UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-9187 IES INDUSTRIES INC. (an Iowa Corporation) 42-1271452
IES Tower, Cedar Rapids, Iowa 52401
319-398-4411
0-4117-1 IES UTILITIES INC. (an Iowa Corporation) 42-0331370
IES Tower, Cedar Rapids, Iowa 52401
319-398-4411
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrants'
classes of common stock, as of April 30, 1997.
IES Industries Inc. Common Stock, no par value - 30,304,617 shares
IES Utilities Inc. Common Stock, $2.50 par value - 13,370,788 shares
IES INDUSTRIES INC. AND IES UTILITIES INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Consolidated Financial Statements.
IES Industries Inc.:
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3 - 4
Consolidated Statements of Income -
Three and Twelve Months Ended
March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows -
Three and Twelve Months Ended
March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7 - 14
IES Utilities Inc.:
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 15 - 16
Consolidated Statements of Income -
Three and Twelve Months Ended
March 31, 1997 and 1996 17
Consolidated Statements of Cash Flows -
Three and Twelve Months Ended
March 31, 1997 and 1996 18
Notes to Consolidated Financial Statements 19
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition. 20 - 32
Part II. Other Information. 33 - 35
Signatures. 36 - 37
PART I - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS
March 31,
1997 December 31,
ASSETS (in thousands) (Unaudited) 1996
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 2,015,838 $ 2,007,839
Gas 176,439 175,472
Other 132,421 126,850
2,324,698 2,310,161
Less - Accumulated depreciation 1,054,799 1,030,390
1,269,899 1,279,771
Leased nuclear fuel, net of amortization 31,468 34,725
Construction work in progress 48,726 43,719
1,350,093 1,358,215
Other, net of accumulated depreciation
and amortization of $74,652 and
$70,031, respectively 228,521 223,805
1,578,614 1,582,020
Current assets:
Cash and temporary cash investments 26,625 8,675
Accounts receivable -
Customer, less allowance for doubtful
accounts of $1,165 and $1,087, respectively 34,826 50,821
Other 9,466 12,040
Income tax refunds receivable 9,428 8,890
Production fuel, at average cost 12,042 13,323
Materials and supplies, at average cost 23,992 22,842
Adjustment clause balances 0 10,752
Regulatory assets 32,067 26,539
Prepayments and other 19,698 24,169
168,144 178,051
Investments:
Nuclear decommissioning trust funds 61,516 59,325
Investment in foreign entities 45,142 44,946
Investment in McLeod, Inc. 29,200 29,200
Cash surrender value of life insurance policies 11,562 11,217
Other 7,207 4,903
154,627 149,591
Other assets:
Regulatory assets 196,096 201,129
Deferred charges and other 15,169 14,771
211,265 215,900
$ 2,112,650 $ 2,125,562
IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
CAPITALIZATION AND LIABILITIES 1997 December 31,
(in thousands, except share amounts) (Unaudited) 1996
Capitalization:
Common stock - no par value - authorized
48,000,000 shares; outstanding 30,217,336
and 30,077,212 shares, respectively $ 412,143 $ 407,635
Retained earnings 215,703 219,246
Total common equity 627,846 626,881
Cumulative preferred stock of IES Utilities Inc. 18,320 18,320
Long-term debt (excluding current portion) 651,763 701,100
1,297,929 1,346,301
Current liabilities:
Short-term borrowings 126,000 135,000
Capital lease obligations 14,047 15,125
Maturities and sinking funds 63,480 8,473
Accounts payable 62,142 99,861
Dividends payable 16,527 16,431
Accrued interest 11,041 8,985
Accrued taxes 71,599 43,926
Accumulated refueling outage provision 3,002 1,316
Adjustment clause balances 3,759 0
Environmental liabilities 5,679 5,679
Other 17,754 22,087
395,030 356,883
Long-term liabilities:
Pension and other benefit obligations 43,852 39,643
Capital lease obligations 17,421 19,600
Environmental liabilities 47,560 47,502
Other 21,959 18,488
130,792 125,233
Deferred credits:
Accumulated deferred income taxes 255,087 262,675
Accumulated deferred investment tax credits 33,812 34,470
288,899 297,145
Commitments and contingencies (Note 7)
$ 2,112,650 $ 2,125,562
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<TABLE>
IES INDUSTRIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues:
Electric $ 137,286 $ 125,368 $ 586,191 $ 569,262
Gas 84,106 90,024 268,060 215,381
Other 36,295 27,805 134,151 103,173
257,687 243,197 988,402 887,816
Operating expenses:
Fuel for production 29,881 20,292 94,168 97,105
Purchased power 18,673 14,469 92,553 65,029
Gas purchased for resale 64,498 67,437 214,412 159,864
Other operating expenses 52,964 52,525 215,197 205,822
Maintenance 13,568 10,833 51,736 44,763
Depreciation and amortization 28,739 27,384 108,750 99,803
Taxes other than income taxes 13,295 13,262 48,203 48,836
221,618 206,202 825,019 721,222
Operating income 36,069 36,995 163,383 166,594
Interest expense and other:
Interest expense 14,846 12,906 56,763 51,667
Allowance for funds used during
construction -394 -690 -1,807 -2,999
Preferred dividend requirements
of IES Utilities Inc. 229 229 914 914
Miscellaneous, net -244 -1,677 3,765 -4,489
14,437 10,768 59,635 45,093
Income before income taxes 21,632 26,227 103,748 121,501
Income taxes:
Current 16,138 14,110 40,274 51,506
Deferred -6,163 -1,317 6,988 1,138
Amortization of investment
tax credits -658 -661 -2,642 -2,674
9,317 12,132 44,620 49,970
Net income $ 12,315 $ 14,095 $ 59,128 $ 71,531
Average number of common
shares outstanding 30,188 29,645 29,997 29,391
Earnings per average
common share $ 0.41 $ 0.48 $ 1.97 $ 2.43
Dividends declared per
common share $ 0.525 $ 0.525 $ 2.10 $ 2.10
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<TABLE>
IES INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,315 $ 14,095 $ 59,128 $ 71,531
Adjustments to reconcile net income to
net cash flows from operating activities -
Depreciation and amortization 28,739 27,384 108,750 99,803
Amortization of principal under capital
lease obligation 3,369 4,624 15,237 17,781
Deferred taxes and investment tax credits -6,821 -1,978 4,346 -1,536
Refueling outage provision 1,686 2,546 -7,234 3,569
Amortization of other assets 3,039 2,913 9,895 9,247
Other 2,279 1,104 2,078 1,040
Other changes in assets and liabilities -
Accounts receivable 18,569 -7,131 3,546 -20,186
Sale of utility accounts receivable 0 0 7,000 -6,000
Production fuel, materials and supplies 916 1,351 687 3,744
Accounts payable -35,242 -8,620 -5,690 -4,064
Accrued taxes 27,135 16,293 -7,123 20,371
Provision for rate refunds 0 166 -272 -7,728
Adjustment clause balances 14,511 3,387 -2,776 3,733
Gas in storage 6,073 7,744 -2,825 2,798
Other 1,927 772 12,921 -4,456
Net cash flows from operating activities 78,495 64,650 197,668 189,647
Cash flows from financing activities:
Dividends declared on common stock -15,858 -15,582 -63,015 -61,792
Proceeds from issuance of common stock 3,479 3,726 13,917 14,696
Purchase of treasury stock 0 0 -269 0
Net change in IES Diversified Inc. credit
facility 5,695 -995 54,550 52,725
Proceeds from issuance of other long-term
debt 0 0 60,000 50,007
Reductions in other long-term debt -79 -79 -15,454 -50,431
Net change in short-term borrowings -9,000 -9,000 34,000 64,000
Principal payments under capital lease
obligations -2,296 -4,913 -16,491 -15,714
Other 96 -69 -292 -1,576
Net cash flows from financing activities -17,963 -26,912 66,946 51,915
Cash flows from investing activities:
Construction and acquisition expenditures -
Utility -19,758 -23,333 -138,684 -121,437
Other -13,423 -15,359 -94,183 -99,663
Oil and gas properties held for resale 0 9,843 0 0
Deferred energy efficiency expenditures -4,014 -3,667 -17,204 -18,159
Nuclear decommissioning trust funds -1,502 -1,502 -6,008 -6,219
Proceeds from disposition of assets 567 1,204 7,658 12,524
Other -4,452 -1,431 -3 -3,015
Net cash flows from investing activities -42,582 -34,245 -248,424 -235,969
Net increase in cash and temporary
cash investments 17,950 3,493 16,190 5,593
Cash and temporary cash investments
at beginning of period 8,675 6,942 10,435 4,842
Cash and temporary cash investments
at end of period $ 26,625 $ 10,435 $ 26,625 $ 10,435
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 12,308 $ 10,544 $ 54,811 $ 51,615
Income taxes $ -676 $ 8,471 $ 45,733 $ 32,215
Noncash investing and financing activities -
Capital lease obligations incurred $ 112 $ 2,604 $ 11,790 $ 4,405
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
This document contains the Quarterly Reports on Form 10-Q for the
quarter ended March 31, 1997 for each of IES Industries Inc. and IES
Utilities Inc. Information contained herein relating to an individual
registrant is filed by such registrant on its own behalf. Accordingly,
except for its subsidiaries, IES Utilities Inc. makes no representation
as to information relating to IES Industries Inc. or to any other
companies affiliated with IES Industries Inc. IES Industries Inc. and
its consolidated subsidiaries may collectively be referred to as "the
Company".
From time to time, the Company may make forward-looking statements
within the meaning of the federal securities laws that involve
judgments, assumptions and other uncertainties beyond the control of the
Company. These forward-looking statements may include, among others,
statements concerning revenue and cost trends, cost recovery, cost
reduction strategies and anticipated outcomes, pricing strategies,
changes in the utility industry, planned capital expenditures, financing
needs and availability, statements of the Company's expectations,
beliefs, future plans and strategies, anticipated events or trends and
similar comments concerning matters that are not historical facts.
Investors and other users of the forward-looking statements are
cautioned that such statements are not a guarantee of future performance
of the Company and that such forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such statements.
Some, but not all, of the risks and uncertainties include weather
effects on sales and revenues, competitive factors, general economic
conditions in the Company's service territory, federal and state
regulatory or government actions, the operating of a nuclear facility
and changes in the rate of inflation.
IES INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1997
(1) GENERAL:
The interim Consolidated Financial Statements have been prepared by
IES Industries Inc. (Industries) and its consolidated subsidiaries,
without audit, pursuant to the rules and
regulations of the United States Securities and Exchange Commission
(SEC). Industries' wholly-owned subsidiaries are IES Utilities Inc.
(Utilities) and IES Diversified Inc. (Diversified). Industries is an
investor-owned holding company whose primary operating company,
Utilities, is engaged principally in the generation, transmission,
distribution and sale of electric energy and the purchase, distribution,
transportation and sale of natural gas. The Company's principal markets
are located in the State of Iowa. The Company also has various non-
utility subsidiaries which are primarily engaged in the energy-related,
transportation and real estate development businesses.
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 Consolidated 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 1997 presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect: 1) the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements, and 2) the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
It is suggested that these Consolidated Financial Statements be
read in conjunction with the Consolidated Financial Statements and the
notes thereto included in the Company's Form 10-K for the year ended
December 31, 1996. 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:
Summary of significant accounting policies
Leases
Utility accounts receivable (other than discussed in Note 4)
Income taxes
Benefit plans
Common, preferred and preference stock
Debt (other than discussed in Note 6)
Estimated fair value of financial instruments (other than discussed
in Note 5)
Derivative financial instruments
Commitments and contingencies (other than discussed in Note 7)
Jointly-owned electric utility plant
Segments of business
(2) PROPOSED MERGER OF THE COMPANY:
On November 10, 1995, Industries, WPL Holdings, Inc. (WPLH) and
Interstate Power Company (IPC) entered into an Agreement and Plan of
Merger, as amended (Merger Agreement). At the 1996 annual meetings, the
shareowners of all three companies approved the Merger Agreement. The
merger is still subject to approval by several federal and state
regulatory agencies. See Management's Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion.
(3) RATE MATTERS:
(a) Electric Price Announcements -
Utilities and its Iowa-based proposed merger partner, IPC,
announced in 1996 their intentions to hold retail electric prices to
their current levels until at least January 1, 2000. The companies made
the proposal as part of their testimony in the merger-related
application filed with the Iowa Utilities Board (IUB). The proposal
excludes price changes due to government-mandated programs, such as
energy efficiency cost recovery, or unforeseen dramatic changes in
operations. Utilities, Wisconsin Power & Light Company
(WP&L) and IPC also proposed to freeze their
wholesale electric prices for four years from the effective date of the
merger as part of their merger filing with the Federal Energy Regulatory
Commission (FERC). The Company does not expect the merger-related
electric price proposals to have a material adverse effect on its
financial position or results of operations.
(b) Energy Efficiency Cost Recovery -
Until recently, IUB rules mandated Utilities to spend 2% of
electric and 1.5% of gas gross retail operating revenues for energy
efficiency programs. Under provisions of the IUB rules, Utilities is
currently recovering the energy efficiency costs incurred through 1993
for such programs, including its direct expenditures, carrying costs, a
return on its expenditures and a reward. These costs are being
recovered over a four-year period and the recovery began on June 1,
1995.
In December 1996, under provisions of the IUB rules, the Company
filed for recovery of the costs relating to its 1994 and 1995 programs.
Utilities' proposed recovery was for approximately $53 million ($42
million electric and $11 million gas) and was composed of $34 million
for direct expenditures and carrying costs, $10 million for a return on
the expenditures over the recovery period and $9 million for a reward
based on a sharing of the benefits of such programs. The Company
expects to receive the final order in the proceeding in June 1997 with
recovery of the allowed costs to commence in the third quarter of 1997.
Iowa statutory changes enacted in 1996 have
eliminated: 1) the 2% and 1.5% spending requirements described above in
favor of IUB-determined energy savings targets, 2) the delay in
recovery of energy efficiency costs by allowing recovery which is
concurrent with spending and 3) the recovery of a sharing reward. The
IUB commenced a rulemaking in January 1997 to implement the statutory
change and a final order in this proceeding was issued in April 1997.
The new rules provide that the Company will begin to recover its 1996
expenditures, and the 1997 expenditures incurred at such time, during
the summer of 1997 over a time period yet to be determined. The Company
would also begin concurrent recovery of its prospective expenditures at
such time. The implementation of these changes will gradually eliminate
the regulatory asset which exists under the current rate making
mechanism as these costs are recovered.
The Company has the following amounts of energy efficiency costs
included in regulatory assets on its Consolidated Balance Sheets as
follows (in thousands):
March 31, December 31,
1997 1996
Costs incurred through 1993 $ 10,934 $ 12,834
Costs incurred in 1994-1995 33,612 33,161
Costs incurred from 1/1/96 - 3/31/97 18,651 15,087
$ 63,197 $ 61,082
The above amounts include the direct expenditures and carrying
costs incurred by the Company but do not include any amounts for a
return on its expenditures over the recovery period or for a reward.
(4) UTILITY ACCOUNTS RECEIVABLE:
Utilities has entered into an agreement, which expires in 1999,
with a financial institution to sell, with limited recourse, an
undivided fractional interest of up to $65 million in its pool of
utility accounts receivable. At March 31, 1997, $65 million was sold
under the agreement.
SFAS 125, issued by the FASB in 1996 and effective for 1997,
provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishment of liabilities. The accounting
for Utilities' sale of accounts receivable agreement is impacted by this
standard. As a result, the agreement was modified in the first quarter
of 1997 to comply with the SFAS 125 requirements and thus the accounting
and reporting for the sale of Utilities' receivables remains unchanged.
(5) INVESTMENTS:
(a) Foreign Entities -
At March 31, 1997, the Company had $45.1 million of investments in
foreign entities on its Consolidated Balance Sheet that included 1)
investments in two New Zealand electric distribution entities, 2) a loan
to a New Zealand company, 3) an investment in a cogeneration facility in
China, and 4) an investment in an international venture capital fund.
The Company accounts for the China investment under the equity method
and the other investments under the cost method. The geographic
concentration of the Company's investments in foreign entities at March
31, 1997, included investments of approximately $31.0 million in New
Zealand, $13.7 million in China and $0.4 million in other countries.
(b) McLeod, Inc. (McLeod) -
At March 31, 1997, the Company had a $20.0 million investment in
Class A common stock of McLeod and a $9.2 million investment in Class B
common stock as well as vested options that, if exercised, would
represent an additional investment of approximately $2.3 million.
McLeod provides local, long-distance and other telecommunications
services.
McLeod completed an Initial Public Offering (IPO) of its Class A
common stock in June 1996 and a secondary offering in November 1996. As
of March 31, 1997, the Company was the beneficial owner of approximately
10.6 million total shares on a fully diluted basis. Class B shares are
convertible at the option of the Company into Class A shares at any time
on a one-for-one basis. The rights of McLeod Class A common stock and
Class B common stock are substantially identical except that Class A
common stock has 1 vote per share and Class B common stock has 0.40 vote
per share. The Company currently accounts for this investment under the
cost method.
The Company has entered into an agreement with McLeod which
provides that for two years commencing on June 10, 1996, the Company
cannot sell or otherwise dispose of any of its securities of McLeod
without the consent of the McLeod Board of Directors. This contractual
sale restriction results in restricted stock under the provisions of
Statement of Financial Accounting Standards No. 115 (SFAS No. 115),
Accounting for Certain Investments in Debt and Equity Securities, until
such time as the restrictions lapse and such shares became qualified for
sale within a one year period. As a result, the Company currently
carries this investment at cost.
The closing price of the McLeod Class A common stock on March 31,
1997, on the Nasdaq National Market, was $17.75 per share. The current
market value of the shares the Company beneficially owns (approximately
10.6 million shares) is impacted by, among other things, the fact that
the shares cannot be sold for a period of time. It is not possible to
estimate what the market value of the shares will be at the point in
time such sale restrictions are lifted. In addition, any gain upon an
eventual sale of this investment would likely be subject to a tax. The
estimated fair value of the McLeod investment at March 31, 1997, based
upon the closing price on March 31 of $17.75, was $185 million.
Under the provisions of SFAS No. 115, the carrying value of the
McLeod investment will be adjusted to estimated fair value at the time
such shares become qualified for sale within a one year period; this
will occur on June 10, 1997, which is one year before the contractual
restrictions on sale are lifted. At that time, the adjustment to
reflect the estimated fair value of this investment will be reflected as
an increase in the investment carrying value with the unrealized gain
reported as a net of tax amount in other common shareholders' equity
until realized (i.e., until the shares are sold by the Company).
(6) DEBT:
(a) Long-Term Debt -
In the second quarter of 1997, Utilities issued $55 million of
Collateral Trust Bonds, 6.875%, due 2007. Holders thereof may elect to
have their Collateral Trust Bonds redeemed, in whole but not in part, on
May 1, 2002, at 100% of the principal amount thereof, plus accrued
interest. The proceeds from the Collateral Trust Bonds were used to
refinance $15 million of Series L, 7.875% First Mortgage Bonds, $30
million of Series M, 7.625% First Mortgage Bonds and $10 million of
7.375% First Mortgage Bonds.
Diversified has a variable rate credit facility that extends
through November 20, 1999, with two one-year extensions potentially
available to Diversified. The unborrowed portion of the agreement is
also used to support Diversified's commercial paper program. A combined
maximum of $300 million of borrowings under the agreement and commercial
paper program may be outstanding at any one time. Interest rates and
maturities are set at the time of borrowing for direct borrowings under
the agreement and for issuances of commercial paper. The interest rate
options are based upon quoted market rates and the maturities are less
than one year. At March 31, 1997, $28 million was borrowed under this
facility, with interest rates ranging from 5.75% to 5.81%, maturing in
the second quarter of 1997. Diversified had $149.8 million of commercial
paper outstanding at March 31, 1997, with interest rates ranging from
5.47% to 5.56% and maturity dates in the second quarter of 1997.
Diversified intends to continue borrowing under the renewal options of
the facility and no conditions exist at March 31, 1997, that would
prevent such borrowings. Accordingly, this debt is classified as long-
term in the Consolidated Balance Sheets.
(b) Short-Term Debt -
At March 31, 1997, the Company had bank lines of credit aggregating
$146.1 million. Utilities was using $126 million to support commercial
paper (weighted average interest rate of 5.38%) and $11.1 million to
support certain 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, Utilities has an
uncommitted credit facility with a financial institution whereby it can
borrow up to $40 million. Rates are set at the time of borrowing and no
fees are paid to maintain this facility. At March 31, 1997, there were
no borrowings outstanding under this facility.
(7) CONTINGENCIES:
(a) Environmental Liabilities -
The Company has recorded environmental liabilities of approximately
$53 million in its Consolidated Balance Sheets at March 31, 1997. The
Company's significant environmental liabilities are discussed below.
Former Manufactured Gas Plant (FMGP) Sites
Utilities has been named as a Potentially Responsible Party (PRP)
by various federal and state environmental agencies for 28 FMGP sites,
but believes it is not responsible for two of these sites based on
extensive reviews of the ownership records and historical information
available for the two sites. Utilities has notified the appropriate
regulatory agency that it believes it does not have any responsibility
as relates to these two sites, but no response has been received from
the agency on this issue. Utilities is also aware of six other sites
that it may have owned or operated in the past and for which, as a
result, it may be designated as a PRP in the future in the event that
environmental concerns arise at these sites. Utilities is working
pursuant to the requirements of the various agencies to investigate,
mitigate, prevent and remediate, where necessary, damage to property,
including damage to natural resources, at and around the sites in order
to protect public health and the environment. Utilities believes it has
completed the remediation of ten sites although it is in the process of
obtaining final approval from the applicable environmental agencies on
this issue for each site. Utilities is in various stages of the
investigation and/or remediation processes for the remaining 16 sites
and estimates the range of additional costs to be incurred for
investigation, remediation and monitoring of the sites to be
approximately $23 million to $54 million.
Utilities has recorded environmental liabilities related to the
FMGP sites of approximately $35 million (including $4.7 million as
current liabilities) at March 31, 1997. These amounts are based upon
Utilities' best current estimate of the amount to be incurred for
investigation, remediation and monitoring costs for those sites where
the investigation process has been or is substantially completed, and
the minimum of the estimated cost range for those sites where the
investigation is in its earlier stages. It is possible that future cost
estimates will be greater than the current estimates as the
investigation process proceeds and as additional facts become known.
Regulatory assets of approximately $35 million, which reflect the future
recovery that is being provided through Utilities' rates, have been
recorded in the Consolidated Balance Sheets. Considering the current
rate treatment allowed by the IUB, management believes that the clean-up
costs incurred by Utilities for these FMGP sites will not have a
material adverse effect on its financial position or results of
operations.
In April 1996, Utilities filed a lawsuit against certain of its
insurance carriers seeking reimbursement for investigation, mitigation,
prevention, remediation and monitoring costs associated with the FMGP
sites. Settlement discussions are proceeding between Utilities and its
insurance carriers regarding the recovery of these FMGP-related costs.
Settlement has been reached with four carriers and an agreement in
principle has been reached with two other carriers thus far. Amounts
received from insurance carriers are being deferred pending a
determination of the regulatory treatment of such recoveries.
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 Duane Arnold Energy Center
(DAEC), averages $1.4 million
annually through 2007, of which Utilities' 70% share is $1.0 million.
Utilities is recovering the costs associated with this assessment
through its electric fuel adjustment clauses over the period the costs
are assessed. Utilities' 70% share of the future assessment, $9.9
million payable through 2007, has been recorded as a liability in the
Consolidated Balance Sheets, including $0.9 million included in "Current
liabilities - Environmental liabilities," with a related regulatory
asset for the unrecovered amount.
Oil and Gas Properties Dismantlement and Abandonment Costs
Whiting Petroleum Corporation (Whiting), a wholly owned subsidiary
under Diversified, is responsible for certain dismantlement and abandonment
costs related to various off-shore oil and gas properties, the most
significant of which is located off the coast of California. The
Company estimates the total costs for these properties to be
approximately $16 million and the expenditures are not expected to be
incurred for approximately five years. Whiting accrues these costs as
reserves are extracted and such costs are included in "Depreciation and
amortization" in the Consolidated Statements of Income, resulting in a
liability of $7.8 million at March 31, 1997, in the Consolidated Balance
Sheets.
(b) Air Quality Issues -
The Clean Air Act Amendments of 1990 (Act) requires emission
reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) to achieve
reductions of atmospheric chemicals believed to cause acid rain. The
provisions of the Act are being implemented in two phases; the Phase I
requirements have been met and the Phase II requirements affect eleven
other fossil units beginning in the year 2000. Utilities expects to
meet the requirements of Phase II by switching to lower sulfur fuels,
capital expenditures primarily related to fuel burning equipment and
boiler modifications, and the possible purchase of SO2 allowances.
Utilities estimates capital expenditures at approximately $12.9 million,
including $0.6 million in 1997, in order to meet the acid rain
requirements of the Act.
The acid rain program under the Act also governs SO2 allowances.
An allowance is defined as an authorization for an owner to emit one ton
of SO2 into the atmosphere. Currently, Utilities receives a sufficient
number of allowances annually to offset its emissions of SO2 from its
Phase I units. It is anticipated that in the year 2000, Utilities may
have an insufficient number of allowances annually to offset its
estimated emissions and may have to purchase additional allowances, or
make modifications to the plants or limit operations to reduce
emissions. Utilities is reviewing its options to ensure that it will
have sufficient allowances to offset its emissions in the future.
Utilities believes that the potential cost of ensuring sufficient
allowances will not have a material adverse effect on its financial
position or results of operations.
The Act and other federal laws also require the United States
Environmental Protection Agency (EPA) to study and regulate, if
necessary, additional issues that potentially affect the electric
utility industry, including emissions relating to NOx, ozone transport,
mercury and particulate control; toxic release inventories and
modifications to the PCB rules. In December 1996, the EPA issued
proposed rules that would tighten the National Ambient Air Quality
Standards (NAAQS) for ozone and particulate matter emissions. Also in
the fourth quarter of 1996, the EPA announced that it would issue a
notice in March 1997 requiring the 37 states in the Ozone Transport
Assessment Group (OTAG), which includes Iowa, to implement further
controls on NOx. These proposals could result in the Company having to
incur additional capital expenditures to further reduce its emissions of
NOx, ozone and particulate matter. However, the March 1997 notice has
not yet been issued and it now appears that Iowa may be one of several
states removed from the OTAG process. The current developments in this
process make the impacts of these potential regulations too speculative
to quantify.
In 1995, the EPA published the Sulfur Dioxide Network Design Review
for Cedar Rapids, Iowa, which, based on the EPA's assumptions and worst-
case modeling method suggests that the Cedar Rapids area could be
classified as "nonattainment" for the NAAQS established for SO2. The
worst-case modeling study suggested that two of Utilities' generating
facilities contribute to the modeled exceedences and recommended that
additional monitors be located near Utilities' sources to assess actual
ambient air quality. As a result of exceedences at a relocated
monitor, the EPA issued a letter in March 1997 to the Iowa Governor's
Office directing the state to develop a plan of action within 120 days.
The Governor of Iowa has since issued a letter to the EPA stating that a
plan of action will be in place with local industry to avoid the area
being declared nonattainment. In this regard, Utilities is entering
into a Consent Agreement with the Iowa Department of Natural Resources.
The intent of this agreement, as currently proposed, is to develop a
three-year plan for a process to explore and implement options to modify
one of Utilities fossil generating facilities to reduce SO2 emissions.
In addition, Utilities is proposing to resolve the remainder of EPA's
nonattainment concerns by modifying the current stacks or installing a
new stack at the other generating facility contributing to the modeled
exceedences, at a potential aggregate capital cost of up to $4.5 million
over the next two years.
Pursuant to a routine internal review of operations, Utilities
determined that certain changes undertaken during the previous three
years at one of its power plants may have required a federal Prevention
of Significant Deterioration (PSD) permit. Utilities initiated
discussions with its regulators on the matter, resulting in the
submittal of a PSD permit application in February 1997. Utilities may
be required to accept operational limits or to install additional
controls and may be subject to liability for not having obtained the
permit previously; however, Utilities believes that any likely actions
resulting from this matter will not have a material adverse effect on
its financial position or results of operations.
IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS
March 31,
1997 December 31,
ASSETS (in thousands) (Unaudited) 1996
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 2,015,838 $ 2,007,839
Gas 176,439 175,472
Other 132,421 126,850
2,324,698 2,310,161
Less - Accumulated depreciation 1,054,799 1,030,390
1,269,899 1,279,771
Leased nuclear fuel, net of amortization 31,468 34,725
Construction work in progress 48,726 43,719
1,350,093 1,358,215
Other, net of accumulated depreciation
and amortization of $1,518 and $1,438,
respectively 5,791 5,872
1,355,884 1,364,087
Current assets:
Cash and temporary cash investments 21,833 11,608
Accounts receivable -
Customer, less allowance for doubtful
accounts of $623 and $546, respectively 25,049 22,461
Other 7,990 11,270
Income tax refunds receivable 2,117 2,664
Production fuel, at average cost 12,042 13,323
Materials and supplies, at average cost 22,888 21,716
Adjustment clause balances 0 10,752
Regulatory assets 32,067 26,539
Prepayments and other 13,558 18,705
137,544 139,038
Investments:
Nuclear decommissioning trust funds 61,516 59,325
Cash surrender value of life insurance
policies 4,457 4,281
Other 88 313
66,061 63,919
Other assets:
Regulatory assets 196,096 201,129
Deferred charges and other 10,808 10,437
206,904 211,566
$ 1,766,393 $ 1,778,610
IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
CAPITALIZATION AND LIABILITIES 1997 December 31,
(in thousands, except share amounts) (Unaudited) 1996
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 228,959 231,337
Total common equity 541,428 543,806
Cumulative preferred stock - par value $50
per share - authorized 466,406 shares;
366,406 shares outstanding 18,320 18,320
Long-term debt (excluding current portion) 462,389 517,334
1,022,137 1,079,460
Current liabilities:
Short-term borrowings 126,000 135,000
Capital lease obligations 14,047 15,125
Maturities and sinking funds 63,140 8,140
Accounts payable 48,598 76,287
Accrued interest 10,886 8,839
Accrued taxes 68,620 40,953
Accumulated refueling outage provision 3,002 1,316
Adjustment clause balances 3,759 0
Environmental liabilities 5,517 5,517
Other 15,074 17,114
358,643 308,291
Long-term liabilities:
Pension and other benefit obligations 29,383 25,826
Capital lease obligations 17,421 19,600
Environmental liabilities 39,565 40,299
Other 17,402 14,030
103,771 99,755
Deferred credits:
Accumulated deferred income taxes 248,030 256,634
Accumulated deferred investment tax credits 33,812 34,470
281,842 291,104
Commitments and contingencies (Note 7)
$ 1,766,393 $ 1,778,610
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<TABLE>
IES UTILITIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric $ 137,286 $ 125,368 $ 586,191 $ 569,262
Gas 81,428 69,241 173,051 153,358
Other 7,684 4,159 23,367 13,135
226,398 198,768 782,609 735,755
Operating expenses:
Fuel for production 29,881 20,292 94,168 97,105
Purchased power 18,673 14,469 92,553 65,029
Gas purchased for resale 60,791 47,369 117,298 100,434
Other operating expenses 36,296 38,358 147,939 149,196
Maintenance 12,806 9,992 48,684 41,899
Depreciation and amortization 23,470 22,024 86,421 80,820
Taxes other than income taxes 11,893 12,060 43,436 44,699
193,810 164,564 630,499 579,182
Operating income 32,588 34,204 152,110 156,573
Interest expense and other:
Interest expense 12,306 10,893 45,128 44,895
Allowance for funds used during construction -394 -690 -1,807 -2,999
Miscellaneous, net -420 -963 5,835 -117
11,492 9,240 49,156 41,779
Income before income taxes 21,096 24,964 102,954 114,794
Federal and state income taxes:
Current 17,082 13,361 39,051 48,812
Deferred -7,179 -1,864 5,093 1,409
Amortization of investment tax credits -658 -661 -2,642 -2,674
9,245 10,836 41,502 47,547
Net income 11,851 14,128 61,452 67,247
Preferred dividend requirements 229 229 914 914
Net income available for common stock $ 11,622 $ 13,899 $ 60,538 $ 66,333
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<TABLE>
IES UTILITIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,851 $ 14,128 $ 61,452 $ 67,247
Adjustments to reconcile net income to net cash
flows from operating activities -
Depreciation and amortization 23,470 22,024 86,421 80,820
Amortization of principal under capital
lease obligations 3,369 4,624 15,237 17,781
Deferred taxes and investment tax credits -7,837 -2,525 2,451 -1,265
Refueling outage provision 1,686 2,546 -7,234 3,569
Amortization of other assets 2,952 2,913 9,832 9,247
Other 280 0 545 447
Other changes in assets and liabilities -
Accounts receivable 692 -7,459 -5,049 -17,302
Sale of utility accounts receivable 0 0 7,000 -6,000
Production fuel, materials and supplies 894 902 644 2,612
Accounts payable -25,211 -10,296 -2,033 -10,451
Accrued taxes 28,214 17,070 -90 16,638
Provision for rate refunds 0 166 -272 -7,728
Adjustment clause balances 14,511 3,387 -2,776 3,733
Gas in storage 5,470 7,744 -2,825 2,798
Other 5,266 1,506 11,047 -6,006
Net cash flows from operating activities 65,607 56,730 174,350 156,140
Cash flows from financing activities:
Dividends declared on common stock -14,000 -10,000 -48,000 -40,000
Dividends declared on preferred stock -229 -229 -914 -914
Proceeds from issuance of long-term debt 0 0 60,000 50,000
Reductions in long-term debt 0 0 -15,140 -50,140
Net change in short-term borrowings -9,000 -14,647 30,759 51,697
Principal payments under capital
lease obligations -2,296 -4,913 -16,491 -15,714
Other 0 -86 -333 -1,910
Net cash flows from financing activities -25,525 -29,875 9,881 -6,981
Cash flows from investing activities:
Construction and acquisition expenditures -
Utility -19,758 -23,374 -138,765 -121,833
Other -12 -197 -1,083 -2,965
Deferred energy efficiency expenditures -4,014 -3,667 -17,204 -18,159
Nuclear decommissioning trust funds -1,502 -1,502 -6,008 -6,219
Other -4,571 -415 228 -2,039
Net cash flows from investing activities -29,857 -29,155 -162,832 -151,215
Net increase (decrease) in cash and temporary
cash investments 10,225 -2,300 21,399 -2,056
Cash and temporary cash investments at
beginning of period 11,608 2,734 434 2,490
Cash and temporary cash investments at end
of period $ 21,833 $ 434 $ 21,833 $ 434
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 9,777 $ 8,530 $ 43,318 $ 44,845
Income taxes $ -546 $ 7,138 $ 37,699 $ 33,371
Noncash investing and financing activities -
Capital lease obligations incurred $ 112 $ 2,604 $ 11,790 $ 4,405
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
IES UTILITIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Except as modified below, the IES Industries Inc. (Industries)
Notes to Consolidated Financial Statements are incorporated by reference
insofar as they relate to IES Utilities Inc. (Utilities). Industries'
Note 5 does not relate to Utilities and, therefore, is not incorporated
by reference.
(1) GENERAL:
The interim Consolidated Financial Statements have been prepared by
IES Utilities Inc. (Utilities) and its consolidated subsidiaries,
without audit, pursuant to the rules and regulations of the United
States Securities and Exchange Commission (SEC). Utilities' only wholly-
owned subsidiary is IES Ventures Inc. (Ventures), which is a holding
company for unregulated investments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
IES Industries Inc.'s Consolidated Financial Statements include the
accounts of IES Industries Inc. (Industries) and its consolidated
subsidiaries (collectively the Company). Industries' wholly-owned
subsidiaries are IES Utilities Inc. (Utilities) and IES Diversified Inc.
(Diversified). The information presented in this management's
discussion and analysis addresses the financial statements of Industries
and Utilities as presented in this joint filing. Information related to
Utilities also relates to Industries' Consolidated Financial Statements.
Information related to Diversified does not pertain to the discussion of
the financial condition and results of operations of Utilities. The
references to various Notes to Consolidated Financial Statements are all
to Industries' Notes to Consolidated Financial Statements.
COMPETITION
Electric energy generation, transmission and distribution, are in a
period of fundamental change in the manner in which customers obtain,
and energy suppliers provide, energy services. As legislative,
regulatory, economic and technological changes occur, electric utilities
are faced with increasing pressure to become more competitive. Such
competitive pressures could result in loss of customers and an
incurrence of stranded costs (i.e., the cost of assets rendered
unrecoverable as the result of competitive pricing). To the extent
stranded costs cannot be recovered from customers, they would be borne
by security holders.
The National Energy Policy Act of 1992 addresses several matters
designed to promote competition in the electric wholesale power
generation market. In 1996, the Federal Energy Regulatory Commission
(FERC) issued final rules (FERC Orders 888 and 889) requiring electric
utilities to open their transmission lines to other wholesale buyers and
sellers of electricity. The rules became effective in July 1996.
Utilities filed conforming pro-forma open access transmission tariffs
with the FERC which became effective in October 1995. In response to
FERC Order 888, Utilities filed its final pro-forma tariffs with FERC in
July 1996. The non-rate provisions of the tariffs were approved in
November 1996. FERC has not yet ruled on the rate provisions of the
tariffs. The geographic position of Utilities' transmission system
could provide revenue opportunities in the open access environment.
Industrial Energy Applications, Inc. (IEA), a wholly-owned subsidiary
under Diversified, received approval in the 1995 FERC proceeding to
market electric power at market based rates. The Company cannot predict
the long-term consequences of these rules on its results of operations
or financial condition.
FERC does not have jurisdiction over retail distribution, and thus
the final FERC rules do not provide for the recovery of stranded costs
resulting from retail competition. The various states retain
jurisdiction over the question of whether to permit retail competition,
the terms of such retail competition and the recovery of any portion of
stranded costs that are ultimately determined by FERC and the states to
have resulted from retail competition.
The Iowa Utilities Board (IUB) initiated a Notice of Inquiry
(Docket No. NOI-95-1) in early 1995 on the subject of "Emerging
Competition in the Electric Utility Industry" to address all forms of
competition in the electric utility industry and to gather information
and perspectives on electric competition from all persons or entities
with an interest or stake in the issues. In January 1996, the IUB
created its own timeline for evaluating industry restructuring in Iowa.
Included in the IUB's process was the creation of a 22-member advisory
panel, of which Utilities is a member. The IUB conducted public
information meetings around the State of Iowa. The Staff's report in
this docket was accepted by the IUB, finding, in part, that there is no
compelling reason to move quickly into restructuring the electric
utility industry in Iowa, based upon the current level of relative
prices. However, they will continue the analysis and debate on
restructuring and retail competition in Iowa.
As part of Utilities' strategy for the emerging and competitive
power markets, Utilities, Interstate Power Company (IPC) and Wisconsin
Power and Light Company (WP&L) (the utility subsidiary of WPL Holdings,
Inc. (WPLH)), and a number of other utilities have proposed the creation
of an independent system operator (ISO) for the companies' power
transmission grid. The companies would retain ownership and control of
the facilities, but the ISO would set rates for access and assure fair
treatment for all companies seeking access. The proposal requires
approval from state regulators and the FERC. Various other proposals
for ISO's have been made by other companies, and Utilities is monitoring
all such proposals. Membership in an ISO could become a condition of
merger approval by the various regulatory bodies.
Utilities is subject to the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). If a portion of Utilities' operations
become no longer subject to the provisions of SFAS 71, as a result of
competitive restructurings or otherwise, a write-down of related
regulatory assets would be required, unless some form of transition cost
recovery is established by the appropriate regulatory body which would
meet the requirements under generally accepted accounting principles for
continued accounting as regulatory assets during such recovery period.
In addition, the Company would be required to determine any impairment
to other assets and write-down such assets to their fair value.
Utilities believes that it still meets the requirements of SFAS 71.
The Company cannot predict the long-term consequences of these
competitive issues on its results of operations or financial condition.
The Company's strategy for dealing with these emerging issues includes
seeking growth opportunities, continuing to offer quality customer
service, ongoing cost reductions and productivity enhancements, the
major objective of which is to allow Utilities to better prepare for a
competitive, deregulated electric utility industry. In this connection,
Utilities is in the final stages of a significant process improvement
program to improve its service levels, reduce its cost structure and
become more market-focused and customer oriented. (The Company's
continuous improvement efforts, in general, will be an ongoing effort,
however).
PROPOSED MERGER OF THE COMPANY
Industries, WPLH and IPC have entered into an Agreement and Plan of
Merger, as amended, dated November 10, 1995, which provides for the
combination of all three companies. The new company will be named
Interstate Energy Corporation (IEC).
WPLH is a holding company headquartered in Madison, Wisconsin, and
is the parent company of WP&L and Heartland Development Corporation
(HDC). WP&L supplies electric and gas service to approximately 385,000
and 150,000 customers, respectively, in south and central Wisconsin.
HDC and its principal subsidiaries are engaged in businesses in three
major areas: environmental engineering and consulting, affordable
housing and energy services. IPC, an operating public utility
headquartered in Dubuque, Iowa, supplies electric and gas service to
approximately 165,000 and 49,000 customers, respectively, in northeast
Iowa, northwest Illinois and southern Minnesota.
The proposed merger, which will be accounted for as a pooling of
interests, was approved by the respective shareowners on September 5,
1996. The merger is conditioned on the receipt of approvals of several
federal and state agencies. Updates to the status of these approvals
are as follows (for additional information regarding the merger please
refer to the Company's 1996 Annual Report on Form 10-K):
The FERC issued an order on January 15, 1997, finding no
substantial market-power concerns with the merger. Some limited issues
were set for hearings which began on April 23, 1997 and ended on May 2,
1997. A final decision is expected in the third or fourth quarter of
1997.
On May 7, 1997, the Illinois Commerce Commission issued and order
approving the proposed merger.
On March 24, 1997, the Minnesota Public Utilities Commission issued
an order approving the merger without hearings, subject to a number of
technical conditions which the parties are willing to meet. Included is
a 4-year rate freeze for IEC's Minnesota customers.
A hearing regarding the merger is expected to begin July 14, 1997,
before the Iowa Utilities Board.
On May 7, 1997, WP&L filed testimony with the Public Service
Commission of Wisconsin proposing a retail electric, gas and water rate
freeze from the date of the merger approval through calendar year 2000.
The companies expect to receive all necessary regulatory approvals
relating to the merger by the third or fourth quarter of 1997. Refer to
Note 3(a) of the Notes to Consolidated Financial Statements for a
discussion of merger-related retail and wholesale price proposals that
Utilities has announced.
RESULTS OF OPERATIONS OF THE COMPANY
The following discussion analyzes significant changes in the
components of net income and financial condition from the prior periods
for the Company.
The Company's net income decreased ($1.8) million and ($12.4)
million during the three and twelve month periods, respectively.
Earnings per average common share decreased ($0.07) and ($0.46) for the
respective periods. Utilities' net income available for common stock
decreased ($2.3) million and ($5.8) million during the three and twelve
month periods, respectively. The impact of weather on Utilities'
electric and gas sales contributed significantly to the decrease in
earnings for both periods. Weather conditions in the first quarter of
1997 were milder than normal and weather conditions in the first quarter
of 1996 were colder than normal. In addition, the twelve month periods
were impacted by cooler weather conditions during the summer of 1996
than the summer of 1995. Accordingly, in comparing the three and twelve
month periods, the Company estimates that weather impacted earnings by
approximately ($0.06) per share and ($0.28) per share, respectively.
The decrease in earnings for the twelve month period was also impacted
by costs incurred relating to the successful defense of the hostile
takeover attempt mounted by MidAmerican Energy Company (MAEC) in the
third quarter of 1996 and a higher effective income tax rate. The
Company estimates that the cost of the hostile takeover defense reduced
earnings for the twelve month period by ($0.15) per share. Increased
operating expenses and interest expense also contributed to the earnings
decrease for both periods. Increased electric and steam sales to
industrial customers at Utilities and increased earnings at the
Company's oil and gas subsidiary, Whiting Petroleum Corporation
(Whiting), partially offset these items each period.
The Company's operating income decreased ($0.9) million and ($3.2)
million during the three and twelve month periods, respectively, while
Utilities' operating income decreased ($1.6) million and ($4.5) million
during the same periods.
Electric Operations
Electric margins and Kwh sales for Utilities for the three months ended
March 31 were as follows:
Revenues and Costs Kwhs Sold
(In thousands) (In thousands)
1997 1996 1997 1996
Residential and rural $ 52,816 $ 49,852 691,010 709,412
General service 23,820 22,276 310,588 314,491
Large general service 51,100 41,598 1,411,096 1,275,964
Sales for resale and other 7,677 6,961 143,143 149,979
Total, excluding off-
system sales 135,413 120,687 2,555,837 2,449,846
Off-system sales 1,873 4,681 46,895 256,557
Total 137,286 125,368 2,602,732 2,706,403
Fuel for production
(excluding steam) 24,893 18,163
Purchased power 18,673 14,469
Margin $ 93,720 $ 92,736
The electric margin increased $1.0 million during the three month
period primarily due to higher large general service Kwh sales relating
to continuing industrial growth in Utilities' service territory. This
increase was partially offset by lower Kwh sales to residential and
rural and general service customers, largely due to the impact of
weather. Under historically normal weather conditions, total Kwh sales
(excluding off-system sales) for the three month period would have
increased 5.6%, as compared to the actual increase of 4.3%.
Electric margins and Kwh sales for Utilities for the twelve months ended
March 31 were as follows:
Revenues and Costs Kwhs Sold
(In thousands) (In thousands)
1997 1996 1997 1996
Residential and rural $ 215,763 $ 219,683 2,615,302 2,720,333
General service 99,741 101,672 1,227,212 1,256,724
Large general service 222,724 204,130 5,635,739 5,350,033
Sales for resale and other 31,281 25,327 580,942 586,996
Total, excluding off-
system sales 569,509 550,812 10,059,195 9,914,086
Off-system sales 16,682 18,450 1,021,636 1,084,190
Total 586,191 569,262 11,080,831 10,998,276
Fuel for production
(excluding steam) 81,338 90,680
Purchased power 92,553 65,029
Margin $ 412,300 $ 413,553
The electric margin decreased ($1.3) million during the twelve
month period primarily due to lower Kwh sales to residential and rural
and general service customers and a true-up adjustment to unbilled sales
recorded in 1995. In addition to the weather conditions for the three
month period mentioned previously, the twelve month period Kwh sales for
residential and rural and general service customers were also impacted
by cooler weather conditions during the summer of 1996 as compared to
the summer of 1995. These decreases were partially offset by continued
large general service Kwh sales growth and lower purchased power
capacity costs.
Under historically normal weather conditions, total sales
(excluding off-system sales) for the twelve month period would have
increased 4.1%, as compared to the actual increase of 1.5%.
Refer to Notes 3(a) and 3(b) of the Notes to Consolidated Financial
Statements for a discussion of merger-related retail and wholesale
electric price proposals that Utilities has announced and the energy
efficiency cost recoveries, respectively.
Utilities' 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.
Gas Operations
Gas margins and dekatherm (Dth) sales for Utilities and IEA for the
three months ended March 31 were as follows:
Revenues and Costs Dths Sold
(In thousands) (In thousands)
1997 1996 1997 1996
Utilities -
Residential $ 50,587 $ 44,428 7,638 8,511
Commercial 25,575 21,186 4,333 4,762
Industrial 4,240 2,807 835 841
Transportation and
other 1,026 820 2,764 2,826
Total Utilities 81,428 69,241 15,570 16,940
IEA 2,678 20,783 975 8,487
Total 84,106 90,024 16,545 25,427
Gas purchased for resale 64,498 67,437
Margin $ 19,608 $ 22,587
Total gas margin decreased ($3.0) million during the three month
period due to lower gas margins at both Utilities and IEA. The decrease
in Utilities' margin was primarily due to lower Dth sales, resulting
from the milder weather conditions in 1997. Under historically normal
weather conditions, Utilities' gas sales and transported volumes would
have decreased (2.8%) during the three month period, as compared to the
actual decrease of (8.1%).
IEA's reported Dth gas sales were significantly lower as a result
of IEA contributing substantially all of its gas marketing business to a
joint venture, effective January 1, 1997, in exchange for a partial
interest in the joint venture. The investment in the joint venture is
accounted for under the equity accounting method and IEA's allocated
portion of gas revenues and gas expenses resulting from the joint
venture are recorded in "Miscellaneous, net" on Industries' Consolidated
Statements of Income. Fluctuations in gas prices and the
competitiveness of the gas marketing business also contributed to the
lower margin at IEA.
Gas margins and Dth sales for Utilities and IEA for the twelve months
ended March 31 were as follows:
Revenues and Costs Dths Sold
(In thousands) (In thousands)
1997 1996 1997 1996
Utilities -
Residential $ 103,866 $ 95,569 16,807 17,595
Commercial 51,356 45,098 9,894 10,168
Industrial 13,689 9,195 3,790 3,076
Transportation and
other 4,140 3,496 10,279 10,908
Total Utilities 173,051 153,358 40,770 41,747
IEA 95,009 62,023 35,542 33,284
Total 268,060 215,381 76,312 75,031
Gas purchased for resale 214,412 159,864
Margin $ 53,648 $ 55,517
Total gas margin decreased ($1.9) million during the twelve month
period due to a lower margin at IEA which was partially offset by an
increased margin at Utilities. While IEA's Dth gas sales increased
during this time period, their margins actually decreased due to
fluctuations in gas prices, the competitiveness of the gas marketing
business and the formation of the joint venture, as discussed above.
The increase in Utilities' margin was primarily due to the impact
of an annual increase of $6.3 million in Utilities' gas rates that was
implemented in the fourth quarter of 1995. This was partially offset by
lower Dth sales, largely due to the milder weather conditions. Under
historically normal weather conditions, Utilities' gas sales and
transported volumes would have decreased (1.0%) during the twelve month
period, as compared to the actual decrease of (2.3%).
Utilities' gas tariffs include purchased gas adjustment clauses
(PGA) that are designed to currently recover the cost of gas sold.
Other Revenues The Company's other revenues increased $8.5 million and
$31.0 million during the three and twelve month periods, respectively
($3.5 million and $10.2 million at Utilities). The increase for both
periods was primarily because of increased steam revenues at Utilities,
increased operating activities at IEA and increased oil and gas revenues
at Whiting. Steam revenues at Utilities increased during both periods
due to an increase in volumes sold resulting from the addition of new
industrial customers. The increase in Whiting revenues during both
periods was primarily due to increases in oil and gas prices.
Operating Expenses The Company's other operating expenses increased
$0.4 million and $9.4 million during the three and twelve month periods,
respectively (($2.1) million and ($1.3) million at Utilities). The
increase for both periods was primarily due to costs relating to the
increased operating activities at IEA and higher information technology
costs. These increases were partially offset by decreases in costs
relating to the Company's process improvement programs and decreased
operating expenses at the Duane Arnold Energy Center (DAEC), Utilities'
nuclear generating facility. Lower operating expenses at Whiting also
partially offset the three month increase. Increases in costs relating
to the pending merger and higher operating expenses at Whiting also
contributed to the twelve month increase.
The Company's maintenance expenses increased $2.7 million and $7.0
million during the three and twelve month periods, respectively ($2.8
million and $6.8 million at Utilities). The increase for both periods
was primarily due to increased maintenance activities at Utilities'
fossil-fueled generating stations. The twelve month increase was
partially offset by lower maintenance expenses at the DAEC.
The Company's depreciation and amortization expense increased $1.4
million and $8.9 million during the three and twelve month periods,
respectively ($1.4 million and $5.6 million at Utilities), primarily
because of increases in utility plant in service. The twelve month
increase was also due to increases in amortization costs relating to the
future dismantlement and abandonment of Whiting's offshore oil and gas
properties. Depreciation and amortization expenses for both periods
include a provision for decommissioning the DAEC, which is collected
through rates. The current annual recovery level is $6.0 million.
During the first quarter of 1996, the Financial Accounting
Standards Board (FASB) issued an Exposure Draft on Accounting for
Liabilities Related to Closure and Removal of Long-Lived Assets which
deals with, among other issues, the accounting for decommissioning
costs. If current electric utility industry accounting practices for
such decommissioning are changed: (1) annual provisions for
decommissioning could increase and (2) the estimated cost for
decommissioning could be recorded as a liability, rather than as
accumulated depreciation, with recognition of an increase in the
recorded amount of the related DAEC plant. If such changes are
required, Utilities believes that there would not be an adverse effect
on its financial position or results of operations based on current rate
making practices.
Interest Expense and Other The Company's interest expense increased
$1.9 million and $5.1 million during the three and twelve month periods,
respectively ($1.4 million and $0.2 million at Utilities), primarily
because of increases in the average amount of short-term debt
outstanding at Utilities, the average amount of borrowings under
Diversified's credit facility and a higher amount of long-term debt
outstanding at Utilities. The twelve month increase was partially
offset by lower average interest rates, rate refund interest recorded in
1995 at Utilities and the effects of an interest rate swap agreement at
Diversified.
Miscellaneous, net for the Company reflects a comparative decrease
in income of ($8.3) million during the twelve month period (($6.0)
million at Utilities), primarily due to approximately $7.8 million in
costs incurred relating to the successful defense of the hostile
takeover attempt mounted by MAEC and certain property write-downs at
Diversified. Dividends received from the two New Zealand entities in
which the company has equity investments partially offset these items.
Income Taxes The Company's income tax expense decreased ($2.8) million
and ($5.4) million during the three and twelve month periods,
respectively (($1.6) million and ($6.0) million at Utilities), primarily
due to lower pretax income. Also contributing to the decrease for the
three month period was a reserve recorded in the first quarter of 1996
related to an Internal Revenue Service (IRS) audit for tax years 1991-
1993. The decrease for both periods was partially offset by the
incurrence of certain merger-related expenses which are not tax
deductible. The decrease for the twelve month period was partially
offset due to the recording of additional tax expense for the settlement
of the IRS audit in the fourth quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily attributable to
Utilities' construction programs, its debt maturities and the level of
Diversified's business opportunities. The Company's pretax ratio of
times interest earned was 2.84 and 3.37 for the twelve months ended
March 31, 1997 and March 31, 1996, respectively. Cash flows from
operating activities for the twelve months ended March 31, 1997 and
March 31, 1996 were $198 million and $190 million, respectively.
The Company anticipates that future capital requirements will be
met by cash generated from operations and external financing. The level
of cash generated from operations is partially dependent upon economic
conditions, legislative activities, environmental matters and timely
regulatory recovery of Utilities' costs. See Notes 3 and 7 of the Notes
to Consolidated Financial Statements as well as the Company's 1996
Annual Report on Form 10-K.
Access to the long-term and short-term capital and credit markets,
and costs of external financing, are dependent on the Company's
creditworthiness. The Company's debt ratings are as follows:
Moody's Standard & Poor's
Utilities - Long-term debt A2 A
- Commercial paper P1 A1
Diversified - Commercial paper P2 A2
The Company's liquidity and capital resources will be affected by
environmental, regulatory and competitive issues, including the ultimate
disposition of remediation issues surrounding the Company's
environmental liabilities and the Clean Air Act as amended, as discussed
in Note 7 of the Notes to Consolidated Financial Statements and the
Company's 1996 Annual Report on Form 10-K, and emerging competition in
the electric utility industry as discussed in the Competition section.
Consistent with rate making principles of the IUB, 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.
At March 31, 1997, Utilities had approximately $63 million of
energy efficiency program costs recorded as regulatory assets. See Note
3(b) of the Notes to Consolidated Financial Statements for a discussion
of the timing of the filings for the recovery of these costs under IUB
rules and Iowa statutory changes recently enacted relating to these
programs.
At March 31, 1997, the Company had a $20.0 million investment in
Class A common stock of McLeod, Inc. (McLeod) and a $9.2 million
investment in Class B common stock as well as vested options that, if
exercised, would represent an additional investment of approximately
$2.3 million. McLeod provides local, long-distance and other
telecommunications services. See Note 5(b) of the Notes to Consolidated
Financial Statements for further information on the Company's investment
in McLeod.
The Company has financial guarantees amounting to $23.0 million
outstanding at March 31, 1997, which are not reflected in the
consolidated financial statements. Such guarantees are generally issued
to support third-party borrowing arrangements and similar transactions.
The Company believes that any possible cash payments associated with
these agreements will not have a material adverse effect on the
financial position or results of operations of the Company.
At March 31, 1997, the Company had approximately $45 million of
investments in foreign entities (see Note 5(a) of the Notes to
Consolidated Financial Statements for a further discussion). In
addition, the Company also continues to explore other international
investment opportunities. Such investments may carry a higher level of
risk than the Company's traditional utility investments or Diversified's
domestic investments. Such risks could include foreign government
actions, foreign economic and currency risks and others. The Company
may also incur business development expenses for potential projects
pursued by the Company that may never materialize. The Company is
striving to select international investments where these risks are both
understood and minimized.
The Resale Power Group of Iowa (RPGI), consisting of virtually all
of Utilities' wholesale customers, has notified Utilities that it will
not purchase its power supply from Utilities after December 31, 1998.
It is possible that certain RPGI customers will drop out of RPGI in
order to remain as Utilities' customers; to-date, two customers have
signed contracts to remain with Utilities. All RPGI customers will
continue to purchase transmission services from Utilities after December
31, 1998. While the Company cannot determine the outcome of this issue
at this time, the result will not have a material adverse effect on its
financial position or results of operations given 1) Utilities'
wholesale sales only account for approximately 5% of Utilities' total
electric sales, excluding off-system sales; 2) Utilities currently has
to supplement its generating capability with purchased power to meet its
sales load; 3) Utilities' annual electric sales growth rate continues to
be strong; and 4) Utilities will continue to realize transmission
revenues from such customers.
Under provisions of the Merger Agreement, there are restrictions on
the amount of common stock and long-term debt the Company can issue
pending the merger. The Company does not expect the restrictions to
have a material effect on its ability to meet its future capital
requirements.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program anticipates
expenditures of approximately $225 million for 1997, of which
approximately $147 million represents expenditures at Utilities and
approximately $78 million represents expenditures at Diversified. Of
the $147 million of Utilities' expenditures, 39% represents expenditures
for electric transmission and distribution facilities, 21% represents
electric generation expenditures, 21% represents information technology
expenditures and 5% represents gas expenditures. The remaining 14%
represents miscellaneous electric, steam and general expenditures.
Diversified's anticipated expenditures include approximately $75 million
for domestic and international energy-related construction and
acquisition expenditures. The Company had construction and acquisition
expenditures of approximately $33 million for the three months ended
March 31, 1997, including approximately $20 million of utility
expenditures and $13 million of non-utility expenditures.
The Company's levels of construction and acquisition expenditures
are projected to be $208 million in 1998, $212 million in 1999,
$182 million in 2000 and $198 million in 2001. It is estimated that
virtually all of Utilities' construction and acquisition expenditures
will be provided by cash from operating activities (after payment of
dividends) for the five-year period 1997-2001. Financing plans for
Diversified's construction and acquisition program will vary, depending
primarily on the level of energy-related acquisitions.
Capital expenditure and 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 and business
combination 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.
Under provisions of the Merger Agreement, there are restrictions on
the amount of construction and acquisition expenditures the Company can
make pending the merger. The Company does not expect the restrictions
to have a material effect on its ability to implement its anticipated
construction and acquisition program.
LONG-TERM FINANCING
Other than Utilities' periodic sinking fund requirements, which
Utilities intends to meet by pledging additional property, the following
long-term debt (excluding the $55 million of First Mortgage Bonds
retired prior to maturity in the second quarter of 1997) will mature
prior to December 31, 2001:
(in millions)
Utilities $ 192.2
Diversified's credit facility 177.8
Other subsidiaries' debt 11.1
$ 381.1
The Company intends to refinance the majority of the debt
maturities with long-term securities.
In the second quarter of 1997, Utilities issued $55 million of
Collateral Trust Bonds, 6.875%, due 2007. Holders thereof may elect to
have their Collateral Trust Bonds redeemed, in whole but not in part, on
May 1, 2002, at 100% of the principal amount thereof, plus accrued
interest. The proceeds from the Collateral Trust Bonds were used to
refinance $15 million of Series L, 7.875% First Mortgage Bonds, $30
million of Series M, 7.625% First Mortgage Bonds and $10 million of
7.375% First Mortgage Bonds.
Utilities has entered into an Indenture of Mortgage and Deed of
Trust dated September 1, 1993 (New Mortgage). The New Mortgage provides
for, among other things, the issuance of Collateral Trust Bonds upon the
basis of First Mortgage Bonds being issued by Utilities. The lien of
the New Mortgage is subordinate to the lien of Utilities' first
mortgages until such time as all bonds issued under the first mortgages
have been retired and such mortgages satisfied. Accordingly, to the
extent that Utilities issues Collateral Trust Bonds on the basis of
First Mortgage Bonds, it must comply with the requirements for the
issuance of First Mortgage Bonds under Utilities' first mortgages.
Under the terms of the New Mortgage, Utilities has covenanted not to
issue any additional First Mortgage Bonds under its first mortgages
except to provide the basis for issuance of Collateral Trust Bonds.
The indentures pursuant to which Utilities issues First Mortgage
Bonds constitute direct first mortgage liens upon substantially all
tangible public utility property and contain covenants which restrict
the amount of additional bonds which may be issued. At March 31, 1997,
such restrictions would have allowed Utilities to issue at least
$241 million of additional First Mortgage Bonds.
In order to provide an instrument for the issuance of unsecured
subordinated debt securities, Utilities entered into an Indenture dated
December 1, 1995 (Subordinated Indenture). The Subordinated Indenture
provides for, among other things, the issuance of unsecured subordinated
debt securities. Any debt securities issued under the Subordinated
Indenture are subordinate to all senior indebtedness of Utilities,
including First Mortgage Bonds and Collateral Trust Bonds.
Utilities has received authority from the FERC and the Securities
and Exchange Commission (SEC) to issue up to $250 million of long-term
debt, and has $135 million of remaining authority under the current FERC
docket through April 1998, and $85 million of remaining authority under
the current SEC shelf registration.
Diversified has a variable rate credit facility that extends
through November 20, 1999, with two one-year extensions potentially
available to Diversified. Refer to Note 6(a) of the Notes to
Consolidated Financial Statements for a further discussion of this
credit facility.
The Articles of Incorporation of Utilities authorize and limit the
aggregate amount of additional shares of Cumulative Preference Stock and
Cumulative Preferred Stock that may be issued. At March 31, 1997,
Utilities could have issued an additional 700,000 shares of Cumulative
Preference Stock and 100,000 additional shares of Cumulative Preferred
Stock. In addition, Industries had 5,000,000 shares of Cumulative
Preferred Stock, no par value, authorized for issuance, none of which
were outstanding at March 31, 1997.
The Company's capitalization ratios at March 31, 1997 were as
follows:
Long-term debt 52%
Preferred stock 1
Common equity 47
100%
The ratios include $55 million of long-term debt due in less than
one-year because the Company refinanced the debt with long-term
securities in the second quarter of 1997.
Under provisions of the Merger Agreement, there are restrictions on
the amount of common stock and long-term debt the Company can issue
pending the merger. The Company does not expect the restrictions to
have a material effect on its ability to meet its future capital
requirements.
SHORT-TERM FINANCING
For interim financing, Utilities is authorized by the FERC to
issue, through 1998, up to $200 million of short-term notes. In
addition to providing for ongoing working capital needs, this
availability of short-term financing provides Utilities flexibility in
the issuance of long-term securities. At March 31, 1997, Utilities had
outstanding short-term borrowings of $126 million.
Utilities has an agreement, which expires in 1999, with a financial
institution to sell, with limited recourse, an undivided fractional
interest of up to $65 million in its pool of utility accounts
receivable. At March 31, 1997, Utilities had sold $65 million under the
agreement.
At March 31, 1997, the Company had bank lines of credit aggregating
$146.1 million. Utilities was using $126 million to support commercial
paper (weighted average interest rate of 5.38%) and $11.1 million to
support certain 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, Utilities has an
uncommitted credit facility with a financial institution whereby it can
borrow up to $40 million. Rates are set at the time of borrowing and no
fees are paid to maintain this facility. At March 31, 1997, there were
no borrowings outstanding under this facility.
ENVIRONMENTAL MATTERS
Utilities has been named as a Potentially Responsible Party (PRP)
by various federal and state environmental agencies for 28 Former
Manufactured Gas Plant (FMGP) sites. Utilities has recorded
environmental liabilities related to the FMGP sites of approximately $35
million (including $4.7 million as current liabilities) at March 31,
1997. Regulatory assets of approximately $35 million, which reflect the
future recovery that is being provided through Utilities' rates, have
been recorded in the Consolidated Balance Sheets. Considering the
current rate treatment allowed by the IUB, management believes that the
clean-up costs incurred by Utilities for these FMGP sites will not have
a material adverse effect on its financial position or results of
operations. Refer to Note 7(a) of the Notes to Consolidated Financial
Statements for a further discussion, including a discussion of a lawsuit
filed by Utilities seeking recovery of FMGP-related costs from its
insurance carriers.
The Clean Air Act Amendments of 1990 (Act) requires emission
reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) to achieve
reductions of atmospheric chemicals believed to cause acid rain. The
acid rain program under the Act also governs SO2 allowances. The Act
and other federal laws also require the United States Environmental
Protection Agency (EPA) to study and regulate, if necessary, additional
issues that potentially affect the electric utility industry, including
emissions relating to NOx, ozone transport, mercury and particulate
control; toxic release inventories and modifications to the PCB rules.
In 1995, the EPA published the Sulfur Dioxide Network Design Review
for Cedar Rapids, Iowa, which, based on the EPA's assumptions and worst-
case modeling method suggests that the Cedar Rapids area could be
classified as "nonattainment" for the National Ambient Air Quality
Standards established for SO2. The worst-case modeling study suggested
that two of Utilities' generating facilities contribute to the modeled
exceedences.
Pursuant to a routine review of operations, Utilities determined
that certain changes undertaken during the previous three years at one
of its power plants may have required a federal Prevention of
Significant Deterioration (PSD) permit. Refer to Note 7(b) of the Notes
to Consolidated Financial Statements for a further discussion of the
above mentioned air quality issues.
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." Refer to Note 7(a) of the
Notes to Consolidated Financial Statements for a further discussion.
The Nuclear Waste Policy Act of 1982 assigned responsibility to the
U.S. Department of Energy (DOE) to establish a facility for the ultimate
disposition of high level waste and spent nuclear fuel and authorized
the DOE to enter into contracts with parties for the disposal of such
material beginning in January 1998. Utilities entered into such a
contract and has made the agreed payments to the Nuclear Waste Fund
(NWF) held by the U.S. Treasury, however, Utilities has since been
formally notified by the DOE that they anticipate being unable to begin
acceptance of spent nuclear fuel by January 31, 1998. Furthermore, the
DOE has experienced significant delays in its efforts and material
acceptance is now expected to occur no earlier than 2010 with the
possibility of further delay being likely. Utilities has been storing
spent nuclear fuel on-site since plant operations began in 1974 and has
current on-site capability to store spent fuel until 2001. Utilities is
aggressively reviewing options for expanding on-site storage and
according to their current analysis, construction of an on-site storage
facility with dry cask modular capability is the most favorable option.
Utilities continues to evaluate these and other courses of action to
protect the interests of its customers and its rights under the DOE
contract. Utilities is also evaluating legislation proposed to the
Congress addressing this issue. In July 1996, the IUB initiated a
Notice of Inquiry (NOI) on spent nuclear fuel. In April 1997, IUB staff
recommendations were accepted by the IUB and concluded that a state
mandated escrowing of utility payments was inappropriate. The IUB also
endorsed the feasibility of Utilities' plans for additional spent fuel
storage in the state of Iowa. These recommendations are consistent with
Utilities' comments in the NOI proceeding.
The Low-Level Radioactive Waste Policy Amendments Act of 1985
mandated that each state must take responsibility for the storage of low-
level radioactive waste produced within its borders. The State of Iowa
has joined the Midwest Interstate Low-Level Radioactive Waste Compact
Commission (Compact), which is planning a storage facility to be located
in Ohio to store waste generated by the Compact's six member states. At
March 31, 1997, Utilities had prepaid costs of approximately
$1.1 million to the Compact for the building of such a facility. A
Compact disposal facility is anticipated to be in operation in
approximately ten years after approval of new enabling legislation by
the member states. Such legislation was approved in 1996 by all six
states that are members of the Compact. Final approval by the U.S.
Congress is now required. On-site storage capability currently exists
for low-level radioactive waste expected to be generated until the
Compact facility is able to accept waste materials. In addition, the
Barnwell, South Carolina disposal facility has reopened for an
indefinite time period and Utilities currently intends to ship to this
facility the waste it produces as long as the Barnwell site remains
open, thereby minimizing the amount of low-level waste stored on-site.
Whiting is responsible for certain dismantlement and abandonment
costs related to various off-shore oil and gas properties. Refer to
Note 7(a) of the Notes to Consolidated Financial Statements for a
further discussion.
OTHER MATTERS
Labor Issues Utilities has six collective bargaining agreements,
covering approximately 54% of its workforce. None of the agreements
expires in 1997.
Financial Derivatives The Company has a policy that financial
derivatives are to be used only to mitigate business risks and not for
speculative purposes. Derivatives have been used by the Company on a
very limited basis. At March 31, 1997, the only material financial
derivatives outstanding for the Company were an interest rate swap
agreement at Diversified and gas futures contracts at IEA.
Accounting Pronouncements SFAS 128, Earnings Per Share, was issued by
the FASB in the first quarter of 1997. SFAS 128 deals with, among other
issues, the computation and disclosure of earnings per share amounts
when a company has stock options, warrants and/or
convertible securities outstanding. SFAS 128 is effective for periods
ending after December 15, 1997, and is not expected to have a
material impact upon adoption.
Inflation The Company does not expect the effects of inflation at
current levels to have a significant effect on its financial position or
results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On April 30, 1996, Utilities filed suit, IES Utilities Inc. v. Home
Ins. Co., et al., No. 4-96-CV-10343 (S.D. Iowa filed Apr. 30, 1996),
against various insurers who had sold comprehensive general liability
policies to Iowa Southern Utilities Company (ISU) and Iowa Electric
Light and Power Company (IE) (Utilities was formed as the result of a
merger of ISU and IE). The suit seeks judicial determination of the
respective rights of the parties, a judgment that each defendant is
obligated under its respective insurance policies to pay in full all
sums that Utilities has become or may become obligated to pay in
connection with its defense against allegations of liability for
property damage at and around Former Manufactured Gas Plant (FMGP)
sites, and indemnification for all sums that it has or may become
obligated to pay for the investigation, mitigation, prevention,
remediation and monitoring of damage to property, including damage to
natural resources like groundwater, at and around the FMGP sites.
Settlement discussions are proceeding between Utilities and its
insurance carriers regarding the recovery of these FMGP-related costs.
Settlement has been reached with four carriers and an agreement in
principle has been reached with two other carriers thus far. Amounts
received from insurance carriers are being deferred pending a
determination of the regulatory treatment of such recoveries.
Industries, Diversified, IES Energy Inc. (a wholly-owned subsidiary
of Diversified), MicroFuel Corporation (the Corporation) now known as
Ely, Inc. in which IES Energy has a 69.40% equity ownership, and other
parties have been sued in Linn County District Court in Cedar Rapids,
Iowa, by Allen C. Wiley. Mr. Wiley claims money damages on various tort
and contract theories arising out of the 1992 sale of the assets of the
Corporation, of which Mr. Wiley was a director and shareholder. All of
the defendants in Mr. Wiley's suit answered the complaint and denied
liability. Industries and Diversified were dismissed from the suit in a
motion for summary judgment. In addition, a grant of summary judgment
has reduced Mr. Wiley's claims against the remaining parties to breach
of fiduciary duty. A separate motion for summary judgment, which was
filed seeking dismissal of the remaining claims against the remaining
parties, was overruled on September 20, 1996, and the trial has been set
for May 1998. All of the defendants are vigorously contesting the
claims.
The Corporation commenced a separate suit to determine the fair
value of Mr. Wiley's shares under Iowa Code section 490. A decision was
issued on August 31, 1994, by the Linn County District Court ruling that
the value of Mr. Wiley's shares was $377,600 based on a 40 cent per
share valuation. The Corporation contended that the value of Mr. Wiley's
shares was 2.5 cents per share. The Decision was appealed to the Iowa
Supreme Court by the Corporation on a number of issues, including the
Corporation's position that the trial court erred as a matter of law in
discounting the testimony of the Corporation's expert witness. The Iowa
Supreme Court assigned the case to the Iowa Court of Appeals. On
February 2, 1996, the Iowa Court of Appeals reversed the District Court
ruling after determining the District Court erred in discounting the
expert testimony. The case was remanded back to the District Court for
consideration of the expert testimony, but with no additional evidence
taken. The District Court re-affirmed its original decision on August
28, 1996, and the Corporation has again appealed to the Iowa Supreme
Court.
On October 3, 1996, Lambda Energy Marketing Company, L. C. (Lambda)
filed a request with the IUB that the IUB initiate formal complaint
proceedings against Utilities. Lambda alleges that Utilities is
discriminating against it by refusing to enter into contracts with it
for remote displacement service and by favoring IEA, a subsidiary of the
Company, in such matters. On October 17, 1996, Utilities filed a
Response which denied the allegations, and alleged, inter alia, that
Lambda is unlawfully attempting to provide retail electrical services in
Utilities' exclusive service territory. The IUB hearings were held in
March 1997. A decision is expected in the second quarter of 1997.
On October 9, 1996, the Company filed a civil suit in the Iowa
District Court in and for Linn County against Lambda, Robert Latham,
Louie Ervin, and David Charles (collectively the "Defendants", including
three former employees of the Company and/or its subsidiaries) alleging,
inter alia, violations of Iowa's trade secret act and interference with
existing and prospective business advantage. On November 1, 1996, the
Defendants filed their Answer and Counterclaims alleging, inter alia,
violation of Iowa competition law, tortious interference and commercial
disparagement. The Defendants therewith also filed a Third-Party
Petition against Utilities, IEA and Lee Liu, Chairman of the Board &
Chief Executive Officer of Industries and Utilities, alleging, inter
alia, tortious interference and commercial disparagement. On April 9,
1997, Utilities amended its suit to include Central Iowa Power
Cooperative alleging that it, too, inter alia had violated Iowa's trade
secret act, and had tortiously interfered with existing and prospective
business advantage.
Reference is made to Notes 3 and 7 of Industries' Notes to
Consolidated Financial Statements for a discussion of Utilities' rate
proceedings and the Company's environmental matters, respectively, and
Item 2. Management's Discussion and Analysis of the Results of
Operations and Financial Condition - Environmental Matters.
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.
(a) IES Utilities Inc. has calculated their 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, 1997 3.09
December 31, 1996 3.23
December 31, 1995 3.04
December 31, 1994 3.18
December 31, 1993 3.41
December 31, 1992 2.49
(b) Leland Cox joined Utilities in April 1997 as Vice President, Sales
and Service.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
*4(a) Fifth Supplemental Indenture, dated as of April 1,
1997, supplementing Utilities' Indenture of Mortgage and Deed
of Trust, dated September 1, 1993.
*4(b) Sixty-third Supplemental Indenture, dated as of
April 1, 1997, supplementing Utilities' Indenture of Mortgage
and Deed of Trust, dated August 1, 1940.
*4(c) Commercial Paper Dealer Agreement, dated as of
November 9, 1994, between IES Diversified Inc. and Citicorp
Securities, Inc.
*4(d) First Amendment, dated as of March 24, 1997, to the
Commercial Paper Dealer Agreement, dated as of November 9,
1994, between IES Diversified Inc. and Citicorp Securities,
Inc.
*10(a) Receivables Purchase and Sale Agreement dated as of
June 30, 1989, as Amended and Restated as of February 28,
1997, 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 (IES Utilities Inc.)
*27(a) Financial Data Schedule (IES Industries Inc.)
*27(b) Financial Data Schedule (IES Utilities Inc.)
* Exhibits designated by an asterisk are filed herewith.
(b) Reports on Form 8-K -
IES Industries Inc.
None.
IES Utilities Inc.
Items Reported Financial Statements Date of Report
5 None April 28, 1997
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 INDUSTRIES INC.
(Registrant)
Date: May 14, 1997 By /s/ Thomas M. Walker
(Signature)
Thomas M. Walker
Executive Vice President &
Chief Financial Officer
By /s/ John E. Ebright
(Signature)
John E. Ebright
Controller & Chief Accounting Officer
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 14, 1997 By /s/ Thomas M. Walker
(Signature)
Thomas M. Walker
Executive Vice President &
Chief Financial Officer
By /s/ John E. Ebright
(Signature)
John E. Ebright
Controller & Chief Accounting Officer
Exhibit 4(a)
CONFORMED COPY
Prepared by: IES Utilities Inc., Darin Smith, 200 First
St. SE, Cedar Rapids, IA 52401, (319)
398-4505
______________________________________________________________________________
______________________________________________________________________________
IES UTILITIES INC.
(formerly known as Iowa Electric Light and Power Company)
TO
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
______________
Fifth Supplemental Indenture
Dated as of April 1, 1997
______________
TO
INDENTURE OF MORTGAGE and DEED OF TRUST
Dated as of September 1, 1993
______________________________________________________________________________
FIFTH SUPPLEMENTAL INDENTURE, dated as of April 1, 1997
(the "Fifth Supplemental Indenture"), made by and between IES
UTILITIES INC. (formerly known as Iowa Electric Light and Power
Company), a corporation organized and existing under the laws of
the State of Iowa (the "Company"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association organized and existing under
the laws of the United States of America (the "Trustee"), as Trustee
under the Indenture of Mortgage and Deed of Trust dated as of
September 1, 1993, hereinafter mentioned.
WHEREAS, the Company has heretofore executed and delivered
its Indenture of Mortgage and Deed of Trust dated as of September 1,
1993, to the Trustee, for the security of the securities of the
Company to be issued there under (the "Collateral Trust Bonds" or
"Bonds"), and the said Indenture has been supplemented by four
supplemental indentures, dated as of October 1, 1993, November 1,
1993, March 1, 1995 and September 1, 1996, which Indenture as so
supplemented and to be hereby supplemented is hereinafter referred to
as the "Indenture"; and
WHEREAS, the Company desires to create a series of
Collateral Trust Bonds to be issued under the Indenture, to be known
as Collateral Trust Bonds, 6 7/8% Series Due 2007 (the "Collateral
Trust Bonds of the 6 7/8% Series"); and
WHEREAS, the Company, in the exercise of the powers and
authority conferred upon and reserved to it under the provisions of
the Indenture, has duly resolved and determined to make, execute and
deliver to the Trustee a Fifth Supplemental Indenture in the form
hereof for the purposes herein provided; and
WHEREAS, pursuant to Section 1401 of the Indenture,
the Company may from time to time execute one or more
supplemental indentures in order to better assure, convey and
confirm unto the Trustee any property subject to the Lien of the
Indenture; and
WHEREAS, the Company desires to so assure, convey and
confirm property described in Exhibit A to this Supplemental
Indenture; and
WHEREAS, all conditions and requirements necessary to
make this Fifth Supplemental Indenture a valid, binding and legal
instrument have been done, performed and fulfilled, and the execution
and delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
THAT IES UTILITIES INC., in consideration of the purchase
and ownership from time to time of the Bonds created in the
Fifth upplemental Indenture and the service by the Trustee,
and its successors, under the Indenture and of One Dollar to it duly
paid by the Trustee at or before the ensealing and delivery of these
presents, the receipt whereof is hereby acknowledged, hereby
covenants and agrees to and with the Trustee and its successors
in the trust under the Indenture, for the benefit of those who
shall hold the Bonds as follows:
ARTICLE I
DESCRIPTION OF COLLATERAL TRUST BONDS OF THE 6 7/8% SERIES
SECTION 1. The Company hereby creates a new series of
Bonds to be known as "Collateral Trust Bonds of the 6 7/8%
Series." The Collateral Trust Bonds of the 6 7/8% Series shall
be executed, authenticated and delivered in accordance with the
provisions of, and shall in all respects be subject to, all of the
terms, conditions andcovenants of the Indenture, as supplemented and
modified.
The commencement of the first interest period shall be
April 30, 1997. The Collateral Trust Bonds of the 6 7/8% Series
shall mature May 1, 2007, and shall bear interest at the rate of 6
7/8% per annum, payable semi-annually on the 1st day of May and the
1st day of November in each year, commencing on November 1, 1997.
The person in whose name any of the Collateral Trust Bonds of the 6
7/8% Series is registered at the close of business on any record
date (as hereinafter defined) with respect to any interest payment
date shall be entitled to receive the interest payable on such
interest payment date notwithstanding the cancellation of such
Collateral Trust Bonds of the 6 7/8% Series upon any transfer or
exchange subsequent to the record date and prior to such interest
payment date; provided, however, that if and to the extent the
Company shall default in the payment of the interest due on
such interest payment date, such defaulted interest shall be paid as
provided in Section 307 of the Indenture.
The term "record date" as used in this Section with respect
to any interest payment date shall mean the April 15 or October 15,
as the case may be, next preceding the semi-annual interest payment
date, or, if such April 15 or November 15 shall be a legal holiday
or a day on which banking institutions in the Borough of Manhattan,
the City of New York, State of New York or in the City of Chicago,
State of Illinois, are authorized by law to close, then the next
preceding day which shall not be a legal holiday or a day on which
such institutions are so authorized to close.
SECTION 2. The Collateral Trust Bonds of the 6 7/8%
Series shall be issued only as registered Bonds without coupons
of the denomination of $1,000, or any integral multiple of
$1,000, appropriately numbered. Subject to the terms and conditions
set forth in the Indenture, the Collateral Trust Bonds of the 6 7/8%
Series may be exchanged for one or more new Collateral Trust Bonds
of the 6 7/8% Series or other authorized denominations, for
the same aggregate principal amount, upon surrender thereof, to the
agency of the Company in the City of Chicago, Illinois, or, at the
option of the holder, at the agency of the Company in the City of New
York.
Collateral Trust Bonds of the 6 7/8% Series may be
exchanged or transferred without expense to the registered owner
thereof except that any taxes or other governmental charges that
may be imposed in connection with such transfer or exchange
shall be paid by the registered owner requesting such transfer or
exchange as a condition precedent to the exercise of such
privilege.
SECTION 3. Except as otherwise provided in this Section,
the registered owner of all Collateral Trust Bonds of the 6 7/8%
Series shall be CEDE & Co., as nominee of The Depository Trust Company
("DTC"). Payment of interest for any Collateral Trust Bonds of the 6
7/8% Series registered as of each record date in the name of CEDE &
Co. shall be made by wire transfer to the account of CEDE & Co.
on the interest payment date for such Collateral Trust Bonds of the
6 7/8% Series at the address indicated on the record date for CEDE &
Co. in the registration books of the Company kept by Trustee, as
registrar.
The Collateral Trust Bonds of the 6 7/8% Series
shall initially be issued in the form of one or more fully registered
global bonds ("Global Bonds") which will have an aggregate
principal amount equal to the Collateral Trust Bonds of the 6 7/8%
Series represented thereby. Upon initial issuance, the ownership of
the Collateral Trust Bonds of the 6 7/8% Series shall be registered
in the registration books of the Company kept by the Trustee in the
name of CEDE & Co., as nominee of DTC. The Trustee and the Company
may treat DTC (or its nominee) as the sole and exclusive owner of the
Collateral Trust Bonds of the 6 7/8% Series registered in its name
for the purposes of payment of the principal of, premium, if
any, or interest on such Collateral Trust Bonds of the 6 7/8%
Series, giving any notice permitted or required to be given to
Holders herein, registering the transfer of such Collateral Trust
Bonds of the 6 7/8% Series, obtaining any consent or other action to
be taken by Holders and for all other purposes whatsoever; and
neither the Trustee nor the Company shall be affected by any notice
to the contrary. Neither the Trustee nor the Company shall have
any responsibility or obligation to any DTC participant, any Person
claiming a beneficiary ownership interest in Collateral Trust Bonds of
the 6 7/8% Series registered in the name of CEDE & Co. under or
through DTC or any DTC participant, or any other Person which
is not shown on the registration books of the Company kept by the
Trustee as being a Holder with respect to the accuracy of any
records maintained by DTC, CEDE & Co. or any DTC participant; the
payment by DTC or any DTC participant to any beneficial owner of
any amount in respect of the principal of, premium, if any, or
interest on the Collateral Trust Bonds of the 6 7/8% Series
registered in the name of CEDE & Co.; the delivery to any DTC
participant or any beneficial owner of any notice which is permitted
or required to be given to Holders herein; the selection by DTC or any
DTC participant of any Person to receive payment in the event of a
partial payment of any Collateral Trust Bonds of the 6 7/8% Series
registered in the name of CEDE & Co.; or any consent given or other
action taken by DTC as Holder. The Paying Agent shall pay all
principal of, premium, if any, and interest on any Collateral Trust
Bonds of the 6 7/8% Series registered in the name of CEDE & Co.,
only to or upon the order of CEDE & Co., as nominee of DTC, and
all such payments shall be valid and effective to fully satisfy and
discharge the Company's obligations with respect to the principal
of, premium, if any, and interest on such Collateral Trust Bonds of
the 6 7/8% Series to the extent of the sum or sums so paid. Upon
delivery by DTC to the Trustee of written notice to the effect that
DTC had determined to substitute a new nominee in place of CEDE &
Co., and subject to the provisions herein with respect to record
dates, the words "CEDE & Co." herein shall refer to such new
nominee of DTC.
A Global Bond shall be exchangeable for definitive
certificates registered in the names of persons other than DTC or
its nominee only if (i) DTC notifies the Company that it is
unwilling or unable to continue as a depositary for such Global Bond
and no successor depositary shall have been appointed, or if at any
time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, at a time when DTC is required to
be so registered to act as such depositary, (ii) the Company in its
sole discretion determines that such Global Bond shall be so
exchangeable or (iii) there shall have occurred and be continuing an
Event of Default with respect to the Collateral Trust Bonds of the
6 7/8% Series. In any such event, the Trustee shall issue, register
the transfer of and exchange definitive certificates as requested by
DTC in appropriate amounts and the Company and the Trustee shall be
obligated to deliver definitive certificates. In the event definitive
certificates are issued to Holders other than DTC, the provisions
herein shall apply to, among other things, the registration,
transfer of and exchange of such certificates and the method of
payment of principal of, premium, if any, and interest on such
certificates. Whenever DTC requests the Company and the Trustee to do
so, the Trustee and the Company will cooperate with DTC in taking
appropriate action after reasonable notice (i) to make available
one or more separate certificates evidencing the Collateral Trust
Bonds of the 6 7/8% Series registered in the name of CEDE & Co., to
any DTC participant having Collateral Trust Bonds of the 6 7/8%
Series credited to its DTC account or (ii) to arrange for another
bonds depository to maintain custody of certificates evidencing such
Collateral Trust Bonds of the 6 7/8% Series.
So long as any Collateral Trust Bonds of the 6 7/8% Series
are registered in the name of CEDE & Co., as nominee of DTC, all
payments with respect to the principal of, premium, if any, and
interest on such Collateral Trust Bonds of the 6 7/8% Series and
all notices, with respect to such Collateral Trust Bonds of the 6
7/8% Series shall be made and given to DTC as provided in the Letter
of Representations dated April 16, 1997.
In connection with any notice or other communication to
be provided to Holders by the Company or the Trustee with respect to
any consent or other action to be taken by Holders, so long
as any Collateral Trust Bonds of the 6 7/8% Series are registered in
the name of CEDE & Co., as nominee of DTC, the Company or the
Trustee, as the case may be, shall establish a record date for
such consent or other action and give DTC notice of such record date
not less than 15 calendar days in advance of such record date to the
extent possible.
The notice requirements set forth in the Letter of
Representations with respect to redemptions, conversions and
mandatory tenders shall be effective whenever the Collateral Trust
Bonds of the 6 7/8% Series are registered in the name of DTC
or its nominee, notwithstanding any other provision herein, to the
extent such other provisions are incompatible with the notice
requirements set forth in the Letter of Representations.
SECTION 4. The Collateral Trust Bonds of the 6 7/8%
Series and the Trustee's Certificate of Authentication shall be
substantially in the following forms respectively:
[FORM OF FACE OF BOND]
[FORM OF LEGEND FOR GLOBAL BOND]
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to
Issuer or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede
& Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or
to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch
as the registered owner hereof, Cede & Co., has an interest herein.
IES UTILITIES INC.
COLLATERAL TRUST BOND, ___% SERIES DUE ____.
No. ________ $_________
CUSIP ___________
IES UTILITIES INC., a corporation organized and existing
under the laws of the State of Iowa (the "Company," which term shall
include any successor corporation as defined in the Indenture
hereinafter referred to), for value received, hereby promises
to pay to ______________, or its registered assigns, the sum of
_____________ ($_______) dollars on the ___ day of _____, ____,
in any coin or currency of the United States of America which at
the time of payment is legal tender for public and private debts, and
to pay interest thereon in like coin or currency from ______ __,
____, payable semi-annually, on the ___ day of ______ and ______ in
each year, commencing _______ __, ____, at the rate of ___% per
annum, until the Company's obligation with respect to the payment of
such principal shall be discharged as provided in the Indenture
hereinafter mentioned. The interest so payable on any ___ day of
______ or ______ will, subject to certain exceptions provided in the
_____ Supplemental Indenture dated as of ______ __, ____, be paid to
the person in whose name this Collateral Trust Bond is registered at
the close of business on the immediately preceding ______ ____ or
______ ____, as the case may be. Except as otherwise provided
in the Indenture, any such interest not paid or duly provided
for shall forthwith cease to be payable to such person, and shall
either be paid to the person in whose name this Collateral Trust
Bond is registered at the close of business on a Special Record Date
for the payment of such interest to be fixed by the Trustee, notice
of which shall be given to holders of Collateral Trust Bonds of this
Series not less than 10 days prior to such Special Record Date, or
be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Collateral Trust Bonds of this Series may be listed, and upon such
notice as may be required by such exchange, all as more fully
provided for in said Indenture. Both principal of, and interest
on, this Collateral Trust Bond are payable at the agency of the
Company in the City of Chicago, Illinois, or, at the option of
the holder, at the agency of the Company in the City of New York.
This Collateral Trust Bond shall not be entitled to
any benefit under the Indenture or any indenture supplemental
thereto, or become valid or obligatory for any purpose, until
the form of certificate endorsed hereon shall have been signed by
or on behalf of The First National Bank of Chicago, the Trustee
under the Indenture, or a successor trustee thereto under the
Indenture, or by an authenticating agent duly appointed by the Trustee
in accordance with the terms of the Indenture.
The provisions of this Collateral Trust Bond are continued
on the reverse hereof and such continued provisions shall for all
purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, IES Utilities Inc. has caused
this Collateral Trust Bond to be signed (manually or by facsimile
signature) in its name by an Authorized Executive Officer, as
defined in the Indenture, and its corporate seal (or a facsimile
thereof) to be hereto affixed and attested (manually or by
facsimile signature) by an Authorized Executive Officer, as defined
in the Indenture.
Dated ________________ IES UTILITIES INC.
By_____________________________
Authorized Executive Officer
ATTEST:
_____________________________
Authorized Executive Officer
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Collateral Trust Bonds of the
series designated therein referred to in the within-mentioned
Indenture and _____ Supplemental Indenture dated as of ______ __,
____.
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By___________________________
Authorized Officer
[FORM OF REVERSE OF BOND]
IES UTILITIES INC.
COLLATERAL TRUST BOND, ____% SERIES DUE ____
This Collateral Trust Bond is one of a duly authorized issue
of Collateral Trust Bonds of the Company in an aggregate
principal amount of up to $________ of the series hereinafter
specified, all issued and to be issued under and equally secured by
an Indenture of Mortgage and Deed of Trust dated as of September 1,
1993, executed by the Company to The First National Bank of
Chicago, as Trustee (the "Trustee"), as supplemented by _____
supplemental indentures, (including a _____ Supplemental Indenture
dated as of ______ __, ____), each executed by the Company to
said Trustee (said Indenture, as so supplemented, being herein
sometimes referred to as the "Indenture"), to which Indenture and
all indentures supplemental thereto reference is hereby made for a
description of the properties mortgaged and pledged, the nature and
extent of the security, the rights of registered owners of the
Collateral Trust Bonds and of the Trustee in respect thereof, and the
terms and conditions upon which the Collateral Trust Bonds are, and
are to be, secured. The Collateral Trust Bonds may be issued in
series, for various principal sums, may mature at different times,
may bear interest at different rates and may otherwise vary as
provided in the Indenture. This Collateral Trust Bond is one of a
series designated as the "Collateral Trust Bonds, ____% Series Due
____" (the "Collateral Trust Bonds of the ____% Series") of the
Company, in an aggregate principal amount of up to $________,
issued under and secured by the Indenture and described in the
_____ Supplemental Indenture thereto dated as of ______ __, ____
(the "_____ Supplemental Indenture") between the Company and the
Trustee.
The Collateral Trust Bonds of the ____% Series will not
be redeemable prior to their maturity by the Company; provided,
however, that such Bonds may be redeemed by the Company in whole at
any time or in part from time to time, up on at least 30 days
notice, at the redemption price equal to 100% of the principal
amount thereof, plus accrued interest to the date of redemption,
through application of cash received by the Trustee as a result of
properties of the Company being taken by eminent domain or being
sold to an entity possessing the power of eminent domain.
Each Holder of Collateral Trust Bonds of the ____%
Series shall have the right, at such Holder's option, to require the
Company to redeem such Holder's Bonds on ______ __, ____ (the
"Redemption Date") at a redemption price in cash equal to 100% of the
principal amount of such Bonds (the "Redemption Price"), together
with accrued and unpaid interest to the Redemption Date. Each
beneficial holder may exercise such right only with respect to
all of such beneficial holder's Collateral Trust Bonds of the
____% Series, and not a part thereof. To exercise the redemption
right, if the Collateral Trust Bonds of the ____% Series are not
then represented by a Global Bond, a Holder of Collateral Trust
Bonds of the ____% Series shall deliver to the Trustee (i) a duly
signed and completed "Notice to Elect Redemption" not earlier than
______ __, ____ and not later than 5:00 p.m., New York City time, on
______ __, ____, and, (ii) all of such Holder's Collateral Trust
Bonds of the ____% Series, duly endorsed, if required, for transfer
to the Company. Such Notice shall be irrevocable. If the Collateral
Trust Bonds of the ____% Series are then represented by a Global
Bond, a beneficial holder of Collateral Trust Bonds of the ____%
Series shall deliver a Notice to the broker or participant
through which such beneficial holder holds an interest in such
Collateral Trust Bonds of the ___ ____% Series and such Global Bond
may be delivered in such other manner as may be agreed to by DTC or
other securities depositary, as the case may be, the Company and the
Trustee; provided, however, that the corresponding notice to elect
redemption as to any such Collateral Trust Bonds of the ____% Series
represented by a Global Bond must nonetheless be received by the
Trustee from the Holder thereof no earlier than ______ __, ____
and no later than 5:00 p.m., New York City time, on ______ __,
____. The Collateral Trust Bonds of the ____% Series
surrendered for redemption shall, on the Redemption Date, become due
and payable at the Redemption Price, and from and after such date
(unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Collateral Trust Bonds of the ____%
Series shall cease to bear interest.
In case an Event of Default, as defined in the
Indenture, shall occur, the principal of all the Collateral Trust
Bonds of the ____% Series at any such time outstanding under the
Indenture may be declared or may become due and payable, upon the
conditions and in the manner and with the effect provided in the
Indenture. The Indenture provides that such declaration may be
rescinded under certain circumstances.
No reference herein to the Indenture and no provision of
this Collateral Trust Bond or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of and premium, if any, and
interest on this Collateral Trust Bond at the times, place and rate,
in the coin or currency, and in the manner, herein prescribed.
To the extent permitted on the front hereof, this
Collateral Trust Bond may be exchanged or transferred without
expense to the registered owner hereof except that any taxes or
other governmental charges that may be imposed in connection with
such transfer or exchange shall be paid by the registered owner
requesting such transfer or exchange as a condition precedent to
the exercise of such privilege.
Prior to due presentment of this Collateral Trust Bond
for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose
name this Collateral Trust Bond is registered as the absolute owner
hereof for all purposes, whether or not this Collateral Trust Bond
be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.
As provided in the Indenture, no recourse shall be had for
the payment of the principal of or premium, if any, or interest on
any Collateral Trust Bonds or any part thereof, or for any claim
based thereon or otherwise in respect thereof, or of the
indebtedness represented thereby, or upon any obligation, covenant or
agreement under the Indenture, against, and no personal liability
whatsoever shall attach to, or be incurred by, any incorporator,
stockholder, officer or director, as such, past, present or future
of the Company or of any predecessor or successor corporation
(either directly or through the Company or a predecessor or
successor corporation), whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly
agreed and understood that the Indenture and all the Collateral
Trust Bonds are solely corporate obligations and that any
such personal liability is hereby expressly waived and released as
a condition of, and as part of the consideration for, the execution of
the Indenture and the issuance of the Collateral Trust Bonds.
NOTICE TO ELECT REDEMPTION
The undersigned hereby irrevocably requests and instructs
IES Utilities Inc. (the "Issuer") to redeem on ______ __, ____, all
of the Collateral Trust Bonds of the ____% Series which it holds,
pursuant to the terms set forth in such Bonds and in the ____
Supplemental Indenture dated as of ______ __, ____ between the Issuer
and The First National Bank of Chicago (the "Trustee") to the
Indenture of Mortgage and Deed of Trust dated as of September 1,
1993 between the Issuer and the Trustee (the Indenture, as so
supplemented by the _____ Supplemental Indenture, the "Indenture").
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Indenture.
The undersigned acknowledges that, in order for the
Collateral Trust Bonds of the ____% Series to be redeemed
pursuant to this election, (i) the Trustee must receive this "Option
to Elect Redemption" form, duly completed, from the undersigned (in
the event Collateral Trust Bonds of the ____% Series are not then
represented by a Global Bond), or (ii) the Trustee must receive a
notice to elect redemption of the undersigned's Collateral Trust
Bonds of the ____% Series from the Holder thereof (in the event the
Collateral Trust Bonds of the ____% Series are then represented by
a Global Bond), in each case at The First National Bank of Chicago, 14
Wall Street, 8th Floor, Window 2, New York, New York 10005, or at
such other place or places in New York, New York as the Issuer may
from time to time notify to the Holders of the Bonds, no earlier than
______ __, ____ and no later than 5:00 P.M., New York City time, on
______ __, ____.
The undersigned hereby certifies that the principal amount
of Collateral Trust Bonds of the ____% Series owned beneficially by
the undersigned is as follows: $___________.
Dated: _________________, ____
Name of beneficial holder:
__________________________________
By:_______________________________
Name:
Title:
[END OF BOND FORM]
ARTICLE II
ISSUE OF COLLATERAL TRUST BONDS
SECTION 1. Pursuant to the terms of Section 401 of
the Indenture, the Company hereby exercises the right to obtain
the authentication of $55,000,000 principal amount of Collateral
Trust Bonds.
SECTION 2. Such Collateral Trust Bonds of the 6 7/8%
Series may be authenticated and delivered prior to the filing for
recordation of this Fifth Supplemental Indenture.
ARTICLE III
REDEMPTION
SECTION 1. Redemption at Option of Company. The Collateral
Trust Bonds of the 6 7/8% Series will not be redeemable prior to
their maturity by the Company; provided, however, that such Bonds
may be redeemed by the Company in whole at any time or in part from
time to time, upon at least 30 days notice, at the redemption price
equal to 100% of the principal amount thereof, plus accrued interest
to the date of redemption, through application of cash received by the
Trustee as a result of properties of the Company being taken by
eminent domain or being sold to an entity possessing the power of
eminent domain.
SECTION 2. Redemption at Option of Holder. (a) Each
holder of Collateral Trust Bonds of the 6 7/8% Series shall have the
right, at such Holder's option, exercisable to the extent specified
in paragraph (b) below and during the period and in the manner
specified in paragraph (c) below, to require the Company to redeem,
and upon the exercise of such right the Company shall redeem, such
Holder's Collateral Trust Bonds of the 6 7/8% Series on May 1, 2002
(the "Redemption Date") at a redemption price in cash equal to 100%
of the principal amount of such Collateral Trust Bonds of the 6
7/8% Series (the "Redemption Price"), together with, to the extent
provided in paragraph (d) below, accrued and unpaid interest to the
Redemption Date.
(b) If, at the time of exercise of the redemption right, the
Collateral Trust Bonds of the 6 7/8% Series are represented by a
Global Bond, each beneficial holder may exercise such redemption
right only with respect to all of such beneficial holder's
Collateral Trust Bonds of the 6 7/8% Series, and not a part
thereof. If, at the time of exercise of the redemption right, the
Collateral Trust Bonds of the 6 7/8% Series are not represented
by a Global Bond, each Holder may exercise such redemption right
only with respect to all of such Holder's Collateral Trust Bonds of
the 6 7/8% Series, and not a part thereof.
(c) To exercise the redemption right, if the Collateral
Trust Bonds of the 6 7/8% Series are not then represented by a Global
Bond, a Holder of Collateral Trust Bonds of the 6 7/8% Series shall
deliver to the Trustee at its corporate trust office in The City of
New York (i) a duly signed and completed "Notice to Elect
Redemption" (a "Notice") in substantially the form provided herein,
not earlier than March 1, 2002 and not later than 5:00 p.m., New
York City time, on April 1, 2002, and (ii) all of such Holder's
Collateral Trust Bonds of the 6 7/8% Series, duly endorsed for
transfer to the Company if required by the Trustee or the Company.
Such Notice shall be irrevocable. Any Notice received other than
within the period specified herein shall be ineffective. If the
Collateral Trust Bonds of the 6 7/8% Series are then represented by a
Global Bond, a beneficial holder of Collateral Trust Bonds of the 6
7/8% Series shall deliver a Notice to the broker or participant
through which such beneficial holder holds an interest in such
Collateral Trust Bonds of the 6 7/8% Series and such Global Bond may
be delivered in such other manner as may be agreed to by DTC or other
securities depositary, as the case may be, the Company and the
Trustee; provided, however, that the corresponding notice to elect
redemption as to any such Collateral Trust Bonds of the 6 7/8%
Series represented by a Global Bond must nonetheless be received
by the Trustee from the Holder thereof no earlier than March 1,
2002 and no later than 5:00 p.m., New York City time, on April 1,
2002.
(d) The Collateral Trust Bonds of the 6 7/8%
Series surrendered for redemption shall, on the Redemption Date,
become due and payable at the Redemption Price, and from and after
such date (unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Collateral Trust Bonds
of the 6 7/8% Series shall cease to bear interest. On the Redemption
Date, such Collateral Trust Bonds of the 6 7/8% Series shall be
redeemed by the Company at the Redemption Price plus accrued
interest to the Redemption Date, exclusive of installments of
interest whose stated Maturity is on or prior to the Redemption Date,
payment of which shall have been made or duly provided for to the
Holders of Collateral Trust Bonds of the 6 7/8% Series on the relevant
record date in accordance with Section 307 of the Indenture.
(e) On or before the Redemption Date, the Company
shall deposit with the Trustee an amount of money sufficient to
pay the Redemption Price and accrued interest, if any, of all the
Collateral Trust Bonds of the 6 7/8% Series which are to be redeemed
on that date.
ARTICLE IV
DESCRIPTION OF PROPERTY
To secure the payment of the principal of, premium, if
any, and interest, if any, on all Collateral Trust Bonds issued
under the Indenture and Outstanding (as defined in the Indenture),
when payable in accordance with the provisions thereof, and to secure
the performance by the Company of, and its compliance with, the
covenants and conditions of the Indenture, the Company hereby
grants, bargains, sells, conveys, assigns, transfers, mortgages,
pledges, sets over and confirms to the Trustee a security interest
in, all right, title and interest of the Company in and to the
property described in Exhibit A to this Fifth Supplemental Indenture.
TO HAVE AND TO HOLD all said property
hereby granted, bargained, sold, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed, or in which a security
interest has been granted by the Company in this Fifth Supplemental
Indenture, unto the Trustee and its successors and assigns forever,
but in trust nevertheless upon the trusts, for the purposes, and
subject to all the exceptions and reservations, terms, conditions,
provisions and restrictions of the Indenture, and for the equal
and proportionate benefit and security of all present and future
holders of the Collateral Trust Bonds, without any preference,
priority or distinction of any one Collateral Trust Bond over any
other Collateral Trust Bond by reason of priority in the issue or
negotiation thereof or otherwise, except as may otherwise be
expressly provided in the Indenture, but subject, however, to all
the conditions, agreements, covenants, exceptions, limitations,
restrictions and reservations expressed or provided in the deeds or
other instruments of record affecting the property, or any part
or portion thereof, insofar as the same are at the time of
execution hereof in force and effect and permitted by law.
ARTICLE V
THE TRUSTEE
The Trustee hereby accepts the trusts hereby declared
and provided, and agrees to perform the same upon the terms and
conditions in the Indenture set forth and upon the following terms and
conditions:
The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of
this Fifth Supplemental Indenture or the due execution hereof by
the Company or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.
In general, each and every term and condition contained in
Article Eleven of the Indenture shall apply to this
Supplemental Indenture with the same force and effect as if the
same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate to
make the same conform to this Fifth Supplemental Indenture.
ARTICLE VI
MISCELLANEOUS PROVISIONS
This Fifth Supplemental Indenture may be simultaneously
executed in any number of counterparts, each of which when so
executed shall be deemed to be an original; but such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Fifth Supplemental Indenture to be duly executed, and their
respective corporate seals to be hereunto affixed and attested, all as
of the day and year first above written.
IES UTILITIES INC.
By /s/ Larry D. Root
Larry D. Root
President & Chief Operating Officer
ATTEST:
/s/ Stephen W. Southwick
Stephen W. Southwick
Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, Trustee
By /s/ John R. Prendiville
John R. Prendiville
Vice President
ATTEST:
/s/ Georgia E. Tsirbas
Georgia E. Tsirbas
Assistant Vice President
STATE OF IOWA )
) ss:
COUNTY OF LINN )
On the 24th day of April, 1997, before me personally
came Larry D. Root, to me known, who, being by me duly sworn, did
depose and say that he is the President & Chief Executive Officer of
IES UTILITIES INC., the corporation described in and which executed
the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation, and that he signed his name
thereto by like authority, acknowledging the instrument to be the
free act and deed of said corporation.
/s/ Kathleen C. Balvanz
Notary Public
[Notarial Seal]
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
On the 30th day of April, 1997, before me personally
came John R. Prendiville to me known, who, being by me duly sworn, did
depose and say that he is a Vice President of THE FIRST NATIONAL
BANK OF CHICAGO, the national banking association described in
and which executed the foregoing instrument; that he knows the
seal of said national banking association; that the seal affixed to
said instrument is the seal of said national banking association;
that it was so affixed by authority of the Board of Directors of
said national banking association, and that he signed his name
thereto by like authority, acknowledging the instrument to be the
free act and deed of said national banking association.
/s/ Dana McCray
Notary Public
[Notarial Seal]
EXHIBIT A
DESCRIPTION OF PROPERTY
Boone County
Parcel `D' in Southeast quarter (1/4) of Southwest quarter (1/4)
of Section one (1), Township eighty-three (83) North, Range twenty-
five (25), West of the 5th P.M., Boone County, Iowa, as shown
on Plat recorded in Plat Book 19, Page 284, in the office of the
Recorder of Boone County, Iowa.
Iowa County
That part of the Southeast Quarter of the Southeast Quarter of
Section 16, Township 80 North, Range 10 West of the 5th P.M., Iowa
County, Iowa, described as follows:
Commencing at the Southeast corner of said Southeast Quarter;
thence North 90 degree 00'00" West (assumed bearing for this
description only) 33.02 feet along the South line of said
Southeast Quarter to a point 33.00 feet in perpendicular distance
West of the Eastline of said Southeast Quarter; thence North 1
degree 45'19" West 33.02 feet along a line 33 feet West of and
parallel to said East line to a point 33.00 feet in perpendicular
distance North of the South line of said Southeast Quarter said
point being the point of intersection of the North right-of-way line
of 190th Street and the West right-of-way line of County Road E77, and
said point being the point of beginning; thence North 90 degree
00'00" West 400.00 feet along said North right-of-way line;
thence North 1 degree 45'19" West 500.00 feet; thence North 90
degree 00'00" East 400.00 feet to a point of intersection with the
West right-of-way line of County Road E77; thence South 1 degree
45'19" East 500.00 feet along said West right-of-way line to the
point of beginning; Said tract contains 4.59 acres more or less and
is subject to easements of record.
Exhibit 4(b)
CONFORMED COPY
Prepared by: IES Utilities Inc., Darin Smith, 200 First St. SE, Cedar
Rapids, IA 52401, (319) 398-4505
______________________________________________________________________________
______________________________________________________________________________
IES UTILITIES INC.
(formerly known as Iowa Electric Light and Power Company)
To
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
__________________________
Sixty-third Supplemental
Indenture
Dated as of April 1, 1997
__________________________
SUPPLEMENTAL TO
INDENTURE OF MORTGAGE AND DEED OF TRUST
DATED AS OF AUGUST 1, 1940
______________________________________________________________________________
THIS SIXTY-THIRD SUPPLEMENTAL INDENTURE, dated as of April 1,
1997, between IES UTILITIES INC. (formerly known as Iowa Electric Light
and Power Company), a corporation organized and existing under the laws
of the State of Iowa (hereinafter called the "Company"), party of the
first part, and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee, a
national banking association organized and existing under the laws of
the United States of America, party of the second part,
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered its
Indenture of Mortgage and Deed of Trust, dated as of August 1, 1940
(hereinafter called the "Original Indenture"), to the Trustee to secure
the first mortgage bonds (herein sometimes referred to as "first
mortgage bonds") of the Company, issuable in series; and
WHEREAS, the Company thereafter executed and delivered certain
Supplemental Indentures, First through Sixty-second, inclusive, for the
various purposes of creating additional series of first mortgage bonds,
conveying and confirming unto the Trustee certain additional property,
correcting the description of a certain parcel of land as set forth in
the Original Indenture and amending the Original Indenture in certain
respects (the Original Indenture and the above referred to Supplemental
Indentures together with this Sixty-third Supplemental Indenture being
herein sometimes collectively referred to as the "Indenture"); and
WHEREAS, there have been issued and are now outstanding under
the Indenture the following described first mortgage bonds:
First Mortgage Bonds Principal Amount
Series L, 7-7/8% due 2000 15,000,000
Series M, 7-5/8% due 2002 30,000,000
Series Y, 8-5/8% due 2001 60,000,000
Series Z, 7.60% due 1999 50,000,000
Collateral Series A due 2008 50,000,000
Collateral Series B due 2023 50,000,000
Collateral Series C due 2000 50,000,000
Collateral Series D due 2006 60,000,000
Pollution Control Collateral Series A, due 2023 10,200,000
Pollution Control Collateral Series B, due 2023 7,000,000
Pollution Control Collateral Series C, due 2023 2,200,000
WHEREAS, the Original Indenture in Section 158 provides that
the Company, when authorized by resolution of the Board, and the
Trustee, may at any time, subject to the restrictions in the Original
Indenture contained, enter into such an indenture supplemental to the
Original Indenture as may or shall be by them deemed necessary or
desirable for the purpose of creating any new series of first mortgage
bonds or of adding to the covenants and agreements of the Company in the
Original Indenture contained, other covenants and agreements thereafter
to be observed by the Company and for any other purpose not inconsistent
with the terms of the Original Indenture and which shall not impair the
security of the same; and
WHEREAS, the Company desires to execute and deliver this Sixty-
third Supplemental Indenture, in accordance with the provisions of the
Original Indenture, for the purpose of providing for the creation of a
new series of first mortgage bonds to be designated "First Mortgage
Bonds, Collateral Series E, Due 2007" (hereinafter called the "Bonds of
Series E" or the "Bonds"), and for the purpose of adding to the
covenants and agreements of the Company in the Original Indenture
contained, other covenants and agreements hereafter to be observed by
the Company;
WHEREAS, the Bonds are to be issued to The First National Bank
of Chicago as trustee (the "New Mortgage Trustee") under the Company's
Indenture of Mortgage and Deed of Trust dated as of September 1, 1993
(the "New Mortgage"), and are to be owned and held by the New Mortgage
Trustee as "Class 'A' Bonds" (as defined in the New Mortgage) in
accordance with the terms of the New Mortgage; and
WHEREAS, all acts and proceedings required by law and by the
Articles of Incorporation of the Company, including all action requisite
on the part of its stockholders, directors and officers, necessary to
make the Bonds, when executed by the Company, authenticated and
delivered by the Trustee and duly issued, the valid, binding and legal
obligations of the Company, and to constitute the Indenture a valid and
binding mortgage and deed of trust for the security of the Bonds in
accordance with the terms of the Indenture and the terms of the Bonds,
have been done and taken; and the execution and delivery of this Sixty-
third Supplemental Indenture have been in all respects duly authorized.
NOW, THEREFORE, THIS SIXTY-THIRD SUPPLEMENTAL INDENTURE
WITNESSETH, that, in order to further secure the payment of the
principal of, premium, if any, and interest, if any, on all first
mortgage bonds at any time issued and outstanding under the Indenture,
according to their tenor, purport and effect, and to secure the
performance and observance of all the covenants and conditions in said
first mortgage bonds and in the Indenture contained (except any covenant
of the Company with respect to the refund or reimbursement of taxes,
assessments or other governmental charges on account of the ownership of
any first mortgage bonds, or the income derived therefrom, for which the
holders of such first mortgage bonds shall look only to the Company and
not to the property mortgaged and pledged) and for and in consideration
of the premises and of the mutual covenants herein contained and of the
purchase and acceptance of the Bonds by the holders thereof, and of the
sum of $1.00 duly paid to the Company by the Trustee at or before the
ensealing and delivery hereof, and for other valuable considerations,
the receipt whereof is hereby acknowledged, the Company has executed and
delivered this Sixty-third Supplemental Indenture, and, by these
presents does grant, bargain, sell, release, convey, assign, transfer,
mortgage, pledge, set over, warrant and confirm unto the Trustee the
properties of the Company described and referred to in the Original
Indenture and all indentures supplemental thereto, as thereby conveyed
or intended so to be, and not heretofore specifically released, together
with all and singular the plants, buildings, improvements, additions,
tenements, hereditaments, easements, rights, privileges, licenses and
franchises and all other appurtenances whatsoever belonging or in any
wise appertaining to any of the property hereby mortgaged or pledged, or
intended so to be, or any part thereof, now owned or which may hereafter
be owned or acquired by the Company, and the reversion and reversions,
remainder and remainders, and the tolls, rents, revenues, issues,
earnings, income, product and profits thereof, and of every part and
parcel thereof, and all the estate, right, title, interest, property,
claim and demand of every nature whatsoever of the Company, at law or in
equity, or otherwise howsoever, in, of and to such property and every
part and parcel thereof, including the following property acquired by
the Company since the execution and delivery of the Sixty-second
Supplemental Indenture dated as of September 1, 1996:
Boone County
Parcel `D' in Southeast quarter (1/4) of Southwest quarter (1/4) of
Section one (1), Township eighty-three (83) North, Range twenty-five
(25), West of the 5th P.M., Boone County, Iowa, as shown on Plat
recorded in Plat Book 19, Page 284, in the office of the Recorder of
Boone County, Iowa.
Iowa County
That part of the Southeast Quarter of the Southeast Quarter of Section
16, Township 80 North, Range 10 West of the 5th P.M., Iowa County, Iowa,
described as follows:
Commencing at the Southeast corner of said Southeast Quarter; thence
North 90 degree 00'00" West (assumed bearing for this description only)
33.02 feet along the South line of said Southeast Quarter to a point 33.00
feet in perpendicular distance West of the Eastline of said Southeast
Quarter; thence North 1 degree 45'19" West 33.02 feet along a line 33 feet
West of and parallel to said East line to a point 33.00 feet in perpendicular
distance North of the South line of said Southeast Quarter said point
being the point of intersection of the North right-of-way line of 190th
Street and the West right-of-way line of County Road E77, and said point
being the point of beginning; thence North 90 degree 00'00" West 400.00
feet along said North right-of-way line; thence North 1 degree 45'19"
West 500.00 feet; thence North 90 degree 00'00" East 400.00 feet to a
point of intersection with the West right-of-way line of County Road E77;
thence South 1 degree 45'19" East 500.00 feet along said West right-of-way
line to the point of beginning; Said tract contains 4.59 acres more or
less and is subject to easements of record.
TO HAVE AND TO HOLD all and singular the lands, properties,
estates, rights, franchises, privileges and appurtenances mortgaged,
conveyed, pledged or assigned as aforesaid, or intended so to be,
together with all the appurtenances thereunto appertaining, unto the
Trustee and its successors and assigns forever, upon the trusts, for the
uses and purposes and under the terms and conditions and with the
rights, privileges and duties as in the Indenture set forth;
Subject, however, to the reservations, exceptions, limitations
and restrictions contained in the several deeds, leases, servitudes,
contracts or other instruments through which the Company acquired and/or
claims title to and/or enjoys the use of the aforesaid properties; and
subject also to Permitted Encumbrances (as defined in Section 24 of the
Original Indenture) and, as to any property acquired by the Company
since the execution and delivery of the Original Indenture, to any liens
thereon existing, and to any liens for unpaid portions of the purchase
money placed thereon, at the time of such acquisition, but only to the
extent that such liens are permitted by Sections 72 and 83 of the
Original Indenture, as amended, and Section 7 of this Sixty-third
Supplemental Indenture;
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate
use, benefit, security and protection of those who from time to time
shall hold the first mortgage bonds and coupons authenticated and
delivered under the Indenture and duly issued by the Company, without
any discrimination, preference or priority of any one first mortgage
bond or coupon over any other by reason of priority in the time of
issue, sale or negotiation thereof or otherwise, except as provided in
Section 69 of the Original Indenture, so that, subject to said
provisions, each and all of said first mortgage bonds and coupons shall
have the same right, lien and privilege under the Indenture and shall be
equally and ratably secured thereby (except as any sinking,
amortization, improvement, renewal or other fund, or any other covenants
or agreements established in accordance with the provisions of the
Original Indenture, may afford additional security for the first
mortgage bonds of any particular series), and shall have the same
proportionate interest and share in the Trust Estate (as defined in the
Original Indenture), with the same effect as if all of the first
mortgage bonds and coupons had been issued, sold and negotiated
simultaneously on the date of the delivery of the Original Indenture;
and in trust for enforcing payment of the principal of the first
mortgage bonds and of the interest and premium, if any, thereon,
according to the tenor, purport and effect of the first mortgage bonds
and coupons and of the Indenture, and for enforcing the terms,
provisions, covenants and stipulations therein and in the first mortgage
bonds set forth, and upon the trusts, uses and purposes and subject to
the covenants, agreements and conditions set forth and declared in the
Indenture;
AND THIS SIXTY-THIRD SUPPLEMENTAL INDENTURE FURTHER
WITNESSETH, that the Company hereby covenants and agrees to and with the
Trustee and its successors and assigns forever as follows:
SECTION 1. There shall be, and is hereby created, a new
series of first mortgage bonds, known as and entitled "First Mortgage
Bonds, Collateral Series E, Due 2007," and the form thereof shall be
substantially as hereinafter set forth.
The Bonds of Series E shall be issued and delivered to the New
Mortgage Trustee under the New Mortgage as the basis for the
authentication and delivery under the New Mortgage of a series of
securities ("Collateral Trust Securities"). As provided in the New
Mortgage, the Bonds of Series E will be registered in the name of the
New Mortgage Trustee, subject to the provisions of the New Mortgage, for
the benefit of the holders of all securities from time to time
outstanding under the New Mortgage, and the Company shall have no
interest therein. The Bonds of Series E will not be transferable except
to a successor trustee under the New Mortgage.
Any payment or deemed payment by the Company under the New
Mortgage of the principal of or interest, if any, on the Collateral
Trust Securities (other than by the application of the proceeds of a
payment in respect of the Bonds of Series E) shall, to the extent
thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest, if any,
on such Bonds of Series E, as the case may be, which is then due.
The principal amount of the Bonds of Series E shall be limited
to $55,000,000, except in case of the issuance of Bonds as provided in
Section 14 of the Original Indenture on account of mutilated, lost,
stolen, or destroyed Bonds. The Bonds of Series E shall be registered
bonds only without coupons of the denomination of $1,000 and any
multiple of $1,000, and of such respective amounts of each of said
denominations as may be executed by the Company and delivered to the
Trustee for authentication and delivery. Notwithstanding the provisions
of Section 7 of the Original Indenture to the contrary, no reservation
of unissued coupon bonds shall be required with respect to the Bonds of
Series E. All Bonds of Series E shall mature May 1, 2007, and shall not
bear interest, except that if the Company should default in payment of
principal on a Bond of Series E, such Bond shall bear interest on such
defaulted principal at the rate of 6% per annum (to the extent that
payment of such interest is enforceable under applicable law) until the
Company's obligation with respect to the payment of such principal shall
be discharged. The principal, premium, if any, and the interest, if
any, on the Bonds of Series E shall be payable at the office of the
Trustee in the City of Chicago, State of Illinois, or at the option of
the holder, at the principal corporate trust office of First Chicago
Trust Company of New York in the Borough of Manhattan in the City of New
York, in any coin or currency of the United States of America which at
the time of payment shall be legal tender for public and private debts.
The Bonds of Series E shall be subject to redemption under certain
circumstances specified in Section 54 of the Original Indenture as
amended.
The Bonds of Series E will be redeemable, at the option of the
Company, in whole at any time or in part from time to time, upon 30 days
notice, at a redemption price equal to 100% of the principal amount
thereof together with accrued interest, if any, thereon to the date
fixed for redemption. The Bonds shall be redeemed no later than the
redemption of the Collateral Trust Securities, in a principal amount
equal to the principal amount of Collateral Trust Securities then being
redeemed, and at a redemption price equal to the redemption price
(excluding interest other than interest on defaulted principal, if any)
applicable to such redemption of Collateral Trust Securities.
Notwithstanding Section 11 of the Original Indenture, the
Company may execute, and the Trustee shall authenticate and deliver,
definitive Bonds of Series E in typewritten form.
Subject to the provisions of Section 8 of the Original
Indenture, all definitive Bonds of Series E shall be interchangeable for
other Bonds of Series E of a different authorized denomination or
denominations, as requested by the holder surrendering the same, upon
surrender to the agency of the Company in the City of Chicago, Illinois,
or, at the option of the holder, at the agency of the Company in the
City of New York. Anything contained in Section 13 of the Original
Indenture notwithstanding, upon such interchange of Bonds of Series E,
no charge may be made by the Company except the payment of a sum
sufficient to reimburse the Company for any stamp tax or other
governmental charge incident thereto.
The Trustee is hereby appointed Registrar of the Bonds of
Series E for the purpose of registering and transferring Bonds of Series
E as in Section 12 of the Original Indenture provided. Bonds of Series
E may also be so registered and transferred at the principal corporate
trust office of First Chicago Trust Company of New York in the Borough
of Manhattan in the City of New York, which company is hereby authorized
to act as co-Registrar of Bonds of Series E in the City of New York. In
case any Bonds of Series E shall be redeemed in part only, any delivery
pursuant to Section 97 of the Original Indenture of a new Bond or Bonds
of Series E of an aggregate principal amount equal to the unredeemed
portion of such Bond of Series E shall, at the option of the registered
owner, be made by the co-Registrar. For all purposes of Articles Eleven
and Eighteen of the Original Indenture, First Chicago Trust Company of
New York in the City of New York, as the New York Paying Agent for Bonds
of Series E, shall be deemed to be the agent of the Trustee for the
purpose of receiving all or any part, as may be directed by the Trustee,
of any deposit for the purpose of redeeming, or of paying at maturity,
any Bonds of Series E, and any money so deposited with First Chicago
Trust Company of New York in the City of New York, upon the direction of
the Trustee, in trust for the purpose of paying the redemption price of,
or of paying at maturity, any Bonds of Series E, shall be deemed to
constitute a deposit in trust with, and to be held in trust by, the
Trustee in accordance with the provisions of Article Eleven or Eighteen
of the Original Indenture.
So long as any Bonds of Series E shall be outstanding, in
addition to the offices or agencies required to be maintained by the
provisions of the Original Indenture, the Company shall keep or cause to
be kept at an office or agency to be maintained by the Company in the
Borough of Manhattan, the City of New York, books for the registration
and transfer of Bonds pursuant to the foregoing provisions of this
Section and to the provisions of the Original Indenture.
SECTION 2. For the purpose of redemption under certain
circumstances specified in Section 54 of the Original Indenture, as
amended, by the application of cash received by the Trustee as the
result of the taking by eminent domain or of the purchase by a public
authority of properties of the Company, the Bonds shall be redeemable at
a special redemption price of 100% of the principal amount thereof
together with accrued interest, if any, to the date fixed for
redemption.
SECTION 3. The Bonds and the certificate of authentication to
be borne by such Bonds shall be substantially in the following forms,
respectively:
[FORM OF FACE OF BOND]
This Bond is not transferable except to a successor trustee under
the Indenture of Mortgage and Deed of Trust, dated as of September 1,
1993, between IES Utilities Inc. and The First National Bank of Chicago,
Trustee.
No. $
IES UTILITIES INC.
FIRST MORTGAGE BOND, COLLATERAL SERIES __
Due ____
IES UTILITIES INC. (hereinafter called the "Company"), a
corporation of the State of Iowa, for value received, hereby promises to
pay to THE FIRST NATIONAL BANK OF CHICAGO, as trustee under the
Indenture of Mortgage and Deed of Trust, dated as of September 1, 1993,
between the Company and such trustee, or registered assigns, on the ____
day of ______, ____, the sum of ___________ ($________) dollars in any
coin or currency of the United States of America which at the time of
payment shall be legal tender for public and private debts. This Bond
shall not bear interest except that, if the Company should default in
the payment of principal hereof, this Bond shall bear interest on such
defaulted principal at the rate of 6% per annum (to the extent that
payment of such interest is enforceable under applicable law) until the
Company's obligation with respect to the payment of such principal shall
be discharged as provided in the Indenture hereinafter mentioned.
Principal of and interest, if any, on this Bond shall be payable at the
agency of the Company in the City of Chicago, Illinois, or, at the
option of the holder, at the agency of the Company in the City of New
York.
Reference is made to the further provisions of this Bond set
forth on the reverse hereof. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Bond shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been
signed by The First National Bank of Chicago, or its successor, as
Trustee under the Indenture hereinafter mentioned.
IN WITNESS WHEREOF, the Company has caused this Bond to be
signed in its name, manually or in facsimile, by its President or one of
its Vice Presidents and its corporate seal to be impressed or imprinted
hereon and attested, manually or in facsimile, by its Secretary or one
of its Assistant Secretaries.
Dated:
IES UTILITIES INC.
By_____________________________
Authorized Executive Officer
ATTEST:
_____________________________
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the first mortgage bonds described in the
within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By_________________________________
Authorized Officer
[FORM OF REVERSE OF BOND]
IES UTILITIES INC.
FIRST MORTGAGE BOND, COLLATERAL SERIES __
Due ____
This Bond is one of an authorized issue of Bonds of the
Company known as its "first mortgage bonds", issued and to be issued in
series under, and all equally and ratably secured (except as any
sinking, amortization, improvement, renewal or other fund, or any other
covenants or agreements, established in accordance with the provisions
of the Indenture hereinafter mentioned, may afford additional security
for the first mortgage bonds of any particular series) by an Indenture
of Mortgage and Deed of Trust dated as of August 1, 1940, executed by
the Company to The First National Bank of Chicago, as Trustee, as
supplemented by ________ Supplemental Indentures (including a Seventh
Supplemental Indenture dated as of July 1, 1946, a Thirty-second
Supplemental Indenture dated as of September 1, 1966, a Forty-fifth
Supplemental Indenture dated as of November 1, 1976, a Fifty-fifth
Supplemental Indenture dated as of March 1, 1988, a Fifty-sixth
Supplemental Indenture dated as of October 1, 1988, a Fifty-ninth
Supplemental Indenture dated as of October 1, 1993, a Sixtieth
Supplemental Indenture dated as of November 1, 1993, a Sixty-second
Supplemental Indenture dated as of September 1, 1996 and a Sixty-third
Supplemental Indenture dated as of April 1, 1997) each duly executed by
the Company to said Trustee (said Indenture, as so supplemented, being
herein sometimes referred to as the "Indenture"), to which Indenture and
all indentures supplemental thereto reference is hereby made for a
description of the properties mortgaged and pledged, the nature and
extent of the security, the rights of the holders of said first mortgage
bonds, and of the Trustee and of the Company in respect of such
security, and the terms and conditions upon which said first mortgage
bonds are and are to be issued and secured. As provided in, and to the
extent permitted by, the Indenture, the rights and obligations of the
Company and of the holders of said first mortgage bonds may be changed
and modified with the consent of the Company by the affirmative vote of
the holders of at least 75% in principal amount of the first mortgage
bonds then outstanding affected by such change or modification
(excluding first mortgage bonds disqualified from voting by reason of
the Company's interest therein as provided in the Indenture); provided,
however, that without the consent of the registered owner hereof no such
change or modification shall permit the reduction of the principal or
the extension of the maturity of the principal of this Bond or the
reduction of the rate of interest, if any, hereon or any other
modification of the terms of payment of such principal or interest. As
provided in the Indenture, said first mortgage bonds are issuable in
series which may vary as in the Indenture provided or permitted. This
Bond is one of a series of first mortgage bonds entitled "First Mortgage
Bonds, Collateral Series __, Due ____".
Any payment or deemed payment by the Company of the principal
of or interest, if any, on the Collateral Trust Securities (as defined
in the ________ Supplemental Indenture) (other than by the application
of the proceeds of a payment in respect of this Bond) shall, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest, if any,
on this Bond which is then due.
This Bond is redeemable, at the option of the Company, in
whole at any time or in part from time to time, upon 30 days notice, at
a redemption price equal to 100% of the principal amount thereof
together with accrued interest, if any, thereon to the date fixed for
redemption. This Bond is also subject to redemption under certain
circumstances specified in Section 54 of the Indenture by the
application of cash received by the Trustee as the result of the taking
by eminent domain or of the purchase by a public authority of properties
of the Company, as more fully provided in, and subject to the provisions
of, the Indenture, upon at least 30 days prior notice given as
aforesaid, at a special redemption price of 100% of the principal amount
thereof. In addition, the Bonds shall be redeemed by the Company no
later than the redemption of the Collateral Trust Securities in a
principal amount equal to the principal amount of Collateral Trust
Securities then being redeemed, and at a redemption price equal to the
redemption price (excluding interest other than interest on defaulted
principal, if any) applicable to such redemption of Collateral Trust
Securities.
If an event of default, as defined in the Indenture, shall
occur, the principal of this Bond may become or be declared due and
payable, in the manner and with the effect provided in the Indenture.
To the extent permitted on the front hereof, this Bond is
transferable by the registered owner hereof in person or by attorney
authorized in writing at the agency of the Company in the City of
Chicago, Illinois, or, at the option of the holder, at the agency of the
Company in the City of New York, upon surrender and cancellation of this
Bond and upon any such transfer a new first mortgage bond of the same
series, for the same aggregate principal amount, will be issued to the
transferee in exchange herefor. The Company and the Trustee may deem
and treat the person in whose name this Bond is registered as the
absolute owner hereof, for the purpose of receiving payment and for all
other purposes.
This Bond, alone or with other first mortgage bonds of the
same series, may be exchanged upon surrender thereof to the Trustee at
the agency of the Company in the City of Chicago, Illinois, or, at the
option of the holder, at the agency of the Company in the City of New
York, for one or more other first mortgage bonds of the same series and
of the same aggregate principal amount but of a different authorized
denomination or denominations, upon payment of a sum sufficient to
reimburse the Company for any stamp tax or other governmental charge
incident thereto, and subject to the terms and conditions set forth in
the Indenture.
No recourse shall be had for the payment of the principal of
or interest, if any, on this Bond, or for any claim based hereon or
otherwise in respect hereof or of the Indenture or of any indenture
supplemental thereto, against any incorporator, stockholder, director,
or officer, as such, past, present or future, of the Company or of any
predecessor or successor corporation, either directly or through the
Company or any predecessor or successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or by any legal or equitable proceeding or
otherwise howsoever; all such liability being, by the acceptance hereof
and as a part of the consideration for the issuance hereof, expressly
waived and released by every registered owner hereof, as more fully
provided in the Indenture; provided, however, that nothing herein or in
the Indenture contained shall be taken to prevent recourse to and the
enforcement of the liability, if any, of any shareholder or any
stockholder or subscriber to capital stock upon or in respect of shares
of capital stock not fully paid up.
[END OF BOND FORM]
SECTION 4. Anything contained in Sections 97 and 98 of the
Indenture to the contrary notwithstanding, if less than all of the
outstanding Bonds are to be called for redemption, the Bonds to be
redeemed in whole or in part shall be designated by the Trustee (within
10 days after receipt from the Company of notice of its intention to
redeem Bonds) by lot according to such method as the Trustee shall deem
proper in its discretion. For the purpose of any drawing, the Trustee
shall assign a number for each $1,000 principal amount of each
outstanding Bond.
The provisions of Section 97 of the Indenture relating to
notations of partial redemption shall not apply to the Bonds.
SECTION 5. The recitals contained in this Supplemental
Indenture are made by the Company and not by the Trustee; and all of the
provisions contained in the Original Indenture, as heretofore
supplemented, in respect of the rights, privileges, immunities, powers,
and duties of the Trustee shall, except as hereinabove modified, be
applicable in respect hereof as fully and with like effect as if set
forth herein in full.
SECTION 6. All the covenants, stipulations, promises and
agreements in this Supplemental Indenture contained, by or on behalf of
the Company, shall bind and inure to the benefit of its successors and
assigns, whether so expressed or not.
SECTION 7. Nothing in this Supplemental Indenture expressed
or implied is intended or shall be construed to give to any person other
than the Company, the Trustee, and the holders of the first mortgage
bonds any legal or equitable right, remedy or claim under or in respect
of the Indenture or any covenant, condition or provision therein or in
the first mortgage bonds contained, and all such covenants, conditions,
and provisions are and shall be held to be for the sole and exclusive
benefit of the Company, the Trustee and the holders of the first
mortgage bonds issued under the Indenture.
SECTION 8. All references in the Original Indenture to the
various Sections and Articles thereof shall be deemed to refer to said
Sections and Articles as heretofore amended, and the Original Indenture
shall hereafter be construed and applied as heretofore amended and
supplemented.
SECTION 9. This Supplemental Indenture may be executed in any
number of counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts, or as
many of them as the Company and the Trustee shall preserve undestroyed,
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, IES UTILITIES INC. has caused this Sixty-
third Supplemental Indenture to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto
affixed and attested by its Secretary or an Assistant Secretary, and THE
FIRST NATIONAL BANK OF CHICAGO, in token of its acceptance of the trusts
created hereunder, has caused this Sixty-third Supplemental Indenture to
be signed in its corporate name by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereunto affixed
and attested by one of its Trust Officers, all as of the day and year
first above written.
IES UTILITIES INC.
By /s/ Larry D. Root
Larry D. Root
President & Chief Operating Officer
(CORPORATE SEAL)
ATTEST:
/s/ Stephen W. Southwick
Secretary
Stephen W. Southwick
THE FIRST NATIONAL BANK OF
CHICAGO, Trustee
By
John R. Prendiville
Vice President
(CORPORATE SEAL)
ATTEST:
Authorized Officer
Georgia E. Tsirbas
IN WITNESS WHEREOF, IES UTILITIES INC. has caused this Sixty-
third Supplemental Indenture to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto
affixed and attested by its Secretary or an Assistant Secretary, and THE
FIRST NATIONAL BANK OF CHICAGO, in token of its acceptance of the trusts
created hereunder, has caused this Sixty-third Supplemental Indenture to
be signed in its corporate name by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereunto affixed
and attested by one of its Trust Officers, all as of the day and year
first above written.
IES UTILITIES INC.
By
Larry D. Root
President & Chief Operating Officer
(CORPORATE SEAL)
ATTEST:
Secretary
Stephen W. Southwick
THE FIRST NATIONAL BANK OF
CHICAGO, Trustee
By /s/ John R. Prendiville
John R. Prendiville
Vice President
(CORPORATE SEAL)
ATTEST:
/s/ Georgia E. Tsirbas
Authorized Officer
Georgia E. Tsirbas
STATE OF IOWA )
) ss:
COUNTY OF LINN )
On this 24th day of April, 1997 before me, the undersigned, a
Notary Public in and for the said County in the state aforesaid,
personally appeared Larry D. Root and Stephen W. Southwick, to me
personally known, and to me known to be President & Chief Operating
Officer, and Secretary respectively, of IES UTILITIES INC., one of the
corporations described in and which executed the within and foregoing
instrument, and who, being by me severally duly sworn, each did say that
he the said Larry D. Root is President & Chief Operating Officer, and
that he the said Stephen W. Southwick is Secretary of the said IES
UTILITIES INC., a corporation; that the seal affixed to the within and
foregoing instrument is the corporate seal of the said corporation, and
that the said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors; and the said Larry
D. Root and Stephen W. Southwick each acknowledged the execution of said
instrument to be the voluntary act and deed of said corporation by it
voluntarily executed.
WITNESS my hand and notarial seal this 24th day of April,
1997.
/s/ Kathleen C. Balvanz
Notary Public
My Commission expires:
(NOTARIAL SEAL)
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
On this 30th day of April, 1997, before me, the undersigned, a
Notary Public in and for said County in the State aforesaid, personally
appeared John R. Prendiville and Georgia E. Tsirbas, to me personally
known, and to me known to be a Vice President and an Assistant Vice
President, respectively, of THE FIRST NATIONAL BANK OF CHICAGO, one of
the corporations described in and which executed the within and
foregoing instrument, and who, being by me severally duly sworn, each
did say that he the said John R. Prendiville is a Vice President that
the said Georgia E. Tsirbas is an Assistant Vice President of the said
THE FIRST NATIONAL BANK OF CHICAGO, a corporation; that the seal affixed
to the within and foregoing instrument is the corporate seal of the said
corporation, and that the said instrument was signed and sealed on
behalf of said corporation by authority of its By-Laws; and the said
John R. Prendiville and Georgia E. Tsirbas each acknowledged the
execution of said instrument to be the voluntary act and deed of said
corporation by it voluntarily executed.
WITNESS my hand and notarial seal this 30th day of April,
1997.
/s/ Dana McCray
Notary Public
My Commission expires:
(NOTARIAL SEAL)
Exhibit 4(c)
CITICORP SECURITIES, INC.
COMMERCIAL PAPER DEALER AGREEMENT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THIS AGREEMENT, dated as of November 9, 1994 between IES
Diversified Inc. the "Company") and Citicorp Securities, Inc. ("CSI" or
the "Dealer").
It is agreed as follows:
1. The Notes. "Notes" shall mean promissory notes of the Company,
offered for sale in a transaction which is exempt from registration
under Section 4(2) the Securities Act of 1933, as amended (the "1933
Act"), and having maturities of 270 days or less. Notes will be issued
in a minimum denomination of $250,000 up to a maximum aggregate amount
of $150,000,000 face amount (the "Maximum Amount") at any time
outstanding.
2. Issuance and Purchase of Notes.
2.1 (a) The Company hereby appoints CSI as a placement agent for
the Notes. While (i) the Company has and shall have no obligation to
sell Notes to CSI or to permit CSI to arrange any sale of Notes for the
account of the Company and (ii) CSI has and shall have no obligation to
the Company to purchase Notes of the Company or arrange the sale of
Notes for the account of the Company, the parties hereto agree that any
Notes which CSI purchases or any sale of which CSI arranges will be
purchased or sold by CSI in reliance on the representations, warranties,
covenants and agreements of the Company contained herein or made
pursuant hereto and on the terms and conditions and in the manner
provided herein.
(b) The offer and sale of the Notes by the Company is to be
effected pursuant to the exemption from the registration requirements of
the 1933 Act provided by Section 4(2) thereof, which exempts
transactions by an issuer not involving any public offering. Offers and
sales of the Notes by the Company will be in accordance with the general
provisions of Rule 506 of Regulation D under the 1933 Act. CSI and the
Company hereby establish the following procedures in connection with the
placement by CSI of the Notes:
(i) CSI may make offers and sales of Notes to a prospective
investor only if reasonably believed by the Dealer to be a sophisticated
institutional investor who (A) is an "Accredited Investor" (as that term
is defined in Rule 501(a) of Regulation D under the 1933 Act) (or is a
fiduciary or agent (other than a U.S. bank or savings and loan
association or other institution described in Section 3(a)(5) of the
1933 Act) which is purchasing the Notes for the account of an
institutional Accredited Investor), (B) has knowledge and experience (or
is a fiduciary or agent with sole investment discretion having such
knowledge and experience) in financial and business matters and (or such
fiduciary or agent) is capable of evaluating the merits and risks of
investing in the Notes and (C) in the case of a resale of Notes pursuant
to Rule 144A under the 1933 Act, is a "Qualified Institutional Buyer" as
defined in Rule 144A or is a Qualified Institutional Buyer purchasing
the Notes on behalf of one or more other Qualified Institutional Buyers.
(ii) No sale of the Notes to any one investor will be for less than
$250,000 face or principal amount. If the purchaser is a fiduciary or
agent (other than a U.S. bank or savings and loan association or other
institution described in section 3(a)(5) of the 1933 Act) acting on
behalf of others, each account for which it is acting must purchase at
least $250,000 face or principal amount of the Notes.
(iii) CSI will deliver to each prospective investor (or the
fiduciary or agent acting for such investor) a copy of the Private
Placement Memorandum as defined and described in Section 2.5 herein, as
the same may be updated from time to time, at or before the time of the
sale of Notes to such investor.
(iv) The Notes will not be offered or sold by any means of general
solicitation or general advertising within the meaning of Rule 502(c)
under the 1933 Act.
2.2 The authentication and delivery to, or at the direction of,
CSI of a Note by Citibank, N.A. (the "Issuing and Paying Agent") shall
constitute the issuance of such Note by the Company. The Company agrees
that such Notes shall be made in the manner prescribed in the Commercial
Paper Issuing and Paying Agent and Citi Treasury Manager Agreement dated
as of November 9 1994 by and between the Company and the Issuing and
Paying Agent (the "Issuing and Paying Agency Agreement"), a copy of
which has been delivered to CSI.
2.3 CSI shall be entitled to compensation for its services in an
amount to be agreed upon with the Company with respect to each proposed
issuance and sale of Notes by the Company.
2.4 Delivery of and payment for Notes shall be made in accordance
with the Issuing and Paying Agency Agreement.
2.5 (a) "The Company shall prepare in connection with each
issuance or sale of Notes a disclosure document (the "Private Placement
Memorandum"), the text of which shall have been agreed to by CSI and the
Company. The Company shall update the Private Placement Memorandum as
necessary, so that at the time of each sale of a Note, the Private
Placement Memorandum (including the documents incorporated therein by
reference), as so updated, will not contain an untrue statement of a
material fact or omit to state a fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The Company shall furnish to CSI the latest
annual report to shareholders, the latest annual report on Form 10-K
and, if more recent than the latest annual report, the most recent
quarterly report on Form IO-Q (and, if applicable, current report on
Form 8-K) and the most recent definitive proxy statement sent to
shareholders, in each case, if any, filed by IES Industries Inc.
("Industries") or the Company with the Securities and Exchange
Commission (the "SEC"), as well as any other current periodic reports
provided to shareholders by the Company or Industries and any other
reports and other information filed with the SEC pursuant to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act"). As long as any of the Notes are outstanding,
the Company will provide CSI with all reports described above, as well
as all public releases of other material information, in quantities
sufficient for CSI's subsequent distribution to holders of the Notes.
(b) The Private Placement Memorandum will contain, inter alia, the
following information:
(1) brief descriptions of the Company and of the Notes, the use of
the proceeds from the offering, and any material changes in the affairs
of the Company which are not disclosed in the other documents furnished
hereunder;
(2) financial information derived from the
Company's financial statements; and
(3) a statement that such documents filed with the
SEC referred to in Section 2.5(a) of this Agreement
are incorporated by reference in the Private
Placement Memorandum and will be supplied to the offeree
upon request.
2.6 Prior to any offer of Notes by CSI, CSI may make such
investigation of the affairs of the Company as it may reasonably
request.
2.7 The Dealer agrees that it will not effect or approve any
resale of the Notes except to itself or to a person it reasonably
believes to be an institutional Accredited Investor or, in the case of a
resale pursuant to Rule 144A, a Qualified Institutional Buyer, and each
such resale shall be made in accordance with the provisions of this
Section 2.
2.8 The Company and CSI agree that the Private Placement
Memorandum and the face of the Notes (except the Notes that are in book-
entry form) will have a legend substantially to the following effect:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("THE ACT"), AND THE INITIAL SALES OF THIS NOTE MAY BE
MADE ONLY TO INSTITUTIONAL INVESTORS APPROVED AS "ACCREDITED INVESTORS"
AS DEFINED IN RULE 501(A) UNDER THE ACT. SUBSEQUENT SALES OF THIS NOTE
MAY BE MADE ONLY TO INSTITUTIONAL INVESTORS APPROVED AS "ACCREDITED
INVESTORS" OR, PURSUANT TO RULE 144A UNDER THE ACT, TO QUALIFIED
INSTITUTIONAL BUYERS AS DEFINED IN RULE 144A. BY ITS ACCEPTANCE OF THIS
NOTE, THE PURCHASER (A) REPRESENTS THAT IT IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THAT THIS NOTE IS BEING ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION
THEREOF AND, IN THE CASE OF RESALES PURSUANT TO RULE 144A, THAT IT IS A
QUALIFIED INSTITUTIONAL BUYER, THAT ANY PERSON FOR WHICH IT MAY BE
PURCHASING THIS NOTE IS A QUALIFIED INSTITUTIONAL BUYER AND THAT THE
PURCHASER UNDERSTANDS THAT THIS NOTE MAY BE SOLD TO IT PURSUANT TO RULE
144A, AND (B) AGREES THAT ANY RESALE OR TRANSFER OF THIS NOTE OR ANY
INTEREST THEREIN WILL BE MADE ONLY IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE ACT AND ONLY (1) TO AN APPROVED DEALER, (2)
THROUGH AN APPROVED DEALER TO AN INSTITUTION WHO IS AN ACCREDITED
INVESTOR OR (3) DIRECTLY TO A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MADE PURSUANT TO RULE 144A."
2.9 The Company and CSI agree that the Private Placement
Memorandum will include statements substantially as follows:
"Each purchaser of a Note will be deemed to have
represented and agreed as follows: (1) the purchaser
understands that the Notes are being issued only in
transactions not involving any public offering within the
meaning of the Act; (2) the purchaser is a sophisticated
institutional investor who (A) is an "Accredited Investor" (as
that term is defined in Rule 501(a) of Regulation D under the
Act) (or is a fiduciary or agent (other than a U.S. bank or
savings and loan association) which is purchasing the Notes
for the account of an institutional Accredited Investor), (B)
has knowledge and experience (or is a fiduciary or agent with
sole investment discretion having such knowledge and
experience) in financial and business matters and it (or such
fiduciary or agent) is capable of evaluating the merits and
risks of investing in the Notes, (C) has had access to such
information as the purchaser deems necessary in order to make
an informed investment decision, and (D) in the case of a
resale of Notes pursuant to Rule 144A under the Act, is a
"Qualified Institutional Buyer" as defined in Rule 144A or is
a Qualified Institutional Buyer purchasing the Notes on behalf
of one or more other Qualified Institutional Buyers; (3) such
Note is being purchased for the purchaser's own account (or
for the account of one or more other institutional Accredited
Investors (or, in the case of a resale pursuant to Rule 144A
under the Act, one or more other Qualified Institutional
Buyers) for which it is acting as duly authorized fiduciary or
agent) for investment and not with a view to distribution; (4)
if in the future the purchaser (or any such other investor or
any other fiduciary or agent representing such investor)
decides to sell such Note prior to maturity, it will be sold
only in a transaction exempt from registration under the Act,
and only (A) to CSI, (B) through CSI to an institutional
investor approved by CSI as an institutional Accredited
Investor or a Qualified Institutional Buyer or (C) directly to
a Qualified Institutional Buyer in a transaction made pursuant
to Rule 144A; (5) the purchaser understands that, although CSI
may repurchase Notes, CSI is not obligated to do so, and
accordingly the purchaser (or any such other investor) should
be prepared to hold such Note until maturity; (6) the
purchaser acknowledges that CSI has not verified any of the
information contained or incorporated by reference in this
Memorandum and makes no representation with respect to any
such information; (7) the purchaser acknowledges that Notes
sold to the purchaser by CSI may be sold to the purchaser
pursuant to Rule 144A under the Act; and (8) the purchaser
understands that each Note will bear a legend substantially as
set forth in capital letters above."
3. Representations and Warranties of the Company. The Company
represents and warrants to CSI that:
(a) The Private Placement Memorandum (including the documents
incorporated therein by reference) does not, and the Private Placement
Memorandum (including the documents incorporated by reference therein)
as supplemented or revised from time to time shall not, contain any
untrue statement of a material fact or omit to state a material fact
required by the terms hereof to be stated therein or necessary in order
to make such statements in the light of the circumstances in which they
were made not misleading.
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Iowa.
The Company has, (except to the extent that the lack thereof would not
have an adverse material effect on the Company and its subsidiaries
taken as a whole or its ability to perform its obligations hereunder and
under the Notes) all corporate power and authority, and all
authorizations, approvals, orders, licenses, certificates, consents, and
permits necessary to carry on its business as presently conducted and to
enter into, deliver, and perform this Agreement, the Issuing and Paying
Agency Agreement and the Notes and to consummate the transactions
contemplated hereby to which it shall be a party, including the
issuance, sale and delivery by it of Notes.
(c) No other offering of securities of the Company makes
unavailable the exemption under Section 4(2) of the 1933 Act for
offering and sale of the Notes hereunder.
(d) No default exists, and no event or condition has occurred
which with notice or after the expiration of any applicable grace
period, or both, would constitute a default, under any credit facility
or any indenture, mortgage, deed of trust, note or other agreement or
instrument binding upon the Company or any of its subsidiaries or its or
their properties or business which is material to the Company and its
subsidiaries taken as a whole.
(e) The execution, delivery and performance of this Agreement, the
Commercial Paper Support Agreement (as defined below), the Issuing and
Paying Agency Agreement and the Notes by the Company and the
consummation of the transactions contemplated hereby, including the
issuance, sale and delivery by the Company of any Notes hereunder, will
not contravene any provision of the certificate or articles of
incorporation or by-laws of the Company or any of its subsidiaries or
constitute a default (or an event which with notice or after expiration
of any applicable grace period, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge, or
encumbrance upon any property or assets of the Company or its
subsidiaries pursuant to the terms of any agreement or instrument or any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation known to the Company which is binding upon the Company or any
of its subsidiaries or its or their properties or business which is
material to the Company and its subsidiaries taken as a whole.
(f) No consent of, or action by, or filing or registration with,
any governmental authority or other regulatory body (other than
approvals that may be required by any state securities or "blue sky"
laws and have been obtained or are being arranged by the Company in
accordance with Section 4(e) of this Agreement) is required in
connection with the execution, delivery and performance by the Company
of this Agreement, the Issuing and Paying Agency Agreement or the Notes
or the consummation by the Company of the transactions contemplated
hereby and thereby, including the issuance, sale, delivery and payment
of any Notes.
(g) Since the respective dates as of which information is given in
the Private Placement Memorandum, except as otherwise set forth therein,
there has not been any material adverse change, or, to the Company's
knowledge, any development involving a prospective material adverse
change, in the financial condition, or in the earnings, business or
operations of the Company and its subsidiaries taken as a whole.
(h) Assuming the Notes are offered and sold in the manner
contemplated herein, the offer and sale of the Notes by the Company will
constitute exempted transactions under Section 4(2) of the 1933 Act and,
consequently, registration of the notes under the 1933 Act will not be
required.
(i) This Agreement and the Issuing and Paying Agency Agreement
have been duly and validly authorized, executed and delivered by the
Company and, assuming that they are such with respect to the other
parties thereto, are legal, valid and binding agreements of the Company
subject to (a) the effect of applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and (b) the
application of general equitable principles (regardless of whether
considered in a proceeding in equity or at law). The issuance and sale
of Notes in an aggregate principal amount at any time outstanding of up
to the Maximum Amount by the Company hereunder have been duly and
validly authorized by the Company and, when delivered by the Issuing and
Paying Agent upon payment therefor as provided in the Issuing and Paying
Agency Agreement, each Note will be the legal, valid and binding
obligation of the Company subject to (a) the effect of applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally and (b) the application of general equitable principles
(regardless of whether considered in a proceeding in equity or at law).
(j) The Commercial Paper Support Agreement dated November 9, 1994
by and between Industries and the Company (the "Support Agreement") is
in full force and effect to the benefit of the holders of the Notes.
(k) The Company is not an "investment company" nor a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(l) Except as disclosed to CSI in writing, neither the Company nor
any subsidiary has, (i) any debt, duty, liability or obligation in
respect of, or contained in any agreement pertaining to borrowed money
or any other material liability or obligation the payment or performance
of which is past due and the failure of such payment or performance
could have a material adverse effect on the Company and its subsidiaries
taken as a whole or (ii) any litigation, investigation or proceeding
pending or threatened (or any basis therefor) before or by any court,
arbitrator, governmental authority or other regulatory body of which it
has knowledge, which, if determined adversely could reasonably be
expected to have a material adverse effect on the business, assets,
financial condition or prospects of the Company and its subsidiaries
taken as a whole.
(m) Unless, prior to the date of the delivery of any Note, the
Company has provided CSI with written notice that any representation or
warranty set forth herein is not true and correct, each delivery of a
Note to CSI or to a person whose purchase of a Note was arranged by CSI
shall be deemed a representation and warranty by the Company, as of the
date thereof that (i) all Notes issued on such date have been duly
authorized, issued and delivered and, upon payment therefor, will
constitute legal, valid and binding obligations of the Company subject
to (a) the effect of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally and (b) the application of
general equitable principles (regardless of whether considered in a
proceeding in equity or at law) and (ii) the representations and
warranties of the Company set forth in paragraphs (a) through (1) of
this Section 3 are true and correct on and as of such date as if made on
and as of such date.
4. Covenants of the Company. The Company covenants and
agrees that:
(a) For the benefit of CSI and the holders from time to time of
the Notes, the Company will not permit to become effective any
amendment, supplement, rider, waiver or consent to or under the Notes,
the Support Agreement, the Credit Agreement (as defined below), or the
Issuing and Paying Agency Agreement which might adversely affect the
interests of the holder of any Note then outstanding. The Company will
give CSI notice of any proposed amendment, supplement, rider, waiver or
consent to or under the Notes or such Agreement at least ten days prior
to the effective date thereof.
(b) The Company will cause CSI to receive, on or before the date
of the first placement of Notes by CSI hereunder, (i) resolutions of the
Company's Board of Directors substantially in the form of Exhibit A
hereto, (ii) an Incumbency Certificate naming those company officers
authorized to sign commercial paper notes substantially in the form of
Exhibit B hereto, (iii) a favorable opinion from counsel to the Company
satisfactory to CSI substantially in the form of Exhibit C hereto, (iv)
a true and complete copy of the Issuing and Paying Agency Agreement, (v)
a true and complete copy of the Support Agreement, (vi) evidence that
the Notes have been rated[ ] by Standard and Poor's
Corporation and Moody's Investors Service, respectively, and (vii) a
Certificate of the President, any Vice President or the Treasurer of the
Company as to the continuing accuracy of the Company's representations
and warranties contained herein; and subsequently, upon CSI's reasonable
request (to be made not more frequently than once in any twelve-month
period), the items set forth in clauses (ii), (iii) and (vii) above.
(c) The Company will, whenever there shall occur any material
change in the financial condition of the Company, or any material
development or occurrence in relation to the Company known to it which
is material to the Company and its subsidiaries taken as a whole
(including, without limitation, the Company's being put on a "watchlist"
or being downgraded by a rating agency which rates its commercial
paper), immediately notify CSI thereof, prior to any subsequent issuance
of Notes.
(d) The Company will, at all times that any Notes sold by it
hereunder are outstanding, maintain unused and available in same day
funds credit facilities under the Second Amended and Restated Credit
Agreement dated as of November 9, 1994 among the Company, the banks
party thereto and Citibank, N.A. as Agent (the "Credit Agreement") or
with other banks reasonably satisfactory to CSI in an amount equal to at
least 100% of the aggregate amount to be paid upon maturity of the Notes
then outstanding. If at any. time the Company has reason to believe
that the Credit Agreement may not be available to meet its obligations
under this agreement and the Notes, the Company shall immediately
provide written notice to that effect to CSI. The Company will send CSI
all notices, reports and information which it is required to give or
gives (or which it receives from) any lender or the agent, as the case
may be, pursuant to the Credit Agreement.
(e) The Company will use good faith efforts to arrange for the
qualification of the Notes for sale under the state securities or "blue
sky" laws of such jurisdictions in the United States as CSI may
reasonably request and will maintain such qualification in effect as
long as required for the distribution of the Notes and will arrange for
the determination of the legality of the Notes for purchase by
institutional investors.
(f) Neither the Company nor any of its Affiliates (as defined in
Rule 501 (b) of Regulation D under the 1933 Act) will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
securities (as defined in the 1933 Act) which will be integrated with
the sale of Notes in a manner which would require the registration under
the 1933 Act of the Notes.
(g) The Company will provide to CSI and any investor or
prospective investor of the Notes, upon the request of such investor or
prospective investor, the information required to render the Notes
eligible for resale pursuant to Section (d) (4) (i) of Rule 144A under
the 1933 Act.
5. Indemnification.
The Company agrees to indemnify and hold harmless CSI and each
person, if any, who controls CSI within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, (each an "Indemnified Party"),
against any and all reasonably incurred losses, claims, damages,
liabilities or expenses (including reasonable legal fees and expenses),
joint or several, to which CSI or any of them may become subject or
which may be claimed against CSI any of them insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Private Placement
Memorandum (including the documents incorporated therein by reference)
or the omission or alleged omission to state in any such information a
material fact required by the terms hereof to be stated therein or
necessary to make any statement therein, in the light of the
circumstances in which such statement is made, not misleading or (ii)
any inaccuracy of any of the Company's representations or warranties, or
any breach of any of the Company's covenants and agreements, contained
in this Agreement; Indemnified Party must notify Company in writing and
the Company agrees to reimburse each such Indemnified Party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability,
expense or action; provided, however, that the Company shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at a time
for the Indemnified Parties which firm shall be designated in writing by
CSI. As soon as practicable after receipt by the Indemnified Party of
notice of the commencement of any action, the Indemnified Party will, if
a claim in respect thereof is to be made against the Company under
Section 5 hereof, notify the Company in writing of the commencement
thereof; provided, however, the failure to so notify the Company will
not relieve the Company from liability under this Section 5.
The Company shall be entitled to appoint counsel of the Company's
choice at the Company's expense to represent CSI in any action for which
indemnification is sought (in which case the Company shall not
thereafter be responsible for the fees and expenses of any separate
counsel retained by CSI except as set forth below); provided, however,
that such counsel shall be satisfactory to CSI. Notwithstanding the
Company's election to appoint counsel to represent CSI in an action, CSI
shall have the right to employ separate counsel (including local
counsel), and the Company shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by
the Company to represent CSI would present such counsel with a conflict
of interest, (ii) the actual or potential defendants in, or targets of,
any such action include both CSI and the Company and CSI shall have
reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to the
Company, (iii) the Company shall not have employed counsel satisfactory
to CSI to represent CSI within a reasonable time after the institution
of such action or (iv) the Company shall authorize CSI to employ
separate counsel at the expense of the Company.
6. General.
6.1 All notices required under the terms and provisions hereof
shall be in writing, given in person, or by telex, telecopier or
telegram (charges prepaid), and if by telex, telecopier or telegram,
promptly confirmed by letter, and any such notice shall be effective
when received at the address specified for the intended recipient on the
signature page hereof or at such other address as such recipient may
designate from time to time by notice to the other party.
6.4 This Agreement may be terminated by either party hereto on 15
days notice to the other; provided, however, that termination hereof
shall not affect (i) any obligation of either party hereunder with
respect to any Note outstanding at the time of such termination or with
respect to any action or event occurring prior to such termination or
(ii) any obligation of the Company under Section 5 hereof.
6.5 This Agreement may be executed in any number of counterparts,
each part of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CITICORP SECURITIES, INC.
399 Park Avenue
New York, New York 10043
Telecopier No.: 212-291-3910
Attention: Commercial Paper
/s/ MA Renaud
By: Mark A.Renaud
Title: Vice President
IES DIVERSIFIED INC.
200 First Street S.E.,
Cedar Rapids, Iowa 52401
Telecopier No.: (319) 398-4533
Attention:
/s/ Robert J. Latham
By: ROBERT J. LATHAM
Title: TREASURER
Exhibit 4(d)
FIRST AMENDMENT
to the
COMMERCIAL PAPER DEALER AGREEMENT
Dated as of November 9, 1994
between
IES DIVERSIFIED INC.
and
CITICORP SECURITIES, INC.
This FIRST AMENDMENT is made and entered into as of the 24th day of
March, 1997, between IES DIVERSIFIED INC., an Iowa corporation (the
"Company"), and CITICORP SECURITIES, INC. ("CSI") in connection with the
Commercial Paper Dealer Agreement, dated as of November 9, 1994, between
the Company and CSI (the "Dealer Agreement"). Capitalized terms used
herein but not defined shall have the meanings ascribed thereto in the
Dealer Agreement.
1. Section 1 of the Dealer Agreement is hereby amended effective
as of the date hereof to change the Maximum Amount referred to therein
to mean $300,000,000 or such lesser amount (but not less than
$150,000,000) for which the Company has all required authorizations and
consents to issue Notes. Furthermore, the Company shall notify CSI and
the Issuing and Paying Agent of each authorization and consent
increasing the maximum amount above $150,000,000.
2. Except as amended above, the Dealer Agreement shall continue
in full force and effect in accordance with its terms and the Company
hereby confirms, as of the date hereof, the representations and
warranties contained therein.
3. This Amendment may be executed in any number of counterparts,
each part of which shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
4. This Amendment shall be governed by, and construed in
accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the Company and CSI have caused their duly
authorized representatives to execute this First Amendment as of the
date first above written.
IES DIVERSIFIED INC.
By:
Name:
Title:
CITICORP SECURITIES, INC.
By:
Name:
Title:
Exhibit 10(a)
[EXECUTION COPY]
U.S. $65,000,000
RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
As AMENDED and RESTATED as of FEBRUARY 28, 1997
Among
IES UTILITIES INC.
as Seller
and
CITIBANK, N.A.
and
CITICORP NORTH AMERICA, INC.
Individually and as Agent
TABLE OF CONTENTS
Section Page
PRELIMINARY STATEMENTS 1
ARTICLE I DEFINITIONS
SECTION 1.01. Certain Defined Terms 2
SECTION 1.02. Incorporation by Reference 4
SECTION 1.03. Other Terms 5
SECTION 1.04. Computation of Time Periods 5
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Commitment 5
SECTION 2.02. Making Purchases 5
SECTION 2.03. Termination or Reduction of the Commitment 6
SECTIONS 2.04 through 2.09. Incorporation by Reference 6
SECTION 2.10. Fees 7
SECTION 2.11. Intentionally Left Blank 7
SECTION 2.12. Recourse for Defaulted Receivables 7
SECTION 2.13. Eurodollar Increased Costs 8
SECTION 2.14. Additional Yield on Shares Bearing a Eurodollar
Rate 8
ARTICLE III CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase 8
SECTION 3.02. Conditions Precedent to the Effectiveness of
the Amendment and Restatement of the
Original Agreement 9
SECTION 3.03. Conditions Precedent to All Purchases and
Reinvestments 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller 10
ARTICLE V GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller 11
SECTION 5.02. Reporting Requirements of the Seller 11
SECTION 5.03. Negative Covenants of the Seller 11
ARTICLE VI ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent 11
SECTIONS 6.02 through 6.05. Incorporation by Reference 11
ARTICLE VII EVENTS OF TERMINATION
SECTION 7.01. Events of Termination 12
ARTICLE VIII THE AGENT
SECTION 8.01. Authorization and Action 13
SECTION 8.02. Agent's Reliance, Etc 13
SECTION 8.03. CNAI and Affiliates 14
SECTION 8.04. Indemnification of Agent 14
ARTICLE IX ASSIGNMENT OF SHARES
SECTION 9.01. Assignability 14
SECTION 9.02. Annotation of Certificate 17
ARTICLE X INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller 17
ARTICLE XI MISCELLANEOUS
SECTION 11.01. Amendments, Etc. 18
SECTION 11.02. Notices, Etc. 19
SECTION 11.03. No Waiver: Remedies 19
SECTION 11.04. Binding Effect: Assignability 20
SECTION 11.05. Governing Law 20
SECTION 11.06. Costs, Expenses and Taxes 20
SECTION 11.07. Confidentiality 20
SECTION 11.08. Execution in Counterparts 21
SECTION 11.09. Amendment of the Original Certificate 21
EXHIBITS
EXHIBIT A Form of Certificate
EXHIBIT B CIESCO Agreement
EXHIBIT C Form of Opinion of Counsel for the Seller
EXHIBIT D Form of Assignment and Acceptance
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
as Amended and Restated as of February 28, 1997
IES UTILITIES INC. (formerly known as Iowa Electric Light and
Power Company), an Iowa corporation (the "Seller"), CITIBANK, N.A.
("Citibank") and CITICORP NORTH AMERICA, INC., a Delaware corporation,
individually ("CNAI") and as agent (the "Agent") for itself and the
Banks (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 Shares.
(3) Citibank desires to purchase Shares from the Seller, and
CNAI may elect to purchase Shares from the Seller.
(4) In consideration of the reinvestment in Pool Receivables
of daily Collections (other than with regard to accrued Yield,
Miscellaneous Fees, and Collection Agent Fee) attributable to an Share,
the Seller will sell to the Owner of such Share, respectively,
additional interests in the Pool Receivables as part of such Share 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 Shares.
(5) CNAI has been requested and is willing to act as Agent.
(6) The Seller, Citibank and CNAI, as Agent, entered into a
Receivables Purchase and Sale Agreement, dated as of June 30, 1989, and
amended and restated as of April 15, 1994 (collectively, the "Original
Agreement").
(7) The Seller, Citibank and CNAI, individually and as Agent,
desire to again amend and restate the Original Agreement.
NOW THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. (a) Unless otherwise
defined herein, and subject to the modifications herein set forth,
capitalized terms used in this Agreement or in any provisions of the
Ciesco Agreement incorporated herein by reference shall have the
meanings given to them in the Ciesco Agreement. Without limiting the
foregoing, the defined terms "Contracts", "Credit and Collection Policy"
(together with the related Schedule to the Original Ciesco Agreement)
and "Seller Report" (together with the related Exhibit B of the Ciesco
Agreement), are hereby incorporated by reference.
(b) 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):
"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.
"APA" means the Asset Purchase Agreement entered into by a
Bank concurrently with the Assignment and Acceptance pursuant to which
it became a party to this Agreement.
"Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank and an Eligible Assignee, and accepted
by the Agent, in substantially the form of Exhibit D hereto.
"Bank Commitment" of any Bank means, (a) with respect to
Citibank, $65,000,000, or such amount as reduced by any Assignment and
Acceptance entered into between Citibank and other Banks (but not
reduced below (i) 10% of the Commitment minus (ii) the Capital of Shares
purchased by CNAI), or (b) with respect to a Bank that has entered into
an Assignment and Acceptance, the amount set forth therein as such
Bank's Bank Commitment, or such amount as reduced by any Assignment and
Acceptance entered into between such Bank and an Eligible Assignee, in
each case as reduced (or terminated) pursuant to the next sentence. Any
reduction (or termination) of the Commitment pursuant to the terms of
this Agreement shall reduce ratably (or terminate) each Bank's Bank
Commitment.
"Banks" means Citibank and each Eligible Assignee that shall
become a party to this Agreement pursuant to Section 9.01.
"Ciesco Agreement" means the Receivables Purchase and Sale
Agreement, dated as of June 30, 1989, as amended and restated as of
February 28, 1997, among the Seller and Ciesco L.P. and CNAI, as Agent,
in substantially the form attached hereto as Exhibit B, as the same may,
from time to time, be amended, modified or supplemented.
"Capital" of any Share means the original amount paid to the
Seller for such Share at the time of its acquisition by the Banks or
CNAI, as the case may be, pursuant to Sections 2.01 and 2.02, or such
amount divided or combined by any dividing or combining of such Share
pursuant to Section 2.09, 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 Share 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 Share shall be increased by the amount of
such distribution, all as though such distribution had not been made.
"Certificate" means the Original Certificate, as amended by
the amendment and restatement of the Original Agreement.
"Citibank Rate" for any Fixed Period for any Share means the
interest rate defined as the "Assignee Rate" in the Ciesco Agreement
minus the "Fee Letter Fees Rate" (as defined in the Ciesco Agreement).
"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.
"Commitment" means $65,000,000 as such amount may be reduced
pursuant to Section 2.03.
"Commitment Termination Date" means the earliest of
(a) April 14, 1999, unless, prior to such date (or the date of any
extension referred to below), Citibank, in its sole discretion, shall
consent that the Commitment Termination Date be extended for an
additional year, (b) the Facility Termination Date under the Ciesco
Agreement, (c) the date determined pursuant to Section 2.03 or
Section 7.01, or (d) the date the Commitment reduces to zero.
"Eligible Assignee" means (i) CNAI or any of its Affiliates,
(ii) any Bank already a party to this Agreement, (iii) Persons managed
by CNAI or any of its Affiliates, or (iv) any other financial
institution or other entity which is acceptable to the Agent and
approved by the Seller, which approval shall not be unreasonably
withheld.
"Event of Termination" has the meaning specified in
Section 7.01.
"Investor" means Ciesco L.P., as the "Investor" pursuant to
the Ciesco Agreement.
"Majority Banks" means at any time Banks holding more than 50%
of the aggregate outstanding Capital of all Shares or, if no Capital is
then outstanding, Banks having more than 50% of the Commitment.
"Original Agreement" means the Receivables Purchase and Sale
Agreement, dated as of June 30, 1989, among the Seller, Citibank, and
CNAI, individually and as Agent and amended and restated as of April 15,
1994.
"Original Certificate" means the certificate of assignment,
dated as of June 30, 1989, by the Seller to the Agent.
"Original Ciesco Agreement" means the Receivables Purchase and
Sale Agreement, dated as of June 30, 1989, among the Seller, Ciesco L.P.
and CNAI, as Agent and amended and restated as of April 15, 1994.
"Owner" means each Bank which purchases an Share hereunder and
all other owners by assignment or otherwise of an Share.
"Termination Date" for any Share means the earlier of (i) the
Reinvestment Termination Date for such Share and (ii) the Commitment
Termination Date.
"Yield" means for each Share for any Fixed Period the product
of
CR x C x ED + LF
--
360
where:
CR = the Citibank Rate for such Share for
such Fixed Period;
C = the Capital of such Share during such
Fixed Period;
ED = the actual number of days elapsed
during such Fixed Period; and
LF = the Liquidation Fee, if any, for such
Share for such Fixed Period;
provided 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 Share shall not be considered paid by any distribution if at any
time such distribution is rescinded or must otherwise be returned for
any reason.
SECTION 1.02. Incorporation by Reference. Various provisions
of (including defined terms) and Exhibits and Schedules to the Ciesco
Agreement are specifically incorporated in this Agreement by reference,
with the same force and effect as if the same were set out in this
Agreement in full. All references in such incorporated provisions to
the "Agent" and "Agreement" shall, without further reference, mean and
refer to CNAI as Agent under this Agreement and this Agreement,
respectively, and, without limitation, all references in such
incorporated provisions to "Certificate", "Collections", "Contract",
"Credit and Collection Policy", "Share", "Net Receivables Pool Balance",
"Owner", "Pool Receivable", "Purchase", "Receivable", "Receivables Pool"
and "Related Security" shall mean and refer to the Certificate,
Collections, a Contract, the Credit and Collection Policy, an Share, the
Net Receivables Pool Balance, an Owner, a Pool Receivable, a Purchase, a
Receivable, the Receivables Pool and the Related Security under this
Agreement, respectively; likewise, to the extent any word or phrase is
defined in this Agreement, any such word or phrase appearing in
provisions so incorporated by reference from the Ciesco Agreement shall
have the meaning given to it in this Agreement. The incorporation by
reference into this Agreement from the Ciesco Agreement is for
convenience only, and this Agreement and the Ciesco Agreement shall at
all times be, and be deemed to be and treated as, separate and distinct
facilities. Incorporation by reference in this Agreement from the
Ciesco Agreement shall not be affected or impaired by any subsequent
expiration or termination of the Ciesco Agreement, nor by any amendment
thereof or waiver thereunder unless the Agent, as agent for the Banks
shall have consented to such amendment or waiver in writing.
SECTION 1.03. 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 1.04. 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 mean "to but
excluding."
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Commitment. On the terms and conditions
hereinafter set forth, CNAI may in its sole discretion, and if CNAI does
not elect to do so the Banks shall, make Purchases from time to time
during the period from the date hereof to the Commitment Termination
Date. Under no circumstances shall the Banks be obligated to make, or
CNAI make, any Purchase if, after giving effect to such Purchase, the
aggregate outstanding Capital of Shares, together with the aggregate
outstanding "Capital" of all "Shares" under the Ciesco Agreement, would
exceed the Commitment. The Owner of each Share shall, with the proceeds
of Collections attributable to such Share, reinvest pursuant to
Section 2.05 in additional undivided percentage interests in the Pool
Receivables by making an appropriate readjustment of such Share.
Nothing in this Agreement shall be deemed to be or construed as a
commitment by CNAI to purchase any Share at any time.
SECTION 2.02. Making Purchases. (a) Each Purchase shall be
made on at least three Business Days' notice from the Seller to the
Agent. Each such notice of a Purchase shall specify the initial
purchase price for the Share to be purchased and date of such Purchase
and the desired duration of the initial Fixed Period for the Share to be
purchased. The Agent shall notify the Seller whether the desired
duration of the initial Fixed Period for the Share to be purchased is
acceptable and the Agent shall promptly notify the Banks of the proposed
Purchase. Such notice of Purchase shall be sent by telecopier, telex or
cable to all Banks concurrently and shall specify the date of such
Purchase, each Bank's Percentage Interest (as set forth in the
Assignment and Acceptance) multiplied by the aggregate amount of Capital
of the Share being purchased, the Fixed Period for such Share and
whether Yield for the Fixed Period for such Share is calculated based on
the Eurodollar Rate (which may be selected only if such notice is given
at least two Business Days prior to the purchase date) or the Alternate
Base Rate.
(b) Prior to 2:00 P.M. (New York City time) on the date of
each such Purchase, the Banks ratably in accordance with their
respective Bank Commitments shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Agent the
amount of their respective Purchases by deposit of the applicable amount
in immediately available 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.
(c) Notwithstanding the foregoing, the total outstanding
Capital of Shares that any Bank shall be obligated to purchase under
this Section 2.02 shall not at any time exceed such Bank's Bank
Commitment less (in the case of any Bank other than Citibank) the
aggregate "Capital" of "Percentage Interests" purchased under the APA.
Each Bank's obligation shall be several, such that the failure of any
Bank to make available to the Seller any funds in connection with any
Purchase shall not relieve any other Bank of its obligation, if any,
hereunder to make funds available on the date of such Purchase, but no
Bank shall be responsible for the failure of any other Bank to make
funds available in connection with any Purchase.
(d) If CNAI chooses to purchase Shares, it shall do so by
entering into an Assignment and Acceptance.
SECTION 2.03. Termination or Reduction of the Commitment.
(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 Commitment; provided that, for purposes of this Section 2.03(a), the
unused portion of the Commitment shall be computed as the excess of
(A) the Commitment immediately prior to giving effect to such
termination or reduction over (B) the sum of (i) the aggregate Capital
of Shares outstanding at the time of such computation and (ii) the
aggregate"Capital" of "Shares" outstanding under the Ciesco 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 Ciesco Agreement, reduce in part the
unused portion of the Purchase Limit (as defined in the Ciesco
Agreement), the Commitment shall automatically reduce by an equal
amount. The Commitment shall automatically terminate in whole on any
day on which the Seller shall terminate in whole the Purchase Limit
pursuant to Section 2.03(a) of the Ciesco Agreement.
SECTIONS 2.04 through 2.09. Incorporation by Reference. Each
of Sections 2.04 through 2.09 of the Ciesco Agreement is hereby
incorporated herein by this reference.
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 Share owned by such Owner, from the date
of the initial Purchase hereunder until the later of the Commitment
Termination Date or the date on which such Capital is reduced to zero,
payable on the last day of each Settlement Period for such Share;
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 Share, 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, the subject to
the priority of payment set forth in, Sections 2.05 and 2.06.
SECTION 2.11. Intentionally Left Blank.
SECTION 2.12. 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 Share in which a
Liquidation Day has occurred for such Share, the Seller shall be
obligated to pay to the Agent for the account of the Owner of such
Share, without prejudice to any other rights that the Investor or any
other Owner may have hereunder or under applicable law, an amount equal
to the interest of such Share 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 Share 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 Share,
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 Share;
(ii) plus an amount equal to the interest of such Share
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 2.12(a) above, provided
that the Default Recourse Limit for any Share 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
2.12(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 2.13. 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
2.14) in or in the interpretation of any law or regulation or (ii)
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 any Bank of agreeing to purchase or
purchasing, or maintaining the ownership of Shares in respect of which
Yield is computed by reference to the Eurodollar Rate, then, upon demand
by such Bank (with a copy to the Agent), the Seller shall immediately
pay to the Agent, for the account of such Bank (as a third-party
beneficiary), from time to time as specified by such Bank, additional
amounts sufficient to compensate such Bank for such increased costs;
provided that (a) such costs of a Bank shall not be reimbursed to the
extent that they relate to the amount of capital required or expected to
be maintained by such Bank 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 90 days prior to
the date on which a Bank initially made demand for reimbursement. A
certificate as to such amounts submitted to the Seller and the Agent by
such Bank shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 2.14. Additional Yield on Shares Bearing a Eurodollar
Rate. The Seller shall pay to any Bank, so long as such Bank shall be
required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities, additional
Yield on the unpaid Capital of each Share of such Bank 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 such Bank for such Fixed Period, payable on each
date on which Yield is payable on such Share. Such additional Yield
shall be determined by such Bank 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 such Bank
shall be conclusive and binding for all purposes, absent manifest error.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase. The
initial Purchase hereunder was subject to the conditions precedent that
the conditions precedent to the initial "Purchase" under the Ciesco
Agreement were satisfied on or prior to the date of such Purchase and
that the Agent received on or before the date of such Purchase the
following, each (unless otherwise indicated) 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.
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 thereof the following, each (unless
otherwise indicated) dated the date hereof, in form and substance
satisfactory to the Agent:
(a) The Certificate.
(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) A favorable opinion of Stephen W. Southwick, Esq.,
Vice President, General Counsel and Secretary of the Seller,
substantially in the form of Exhibit C hereto and as to such
other matters as the Agent may reasonably request.
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 Share 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 Seller Report, dated
within five 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 Ciesco Agreement shall be in
full force and effect and 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, and
(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 Termination or would constitute an Event of
Termination but for the requirement that notice be given or
time elapse or both,
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.
Each of the representations and warranties of the Seller as set forth in
Section 4.01 of the Ciesco Agreement (including Schedule I) is hereby
incorporated herein by this reference and is deemed to be herein
restated and hereby reconfirmed in favor of the Banks, CNAI and the
Agent.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller. Until the
later of the Commitment Termination Date and the date upon which no
Capital for any Share shall be existing, the Seller will, unless the
Agent shall otherwise consent in writing, comply with each and every
affirmative covenant of the Seller as set forth in Section 5.01 of the
Ciesco Agreement, each of which is hereby incorporated herein by this
reference.
SECTION 5.02. Reporting Requirements of the Seller. Until
the later of the Commitment Termination Date and the date upon which no
Capital for any Share shall be existing, the Seller will, unless the
Agent shall otherwise consent in writing, furnish to the Agent each and
every report, document, certificate or other item referred to in
Section 5.02 of the Ciesco Agreement, which is incorporated herein by
this reference, except that each reference in said Section 5.02(c) to an
"Event of Investment Ineligibility" shall be and be deemed to be a
reference to an Event of Termination.
SECTION 5.03. Negative Covenants of the Seller. Until the
later of the Commitment Termination Date and the date upon which no
Capital for any Share shall be existing, the Seller will not, without
the written consent of the Agent, violate any negative covenant set
forth in Section 5.03 of the Ciesco Agreement, each of which is
incorporated herein by this reference.
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.
SECTIONS 6.02 through 6.05. Incorporation by Reference. Each
of Sections 6.02 through 6.05 of the Ciesco Agreement is hereby
incorporated herein by this reference, except that the reference in said
Section 6.02(b) to "Facility Termination Date" shall be and be deemed to
be a reference to the Commitment Termination Date.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") 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) of the Ciesco Agreement (in each case as
incorporated herein by reference); 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) 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 Share shall for any
reason cease to be, a valid and perfected first priority
undivided percentage ownership interest to the extent of the
pertinent Share 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 Share legal and equitable title to, and
ownership of, an undivided percentage ownership interest in
Pool Receivables and Related Security to the extent of such
Share; or
(f) 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
(g) The sum of the Shares percentage hereunder plus the
"Shares" percentage under the Ciesco Agreement shall for a
period of five consecutive Business Days be equal to or exceed
100%; or
(h) 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;
(i) There shall have occurred any event which
constitutes or would, with the giving of notice or the lapse
of time or both, constitute an "Event of Investment
Ineligibility" under the Ciesco Agreement or the Ciesco
Agreement shall cease for any reason to be in full force and
effect;
then, and in any such event, the Agent may, by notice to the Seller
declare the Commitment to be terminated, whereupon the Commitment shall
forthwith terminate, without demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Seller; provided
that, upon the occurrence of any event described above in subsection
(e), or in the event of an actual or deemed entry of an order of relief
with respect to the Seller referred to in Section 7.01(g) of the Ciesco
Agreement, the Commitment shall automatically be terminated 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
Commitment, 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 Share owned by
such Owner to an Assignee following the occurrence of any Event of
Termination.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each of the Banks
and CNAI 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. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement of this Agreement), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act
or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Banks, and
such instructions shall be binding upon all Banks; provided that the
Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement or
applicable law.
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 the Banks or CNAI and shall not be responsible to
any of them 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 the Banks or CNAI 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; (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; and (vi) may
treat the Bank which funded any purchase of an Share as the Owner of
such Share until the Agent receives and accepts an Assignment and
Acceptance entered into by such Bank, as assignor, and an Eligible
Assignee, as assignee, as provided in Section 9.01.
SECTION 8.03. CNAI and Affiliates. With respect to any Share
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 Banks.
SECTION 8.04. Indemnification of Agent. The Banks agree to
indemnify the Agent (to the extent not reimbursed by the Seller),
ratably according to the respective amounts of Capital of the Shares (or
interests therein) owned by each of them (or if no Capital is then
outstanding, the Banks shall indemnify the Agent ratably according to
the respective amounts of their Bank Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any
action taken or omitted by the Agent under this Agreement, provided that
no Bank shall be liable for a portion of such liabilities, losses any
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct.
ARTICLE IX
ASSIGNMENT OF SHARES
SECTION 9.01. Assignability. (a) Each Bank may assign to
any Eligible Assignee or to any other Bank all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Bank Commitment and any Shares or
interests therein owned by it); provided that
(i) Citibank may not assign any portion of its Bank
Commitment to the extent that it reduces such commitment below (A)
10% of the Commitment minus (B) the Capital of Shares purchased by
CNAI,
(ii) each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this
Agreement.
(iii) the amount being assigned pursuant to each such
assignment shall in no event be less than the lesser of $10,000,000
and all of the assigning Bank's Bank Commitment,
(iv) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing
and recordation fee of $2,500, and
(v) concurrently with such assignment, a Bank shall, if such
Bank is a Bank other than Citibank, assign to such Eligible
Assignee an equal percentage of its rights and obligations under
the APA.
Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (y) the Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish
such rights and be released from such obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and obligations under
this Agreement, such Bank shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance,
such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto;
(ii) such assigning Bank makes no representations or warranty
and assumes no responsibility with respect to the financial
condition of the Seller or the performance or observance by the
Seller of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy
of this Agreement, together with copies of the financial statements
referred to in Article V and such other documents and information
as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance
upon the Agent, such assigning Bank or any other Bank and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement;
(v) such assignee 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; and
(vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in
Section 11.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Banks and the Bank Commitment of, and aggregate
outstanding Capital of Shares or interests therein owned by, each Bank
from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and
the Seller, the Agent and the Banks may treat each person whose name is
recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Seller
or any Bank at any reasonable time and from time to time upon reasonable
prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an Eligible Assignee, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the
form of Exhibit D hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii)
give prompt notice thereof to the Seller.
(e) Each Bank may sell participations to one or more banks or
other entities, in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of
its Bank commitment and the Shares or interests therein owned by it);
provided that (i) such Bank's obligations under this Agreement
(including, without limitation, its Bank Commitment to the Seller
hereunder), shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the Seller, the Agent and the other Banks shall
continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, and (iv)
concurrently with such participation, the Selling Bank shall, if such
Bank is any Bank other than Citibank, sell to such bank or other entity
a participation in an equal percentage of its rights and obligations
under the APA.
SECTION 9.02. Annotation of Certificate. The Agent shall
annotate the Certificate to reflect any assignment of an Share 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, the Banks or CNAI 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 Shares 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 delayed payment thereon) due to creditworthiness of Obligors or (c)
any income taxes incurred by such Indemnified Party arising out of or as
a result of this Agreement or the ownership of Shares or in respect of
any Receivable or any Contract. Without limiting or being limited by
the foregoing (but subject to the restrictions described in the
foregoing clauses (a) and (b)), 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 purported sale by the Seller (and acceptance of any
initial purchase price payment or reinvestment payment thereof) of
an undivided percentage ownership interest in any Pool Receivable
at the date of such payment or reinvestment of the aggregate
percentage interest in the Pool Receivables with respect to all
then outstanding Shares plus all then outstanding "Shares" under
the Ciesco Agreement equals or exceeds 100%;
(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 Share an undivided
percentage ownership interest, to the extent of such Share, 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 obligation
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 Shares or in respect of any Receivable, Related
Security or Contract; or
(x) the commingling of Collections of Pool Receivables at any
time with other funds.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or waiver of
any provision of this Agreement (including, without limitation, any
provision of the Ciesco Agreement which is incorporated herein by
reference), 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, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. Notwithstanding the foregoing, the Agent agrees that it
shall not
(a) without the prior written consent of each Bank, (i) amend
the definitions of Eligible Receivable, Defaulted Receivable or
Delinquent Receivable contained in this Agreement, or modify the
then existing concentration Limit or any Special Concentration
Limit or (ii) amend, modify or waive any provision of this
Agreement in any way which would (A) reduce the amount of Capital
or Yield that is payable on account of any Share or delay any
scheduled date for payment thereof, or (B) impair any rights
expressly granted to an assignee or participant under this
Agreement, or (C) reduce fees payable by the Seller to the Agent or
to Citibank which relate to payments to the Banks or delay the
dates on which such fees are payable, or (D) modify any provisions
relating to recourse for uncollectible Receivables or to reserves
for Yield or for the Collection Agent Fee, or (iii) agree to a
different Assignee Rate pursuant to the final proviso in the
definition of Assignee Rate; or
(b) without the prior written consent of the Majority Banks,
(i) amend the definitions of Default Ratio, Delinquency Ratio or
Net Receivables Pool Balance, (ii) amend the Events of Termination
to increase the maximum permitted Default Ratio or Delinquency
Ratio or reduce the minimum required Net Receivables Pool Balance
to Capital ratio or (iii) (A) waive violations of the Default Ratio
or the Delinquency Ratio for more than two consecutive months, or
(B) waive a violation of the Net Receivables Pool Balance to
Capital ratio for more than one month beyond any applicable grace
period unless the Seller has cured or has agreed to cure such
violation within 30 days after notice from the Agent or (iv) amend
this Agreement to increase the Commitment.
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, or, with respect to any other Bank, at its address specified in
the Assignment and Acceptance pursuant to which it became a Bank or at
such other address as shall be designated by such Bank 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 the Agent, the Banks or CNAI to exercise, and no delay in exercising,
any of their respective rights 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. Without
limiting the foregoing, Citibank is hereby authorized by the Seller at
any time and from time to time, to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at
any time owing by Citibank to or for the credit or the account of the
Seller against any and all of the obligations of the Seller, now or
hereafter existing under this Agreement to Citibank, CNAI or the Agent
or their respective successors and assigns, whether or not any demand
shall have been made under this Agreement and although such obligations
may be unmatured. Citibank agrees promptly to notify the Seller after
any such set-off and application; provided that the failure to give such
notice shall not affect the validity of such set-off and application.
SECTION 11.04. Binding Effect: Assignability. This Agreement
shall be binding upon and inure to the benefit of the Seller, the Agent,
the Banks and CNAI, 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 Commitment Termination
Date, as no Capital of any Share shall be outstanding; provided that
rights and remedies with respect to the provisions of Article X and
Section 11.06 and 11.07 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 and Citibank, with
respect thereto and with respect to advising the Agent and Citibank 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 Banks, 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 stamp and
other taxes (excluding income 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.
SECTION 11.07. Confidentiality. Except to the extent
otherwise required by applicable law, the Seller agrees to maintain the
confidentiality of this Agreement (and all drafts thereof), including
the terms and provisions of the Ciesco Agreement (and all drafts
thereof) incorporated herein by reference, 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 11.08. 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 11.09. Amendment of the Original Certificate. The
Original Certificate is hereby amended in its entirety to read as set
forth in Exhibit A and the Agent is hereby authorized to endorse on the
Original Certificate the changes made pursuant to the amendment and
restatement of this Agreement. Each reference in this Agreement to "the
Certificate" shall mean the Original Certificate as amended by the
amendment and restatement of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers (or agents) thereunto duly
authorized, as of the date first above written.
IES UTILITIES INC.
By:___________________________
Title:
By:___________________________
Title:
200 First Street, S.E.
Cedar Rapids, IA 52401
CITICORP NORTH AMERICA, INC.,
individually and as Agent
By:___________________________
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Corporate Asset
Funding Department
(TWX 510 600 5528
Answerback CIC CAT UD)
CITIBANK, N.A.
By:___________________________
Attorney-in-Fact
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Vice President
Facsimile No. 914-899-7015
EXHIBIT A
FORM OF CERTIFICATE
Dated as of June 30, 1989
As amended and restated as of February 28, 1997
Reference is made to the Receivables Purchase and Sale
Agreement dated as of June 30, 1989, as amended and restated as of
February 28, 1997 (the "Agreement") among IES Utilities Inc. (formerly
known as Iowa Electric Light and Power Company, the "Seller"), Citibank,
N.A. ("Citibank") and Citicorp North America, Inc., individually and 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 each Share as determined from time to time under
the Agreement.
Each Purchase of an Share made from the Seller, each
assignment of such Share by its Owner to an Assignee and each reduction
in Capital in respect of each Share 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 Share initially by the purchaser thereof 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:________________________
GRID
Number Capital Owner
of (Giving Effect (Giving Effect
Shares* Transaction** to Transaction) to Transaction)
* Shares will be numbered sequentially based upon date of Purchase.
** Transactions are Purchases, Reductions in Capital, Assignments,
Divisions of Shares and Combinations of Shares.
EXHIBIT B IS FILED AFTER EXHIBIT D AND SCHEDULE 1.
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE SELLER
[Date]
Citibank, N.A.
450 Mamaroneck Avenue
Harrison, NY 10528
Citicorp North America, Inc.
as Agent
450 Mamaroneck Avenue
Harrison, NY 10528
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
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 February 28, 1997 (the
"Agreement"), of the Receivables Purchase and Sale Agreement, dated as
of June 30, 1989, among IES Utilities Inc. (the "Seller"), Citibank,
N.A., and Citibank North America, Inc., individually and 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 ____________, 1997, as to the continued
existence and good standing of the Seller in such State.
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, writs,
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.
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.
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 Share purchased prior to the date of this opinion
constituted, and each Share purchased pursuant to a subsequent
Purchase will constitute, a valid undivided ownership interest (an
"Undivided Interest"), to the extent of the Share purchased
pursuant to such Purchase, in each Pool Receivable then exiting or
thereafter arising and in the Related Security and Collections.
7. The nature of the Share 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,
Stephen W. Southwick
Attorney
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19__
Reference is made to the Receivables Purchase and Sale
Agreement dated as of June 30, 1989, as amended to date (the
"Agreement") among IES UTILITIES INC. (formerly known as Iowa Electric
Light and Power Company), an Iowa corporation (the "Seller"), the Banks
(as defined in the Agreement) and Citicorp North America, Inc., a
Delaware corporation, individually and as Agent ("Agent") for the Banks.
Terms defined in the Agreement are used herein with the same meaning.
____________________ (the "Assignor") and ___________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, that
interest in and to all of the Assignor's rights and obligations under
the Agreement as of the date hereof which represents the percentage
interest specified on Schedule 1 of all outstanding rights and
obligations under the Agreement, including, without limitation, such
interest in the Assignor's Bank Commitment and the Shares or interests
therein owned by the Assignor. After giving effect to such sale and
assignment, the Assignee's Bank Commitment and the amount of the Capital
held by the Assignee will be as set forth in Section 2 of Schedule 1.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection
with the Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Seller, or the performance or observance
by the Seller of any of its obligations under the Agreement or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Agreement, together with copies of the financial statements referred
to in Section 5.02 thereto and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision
to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Agreement; (iii) confirms that it
is an Eligible Assignee; (iv) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the
Agreement as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations
which by the terms of the Agreement are required to be performed by it
as a Bank; (vi) specifies as its address for notices the office set
forth beneath its name on the signature pages hereof; (vii) represents
that this Assignment and Acceptance has been duly authorized, executed
and delivered by such Assignee pursuant to its corporate powers and
constitutes the legal, valid and binding obligation of such Assignee and
(viii) if the Assignee is organized under the laws of a jurisdiction
outside the United States, attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the
Assignee under the Agreement or such other documents as are necessary to
indicate that all such payments are subject to such rates at a rate
reduced by an applicable tax treaty.
4. Following the execution of this Assignment and Acceptance
by the Assignor and the Assignee, it will be delivered to the Agent for
acceptance and recording by the Agent. The effective date of this
Assignment and Acceptance shall be the date of acceptance thereof by the
Agent, unless otherwise specified on Schedule 1 hereto (the "Effective
Date").
5. Upon such acceptance and recording by the Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Agreement
and, to the extent provided in this Assignment and Acceptance, have the
rights and obligations of a Bank thereunder and (ii) the Assignor shall,
to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the
Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of Capital, Yield and fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods
prior to the Effective Date directly between themselves.
7. The Assignee agrees to abide by any obligations set forth
in the Agreement on the part of a Bank. Furthermore, the Assignee
understands that the Agreement itself is a confidential document and
will not disclose it to any other Person except with the Agent's prior
written consent, or to the Assignee's legal counsel if such counsel
agrees to hold it confidential, or as required by law. Notwithstanding
the foregoing, the Assignee may, in connection with any assignment or
participation or proposed assignment or participation, disclose to the
assignee or participant or proposed assignee or participant any
information relating to the Seller, including the Receivables, furnished
to the Assignee by or on behalf of the Seller or by the Agent; provided
that, prior to any such disclosure, the assignee or participant or
proposed assignee or participant agrees to preserve the confidentiality
of any confidential information relating to the Seller received by it
any of the foregoing entities.
8. If, pursuant to Section 11.01(b)(iv) of the Agreement,
the Agreement shall be amended to increase the Commitment, then (i) the
Agent shall promptly notify each Bank of such amendment, and (ii) on the
effective date of such amendment, each Bank's Percentage Interest under
its Assignment and Acceptance Agreement shall be proportionately reduced
and each Bank's Bank Commitment shall remain the same; provided that
each Bank may elect to maintain its Percentage Interest by executing and
delivering, within ten days after receipt of notice of such amendment, a
new Schedule 1 to this Assignment and Acceptance Agreement reaffirming
its Percentage Interest and indicating its new Bank Commitment.
9. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such
execution being made on Schedule 1 hereto.
Schedule 1
to
IES Utilities Inc.
Assignment and Acceptance
Dated , 19__
Section 1.
Percentage Interest: 1 __________%
Section 2.
Assignee's Bank Commitment: $__________
Aggregate Outstanding Capital of
Shares held by
the Assignee: $__________
Section 3.
Effective Date: 2 _______________, 19__
[NAME OF ASSIGNOR]
By:_______________________
Title:
[NAME OF ASSIGNEE]
By:_______________________
Title:
Address for Notices:
Accepted this _____ day
of ______________, 19__
CITICORP NORTH AMERICA, INC., as Agent
By:____________________
Vice President
_______________________________
1 This percentage must be the same as the Assignee's percentage
interest under the APA.
2 This date should be no earlier than the date of acceptance by the
Agent.
EXHIBIT B
U.S. $65,000,000
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
As AMENDED and RESTATED as of FEBRUARY 28, 1997
Among
IES UTILITIES INC.
as Seller
and
CIESCO L.P.
as the Investor
and
CITICORP NORTH AMERICA, INC.
as Agent
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
SECTION 1.01. Certain Defined Terms 2
SECTION 1.02. Other Terms 17
SECTION 1.03. Computation of Time Periods 17
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility 17
SECTION 2.02. Making Purchases 18
SECTION 2.03. Termination or Reduction of the Purchase Limit 18
SECTION 2.04. Share 18
SECTION 2.05. Non-Liquidation Settlement Procedures 19
SECTION 2.06. Liquidation Settlement Procedures 19
SECTION 2.07. General Settlement Procedures 20
SECTION 2.08. Payments and Computations, Etc. 21
SECTION 2.09. Dividing or Combining of Shares 21
SECTION 2.10. Fees 21
SECTION 2.11. Recourse for Defaulted Receivables 22
SECTION 2.12. Eurodollar Increased Costs 22
ARTICLE III CONDITIONS OF PURCHASES
SECTION 3.01. Condition Precedent to Initial Purchase 23
SECTION 3.02. Conditions Precedent to the Effectiveness
of the Amendment and Restatement of the Original
Agreement 24
SECTION 3.03. Conditions Precedent to All Purchases and
Reinvestments 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller 25
ARTICLE V GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller 27
SECTION 5.02. Reporting Requirements of the Seller 28
SECTION 5.03. Negative Covenants of the Seller 29
ARTICLE VI ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent 30
SECTION 6.02. Duties of Collection Agent 30
SECTION 6.03. Rights of the Agent 31
SECTION 6.04. Responsibilities of the Seller 32
SECTION 6.05. Further Action Evidencing Purchases 32
ARTICLE VII EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. Events of Investment Ineligibility 33
ARTICLE VIII THE AGENT
SECTION 8.01. Authorization and Action 35
SECTION 8.02. Agent's Reliance, Etc 35
SECTION 8.03. CNAI and Affiliates 35
SECTION 8.04. Investor's Purchase Decision 35
ARTICLE IX ASSIGNMENT OF SHARES
SECTION 9.01. Assignability 36
SECTION 9.02. Annotation of Certificate 36
ARTICLE X INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller 36
ARTICLE XI MISCELLANEOUS
SECTION 11.01. Amendments, Etc. 38
SECTION 11.02. Notices, Etc. 38
SECTION 11.03. No Waiver; Remedies 38
SECTION 11.04. Binding Effect; Assignability 38
SECTION 11.05. Governing Law 38
SECTION 11.06. Costs and Expenses 39
SECTION 11.07. No Proceedings 39
SECTION 11.08. Confidentiality 39
SECTION 11.09. Execution in Counterparts 39
SECTION 11.10. Amendment of the Original Certificate 39
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of June 30, 1989
as Amended and Restated as of February 28, 1997
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 Shares.
(3) The Investor desires to purchase Shares from the Seller.
(4) In consideration of the reinvestment in Pool Receivables
of daily Collections (other than with regard to accrued Yield,
Miscellaneous Fees and Collection Agent Fee) attributable to a Share,
the Seller will sell to the Owner of such Share additional interests in
the Pool Receivables as part of such Share 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 Shares.
(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 and
amended and restated the same as of April 15, 1994 (collectively, the
"Original Agreement").
(7) The Seller, the Investor and CNAI, as Agent, desire to
again 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
40519819) 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 Share means (i)
the applicable Fees Letter Fees Rate plus (ii) 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 Share 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 Share 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 Share will not be funded by issuance of
commercial paper, and
(iv) in the case of any Fixed Period for a Share 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 plus the applicable Fees Letter Fees Rate; 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
Seller 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 Share means the original amount paid to the
Seller for such Share 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 Share 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 Share 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 Share 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
February 28, 1997, 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 Share at any time means
the sum of (i) the Liquidation Collection Agent Fee for such Share at
such time plus (ii) the unpaid Collection Agent Fee relating to such
Share 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 Share, the date of
Purchase of such Share 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 Share 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 Receivable" means, at any time and with respect to
any Share, 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
Share 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 Share
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 a Share;
(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.
"Eurocurrency Liability Yield" means so long as any 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 Share 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 Share. 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.
"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 Shares 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.
"Fee Letter Fees" means the fees as agreed to with the
Investor pursuant to a separate letter agreement from time to time.
"Fee Letter Fees Rate" means the Fee Letter Fees expressed as
a per annum rate.
"Fixed Period" means with respect to any Share:
(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 Share and
ending on the next succeeding CP Fixed Period Date for such Share;
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 Share to commence on the last day of the
immediately preceding Fixed Period for such Share (or, if there is
no such Fixed Period, on the date of Purchase of such Share),
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
Share, (a) if such Fixed Period is such Share'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 Share which
commences before the Termination Date for such Share 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 Share shall be of such duration as shall be selected
by the Agent.
"Fixed Rate" means for any Fixed Period (i) the Fee Letter
Fees Rate plus (ii) the rate per annum determined by the Agent for
funding by the Investor of the Purchase or maintenance of a Share for
such Fixed Period as agreed between the Agent and the Seller; provided
that, if the rate under (ii) above of this definition of "Fixed Rate" as
agreed between the Agent and the Seller and the Investor with regard to
any Fixed Period for any Share is a discount rate, the "Fixed Rate" for
such Fixed Period shall be (x) the Fees Letter Fees Rate plus (y) 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
Share at the time of its purchase. Therefore, if (i) the Capital of
such Share paid to the Seller with respect to such Share at the time of
its purchase shall be reduced prior to the end of such Fixed Period or
(ii) the Termination Date for such Share shall occur before the end of
such Fixed Period, the Fixed Rate shall be recomputed so as to 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 Share at a Fixed Rate) and
shall include as liquidated damages a fee equal to the sum of (x) the
accrued and unpaid applicable Fee Letter Fees plus (ii) 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 (computed without regard to the Fees
Letter Fees Rate) for such Share for such Fixed Period;
R = Redeployment Rate, as hereinafter defined;
f = Fixed Rate (determined without regard to the
Fee Letter Fees) 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 included as a
consequence in such recomputed Fixed Rate. "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 Share was paid. "Capital
Liquidation Amount" means, the total amount of Capital of such Share not
so maintained or the total amount of Capital of such Share 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 Rate" for any Fixed Period for any Share means (i)
the Fee Letter Fees Rate plus (ii):
(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 Share 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 Share 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.
"Seller 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 Share at any
date an amount equal to (i) the Capital of such Share 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 Share means either (i) each day
during any Settlement Period for such Share 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 Share.
"Liquidation Fee" means, for each Share 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
Share 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 Share 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
Share from such Owner's investing the proceeds of such reductions of
Capital.
"Liquidation Yield" means, for any Share at any date, an
amount equal to the product of (i) the Capital of such Share as at such
date and (ii) the product of (a) the Assignee Rate for such Share 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 Share 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%.
"Miscellaneous Fees" for any Share at any time means, the sum
of the following:
(a) any unpaid reasonable fees and out of pocket expenses of
counsel for the Agent, the Investor, CNA and their respective Affiliates
with respect to advising the Agent, the Investor, Citibank, CNAI and
their respective Affiliates as to their rights and remedies under this
Agreement, and 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;
(b) 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 Share 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 any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and
fees.
(c) 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
liability for the Other Costs shall be attributed 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 computation
of the Miscellaneous Fees shall provide for full payment of such Other
Costs; however, if such Other Costs are attributable to any Other Seller
and not to the Seller, the Other Seller shall be solely liable for such
Other Costs.
"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 a Share 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 a Share 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 Share 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 Share 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 Share means each period commencing
on the first day of each Fixed Period for such Share 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 Share, 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.
"Share" 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 Share
shall be computed as
C + YR + CAFR + MF
------------------
NRPB
where:
C = the Capital of such Share at the time
of such computation;
YR = the Yield Reserve of such Share at
the time of such computation;
CAFR = the Collection Agent Fee Reserve of
such Share at the time of such computation;
MF = the accrued Miscellaneous Fees at the time
of such computation; and
NRPB = the Net Receivables Pool Balance at
the time of such computation.
Each Share shall be determined from time to time pursuant to the
provisions of Section 2.04.
"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 Share means the earlier of (i) the
Reinvestment Termination Date for such Share 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 Share for any Fixed Period to the extent the
Investor will be funding such Share 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 + ELY
--
360
(ii) for each Share for any Fixed Period to the extent the
Owner will not be funding such Share on the first day of such Fixed
Period through the issuance of commercial paper or notes,
AR x C x ED + LF + ELY
--
360
where:
AR = the Assignee Rate for such Share for such Fixed
Period;
C = the Capital of such Share during such Fixed
Period;
IR = the Investor Rate for such Share 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
Share;
LF = the Liquidation Fee, if any, for such Share for
such Fixed Period; and
ELY = the Eurocurrency Liability Yield, if any, for
such Share 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 semiannual 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 Share 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 Share at any time means the sum of (i)
the Liquidation Yield at such time for such Share, and (ii) the accrued
and unpaid Yield for such Share.
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".
marked for toc1
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 Shares, together with the aggregate
outstanding "Capital" of "Shares" under the Citibank Agreement, would
exceed the Purchase Limit. The Owner of each Share shall, with the
proceeds of Collections attributable to such Share, reinvest pursuant to
Section 2.05(ii) in additional undivided percentage interests in the
Pool Receivables by making an appropriate readjustment of such Share.
Nothing in this Agreement shall be deemed to be or construed as a
commitment by the Investor to purchase any Share at any time. The
purchase price for each Share shall be equal to the initial purchase
price payable pursuant to Section 2.02, the reinvestment payments
pursuant to Section 2.05 and the deferred purchase price payment, if
any, pursuant to Sections 2.04(a) and 2.06.
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 initial purchase price for such Share to be paid to the
Seller, and the date of purchase and duration of the initial Fixed
Period for the Share 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 Share 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 initial purchase price 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 Share shall on the first day of each Fixed Period
(other than the initial Fixed Period) for such Share, notify the Agent
of the Investor Rate for such Fixed Period. The parties hereto intend
the sale of each Share to be a true sale thereof (and not the transfer
of a lien therein) and, accordingly, will treat the sale of each Share
as a sale for accounting purposes.
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 Shares outstanding at the time of such computation and (ii) the
aggregate "Capital" of "Shares" 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. Any date
on which the Purchase Limit shall be reduced to zero shall be a
"Facility Termination Date", and this Agreement shall terminate on the
first day thereafter when no Capital of any Share shall be outstanding
and all other amounts then due and payable under this Agreement shall
have been paid in full.
(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. Share. (a) Each Share shall be initially
computed as of the opening of business of the Collection Agent on the
date of Purchase of such Share. Thereafter until the Termination Date
for such Share, such Share shall be automatically recomputed as of the
close of business of the Collection Agent on each day (other than a
Liquidation Day and Provisional Liquidation Day). Such Share 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 Share, as computed as of the
day immediately preceding the Termination Date for such Share, shall
remain constant at all times on and after such Termination Date. Such
Share shall become zero at such time as the Owner of such Share shall
have received the accrued Yield and Miscellaneous Fees for such Share
and shall have recovered the Capital of such Share, and the Collection
Agent shall have received the accrued Collection Agent Fee for such
Share and all subsequent Collections received by the Collection Agent,
if any, with respect to such Share as calculated immediately prior
thereto shall be distributed by the Collection Agent (on behalf of the
Owner) to the Seller as a deferred purchase price payment for such
Share.
(b) If any Share would otherwise be reduced on any day on
account of Receivables arising as or becoming Pool Receivables, the
Owner of such Share 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 Share'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 Share, the Receivables Pool for such Share and the Net
Receivables Pool Balance for such Share, 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 Share to remain constant, such Receivables or portion
thereof being included in the Receivables Pool for such Share in the
order of the Seller's account numbers for such Receivables up to an
aggregate amount so as to cause such Share 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 Share, the Collection Agent
shall: (i) out of Collections of Pool Receivables attributable to such
Share received on such day, set aside and hold in trust for the Owner of
such Share an amount equal to the Yield, Miscellaneous Fees and
Collection Agent Fee accrued through such day for such Share and not so
previously set aside and (ii) reinvest the remainder of such
Collections, for the benefit of such Owner, by recomputation of such
Share pursuant to Section 2.04 as of the end of such day and the payment
of such remainder to the Seller. On the last day of each Settlement
Period for each Share, the Collection Agent shall deposit to the Agent's
Account for the account of the Owner of such Share 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 Share in payment of the accrued Yield and
Miscellaneous Fees for such Share and to the Collection Agent in payment
of the accrued Collection Agent Fee payable with respect to such Share.
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
Collection Agent Fee payable with respect to such Share, and second, in
payment of the accrued Yield for such Share and third, in payment of the
accrued Miscellaneous Fees payable with respect to such Share.
SECTION 2.06. Liquidation Settlement Procedures. On each
Liquidation Day and on each Provisional Liquidation Day during each
Settlement Period for each Share, the Collection Agent shall set aside
and hold in escrow for the Owner of such Share the Collections of Pool
Receivables attributable to such Share received on such day. On the
last day of each Settlement Period for each Share, the Collection Agent
shall deposit to the Agent's Account for the account of the Owner of
such Share the amounts set aside pursuant to the preceding sentence but
not to exceed the sum of (i) the accrued Yield for such Share, (ii) the
Capital of such Share, (iii) the accrued Collection Agent Fee payable
with respect to such Share (iv) the accrued Miscellaneous Fees payable
with respect to such Share and (v) the aggregate amount of other amounts
owed hereunder by the Seller to the Owner of such Share. 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
on behalf of the Owner as a deferred purchase price payment for such
Share; provided, however, 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
Share (w) in payment of the accrued Yield for such Share, (x) in
reduction (to zero) of the Capital of such Share, (y) in payment of the
accrued Miscellaneous Fees with respect to such Share 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 Share. 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 Collection Agent Fee payable with respect to such
Share, second, in payment of the Accrued Yield for such Share, third, in
reduction of Capital of such Share, fourth, in payment of the accrued
Miscellaneous Fees with respect to such Share, and Fifth, in payment of
other amounts payable to such Owner.
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 (which shall
be remitted to the Collection Agent and distributed pursuant to Section
2.05 or 2.06 hereof, as applicable). 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 a Share (A) an Seller Report, relating to each Share, 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 Share; 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 a Share,
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 Shares. 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 Share (an "Existing Share"), divide such Existing
Share on such last day into two or more new Shares, each such new Share
having Capital as designated in such notice and all such new Shares
collectively having aggregate Capital equal to the Capital of such
Existing Share. 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 Shares 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 Shares or (ii)
combine such Existing Share or Shares, if owned by the Investor, and
such proposed Share to be purchased, on such last day into one new
Share, such new Share having Capital equal to the aggregate Capital of
such Existing Shares, or such Existing Share or Shares and such proposed
Share, as the case may be. On and after any division or combination of
Shares as described above, each of the new Shares resulting from such
division, or the new Share resulting from such combination, as the case
may be, shall be a separate Share having Capital as set forth above, and
shall take the place of such Existing Share or Shares or proposed Share,
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. 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 Share 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 Share; 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 Share, 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 Share in which a Liquidation Day has occurred for such Share, the
Seller shall be obligated to pay to the Agent for the account of the
Owner of such Share, without prejudice to any other rights that any
Owner may have hereunder or under applicable law, an amount equal to the
interest of such Share 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 Share 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 Share, 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 Share;
(ii) plus an amount equal to the interest of such Share 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 Share 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, Shares 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.
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) The Certificate;
(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) A favorable opinion of Stephen W. Southwick, Vice
President, General Counsel and Secretary of the Seller, Attorney
for the Seller, substantially in the form of Exhibit C hereto and
as to such other matters as the Agent may reasonably request.
(d) A favorable opinion of Katten Muchin & Zavis, counsel for
the Agent, as to such matters as the Agent may reasonably request.
(e) An executed copy of the Citibank Agreement.
(f) 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 reinvestment in Pool Receivables of those Collections
attributable to a Share 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 Seller 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 September 30, 1996, 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
September 30, 1996, 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 Share 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 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).
(i) Each Seller 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 light of the circumstances under which they were
made, not misleading.
(j) The chief place of business 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)).
(l) 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 Share 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). The sale of each Share shall be treated
as a sale for all record keeping purposes.
(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 Share 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 Share 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 (on behalf of the Owner) 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 Collection Agent, while it is
the Seller, may, in accordance with the Credit and Collection Policy,
extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as the Collection Agent 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 a
Share of an amount equal to the Capital plus accrued Yield for such
Share 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 Shares 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
Shares 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 Shares 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
A.gent: (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 Shares; (ii) mark
conspicuously each invoice evidencing each Pool Receivable and the
related Contract with a legend, acceptable to the Agent, evidencing that
such Shares 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 Share shall for any reason cease to be, a valid and
perfected first priority undivided percentage ownership interest to the
extent of the pertinent Share 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 Share legal
and equitable title to, and ownership of, an undivided percentage
ownership interest in Pool Receivables and Related Security to the
extent of such Share; 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 Shares percentage hereunder plus the
"Shares" 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 Share 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 Share
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 SHARES
SECTION 9.01. Assignability. (a) This Agreement and the
Owner's rights and obligations herein (including ownership of each
Share) 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 a Share 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 Shares 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 delayed payment thereon) due to creditworthiness of the Obligors, or
(c) any income taxes incurred by such Indemnified Party arising out of
or as a result of this Agreement or the ownership of Shares or in
respect of any Receivable or any Contract. Without limiting or being
limited by the foregoing (but subject to the restrictions described in
the foregoing clauses (a) and (b)), the Seller shall pay on demand to
each Indemnified Party (without duplication of any amounts payable by
the Sellers as a deemed Collection pursuant to Section 2.07) any and all
amounts necessary to indemnify such Indemnified Party from and against
any and all Indemnified Amounts relating to or resulting from any of the
following:
(i) the purported sale by the Seller (and acceptance of any
initial purchase price payment or reinvestment payment thereof) of
an undivided percentage ownership interest in any Pool Receivable
if at the time of such payment or reinvestment the aggregate
percentage interest in the Pool Receivables with respect to all
then outstanding Shares plus all then outstanding "Shares" under
the Parallel Purchase Commitment equals or exceeds 100%;
(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 a Share an undivided
percentage ownership interest, to the extent of such Share, 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 Shares 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)
in the event Seller does not consummate a Purchase pursuant to the
terms of this Agreement.
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 is a 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 Share 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 and Expenses. 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 with respect thereto.
SECTION 11.07. No Proceedings. Each of the Seller, the
Agent, CNAI and each assignee of a Share or any interest therein and
each entity which enters into a commitment to purchase Shares 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 officer is hereunto duly authorized, as of
the date first above written.
IES UTILITIES INC.
By: _________________________
Title:
By: _________________________
Title:
200 First Street, S.E.
Cedar Rapids, IA 52401
CIESCO L.P.
By: CITICORP NORTH AMERICA, INC.,
as Attorney-in-Fact
By: _______________________
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: Vice President
Facsimile No. (914) 899-7890
CITICORP NORTH AMERICA, INC.
By: _____________________________
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 February 28, 1997
Reference is made to the Receivables Purchase and Sale
Agreement dated as of June 30, 1989, as amended and restated as of
February 28, 1997 (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 each Share as determined from time to time under
the Agreement.
Each Purchase of a Share by the Investor from the Seller, each
assignment of such Share by its Owner to an Assignee and each reduction
in Capital in respect of each Share 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 Share 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:_____________________________
GRID
Number Capital Owner
of (Giving Effect (Giving Effect
Shares* Transaction** to Transaction) to Transaction)
* Shares will be numbered sequentially based upon date of Purchase.
** Transactions are Purchases, Reductions in Capital, Assignments,
Divisions of Shares and Combinations of Shares.
EXHIBIT B
FORM OF SELLER 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
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
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 February 28, 1997 (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 _______________, 1997, as to the continued
existence and good standing of the Seller in such State.
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.
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.
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 Share purchased prior to the date of this opinion
constituted, and each Share purchased pursuant to a subsequent
Purchase will constitute, a valid undivided ownership interest (an
"Undivided Interest"), to the extent of the Share purchased
pursuant to such Purchase, in each Pool Receivable then exiting or
thereafter arising and in the Related Security and Collections.
7. The nature of the Share 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)(S) 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,
Stephen W. Southwick
Attorney
EXHIBIT D
NOTICE OF PURCHASE OF
A SHARE 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 February 28, 1997 (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
Share ______________
(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 Share:
(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 Share
is to be made available to it in accordance with Section 2.02 of the
Agreement.
Very truly yours,
IES UTILITIES INC.
By: _________________________
Title:
SCHEDULE I
IES UTILITIES INC.
LIST OF SPECIAL ACCOUNT BANKS
ACCOUNT NUMBER
Firstar Bank Iowa, N.A. 110-00010-6
222 2nd Avenue S.E.
Cedar Rapids, IA 52401
Brenton Bank & Trust 136026
102 South Central Street
Marshalltown, IA 50158
Brenton National Bank 75130109
P.O. Box 149
Grinnell, IA 50112
Central State Bank 3228483
P.O. Box 146
Muscatine, IA 52761
Iowa State Bank and Trust 296023
P.O. Box 927
Fairfield, IA 52556
First Bank and Trust 136026
P.O. Box AA
Spirit Lake, IA 51360
First National Bank 136042
5th and Burnett
Ames, IA 50010
Firstar Bank Ottumwa, N.A. 01148109
123 East Third Street
Ottumwa, IA 52501
Firstar Bank Burlington, N.A. 621021453
P.O. Box 1088
Burlington, IA 52601
Mercantile Bank 786209
100 E. Jackson
Centerville, IA 52544
Mercantile Bank 346217
P.O. Box 1166
Newton, IA 50208
Iowa Falls State Bank 307761
P.O. Box 129
Iowa Falls, IA 50126
Iowa State Savings Bank 124109
P.O. Box 109
Creston, IA 50801
Iowa Trust & Savings Bank 244007
200 N. 10th
Centerville, IA 52544
Lee County Bank & Trust, N.A. 25577
8th Street & Avenue
Fort Madison, IA 52627
Security Bank 6101378
1402 Washington Street
Eldora, IA 50627
State Central Bank 3072121
601 Main Street
Keokuk, IA 52632
Washington State Bank 170054
Lock Box 311
Washington, IA 52353
Mercantile Bank 118079
101 South Filmore Street
Mount Ayr, IA 50854
<TABLE>
EXHIBIT 12
IES UTILITIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Twelve Months
Year Ended December 31, Ended
1992 1993 1994 1995 1996 March 31, 1997
(in thousands, except ratio of earnings to fixed charges)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 45,291 $ 67,970 $ 61,210 $ 59,278 $ 63,729 $ 61,452
Federal and state
income taxes 20,723 37,963 37,966 41,095 43,092 41,502
Net income before
income taxes 66,014 105,933 99,176 100,373 106,821 102,954
Interest on long-term debt 35,689 34,926 37,942 36,375 37,048 37,909
Other interest 3,939 5,243 3,630 8,085 6,666 7,219
Estimated interest
component of rents 4,567 3,729 3,970 4,637 4,091 4,148
Fixed charges as defined 44,195 43,898 45,542 49,097 47,805 49,276
Earnings as defined $ 110,209 $ 149,831 $ 144,718 $ 149,470 $ 154,626 $ 152,230
Ratio of earnings to fixed
charges (unaudited) 2.49 3.41 3.18 3.04 3.23 3.09
For the 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>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
EXHIBIT 27(a)
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1997 and the Consolidated Statement
of Income and the Consolidated Statement of Cash Flows for the three months
ended March 31, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000789943
<NAME> IES INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,350,093
<OTHER-PROPERTY-AND-INVEST> 383,148
<TOTAL-CURRENT-ASSETS> 168,144
<TOTAL-DEFERRED-CHARGES> 15,169
<OTHER-ASSETS> 196,096
<TOTAL-ASSETS> 2,112,650
<COMMON> 412,143
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 215,703
<TOTAL-COMMON-STOCKHOLDERS-EQ> 627,846
0
18,320
<LONG-TERM-DEBT-NET> 651,763
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 126,000
<LONG-TERM-DEBT-CURRENT-PORT> 63,480
0
<CAPITAL-LEASE-OBLIGATIONS> 17,421
<LEASES-CURRENT> 14,047
<OTHER-ITEMS-CAPITAL-AND-LIAB> 593,773
<TOT-CAPITALIZATION-AND-LIAB> 2,112,650
<GROSS-OPERATING-REVENUE> 257,687
<INCOME-TAX-EXPENSE> 9,317<F1>
<OTHER-OPERATING-EXPENSES> 221,618
<TOTAL-OPERATING-EXPENSES> 221,618<F1>
<OPERATING-INCOME-LOSS> 36,069
<OTHER-INCOME-NET> 638
<INCOME-BEFORE-INTEREST-EXPEN> 36,707
<TOTAL-INTEREST-EXPENSE> 14,846
<NET-INCOME> 12,315<F2>
229<F2>
<EARNINGS-AVAILABLE-FOR-COMM> 12,315
<COMMON-STOCK-DIVIDENDS> 15,858
<TOTAL-INTEREST-ON-BONDS> 38,631
<CASH-FLOW-OPERATIONS> 78,495
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0
<FN>
<F1>Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income for IES Industries Inc. (Industries).
<F2> Since the preferred dividends are for a subsidiary of Industries, they are
considered a fixed charge on Industries' Consolidated Statement of Income.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
EXHIBIT 27(b)
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1997 and the Consolidated Statement
of Income and the Consolidated Statement of Cash Flows for the three months
ended March 31, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000052485
<NAME> IES UTILITIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,350,093
<OTHER-PROPERTY-AND-INVEST> 71,852
<TOTAL-CURRENT-ASSETS> 137,544
<TOTAL-DEFERRED-CHARGES> 10,808
<OTHER-ASSETS> 196,096
<TOTAL-ASSETS> 1,766,393
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 228,959
<TOTAL-COMMON-STOCKHOLDERS-EQ> 541,428
0
18,320
<LONG-TERM-DEBT-NET> 462,389
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 126,000
<LONG-TERM-DEBT-CURRENT-PORT> 63,140
0
<CAPITAL-LEASE-OBLIGATIONS> 17,421
<LEASES-CURRENT> 14,047
<OTHER-ITEMS-CAPITAL-AND-LIAB> 523,648
<TOT-CAPITALIZATION-AND-LIAB> 1,766,393
<GROSS-OPERATING-REVENUE> 226,398
<INCOME-TAX-EXPENSE> 9,245<F1>
<OTHER-OPERATING-EXPENSES> 193,810
<TOTAL-OPERATING-EXPENSES> 193,810<F1>
<OPERATING-INCOME-LOSS> 32,588
<OTHER-INCOME-NET> 814
<INCOME-BEFORE-INTEREST-EXPEN> 33,402
<TOTAL-INTEREST-EXPENSE> 12,306
<NET-INCOME> 11,851
229
<EARNINGS-AVAILABLE-FOR-COMM> 11,622
<COMMON-STOCK-DIVIDENDS> 14,000
<TOTAL-INTEREST-ON-BONDS> 38,631
<CASH-FLOW-OPERATIONS> 65,607
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income for IES Utilities Inc.
</FN>
</TABLE>
