<PAGE> 1
As Filed Pursuant to Rule 424(b)(2)
Registration No. 333-32097
Prospectus Supplement (To Prospectus dated July 25, 1997)
IES UTILITIES INC.
$135,000,000
6 5/8% SENIOR DEBENTURES, SERIES A, DUE 2009
The 6 5/8% Senior Debentures, Series A, Due 2009 (the "Offered Debentures") of
IES Utilities Inc. (the "Company") will mature on August 1, 2009. The Offered
Debentures will be unsecured obligations of the Company and will rank on a
parity with all other unsecured and unsubordinated debt of the Company. Interest
on the Offered Debentures is payable semi-annually on February 1 and August 1 of
each year, commencing February 1, 1998. The Offered Debentures will not be
redeemable prior to maturity and will not provide for any sinking fund. The
Offered Debentures will be represented by one or more global securities (the
"Global Securities") registered in the name of The Depository Trust Company
("DTC") or its nominee. Beneficial interests in Global Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC and its participants. See "CERTAIN TERMS OF THE OFFERED DEBENTURES" herein.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
=================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- -------------------------------------------------------------------------------------------------
Per Debenture 99.595% 0.500% 99.095%
Total $134,453,250 $675,000 $133,778,250
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from August 4, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of expenses, payable by the Company, estimated at $150,000.
- --------------------------------------------------------------------------------
The Offered Debentures are offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to approval of certain
legal matters by Dorsey & Whitney LLP, counsel for the Underwriters and certain
other conditions. It is expected that delivery of the Offered Debentures will be
made on or about August 4, 1997, through the book-entry facilities of DTC,
against payment therefor in immediately available funds.
CHASE SECURITIES INC.
SALOMON BROTHERS INC
SMITH BARNEY INC.
UBS SECURITIES
The date of this Prospectus Supplement is July 30, 1997
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED DEBENTURES,
INCLUDING OVERALLOTMENT, STABILIZING AND SYNDICATE COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
THE COMPANY
The Company was incorporated under the laws of the State of Iowa on May 25,
1925. The Company is a public utility operating company with all of its
operations in the State of Iowa and is a wholly-owned subsidiary of IES
Industries Inc. ("Industries"), a public utility holding 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, providing for:
(a) IPC becoming a wholly-owned subsidiary of WPLH, and (b) the merger of
Industries with and into WPLH, which merger will result in the combination of
Industries and WPLH as a single holding company. The new holding company will be
named Interstate Energy Corporation and Industries will cease to exist. The
proposed merger is expected to close promptly after all of the conditions to its
consummation, including the receipt of all regulatory approvals, which are
expected to be received by the fourth quarter of 1997, are fulfilled or waived.
For further information regarding the Company and the proposed merger, see "THE
COMPANY" and "THE MERGER" in the accompanying Prospectus.
RECENT DEVELOPMENTS
The Company's operating revenues for the quarter and six months ended June
30, 1997, $169,623,000 and $396,021,000, respectively, were higher compared to
$164,240,000 and $363,008,000 for the same periods in 1996. Operating income for
the quarter and six months ended June 30, 1997, $26,437,000 and $59,026,000,
respectively, was also higher compared to $23,009,000 and $57,212,000 for the
same periods in 1996. Net income available for common stock for the quarter and
six months ended June 30, 1997, $6,662,000 and $18,285,000, respectively, was
lower compared to $7,001,000 and $20,900,000 for the same periods in 1996 due to
higher interest and depreciation expenses and a reserve for non-utility
investments.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Debentures will be used to
reduce outstanding short-term debt. As of July 15, 1997, the average weighted
interest rate on the short-term debt to be repaid was approximately 5.58% per
annum with maturities of less than one month.
CERTAIN TERMS OF THE OFFERED DEBENTURES
The following description of the particular terms of the Offered Debentures
supplements, and to the extent inconsistent therewith supersedes, the
description of the general terms and provisions of Senior Debentures set forth
in the accompanying Prospectus, to which description reference is hereby made.
All capitalized terms used herein which are not defined herein shall have the
same meanings as the same terms used in the accompanying Prospectus.
General. The Offered Debentures are unsecured obligations of the Company
and will rank on a parity with all other unsecured and unsubordinated debt of
the Company. The Offered Debentures are limited to $135,000,000 in aggregate
principal amount and will be issued under the Company's Indenture (For Senior
Unsecured Debt Securities) dated as of August 1, 1997 between the Company and
The First National Bank of Chicago, as Trustee (the "Senior Unsecured
Indenture"). The Senior Unsecured Indenture does not limit the aggregate amount
of unsecured and unsubordinated debt of the Company. The Offered Debentures are
not afforded any protection under the Company's Indenture of Mortgage and Deed
of Trust, dated as of August 1, 1940, the Indenture or Deed of Trust, dated as
of February 1, 1923, or the Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1993. A default with respect to, or an acceleration of, any other
indebtedness of the Company, including indebtedness subordinate to the Offered
Debentures, will not constitute an Event of Default with respect to the Offered
Debentures.
S-2
<PAGE> 3
Maturity, Interest and Payment. The Offered Debentures will mature on
August 1, 2009. The Offered Debentures will bear interest at the rate shown in
their title, payable semi-annually on February 1 and August 1 in each year,
commencing February 1, 1998, to holders registered at the close of business on
the January 15 and July 15, as the case may be, next preceding such interest
payment date. Interest on the Offered Debentures will accrue from August 4,
1997, or from the most recent interest payment date to which interest has been
paid or provided for to, but excluding, the most recent interest payment date.
Offered Debentures may be transferred or exchanged without any service charge.
The Offered Debentures may be transferred at the office of the agent of the
Company in New York, New York.
No Redemption or Sinking Fund. The Offered Debentures may not be redeemed
prior to maturity by the Company and no sinking fund will be established for the
benefit of the Offered Debentures.
Defeasance. The provisions described in the accompanying Prospectus under
the caption "DESCRIPTION OF THE SENIOR UNSECURED INDENTURE -- Defeasance" are
applicable to the Offered Debentures.
As is set forth in such description, under the provisions of the Senior
Unsecured Indenture, at the Company's election, the Offered Debentures will be
deemed to have been paid for purposes of the Senior Unsecured Indenture and the
entire indebtedness of the Company in respect thereof will be deemed to have
been satisfied and discharged if there has been irrevocably deposited with the
Trustee or any Paying Agent in trust sufficient cash or certain government
securities, or a combination thereof, to fully satisfy all principal of and
interest on the Offered Debentures.
Under existing case law and regulations, such a deposit, satisfaction and
discharge (a "defeasance") is treated as a sale or exchange of the obligations
in respect of the Offered Debentures for federal income tax purposes. A holder
would then recognize gain or loss in the amount by which the fair market value
of the Offered Debentures after the defeasance was greater or less than the
holder's basis in the Offered Debentures prior to the defeasance. Such gain or
loss generally would be capital gain or loss to a holder who held the Offered
Debentures as capital assets. In addition, there may be other associated tax
consequences. Prospective purchasers are urged to consult their own tax advisors
as to the specific consequences to them of a defeasance. See "DESCRIPTION OF THE
SENIOR UNSECURED INDENTURE -- Defeasance" in the accompanying Prospectus.
Global Securities. The Offered Debentures will be represented by a Global
Security or Securities that will be deposited with, or on behalf of, DTC and
registered in the name of DTC or a nominee thereof.
DTC has advised the Company and the Underwriters that DTC is (i) a
limited-purpose trust company organized under the New York Banking Law, (ii) a
"banking organization" within the meaning of the New York Banking Law, (iii) a
member of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and (v) a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities of its participating
organizations ("participants") and to facilitate the clearance and settlement of
securities transactions, such as transfers and pledges, among its participants
in such securities through electronic computerized book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own
DTC. Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
A Global Security shall be exchangeable for Offered Debentures 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 depository for such
Global Security and no successor depository 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 depository, (ii) the Company in its sole discretion
S-3
<PAGE> 4
determines that such Global Security shall be so exchangeable or (iii) there
shall have occurred and be continuing an Event of Default with respect to such
Offered Debentures. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Offered Debentures registered in
such names as DTC shall direct. It is expected that such instructions will be
based upon directions received by DTC from its participants with respect to
ownership of beneficial interest in such Global Security.
Settlement for the Offered Debentures will be made in immediately available
funds. So long as the Offered Debentures are represented by one or more Global
Securities, all payments of principal and interest will be made by the Company
in immediately available funds.
So long as the Offered Debentures are represented by one or more Global
Securities registered in the name of DTC or its nominee, the Offered Debentures
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in the Offered Debentures will therefore be required by DTC to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on the trading
activity in the Offered Debentures.
A further description of DTC's procedures with respect to the Offered
Debentures is set forth under "GLOBAL SECURITIES" in the accompanying
Prospectus.
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to the Underwriters, the
respective principal amounts of the Offered Debentures set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
OFFERED
UNDERWRITER DEBENTURES
----------------------------------------------------------- ---------------
<S> <C>
Chase Securities Inc. ..................................... $33,750,000
Salomon Brothers Inc ...................................... 33,750,000
Smith Barney Inc........................................... 33,750,000
UBS Securities LLC......................................... 33,750,000
------------
$135,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the Offered Debentures is subject
to the approval of certain legal matters by its counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the
Offered Debentures if any are taken.
The Underwriters initially propose to offer all or part of the Offered
Debentures directly to the public at the public offering price set forth on the
cover page hereof and all or part to certain dealers at prices that represent
concessions not to exceed 0.30% of the principal amount thereof. The
Underwriters may allow, and such dealers may reallow, concessions to certain
other dealers not to exceed 0.25% of the principal amount thereof. After the
public offering, the public offering price and concessions may be changed by the
Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Offered Debentures are a new issue of securities with no established
trading market. The Company does not intend to apply for listing of the Offered
Debentures on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Offered
Debentures, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Offered Debentures and any
such market making activity may be discontinued at any time at the sole
discretion of each Underwriter. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Offered Debentures.
S-4
<PAGE> 5
In connection with the offering of the Offered Debentures, Chase Securities
Inc., on behalf of the Underwriters may engage in overallotment, stabilizing
transactions and syndicate covering transactions in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended. Overallotment involves
sales in excess of the offering size, which creates a short position for the
Underwriters. Stabilizing transactions involve bids to purchase the Offered
Debentures in the open market for the purpose of pegging, fixing or maintaining
the price of the Offered Debentures. Syndicate covering transactions involve
purchases of the Offered Debentures in the open market after the distribution
has been completed in order to cover short positions. Such stabilizing
transactions and syndicate covering transactions may cause the price of the
Offered Debentures to be higher than it would otherwise be in the absence of
such transactions. Such activities, if commenced, may be discontinued at any
time.
Certain of the Underwriters and their affiliates engage from time to time
in investment banking and general financing and banking transactions with the
Company and its affiliates.
S-5
<PAGE> 6
PROSPECTUS
$135,000,000
IES UTILITIES INC.
DEBT SECURITIES
IES Utilities Inc. (the "Company") may from time to time issue up to
$135,000,000 aggregate principal amount of its various debt securities,
including Collateral Trust Bonds, Senior Debentures and Junior Subordinated
Debentures (collectively referred to as "Securities"), in one or more series, at
prices and on terms to be determined at the time of sale. The terms of the
Securities in respect of which this Prospectus is being delivered, including,
where applicable, the series designation, the principal amount of the series,
the maturity, the rate and time of payment of interest, the initial public
offering price, the provisions for redemption and other provisions, will be set
forth in one or more Prospectus Supplements (each a "Prospectus Supplement"),
together with the terms of offering of the Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Securities may be sold by the Company through underwriters, dealers or
agents, or directly to one or more purchasers pursuant to terms fixed at the
time of sale. The Prospectus Supplement will set forth the names of the
underwriters, dealers or agents, if any, any applicable commissions or
discounts, and the net proceeds to the Company from any such sale. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers or agents.
The Date of this Prospectus is July 25, 1997.
<PAGE> 7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
SEC's regional offices located at 1400 Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60601 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such materials can be obtained at prescribed rates from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. In addition, such reports and
other information concerning the Company can be inspected at the principal
office of the Company, 200 First Street S.E., Cedar Rapids, Iowa 52401.
The Company has filed with the SEC a registration statement on Form S-3
(herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith, which
may be inspected without charge at the office of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such documents may also be obtained from
the SEC at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
Exchange Act are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
3. The Company's Current Report on Form 8-K dated April 28, 1997.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13, 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Securities shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing such documents;
provided, however, that documents filed by the Company pursuant to Sections 13,
14 or 15(d) of the Exchange Act prior to the end of the fiscal year covered by
the most recent Annual Report on Form 10-K of the Company shall not be deemed to
be incorporated herein by reference or to be a part hereof from and after the
date of the filing of such Annual Reports on Form 10-K. The documents
incorporated herein by reference are sometimes hereinafter called the
"Incorporated Documents." Any statement contained herein or in an Incorporated
Document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in a Prospectus
Supplement or in any subsequently filed Incorporated Document modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more Incorporated Documents; accordingly, such information
contained herein is qualified in its entirety by reference to Incorporated
Documents and should be read in conjunction therewith.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of such person, a copy of any or all of the Incorporated
Documents (not including exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests for such
copies should be directed to William
2
<PAGE> 8
Jurgensen, Director of Shareholder Services, IES Industries Inc., 200 First
Street S.E., Cedar Rapids, Iowa 52401, telephone (319) 398-7755.
No person has been authorized to give any information or make any
representation not contained in this Prospectus or, with respect to any
Security, the Prospectus Supplement relating thereto, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or any underwriter. This Prospectus and any Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus and a Prospectus Supplement nor any sale made
thereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date of that Prospectus
Supplement.
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION................................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................... 2
THE COMPANY............................................................................. 4
THE MERGER.............................................................................. 4
USE OF PROCEEDS......................................................................... 5
SELECTED CONSOLIDATED FINANCIAL INFORMATION............................................. 5
PLAN OF DISTRIBUTION.................................................................... 6
DESCRIPTION OF THE COLLATERAL TRUST BONDS............................................... 6
DESCRIPTION OF THE 1940 INDENTURE....................................................... 18
DESCRIPTION OF THE ISU 1923 INDENTURE................................................... 22
DESCRIPTION OF THE SENIOR UNSECURED INDENTURE........................................... 27
DESCRIPTION OF THE SUBORDINATED INDENTURE............................................... 37
GLOBAL SECURITIES....................................................................... 46
EXPERTS................................................................................. 47
LEGAL MATTERS........................................................................... 47
</TABLE>
3
<PAGE> 9
THE COMPANY
The Company was incorporated under the laws of the State of Iowa on May 25,
1925. The Company is a public utility operating company with all of its
operations in the State of Iowa and is a wholly-owned subsidiary of IES
Industries Inc. ("Industries"), a public utility holding company. The Company is
the surviving corporation following the merger on December 31, 1993 of Iowa
Southern Utilities Company ("Iowa Southern" or "ISU") with and into Iowa
Electric Light and Power Company ("IE"). The surviving corporation was
subsequently renamed IES Utilities Inc.
The Company supplies electric energy and natural gas to a service area with
an estimated population of approximately one million. For the twelve months
ended March 31, 1997, the Company derived approximately 75% of its revenues from
the sale of electric energy, approximately 22% from the sale of natural gas and
approximately 3% from the sale of steam gas. At March 31, 1997, the Company
provided service to approximately 336,000 electric, 176,000 natural gas and 226
steam retail customers as well as 30 resale customers in more than 550 Iowa
communities. The Company's principal executive offices are located at 200 First
Street S.E., Cedar Rapids, Iowa 52401, telephone (319) 398-4411.
Additional information concerning the Company and its operations is
contained in the Incorporated Documents, to which reference is hereby made.
THE MERGER
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"), providing for: (a) IPC becoming a wholly-owned
subsidiary of WPLH, and (b) the merger of Industries with and into WPLH, which
merger will result in the combination of Industries and WPLH as a single holding
company (collectively, the "Proposed Merger"). The new holding company will be
named Interstate Energy Corporation ("Interstate Energy") and Industries will
cease to exist. The Proposed Merger, which will be accounted for as a pooling of
interests and is intended to be tax-free for federal income tax purposes, has
been approved by the respective Boards of Directors and shareholders. It is
still subject to approval by several federal and state regulatory agencies. The
companies expect to receive such regulatory approvals by the third or fourth
quarter of 1997.
WPLH is a holding company headquartered in Madison, Wisconsin, and is the
parent company of Wisconsin Power and Light Company ("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.
Interstate Energy will be the parent company of Utilities, WP&L and IPC and
will be registered under the Public Utility Holding Company Act of 1935, as
amended. The Merger Agreement provides that these operating utility companies
will continue to operate as separate entities for a minimum of three years
beyond the effective date of the merger. In addition, the non-utility operations
of the Company and WPLH will be combined shortly after the effective date of the
merger under one entity to manage the diversified operations of Interstate
Energy. The corporate headquarters of Interstate Energy will be in Madison,
Wisconsin.
The Securities and Exchange Commission historically has interpreted the
1935 Act to preclude registered holding companies, with limited exceptions, from
owning both electric and gas utility systems. Although the Securities and
Exchange Commission has recommended that registered holding companies be allowed
to hold both gas and electric utility operations if the affected states agree,
it remains possible that the Securities and Exchange Commission may require as a
condition to its approval of the Proposed Merger that the Company, WPLH and IPC
divest their gas utility properties, and possibly certain non-utility ventures
of the Company and WPLH, within a reasonable time after the effective date of
the Proposed Merger.
4
<PAGE> 10
Additional information concerning the Proposed Merger is contained in the
Incorporated Documents, to which reference is hereby made.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement or a
supplement thereto, the Company intends to use the net proceeds to be received
from the issuance and sale of the Securities offered hereby (i) to reduce
short-term debt and (ii) for general corporate purposes.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES AND RATIOS)
The financial data presented below should be read in conjunction with the
Company's consolidated financial statements and notes thereto which are
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
TWELVE --------- --------- --------- --------- ---------
MONTHS ENDED
MARCH 31, 1997
--------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income Summary:
Operating revenues........... $782,609 $754,979 $709,826 $685,366 $713,750 $610,262
Operating income............. 152,110 153,725 142,265 135,591 143,329 100,361
Net income................... 61,452 63,729 59,278 61,210 67,970 45,291
Dividend requirements on 914 914 914 914 1,729
preferred stock........... 914
Net income available for 62,815 58,364 60,296 67,056 43,562
common stock(1)........... 60,538
Cash dividends declared on 44,000 43,000 52,000 31,300 24,721
common stock................. 48,000
Ratio of earnings to fixed 3.23 3.04 3.18 3.41 2.49
charges(2)................... 3.09
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
(UNAUDITED)(3)
---------------------------
PERCENT OF
ACTUAL CAPITALIZATION
---------- --------------
<S> <C> <C>
Capitalization Summary:
Long-term debt(4).................................................. $ 525,529 48.4%
Preferred stock.................................................... 18,320 1.7%
Common equity...................................................... 541,428 49.9%
---------- -----
Total...................................................... $1,085,277 100.0%
========== =====
</TABLE>
- ---------------
(1) All of the Company's common stock is owned by IES Industries Inc.
(2) For purposes of computation of these ratios, (a) earnings have been
calculated by adding fixed charges and federal and state income taxes to net
income; (b) fixed charges consist of interest (including amortization of
debt expense, premium and discount) on long-term and other debt, and the
estimated interest component of rents.
(3) Does not reflect the issuance of the Securities or the use of the proceeds
thereof.
(4) Includes $63,140,000 of current maturities.
5
<PAGE> 11
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters or dealers, (ii) directly to one or more purchasers, or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
any offering of the Securities, including the names of any underwriters or
agents, the purchase price of such Securities, the proceeds to the Company from
such sale, any underwriting discounts and other items constituting underwriters'
compensation, the initial public offering price, and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable Prospectus Supplement, the
obligations of the underwriters to purchase such Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all of such Securities if any of such Securities are purchased. The initial
public offering prices and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Securities will be named, and any commissions payable by the Company
to such agent will be set forth, in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a reasonable efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters, or dealers to solicit offers by certain
specified institutions to purchase the Securities at the public offering price
set forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement or a supplement thereto. Such contracts will be subject only to those
conditions set forth in the applicable Prospectus Supplement, and such
Prospectus Supplement will set forth the commissions payable for solicitation of
such contracts.
Any underwriters, dealers, or agents participating in the distribution of
the Securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of the Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act. Agents and underwriters may be customers
of, engage in transactions with, or perform services for the Company or its
affiliates in the ordinary course of business.
DESCRIPTION OF THE COLLATERAL TRUST BONDS
GENERAL
If the Securities are issued as Collateral Trust Bonds, those Collateral
Trust Bonds will be issued in one or more series as fully registered bonds,
without coupons, under an Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1993 (the "Original Mortgage"), between the Company and The First
National Bank of Chicago, as Trustee (the "Trustee"), as amended and
supplemented. As used herein, the term "Bonds" refers to any series of
Collateral Trust Bonds in respect of which this Prospectus is being delivered.
The Original Mortgage as amended and supplemented by various supplemental
indentures including one or more supplemental indentures relating to any
issuance of Collateral Trust Bonds, is hereinafter referred to as the
"Mortgage." The summaries herein concerning the Collateral Trust Bonds do not
purport to be complete and are subject to the detailed provisions of the
Mortgage, a copy of which was previously filed with the Commission, is listed as
an exhibit to the Registration Statement of which this Prospectus is a part, and
is incorporated herein by reference. Capitalized terms used herein which are not
otherwise defined in this
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Prospectus have the meanings ascribed thereto in the Mortgage. Wherever
particular provisions of the Mortgage or terms defined therein are referred to,
such provisions or definitions are incorporated by reference as a part of the
statements made herein and such statements are qualified in their entirety by
such reference. References to article and section numbers herein, unless
otherwise indicated, are references to article and section numbers of the
Mortgage.
The Mortgage provides that, in addition to Collateral Trust Bonds,
additional debt securities may be issued thereunder, without limitation as to
the aggregate principal amount. (See "Issuance of Additional Securities" below.)
The Bonds will be secured equally and ratably with all other securities issued
under the Mortgage.
TERMS OF SPECIFIC SERIES OF THE BONDS
Reference is made to the applicable Prospectus Supplement, or a supplement
thereto, for a description of the following terms of the Bonds: (i) the title of
such Bonds; (ii) the limit, if any, upon the aggregate principal amount of such
Bonds; (iii) the date or dates on which the principal of such Bonds is payable;
(iv) the rate or rates at which such Bonds will bear interest, if any; the date
or dates from which such interest will accrue; the dates on which such interest
will be payable ("Interest Payment Dates"); and the regular record dates for the
interest payable on such Interest Payment Dates; (v) the option, if any, of the
Company to redeem such Bonds and the periods within which or the dates on which,
the prices at which and the terms and conditions upon which, such Bonds may be
redeemed, in whole or in part, upon the exercise of such option; (vi) the
obligation, if any, of the Company to redeem or purchase Bonds pursuant to any
sinking fund or analogous provisions or at the option of the Holder (as
hereinafter defined) and the periods within which or the dates on which, the
prices at which and the terms and conditions upon which, such Bonds will be
redeemed, in whole or in part, pursuant to such obligation; (vii) the
denominations in which such Bonds will be issuable; (viii) whether such Bonds
are to be issued in whole or in part in the form of one or more global Bonds
and, if so, the identity of the depositary for such global Bonds; and (ix) any
other terms of such Bonds not inconsistent with the provisions of the Mortgage.
PAYMENT OF BONDS; TRANSFERS; EXCHANGES
Except as may be provided in the applicable Prospectus Supplement, or a
supplement thereto, interest, if any, on each Bond payable on each Interest
Payment Date will be paid to the person in whose name such Bond is registered
(the registered holder of any Bond being hereinafter called a "Holder") as of
the close of business on the regular record date relating to such Interest
Payment Date; provided, however, that interest payable at maturity (whether at
stated maturity, upon redemption or acceleration of maturity or otherwise,
hereinafter "Maturity") will be paid to the person to whom principal is paid.
However, if there has been a default in the payment of interest on any Bond,
such defaulted interest may be payable to the Holder of such Bond as of the
close of business on a date selected by the Trustee which is not more than 15
days and not less than 10 days prior to the date proposed by the Company for
payment of such defaulted interest or in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such Bond
may be listed, if the Trustee deems such manner of payment practicable. (Section
307)
Principal of and premium, if any, and interest on the Bonds at Maturity
will be payable upon presentation of the Bonds at the office of the Trustee in
Chicago, Illinois or, at the option of the Holder, at the principal corporate
trust office of The First National Bank of Chicago in New York, New York. The
transfer of Bonds may be registered, and the Bonds may be exchanged for other
Bonds of the same series and tranche, of authorized denominations of like tenor
and aggregate principal amount, at the office of The First National Bank of
Chicago in New York, New York as Bond Registrar for the Bonds. The Company will
not be required to issue, and no Bond Registrar will be required to register the
transfer of or to exchange (a) Collateral Trust Bonds of any series (including
the Bonds offered hereby) during a period of 15 days prior to giving any notice
of redemption thereof or (b) any Bond selected for redemption in whole or in
part, except the unredeemed portion of any Bond being redeemed in part. (Section
305)
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The Company may change the place for payment or registration of transfer or
exchange of the Bonds, may appoint one or more additional Paying Agents or Bond
Registrars (including, without limitation, the Company) and may remove any
Paying Agent or Bond Registrar, all at its discretion. The applicable Prospectus
Supplement or a supplement thereto, will identify any such changes prior to the
date of such Prospectus Supplement or supplement thereto. (Section 602)
REDEMPTION
Any terms for the optional or mandatory redemption of the Bonds will be set
forth in a Prospectus Supplement or a supplement thereto. Except as will
otherwise be provided with respect to Bonds redeemable at the option of the
Holder, redeemable Bonds will be redeemed only upon notice by mail not less than
30 nor more than 60 days prior to the date fixed for redemption and, if less
than all the Bonds of a series, or any tranche thereof, are to be redeemed, the
particular Bonds to be redeemed will be selected by such method as will be
provided for any particular series, or in the absence of any such provision, by
such method as the Bond Registrar deems fair and appropriate. (Sections 503 and
504)
Any notice of redemption of Bonds, at the option of the Company, may state
that such redemption will be conditional upon receipt by the Trustee, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Bonds and that
if such money has not been so received, such notice will be of no force and
effect and the Company will not be required to redeem such Bonds. (Section 504)
NO MAINTENANCE, REPLACEMENT OR SINKING FUNDS
While the Mortgage contains provisions for the maintenance of the Mortgage
Property (Section 601), it does not contain any provisions for any maintenance,
replacement, sinking or analogous fund and, except as may be provided in the
applicable Prospectus Supplement, or a supplement thereto, there will be no
provisions for any such funds for the Bonds.
SECURITY
General. Except as discussed below, securities (including the Bonds) now
or hereafter issued under the Mortgage will be secured primarily by:
(a) first mortgage bonds issued under the Company's Indenture of
Mortgage and Deed of Trust, dated as of August 1, 1940 (as amended and
supplemented, the "1940 Indenture"), to The First National Bank of Chicago,
as trustee (the "1940 Indenture Trustee"), and delivered to the Trustee
under the Mortgage. As discussed under "DESCRIPTION OF THE 1940
INDENTURE -- Security," the 1940 Indenture constitutes, subject to certain
exceptions, a first mortgage lien on substantially all of the properties of
the Company except properties of Iowa Southern at the time of the IE-ISU
merger;
(b) first mortgage bonds issued under Iowa Southern's Indenture or
Deed of Trust, dated as of February 1, 1923 (as amended and supplemented,
the "ISU 1923 Indenture"), with The Northern Trust Company (The First
National Bank of Chicago, successor) (the "ISU Corporate Trustee") and
Harold H. Rockwell (Richard D. Manella, successor) as trustees (the "ISU
Indenture Trustees"), and delivered to the Trustee under the Mortgage; as
discussed under "DESCRIPTION OF THE ISU 1923 INDENTURE -- Security," the
ISU 1923 Indenture constitutes, subject to certain exceptions, a first
mortgage lien on substantially all of the properties owned by Iowa Southern
at the time of the IE-ISU merger (which are now, subsequent to such merger,
properties of the Company); and
(c) the Lien of the Mortgage on the Company's properties used in the
generation, purchase, transmission, distribution or sale of electric energy
by the Company, or in the manufacture of manufactured gas, or in the
purchase, transportation, distribution or sale of manufactured gas or
natural gas, or in the generation, manufacture, distribution or sale of
steam and hot water, which Lien is junior to the liens of the 1940
Indenture and the ISU 1923 Indenture.
(Granting Clause First)
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As discussed below under "Class "A" Bonds," following a merger or
consolidation of another corporation into the Company, or the transfer by
another corporation of property to the Company, the Company could issue and
deliver to the Trustee bonds issued under an existing mortgage on the properties
of such other corporation in lieu of or in addition to bonds issued under the
1940 Indenture or the ISU 1923 Indenture. In such event, the securities
(including the Bonds) issued under the Mortgage would be secured, additionally,
by such bonds and by the Lien of the Mortgage on the properties of such other
corporation, which would be junior to the liens of the existing mortgage of such
corporation, the 1940 Indenture and the ISU 1923 Indenture. The 1940 Indenture
and the ISU 1923 Indenture and all such other mortgages are hereinafter,
collectively, called the "Class "A" Mortgages," and all bonds outstanding under
the Class "A" Mortgages are hereinafter collectively called the "Class "A"
Bonds." If and when no Class "A" Mortgages are in effect, the Mortgage will
constitute a first mortgage lien on all property of the Company subject thereto.
(Sections 101 and 706)
Class "A" Bonds. Any Class "A" Bonds issued after the date of the Mortgage
(other than in substitution or exchange for previously outstanding Class "A"
Bonds) will be issued and delivered to, and registered in the name of, the
Trustee or its nominee and will be owned and held by the Trustee, subject to the
provisions of the Mortgage, for the benefit of the Holders of all securities
issued under the Mortgage and Outstanding from time to time. Class "A" Bonds
issued as the basis of authentication and delivery of securities under the
Mortgage (a) will mature on the same dates, and in the same principal amounts,
as such securities and (b) will contain, in addition to any mandatory redemption
provisions applicable to all Class "A" Bonds Outstanding under the related Class
"A" Mortgage, mandatory redemption provisions correlative to provisions for
mandatory redemption, or for redemption at the option of the Holder, of such
securities. Class "A" Bonds issued as the basis for authentication and delivery
of a series or tranche of securities under the Mortgage (x) may, but need not,
bear interest, any such interest to be payable at the same times as interest on
the securities of such series or tranche and (y) may, but need not, contain
provisions for the redemption thereof at the option of the Company, any such
redemption to be made at a redemption price or prices not less than the
principal amount of such Class "A" Bonds. (Sections 402 and 701)
Any payment by the Company of principal of or premium or interest on the
Class "A" Bonds held by the Trustee will be applied by the Trustee to the
payment of any principal, premium or interest, as the case may be, in respect of
any Mortgage securities which is then due and, to the extent of such
application, the obligation of the Company under the Mortgage to make such
payment in respect of such securities will be deemed satisfied and discharged.
If, at the time of any such payment of principal of Class "A" Bonds, such
payment shall exceed the amount of principal then due in respect of the
securities, the excess of such payment will be deemed to constitute Funded Cash
and will be held by the Trustee as part of the Mortgaged Property, to be
withdrawn, used or applied as provided in the Mortgage. If, at the time of any
such payment of premium or interest on Class "A" Bonds held by the Trustee, such
payment shall exceed the amount of premium or interest then due in respect of
such securities, the excess of such payments will be remitted to the Company at
its request. Any payment by the Company of principal of or premium or interest
on any Mortgage securities authenticated and delivered on the basis of the
deposit with the Trustee of Class "A" Bonds (other than by application of the
proceeds of a payment in respect of such Class "A" Bonds) will, to the extent
thereof, be deemed to satisfy and discharge the obligation of the Company, if
any, to make a payment of principal, premium or interest, as the case may be, in
respect of such Class "A" Bonds which is then due. (Section 702; see "Withdrawal
of Cash" below.)
The Trustee may not sell, assign or otherwise transfer any Class "A" Bonds
held by the Trustee except to a successor trustee under the Mortgage. (Section
704) At the time any Mortgage securities of any series or tranche which have
been authenticated and delivered upon the basis of Class "A" Bonds cease to be
Outstanding (other than a result of the application of the proceeds of the
payment or redemption of such Class "A" Bonds), the Trustee shall surrender to,
or upon the order of, the Company an equal principal amount of such Class "A"
Bonds having the same Stated Maturity and mandatory redemption provisions as
such securities. (Section 703)
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At the date of this Prospectus, the only Class "A" Mortgages are the 1940
Indenture and the ISU 1923 Indenture and the only Class "A" Bonds issuable are
first mortgage bonds issuable thereunder. The Mortgage provides that in the
event of the merger or consolidation of another company with or into the
Company, an existing mortgage constituting a lien on properties of such other
company prior to the Lien of the Mortgage may be designated by the Company as an
additional Class "A" Mortgage. Any bonds thereafter issued under such additional
mortgage would be Class "A" Bonds and (other than in substitution or exchange
for previously Outstanding Class "A" Bonds) could be issued only to provide the
basis for the authentication and delivery of securities under the Mortgage.
(Section 706)
When no bonds are Outstanding under a Class "A" Mortgage except for Class
"A" Bonds held by the Trustee, then, at the request of the Company and subject
to satisfaction of certain conditions, the Trustee will surrender such Class "A"
Bonds for cancellation and the related Class "A" Mortgage will be satisfied and
discharged; whereupon, the lien of such Class "A" Mortgage on the property owned
by the Company will cease to exist and the Lien of the Mortgage will become a
first mortgage lien on such property, subject to Permitted Liens. (Section 707)
So long as any securities are Outstanding under the Mortgage, the Company
will not (a) issue any additional Class "A" Bonds except (i) to replace any
mutilated, destroyed, lost or stolen securities of the same series or to effect
exchanges and transfers of such securities or (ii) to the Trustee as the basis
for the authentication and delivery of securities or (b) subject to the lien of
any Class "A" Mortgage any property which is excepted and excluded from, or not
included in or subject to, the lien of such Class "A" Mortgage. (Section 610)
First mortgage bonds may be issued under the 1940 Indenture on the basis of
property additions, retirements of bonds previously issued under the 1940
Indenture and cash deposited with the 1940 Indenture Trustee. (See "DESCRIPTION
OF THE 1940 INDENTURE -- Issuance of Additional Bonds.") First mortgage bonds
may be issued under the ISU 1923 Indenture on the basis of property additions,
retirements of bonds previously issued under the ISU 1923 Indenture and cash
deposited with the ISU Corporate Trustee. (See "DESCRIPTION OF THE ISU 1923
INDENTURE -- Issuance of Additional Bonds.")
Lien of the Mortgage. At the date of this Prospectus, substantially all of
the Company's property subject to the Lien of the Mortgage is also subject to
the prior lien of the 1940 Indenture or the ISU 1923 Indenture. Any Bonds
offered hereby will have the benefit of the first mortgage lien of the 1940
Indenture and the ISU 1923 Indenture on such property, and the benefit of the
prior lien of any additional Class "A" Mortgage on any property subject thereto,
to the extent of the aggregate principal amount of Class "A" Bonds issued under
the respective Class "A" Mortgage and held by the Trustee.
The Lien of the Mortgage is subject to Permitted Liens which include tax
liens and other governmental charges which are not delinquent or which can
thereafter be paid without penalty or which are being contested, construction
and materialmen's liens, certain judgment liens, easements, reservations and
rights of others (including governmental entities) in, and defects of title in,
certain property of the Company, certain leasehold interests, liens on the
Company's pollution control and sewage and solid waste disposal facilities which
were previously financed with industrial development revenue bonds and certain
other liens and encumbrances. (Granting Clauses and Section 101)
There are excepted from the Lien of the Mortgage, among other things, cash
and securities not paid, deposited or held under the Mortgage; contracts, leases
and other agreements of all kinds, contract rights, bills, notes and other
instruments, accounts receivable, claims, judgments, certain intellectual
property rights and other general intangibles; automobiles, aircraft and
vessels; all goods, wares, merchandise, equipment, spare parts, tools,
materials, supplies and fuel held for sale or lease in the ordinary course of
business or for use or consumption in, or in the operation of, any properties of
or for the benefit of the Company; nuclear fuel; computers, machinery and
equipment used exclusively for corporate administrative or clerical purposes;
all gas, oil, minerals and timber, and rights thereto; electric energy, gas,
steam, water and other products generated, produced or purchased; property
installed on the premises of customers of the Company and designed to aid in
conservation or efficient use of energy; leasehold interests and leasehold
improvements of the Company; and all property which is located outside of the
State of Iowa and is neither specifically
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described in the Granting Clauses of the Mortgage nor specifically subjected or
required to be subjected to the Lien of the Mortgage by any provision thereof.
(Granting Clauses)
Without the consent of the Holders, the Company and the Trustee may enter
into supplemental indentures to subject to the Lien of the Mortgage additional
property (including property which would otherwise be excepted from such Lien).
(Section 1401) Such property, so long as the same would otherwise constitute
Property Additions, would thereupon constitute Property Additions and be
available as a basis for the issuance of securities under the Mortgage. (See
"Issuance of Additional Securities" below.) Property Additions generally include
any unit or element of property which is owned by the Company and is subject to
the Lien of the Mortgage except (i) any property, the cost of acquisition or
construction of which is property chargeable to an operating expense account of
the Company and (ii) goodwill, going concern value rights and intangible
property, unless the cost thereof is included in the cost of such unit or
element of property and no separate consideration was paid or apportioned
therefor, in which case Property Additions may include such goodwill, going
concern rights and intangible property. (Section 103)
The Mortgage contains provisions subjecting after-acquired property (other
than Excepted Property) to the Lien thereof. These provisions are limited in the
case of consolidation or merger or sale of substantially all of the Company's
assets. In the event of consolidation or merger or the transfer of all of the
Mortgaged Property as or substantially as an entirety, the Mortgage will not be
required to be a lien upon any of the properties then owned or thereafter
acquired by the successor corporation except properties acquired from the
Company in or as a result of such transaction and properties which are an
integral part of, or essential to the use or operation of, any Mortgaged
Property, and renewals, replacements and substitutions of or for any part
thereof. (Article Thirteen; see "Consolidation, Merger, Conveyance, Transfer or
Lease" below.) In addition, after-acquired property may be subject to vendors'
liens, purchase money mortgages and other liens thereon at the time of
acquisition thereof, including the lien of any Class "A" Mortgage.
The Mortgage provides that the Trustee will have a lien, prior to the lien
on behalf of the holders of securities issued under the Mortgage, upon Mortgaged
Property, for the payment of its reasonable compensation and expenses and for
indemnity against certain liabilities. (Section 1107)
ISSUANCE OF ADDITIONAL SECURITIES
The maximum principal amount of securities which may be issued under the
Mortgage is unlimited. (Section 301) Under the Mortgage, securities of any
series may be issued from time to time on the basis of, and in an aggregate
principal amount not exceeding:
(1) the aggregate principal amount of Class "A" Bonds issued and
delivered to the Trustee for such purpose;
(2) 75% of the Cost or fair value (whichever is less) of Property
Additions (as described below) which do not constitute Funded Property
(generally, Funded Property includes Property Additions which have been
made, or deemed to have been made, the basis of the authentication and
delivery of securities, the release of Mortgaged Property from the Lien of
the Mortgage or cash withdrawals, or which have been substituted for
retired property), after certain deductions and additions, primarily
including adjustments to offset property retirements;
(3) the aggregate principal amount of Retired Securities (which
consist of securities no longer outstanding under the Mortgage which have
not been used for certain other purposes under the Mortgage and which are
not to be paid, redeemed, purchased or otherwise retired by the application
thereto of Funded Cash) or Retired Prior Lien Bonds; and
(4) the amount of cash deposited with the Trustee.
(Article Four)
THE COMPANY IS NOT REQUIRED TO SATISFY A NET EARNINGS REQUIREMENT PRIOR TO
THE ISSUANCE OF SECURITIES UNDER THE MORTGAGE.
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Unless otherwise provided in the applicable Prospectus Supplement, or
supplement thereto, the Company will issue the Bonds on the basis of Class "A"
Bonds issued under the 1940 Indenture. (See "DESCRIPTION OF THE 1940
INDENTURE -- Issuance of Additional Bonds" for a description of the requirements
for the issuance of bonds under the 1940 Indenture, which requirements are
generally more restrictive than those for the issuance of securities under the
Mortgage.)
RELEASE OF PROPERTY
Unless an Event of Default (hereinafter defined) shall have occurred and be
continuing, the Company may obtain the release from the Lien of the Mortgage of
any Funded Property, except for cash held by the Trustee, upon delivery to the
Trustee of cash equal in amount to the amount, if any, that the Cost of the
property to be released (or, if less, the fair value of such property at the
time it became Funded Property) exceeds the aggregate of:
(1) the principal amount, subject to certain limitations, of
obligations secured by purchase money mortgages upon the property to be
released delivered to the Trustee;
(2) the Cost or fair value (whichever is less) of certified Property
Additions not constituting Funded Property after certain deductions and
additions, primarily including adjustments to offset property retirements
(except that such adjustments need not be made if such Property Additions
were acquired or made within the 90-day period preceding the request for
such release);
(3) an amount equal to 133 1/3% of the aggregate principal amount of
securities the Company would be entitled to issue on the basis of Retired
Securities or Retired Prior Lien Bonds (with such entitlement being waived
by operation of such release);
(4) the amount of cash deposited with, or the principal amount of
obligations secured by purchase money mortgages upon the property released
and delivered to, the Trustee or other holder of a lien prior to the Lien
of the Mortgage;
(5) an amount equal to 133 1/3% of the aggregate principal amount of
securities Outstanding under the Mortgage and delivered to the Trustee
(with such Securities to be canceled by the Trustee); and
(6) any taxes and expenses incidental to any sale, exchange,
dedication or other disposition of the property to be released.
(Section 803)
Unless an Event of Default shall have occurred and be continuing, property
which is not Funded Property may generally be released from the Lien of the
Mortgage without depositing any cash or property with the Trustee as long as (a)
the aggregate amount of Cost or fair value (whichever is less) of all Property
Additions which do not constitute Funded Property (excluding the property to be
released) after certain deductions and additions, primarily including
adjustments to offset property retirements, is not less than zero or (b) the
Cost or fair value (whichever is less) of property to be released does not
exceed the aggregate amount of the Cost or fair value (whichever is less) of
Property Additions acquired or made within the 90-day period preceding the
release. (Section 804)
The Mortgage provides simplified procedures for the release of property
which has been released from the lien of Class "A" Mortgages, minor properties
and property taken by eminent domain, and provides for dispositions of certain
obsolete property and grants or surrender of certain rights without any release
or consent by the Trustee.
If any property released from the Lien of Mortgage continues to be owned by
the Company after such release, the Mortgage will not become a lien on any
improvement, extension or addition to such property or renewals, replacements or
substitutions of or for any part or parts of such property. (Article Eight)
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WITHDRAWAL OF CASH
Subject to certain limitations, unless an Event of Default shall have
occurred and be continuing, cash held by the Trustee may (1) be withdrawn by the
Company (a) to the extent of the Cost or fair value (whichever is less) of
Property Additions not constituting Funded Property, after certain deductions
and additions, primarily including adjustments to offset retirements or (b) in
an amount equal to 133 1/3% of the aggregate principal amount of securities that
the Company would be entitled to issue under the Mortgage on the basis of
Retired Securities or Retired Prior Lien Bonds (with the entitlement to such
issuance being waived by operation of such withdrawal) or (c) in an amount equal
to 133 1/3% of the aggregate principal amount of any securities Outstanding
under the Mortgage and issued under the Mortgage and delivered to the Trustee,
or (2) upon the request of the Company, be applied to (a) the purchase of
securities issued under the Mortgage (at prices not exceeding 133 1/3% of the
principal amount thereof) or (b) the redemption or payment at Stated Maturity of
securities issued under the Mortgage (with any securities received by the
Trustee pursuant to these provisions being canceled by the Trustee) (Section
806); provided, however, that cash deposited with the Trustee as the basis for
the authentication and delivery of securities, as well as cash representing a
payment of principal of Class "A" Bonds, may only be withdrawn in an amount
equal to the aggregate principal amount of securities the Company would be
entitled to issue under the Mortgage on any basis (with the entitlement to such
issuance being waived by operation of such withdrawal), or may, upon the request
of the Company, be applied to the purchase redemption or payment of securities
issued under the Mortgage at prices not exceeding, in the aggregate, the
principal amount thereof. (Sections 405 and 702)
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company may not consolidate with or merge into any other corporation or
convey, transfer or lease the Mortgaged Property as or substantially as an
entirety to any Person unless (a) such transaction is on such terms as will
fully preserve in all material respects the Lien and security of the Mortgage
and the rights and powers of the Trustee and the Holders and (b) the corporation
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or other transfer, or which leases, the Mortgaged
Property as or substantially as an entirety is a corporation organized and
existing under the laws of the United States of America, any State or Territory
thereof or the District of Columbia, and such corporation executes and delivers
to the Trustee a supplemental indenture, which contains an assumption by such
corporation of the Company's obligations under the Mortgage and which contains a
grant, conveyance, transfer and mortgage by such corporation confirming the Lien
of the Mortgage on the Mortgaged Property and subjecting to such Lien all
property thereafter acquired by such corporation which shall constitute an
integral part, or be essential to the use or operation of, any Mortgage Property
or a renewal, replacement or substitution of or for any part thereof. (Section
1301)
MODIFICATION OF THE MORTGAGE
Without the consent of any Holders, the Company and the Trustee may enter
into one or more supplemental indentures for certain purposes, including any of
the following:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company in the
Mortgage and in the securities; or
(b) to add one or more covenants of the Company or other provisions
for the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be outstanding, securities
issued under the Mortgage of one or more specified series, or one or more
tranches thereof, or to surrender any right or power conferred upon the
Company by the Mortgage; or
(c) to correct or amplify the description of any property at any time
subject to the Lien of the Mortgage, or to subject to the Lien of the
Mortgage additional property; or
(d) to change or eliminate any provision of the Mortgage or to add any
new provision to the Mortgage, provided that, if such change, elimination
or addition adversely affects the interests of the Holders of the
securities of any series or tranche in any material respect, such change,
elimination or
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addition will become effective with respect to such series or tranche only
when no security of such series or tranche remains Outstanding under the
Mortgage; or
(e) to establish the form or terms of the securities of any series or
tranche as permitted by the Mortgage; or
(f) to cure any ambiguity, to correct or supplement any provision
therein which may be defective or inconsistent with any other provision
therein, or to comply with the rules or regulations of any national
securities exchange on which any of the securities issued under the
Mortgage may be listed, or to change, alter, modify, vary or eliminate any
of the provisions thereof or to add other provisions to the Mortgage, so
long as such other changes, alterations, modifications, variations,
eliminations or additions do not adversely affect the interests of the
Holders of securities of any series or tranche in any material respect,
unless they are expressly stated to become effective only as to securities
which are not then Outstanding.
Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is amended after the date
of the Mortgage in such a way as to require changes to the Mortgage or the
incorporation therein of additional provisions or so as to permit changes to, or
the elimination of, provisions which, at the date of the Mortgage or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
Mortgage, the Company and the Trustee may, without the consent of any Holders,
enter into one or more supplemental indentures to evidence or effect such
amendments. (Section 1401)
For most purposes not described above, the consent of the Holders of not
less than a majority in aggregate principal amount of the securities of all
affected series then Outstanding under the Mortgage is required for the purpose
of amending or modifying the Mortgage pursuant to one or more supplemental
indentures; provided, however, that no such amendment or modification may,
without the consent of each Holder of the Outstanding securities of each series
or tranche directly affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any security
issued under the Mortgage, or reduce the principal amount thereof or the rate of
interest thereon (or the amount of any installment of interest thereon) or
change the method of calculating such rate or reduce any premium payable upon
the redemption thereof, or impair the right to institute suit for the
enforcement of any such payment on or after the maturity thereof, (b) permit the
creation of any lien ranking prior to the Lien of the Mortgage with respect to
all or substantially all of the Mortgaged Property or terminate the Lien of the
Mortgage, or (c) reduce the percentage in principal amount of the Outstanding
securities of such series or tranche, the consent of the Holders of which is
required for any such supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with any provision of the
Mortgage or of any default thereunder and its consequences, or reduce the
requirements for quorum or voting. A supplemental indenture which changes or
eliminates any covenant or other provision of the Mortgage which has expressly
been included solely for the benefit of the Holders of, or which is to remain in
effect only so long as there shall be Outstanding securities of one or more
specified series, or one or more tranches thereof, or modifies the rights of the
Holders of securities such series or tranches with respect to such covenants or
other provision, will not be deemed to affect the rights under the Mortgage of
Holders of the securities of any other series or tranche. (Section 1402)
WAIVER
The Holders of at least a majority in aggregate principal amount of all
affected Outstanding securities issued under the Mortgage may waive the
Company's obligations to comply with certain covenants of the Mortgage, provided
that such waiver occurs before the time such compliance is required. (Section
609)
EVENTS OF DEFAULT
Each of the following events constitutes an Event of Default under the
Mortgage:
(1) failure to pay interest on any security issued under the Mortgage
within 90 days after the same becomes due;
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(2) failure to pay principal or premium, if any, on any security
issued under the Mortgage within three business days after its due date;
(3) failure to perform or breach of any covenant or warranty of the
Company in the Mortgage (other than as referred to in (1) or (2) above) for
a period of 90 days after there has been given to the Company by the
Trustee, or to the Company and the Trustee by the Holders of at least 30%
in principal amount of Outstanding securities issued under the Mortgage, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default," unless the
Trustee, or the Trustee and the Holders of a principal amount of securities
not less than the principal amount of securities the Holders of which gave
such notice, as the case may be, agree in writing to an extension of such
period prior to its expiration; provided, however, that the Trustee, or the
Trustee and such Holders, as the case may be, will be deemed to have agreed
to an extension of such period if corrective action has been initiated by
the Company within such period and is being diligently pursued;
(4) certain events relating to reorganization, bankruptcy and
insolvency of the Company and appointment of a receiver or trustee for its
property; and
(5) the occurrence of a matured event of default under any Class "A"
Mortgage; provided that the waiver or cure of any such event of default and
the rescission and annulment of the consequences thereof shall constitute a
waiver of the corresponding Event of Default under the Mortgage and a
rescission and annulment of the consequences thereof.
(Section 1001)
The Trust Indenture Act currently requires that the Company give the
Trustee, not less often than annually, a brief statement as to the Company's
compliance with the conditions and covenants under the Mortgage.
REMEDIES
If an Event of Default occurs and is continuing, then the Trustee or the
Holders of not less than a majority in principal amount of securities then
Outstanding under the Mortgage may declare the principal amount (or if the
securities are Discount Securities, such portion of the principal amount as may
be provided for such Discount Securities pursuant to the terms of the Mortgage)
of all of the securities Outstanding under the Mortgage together with premium,
if any, and interest accrued, if any, thereon to be immediately due and payable.
At any time after such declaration of the maturity of the securities then
Outstanding, but before the sale of any of the Mortgaged Property and before a
judgment or decree for payment of money shall have been obtained by the Trustee
as provided in the Mortgage, the Event or Events of Default giving rise to such
declaration of maturity will, without further act, be deemed to have been
waived, and such declaration and its consequences will, without further act, be
deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest, if any, on all securities then
Outstanding under the Mortgage;
(2) the principal of and premium, if any, on any securities then
Outstanding under the Mortgage which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate or
rates prescribed therefor in such securities; and
(3) all amounts due to the Trustee as compensation and
reimbursement as provided in the Mortgage; and
(b) any other Event or Events of Default other than the non-payment of
the principal of securities which shall have become due solely by such
declaration of acceleration, shall have been cured or waived as provided in
the Mortgage.
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(Sections 1002 and 1017)
The Mortgage provides that, under certain circumstances and to the extent
permitted by law, if an Event of Default occurs and is continuing, the Trustee
has the power to take possession of, and to hold, operate and manage, the
Mortgaged Property, or with or without entry, sell the Mortgaged Property. If
the Mortgaged Property is sold, whether by the Trustee or pursuant to judicial
proceedings, the principal of the securities Outstanding under the Mortgage, if
not previously due, will become immediately due, together with premium, if any,
and any accrued interest (including interest upon overdue installments of
interest at the same rates respectively as were born by the respective
securities on which installments of interest were overdue). (Sections 1003, 1004
and 1005)
If an Event of Default occurs and is continuing, the Holders of a majority
in principal amount of the securities then Outstanding under the Mortgage will
have the right to direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that (a) such direction does not
conflict with any rule of law or with the Mortgage, and could not involve the
Trustee in personal liability in circumstances where indemnity would not, in the
Trustee's sole discretion, be adequate and (b) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
discretion. (Section 1016)
The Mortgage provides that no Holder of any security will have any right to
institute any proceeding, judicial or otherwise, with respect to the Mortgage
for the appointment of a receiver or for any other remedy thereunder unless (a)
such Holder has previously given to the Trustee written notice of a continuing
Event of Default; (b) the Holders of not less than a majority in aggregate
principal amount of the securities then Outstanding under the Mortgage have made
written request to the Trustee to institute proceedings in respect of such Event
of Default and have offered the Trustee reasonable indemnity against costs and
liabilities incurred in complying with such request; and (c) the Trustee has
refused, or for sixty days after receipt of such Notice, the Trustee has failed,
to institute any such proceeding and no direction inconsistent with such request
has been given to the Trustee by the Holders of a majority in aggregate
principal amount of securities then Outstanding under the Mortgage. Furthermore,
no Holder will be entitled to institute any such action if and to the extent
that such action would disturb or prejudice the rights of the other Holders.
(Section 1011)
Notwithstanding that the right of a Holder to institute a proceeding with
respect to the Mortgage is subject to certain conditions precedent, each Holder
of a security has the right, which is absolute and unconditional, to receive
payment of the principal of and premium, if any, and interest (including
interest upon overdue interest), if any, on such security when due and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such Holder. (Section 1012)
The Mortgage obligates the Trustee to give the Holders notice of any
default under the Mortgage to the extent required by the Trust Indenture Act,
unless such default shall have been cured or waived, except that no such notice
to Holders of a default of the character described in paragraph (3) under "Event
of Default" shall be given until at least 60 days after the occurrence thereof.
(Section 1102) The Trust Indenture Act currently permits the Trustee to withhold
notices of default (except for certain payment defaults) if the Trustee in good
faith determines the withholding of such notice to be in the interests of the
Holders.
As a condition precedent to certain actions by the Trustee in the
enforcement of the Lien of Mortgage and institution of action on the securities
Outstanding under the Mortgage, the Trustee may require adequate indemnity
against costs, expenses and liabilities to be incurred in connection therewith.
(Sections 1011 and 1101)
In addition to every other right and remedy provided in the Mortgage, the
Trustee may exercise any right or remedy available to the Trustee in its
capacity as owner and Holder of Class "A" Bonds which arises as a result of a
default or matured event of default under any Class "A" Mortgage, whether or not
an Event of Default under the Mortgage has occurred and is continuing. (Section
1020)
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DEFEASANCE
Upon request of the Company, any securities Outstanding under the Mortgage,
or any portion of the principal amount thereof, will be deemed to have been paid
for purposes of the Mortgage, and the entire indebtedness of the Company in
respect thereof will be deemed to have been satisfied and discharged, if there
has been irrevocably deposited with the Trustee or any Paying Agent (other than
the Company), in trust: (a) money in the amount which will be sufficient, or (b)
Eligible Obligations (as described below), which do not contain provisions
permitting the redemption or other prepayment thereof at the option of the
issuer thereof, the principal of and the interest on which when due, without any
regard to reinvestment thereof, will provide monies which, together with the
money, if any, deposited with or held by the Trustee, will be sufficient, or (c)
a combination of (a) and (b) which will be sufficient, to pay when due the
principal of and premium, if any, and interest, if any, due and to become due on
such securities or portions thereof. (Section 901) For this purpose, Eligible
Obligations include direct obligations of, or obligations unconditionally
guaranteed by, the United States of America, entitled to the benefit of the full
faith and credit thereof, and certificates, depositary receipts or other
instruments which evidence a direct ownership interest in such obligations or in
any specific interest or principal payments due in respect thereof.
For federal income tax purposes, the deposit contemplated in the preceding
paragraph, together with the entire discharge and satisfaction of the Company's
obligations under the Mortgage and the affected securities thereunder, would be
treated as an exchange of the affected securities for other securities or for a
direct interest in the cash and securities held in the trust. In general, a
Holder of such securities would recognize gain or loss to the extent the fair
market value thereof exceeds such Holder's adjusted basis in such security. Such
a Holder thereafter would be required to recognize for federal income tax
purposes a share of the income, gain or loss of the trust. The amount so
required to be recognized could be different from the amount that would
otherwise have been recognized in the absence of such deposit. Prospective
investors are urged to consult their own tax advisors as to the specific
consequences to them of any such deposit.
RESIGNATION OF THE TRUSTEE
The Trustee may resign at any time by giving written notice thereof to the
Company or may be removed at any time by act of the Holders of a majority in
principal amount of securities then Outstanding delivered to the Trustee and the
Company. No resignation or removal of the Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the Mortgage. So long
as no Event of Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing, if the Company
has delivered to the Trustee a resolution of its Board of Directors appointing a
successor trustee and such successor has accepted such appointment in accordance
with the terms of the Mortgage, the Trustee will be deemed to have resigned and
the successor will be deemed to have been appointed as trustee in accordance
with the Mortgage. (Section 1110)
MORE RESTRICTIVE PROVISIONS OF CLASS "A" MORTGAGES
The Mortgage is less restrictive upon the Company in certain respects than
is either the 1940 Indenture or the ISU 1923 Indenture, but the Class "A" Bonds
issued under either of those indentures and delivered to the Trustee will be
entitled to the benefits of more restrictive provisions of those indentures (see
"DESCRIPTION OF THE 1940 INDENTURE" and "DESCRIPTION OF THE ISU 1923 INDENTURE"
below). However, pursuant to the Mortgage, the Trustee, as holder of the Class
"A" Bonds, will vote such Class "A" Bonds in favor of certain amendments to the
1940 Indenture and ISU 1923 Indenture. (Section 705; see "Voting of Class "A"
Bonds" under each of "DESCRIPTION OF THE 1940 INDENTURE" and "DESCRIPTION OF THE
ISU 1923 INDENTURE" below).
RELATIONSHIP WITH THE TRUSTEE
The Trustee or an affiliate provides general banking services to the
Company including (i) acting as a depositary for certain Company funds and (ii)
issuing a $15,000,000 line of credit to the Company. As of
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March 31, 1997, the line of credit was being used to support commercial paper.
Additionally, the Trustee has a $45,000,000 credit agreement with the lessor of
the Company's nuclear fuel supporting the Company's nuclear fuel lease.
The Trustee is also the 1940 Indenture Trustee, the ISU 1923 Corporate
Trustee, the Senior Unsecured Indenture Trustee and the Subordinated Indenture
Trustee (each as defined below). As such, the Trustee would have a conflicting
interest for purposes of the Trust Indenture Act if an Event of Default were to
occur under the 1940 Indenture, the ISU 1923 Indenture, the Senior Unsecured
Indenture or the Subordinated Indenture. In any such case, the Trustee may be
required to eliminate such conflicting interest by resigning as the Trustee, the
1940 Indenture Trustee, the ISU 1923 Corporate Trustee, the Senior Unsecured
Indenture Trustee or the Subordinated Indenture Trustee. There are other
instances under the Trust Indenture Act which would require the resignation of
the Trustee, such as an affiliate of the Trustee acting as underwriter with
respect to any of the Securities.
DESCRIPTION OF THE 1940 INDENTURE
GENERAL
The summaries of the 1940 Indenture set forth below do not purport to be
complete and are subject to the detailed provisions of the 1940 Indenture, a
copy of which was previously filed with the Commission, is listed as an exhibit
to the Registration Statement of which this Prospectus is a part, and is
incorporated herein by reference. Capitalized terms used in this section which
are not otherwise defined in this Prospectus shall have the meanings ascribed to
them in the 1940 Indenture. Wherever particular provisions or terms defined in
the 1940 Indenture are referred to herein, such provisions or definitions are
incorporated by reference as part of the statements made herein, and such
statements are qualified in their entirety by such reference. References to
article and section numbers in this section, unless otherwise indicated, are
references to article and section numbers of the 1940 Indenture.
SECURITY
The 1940 Indenture constitutes a direct first mortgage lien on
substantially all of the property and franchises of the Company (other than
expressly excepted property and other than properties owned by Iowa Southern at
the time of the IE-ISU merger on December 31, 1993), subject only to permitted
encumbrances and liens. Substantially all property and franchises (other than
expressly excepted property) hereafter acquired by the Company will become
subject to the lien of the 1940 Indenture, subject only to permitted liens and
encumbrances and liens and encumbrances, if any, existing or placed on such
after-acquired property at the time of acquisition thereof. The lien of the 1940
Indenture on the property owned by Iowa Southern at the time of the IE-ISU
merger, and extensions and additions appurtenant to such property, are junior to
the lien of the ISU 1923 Indenture.
The 1940 Indenture excepts from the lien thereof all cash, securities,
contracts, and bills, notes and accounts receivable acquired in the ordinary
course of business which are not specifically pledged under the 1940 Indenture
and all tangible personal property purchased or held for sale in the ordinary
course of business or consumable in the operation of the plants or system of the
Company, automobiles, buses, trucks and similar vehicles. (Granting Clauses)
Any bonds issued under the 1940 Indenture as the basis for the issuance of
Bonds under the Mortgage will be secured equally and ratably with the bonds of
all other series then outstanding under the 1940 Indenture.
EFFECT OF THE IE-ISU MERGER ON THE 1940 INDENTURE
The merger of IE and ISU did not impair the lien of the 1940 Indenture or
any of the rights or powers of the 1940 Indenture Trustee or the bondholders
under the 1940 Indenture. (Section 133) Subsequent to that merger, the Company
became the successor to IE under the 1940 Indenture.
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ISSUANCE OF ADDITIONAL BONDS
The 1940 Indenture does not fix an overall limitation on the aggregate
principal amount of the bonds of all series that may be issued or outstanding
thereunder. (Section 3) Generally, additional bonds of any series may be issued,
subject to the provisions of the 1940 Indenture, in a principal amount equal to:
(a) 60% of Net Bondable Additions not previously utilized under the
1940 Indenture resulting from the acquisition by purchase, construction or
otherwise of Property Additions (Article IV);
(b) the principal amount of bonds, previously authenticated under the
1940 Indenture, which have been retired or for the retirement of which the
1940 Indenture Trustee holds the necessary funds, other than bonds redeemed
through the operation of cash sinking funds and other than retired bonds
used to satisfy the maintenance and renewal provisions of the 1940
Indenture (Article VI); or
(c) the amount of cash deposited with the 1940 Indenture Trustee as
the basis for the issuance of such bonds, which cash may be applied to the
retirement of bonds or may be withdrawn in lieu of the authentication of an
equal principal amount of bonds to whose authentication and delivery the
Company would be entitled under the provisions referred to in clauses (a)
and (b). (Article V)
No such bonds in any event may be issued under (a) or (c), or under (b) if
the bonds to be issued bear a higher rate of interest than that borne by the
bonds retired or being retired (except in case such bonds mature within 2
years), unless (i) the Net Earnings of the Company for a 12 months' period
within the immediately preceding 15 months' period shall have been at least
equal to two times the aggregate amount of annual interest charges on all bonds
then outstanding under the 1940 Indenture, including the bonds then applied for,
and (ii) at least 85% of such required minimum amount of Net Earnings consists
of Net Operating Revenues from the Public Utility Property of the Company.
(Articles IV, V, and VI)
Bonds issuable under the 1940 Indenture are available as the basis for the
issuance of securities under the Mortgage. As of March 31, 1997, on the basis of
the most restrictive provisions described above, the Company would have been
entitled to issue an aggregate of at least $241 million of additional bonds
under the 1940 Indenture.
ACQUISITION OF PROPERTY SUBJECT TO PRIOR LIENS
The 1940 Indenture prohibits the Company from acquiring any property
subject to a prior lien, or placing any prior lien on property at the time of
acquisition thereof, if either the principal amount of indebtedness secured by
prior liens on such property exceeds 60% of the cost or the fair value of such
property, whichever shall be less, or the Net Earnings of the Company for a
period of 12 months within the 15 months immediately preceding the month in
which the property is to be acquired shall not have been at least equal to two
times the aggregate amount of the annual interest charges on the Secured Bonded
Debt of the Company; provided, however, that if the Net Earnings of the Company
for the above-stated period shall have been at least equal to three times the
aggregate amount of the annual interest charges on the Secured Bonded Debt of
the Company, then the 60% limitation shall not apply. In the case of each of the
foregoing Net Earnings requirements, such Net Earnings must consist of Net
Operating Revenues from Public Utility Property to an extent at least equal to
85% of two or three times, as the case may be, the said aggregate amount of
annual interest charges. (Section 83)
MAINTENANCE AND RENEWAL
The 1940 Indenture provides that the Company will, for each year, pay or
cause to be paid to the Trustee, an amount in cash, as and for a renewal fund,
equal to 2 1/2% (or such different percentage as may be fixed upon certification
by an independent engineer that such change in percentage rate is desirable and
justified) of the average gross book value during such year of all of the
depreciable tangible Public Utility Property of the Company (with certain
specified exceptions). The percentage is currently set at 2 1/2%. The Company's
obligation to pay such amount to the Trustee in cash may at the option of the
Company be satisfied in whole or in part by the certification of unused Gross
Bondable Additions or the certification of unused bond retirements, or both.
(Section 74)
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The 1940 Indenture also provides (i) that the Company shall maintain the
mortgaged properties in good repair and working order; (ii) that the Company,
upon written request served upon it and the Trustee by the holders of at least
25% in principal amount of the bonds outstanding, shall cause such properties to
be inspected by an independent engineer (not more often than at five-year
intervals) to determine whether they have been so maintained and whether any
property, not retired on the books, should be so classified for the purpose
(among others) of computing Net Bondable Additions; and (iii) that the Company
shall make good any deficiency in maintenance disclosed by such engineer's
report as rendered or as modified by arbitration. (Section 73)
LIMITATIONS ON DIVIDENDS ON COMMON STOCK
The 1940 Indenture prohibits the Company from declaring or paying any
dividends (except stock dividends or dividends paid out of the proceeds of sale
of stock), or making other distributions on, or acquisitions of, stock unless
immediately after such dividend, distribution or acquisition the net income of
the Company available for dividends (as defined), for the period from December
31, 1945, to and including the date of such dividend, distribution or
acquisition, plus the sum of $250,000 shall at least equal all payments made in
respect of all such dividends, distributions or acquisitions during said period;
provided that such restriction shall not apply to the acquisition of stock out
of the proceeds from the sale of, or in exchange for, any other shares of stock
or securities representing an equity interest subordinate to all debts, secured
or unsecured. (Section 85) Giving effect to the use of the proceeds of the
Securities offered hereby, retained earnings are not restricted under this
provision.
MODIFICATION OF THE 1940 INDENTURE
In general, modifications or alterations of the 1940 Indenture and
indentures supplemental thereto and of the rights and obligations of the Company
and of the holders of the bonds may, with the approval of the Company, be made
at a meeting of bondholders upon the affirmative vote of the holders of 75% or
more of the aggregate principal amount of the bonds entitled to vote with
respect to the matter involved, but no such modifications or alterations are
permitted with respect to certain basic matters, such as terms of payment of
principal or interest on the bonds or the creation of liens ranking prior to, or
on a parity with, the lien of the 1940 Indenture. (Section 167) (See "Voting of
Class "A" Bonds" below.)
DEFAULTS AND NOTICE THEREOF
Defaults under the 1940 Indenture are defined in substance as being (a)
failure to pay principal or any installment of interest on any bond on the due
date; (b) failure to observe any covenant or condition prescribed by the
provisions of any sinking fund created for the benefit of bonds of any series;
(c) failure to perform any other covenant or agreement of the 1940 Indenture,
which failure shall continue for a period of 60 days after a written demand that
such failure be cured has been mailed to the Company by the Trustee or to the
Company by the holders of 15% in principal amount of the bonds; (d) certain
events relating to reorganization, bankruptcy and insolvency of the Company or
the appointment of a receiver or trustee of the Company's property; (e) final
judgment in excess of $100,000 against the Company which is not discharged or
stayed within 30 days; or (f) the assumption by any governmental agency or any
court at the instance of any governmental agency of custody of the whole or any
substantial part of the Trust Estate or of control over the Company's affairs or
operations to the exclusion of management by the Company. (Section 105)
Upon the occurrence of a Default, the 1940 Indenture Trustee may, and upon
request of the holders of a majority in principal amount of the bonds shall (and
the holders of at least 25% in principal amount of the bonds may, by notice in
writing to the Company), declare the principal of and interest on all the bonds
to be immediately due and payable. (Section 107)
The 1940 Indenture Trustee is required to give notice of any Default to
holders of bonds whose names are on file with it within 90 days after the
occurrence of a Default known to it, unless such Default has been cured prior to
the giving of such notice and except that such notice may be withheld, other
than as to a Default in
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payment of principal or interest or of any installment of any sinking fund, if
the 1940 Indenture Trustee determines in good faith that such withholding is in
the interest of the holders of bonds. (Section 106)
The holders of not less than a majority in principal amount of bonds then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the 1940 Indenture Trustee, or exercise any trust or
power conferred upon the 1940 Indenture Trustee. (Section 110)
The Company must file an annual Certificate with the 1940 Indenture Trustee
as to compliance with the conditions and covenants of the 1940 Indenture and as
to the absence of default with respect to any of the covenants contained in the
1940 Indenture. (Section 103)
VOTING OF CLASS "A" BONDS
The Trustee will, as holder of any Class "A" Bonds issued under the 1940
Indenture, attend such meetings of bondholders under the 1940 Indenture, or
deliver its proxy in connection therewith, as relate to matters with respect to
which it is entitled to vote or consent. The Mortgage provides that, so long as
no Event of Default as defined in the Mortgage has occurred or is continuing,
the Trustee will, as holder of such Class "A" Bonds, vote or consent:
(a) in favor of amendments or modifications to the 1940 Indenture of
substantially the same tenor and effect as the following, together with all
amendments and modifications required to effectuate the following:
(i) to provide that, whenever the 1940 Indenture requires
authorization by, or a resolution of, the Board of Directors for the
issuance of a series of bonds or the determination of the terms thereof,
the requirement shall be satisfied if the action taken would be
sufficient for the issuance of a series of bonds, or the determination
of the terms thereof, under the Mortgage;
(ii) to eliminate the renewal fund and to provide that, to the
extent Property Additions have been taken as a credit, or cash held by
the Trustee has been deposited, to satisfy the renewal fund requirements
(or to satisfy any sinking fund requirement which is no longer in
effect), such Property Additions and cash may be used for any purpose
under the 1940 Indenture (including as a basis for the issuance of
bonds) as if they had never been so credited or deposited;
(iii) to permit bonds to be issued in a principal amount equal to
75%, instead of 60%, of Net Bondable Additions;
(iv) to eliminate the Net Earnings requirements for all purposes,
including in connection with the issuance of bonds;
(v) to broaden the definition of "Property Additions" to include
all tangible property owned by the Company and subject to the lien of
the 1940 Indenture;
(vi) to eliminate the restrictions on the payment of dividends on,
or the making of other distributions on, or acquisitions of, stock;
(vii) to eliminate most restrictions on purchase money obligations
which may be received as consideration for the release of property from
the lien of the 1940 Indenture;
(viii) to permit the release, without compliance with other
provisions of the 1940 Indenture, of any property provided that (1) the
release will not impair the electric business of the Company in
contravention of the provisions of the 1940 Indenture and (2) the fair
value of property released pursuant to this provision, together with the
fair value of all other property so released in the then current
calendar year, shall not exceed the greater of $5,000,000 and 3% of the
aggregate principal amount of bonds then outstanding under the 1940
Indenture;
(ix) to modify release provisions to delete the requirement that
the property to be released shall "no longer be useful, necessary,
profitable or advantageous in the judicious management and maintenance
of the Trust Estate or in the conduct of the business of the Company"
and substituting
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therefor the requirement that the release of the property would not
adversely affect the Company's electric business;
(x) to permit the withdrawal by the Company, without compliance
with other provisions of the 1940 Indenture, of cash in an amount,
together with other amounts paid over to the Company pursuant to this
provision in the then current calendar year, up to the greater of
$5,000,000 and 3% of the aggregate principal amount of the bonds then
outstanding under the 1940 Indenture; provided that such cash must be
expended for Property Additions;
(xi) to increase the amount of cash withdrawable by the Company on
the basis of retired bonds from 100% of the principal amount of such
bonds to 133 1/3% of such principal amount;
(xii) to eliminate most restrictions on the acquisition of property
subject to a prior lien;
(xiii) to limit the insurance coverage that must be maintained by
the Company to fire insurance only and to raise the minimum dollar
amount of any one fire loss which must be payable to the 1940 Indenture
Trustee from $10,000 to an amount equal to the greater of $5,000,000 and
3% of the aggregate principal amount of bonds then outstanding under the
1940 Indenture;
(xiv) to modify the definition of "Defaults" under the 1940
Indenture to be substantially the same as "Events of Default" under the
Mortgage;
(xv) to modify the provisions of the 1940 Indenture for the
acceleration of the maturity of bonds to provide that (1) action by the
holders of a majority (rather than the current 25%) in principal amount
of the then outstanding bonds is required to accelerate the maturity of
all outstanding bonds upon Default and (2) any such acceleration and its
consequences are automatically rescinded (rather than at the option of
the holders as is currently provided) upon the curing of all Defaults;
(xvi) to reduce the quorum requirements for bondholder meetings
from 75% to a majority; and
(xvii) to modify the remedies provisions to increase to a majority
from 25% the percentage of the principal amount of outstanding bonds,
the holders of which must have requested that the 1940 Indenture Trustee
take action before individual holders may institute suits against the
Company.
(b) with respect to any other amendments or modifications to the 1940
Indenture as follows:
the Trustee will vote all Class "A" Bonds issued under the 1940
Indenture then held by it, or consent with respect thereto,
proportionately with what is reasonably believed to be the vote or
consent of the holders of all other bonds Outstanding under the 1940
Indenture, the holders of which are eligible to vote or consent;
provided, however, that (i) at any time the Class "A" Bonds under the
1940 Indenture held by the Trustee constitute a majority of the
principal amount of the Outstanding bonds under the 1940 Indenture or
(ii) at any time such Class "A" Bonds held by the Trustee constitute
less than such a majority but there is a proposed amendment or
modification of the 1940 Indenture which, if it were an amendment or
modification of the Mortgage (See "DESCRIPTION OF THE COLLATERAL
TRUST BONDS -- Modification of the Mortgage"), would require the
consent of Holders, then, in either case, the Trustee may only vote
such Class "A" Bonds in accordance with the vote of the Holders of at
least a majority of the principal amount of the bonds casting a vote
and shall seek that vote in accordance with the provisions of the
Mortgage applicable to required votes of Holders in respect of
amendments or modifications to the Mortgage.
DESCRIPTION OF THE ISU 1923 INDENTURE
GENERAL
The summaries of the ISU 1923 Indenture set forth below do not purport to
be complete and are subject to the detailed provisions of the ISU 1923
Indenture, a copy of which was previously filed with the
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Commission, is listed as an exhibit to the Registration Statement of which this
Prospectus is a part, and is incorporated herein by reference. Capitalized terms
used in this section which are not otherwise defined in this Prospectus shall
have the meanings ascribed to them in the ISU 1923 Indenture. Wherever
particular provisions or terms defined in the ISU 1923 Indenture are referred to
in this section, such provisions or definitions are incorporated by reference as
part of the statements made in this section, and such statements are qualified
in their entirety by such reference. References to article and section numbers
herein, unless otherwise indicated, are references to article and section
numbers of the ISU 1923 Indenture.
SECURITY
The ISU 1923 Indenture constitutes a direct first mortgage lien upon
substantially all of the property and rights of Iowa Southern existing at the
time of the IE-ISU merger on December 31, 1993 and upon extensions and additions
appurtenant to such property, with certain exceptions for certain types of
property (including accounts receivable) as provided in the ISU 1923 Indenture,
and subject only to permitted liens. (Granting Clauses)
Any bonds issued under the ISU 1923 Indenture as the basis for the issuance
of Bonds under the Mortgage will be secured equally and ratably with the bonds
of all other series then outstanding under the ISU 1923 Indenture.
EFFECT OF THE IE-ISU MERGER ON THE ISU 1923 INDENTURE
The merger of IE and ISU did not impair the lien of the ISU 1923 Indenture
or any of the rights or powers of the ISU Indenture Trustees or the bondholders
under the ISU 1923 Indenture. (Article XVI) Subsequent to that merger, the
Company became the successor to ISU under the ISU 1923 Indenture.
ISSUANCE OF ADDITIONAL BONDS
The ISU 1923 Indenture does not fix an overall limitation on the aggregate
principal amount of the bonds of all series that may be issued or outstanding
thereunder. (Section 2.01)
Provided that the Earnings Applicable to Bond Interest for a period of
twelve consecutive calendar months within the fifteen months immediately
preceding issuance are at least twice the annual interest requirements of the
bonds applied for and all bonds and Prior Lien Bonds outstanding, additional
bonds of any series may be issued:
(a) in an aggregate principal amount not exceeding 60% of the Cost or
Fair Value, whichever is less, of Property Additions after adjustments to
offset retirements and amounts removed from the utility plant or fixed
capital accounts of the former Iowa Southern (Article V);
(b) in an aggregate principal amount not exceeding the aggregate
principal amount of bonds which shall have been retired (other than bonds
retired through the use of certain funds) (Article VI);
(c) upon deposit of cash with the ISU Corporate Trustee, in an amount
equal to the principal amount of the bonds to be so issued (and such cash
may be withdrawn by the Company in a sum equal to the aggregate principal
amount of the bonds which could be issued under clause (a) or (b) above).
(Article VII)
Bonds issuable under the ISU 1923 Indenture are available as the basis for
the issuance of securities under the Mortgage. As of March 31, 1997, on the
basis of the most restrictive provisions described above, the Company would have
been entitled to issue at least $167 million of additional bonds under the ISU
1923 Indenture.
MAINTENANCE FUND
The ISU 1923 Indenture provides that so long as bonds shall be outstanding,
the Company will pay to the ISU Corporate Trustee annually, as a maintenance
fund, a sum of money equal to 15% of the gross operating revenue of the Company
derived during the calendar year preceding such payment from the operation of
the
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physical properties subject to the lien of the ISU 1923 Indenture after
deducting (1) all gross operating revenue derived during such period from the
operation of property subject to a prior lien and (2) an amount equal to the
total cost to the Company of electric energy and natural gas purchased by it
(and allocable to operations of property subject to the lien of the ISU 1923
Indenture) during such period with certain deductions. The Company is entitled
to credits against such annual payment for certain amounts expended for
maintenance and repairs and Unapplied Balance of Property Additions, retired
bonds, and other matters. Any moneys deposited by the Company with the ISU
Corporate Trustee in the maintenance fund will, upon the request of the Company,
be applied by the ISU Corporate Trustee to the purchase or redemption of bonds
or may be withdrawn by the Company in certain circumstances. (Article XII)
SUBSTITUTIONS AND RELEASES
Generally, property subject to the lien of the ISU 1923 Indenture may be
released only upon the deposit or pledge with the ISU Corporate Trustee of cash,
purchase money obligations, securities, or the certification of property
additions or, in certain instances, upon the substitution of other property of
equivalent value. The Company may also, under certain conditions, without
release, terminate, change, or assent to the modification of leases, easements,
franchises, and governmental permits. (Article XI)
SATISFACTION AND DISCHARGE OF INDENTURE
If the Company shall pay the principal of, premium (if any), and interest
on all outstanding bonds issued under the ISU 1923 Indenture (bonds for the
payment or redemption of which necessary funds have been deposited with the ISU
Corporate Trustee being deemed paid), then the ISU Indenture Trustees may, and
upon the request of the Company shall, cancel and discharge the lien of the ISU
1923 Indenture and reconvey to the Company the mortgaged and pledged property.
(Article XIX)
MODIFICATION OF THE ISU 1923 INDENTURE
To the extent permitted by the terms of the ISU 1923 Indenture,
modification or alteration of the ISU 1923 Indenture or any indenture
supplemental thereto, and of the rights and obligations of the Company and of
ISU bondholders, may be made with the consent of the Company by an affirmative
vote of the holders of not less than 80% in principal amount of the outstanding
bonds issued under the ISU 1923 Indenture and entitled to vote at a meeting of
bondholders and by an affirmative vote of the holders of not less than 80% of
the principal amount of such bonds of the series affected by the change;
provided, however, that no such modification or alteration intended to effect or
permit the extension of the maturity of the principal of any bond, the reduction
in the rate of interest thereon, or any other modification in the terms of
payment of such principal or interest, or the taking of certain other actions,
such as creating liens ranking prior to, or on parity with, the lien of the ISU
1923 Indenture, shall be effective as to any bond the holder of which has not
assented to such modification or alteration. (Article XX) (See "Voting of Class
"A" Bonds" below.)
The Company may fail or omit to comply with certain covenants or conditions
of the ISU 1923 Indenture with the written consent of the holders of at least
66 2/3% of the principal amount of all outstanding bonds issued under the ISU
1923 Indenture. (Section 15.19)
DEFAULTS AND NOTICE THEREOF
Defaults under the ISU 1923 Indenture are defined in substance as being (a)
failure to pay principal of, or premium (if any) on, any bond issued under the
ISU 1923 Indenture; (b) failure to pay any installment of interest on any such
bond, and such failure continues for 30 days; (c) failure to observe any
covenant or condition prescribed by the provisions of any sinking fund created
for the benefit of such bonds of any series; (d) failure by the Company to
perform any other covenant or agreement in such bonds or in the ISU 1923
Indenture, and such failure continues for 60 days after written notice is given;
and (e) certain events relating to reorganization, bankruptcy and insolvency of
the Company, and the appointment of a receiver. (Section 15.01)
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The ISU 1923 Indenture Trustees are required to give notice of any default
to bondholders within 90 days after the occurrence thereof, unless such default
is cured before the giving of such notice (except in the case of certain
defaults, notice of which is not to be given by such Trustees until at least 60
days after the occurrence thereof). The ISU Indenture Trustees may withhold
notice of default (except in the payment of principal of, or interest or premium
(if any) on, any of the bonds or in the payment of any sinking fund or purchase
fund installment) if the ISU Corporate Trustee determines that such withholding
is in the interest of the bondholders. (Section 17.11)
Holders of a majority of the principal amount of outstanding bonds may
direct the method, time, and place of conducting any proceedings for any remedy
available to the ISU Indenture Trustees for any sale of the property subject to
the lien of the ISU 1923 Indenture, or for the foreclosure of the ISU 1923
Indenture, or for the appointment of a receiver, or for the taking of any other
action authorized by the ISU 1923 Indenture in respect of a default or
refraining therefrom. (Section 15.05)
No holder of any bond or coupon shall have any right to any remedy under
the ISU 1923 Indenture, unless such holder has given prior written notice to the
ISU 1923 Indenture Trustees of the default, 25% in aggregate principal amount of
the bonds outstanding have made prior written request to the ISU Corporate
Trustee and have afforded reasonable opportunity to the 1923 ISU Indenture
Trustees to pursue the remedy in the trustees' own names, and the ISU 1923
Indenture Trustees have been offered adequate indemnity for costs, expenses and
liabilities which may be incurred thereby. (Section 15.15)
The Company must file an annual Certificate with the ISU Corporate Trustee
as to compliance with the conditions and covenants of the ISU 1923 Indenture and
as to the absence of default with respect to any of the covenants contained in
the ISU 1923 Indenture. (Section 14.03)
VOTING OF CLASS "A" BONDS
The Trustee will, as holder of any Class "A" Bonds issued under the ISU
1923 Indenture, attend such meetings of bondholders under the ISU 1923
Indenture, or deliver its proxy in connection therewith, as relate to matters
with respect to which it is entitled to vote or consent. The Mortgage provides
that, so long as no Event of Default as defined in the Mortgage has occurred or
is continuing, the Trustee will, as holder of such Class "A" Bonds, vote or
consent:
(a) in favor of amendments or modifications to the ISU 1923 Indenture
of substantially the same tenor and effect as the following, together with
all amendments and modifications required to effectuate the following:
(i) to provide that, whenever the ISU 1923 Indenture requires
authorization by, or a resolution of, the Board of Directors or an
Executive Committee thereof for the issuance of a series of bonds or the
determination of the terms thereof, the requirement shall be satisfied
if the action taken would be sufficient for the issuance of a series of
bonds, or the determination of the terms thereof, under the Mortgage;
(ii) to eliminate the maintenance fund and to provide that, to the
extent Property Additions or bonds previously outstanding have been
taken as a credit, or cash held by the ISU Corporate Trustee has been
deposited, in each case to satisfy the Maintenance Fund Requirements,
such Property Additions, previously outstanding bonds and cash may be
used for any purpose under the ISU 1923 Indenture (including as a basis
for the issuance of bonds) as if they had never been so credited or
deposited;
(iii) to permit bonds to be issued in a principal amount equal to
75%, instead of 60%, of Property Additions;
(iv) to eliminate the Net Earnings requirements for all purposes,
including in connection with the issuance of bonds;
(v) to broaden the definition of "Property Additions" to include
property not used by the Company in its electric, gas or steam business;
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<PAGE> 31
(vi) to permit the release, without compliance with other
provisions of the ISU 1923 Indenture, of any property, provided that (1)
the fair value of property released pursuant to this provision, together
with the fair value of all other property so released in the then
current calendar year, shall not exceed an amount equal to the greater
of $5,000,000 and 3% of the aggregate principal amount of bonds then
outstanding under the ISU 1923 Indenture;
(vii) to permit the withdrawal by the Company, without compliance
with other provisions of the ISU 1923 Indenture, of cash in an amount,
together with other amounts paid over to the Company pursuant to this
provision in the then current calendar year, up to the greater of
$5,000,000 and 3% of the aggregate principal amount of the bonds then
outstanding under the ISU 1923 Indenture; provided that such cash must
be expended for Property Additions;
(viii) to increase the amount of cash withdrawable by the Company
on the basis of retired property from 100% of the cost or fair value of
such property to 133-1/3% of such cost or fair value;
(ix) to raise the minimum dollar amount of any one fire loss which
must be payable to the ISU Indenture Trustees from $10,000 to an amount
equal to the greater of $5,000,000 and 3% of the aggregate principal
amount of bonds then outstanding under the ISU 1923 Indenture;
(x) to modify the definition of "defaults" under the ISU 1923
Indenture to be substantially the same as "Events of Default" under the
Mortgage;
(xi) to modify the provisions of the ISU 1923 Indenture for the
acceleration of the maturity of bonds to provide that (1) action by the
holders of a majority (rather than the current 25%) in principal amount
of the then outstanding bonds is required to accelerate the maturity of
all outstanding bonds upon default and (2) any such acceleration and its
consequences are automatically rescinded (rather than at the option of
the holders as is currently provided) upon the curing of all defaults;
(xii) to reduce the quorum requirements for bondholder meetings
from 80% to a majority; and
(xiii) to modify the remedies provisions to increase to a majority
from 25% the percentage of the principal amount of bonds, the holders of
which must have requested the ISU Corporate Trustee to take action
before individual holders may institute suits against the Company.
(b) with respect to any other amendments or modifications to the ISU
1923 Indenture, as follows:
the Trustee will vote all Class "A" Bonds issued under the ISU 1923
Indenture then held by it, or consent with respect thereto,
proportionately with what is reasonably believed to be the vote or
consent of the holders of all other bonds outstanding under the ISU
1923 Indenture, the holders of which are eligible to vote or consent;
provided, however, that (i) at any time such Class "A" Bonds under
the ISU 1923 Indenture held by the Trustee constitute a majority of
the principal amount of the Outstanding bonds under the ISU 1923
Indenture or (ii) at any time such Class "A" Bonds held by the
Trustee constitute less than such a majority but there is a proposed
amendment or modification of the ISU 1923 Indenture which, if it were
an amendment or modification of the Mortgage (See "DESCRIPTION OF THE
COLLATERAL TRUST BONDS -- Modification of the Mortgage"), would
require the consent of Holders, then, in either case, the Trustee may
only vote such Class "A" Bonds in accordance with the vote of the
Holders of at least a majority of the principal amount of the
securities casting a vote and shall seek that vote in accordance with
the provisions of the Mortgage applicable to required votes of
Holders in respect of amendments or modifications to the Mortgage.
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DESCRIPTION OF THE SENIOR UNSECURED INDENTURE
GENERAL
The Securities may be issued in one or more series under the Indenture (For
Senior Unsecured Debt Securities) (the "Senior Unsecured Indenture") between the
Company and The First National Bank of Chicago, as trustee (the "Senior
Unsecured Indenture Trustee"). The summaries of the Senior Unsecured Indenture
set forth below do not purport to be complete and are subject to the detailed
provisions of the Senior Unsecured Indenture, a copy of which is filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part and is incorporated in this section by reference. Capitalized terms
used in this section which are not otherwise defined in this Prospectus shall
have the meanings ascribed to them in the Senior Unsecured Indenture. Wherever
particular provisions or terms defined in the Senior Unsecured Indenture are
referred to in this section, such provisions or definitions are incorporated by
reference as part of the statements made in this section, and such statements
are qualified in their entirety by such reference. References to article and
section numbers herein, unless otherwise indicated, are references to article
and section numbers of the Senior Unsecured Indenture.
The Securities issued under the Senior Unsecured Indenture (the "Senior
Debentures") will be unsecured obligations of the Company and will rank on a
parity with all other unsecured and unsubordinated debt of the Company. Senior
Debentures shall not be afforded any protection under the Mortgage, pursuant to
which various series of Collateral Trust Bonds may be issued. Reference is made
to the Prospectus Supplement, or a supplement thereto, for a description of the
following terms of the series of Senior Debentures in respect of which this
Prospectus is being delivered: (1) the title of such series of Senior
Debentures; (2) any limit on the aggregate principal amount of such Senior
Debentures or the series of which they are a part; (3) the Person or Persons to
whom interest on the Senior Debentures of such series shall be payable if other
than the Persons in whose names such Senior Debentures are registered; (4) the
date or dates on which the principal of any of such Senior Debentures will be
payable; (5) the rate or rates (which may be fixed or variable) and/or the
method of determination of such rate or rates at which any of such Senior
Debentures will bear interest, if any, the date or dates from which any such
interest will accrue, the Interest Payment Dates on which any such interest will
be payable and the Regular Record Date for any such interest payable on any
Interest Payment Date; (6) the place or places where (i) the principal of,
premium, if any, and interest on any of such Senior Debentures will be payable,
(ii) registration of transfer of such Senior Debentures may be effected, (iii)
exchanges of such Senior Debentures may be effected and (iv) notices and demands
to or upon the Company in respect of such Senior Debentures may be served; the
Security Registrar for such Senior Debentures and, if such is the case, that the
principal of such Senior Debentures shall be payable without presentment or
surrender thereof; (7) the period or periods within which, or the date or dates
on which, the price or prices at which and the terms and conditions upon which
any of such Senior Debentures may be redeemed, in whole or in part, at the
option of the Company; (8) the obligation or obligations, if any, of the Company
to redeem or purchase any of such Senior Debentures pursuant to any sinking fund
or other mandatory redemption provisions or at the option of the Holder thereof,
and the period or periods within which, or the date or dates on which, the price
or prices at which and the terms and conditions upon which any of such Senior
Debentures shall be redeemed or purchased, in whole or in part, pursuant to such
obligation, and applicable exceptions to the requirements of a notice of
redemption in the case of mandatory redemption or redemption at the option of
the Holder; (9) the denominations in which any of such Senior Debentures will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof; (10) if other than the currency of the United States, the currency or
currencies, including composite currencies, in which payment of the principal of
and any premium and interest on any of such Senior Debentures will be payable;
(11) if the principal of or any premium or interest on any of such Senior
Debentures is to be payable, at the election of the Company or the Holder
thereof, in a coin or currency other than in which such Senior Debentures are
stated to be payable, the period or periods within which and the terms and
conditions upon which, such election is to be made; (12) if the principal of or
premium, if any, or interest on such Senior Debentures are to be payable, or are
to be payable at the election of the Company or a Holder thereof, in securities
or other property, the type and amount of such securities or other property, or
the formulary or other method or other means by which such amount shall be
determined, and the period or periods within which, and the terms and
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<PAGE> 33
conditions upon which, any such election may be made; (13) if the amount payable
in respect of principal of or any premium or interest on any of such Senior
Debentures may be determined with reference to an index or other fact or event
ascertainable outside the Senior Unsecured Indenture, the manner in which such
amounts will be determined; (14) if other than the principal amount thereof, the
portion of the principal amount of any of such Senior Debentures which shall be
payable upon declaration of acceleration of the Maturity thereof; (15) any
addition to the Events of Default applicable to any of such Senior Debentures
and any addition to the covenants of the Company for the benefit of the Holders
of such Senior Debentures; (16) the terms, if any, pursuant to which such Senior
Debentures may be converted into or exchanged for shares of capital stock or
other securities of the Company or any other Person; (17) the obligations or
instruments, if any, which shall be considered to be Eligible Obligations in
respect of such Senior Debentures denominated in a currency other than Dollars
or in a composite currency, and any additional or alternative provisions for the
reinstatement of the Company's indebtedness in respect of such Senior Debentures
after the satisfaction and discharge thereof; (18) if such Senior Debentures are
to be issued in global form, (i) any limitations on the rights of the Holder or
Holders of such Senior Debentures to transfer or exchange the same or to obtain
the registration of transfer thereof, (ii) any limitations on the rights of the
Holder or Holders thereof to obtain certificates therefor in definitive form in
lieu of temporary form and (iii) any and all other matters incidental to such
Senior Debentures; (19) if such Senior Debentures are to be issuable as bearer
securities; (20) any limitations on the rights of the Holders of such Senior
Debentures to transfer or exchange such Senior Debentures or to obtain the
registration of transfer thereof, and if a service charge will be made for the
registration of transfer or exchange of such Senior Debentures, the amount or
terms thereof; (21) any exceptions to the provisions governing payments due on
legal holidays or any variations in the definition of Business Day with respect
to such Senior Debentures; and (22) any other terms of such Senior Debentures of
such series, or any Tranche thereof, not inconsistent with the provisions of the
Senior Unsecured Indenture. (Section 301)
Senior Debentures may be sold at a substantial discount below their
principal amount. Certain special United States federal income tax
considerations applicable to Senior Debentures sold at an original issue
discount may be described in the applicable Prospectus Supplement. In addition,
certain special United States federal income tax or other considerations
applicable to any Senior Debentures which are denominated in a currency or
currency unit other than Dollars may be described in the applicable Prospectus
Supplement.
Except as may otherwise be described in the Prospectus Supplement, the
covenants contained in the Senior Unsecured Indenture would not afford Holders
of Senior Debentures protection in the event of a highly-leveraged transaction
or change of control involving the Company.
FORM, EXCHANGE, AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, Senior
Debentures of each series will be issuable only in fully registered form without
coupons and in denominations of $1,000 and any integral multiple thereof.
(Sections 201 and 302)
At the option of the Holder, subject to the terms of the Senior Unsecured
Indenture and the limitations applicable to global securities, Senior Debentures
of any series will be exchangeable for other Senior Debentures of the same
series, of any authorized denomination and of like tenor and aggregate principal
amount. (Section 305)
Subject to the terms of the Senior Unsecured Indenture and the limitations
applicable to global securities, Senior Debentures may be presented for exchange
as provided above for registration of transfer (duly endorsed or accompanied by
a duly executed instrument of transfer) at the office of the Security Registrar
or at the office of any transfer agent designated by the Company for such
purpose. Unless otherwise indicated, no service charge will be made for any
registration of transfer or exchange of Senior Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Every Senior Debenture presented or
surrendered for registration of transfer or exchange shall (if so required by
the Company, the Senior Unsecured Indenture Trustee or the Security Registrar)
be duly endorsed or accompanied by an executed written instrument of transfer in
form satisfactory to the Company, the Senior Unsecured Indenture Trustee or the
Security Registrar. (Section 305) Any
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transfer agent (in addition to the Security Registrar) initially designated by
the Company for any Senior Debenture will be named in the applicable Prospectus
Supplement. The Company may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that the Company will be required
to maintain a transfer agent in each Place of Payment for the Senior Debentures
of each series. The Company may perform all functions of any office or agency.
(Section 602)
The Company shall not be required to execute or register the transfer of or
the exchange of any Senior Debenture, or any Tranche thereof, during a period of
15 days preceding the notice to be given identifying the Senior Debenture called
for redemption, or any Senior Debentures so selected for redemption, in whole or
in part, except the unredeemed portion of any such Senior Debenture being
redeemed in part. (Section 305)
PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Senior Debenture on any Interest Payment Date will be made to
the person in whose name such Senior Debenture (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any interest on the Senior Debentures of a particular series
will be payable at the office of such Paying Agent or Paying Agents as the
Company may designate for such purpose from time to time. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office of
the Senior Unsecured Indenture Trustee in New York, New York will be designated
as the Company's sole Paying Agent for payment with respect to Senior Debentures
of each series. Any other Paying Agents initially designated by the Company for
the Senior Debentures of a particular series will be named in the applicable
Prospectus Supplement. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
office through which any Paying Agent acts, except that the Company will be
required to maintain a Paying Agent in each Place of Payment for the Senior
Debentures of a particular series. (Section 602)
Any moneys deposited by the Company with the Trustee or any Paying Agent
for the payment of the principal of or any premium or interest on any Senior
Debenture which remains unclaimed at the end of two years after such principal,
premium or interest has become due and payable will be paid to the Company, and
the Holder of such Senior Debenture, as an unsecured general creditor and not as
a Holder, thereafter may look only to the Company for payment thereof. (Section
603)
REDEMPTION
Any terms for the optional or mandatory redemption of Senior Debentures
will be set forth in the applicable Prospectus Supplement or a supplement
thereto. Except as shall otherwise be provided in the applicable Prospectus
Supplement with respect to Senior Debentures that are redeemable at the option
of the Holder, Senior Debentures will be redeemable only upon notice by mail not
less than 30 days nor more than 60 days prior to the date fixed for redemption,
and, if less than all the Senior Debentures of a series, or any Tranche thereof,
are to be redeemed, the particular Senior Debentures to be redeemed will be
selected by the Securities Registrar by such method as shall be provided for any
particular series, or in the absence of any such provision, by such method of
random selection as the Security Registrar deems fair and appropriate. (Sections
403 and 404)
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Paying Agent or Agents, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Senior
Debentures and that if such money has not been so received, such notice will be
of no force and effect and the Company will not be required to redeem such
Senior Debentures. (Section 404)
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CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER
Under the terms of the Senior Unsecured Indenture, the Company may not
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person,
unless (i) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a Person organized and existing under the laws of any domestic
jurisdiction and shall expressly assume the Company's obligations on the Senior
Debentures and under the Senior Unsecured Indenture, (ii) immediately after
giving effect to the transaction, no Event of Default shall have occurred and be
continuing, and (iii) the Company will have delivered to the Senior Unsecured
Indenture Trustee an Officer's Certificate and an Opinion of Counsel as provided
in the Senior Unsecured Indenture. (Section 1101)
LIMITATIONS ON LIENS
So long as there remains outstanding any Senior Debentures of any series to
which Section 6.08 of the Senior Unsecured Indenture applies under the terms of
such series, the Company may not, and may not permit any subsidiary to, create
or suffer to be created or to exist any mortgage, pledge, security interest,
encumbrance, easement, lease, reservation, restriction, servitude, charge or
similar right or lien of any kind (for purposes of this paragraph, "Liens") on
any of its properties or assets now owned or hereinafter acquired to secure any
indebtedness, without making effective provision whereby the Senior Debentures
(together with, if the Company shall so determine, any other debt of the Company
or any subsidiary then existing or thereafter created that is not subordinate to
such Senior Debentures) of such series shall be equally and ratably secured with
(or prior to) any and all such indebtedness and with any other indebtedness
similarly entitled to be equally and ratably secured. The foregoing restriction
shall not apply to or prevent the creation or existence of the following: (a)
the Liens of the 1940 Indenture, the 1923 Indenture and the Mortgage or any
indenture supplemental to any thereof subjecting any property to the Lien
thereof or confirming the Lien thereof upon any property, whether now owned or
hereafter acquired; (b) Liens on property existing at the time of acquisition or
construction of such property (or created within one year after completion of
such acquisition or construction), whether by purchase, merger, construction or
otherwise (or on the property of a subsidiary at the date it became a
subsidiary), or to secure the payment of all or any part of the purchase price
or construction cost thereof, including the extension of any such Liens to
repairs, renewals, replacements, substitutions, betterments, additions,
extensions and improvements then or thereafter made on the property subject
thereto; (c) any extensions, renewals or replacements (or successive extensions,
renewals or replacements), in whole or in part of Liens permitted by the
foregoing clauses (a) and (b); (d) the pledge of any bonds or other securities
at any time issued under any of the Liens permitted by clauses (a), (b), or (c);
or (e) Permitted Liens. Further, this restriction shall not apply to or prevent
the creation or existence of leases made, or existing on property acquired, in
the ordinary course of business. "Permitted Liens" means any of the following:
(a) Liens for taxes, assessments and other governmental charges or requirements
not delinquent or which can thereafter be paid without penalty or which are
currently being contested in good faith by appropriate proceedings; (b)
mechanics', workmen's, repairmen's, materialmen's, warehousemen's and carriers'
Liens, Liens or privileges of any employees of the Company for salary or wages
earned, but not yet payable, and other Liens, including without limitation Liens
for worker's compensation awards, arising in the ordinary course of business for
charges or requirements which are not delinquent or which are being contested in
good faith and by appropriate proceedings; (c) Liens in respect of judgments or
awards with respect to which the Company shall (i) in good faith be prosecuting
an appeal or other proceeding for review and with respect to which the Company
shall have secured a stay of execution pending such appeal or other proceeding
or (ii) have the right to prosecute an appeal or other proceeding for review;
(d) easements, leases, reservations or other rights of others in, on and/or
over, and laws, regulations and restrictions affecting, and defects and
irregularities in record title to, the property of the Company or any part
thereof; provided, however, that such easements, leases, reservations, rights,
laws, regulations, restrictions, defects and irregularities do not, in the
reasonable judgment of the Company, in the aggregate materially impair the use
by the Company of its property considered as a whole for the purposes for which
it is held by the Company; (e) any defects or irregularities in title to any
rights-of-way and/or to any real estate used or to be used primarily for
right-of-way
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purposes or held under lease, easement, license or similar right; provided,
however, that (i) the Company shall have obtained from the apparent owner of the
lands or estates therein covered by any such right-of-way a sufficient right, by
the terms of the instrument granting such right-of-way, lease, easement, license
or similar right, to the use thereof for the purpose for which the Company
acquired the same, (ii) the Company has power under eminent domain, or similar
statutes, to remove such defects or irregularities or (iii) such defects or
irregularities may be otherwise remedied without undue effort or expense; (f)
Liens securing indebtedness neither created, assumed nor guaranteed by the
Company nor on account of which it customarily pays interest, existing at the
date of the execution and delivery of this Indenture, or, as to property
hereafter acquired, at the time of the acquisition thereof by the Company, upon
real estate or rights in or relating to real estate acquired by the Company for
rights of way for distribution and transmission lines and for pipes,
substations, structures and appurtenances thereto; (g) leases existing at the
date of the execution and delivery of this Indenture affecting property owned by
the Company at said date and renewals and extensions thereof and leases for a
term of not more than ten (10) years (including extensions or renewals at the
option of the tenant) affecting property acquired by the Company after said
date; (h) any controls, restrictions, obligations, duties and/or other burdens
imposed by any federal, state, municipal or other law, or by any rule,
regulation or order of any Governmental Authority, upon any property of the
Company or the operation or use thereof or upon the Company with respect to any
of its property or the operation or use thereof or with respect to any
franchise, grant, license, permit or public purpose requirement, or any rights
reserved to or otherwise vested in any Governmental Authority to impose any such
controls, restrictions, obligations, duties and/or other burdens; (i) Liens
granted on air or water pollution control or sewage or solid waste disposal
facilities of the Company in connection with the issuance of industrial
development revenue bonds; (j) any right which any Governmental Authority may
have by virtue of any franchise, license, contract or statute to purchase, or
designate a purchaser of or order the sale of, any property of the Company upon
payment of cash or reasonable compensation therefor or to terminate any
franchise, license or other rights or to regulate the property and business of
the Company; (k) any Liens which have been bonded for the full amount in dispute
or for the payment of which other adequate security arrangements have been made
or which, in the opinion of counsel, are not material; (l) Prepaid Liens; (m)
Liens resulting from good faith deposits made in connection with bids, tenders,
contracts or leases to which the Company is a party and Liens resulting from
deposits made to secure public or statutory obligations of the Company or for
the purpose of obtaining a stay or discharge in the course of any legal
proceedings; (n) the pledge or assignment in the ordinary course of business of
electricity, gas (either natural or artificial) or steam, accounts receivable or
customers' installment paper; (o) rights reserved to or vested in others to take
or receive any part of the electricity, gas (either natural or artificial),
steam or any by-products thereof generated or produced by or from any properties
of the Company or with respect to any other rights concerning electricity, gas
(either natural or artificial) or steam supply, transportation, or storage which
are in use in the ordinary course of the electricity, gas (either natural or
artificial) or steam business; (p) any landlord's Lien; (q) Liens incurred
pursuant to Section 907; and (r) Liens or encumbrances not otherwise permitted
if, at the time of incurrence and after giving effect thereto, the aggregate of
all obligations of the Company and its subsidiaries secured thereby does not
exceed 10% of Tangible Net Worth. "Prepaid Lien" means any Lien securing
indebtedness for the payment of which money in the necessary amount shall have
been irrevocably deposited in trust with the trustee or other holder of such
Lien; provided, however, that if such indebtedness is to be redeemed or
otherwise prepaid prior to the stated maturity thereof, any notice requisite to
such redemption or prepayment shall have been given in accordance with the
mortgage or other instrument creating such Lien or irrevocable instructions to
give such notice shall have been given to such trustee or other holder.
"Tangible Net Worth" means (i) common stockholders' equity appearing on the most
recent balance sheet of the Company (or consolidated balance sheet of the
Company and its subsidiaries if the Company then has one or more subsidiaries
the accounts of which are consolidated with the accounts of the Company)
prepared in accordance with generally accepted accounting principles less (ii)
intangible assets (excluding intangible assets recoverable through rates as
prescribed by applicable regulatory authorities).
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EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the Senior
Unsecured Indenture with respect to Senior Debentures of any series: (a) failure
to pay any interest on any Senior Debentures of such series within 60 days after
the same becomes due and payable; provided, that an extension of an interest
payment period by the Company permitted by the terms of the series shall not
constitute a failure to pay interest for this purpose; (b) failure to pay
principal of or premium, if any, on any Senior Debenture of such series within
three business days after the same becomes due and payable; (c) failure to
perform or breach of any other covenant or warranty of the Company in the Senior
Unsecured Indenture (other than a covenant or warranty of the Company in the
Senior Unsecured Indenture solely for the benefit of one or more series of
Senior Debentures other than such series) for 60 days after written notice to
the Company by the Senior Unsecured Indenture Trustee, or to the Company and the
Senior Unsecured Indenture Trustee by the Holders of at least 33% in principal
amount of the Senior Debentures of such series Outstanding under the Senior
Unsecured Indenture as provided in the Senior Unsecured Indenture; (d) certain
events of bankruptcy, insolvency or reorganization; and (e) any other Event of
Default specified in the applicable Prospectus Supplement with respect to Senior
Debentures of a particular series. (Section 801)
An Event of Default with respect to the Senior Debentures may not
necessarily constitute an Event of Default with respect to the Senior Debentures
of any other series issued under the Senior Unsecured Indenture.
If an Event of Default with respect to any series of Senior Debentures
occurs and is continuing, then either the Senior Unsecured Indenture Trustee or
the Holders of not less than 33% in principal amount of the Outstanding Senior
Debentures of such series may declare the principal amount (or if the Senior
Debentures of such series are Discount Securities, such portion of the principal
amount hereof as may be specified in the applicable Prospectus Supplement) of
all of the Senior Debentures of such series to be due and payable immediately;
provided, however, that if an Event of Default occurs and is continuing with
respect to more than one series of Senior Debentures, the Senior Unsecured
Indenture Trustee or the Holders of not less than 33% in aggregate principal
amount of the Outstanding Securities of all such series, considered as one
class, may make such declaration of acceleration and not the Holders of the
Senior Debentures of any one of such series.
Subject to the provisions of the Senior Unsecured Indenture relating to the
duties of the Senior Unsecured Indenture Trustee in case an Event of Default
shall occur and be continuing, the Senior Unsecured Indenture Trustee will be
under no obligation to exercise any of its rights or powers under the Senior
Unsecured Indenture at the request or direction of any Holder, unless such
Holder shall have offered to the Senior Unsecured Indenture Trustee reasonable
security or indemnity. (Section 903) Subject to such provisions of the
indemnification of the Senior Unsecured Indenture Trustee, the Holders of a
majority in principal amount of the Outstanding Senior Debentures of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Unsecured Indenture Trustee,
or exercising any trust or power conferred on the Senior Unsecured Indenture
Trustee, with respect to the Senior Debentures of that series. (Section 812)
No Holder of a Senior Debenture of any series will have any right to
institute any proceeding with respect to the Senior Unsecured Indenture, or for
the appointment of a receiver or a trustee, or for any other remedy thereunder,
unless (i) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Senior Debentures of such
series, (ii) the Holders of not less than a majority in aggregate principal
amount of the Outstanding Senior Debentures of such series have made written
request to the Senior Unsecured Indenture Trustee, and such Holder or Holders
have offered reasonable indemnity to the Senior Unsecured Indenture Trustee, to
institute such proceeding as trustee and (iii) the Senior Unsecured Indenture
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding Senior
Debentures of that series a direction inconsistent with such request, within 60
days after such notice, request and offer. (Section 807) However, such
limitations do not apply to a suit instituted by a Holder of a Senior Debenture
for the enforcement of payment of the principal of or any premium or interest on
such Senior Debenture on or after the applicable due date specified in such
Senior Debenture. (Section 808)
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The Company will be required to furnish to the Senior Unsecured Indenture
Trustee annually, not later than October 1 in each year, a statement by an
appropriate officer as to such officer's knowledge of the Company's compliance
with all conditions and covenants under the Senior Unsecured Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under the Senior Unsecured Indenture. (Section 606)
RIGHT TO CURE
At any time after the declaration of acceleration with respect to the
Senior Debentures of any series has been made and before a judgment or decree
for payment of the money due has been obtained, the Event or Events of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Senior Unsecured
Indenture Trustee a sum sufficient to pay
(1) all overdue interest on all Senior Debentures of such series;
(2) the principal of and premium, if any, on any Senior Debentures
of such series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Senior Debentures;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Senior Debentures, to the extent that payment of such
interest is lawful; and
(4) all amounts due to the Senior Unsecured Indenture Trustee under
the Senior Unsecured Indenture; and
(b) any other Event or Events of Default with respect to the Senior
Debentures of such series, other than the non-payment of the principal of
the Senior Debentures of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Senior Unsecured Indenture. (Section 802)
MODIFICATION AND WAIVER
Without the consent of any Holder of Senior Debentures, the Company and the
Senior Unsecured Indenture Trustee may enter into one or more supplemental
indentures to the Senior Unsecured Indenture for any of the following purposes:
(a) to evidence the assumption by any permitted successor to the Company of the
covenants of the Company in the Senior Unsecured Indenture and the Senior
Debentures; or (b) to add one or more covenants of the Company or other
provisions for the benefit of the Holders of all or any series of Outstanding
Senior Debentures or to surrender any right or power conferred upon the Company
by the Senior Unsecured Indenture; or (c) to add any additional Events of
Default with respect to all or any series of Outstanding Senior Debentures; or
(d) to change or eliminate any provision of the Senior Unsecured Indenture or to
add any new provision to the Senior Unsecured Indenture, provided that if such
change, elimination or addition will adversely affect the interests of the
Holders of Senior Debentures of any series in any material respect, such change,
elimination or addition will become effective with respect to such series only
when the consent of the Holders of such series so affected has been obtained or
when there is no Senior Debenture of such series remaining Outstanding under the
Senior Unsecured Indenture; or (e) to provide collateral security for the Senior
Debentures; or (f) to establish the form or terms of Senior Debentures of any
series as permitted by the Senior Unsecured Indenture; or (g) to provide for the
authentication and delivery of bearer securities and coupons appertaining
thereto representing interest, if any, thereon and for the procedures for the
registration, exchange and replacement thereof and for giving of notice to, and
the solicitation of the vote or consent of, the Holders thereof, and for any and
all other matters incidental thereto; or (h) to evidence and provide for the
acceptance of appointment of a separate or successor Senior Unsecured Indenture
Trustee under the Senior Unsecured Indenture with respect to the Senior
Debentures of one or more series and to add or to change any of the provisions
of the Senior Unsecured Indenture as shall be necessary to provide for or to
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facilitate the administration of the trusts under the Senior Unsecured Indenture
by more than one trustee; or (i) to provide for the procedures required to
permit the utilization of a noncertificated system of registration for any
series of Senior Debentures; or (j) to change any place where (1) the principal
of and premium, if any, and interest, if any, on any Senior Debentures shall be
payable, (2) any Senior Debentures may be surrendered for registration of
transfer or exchange and (3) notices and demands to or upon the Company in
respect of Senior Debentures and the Senior Unsecured Indenture may be served;
or (k) to cure any ambiguity, to correct or supplement any defective or
inconsistent provision or to make or change any other provisions with respect to
matters and questions arising under the Senior Unsecured Indenture, provided
such changes or additions shall not adversely affect the interests of the
Holders of Senior Debentures of any series in any material respect. (Section
1201)
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Senior Debentures of any series may waive compliance by the
Company with certain restrictive provisions of the Senior Unsecured Indenture.
(Section 607) The Holders of not less than a majority in principal amount of the
Outstanding Senior Debentures of any series may waive any past default under the
Senior Unsecured Indenture, except a default in the payment of principal,
premium or interest and certain covenants and provisions of the Senior Unsecured
Indenture that cannot be modified or be amended without the consent of the
Holder of each Outstanding Senior Debenture of such series affected. (Section
813)
Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is amended after the date
of the Senior Unsecured Indenture in such a way as to require changes to the
Senior Unsecured Indenture or the incorporation therein of additional provisions
or so as to permit changes to, or the elimination of, provisions which, at the
date of the Senior Unsecured Indenture or at any time thereafter, were required
by the Trust Indenture Act to be contained in the Senior Unsecured Indenture,
the Senior Unsecured Indenture will be deemed to have been amended so as to
conform to such amendment or to effect such changes or elimination, and the
Company and the Senior Unsecured Indenture Trustee may, without the consent of
any Holders, enter into one or more supplemental indentures to evidence or
effect such amendment. (Section 1201)
Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Senior Debentures of all series
then Outstanding, considered as one class, is required for the purpose of adding
any provisions to, or changing in any manner, or eliminating any of the
provisions of, the Senior Unsecured Indenture pursuant to one or more
supplemental indentures; provided, however, that if less than all of the series
of Senior Debentures Outstanding are directly affected by a proposed
supplemental indenture, then the consent only of the Holders of a majority in
aggregate principal amount of Outstanding Senior Debentures of all series so
directly affected, considered as one class, will be required; and provided,
further, that if the Senior Debentures of any series have been issued in more
than one Tranche and if the proposed supplemental indenture directly affects the
rights of the Holders of one or more, but less than all, such Tranches, then the
consent only of the Holders of a majority in aggregate principal amount of the
Outstanding Senior Debentures of all Tranches so directly affected, considered
as one class, will be required; and provided further, that no such supplemental
indenture may (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Senior Debenture, or reduce the
principal amount thereof or the rate of interest thereon (or the amount of any
installment of interest thereon) or change the method of calculating such rate
or reduce any premium payable upon the redemption thereof, or reduce the amount
of the principal of any Discount Security that would be due and payable upon a
declaration of acceleration of Maturity or change the coin or currency (or other
property) in which any Senior Debenture or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity of any Senior Debenture (or, in the
case of redemption, on or after the redemption date) without, in any such case,
the consent of the Holder of such Senior Debenture, (b) reduce the percentage in
principal amount of the Outstanding Senior Debentures of any series, or any
Tranche thereof, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required for
any waiver of compliance with any provision of the Senior Unsecured Indenture or
any default thereunder and its consequences, or reduce the requirements for
quorum or voting, without, in any such case, the consent of the Holder of each
Outstanding Senior Debenture of such
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series or Tranche, or (c) modify certain of the provisions of the Senior
Unsecured Indenture relating to supplemental indentures, waivers of certain
covenants and waivers of past defaults with respect to the Senior Debentures of
any series, or any Tranche thereof, without the consent of the Holder of each
Outstanding Senior Debenture affected thereby. A supplemental indenture which
changes or eliminates any covenant or other provision of the Senior Unsecured
Indenture which has expressly been included solely for the benefit of one or
more particular series of Senior Debentures or one or more Tranches thereof, or
modifies the rights of the Holders of Senior Debentures of such series or
Tranches with respect to such covenant or other provision, will be deemed not to
affect the rights under the Indenture of the Holders of the Senior Debentures of
any other series or Tranche. (Section 1202)
The Senior Unsecured Indenture provides that in determining whether the
Holders of the requisite principal amount of the Outstanding Senior Debentures
have given any request, demand, authorization, direction, notice, consent, or
waiver under the Senior Unsecured Indenture as of any date, or whether or not a
quorum is present at a meeting of Holders, (i) Senior Debentures owned by the
Company or any other obligor upon the Senior Debentures or any Affiliate of the
Company or of such other obligor (unless the Company, such Affiliate or such
obligor owns all Securities Outstanding under this Senior Unsecured Indenture,
or all Outstanding Senior Debentures of each such series and each such Tranche,
as the case may be, determined without regard to this clause (i)) shall be
disregarded and deemed not to be Outstanding; (ii) the principal amount of a
Discount Security that shall be deemed to be Outstanding for such purposes shall
be the amount of the principal thereof that would be due and payable as of the
date of such determination upon a declaration of acceleration of the Maturity
thereof as provided in the Senior Unsecured Indenture; and (iii) the principal
amount of a Senior Debenture denominated in one or more foreign currencies or a
composite currency that will be deemed to be Outstanding will be the Dollar
equivalent, determined as of such date in the manner prescribed for such Senior
Debenture, of the principal amount of such Senior Debenture (or, in the case of
a Senior Debenture described in clause (ii) above, of the amount described in
such clause). (Section 101)
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act, the
Company may, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, election, waiver or other Act, but
the Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, election,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on the record date shall be deemed to
be Holders for the purposes of determining whether Holders of the requisite
proportion of the Outstanding Senior Debentures have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
direction, waiver or other Act, and for that purpose the Outstanding Senior
Debentures shall be computed as of the record date. Any request, demand,
authorization, direction, notice, consent, election, waiver or other Act of a
Holder shall bind every future Holder of the same Senior Debenture and the
Holder of every Senior Debenture issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Senior
Debenture. (Section 104)
DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, any
Senior Debenture, or any portion of the principal amount thereof, will be deemed
to have been paid for purposes of the Senior Unsecured Indenture, and, at the
Company's election, the entire indebtedness of the Company in respect thereof
will be deemed to have been satisfied and discharged, if there has been
irrevocably deposited with the Senior Unsecured Indenture Trustee or any Paying
Agent (other than the Company), in trust: (a) money in an amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepaying thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which,
together with money, if any, deposited with or held by the Senior Unsecured
Indenture Trustee or such Paying Agent, will be sufficient, or (c) a combination
of (a) and (b) which will be sufficient, to pay
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when due the principal of and premium, if any, and interest, if any, due and to
become due on such Senior Debentures or portions thereof. (Section 701) For this
purpose, unless otherwise indicated in the applicable Prospectus Supplement,
Eligible Obligations include direct obligations of, or obligations
unconditionally guaranteed by, the United States, entitled to the benefit of the
full faith and credit thereof, and certificates, depositary receipts or other
instruments which evidence a direct ownership interest in such obligations or in
any specific interest or principal payments due in respect thereof. (Section
101)
For federal income tax purposes, the deposit contemplated in the preceding
paragraph, together with the entire discharge and satisfaction of the Company's
obligations under the Senior Unsecured Indenture and the affected Senior
Debentures thereunder, would be treated as an exchange of the affected Senior
Debentures for other securities or for a direct interest in the cash and
securities held in the trust. In general, a Holder of such securities would
recognize gain or loss to the extent the fair market value thereof exceeds such
Holder's adjusted basis in such security. Such a Holder thereafter would be
required to recognize for federal income tax purposes a share of the income,
gain or loss of the trust. The amount so required to be recognized could be
different from the amount that would otherwise have been recognized in the
absence of such deposit. Prospective investors are urged to consult their own
tax advisors as to the specific consequences to them of any such deposit.
RESIGNATION OF SENIOR UNSECURED INDENTURE TRUSTEE
The Senior Unsecured Indenture Trustee may resign at any time by giving
written notice thereof to the Company or may be removed at any time by Act of
the Holders of a majority in principal amount of Senior Debentures then
Outstanding delivered to the Senior Unsecured Indenture Trustee and the Company.
No resignation or removal of the Senior Unsecured Indenture Trustee and no
appointment of a successor trustee will become effective until the acceptance of
appointment by a successor trustee in accordance with the requirements of the
Senior Unsecured Indenture. So long as no Event of Default or event which, after
notice or lapse of time, or both, would become an Event of Default has occurred
and is continuing and except with respect to a Senior Unsecured Indenture
Trustee appointed by Act of the Holders of a majority in principal amount of the
Outstanding Senior Debentures, if the Company has delivered to the Trustee a
resolution of its Board of Directors appointing a successor trustee and such
successor has accepted such appointment in accordance with the terms of the
Senior Unsecured Indenture, the Senior Unsecured Indenture Trustee will be
deemed to have resigned and the successor will be deemed to have been appointed
as trustee in accordance with the Senior Unsecured Indenture. (Section 910)
NOTICES
Notices to Holders of Senior Debentures will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Section
106)
TITLE
The Company, the Senior Unsecured Indenture Trustee, and any agent of the
Company or the Senior Unsecured Indenture Trustee may treat the Person in whose
name a Senior Debenture is registered as the absolute owner thereof (whether or
not such Senior Debenture may be overdue) for the purpose of making payment and
for all other purposes. (Section 308)
GOVERNING LAW
The Senior Unsecured Indenture and the Senior Debentures will be governed
by, and construed in accordance with, the laws of the State of New York, except
to the extent the law of any other jurisdiction shall be mandatorily applicable.
(Section 112)
LIMITATION ON SUITS
The Senior Unsecured Indenture limits a Holder's right to institute any
proceeding with respect to the Senior Unsecured Indenture, the appointment of a
receiver or trustee, or for any other remedy under the Senior Unsecured
Indenture. (Section 807)
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MAINTENANCE OF PROPERTIES
The Senior Unsecured Indenture provides that the Company shall cause (or,
with respect to property owned in common with others, make reasonable effort to
cause) all its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and shall cause
(or, with respect to property owned in common with others, make reasonable
effort to cause) to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as, in the judgment of the Company,
may be necessary so that the business carried on in connection therewith may be
properly conducted; provided, however, that nothing shall prevent the Company
from discontinuing, or causing the discontinuance of, the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business. (Section 605)
RELATIONSHIP WITH THE SENIOR UNSECURED INDENTURE TRUSTEE
See "DESCRIPTION OF THE COLLATERAL TRUST BONDS -- Relationship with the
Trustee" for a description of certain relationships between the Senior Unsecured
Indenture Trustee and the Company.
DESCRIPTION OF THE SUBORDINATED INDENTURE
GENERAL
The Securities may be issued in one or more series under the Indenture (For
Unsecured Subordinated Debt Securities) (the "Subordinated Indenture") between
the Company and The First National Bank of Chicago, as trustee (the
"Subordinated Indenture Trustee"). The summaries of the Subordinated Indenture
set forth below do not purport to be complete and are subject to the detailed
provisions of the Subordinated Indenture, a copy of which was previously filed
with the Commission, is listed as an exhibit to the Registration Statement of
which this Prospectus is a part, and is incorporated herein by reference.
Capitalized terms used in this section which are not otherwise defined in this
Prospectus shall have the meanings ascribed to them in the Subordinated
Indenture. Wherever particular provisions or terms defined in the Subordinated
Indenture are referred to in this section, such provisions or definitions are
incorporated by reference as part of the statements made in this section, and
such statements are qualified in their entirety by such reference. References to
article and section numbers herein, unless otherwise indicated, are references
to article and section numbers of the Subordinated Indenture.
The Securities issued under the Subordinated Indenture (the "Subordinated
Debentures") will be unsecured, subordinated obligations of the Company and
shall not be afforded any protection under the Mortgage, pursuant to which
various series of Collateral Trust Bonds may be issued. Reference is made to the
Prospectus Supplement, or a supplement thereto, for a description of the
following terms of the series of Subordinated Debentures in respect of which
this Prospectus is being delivered: (1) the title of such series of Subordinated
Debentures; (2) any limit on the aggregate principal amount of such Subordinated
Debentures or the series of which they are a part; (3) the Person or Persons to
whom interest on the Subordinated Debentures of such series shall be payable if
other than the Persons in whose names such Subordinated Debentures are
registered; (4) the date or dates on which the principal of any of such
Subordinated Debentures will be payable; (5) the rate or rates (which may be
fixed or variable) and/or the method of determination of such rate or rates at
which any of such Subordinated Debentures will bear interest, if any, the date
or dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date for any such
interest payable on any Interest Payment Date; (6) the place or places where (i)
the principal of, premium, if any, and interest on any of such Subordinated
Debentures will be payable, (ii) registration of transfer of such Subordinated
Debentures may be effected, (iii) exchanges of such Subordinated Debentures may
be effected and (iv) notices and demands to or upon the Company in respect of
such Subordinated Debentures may be served; the Security Registrar for such
Subordinated Debentures and, if such is the case, that the principal of such
Subordinated Debentures shall be payable without presentment or surrender
thereof; (7) the period or periods within which, or the date or dates on which,
the price or prices at which and the terms and conditions upon which any of such
Subordinated
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Debentures may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation or obligations, if any, of the Company to redeem or purchase
any of such Subordinated Debentures pursuant to any sinking fund or other
mandatory redemption provisions or at the option of the Holder thereof, and the
period or periods within which, or the date or dates on which, the price or
prices at which and the terms and conditions upon which any of such Subordinated
Debentures shall be redeemed or purchased, in whole or in part, pursuant to such
obligation, and applicable exceptions to the requirements of a notice of
redemption in the case of mandatory redemption or redemption at the option of
the Holder; (9) the denominations in which any of such Subordinated Debentures
will be issuable, if other than denominations of $1,000 and any integral
multiple thereof; (10) if other than the currency of the United States, the
currency or currencies, including composite currencies, in which payment of the
principal of and any premium and interest on any of such Subordinated Debentures
will be payable; (11) if the principal of or any premium or interest on any of
such Subordinated Debentures is to be payable, at the election of the Company or
the Holder thereof, in a coin or currency other than in which such Subordinated
Debentures are stated to be payable, the period or periods within which and the
terms and conditions upon which, such election is to be made; (12) if the
principal of or premium, if any, or interest on such Subordinated Debentures are
to be payable, or are to be payable at the election of the Company or a Holder
thereof, in securities or other property, the type and amount of such securities
or other property, or the formulary or other method or other means by which such
amount shall be determined, and the period or periods within which, and the
terms and conditions upon which, any such election may be made; (13) if the
amount payable in respect of principal of or any premium or interest on any of
such Subordinated Debentures may be determined with reference to an index or
other fact or event ascertainable outside the Subordinated Indenture, the manner
in which such amounts will be determined; (14) if other than the principal
amount thereof, the portion of the principal amount of any of such Subordinated
Debentures which shall be payable upon declaration of acceleration of the
Maturity thereof; (15) any addition to the Events of Default applicable to any
of such Subordinated Debentures and any addition to the covenants of the Company
for the benefit of the Holders of such Subordinated Debentures; (16) the terms,
if any, pursuant to which such Subordinated Debentures may be converted into or
exchanged for shares of capital stock or other securities of the Company or any
other Person; (17) the obligations or instruments, if any, which shall be
considered to be Eligible Obligations in respect of such Subordinated Debentures
denominated in a currency other than Dollars or in a composite currency, and any
additional or alternative provisions for the reinstatement of the Company's
indebtedness in respect of such Subordinated Debentures after the satisfaction
and discharge thereof; (18) if such Subordinated Debentures are to be issued in
global form, (i) any limitations on the rights of the Holder or Holders of such
Subordinated Debentures to transfer or exchange the same or to obtain the
registration of transfer thereof, (ii) any limitations on the rights of the
Holder or Holders thereof to obtain certificates therefor in definitive form in
lieu of temporary form and (iii) any and all other matters incidental to such
Subordinated Debentures; (19) if such Subordinated Debentures are to be issuable
as bearer securities; (20) any limitations on the rights of the Holders of such
Subordinated Debentures to transfer or exchange such Subordinated Debentures or
to obtain the registration of transfer thereof, and if a service charge will be
made for the registration of transfer or exchange of such Subordinated
Debentures, the amount or terms thereof; (21) any exceptions to the provisions
governing payments due on legal holidays or any variations in the definition of
Business Day with respect to such Subordinated Debentures; and (22) any other
terms of such Subordinated Debentures of such series, or any Tranche thereof,
not inconsistent with the provisions of the Subordinated Indenture. (Section
301)
Subordinated Debentures may be sold at a substantial discount below their
principal amount. Certain special United States federal income tax
considerations applicable to Subordinated Debentures sold at an original issue
discount may be described in the applicable Prospectus Supplement. In addition,
certain special United States federal income tax or other considerations
applicable to any Subordinated Debentures which are denominated in a currency or
currency unit other than Dollars may be described in the applicable Prospectus
Supplement.
Except as may otherwise be described in the Prospectus Supplement, the
covenants contained in the Subordinated Indenture would not afford Holders of
Subordinated Debentures protection in the event of a highly-leveraged
transaction or change of control involving the Company.
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SUBORDINATION
The Subordinated Indenture provides that payment of the principal of,
premium, if any, and interest on Subordinated Debentures is subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below) of the Company, all as provided in the
Subordinated Indenture. No payment of principal of (including redemption of and
sinking fund payments), premium, if any, or interest on, Subordinated Debentures
may be made if payment of principal, premium, interest or any other payment on
any Senior Indebtedness is not made when due, any applicable grace period with
respect to such default has ended and such default has not been cured or waived
or ceased to exist, or if the maturity on any Senior Indebtedness has been
accelerated because of default. Upon any distribution of assets of the Company
to creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all principal of, premium, if any, and interest due or to
become due on, all Senior Indebtedness must be paid in full before any payment
on the Subordinated Debentures. Subject to the payment in full of all Senior
Indebtedness, the rights of the holders of Subordinated Debentures will be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on Subordinated Debentures are paid in full. (Sections 1501 -- 1504)
The term "Senior Indebtedness" means all obligations (other than
non-recourse obligations and the indebtedness issued under the Subordinated
Indenture) of, or guaranteed or assumed by, the Company for borrowed money,
including both senior and subordinated indebtedness for borrowed money (other
than the Subordinated Debentures), or for the payment of money relating to any
lease which is capitalized on the consolidated balance sheet of the Company and
its subsidiaries in accordance with generally accepted accounting principles, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligations, whether existing as of the date of the Subordinated
Indenture or subsequently incurred by the Company. (Section 101) Such Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any terms of such Senior Indebtedness. (Section 1509)
The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of March 31, 1997, Senior Indebtedness of
the Company aggregated approximately $708 million.
FORM, EXCHANGE, AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement,
Subordinated Debentures of each series will be issuable only in fully registered
form without coupons and in denominations of $1,000 and any integral multiple
thereof. (Sections 201 and 302)
At the option of the Holder, subject to the terms of the Subordinated
Indenture and the limitations applicable to global securities, Subordinated
Debentures of any series will be exchangeable for other Subordinated Debentures
of the same series, of any authorized denomination and of like tenor and
aggregate principal amount. (Section 305)
Subject to the terms of the Subordinated Indenture and the limitations
applicable to global securities, Subordinated Debentures may be presented for
exchange as provided above for registration of transfer (duly endorsed or
accompanied by a duly executed instrument of transfer) at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose. Unless otherwise indicated, no service charge will be
made for any registration of transfer or exchange of Subordinated Debentures,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. Every Subordinated
Debenture presented or surrendered for registration of transfer or exchange
shall (if so required by the Company, the Subordinated Indenture Trustee or the
Security Registrar) be duly endorsed or accompanied by an executed written
instrument of transfer in form satisfactory to the Company, the Subordinated
Indenture Trustee or the Security Registrar. (Section 305) Any transfer agent
(in addition to the Security Registrar) initially designated by the Company for
any Subordinated Debenture will be named in the applicable Prospectus
Supplement. The Company may at any time designate
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additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except
that the Company will be required to maintain a transfer agent in each Place of
Payment for the Subordinated Debentures of each series. The Company may perform
all functions of any office or agency. (Section 602)
The Company shall not be required to execute or register the transfer of or
the exchange of any Subordinated Debenture, or any Tranche thereof, during a
period of 15 days preceding the notice to be given identifying the Subordinated
Debenture called for redemption, or any Subordinated Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Subordinated Debenture being redeemed in part. (Section 305)
PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Subordinated Debenture on any Interest Payment Date will be
made to the person in whose name such Subordinated Debenture (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any interest on the Subordinated Debentures of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office of
the Subordinated Indenture Trustee in New York, New York will be designated as
the Company's sole Paying Agent for payment with respect to Subordinated
Debentures of each series. Any other Paying Agents initially designated by the
Company for the Subordinated Debentures of a particular series will be named in
the applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Subordinated Debentures of a particular series. (Section 602)
Any moneys deposited by the Company with the Trustee or any Paying Agent
for the payment of the principal of or any premium or interest on any
Subordinated Debenture which remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable will be paid to
the Company, and the Holder of such Subordinated Debenture, as an unsecured
general creditor and not as a Holder, thereafter may look only to the Company
for payment thereof. (Section 603)
REDEMPTION
Any terms for the optional or mandatory redemption of Subordinated
Debentures will be set forth in the applicable Prospectus Supplement or a
supplement thereto. Except as shall otherwise be provided in the applicable
Prospectus Supplement with respect to Subordinated Debentures that are
redeemable at the option of the Holder, Subordinated Debentures will be
redeemable only upon notice by mail not less than 30 days nor more than 60 days
prior to the date fixed for redemption, and, if less than all the Subordinated
Debentures of a series, or any Tranche thereof, are to be redeemed, the
particular Subordinated Debentures to be redeemed will be selected by the
Securities Registrar by such method as shall be provided for any particular
series, or in the absence of any such provision, by such method of random
selection as the Security Registrar deems fair and appropriate. (Sections 403
and 404)
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Paying Agent or Agents, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Subordinated
Debentures and that if such money has not been so received, such notice will be
of no force and effect and the Company will not be required to redeem such
Subordinated Debentures. (Section 404)
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CONSOLIDATION, MERGER, CONVEYANCE, OR OTHER TRANSFER
Under the terms of the Subordinated Indenture, the Company may not
consolidate with or merge into any other corporation or convey, transfer or
lease its properties and assets substantially as an entirety to any Person,
unless (i) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a Person organized and existing under the laws of any domestic
jurisdiction and shall expressly assume the Company's obligations on the
Subordinated Debentures and under the Subordinated Indenture, (ii) immediately
after giving effect to the transaction, no Event of Default shall have occurred
and be continuing, and (iii) the Company will have delivered to the Subordinated
Indenture Trustee an Officer's Certificate and an Opinion of Counsel as provided
in the Subordinated Indenture. (Section 1101)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Subordinated Indenture with respect to Subordinated Debentures of any series:
(a) failure to pay any interest on any Subordinated Debentures of such series
within 60 days after the same becomes due and payable; provided, that an
extension of an interest payment period by the Company permitted by the terms of
the series shall not constitute a failure to pay interest for this purpose; (b)
failure to pay principal of or premium, if any, on any Subordinated Debenture of
such series within three business days after the same becomes due and payable;
(c) failure to perform or breach of any other covenant or warranty of the
Company in the Subordinated Indenture (other than a covenant or warranty of the
Company in the Subordinated Indenture solely for the benefit of one or more
series of Subordinated Debentures other than such series) for 60 days after
written notice to the Company by the Subordinated Indenture Trustee, or to the
Company and the Subordinated Indenture Trustee by the Holders of at least 33% in
principal amount of the Subordinated Debentures of such series Outstanding under
the Subordinated Indenture as provided in the Subordinated Indenture; (d)
certain events of bankruptcy, insolvency or reorganization; and (e) any other
Event of Default specified in the applicable Prospectus Supplement with respect
to Subordinated Debentures of a particular series. (Section 801)
An Event of Default with respect to the Subordinated Debentures may not
necessarily constitute an Event of Default with respect to the Subordinated
Debentures of any other series issued under the Subordinated Indenture.
If an Event of Default with respect to any series of Subordinated
Debentures occurs and is continuing, then either the Subordinated Indenture
Trustee or the Holders of not less than 33% in principal amount of the
Outstanding Subordinated Debentures of such series may declare the principal
amount (or if the Subordinated Debentures of such series are Discount
Securities, such portion of the principal amount hereof as may be specified in
the applicable Prospectus Supplement) of all of the Subordinated Debentures of
such series to be due and payable immediately; provided, however, that if an
Event of Default occurs and is continuing with respect to more than one series
of Subordinated Debentures, the Subordinated Indenture Trustee or the Holders of
not less than 33% in aggregate principal amount of the Outstanding Securities of
all such series, considered as one class, may make such declaration of
acceleration and not the Holders of the Subordinated Debentures of any one of
such series.
Subject to the provisions of the Subordinated Indenture relating to the
duties of the Subordinated Indenture Trustee in case an Event of Default shall
occur and be continuing, the Subordinated Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the Subordinated
Indenture at the request or direction of any Holder, unless such Holder shall
have offered to the Subordinated Indenture Trustee reasonable security or
indemnity. (Section 903) Subject to such provisions of the indemnification of
the Subordinated Indenture Trustee, the Holders of a majority in principal
amount of the Outstanding Subordinated Debentures of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Subordinated Indenture Trustee, or exercising any trust
or power conferred on the Subordinated Indenture Trustee, with respect to the
Subordinated Debentures of that series. (Section 812)
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No Holder of a Subordinated Debenture of any series will have any right to
institute any proceeding with respect to the Subordinated Indenture, or for the
appointment of a receiver or a trustee, or for any other remedy thereunder,
unless (i) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Subordinated Debentures of such
series, (ii) the Holders of not less than a majority in aggregate principal
amount of the Outstanding Subordinated Debentures of such series have made
written request to the Subordinated Indenture Trustee, and such Holder or
Holders have offered reasonable indemnity to the Subordinated Indenture Trustee,
to institute such proceeding as trustee and (iii) the Subordinated Indenture
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debentures of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 807)
However, such limitations do not apply to a suit instituted by a Holder of a
Subordinated Debenture for the enforcement of payment of the principal of or any
premium or interest on such Subordinated Debenture on or after the applicable
due date specified in such Subordinated Debenture. (Section 808)
The Company will be required to furnish to the Subordinated Indenture
Trustee annually, not later than October 1 in each year, a statement by an
appropriate officer as to such officer's knowledge of the Company's compliance
with all conditions and covenants under the Subordinated Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under the Subordinated Indenture. (Section 606)
RIGHT TO CURE
At any time after the declaration of acceleration with respect to the
Subordinated Debentures of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without further
act, be deemed to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Subordinated Indenture
Trustee a sum sufficient to pay
(1) all overdue interest on all Subordinated Debentures of such
series;
(2) the principal of and premium, if any, on any Subordinated
Debentures of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Subordinated Debentures;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Subordinated Debentures, to the extent that payment of
such interest is lawful; and
(4) all amounts due to the Subordinated Indenture Trustee under the
Subordinated Indenture; and
(b) any other Event or Events of Default with respect to the
Subordinated Debentures of such series, other than the non-payment of the
principal of the Subordinated Debentures of such series which has become
due solely by such declaration of acceleration, have been cured or waived
as provided in the Subordinated Indenture. (Section 802)
MODIFICATION AND WAIVER
Without the consent of any Holder of Subordinated Debentures, the Company
and the Subordinated Indenture Trustee may enter into one or more supplemental
indentures to the Subordinated Indenture for any of the following purposes: (a)
to evidence the assumption by any permitted successor to the Company of the
covenants of the Company in the Subordinated Indenture and the Subordinated
Debentures; or (b) to add one or more covenants of the Company or other
provisions for the benefit of the Holders of all or any series of Outstanding
Subordinated Debentures or to surrender any right or power conferred upon the
Company by the
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Subordinated Indenture; or (c) to add any additional Events of Default with
respect to all or any series of Outstanding Subordinated Debentures; or (d) to
change or eliminate any provision of the Subordinated Indenture or to add any
new provision to the Subordinated Indenture, provided that if such change,
elimination or addition will adversely affect the interests of the Holders of
Subordinated Debentures of any series in any material respect, such change,
elimination or addition will become effective with respect to such series only
when the consent of the Holders of such series so affected has been obtained or
when there is no Subordinated Debenture of such series remaining Outstanding
under the Subordinated Indenture; or (e) to provide collateral security for the
Subordinated Debentures; or (f) to establish the form or terms of Subordinated
Debentures of any series as permitted by the Subordinated Indenture; or (g) to
provide for the authentication and delivery of bearer securities and coupons
appertaining thereto representing interest, if any, thereon and for the
procedures for the registration, exchange and replacement thereof and for giving
of notice to, and the solicitation of the vote or consent of, the Holders
thereof, and for any and all other matters incidental thereto; or (h) to
evidence and provide for the acceptance of appointment of a separate or
successor Subordinated Indenture Trustee under the Subordinated Indenture with
respect to the Subordinated Debentures of one or more series and to add or to
change any of the provisions of the Subordinated Indenture as shall be necessary
to provide for or to facilitate the administration of the trusts under the
Subordinated Indenture by more than one trustee; or (i) to provide for the
procedures required to permit the utilization of a noncertificated system of
registration for any series of Subordinated Debentures; or (j) to change any
place where (1) the principal of and premium, if any, and interest, if any, on
any Subordinated Debentures shall be payable, (2) any Subordinated Debentures
may be surrendered for registration of transfer or exchange and (3) notices and
demands to or upon the Company in respect of Subordinated Debentures and the
Subordinated Indenture may be served; or (k) to cure any ambiguity, to correct
or supplement any defective or inconsistent provision or to make or change any
other provisions with respect to matters and questions arising under the
Subordinated Indenture, provided such changes or additions shall not adversely
affect the interests of the Holders of Subordinated Debentures of any series in
any material respect. (Section 1201)
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Subordinated Debentures of any series may waive compliance by
the Company with certain restrictive provisions of the Subordinated Indenture.
(Section 607) The Holders of not less than a majority in principal amount of the
Outstanding Subordinated Debentures of any series may waive any past default
under the Subordinated Indenture, except a default in the payment of principal,
premium or interest and certain covenants and provisions of the Subordinated
Indenture that cannot be modified or be amended without the consent of the
Holder of each Outstanding Subordinated Debenture of such series affected.
(Section 813)
Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), is amended after the date
of the Subordinated Indenture in such a way as to require changes to the
Subordinated Indenture or the incorporation therein of additional provisions or
so as to permit changes to, or the elimination of, provisions which, at the date
of the Subordinated Indenture or at any time thereafter, were required by the
Trust Indenture Act to be contained in the Subordinated Indenture, the
Subordinated Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and the Company and the
Subordinated Indenture Trustee may, without the consent of any Holders, enter
into one or more supplemental indentures to evidence or effect such amendment.
(Section 1201)
Except as provided above, the consent of the Holders of not less than a
majority in aggregate principal amount of the Subordinated Debentures of all
series then Outstanding, considered as one class, is required for the purpose of
adding any provisions to, or changing in any manner, or eliminating any of the
provisions of, the Subordinated Indenture pursuant to one or more supplemental
indentures; provided, however, that if less than all of the series of
Subordinated Debentures Outstanding are directly affected by a proposed
supplemental indenture, then the consent only of the Holders of a majority in
aggregate principal amount of Outstanding Subordinated Debentures of all series
so directly affected, considered as one class, will be required; and provided,
further, that if the Subordinated Debentures of any series have been issued in
more than one Tranche and if the proposed supplemental indenture directly
affects the rights of the Holders of one or more, but less than all, such
Tranches, then the consent only of the Holders of a majority in aggregate
principal
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<PAGE> 49
amount of the Outstanding Subordinated Debentures of all Tranches so directly
affected, considered as one class, will be required; and provided further, that
no such supplemental indenture may (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any
Subordinated Debenture, or reduce the principal amount thereof or the rate of
interest thereon (or the amount of any installment of interest thereon) or
change the method of calculating such rate or reduce any premium payable upon
the redemption thereof, or reduce the amount of the principal of any Discount
Security that would be due and payable upon a declaration of acceleration of
Maturity or change the coin or currency (or other property) in which any
Subordinated Debenture or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity of any Subordinated Debenture (or, in the case of
redemption, on or after the redemption date) without, in any such case, the
consent of the Holder of such Subordinated Debenture, (b) reduce the percentage
in principal amount of the Outstanding Subordinated Debentures of any series, or
any Tranche thereof, the consent of the Holders of which is required for any
such supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with any provision of the Subordinated Indenture or
any default thereunder and its consequences, or reduce the requirements for
quorum or voting, without, in any such case, the consent of the Holder of each
Outstanding Subordinated Debenture of such series or Tranche, or (c) modify
certain of the provisions of the Subordinated Indenture relating to supplemental
indentures, waivers of certain covenants and waivers of past defaults with
respect to the Subordinated Debentures of any series, or any Tranche thereof,
without the consent of the Holder of each Outstanding Subordinated Debenture
affected thereby. A supplemental indenture which changes or eliminates any
covenant or other provision of the Subordinated Indenture which has expressly
been included solely for the benefit of one or more particular series of
Subordinated Debentures or one or more Tranches thereof, or modifies the rights
of the Holders of Subordinated Debentures of such series or Tranches with
respect to such covenant or other provision, will be deemed not to affect the
rights under the Indenture of the Holders of the Subordinated Debentures of any
other series or Tranche. (Section 1202)
The Subordinated Indenture provides that in determining whether the Holders
of the requisite principal amount of the Outstanding Subordinated Debentures
have given any request, demand, authorization, direction, notice, consent, or
waiver under the Subordinated Indenture as of any date, or whether or not a
quorum is present at a meeting of Holders, (i) Subordinated Debentures owned by
the Company or any other obligor upon the Subordinated Debentures or any
Affiliate of the Company or of such other obligor (unless the Company, such
Affiliate or such obligor owns all Securities Outstanding under this
Subordinated Indenture, or all Outstanding Subordinated Debentures of each such
series and each such Tranche, as the case may be, determined without regard to
this clause (i)) shall be disregarded and deemed not to be Outstanding; (ii) the
principal amount of a Discount Security that shall be deemed to be Outstanding
for such purposes shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon a declaration of
acceleration of the Maturity thereof as provided in the Subordinated Indenture;
and (iii) the principal amount of a Subordinated Debenture denominated in one or
more foreign currencies or a composite currency that will be deemed to be
Outstanding will be the Dollar equivalent, determined as of such date in the
manner prescribed for such Subordinated Debenture, of the principal amount of
such Subordinated Debenture (or, in the case of a Subordinated Debenture
described in clause (ii) above, of the amount described in such clause).
(Section 101)
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act, the
Company may, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, election, waiver or other Act, but
the Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, election,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on the record date shall be deemed to
be Holders for the purposes of determining whether Holders of the requisite
proportion of the Outstanding Subordinated Debentures have authorized or agreed
or consented to such request, demand, authorization, direction, notice, consent,
direction, waiver or other Act, and for that purpose the Outstanding
Subordinated Debentures shall be computed as of the record date. Any request,
demand, authorization, direction, notice, consent, election, waiver or other Act
of a Holder shall bind every future
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Holder of the same Subordinated Debenture and the Holder of every Subordinated
Debenture issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Subordinated Debenture. (Section 104)
DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, any
Subordinated Debenture, or any portion of the principal amount thereof, will be
deemed to have been paid for purposes of the Subordinated Indenture, and, at the
Company's election, the entire indebtedness of the Company in respect thereof
will be deemed to have been satisfied and discharged, if there has been
irrevocably deposited with the Subordinated Indenture Trustee or any Paying
Agent (other than the Company), in trust: (a) money in an amount which will be
sufficient, or (b) Eligible Obligations (as described below), which do not
contain provisions permitting the redemption or other prepaying thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide monies which,
together with money, if any, deposited with or held by the Subordinated
Indenture Trustee or such Paying Agent, will be sufficient, or (c) a combination
of (a) and (b) which will be sufficient, to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on such
Subordinated Debentures or portions thereof. (Section 701) For this purpose,
unless otherwise indicated in the applicable Prospectus Supplement, Eligible
Obligations include direct obligations of, or obligations unconditionally
guaranteed by, the United States, entitled to the benefit of the full faith and
credit thereof, and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof. (Section 101)
For federal income tax purposes, the deposit contemplated in the preceding
paragraph, together with the entire discharge and satisfaction of the Company's
obligations under the Subordinated Indenture and the affected Subordinated
Debentures thereunder, would be treated as an exchange of the affected
Subordinated Debentures for other securities or for a direct interest in the
cash and securities held in the trust. In general, a Holder of such securities
would recognize gain or loss to the extent the fair market value thereof exceeds
such Holders adjusted basis in such security. Such a Holder thereafter would be
required to recognize for federal income tax purposes a share of the income,
gain or loss of the trust. The amount so required to be recognized could be
different from the amount that would otherwise have been recognized in the
absence of such deposit. Prospective investors are urged to consult their own
tax advisors as to the specific consequences to them of any such deposit.
RESIGNATION OF SUBORDINATED INDENTURE TRUSTEE
The Subordinated Indenture Trustee may resign at any time by giving written
notice thereof to the Company or may be removed at any time by Act of the
Holders of a majority in principal amount of Subordinated Debentures then
Outstanding delivered to the Subordinated Indenture Trustee and the Company. No
resignation or removal of the Subordinated Indenture Trustee and no appointment
of a successor trustee will become effective until the acceptance of appointment
by a successor trustee in accordance with the requirements of the Subordinated
Indenture. So long as no Event of Default or event which, after notice or lapse
of time, or both, would become an Event of Default has occurred and is
continuing and except with respect to a Subordinated Indenture Trustee appointed
by Act of the Holders of a majority in principal amount of the Outstanding
Subordinated Debentures, if the Company has delivered to the Trustee a
resolution of its Board of Directors appointing a successor trustee and such
successor has accepted such appointment in accordance with the terms of the
Subordinated Indenture, the Subordinated Indenture Trustee will be deemed to
have resigned and the successor will be deemed to have been appointed as trustee
in accordance with the Subordinated Indenture. (Section 910)
NOTICES
Notices to Holders of Subordinated Debentures will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Section
106)
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TITLE
The Company, the Subordinated Indenture Trustee, and any agent of the
Company or the Subordinated Indenture Trustee may treat the Person in whose name
a Subordinated Debenture is registered as the absolute owner thereof (whether or
not such Subordinated Debenture may be overdue) for the purpose of making
payment and for all other purposes. (Section 308)
GOVERNING LAW
The Subordinated Indenture and the Subordinated Debentures will be governed
by, construed in accordance with, the laws of the State of New York, except to
the extent the law of any other jurisdiction shall be mandatorily applicable.
(Section 112)
LIMITATION ON SUITS
The Subordinated Indenture limits a Holder's right to institute any
proceeding with respect to the Subordinated Indenture, the appointment of a
receiver or trustee, or for any other remedy under the Subordinated Indenture.
(Section 807)
MAINTENANCE OF PROPERTIES
The Subordinated Indenture provides that the Company shall cause (or, with
respect to property owned in common with others, make reasonable effort to
cause) all its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and shall cause
(or, with respect to property owned in common with others, make reasonable
effort to cause) to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as, in the judgment of the Company,
may be necessary so that the business carried on in connection therewith may be
properly conducted; provided, however, that nothing shall prevent the Company
from discontinuing, or causing the discontinuance of, the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business. (Section 605)
MODIFICATION OF SENIOR INDEBTEDNESS
In general, the holders of Senior Indebtedness may, without in any manner
affecting the subordination of the payment of principal of and premium, if any,
and interest, if any, on the Subordinated Debentures in their absolute
discretion agree with the Company to change the manner, place or terms of
payment, change or extend the time of payment of, or renew or alter, any Senior
Indebtedness, or amend or supplement any instrument pursuant to which any Senior
Indebtedness is issued, or exercise or refrain from exercising any other of
their rights under the Senior Indebtedness including, without limitation, the
waiver of default thereunder, all without notice to or assent from the Holders
or the Trustee. (Section 1509)
RELATIONSHIP WITH THE SUBORDINATED INDENTURE TRUSTEE
See "DESCRIPTION OF THE COLLATERAL TRUST BONDS -- Relationship with the
Trustee" for a description of certain relationships between the Subordinated
Indenture Trustee and the Company.
GLOBAL SECURITIES
Some or all of the Securities of any series may be represented, in whole or
in part, by one or more global securities (each, a "Global Security") which will
have an aggregate principal amount equal to that of the Securities represented
thereby. Each Global Security will be registered in the name of a depositary
(the "Depositary") or a nominee thereof identified in the applicable Prospectus
Supplement, will be deposited with such Depositary or nominee or a custodian
therefor and will bear a legend regarding the restrictions on exchanges and
registration of transfer thereof referred to below and any such other matters as
may be provided for pursuant to the Mortgage or Subordinated Indenture, as the
case may be.
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<PAGE> 52
As long as the Depositary, or its nominee, is the registered holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and holder of such Global Security and the Securities
represented thereby for all purposes under the Mortgage or the Subordinated
Indenture, as the case may be. Except in limited circumstances, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security or any Securities represented thereby registered in their names,
will not receive or be entitled to receive physical delivery of certificated
Securities in exchange therefor and will not be considered to be the owners or
holders of such Global Security or any Securities represented thereby for any
purpose under the Securities or, as the case may be, the Mortgage or the
Subordinated Indenture. All payments of principal of and any premium and
interest on a Global Security will be made to the Depositary or its nominee, as
the case may be, as the Holder thereof. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. These laws may impair the ability to transfer beneficial
interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Securities represented by the Global Security to
the accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) or any such participant (with respect to
interests of persons held by such participants on their behalf). Payments,
transfers, exchanges, and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Company, the Mortgage Trustee or the
Subordinated Indenture Trustee, or any agents of each of the foregoing, will
have any responsibility or liability for any aspect of the Depositary's or any
participant's records relating to, or for payments made on account of,
beneficial interests in a Global Security, or for maintaining, supervising, or
reviewing any records relating to such beneficial interests.
EXPERTS
The financial statements and schedule included in the latest Annual Report
on Form 10-K of the Company have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto and are incorporated by reference herein in reliance upon the authority
of said firm as experts in auditing and accounting in giving said report.
LEGAL MATTERS
The legality of the Securities will be passed upon for the Company by
Stephen W. Southwick, Vice President, General Counsel & Secretary of the
Company, 200 First Street S.E., Cedar Rapids, Iowa 52401, and by Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York 10004, and
for any underwriters, dealers, agents or purchasers by Dorsey & Whitney LLP, 220
South Sixth Street, Minneapolis, Minnesota 50402. However, all matters
pertaining to the Lien of the Mortgage, organization of the Company, titles to
property and franchises will be passed upon by Stephen W. Southwick, Vice
President, General Counsel & Secretary.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
NEITHER THE DELIVERY OF THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS NOR ANY SALE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREOF OR THEREBY IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
The Company S-2
Recent Developments S-2
Use of Proceeds S-2
Certain Terms of the Offered Debentures S-2
Underwriting S-4
PROSPECTUS
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Company 4
The Merger 4
Use of Proceeds 5
Selected Consolidated Financial Information 5
Plan of Distribution 6
Description of the Collateral Trust Bonds 6
Description of the 1940 Indenture 18
Description of the ISU 1923 Indenture 22
Description of the Senior Unsecured
Indenture 27
Description of the Subordinated Indenture 37
Global Securities 46
Experts 47
Legal Matters 47
</TABLE>
Prospectus Supplement
IES UTILITIES INC.
$135,000,000
6 5/8% SENIOR DEBENTURES,
SERIES A, DUE 2009
CHASE SECURITIES INC.
SALOMON BROTHERS INC
SMITH BARNEY INC.
UBS SECURITIES
Dated July 30, 1997
