The Agreement and the Certificate.
(2) The documents of the Seller pursuant to Article
III of the Agreement.
(3) The Articles of Incorporation of the Seller and
all amendments thereto (the "Articles").
(4) The By-laws of the Seller and all amendments
thereto (the "By-Laws").
(5) Oral verification with the Secretary of State of
Iowa, dated ______, 1994, as to the continued
existence and good standing of the Seller in such
State.
(6) Acknowledgment copies of financing statements (the
"Financing Statements") under the Uniform
Commercial Code as in effect in the State of Iowa
naming the Seller as debtor and CNAI, as Agent, as
secured party, which Financing Statements have
been filed in the filing offices located in the
State of Iowa.
(7) Written verification from Iowa Public Records
Search, L.P., as to the copies of financing
statements on file with the filing offices located
in the State of Iowa and Linn County, Iowa.
I have also examined all of the indentures, loan or
credit agreements, leases, guarantees, mortgages, security
agreements, bonds, notes and other agreements or instruments and
all of the orders, write, judgments, awards, injunctions and
decrees (collectively the "Documents"), which affect or purport
to affect the Seller's ability to sell or otherwise dispose of
Receivables or the Seller's obligations under the Agreement. In
addition, I have examined such other corporate records of the
Seller, certificates of public officials and of officers of the
Seller, and agreements, instruments and other documents, as I
have deemed necessary as a basis for the opinions expressed
below. I have assumed the due execution and delivery, pursuant
to due authorization, of the Agreement by the Investor and the
Agent.
In my examination of the filings referred to above in
paragraph (7), I have assumed that all financing statements,
other then the Financing Statements, in which the Seller is named
as debtor have been properly filed and indexed in the appropriate
filing offices in the State of Iowa and Linn County, Iowa, that
such filings are accurate and complete, and that none of you has
knowledge of the contents of any other financing statement.
Based upon the foregoing and upon such investigation as
I have deemed necessary, I am of the following opinion:
1. The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Iowa.
2. The execution, delivery and performance by the
Seller of the Agreement and the Certificate, and the
Seller's use of the proceeds of Purchases and reinvestments,
are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, and (A) do not
contravene (i) the Articles or the By-Laws or (ii) any law,
rule or regulation applicable to the Seller or, to the best
of my knowledge, (iii) any contractual or legal restriction
contained in any Document listed above; (B) do not result in
or require the creation of any Adverse Claim (other than
pursuant to the Agreement) upon or with respect to any of
the Seller's properties; and (C) do not require compliance
with any bulk sales act or similar law. The Agreement and
the Certificate have been duly executed and delivered on
behalf of the Seller.
3. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Seller of the Agreement or
the Certificate or for the perfection of or the exercise by
the Agent or any Owner of their respective rights and
remedies under the Agreement and the Certificate, except for
the filings of the Financing Statements referred to above in
paragraph (6).
4. The Agreement and the Certificate are legal, valid
and binding obligations of the Seller enforceable against
the Seller in accordance with their respective terms.
5. To the best of my knowledge, there are no pending
or overtly threatened actions or proceedings against the
Seller or any of its subsidiaries before any court,
governmental agency or arbitrator which are likely to
materially adversely affect (i) the financial condition or
operations of the Seller or any of its subsidiaries or (ii)
the ability of the Seller to perform its obligations under
the Agreement or the Certificate, or which purport to affect
the legality, validity, binding effect or enforceability of
the Agreement or the Certificate.
6. Each Eligible Asset purchased prior to the date of
this opinion constituted, and each Eligible Asset purchased
pursuant to a subsequent Purchase will constitute, a valid
undivided ownership interest (an "Undivided Interest"), to
the extent of the Eligible Asset purchased pursuant to such
Purchase, in each Pool Receivable then exiting or thereafter
arising and in the Related Security and Collections.
7. The Financing Statements have been duly filed
pursuant to the UCC, resulting in the perfection and first
priority of each Undivided Interest.
8. The nature of the Eligible Asset is such that its
purchase with the proceeds of notes would constitute a
"current transaction" within the meaning of Section 3(a)(3)
of the Securities Act of 1933, as amended (the "Securities
Act"); since the date of initial Purchase, the Pool
Receivables have not been and will not be applied by the
Seller or any of its consolidated subsidiaries in
determining the total "current transactions" of the Seller
and its consolidated subsidiaries in claiming an exemption
from registration under the Securities Act. Each Purchase
and each reinvestment of Collections pursuant to the
Agreement will constitute a purchase or other acquisition of
notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales
price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of
1940, as amended.
The opinions set forth above are subject to the
following qualifications:
(a) My opinion in paragraph 4 above is subject to the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the
effect of general principles of equity, including (without
limitation) concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether considered in
a proceeding in equity or at law).
(c) I express no opinion as to the priority of the
Undivided Interest as against any claim or lien in favor of
the United States or any
agency or instrumentality thereof (including, without
limitation, federal tax liens and liens under Title IV of
ERISA).
Very truly yours,
Caroline D. Giddings
Attorney
EXHIBIT D
NOTICE OF PURCHASE OF
AN ELIGIBLE ASSET AT A FIXED RATE
Citicorp North America, Inc.
as Agent
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: _____________
Ladies and Gentlemen:
The undersigned, IES Utilities Inc., refers to the
Receivables Purchase and Sale Agreement dated as of June 30,
1989, as amended and restated as of April 15, 1994, (the
"Agreement," the terms defined therein being used herein as
therein defined), among the undersigned, Ciesco L.P., and you, as
Agent, and hereby gives you notice pursuant to Section 2.02 of
the Agreement that the undersigned hereby requests Ciesco L.P. to
make a Purchase under the Agreement, and in that connection sets
forth below the terms on which such Purchase (the "Proposed
Purchase") is requested to be made:
(A) Date of purchase of
Eligible Asset _________
(B) Amount of Capital _________
(C) Maturity date of Fixed Period _________
(D) Fixed Rate _________
(E) Interest Payment Date(s) _________
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the
date of the Proposed Purchase of such Eligible Asset:
(a) the representations and warranties contained in
Section 4.01 are correct, before and after giving effect to
the Proposed Purchase and to the application of the proceeds
therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would
result from the Proposed Purchase or from the application of
the proceeds therefrom, which constitutes an Event of
Investment Ineligibility or would constitute an
Event of Investment Ineligibility but for the requirement
that notice be given or time elapse or both.
The undersigned hereby confirms that the proposed
Purchase of such Eligible Asset is to be made available to it in
accordance with Section 2.02 of the Agreement.
Very truly yours,
IES UTILITIES INC.
By:_______________________
Title:
EXHIBIT 12
<TABLE>
IES UTILITIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
<CAPTION>
Twelve
Year Ended December 31, Months Ended Ended
1989 1990 1991 1992 1993 March 31, 1994 4
(in thousands, except ratio of earnings to fixed charges)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 53,454 $ 45,969 $ 47,563 $ 45,291 $ 67,970 $ 68,491
Federal and
state income
taxes 22,574 22,364 23,494 20,760 37,963 39,192
Net income
before income
taxes 76,028 68,333 71,057 66,051 105,933 107,683
Interest on
long-term
debt 29,044 28,853 31,171 35,689 34,926 35,307
Other interest 3,130 4,704 5,595 3,939 5,243 4,734
Estimated
interest
component of
rents 9,494 7,936 6,594 4,567 3,729 3,741
Fixed charges as
defined 41,668 41,493 43,360 44,195 43,898 43,782
Earnings as
defined $ 117,696 $ 109,826 $ 114,417 $ 110,246 $ 149,831 $ 151,465
Ratio of
earnings to
fixed charges
(unaudited) 2.82 2.65 2.64 2.49 3.41 3.46
For purposes of computation of these ratios (a) earnings have been calculated
by adding fixed charges and Federal and state income taxes to net income;
(b) fixed charges consist of interest (including amortization of debt expense,
premium and discount) on long-term and other debt and the estimated interest
component of rents.
</TABLE>
