<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2 - 26720
LOUISVILLE GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Kentucky 61 - 0264150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 West Main Street 40232
P.O. Box 32010 (Zip Code)
Louisville, KY
(Address of principal executive offices)
(502) 627-2000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 21,294,223 shares, without
par value, as of October 31, 1996, all of which were held by LG&E Energy Corp.
<PAGE>2
Part I. Financial Information - Item 1. Financial Statements
Louisville Gas and Electric Company
Statements of Income
(Thousands of $)
The following statements of income include all normal recurring adjustments and
accruals which are, in the opinion of the Company, necessary to present a fair
statement of the results for the periods shown.
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
OPERATING REVENUES:
Electric (Note 2). . . . . . . . .$183,512 $178,785 $470,945 $444,667
Gas. . . . . . . . . . . . . . . . 20,306 17,566 140,724 119,021
Total operating revenues. . . . . 203,818 196,351 611,669 563,688
OPERATING EXPENSES:
Fuel for electric generation . . . 38,007 36,399 110,613 104,051
Power purchased. . . . . . . . . . 5,370 13,963 13,643 15,806
Gas supply expenses. . . . . . . . 13,328 8,791 90,211 70,752
Other operation expenses . . . . . 33,093 29,616 104,350 100,672
Maintenance. . . . . . . . . . . . 12,145 12,459 42,301 37,145
Depreciation and amortization. . . 22,250 21,440 66,751 64,320
Federal and state income
taxes . . . . . . . . . . . . . . 24,254 21,953 52,663 48,195
Property and other taxes . . . . . 3,690 3,956 12,769 12,549
Total operating expenses. . . . . 152,137 148,577 493,301 453,490
NET OPERATING INCOME. . . . . . . . 51,681 47,774 118,368 110,198
Other income and (deductions)
(Note 3) . . . . . . . . . . . . . 19 191 730 2,402
Interest charges. . . . . . . . . . 9,234 9,619 30,172 31,330
NET INCOME. . . . . . . . . . . . . 42,466 38,346 88,926 81,270
Preferred Stock Dividends . . . . . 1,146 1,566 3,438 4,810
NET INCOME AVAILABLE FOR
COMMON STOCK . . . . . . . . . . .$ 41,320 $ 36,780 $ 85,488 $ 76,460
<PAGE>3
Louisville Gas and Electric Company
Balance Sheets
(Thousands of $)
ASSETS
Sept. 30, Dec. 31,
1996 1995
UTILITY PLANT:
At original cost . . . . . . . . . . . . . . . . . .$2,652,717 $2,598,860
Less: reserve for depreciation. . . . . . . . . . . 987,642 934,942
Net utility plant . . . . . . . . . . . . . . . . . 1,665,075 1,663,918
OTHER PROPERTY AND INVESTMENTS -
less reserve . . . . . . . . . . . . . . . . . . . . 917 760
CURRENT ASSETS:
Cash and temporary cash investments. . . . . . . . . 73,291 58,131
Marketable securities. . . . . . . . . . . . . . . . 6,758 20,449
Accounts receivable - less reserve. . . . . . . . . 96,086 105,589
Materials and supplies - at average cost:
Fuel (predominantly coal) . . . . . . . . . . . . . 14,319 14,996
Gas stored underground. . . . . . . . . . . . . . . 36,796 31,714
Other . . . . . . . . . . . . . . . . . . . . . . . 33,206 34,384
Prepayments. . . . . . . . . . . . . . . . . . . . . 1,269 2,108
Total current assets. . . . . . . . . . . . . . . . 261,725 267,371
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense . . . . . . . . . . . . . . 7,439 7,710
Regulatory assets. . . . . . . . . . . . . . . . . . 29,120 29,926
Other. . . . . . . . . . . . . . . . . . . . . . . . 21,452 9,805
Total deferred debits and other assets. . . . . . . 58,011 47,441
Total assets. . . . . . . . . . . . . . . . . . .$1,985,728 $1,979,490
<PAGE>4
Louisville Gas and Electric Company
Balance Sheets (cont.)
(Thousands of $)
CAPITAL AND LIABILITIES
Sept. 30, Dec. 31,
1996 1995
CAPITALIZATION:
Common stock, without par value -
Outstanding 21,294,223 shares . . . . . . . . . . .$ 425,170 $ 425,170
Retained earnings. . . . . . . . . . . . . . . . . . 210,337 181,049
Other. . . . . . . . . . . . . . . . . . . . . . . . (747) (1,062)
Total common equity . . . . . . . . . . . . . . . . 634,760 605,157
Cumulative preferred stock . . . . . . . . . . . . . 95,328 95,328
Long-term debt . . . . . . . . . . . . . . . . . . . 646,836 646,845
Total capitalization. . . . . . . . . . . . . . . . 1,376,924 1,347,330
CURRENT LIABILITIES:
Long-term debt due within
one year (Note 4) . . . . . . . . . . . . . . . . . - 16,000
Accounts payable . . . . . . . . . . . . . . . . . . 51,447 93,706
Trimble County Settlement . . . . . . . . . . . . . 19,061 28,300
Dividends declared . . . . . . . . . . . . . . . . . 20,346 19,672
Accrued taxes. . . . . . . . . . . . . . . . . . . . 39,119 7,814
Accrued interest . . . . . . . . . . . . . . . . . . 9,840 11,064
Other. . . . . . . . . . . . . . . . . . . . . . . . 13,667 12,071
Total current liabilities . . . . . . . . . . . . . 153,480 188,627
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes . . . . . . . . . . . . . . . . . . . . . . . 214,301 204,816
Investment tax credit, in
process of amortization . . . . . . . . . . . . . . 80,732 84,037
Accumulated provision for pensions
and related benefits. . . . . . . . . . . . . . . . 43,486 47,099
Regulatory liability . . . . . . . . . . . . . . . . 86,009 88,242
Other. . . . . . . . . . . . . . . . . . . . . . . . 30,796 19,339
Total deferred credits and other liabilities. . . . 455,324 443,533
Total capital and liabilities . . . . . . . . . .$1,985,728 $1,979,490
<PAGE>5
Louisville Gas and Electric Company
Statements of Cash Flows
(Thousands of $)
Nine Months Ended
September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . $ 88,926 $ 81,270
Items not requiring cash currently:
Depreciation and amortization . . . . . . . . . . . 66,751 64,320
Deferred income taxes - net . . . . . . . . . . . . 7,040 8,840
Investment tax credit - net . . . . . . . . . . . . (3,305) (3,591)
Other . . . . . . . . . . . . . . . . . . . . . . . 2,967 2,919
(Increases) decreases in net current assets:
Accounts receivable . . . . . . . . . . . . . . . . 9,503 (5,260)
Materials and supplies. . . . . . . . . . . . . . . (3,227) 2,321
Trimble County Settlement . . . . . . . . . . . . . (9,239) -
Accounts payable. . . . . . . . . . . . . . . . . . (42,259) (12,452)
Accrued taxes . . . . . . . . . . . . . . . . . . . 31,305 15,088
Accrued interest. . . . . . . . . . . . . . . . . . (1,224) (2,474)
Prepayments and other . . . . . . . . . . . . . . . 2,435 1,283
Other. . . . . . . . . . . . . . . . . . . . . . . . (7,362) (450)
Net cash provided by operating activities . . . . . 142,311 151,814
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities. . . . . . . . . . . . . . . (6,764) (104,542)
Proceeds from sales of securities. . . . . . . . . . 20,977 114,105
Construction expenditures. . . . . . . . . . . . . . (66,400) (57,373)
Net cash used for
investing activities. . . . . . . . . . . . . . . (52,187) (47,810)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of pollution control bonds. . . . . . . . . - 39,943
Retirement of first mortgage bonds and
pollution control bonds . . . . . . . . . . . . . . (16,000) (41,055)
Payment of dividends . . . . . . . . . . . . . . . . (58,964) (74,810)
Net cash used for financing activities. . . . . . . $(74,964) $ (75,922)
<PAGE>6
Louisville Gas and Electric Company
Statements of Cash Flows (cont.)
(Thousands of $)
Nine Months Ended
September 30,
1996 1995
NET INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS . . . . . . . . . . . . .$ 15,160 $ 28,082
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . 58,131 39,138
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD. . . . . . . . . . . . . . . . . . . . $ 73,291 $ 67,220
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes. . . . . . . . . . . . . . . . . . . $ 23,971 $ 27,911
Interest on borrowed money. . . . . . . . . . . . 30,415 32,558
For the purposes of this statement, all temporary cash investments purchased
with a maturity of three months or less are considered cash equivalents.
<PAGE>7
Louisville Gas and Electric Company
Statements of Retained Earnings
(Thousands of $)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Balance at beginning of period. . . $188,217 $181,575 $181,049 $193,895
Net income. . . . . . . . . . . . . 42,466 38,346 88,926 81,270
Subtotal. . . . . . . . . . . . 230,683 219,921 269,975 275,165
Cash dividends declared
on stock -
5% cumulative preferred . . . . . 269 269 807 807
7.45% cumulative preferred. . . . - 400 - 1,199
Auction rate cumulative pref. . . 510 530 1,530 1,703
$5.875 cumulative preferred . . . 367 367 1,101 1,101
Common. . . . . . . . . . . . . . 19,200 18,500 56,200 70,500
Total dividends declared. . . . 20,346 20,066 59,638 75,310
Balance at end of period. . . . . . $210,337 $199,855 $210,337 $199,855
<PAGE>8
Louisville Gas and Electric Company
Notes to Financial Statements
(Unaudited)
1. The financial statements included herein have been prepared by Louisville
Gas and Electric Company (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year 1995 and the Form 10-Q Report for
the quarters ended March 31, 1996, and June 30, 1996.
2. The Company filed an application with the Public Service Commission of
Kentucky (Commission) on October 7, 1994, in which it requested approval
of an environmental cost recovery surcharge to recover certain costs
required to comply with the Federal Clean Air Act, as amended, and those
federal, state, and local environmental requirements which apply to coal
combustion wastes and by-products from facilities utilized for the
production of energy from coal. On April 6, 1995, the Commission
approved, with modifications, an environmental cost recovery surcharge
that increased electric revenues by $3.2 million in 1995, and is expected
to increase 1996 revenues by approximately $5.7 million. The surcharge
became effective on May 1, 1995.
An appeal of the Commission's April 6, 1995, order by various intervenors
in the proceeding (including the Kentucky Attorney General) is currently
pending in the Franklin Circuit Court of Kentucky. The intervenors are
contesting the validity of the order on several grounds, including the
constitutionality of the Kentucky statute that authorizes the surcharge.
In an order dated April 10, 1996, associated with the first six-month
review of the operation of the surcharge, the Commission stated that all
environmental surcharge revenues collected from the date of the April 10
order will be subject to refund, pending the final determination of the
April 6, 1995, order. The Company is vigorously contesting the legal
challenges to the surcharge, but cannot predict the outcome of the appeal.
The amount of refunds that may be ordered, if any, are not expected to
have a material adverse effect on the Company's financial position or
results of operations.
<PAGE>9
3. Other income and (deductions) consisted of the following (in thousands of
$):
3 Months Ended Sept. 30 9 Months Ended Sept. 30
1996 1995 1996 1995
Interest and dividend
income . . . . . . . $ 1,136 $ 1,304 $ 3,090 $ 4,288
Gains on fixed
asset disposal . . . 7 94 63 1,076
Income taxes and other (1,124) (1,207) (2,423) (2,962)
$ 19 $ 191 $ 730 $2,402
4. On June 1, 1996, the Company's First Mortgage Bonds, 5.625% Series of
$16 million matured and were retired by the Company.
5. Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS
No. 121). The new standard requires that long-lived assets and
certain identified intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In performing such impairment
reviews, companies are required to estimate the sum of future cash
flows from an asset and compare such amount to the asset's carrying
amount. Any excess of carrying amount over expected cash flows will
result in a possible write-down of an asset to its fair value.
Adopting SFAS No. 121 had no impact on the Company's financial
position or results of operations.
6. Reference is made to Part II herein - Item 1, Legal Proceedings, and
Note 13 of the Notes to Financial Statements of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
<PAGE>10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Some of the matters discussed in Part I or Part II of this Form 10-Q may
contain forward looking statements that are subject to certain risks,
uncertainties and assumptions. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but
are not limited to: general economic conditions; business and competitive
conditions in the utility industry; unusual weather; regulatory decisions;
and the other factors described in the Company's Form 10-K for the year
ended December 31, 1995 or listed on Exhibit 99.01 to this Form 10-Q.
Results of Operations
Because of seasonal fluctuations in temperature and other factors the
results of one interim period are not necessarily indicative of results to
be expected for the year.
Quarter Ended September 30, 1996, Compared with
Quarter Ended September 30, 1995
Net income increased $4.1 million (11%) for the quarter ended September 30,
1996, over the quarter ended September 30, 1995, primarily due to
significantly higher electric off-system sales and decreased power
purchases this quarter, partially offset by lower retail electric sales
caused by unseasonably mild temperatures and increased general operation
expenses.
A comparison of operating revenues for the quarter ended September 30,
1996, with the quarter ended September 30, 1995, reflects increases and
decreases which have been segregated by the following principal causes:
Increase or (Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments. . . . . . . $ (1,815) $ 3,933
Demand side management/revenue
decoupling. . . . . . . . . . . . . . . . 6,257 (2,263)
Environmental cost recovery. . . . . . . . . 311 -
Variation in sales volume, etc.. . . . . . . (11,996) 925
Total . . . . . . . . . . . . . . . . . . (7,243) 2,595
Sales for resale. . . . . . . . . . . . . . . 12,046 -
Gas transportation - net. . . . . . . . . . . - 58
Other . . . . . . . . . . . . . . . . . . . . (76) 87
Total . . . . . . . . . . . . . . . . . . $ 4,727 $ 2,740
<PAGE>11
Electric sales for resale increased over the third quarter of 1995 due to
aggressive efforts in marketing off-system sales.
Fuel for electric generation and gas supply expenses comprise a large
segment of the Company's total operating expenses. The Company's electric
and gas rates contain a fuel adjustment clause and a gas supply clause,
respectively, whereby increases or decreases in the cost of fuel and gas
supply may be reflected in the Company's retail rates, subject to the
approval of the Public Service Commission of Kentucky. Fuel for electric
generation increased $1.6 million (4%) for the quarter because of an
increase in generation ($4 million), partially offset by a decrease in the
cost of coal burned ($2.4 million). Gas supply expenses increased $4.5
million (52%) due to an increase in net gas supply cost.
The Company's rates also include an environmental cost recovery surcharge
that recovers certain costs required to comply with the Federal Clean Air
Act and other governmental pollution control requirements. See Note 2 of
Notes to Financial Statements.
Power purchased decreased $8.6 million because of fewer unplanned outages
at the electric generating plants as compared to the same period in 1995.
Other operation expenses increased $3.5 million (12%) over 1995 primarily
because of the recognition of credits to expense in September 1995 for
settlement proceeds received related to a commercial dispute.
Depreciation and amortization increased because of additional depreciable
plant in service.
Variations in income tax expense are largely attributable to changes in
pre-tax income.
Interest charges decreased primarily because of a decrease in outstanding
debt. The Company's First Mortgage Bonds, 5.625% Series of $16 million
were retired at maturity on June 1, 1996. See Note 4 of Notes to Financial
Statements.
The decrease in preferred stock dividends is primarily related to
redemption of the 7.45% Series Cumulative Preferred Stock in December 1995.
Nine Months Ended September 30, 1996, Compared with
Nine Months Ended September 30, 1995
Net income for the nine months ended September 30, 1996 increased $7.7
million (9%) over the same period of 1995. This increase is due primarily
to an increase in sales of electricity and natural gas, partially offset by
increases in operation and maintenance expenses.
<PAGE>12
A comparison of operating revenues for the nine months ended September 30,
1996, with the nine months ended September 30, 1995 reflects increases and
decreases which have been segregated by the following principal causes:
Increase or (Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments. . . . . . . $(2,409) $ 7,352
Demand side management/revenue
decoupling. . . . . . . . . . . . . . . . 3,899 (3,971)
Environmental cost recovery. . . . . . . . . 2,416 -
Variation in sales volume, etc.. . . . . . . (1,241) 19,370
Total . . . . . . . . . . . . . . . . . . 2,665 22,751
Sales for resale. . . . . . . . . . . . . . . 23,167 -
Gas transportation - net. . . . . . . . . . . - (1,481)
Other . . . . . . . . . . . . . . . . . . . . 446 433
Total . . . . . . . . . . . . . . . . . . $ 26,278 $ 21,703
Electric sales for resale increased over the same period in 1995 due to
aggressive efforts in marketing off-system sales.
Fuel for electric generation increased $6.6 million (6%) for the nine
months ended September 30, 1996, primarily because of increased generation
($11.4 million), partially offset by a lower cost of coal burned ($4.8
million). Gas supply expenses increased $19.5 million (28%) primarily
because of an increase in gas delivered to the distribution system ($12.9
million) and the higher cost of net gas supply ($6.6 million).
See Note 2 of Notes to Financial Statements concerning the environmental
cost recovery surcharge.
Power purchased decreased $2.2 million due mainly to less power being
purchased to meet native load and other power commitments and fewer
unplanned outages.
Other operation expenses increased $3.7 million (4%) over 1995 primarily
because of the recognition of credits to expense in September 1995 for
settlement proceeds received related to a commercial dispute.
Maintenance expenses increased $5.2 million (14%), primarily because of an
increase in scheduled outages and turbine overhauls at the electric
generating plants ($3.1 million) and expenses related to the repair of
equipment resulting from storm damage ($1.8 million).
Other income and deductions decreased $1.7 million primarily because of
lower gains related to the sale of property as compared to the same period
in 1995 ($1 million) and lower dividend and interest income from
investments ($1.2 million). See Note 3 of Notes to Financial Statements.
<PAGE>13
Interest charges decreased $1.2 million primarily because of a decrease in
outstanding debt. The Company's First Mortgage Bonds, 5.625% Series of $16
million were retired at maturity on June 1, 1996. See Note 4 of Notes to
Financial Statements.
Preferred stock dividends decreased $1.4 million due to redemption of the
7.45% Series Cumulative Preferred Stock in December 1995.
Liquidity and Capital Resources
The Company's capital structure and cash flow remained strong throughout
the reported periods. This is evidenced primarily by the Company's ability
to meet its capital needs through internal generation.
The Company's need for capital funds is primarily related to the
construction of plant and equipment necessary to meet electric and gas
customers' needs and the protection of the environment. Construction
expenditures for the nine months ended September 30, 1996, of $66 million
were financed with internally generated funds.
The Company's cash and temporary cash investments balance increased $15
million during the nine months ended September 30, 1996. The increase
reflects the Company's cash flow from operations plus proceeds from the
sale of marketable securities less construction expenditures, dividends
paid, and the retirement of bonds.
Variations in accounts receivable, accounts payable and materials and
supplies are not generally significant indicators of the Company's
liquidity, as such variations are primarily attributable to seasonal
fluctuations in weather, which has a direct effect on sales of electricity
and natural gas.
The Company's First Mortgage Bonds, 5.625% Series of $16 million matured on
June 1, 1996. The Company used internally generated cash to retire the
bonds.
At September 30, 1996, the Company had unused lines of credit of $160
million with banks for which it pays commitment fees. The lines are
scheduled to expire in the year 2000. The Company expects to renegotiate
such lines when they expire.
On October 2, 1996, the Company issued $22.5 million of Jefferson County,
Kentucky and $27.5 million of Trimble County, Kentucky, Pollution Control
Bonds, Flexible Rate Series, due September 1, 2026. The initial interest
rates for these bonds were 3.59% and 3.55%, respectively. On December 2,
1996, the proceeds from the bonds will be used to redeem the outstanding
7.25% Series of Jefferson County and Trimble County Pollution Control Bonds
due December 1, 2016.
<PAGE>14
The Company's capitalization ratios at September 30, 1996, and December 31,
1995 were:
Sept. 30, Dec. 31,
1996 1995
Long-term debt. . . . . . . . . . . . . . . . 47.0% 48.6%
Preferred stock . . . . . . . . . . . . . . . 6.9 7.0
Common equity . . . . . . . . . . . . . . . . 46.1 44.4
Total. . . . . . . . . . . . . . . . . . . . 100.0% 100.0%
For a description of significant contingencies that may affect the Company,
reference is made to Part II herein - Item 1, Legal Proceedings.
<PAGE>15
Part II. Other Information
Item 1. Legal Proceedings.
For a description of the significant legal proceedings involving the
Company, reference is made to: (i) the information under the following
items and captions of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995: Item 1, Business; Item 3, Legal Proceedings; Item
7, Management's Discussion and Analysis of Results of Operations and
Financial Condition; Notes 2 and 13 of the Notes to Financial Statements
under Item 8; and (ii) the information under Part II, Item I, Legal
Proceedings, of the Company's Form 10-Q for the quarters ended March 31,
1996 and June 30, 1996. There have been no material changes in these
proceedings as reported in the Company's 1995 Form 10-K, Form 10-Q for the
quarter ended March 31, 1996, and Form 10-Q for the quarter ended June 30,
1996.
Item 6(a). Exhibits.
Exhibit No.
3.06 (revised)Articles of Amendment setting forth minor changes.
27. Financial Data Schedule.
99.01 Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995.
Item 6(b). Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LOUISVILLE GAS AND ELECTRIC COMPANY
Registrant
Date: November 12, 1996 Walter Z. Berger
_______________________________________
Walter Z. Berger
Executive Vice President and
Chief Financial Officer
(On behalf of the registrant in his
capacity as Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,665,075
<OTHER-PROPERTY-AND-INVEST> 917
<TOTAL-CURRENT-ASSETS> 261,725
<TOTAL-DEFERRED-CHARGES> 36,559
<OTHER-ASSETS> 21,452
<TOTAL-ASSETS> 1,985,728
<COMMON> 425,170
<CAPITAL-SURPLUS-PAID-IN> (747)<F1>
<RETAINED-EARNINGS> 210,337
<TOTAL-COMMON-STOCKHOLDERS-EQ> 634,760
0
95,328
<LONG-TERM-DEBT-NET> 646,836
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 608,804
<TOT-CAPITALIZATION-AND-LIAB> 1,985,728
<GROSS-OPERATING-REVENUE> 611,669
<INCOME-TAX-EXPENSE> 52,663
<OTHER-OPERATING-EXPENSES> 440,638
<TOTAL-OPERATING-EXPENSES> 493,301
<OPERATING-INCOME-LOSS> 118,368
<OTHER-INCOME-NET> 730
<INCOME-BEFORE-INTEREST-EXPEN> 119,098
<TOTAL-INTEREST-EXPENSE> 30,172
<NET-INCOME> 88,926
3,438
<EARNINGS-AVAILABLE-FOR-COMM> 85,488
<COMMON-STOCK-DIVIDENDS> 56,200
<TOTAL-INTEREST-ON-BONDS> 30,107
<CASH-FLOW-OPERATIONS> 142,311
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Represents Unrealized Loss on Marketable
Securities.
</FN>
</TABLE>
<PAGE>1
Exhibit 99.01
Louisville Gas and Electric Company Cautionary Factors
The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward-looking statements to
encourage such disclosures without the threat of litigation
providing those statements are identified as forward-looking
and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual
results to differ materially from those projected in the
statement. Forward-looking statements have been and will be
made in written documents and oral presentations of Louisville
Gas and Electric Company (the "Company"). Such statements are
based on management's beliefs as well as assumptions made by
and information currently available to management. When used
in the Company's documents or oral presentations, the words
"anticipate", "estimate", "expect", "objective" and similar
expressions are intended to identify forward-looking
statements. In addition to any assumptions and other factors
referred to specifically in connection with such forward-
looking statements, factors that could cause the Company's
actual results to differ materially from those contemplated in
any forward-looking statements include, among others, the
following:
* Increased competition in the utility industry, including
effects of: decreasing margins as a result of competitive
pressures; industry restructuring initiatives;
transmission system operation and/or administration
initiatives; recovery of investments made under
traditional regulation; nature of competitors entering the
industry; retail wheeling; a new pricing structure; and
former customers entering the generation market;
* Changing market conditions and a variety of other factors
associated with physical energy and financial trading
activities including, but not limited to, price, basis,
credit, liquidity, volatility, capacity, transmission,
currency, interest rate and warranty risks;
* Risks associated with price risk management strategies
intended to mitigate exposure to adverse movement in the
prices of electricity and natural gas on both a global and
regional basis;
* Economic conditions including inflation rates and monetary
fluctuations;
* Customer business conditions including demand for their
products or services and supply of labor and materials
used in creating their products and services;<PAGE>
<PAGE>2
* Financial or regulatory accounting principles or policies
imposed by the Financial Accounting Standards Board, the
Securities and Exchange Commission, the Federal Energy
Regulatory Commission, state public utility commissions,
state entities which regulate natural gas transmission,
gathering and processing and similar entities with
regulatory oversight;
* Availability or cost of capital such as changes in:
interest rates, market perceptions of the utility and
energy-related industries, the Company or security
ratings;
* Factors affecting utility operations such as unusual
weather conditions; catastrophic weather-related damage;
unscheduled generation outages, unusual maintenance or
repairs; unanticipated changes to fossil fuel, or gas
supply costs or availability due to higher demand,
shortages, transportation problems or other developments;
environmental incidents; or electric transmission or gas
pipeline system constraints;
* Employee workforce factors including changes in key
executives, collective bargaining agreements with union
employees, or work stoppages;
* Rate-setting policies or procedures of regulatory
entities, including environmental externalities;
* Social attitudes regarding the utility, natural gas and
power industries;
* Costs and other effects of legal and administrative
proceedings, settlements, investigations, claims and
matters, including but not limited to those described in
Note 13 of the Notes to Financial Statements of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995, under the caption Commitments and
Contingencies;
* Technological developments, changing markets and other
factors that result in competitive disadvantages and
create the potential for impairment of existing assets;
* Other business or investment considerations that may be
disclosed from time to time in the Company's Securities
and Exchange Commission filings or in other publicly
disseminated written documents.
The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
<PAGE>1
Exhibit A
ARTICLES OF AMENDMENT AND
RESTATED ARTICLES OF INCORPORATION
OF
LOUISVILLE GAS AND ELECTRIC COMPANY
"FIRST. The corporate name is
LOUISVILLE GAS AND ELECTRIC COMPANY.
SECOND. The mailing address of the principal office of
Louisville Gas and Electric Company (herein, the "Company")
is 220 West Main Street, P. O. Box 32010, Louisville,
Jefferson County, Kentucky 40232.
THIRD. The address of the registered office of
the Company is 220 West Main Street, P. O. Box 32010,
Louisville, Kentucky, 40232, and the name of the Company's
registered agent at that office is John R. McCall.
FOURTH. The purpose of the Company is the
transaction of any or all lawful business for which
corporations may be incorporated under the Business
Corporation Law of Kentucky, as amended.
FIFTH. The Capital stock of the Company shall be
divided into (a) one million, seven hundred twenty thousand
(1,720,000) shares of Preferred Stock of the par value of
$25 each, (b) six million, seven hundred fifty thousand
(6,750,000) shares of Preferred Stock (without par value)
(the aggregate stated value thereof not to exceed
$225,000,000), and (c) seventy-five million (75,000,000)
shares of Common Stock without par value. The Preferred
Stock and Preferred Stock (without par value) shall be
issued in series having the preferences, rights,
qualifications and restrictions hereinafter provided for.
PREFERRED STOCK AND PREFERRED STOCK (WITHOUT PAR VALUE)
(1) In addition to the series of Cumulative
Preferred Stock, described in paragraphs (10) through (13)
hereof, the Board of Directors is hereby authorized, subject
to and in accordance with the provisions of paragraphs (1)
through (9), inclusive, to cause Preferred Stock (without
par value) to be issued in series, each such series to have
such variations in respect thereof as may be determined by
the Board of Directors prior to the issuance thereof.
The shares of the Preferred Stock of different series
may vary as to:
(a) The distinctive serial designations and
number of shares of such series;
<PAGE>2
(b) The rate of dividends (within such
limits as shall be permitted by law not exceeding 8% per
annum) payable on the shares of the particular series;
(c) The prices (not less than the amount
limited by law) and terms upon which the shares of the
particular series may be redeemed; and
(d) The amount or amounts which shall be
paid to the holders of the shares of particular series
in case of voluntary or involuntary dissolution or any
distribution of assets.
The shares of the Preferred Stock (without par value) of
different series may vary as to:
(a) The distinctive serial designations
and number of shares of such series;
(b) The stated value thereof;
(c) The rate or rates of dividends (within
such limits as shall be permitted by law) payable on the
shares of the particular series, which may be expressed
in terms of a formula or other method by which such rate
or rates shall be calculated from time to time, and the
dividend periods, including the date or dates on which
dividends are payable;
(d) The prices (not less than the amount
limited by law) and terms (including sinking fund
provisions) upon which the shares of the particular
series may be redeemed; and
(e) The amount or amounts which shall
be paid to the holders of the shares of the particular
series in case of voluntary or involuntary dissolution
or any distribution of assets.
The shares of all series of Preferred Stock and
Preferred Stock (without par value) shall in all other
respects be identical, except that the Preferred Stock
(without par value) shall not have the voting rights of
the Preferred Stock provided by paragraph 9(A) hereof.
<PAGE>3
(2) The holders of each series of the Preferred Stock
and the Preferred Stock (without par value) at the time
outstanding shall be entitled, pari passu, with the holders
of every other series of the Preferred Stock and the
Preferred Stock (without par value), to receive, but only
when and as declared by the Board of Directors, out of funds
legally available for the payment of dividends, cumulative
preferential dividends, at the dividend rate or rates for
the particular series fixed therefor as herein provided,
payable on such dates or for such period or periods as may
be specified by the Board of Directors at the time of
establishment of such series, to shareholders of record on
the respective dates, not exceeding thirty (30) days
preceding such dividend payment dates, fixed for the purpose
by the Board of Directors. No dividends shall be declared
on any series of the Preferred Stock or the Preferred Stock
(without par value) in respect of any dividend period unless
there shall likewise be declared on all shares of all other
series of the Preferred Stock and the Preferred Stock
(without par value) at the time outstanding, like
proportionate dividends, ratably, in proportion to the
respective dividend rates fixed therefor, in respect of the
same dividend period, to the extent that such shares are
entitled to receive dividends for such dividend period. The
dividends on shares of all series of the Preferred Stock and
the Preferred Stock (without par value) shall be cumulative.
In the case of all shares of each particular series, the
dividends on shares of such series shall be cumulative from
the date of issue thereof unless the Board of Directors at
the time of establishing such series specifies that such
dividends shall be cumulative from the first day of the
current dividend period in which shares of such series shall
have been issued, so that unless dividends on all
outstanding shares of each series of the Preferred Stock and
the Preferred Stock (without par value), at the dividend
rate or rates and from the dates for accumulation thereof
fixed as herein provided shall have been paid for all past
dividend periods, but without interest on cumulative
dividends, no dividends shall be paid or declared and no
other distribution shall be made on the Common Stock and no
Common Stock shall be purchased or otherwise acquired for
value. The holders of the Preferred Stock and the Preferred
Stock (without par value) of any series shall not be
entitled to receive any dividends thereon other than the
dividends referred to in this paragraph (2).
(3) The Company, by action of its Board of Directors,
may redeem the whole or any part of any series of the
Preferred Stock or the Preferred Stock (without par value),
at any time or from time to time, by paying in cash the
redemption price of the shares of the particular series,
fixed therefor as herein
<PAGE>4
provided, together with a sum in the case of each share of
each series so to be redeemed, computed at the dividend rate
or rates for the series of which the particular share is a
part, from the date from which dividends on such share
became cumulative to the date fixed for such redemption,
less the aggregate of the dividends theretofore or on such
redemption date paid thereon. Notice of every such
redemption shall be given (i) at such time, in such form and
in such manner as may have been determined and fixed for
each series of Preferred Stock and Preferred Stock (without
par value) at the time of establishment of such series or
(ii) if such matters shall not have been so fixed by the
Board of Directors, by publication at least once in one
daily newspaper printed in the English language and of
general circulation in Louisville, Kentucky, the first
publication in such newspaper to be at least thirty (30)
days prior to the date fixed for such redemption, and at
least thirty (30) days' previous notice of every such
redemption shall also be mailed to the holders of record of
the shares of the Preferred Stock or the Preferred Stock
(without par value) so to be redeemed, at their respective
addresses as the same shall appear on the books of the
Company; but no failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity
of the proceedings for the redemption of any shares of the
Preferred Stock or the Preferred Stock (without par value)
so to be redeemed. In case of redemption of part only of
any series of the Preferred Stock or the Preferred Stock
(without par value) at the time outstanding, the Board of
Directors shall fix and determine the stock to be so
redeemed either by lot or by redemption pro rata or by
designation of particular shares for redemption or in any
other manner the Board of Directors may see fit. The Board
of Directors shall have full power and authority, subject to
the limitations and provisions herein contained, to
prescribe the manner in which, and the terms and conditions
upon which, the shares of the Preferred Stock or the
Preferred Stock (without par value) shall be redeemed from
time to time. If such notice of redemption shall have been
duly given and if on or before the redemption date specified
in such notice all funds necessary for such redemption shall
have been set aside by the Company, separate and apart from
its other funds, in trust for the account of the holders of
the shares to be redeemed, so as to be and continue to be
available therefor, then, notwithstanding that any
certificate for such shares so called for redemption shall
not have been surrendered for cancellation, from and after
the date fixed for redemption, the shares represented
thereby shall no longer be deemed outstanding, the right to
receive dividends thereon shall cease to accrue and all
rights with respect to such shares so called for redemption
shall forthwith on such redemption date cease and terminate,
except only the right of the holders thereof to receive out
of the funds so set aside in trust, the amount payable upon
redemption thereof, without interest; provided, however,
that the Company may, after giving notice of any such
redemption as hereinbefore provided or after
<PAGE>5
giving to the bank or trust company hereinafter referred to
irrevocable authorization to give such notice, and at any
time prior to the redemption date specified in such notice,
deposit in trust, for the account of the holders of the
shares to be redeemed, so as to be and continue to be
available therefor, funds necessary for such redemption with
a bank or trust company in good standing, organized under
the laws of the United States of America or of the
Commonwealth of Kentucky or of the State of New York doing
business in the City of Louisville, or in the Borough of
Manhattan, the City of New York, and having capital, surplus
and undivided profits aggregating at least $1,000,000,
designated in such notice of redemption, and, upon such
deposit in trust, all shares with respect to which such
deposit shall have been made shall no longer be deemed to be
outstanding, and all rights with respect to such shares
shall forthwith cease and terminate, except only the right
of the holders thereof to receive at any time from and after
the date of such deposit, the amount payable upon the
redemption thereof, without interest.
(4) Before any amount shall be paid to,
or any assets distributed among, the holders of the Common
Stock or any other stock ranking junior to the Preferred
Stock and the Preferred Stock (without par value) of each
series, upon any liquidation, dissolution or winding up of
the Company, and after paying or providing for the payment
of all creditors of the Company, the holders of each series
of the Preferred Stock and the Preferred Stock (without par
value) at the time outstanding shall be entitled, pari
passu, with the holders of every other series of the
Preferred Stock and the Preferred Stock (without par value),
to be paid in cash the amount for the particular series
fixed therefor as herein provided, together with a sum in
the case of each share of each series, computed at the
dividend rate or rates for the series of which the
particular share is a part, from the date from which
dividends on such share became cumulative to the date fixed
for the payment of such distributive amount, less the
aggregate of the dividends theretofore or on such date paid
thereon; but no payments on account of such distributive
amounts shall be made to the holders of any series of the
Preferred Stock or the Preferred Stock (without par value)
unless there shall likewise be paid at the same time to the
holders of each other series of the Preferred Stock and the
Preferred Stock (without par value) at the time outstanding,
like proportionate distributive amounts, ratably, in
proportion to the full distributive amounts to which they
are respectively entitled as herein provided. The holders
of the Preferred Stock and the Preferred Stock (without par
value) of any series shall not be entitled to receive any
amounts with respect thereto upon any liquidation,
dissolution or winding up of the Company other than as
provided in this paragraph. Neither the consolidation or
merger of the Company with any other corporation or
corporations, nor the sale or transfer by the Company of all
or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Company.
<PAGE>6
(5) Whenever the full dividends on all
series of the Preferred Stock and the Preferred Stock
(without par value) at the time outstanding for all past
dividend periods shall have been paid or declared and set
apart for payment, then such dividends as may be determined
by the Board of Directors may be declared and paid on the
Common Stock or any other stock ranking junior to the
Preferred Stock and the Preferred Stock (without par value)
of each series, but only out of funds legally available for
the payment of dividends; provided, however, that no
dividend shall be declared or paid and no other
distributions shall be made on the Common Stock or on any
such other stock and no shares of the Common Stock or of any
such other stock shall be purchased or otherwise acquired
for value out of capital surplus arising from a reduction in
capital.
(6) In the event of any liquidation,
dissolution or winding up of the Company, all assets and
funds of the Company remaining after paying or providing for
the payment of all creditors of the Company and after paying
or providing for the payment to the holders of all series of
the Preferred Stock and the Preferred Stock (without par
value) of the full distributive amounts to which they are
respectively entitled as herein provided, shall be divided
among and paid to the holders of the Common Stock or any
other stock ranking junior to the Preferred Stock and the
Preferred Stock (without par value) of each series,
according to their respective rights and interests.
(7) (A) So long as any shares
of the Preferred Stock or the Preferred Stock (without par
value) of any series are outstanding, the Company shall not,
without the affirmative vote or written consent of the
holders of at least two-thirds of the total number of shares
of such Preferred Stock and Preferred Stock (without par
value) then outstanding:
Amend, alter, change or repeal any of the
express terms of any series of the Preferred
Stock or the Preferred Stock (without par
value) then outstanding in a manner
prejudicial to the holders thereof; provided,
however, that if any such amendment,
alteration, change or repeal shall be
prejudicial to the holders of one or more,
but not all, of the series of Preferred Stock
or the Preferred Stock (without par value) at
the time outstanding, only such consent of
the holders of two-thirds of the total number
of shares of all series so affected shall be
required.
(B) So long as any shares of
the Preferred Stock or the Preferred Stock (without par
value) of any series are outstanding, the Company shall not,
without the affirmative vote or written consent of the
holders of a majority of the total number of shares of such
Preferred Stock and Preferred Stock (without par value) then
outstanding:
<PAGE>7
(a) Create or authorize any
class of stock ranking prior to or (other than a series
of the 1,720,000 authorized shares of Preferred Stock or
6,750,000 authorized shares of Preferred Stock (without
par value)) ranking on a parity with any series of the
Preferred Stock and the Preferred Stock (without par
value) as to dividends or distributions, or create or
authorize any obligation or security convertible into
shares of stock of any such class; or
(b) Issue, sell or otherwise
dispose of any shares of the Preferred Stock or the
Preferred Stock (without par value), or of any class of
stock ranking prior to or on a parity with the Preferred
Stock and the Preferred Stock (without par value) of
each series as to dividends or distributions, unless the
net income of the Company, determined in accordance with
generally accepted accounting practices, to be available
for the payment of dividends on the Preferred Stock, the
Preferred Stock (without par value) and any class of
stock ranking prior thereto or on a parity therewith as
aforesaid, for a period of twelve (12) consecutive
calendar months within the fifteen (15) calendar months
immediately preceding the issuance, sale or disposition
of such stock, is at least equal to twice the annual
dividend requirements on the entire amount of all
Preferred Stock, all Preferred Stock (without par
value), and of all such other classes of stock ranking
prior thereto or on a parity therewith, as to dividends
or distributions to be outstanding immediately after the
issuance, sale of disposition of such additional shares;
provided that for purposes of calculating the annual
dividend requirements applicable to any series of
Preferred Stock (without par value) proposed to be
issued which will have dividends determined according to
an adjustable, floating or variable rate, the dividend
rate used shall be the higher of (1) the dividend rate
applicable to such series of Preferred Stock (without
par value) on the date of such calculation or (2) the
average dividend rate payable on all series of Preferred
Stock and Preferred Stock (without par value) during the
twelve month period immediately preceding the date of
such calculation; provided further that for purposes of
calculating the annual dividend requirements applicable
to any series of Preferred Stock (without par value)
outstanding at the date of such proposed issue and
having dividends determined according to an adjustable,
floating or variable rate, the dividend rate used shall
be: (1) if such series of Preferred Stock (without par
value) has been outstanding for at least twelve months,
the actual amount of dividends paid on account of such
series of Preferred Stock (without par value) for the
twelve-month period immediately preceding the date of
such calculation, or (2) if such series of Preferred
Stock (without par value) has been outstanding for less
than twelve months, the average dividend rate payable on
such series of Preferred Stock (without par value)
during the period immediately preceding the date of such
calculation; or
<PAGE>8
(c) Merge or consolidate with
or into any other corporation or corporations, unless
such merger or consolidation, or the issuance or
assumption of all securities, to be issued or assumed in
connection with any such merger or consolidation, shall
have been ordered, approved, or permitted by the
Securities and Exchange Commission under the provisions
of the Public Utility Holding Company Act of 1935 or by
any successor commission or regulatory authority of the
United States of America having jurisdiction in the
premises; provided that the provisions of this clause
(c) shall not apply to a purchase or other acquisition
by the Company of franchises or assets of another
corporation in any manner which does not involve a
merger or consolidation.
(C) So long as any shares of the Preferred
Stock or Preferred Stock (without par value) of any series
are outstanding, the Company shall not without written
consent of the holders of a majority of the total number of
shares of such Preferred Stock and Preferred Stock (without
par value) then outstanding or, in the alternative and
subject to the proviso hereinafter set forth in this
subdivision 7(C), the affirmative vote of the holders of a
majority of the total number of the shares of such Preferred
Stock and Preferred Stock (without par value) which are
represented, by the attendance of the holders thereof in
person or by proxy, at a meeting duly called for the
purpose:
Issue or assume any unsecured notes, debentures or
other securities representing unsecured indebtedness for
any purpose other than (1) the refunding of outstanding
unsecured securities theretofore issued or assumed by
the Company, (2) the financing of pollution control
facilities (as defined in the Internal Revenue Code, as
amended or as hereafter amended, and the regulations and
rulings thereunder) through the issuance or assumption
of unsecured notes, debentures or other securities
representing unsecured indebtedness the receipt of
interest on which is exempt from federal income tax at
the time of such issuance or assumption, or (3) the
redemption or other retirement of outstanding shares of
one or more series of the Preferred Stock or Preferred
Stock (without par value) if, immediately after such
issuance or assumption, the total principal amount of
all unsecured notes, debentures or other unsecured
securities representing unsecured indebtedness issued or
assumed by the Company and then outstanding (including
unsecured securities then to be issued or assumed but
excluding unsecured securities theretofore consented to
by the holders of such Preferred Stock and Preferred
Stock (without par value)) will exceed 20% of the sum of
(i) the total principal amount of all bonds or other
securities representing secured indebtedness issued or
assumed by the Company and then to be outstanding, and
(ii) the capital and surplus of the Company as then to
be stated on the books of account of the Company.
<PAGE>9
Provided, however, that if, at any such meeting, at
least one-third of all shares of such Preferred Stock
and Preferred Stock (without par value) then outstanding
shall be voted against the action then proposed, of the
character aforesaid, such action may be taken only with
the affirmative vote of a majority of all shares of such
Preferred Stock and Preferred Stock (without par value)
then outstanding.
If at any meeting of such Preferred Stock and
Preferred Stock (without par value) for the purpose of
taking action on matters set forth in this subdivision
7(C), the presence in person or by proxy of the holders
of a majority of such stock shall not have been obtained
and shall not be obtained for a period of thirty days
from the date of such meeting, the presence in person or
by proxy of the holders of one-third of such stock then
outstanding shall be sufficient to constitute a quorum.
(8) No holder of shares of Preferred
Stock or Preferred Stock (without par value) shall be
entitled as such as a matter of right to subscribe for or
purchase any part of any new or additional issue of stock,
or securities convertible into stock, of any class
whatsoever, whether now or hereafter authorized, and whether
issued for cash, property, services, by way of dividends, or
otherwise.
(9) (A) Every holder of Preferred
Stock of any series shall have one vote for each share of
such Preferred Stock held by him, and every holder of the
Common Stock shall have one vote for each share of Common
Stock held by him, for the election of Directors and upon
all other matters, except as otherwise provided in this
paragraph (9) hereof. At all elections of directors, any
Shareholder may vote cumulatively. The foregoing shall not
modify or affect the special votes and consents provided for
in paragraph (7) hereof.
(B) If and when dividends
shall be in default in an amount equivalent to dividends for
the immediately preceding eighteen months on all shares of
all series of the Preferred Stock and the Preferred Stock
(without par value) at the time outstanding, and until all
dividends in default on such Preferred Stock and such
Preferred Stock (without par value) shall have been paid,
the holders of all shares of the Preferred Stock and all
shares of the Preferred Stock (without par value), voting
separately as one class, shall be entitled to elect the
smallest number of Directors necessary to constitute a
majority of the full Board of Directors, and the holders of
the Common Stock, voting separately as a class, shall be
entitled to elect the remaining Directors of the Company.
<PAGE>10
(C) If and when all dividends
then in default on the Preferred Stock and the Preferred
Stock (without par value) at the time outstanding shall be
paid (and such dividends shall be declared and paid, or
declared and funds set aside for that purpose out of any
funds legally available therefor as soon as reasonably
practicable), the Preferred Stock and the Preferred Stock
(without par value) shall thereupon be divested of any
special right with respect to the election of Directors
provided in subparagraph (B) hereof, and the voting power of
the Preferred Stock, the Preferred Stock (without par value)
and the Common Stock shall revert to the status existing
before the occurrence of such default; but always subject to
the same provisions for vesting such special rights in the
Preferred Stock and the Preferred Stock (without par value)
in case of further like default or defaults in dividends
thereon.
(D) In case of any vacancy
in the Board of Directors occurring among the Directors
elected by the holders of the Preferred Stock and the
Preferred Stock (without par value), as a class, pursuant to
subparagraph (B) hereof, a majority of the remaining
Directors elected by the holders of the Preferred Stock and
the Preferred Stock (without par value) (including, as
elected by such holders, any Directors then in office who
were chosen by other Directors as successor Directors to
fill vacancies as provided in this sentence) may elect a
successor to hold office for the unexpired term of the
Director whose place shall be vacant. In case of a vacancy
in the Board of Directors occurring among the Directors
elected by the holders of the Common Stock, as a class,
pursuant to subparagraph (B) hereof, a majority of the
remaining Directors elected by the holders of the Common
Stock (including, as elected by such holders, any Directors
then in office who were chosen by other directors as
successor directors to fill vacancies as provided in this
sentence) may elect a successor to hold office for the
unexpired term of the Director whose place shall be vacant.
In all other cases, any vacancy occurring among the
Directors shall be filled by the vote of a majority of the
remaining Directors.
(E) At all meetings of
shareholders held for the purpose of electing Directors
during such times as the holders of shares of the Preferred
Stock and the Preferred Stock (without par value) shall have
the special right, voting separately as one class, to elect
Directors pursuant to subparagraph (B) hereof, the presence
in person or by proxy of the holders of a majority of the
outstanding shares of the Common Stock shall be required to
constitute a quorum of such class for the election of
directors, and the presence in person or by proxy of the
holders of Preferred Stock and Preferred Stock (without par
value) entitled to cast a majority of all the votes to which
the holders of the Preferred Stock and the Preferred Stock
(without par value) are entitled, shall be required to
constitute a quorum of such class for the election of
Directors; provided, however, that
<PAGE>11
the absence of a quorum (according to votes, as aforesaid)
of the holders of stock of any such class shall not prevent
the election at any such meeting or adjournment thereof of
Directors by the other such class if such quorum of the
holders of stock of such other class is present in person or
by proxy at such meeting; and provided further that in the
absence of such quorum of the holders of stock of any such
class, a majority (according to votes, as aforesaid) of
those holders of the stock of such class who are present in
person or by proxy shall have power to adjourn the election
of the directors to be elected by such class from time to
time without notice other than announcement at the meeting
until the holders of the requisite number of shares of such
class shall be present in person or by proxy.
(F) Except when some mandatory
provision of law shall be controlling and except as
otherwise provided in paragraph (7) hereof whenever shares
of two or more series of the Preferred Stock or of the
Preferred Stock (without par value) are outstanding, no
particular series shall be entitled to vote as a separate
series on any matter and all shares of the Preferred Stock
and the Preferred Stock (without par value) shall be deemed
to constitute but one class for any purpose for which a vote
of the shareholders of the Company by classes may now or
hereafter be required.
5% CUMULATIVE PREFERRED STOCK, $25 PAR VALUE
(10) The Company has classified $21,519,300
par value of the Preferred Stock as a series of such
Preferred Stock designated as "5% Cumulative Preferred
Stock, $25 Par Value," consisting of 860,772 shares of the
par value of $25 per share.
(11) The preferences, rights, qualifications and
restrictions of the shares of the "5% Cumulative Preferred
Stock, $25 Par Value," shall be as follows:
(a) The annual dividend rate for such
series shall be 5% per annum;
(b) The redemption price for such series
shall be $28.00 per share; and
(c) The preferential amounts to which
the holders of shares of such series shall be entitled
upon any liquidation, dissolution or winding up of the
Company, in addition to dividends accumulated but
unpaid thereon, shall be:
$27.25 per share, in the event of any voluntary
liquidation, dissolution or winding up of the Company,
except that if such voluntary liquidation, dissolution
or winding up of the Company shall have been approved by
the vote in favor thereof given at a meeting called for
that purpose or by the
<PAGE>12
written consent of the holders of a majority of the
total shares of the 5% Cumulative Preferred Stock, $25
Par Value then outstanding, the amount so payable on
such voluntary liquidation, dissolution, or winding up
shall be $25 per share; or
$25 per share, in the event of any involuntary
liquidation, dissolution or winding up of the Company.
COMMON STOCK
(Without par value)
The Board of Directors is hereby authorized to cause
shares of Common Stock, without par value, to be issued from
time to time for such consideration as may be fixed from
time to time by the Board of Directors, or by way of stock
split pro rata to the holders of the Common Stock. The
Board of Directors may also determine the proportion of the
proceeds received from the sale of such stock which shall be
credited upon the books of the Company to Capital or Capital
Surplus.
Each share of the Common Stock shall be equal in all
respects to every other share of the Common Stock.
No holder of shares of Common Stock shall be entitled as
such as a matter of right to subscribe for or purchase any
part of any new or additional issue of stock, or securities
convertible into stock, of any class whatsoever, whether now
or hereafter authorized, and whether issued for cash,
property, services, or otherwise.
SIXTH. The duration of the Company shall be perpetual.
SEVENTH. The private property of the shareholders of
the Company shall not be subject to the payment of corporate
debts.
EIGHTH. A. CERTAIN DEFINITIONS. For purposes of
this Article Eighth:
(1) "Affiliate," including the term "affiliated
person," means a person who directly, or indirectly through
one (1) or more intermediaries, controls, or is controlled
by, or is under common control with, a specified person.
(2) "Associate," when used to
indicate a relationship with any person, means:
(a) Any corporation or organization
(other than the Company or a Subsidiary), of which
such person is an officer, director or partner or
is, directly or indirectly, the Beneficial Owner of
ten percent (10%) or more of any class of Equity
Securities;
<PAGE>13
(b) Any trust or other estate in
which such person has a substantial beneficial
interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(c) Any relative or spouse of such
person, or any relative of such spouse, any one (1)
of whom has the same home as such person or is a
director or officer of the corporation or any of its
Affiliates.
(3) "Beneficial Owner," when used with
respect to any Voting Stock, means a person:
(a) Who, individually or with any
of its Affiliates or Associates, beneficially owns
Voting Stock, directly or indirectly; or
(b) Who, individually or with any of its
Affiliates or Associates, has:
1. The right to acquire Voting Stock,
whether such right is exercisable immediately or
only after the passage of time and whether or not
such right is exercisable only after specified
conditions are met, pursuant to any agreement,
arrangement, or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise;
2. The right to vote Voting Stock pursuant
to any agreement, arrangement, or understanding;
or
3. Any agreement, arrangement, or
understanding for the purpose of acquiring,
holding, voting or disposing of Voting Stock with
any other person who beneficially owns, or whose
Affiliates or Associates beneficially own,
directly or indirectly, such shares of Voting
Stock.
(4) "Business Combination" means:
(a) Any merger or consolidation of the
Company or any Subsidiary with any Interested
Shareholder, or any other corporation, whether or
not itself an Interested Shareholder, which is, or
after the merger or consolidation would be, an
Affiliate of an Interested Shareholder who was an
Interested Shareholder prior to the transaction;
<PAGE>14
(b) Any sale, lease, transfer, or
other disposition, other than in the ordinary course
of business, in one (1) transaction or a series of
transactions in any twelve-month period, to any
Interested Shareholder or any Affiliate of any
Interested Shareholder, other than the Company or
any Subsidiary, of any assets of the Company or any
Subsidiary having, measured at the time the
transaction or transactions are approved by the
Board of Directors of the Company, an aggregate book
value as of the end of the Company's most recently
ended fiscal quarter of five percent (5%) or more of
the total Market Value of the outstanding stock of
the Company or of its net worth as of the end of its
most recently ended fiscal quarter;
(c) The issuance or transfer by
the Company, or any Subsidiary, in one transaction
or a series of transactions in any twelve-month
period, of any Equity Securities of the Company or
any Subsidiary which have an aggregate Market Value
of five percent (5%) or more of the total Market
Value of the outstanding stock of the Company,
determined as of the end of the Company's most
recently ended fiscal quarter prior to the first
such issuance or transfer, to any Interested
Shareholder or any Affiliate of any Interested
Shareholder, other than the Company or any of its
Subsidiaries, except pursuant to the exercise of
warrants or rights to purchase securities offered
pro rata to all holders of the Company's Voting
Stock or any other method affording substantially
proportionate treatment to the holders of Voting
Stock;
(d) The adoption of any plan or
proposal for the liquidation or dissolution of the
Company in which any thing other than cash will be
received by an Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(e) Any reclassification of
securities, including any reverse stock split; or
recapitalization of the Company; or any merger or
consolidation of the Company with any of its
Subsidiaries; or any other transaction which has the
effect, directly or indirectly, in one transaction
or a series of transactions, of increasing by five
percent (5%) or more the proportionate amount of the
outstanding shares of any class of Equity Securities
of the Company or any Subsidiary which is directly
or indirectly beneficially owned by any Interested
Shareholder or any Affiliate of any Interested
Shareholder.
<PAGE>15
(5) "Common Stock" means any stock of the
Company other than preferred or preference stock of the
Company.
(6) "Continuing Director" means any member
of the Company's Board of Directors who is not an
Interested Shareholder or an Affiliate or Associate of
an Interested Shareholder or any of its Affiliates,
other than the Company or any of its Subsidiaries, and
who was a director of the Company prior to the time the
Interested Shareholder became an Interested Shareholder,
and any successor to such Continuing Director who is not
an Interested Shareholder or an Affiliate or Associate
of an Interested Shareholder or any of its Affiliates,
other than the Company or any of its Subsidiaries, and
was recommended or elected by a majority of the
Continuing Directors at a meeting at which a quorum
consisting of a majority of the Continuing Directors is
present.
(7) "Control," including the terms
"controlling," "controlled by" and "under common control
with," means the possession, directly or indirectly, of
the power to direct or cause the direction of the
management and policies of a person, whether through the
ownership of voting securities, by contract, or
otherwise, and the beneficial ownership of ten percent
(10%) or more of the votes entitled to be cast by a
corporation's Voting Stock creates a presumption of
control.
(8) "Equity Security" means:
(a) Any stock or similar security,
certificate of interest, or participation in any
profit-sharing agreement, voting trust certificate,
or certificate of deposit for the foregoing;
(b) Any security convertible, with or
without consideration, into an Equity Security, or
any warrant or other security carrying any right to
subscribe to or purchase an Equity Security; or
(c) Any put, call, straddle, or other
option, right or privilege of acquiring an Equity
Security from or selling an Equity Security to
another without being bound to do so.
(9) "Interested Shareholder" means any
person, other than the Company or any of its
Subsidiaries, who:
<PAGE>16
(a) Is the Beneficial Owner,
directly or indirectly, of ten percent (10%) or more
of the voting power of the outstanding Voting Stock
of the Company; or is an Affiliate of the Company
and at any time within the two-year period
immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of ten
percent (10%) or more of the voting power of the
then outstanding Voting Stock of the Company.
(b) For the purpose of determining
whether a person is an Interested Shareholder, the
number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned by the
person through application of Subsection (3) of this
Paragraph A of Article Eighth but shall not include
any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement, or
understanding, or upon exercise of conversion
rights, warrants or options or otherwise.
(10) "Market Value" means:
(a) In the case of stock, the
highest closing sale price during the thirty-day
period immediately preceding the date in question of
a share of such stock on the composite tape for New
York Stock Exchange listed stocks, or, if such stock
is not quoted on the composite tape, on the New York
Stock Exchange, or if such stock is not listed on
New York Stock Exchange, or if such stock is not
listed on such exchange, on the principal United
States securities exchange, registered under the
Securities Exchange Act of 1934 on which such stock
is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation
with respect to a share of such stock during the
thirty-day period preceding the date in question on
the National Association of Securities Dealers,
Inc., Automated Quotations System or any system then
in use, or if no such quotations are available, the
fair market value on the date in question of a share
of such stock as determined by a majority of the
Continuing Directors at a meeting of the Board of
Directors at which a quorum consisting of at least a
majority of the Continuing Directors is present; and
(b) In the case of property other
than cash or stock, the fair market value of such
property on the date in question as determined by a
majority of the Continuing Directors at a meeting of
the Board of Directors at which a quorum consisting
of at least a majority of the Continuing Directors
is present.
<PAGE>17
(11) "Subsidiary" means any corporation of
which Voting Stock having a majority of the votes
entitled to be cast is owned, directly or indirectly, by
the Company.
(12) "Voting Stock" means shares of capital
stock of a corporation entitled to vote generally in the
election of its directors.
B. MINIMUM SHARE VOTE REQUIREMENTS FOR APPROVAL OF
BUSINESS COMBINATIONS.
(1) In addition to any vote otherwise required by
law or these Articles of Incorporation, a Business
Combination shall be recommended by the Board of
Directors of the Company and approved by the affirmative
vote of at least:
(a) Eighty percent (80%) of the votes
entitled to be cast by outstanding shares of Voting
Stock of the Company, voting together as a single
voting group; and
(b) Two-thirds of the votes entitled to be
cast by holders of Voting Stock other than Voting
Stock beneficially owned by the Interested
Shareholder who is, or whose Affiliate is, a party
to the Business Combination or by an Affiliate or
Associate of such Interested Shareholder, voting
together as a single voting group.
(2) Unless a Business Combination is exempted
from the operation of this Paragraph B in accordance
with Paragraph C of this Article Eighth, the failure to
comply with the voting requirements of Subsection (1) of
this Paragraph B shall render such Business Combination
void.
C. EXEMPTIONS FROM MINIMUM SHARE VOTE REQUIREMENTS.
(1) For purposes of Section (2) of this Paragraph
C:
(a) "Announcement Date" means the first
general public announcement of the proposal or
intention to make a proposal of the Business
Combination or its first communication generally to
shareholders of the Company, whichever is earlier;
(b) "Determination Date" means the date on
which an Interested Shareholder first became an
Interested Shareholder; and
(c) "Valuation Date" means
1. For a Business Combination voted upon by
shareholders, the latter of the day prior to the
date of the shareholders' vote or the date twenty
(20) days prior the consummation of the Business
Combination; and
<PAGE>18
2. For a Business Combination not voted upon
by shareholders, the date of the consummation of
the Business Combination.
(2) The vote required by Section B of this
Article Eighth does not apply to a Business Combination
if each of the following conditions is met:
(a) The aggregate amount of the cash and the
Market Value as of the Valuation Date of
consideration other than cash to be received per
share by holders of Common Stock in such Business
Combination is at least equal to the highest of the
following:
1. The highest per share price
(including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of Common
Stock of the same class or series acquired by it:
a. Within the two-year period
immediately prior to the Announcement Date of
the proposal of the Business Combination; or
b. In the transaction in which
it became an Interested Shareholder,
whichever is higher; or
2. The Market Value per share of Common
Stock of the same class or series on the
Announcement Date or on the Determination Date,
whichever is higher; or
3. The price per share equal to the Market
Value per share of Common Stock of the same class
or series determined pursuant to clause 2 of this
Subsection (a), multiplied by the fraction of:
a. The highest per share price,
including any brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by
the Interested Shareholder for any shares of
Common Stock of the same class or series
acquired by it within the two-year period
immediately prior to the Announcement Date,
over
b. The Market Value per share of Common
Stock of the same class or series on the
first day in such two-year period on which
the Interested Shareholder acquired any
shares of Common Stock.
<PAGE>19
(b) The aggregate amount of the cash and the
Market Value as of the Valuation Date of
consideration other than cash to be received per
share by holders of shares of any class or series of
outstanding stock other than Common Stock is at
least equal to the highest of the following, whether
or not the Interested Shareholder has previously
acquired any shares of a particular class or series
of stock:
1. The highest per share price, including
any brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the Interested
Shareholder for any shares of such class of stock
acquired by it:
a. Within the two-year period
immediately prior to the Announcement Date of
the proposal of the Business Combination; or
b. In the transaction in which it became
an Interested Shareholder, whichever is
higher; or
2. The highest preferential amount per share
to which the holders of shares of such class of
stock are entitled in the event of any voluntary
or involuntary liquidation, dissolution or
winding up of the Company; or
3. The Market Value per share of such class
of stock on the Announcement Date or on the
Determination Date, whichever is higher; or
4. The price per share equal to the Market
Value per share of such class of stock determined
pursuant to clause 3 of this Subsection (b),
multiplied by the fraction of:
a. The highest per share price,
including any brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by
the Interested Shareholder for any shares of
any class of Voting Stock acquired by it
within the two-year period immediately prior
to the Announcement Date, over
b. The Market Value per share of the
same class of Voting Stock on the first day
in such two-year period on which the
Interested Shareholder acquired any shares of
the same class of Voting Stock.
<PAGE>20
(c) In making any price calculation under
Section (2) of this Paragraph C, appropriate
adjustments shall be made to reflect any
reclassification, including any reverse stock split;
recapitalization; reorganization; or any similar
transaction which has the effect of reducing the
number of outstanding shares of the stock. The
consideration to be received by holders of any class
or series of outstanding stock is to be in cash or
in the same form as the Interested Shareholder has
previously paid for shares of the same class or
series of stock. If the Interested Shareholder has
paid for shares of any class of stock with varying
forms of consideration, the form of consideration
for such class of stock shall be either cash or the
form used to acquire the largest number of shares of
such class or series of stock previously acquired by
it.
(d) 1. After the Interested Shareholder has
become an Interested Shareholder and prior to the
consummation of such Business Combination:
a. There shall have been no
failure to declare and pay at the
regular date therefor any full
periodic dividends, whether or
not cumulative, on any outstanding
preferred stock of the Company;
b. There shall have been no
reduction in theannual rate of
dividends paid on any class or
series of stock of the Company
that is not preferred stock,
except as necessary to reflect
any subdivision of the stock;
and an increase in such annual
rate of dividends as necessary to
reflect any reclassification,
including any reverse stock split;
recapitalization; reorganization; or
any similar transaction which has the
effect of reducing the number of
outstanding shares of the stock; and
c. The Interested Shareholder
shall not become the Beneficial Owner
of any additional shares of stock
of the Company except as part of the
transaction which resulted in such
Interested Shareholder becoming an
Interested Shareholder or by virtue
of proportionate stock splits or
stock dividends.
<PAGE>21
2. The provisions of subclauses a
and b of clause 1 do not apply if no
Interested Shareholder or an Affiliate or
Associate of the Interested Shareholder voted
as a director of the Company in a manner
inconsistent with such subclauses and the
Interested Shareholder, within ten (10) days
after any act or failure to act inconsistent
with such subclauses, notifies the Board of
Directors of the Company in writing that the
Interested Shareholder disapproves thereof
and requests in good faith that the Board of
Directors rectify such act or failure to act.
(e) After the Interested Shareholder
has become an Interested Shareholder, the
Interested Shareholder may not have received
the benefit, directly or indirectly, except
proportionately as a shareholder, of any
loans, advances, guarantees, pledges or other
financial assistance provided by the Company
or any Subsidiary, whether in anticipation of
or in connection with such Business
Combination or otherwise.
(3) (a) The vote required by Section
B of this Article Eighth does not apply to any
Business Combination that is approved by a majority
of Continuing Directors at a meeting of the Board of
Directors at which a quorum consisting of at least a
majority of the Continuing Directors is present.
(b) Unless by its terms a
resolution adopted under the foregoing subsection
(a) of this Section (3) is made irrevocable, it may
be altered or repealed by the Board of Directors,
but this shall not affect any Business Combinations
that have been consummated, or are the subject of an
existing agreement entered into, prior to the
alteration or repeal.
D. Powers of the Board of Directors. A majority of the
Continuing Directors of the Company shall have the power and
duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine
compliance with this Article Eighth, including without
limitation, (a) whether a person is an Interested
Shareholder, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether the assets
which are the subject of any Business Combination have, or
the consideration to be received for the issuance or
transfer of securities by the Company or any Subsidiary in
any Business Combination has, an aggregate book value or
Market Value of five percent (5%) or more of the total
Market Value of the outstanding stock of the Company or of
its net worth, and (e) whether the requirements of Paragraph
C of this Article Eighth have been met.
<PAGE>22
E. No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article Eighth
shall be construed to relieve any Interested Shareholder
from any fiduciary obligation imposed by law.
F. Amendment or Repeal. Notwithstanding any other
provisions of this Article Eighth or of any other Article
hereof, or of the By-Laws of the Company (and
notwithstanding the fact that a lesser percentage may be
specified from time to time by law, this Article Eighth, any
other Article hereof, or the By-Laws of the Company), the
provisions of this Article Eighth may not be altered,
amended or repealed in any respect, nor may any provision
inconsistent therewith be adopted, unless such alteration,
amendment, repeal or adoption is approved by the affirmative
vote of the holders of at least: (i) 80% of the combined
voting power of the then outstanding Voting Stock of the
Company, voting together as a single class and (ii) 66-2/3%
of the combined voting power of the then outstanding Voting
Stock (which is not beneficially owned by any Interested
Shareholder), voting together as a single class.
NINTH. A. Number, Election and Terms of Directors. The
business of the Company shall be managed by a Board of
Directors. The number of directors of the Company shall be
fixed from time to time by or pursuant to the By-Laws of the
Company. Except as otherwise provided in or fixed by or
pursuant to the provisions of Article Fifth hereof relating
to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified
circumstances, the directors shall be classified, with
respect to the time for which they severally hold office,
into three classes, as nearly equal in number as possible,
as shall be provided in the manner specified in the By-Laws
of the Company, one class to be originally elected for a
term expiring at the annual meeting of shareholders to be
held in 1988, another class to be originally elected for a
term expiring at the annual meeting of shareholders to be
held in 1989, and another class to be originally elected for
a term expiring at the annual meeting of shareholders to be
held in 1990, with each member of each class to hold office
until his successor is elected and qualified. At each
annual meeting of shareholders of the Company and except as
otherwise provided in or fixed by or pursuant to the
provisions of Article Fifth hereof relating to the rights of
the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified
circumstances, the successors of the class of directors
whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of
shareholders held in the third year following the year of
their election.
<PAGE>23
B. Shareholder Nomination of Director Candidates and
Introduction of Business. Advance notice of shareholder
nominations for the election of directors, and advance
notice of business to be brought by shareholders before an
annual meeting of shareholders, shall be given in the manner
provided in the By-Laws of the Company.
C. Newly Created Directorships and Vacancies. Except
as otherwise provided in or fixed by or pursuant to the
provisions of Article Fifth hereof relating to the rights of
the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified
circumstances: (i) newly created directorships resulting
from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall
be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a
quorum of the Board of Directors; (ii) any director elected
in accordance with the preceding clause (i) shall hold
office for the remainder of the full term of the class of
directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall
have been elected and qualified; and (iii) no decrease in
the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
D. Removal. Except as otherwise provided in or fixed
by or pursuant to the provisions of Article Fifth hereof
relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect directors under
specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote
of the holders of at least 80% of the combined voting power
of the then outstanding shares of the Company's stock
entitled to vote generally, voting together as a single
class. Notwithstanding the foregoing provisions of this
Paragraph D, if at any time any shareholders of the Company
have cumulative voting rights with respect to the election
of directors and less than the entire Board of Directors is
to be removed, no director may be removed from office if the
votes cast against his removal would be sufficient to elect
him as a director if then cumulatively voted at an election
of the class of directors of which he is a part. Whenever
in this Article Ninth or in Article Tenth hereof or in
Article Eleventh hereof, the phrase, "the then outstanding
shares of the Company's stock entitled to vote generally" is
used, such phrase shall mean each then outstanding share of
any class or series of the Company's stock that is entitled
to vote generally in the election of the Company's
directors.
<PAGE>24
E. Amendment or Repeal. Notwithstanding any other
provisions of this Article Ninth or of any other Article
hereof or of the By-laws of the Company (and notwithstanding
the fact that a lesser percentage may be specified from time
to time by law, this Article Ninth, any other Article
hereof, or the By-Laws of the Company), the provisions of
this Article Ninth may not be altered, amended or repealed
in any respect, nor may any provision inconsistent therewith
be adopted, unless such alteration, amendment, repeal or
adoption is approved by the affirmative vote of at least 80%
of the combined voting power of the then outstanding shares
of the Company's stock entitled to vote generally, voting
together as a single class.
TENTH. Any action required or permitted to be taken by
the shareholders of the Company at a meeting of such holders
may be taken without such a meeting only if a consent in
writing setting forth the action so taken shall be signed by
all of the shareholders entitled to vote with respect to the
subject matter thereof. Except as otherwise mandated by
Kentucky law and except as otherwise provided in or fixed by
or pursuant to the provisions of Article Fifth hereof
relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect directors under
specified circumstances, special meetings of shareholders of
the Company may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the
entire Board of Directors or by the President of the
Company. Notwithstanding any other provisions of this
Article Tenth or of any other Article hereof or of the By-
Laws of the Company (and notwithstanding the fact that a
lesser percentage may be specified from time to time by law,
this Article Tenth, any other Article hereof, or the By-Laws
of the Company), the provisions of this Article Tenth may
not be altered, amended or repealed in any respect, nor may
any provision inconsistent therewith be adopted, unless such
alteration, amendment, repeal or adoption is approved by the
affirmative vote of the holders of at least 80% of the
combined voting power of the then outstanding shares of the
Company's stock entitled to vote generally, voting together
as a single class.
ELEVENTH. The Board of Directors shall have power to
adopt, amend and repeal the By-Laws of the Company to the
maximum extent permitted from time to time by Kentucky law;
provided, however, that any By-Laws adopted by the Board of
Directors under the powers conferred hereby may be amended
or repealed by the Board of Directors or by the holders of
at least a majority of the combined voting power of the then
outstanding shares of the Company's stock entitled to vote
generally, voting together as a single class, except that,
and notwithstanding any other provisions of this Article
Eleventh or of any other Article hereof or of the By-Laws of
the Company (and notwithstanding the
<PAGE>25
fact that a lesser percentage may be specified from time to
time by law, this Article Eleventh, any other Article hereof
or the By-Laws of the Company), no provision of Section 2,
Section 4 or Section 5 of Article I of the By-Laws or of
Section 1 of Article II of the By-Laws or of Section 2 of
Article IV of the By-Laws or of Article IX of the By-Laws
may be altered, amended or repealed in any respect, nor may
any provision inconsistent therewith be adopted, unless such
alteration, amendment, repeal or adoption is approved by the
affirmative vote of the holders of at least 80% of the
combined voting power of the then outstanding shares of the
Company's stock entitled to vote generally, voting together
as a single class. Notwithstanding any other provisions of
this Article Eleventh or of any other Article hereof or of
the By-Laws of the Company (and notwithstanding the fact
that a lesser percentage may be specified from time to time
by law, this Article Eleventh, any other Article hereof or
the By-Laws of the Company), the provisions of this Article
Eleventh may not be altered, amended or repealed in any
respect, nor may any provision inconsistent therewith be
adopted, unless such alteration, amendment, repeal or
adoption is approved by the affirmative vote of the holders
of at least 80% of the combined voting power of the then
outstanding shares of the Company's stock entitled to vote
generally, voting together as a single class.
TWELFTH. A director of the Company shall not be
personally liable to the Company or its shareholders for
monetary damages for breach of his duties as a director,
except for liability (i) for any transaction in which the
director's personal financial interest is in conflict with
the financial interests of the Company or its shareholders,
(ii) for acts or omissions not in good faith or which
involve intentional misconduct or are known to the director
to be a violation of law, (iii) under Kentucky Revised
Statutes 271 B.8-330, or (iv) for any transaction from which
the director derived any improper personal benefit. If the
Kentucky Business Corporation Act is amended after approval
by the shareholders of this Article to authorize corporate
action further eliminating or limiting the personal
liability of directors, then the liability of a director of
the Company shall be eliminated or limited to the fullest
extent permitted by the Kentucky Business Corporation Act,
as so amended.
Any repeal or modification of the foregoing paragraph by
the shareholders of the Company shall not adversely affect
any right or protection of a director of the Company
existing at the time of such repeal or modification.
THIRTEENTH. A. RIGHT TO INDEMNIFICATION. Each person
who was or is a director of the Company and who was or is
made a party or is threatened to be made a party to or is
otherwise involved (including, without limitation, as a
witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by
<PAGE>26
reason of the fact that he or she is or was a director or
officer of the Company or is or was serving at the request
of the Company as a director, officer, partner, trustee,
employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan
(hereinafter an "Indemnified Director"), whether the basis
of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and
held harmless by the Company to the fullest extent permitted
by the Kentucky Business Corporation Act, as the same exists
or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits
the Company to provide broader indemnification rights than
such law permitted the Company to provide prior to such
amendment), against all liability, all reasonable expense
and all loss (including, without limitation, judgments,
fines, reasonable attorneys' fees, ERISA excise taxes or
penalties and amounts paid in settlement) incurred or
suffered by such Indemnified Director in connection
therewith and such indemnification shall continue as to an
Indemnified Director who has ceased to be a director and
shall inure to the benefit of the Indemnified Director's
heirs, executors and administrators. Each person who was or
is an officer of the Company and not a director of the
Company and who was or is made a party or is threatened to
be made a party to or is otherwise involved (including,
without limitation, as a witness) in any proceeding, by
reason of the fact that he or she is or was an officer of
the Company or is or was serving at the request of the
Company as a director, officer, partner, trustee, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an
"Indemnified Officer"), whether the basis of such proceeding
is alleged action in an official capacity as an officer or
in any other capacity while serving as an officer, shall be
indemnified and held harmless by the Company against all
liability, all reasonable expense and all loss (including,
without limitation, judgments, fines, reasonable attorneys'
fees, ERISA excise taxes or penalties and amounts paid in
settlement) incurred or suffered by such Indemnified Officer
to the same extent and under the same conditions that the
Company must indemnify an Indemnified Director pursuant to
the immediately preceding sentence and to such further
extent as is not contrary to public policy and such
indemnification shall continue as to an Indemnified Officer
who has ceased to be an officer and shall inure the benefit
of the Indemnified Officer's heirs, executors and
administrators. Notwithstanding the foregoing and except as
provided in Paragraph B of this Article Thirteenth with
respect to proceedings to enforce rights to indemnification,
the Company shall indemnify an Indemnified Director or
Indemnified Officer in connection with a proceeding (or part
thereof) initiated by such Indemnified Director or
Indemnified Officer only if such proceeding (or part
thereof) was authorized by the Board of Directors of the
Company.
<PAGE>27
As hereinafter used in this Article Thirteenth, the term
"indemnitee" means any Indemnified Director or Indemnified
Officer. Any person who is or was a director or officer of
a subsidiary of the Company shall be deemed to be serving in
such capacity at the request of the Company for purposes of
this Article Thirteenth. The right to indemnification
conferred in this Article shall include the right to be paid
by the Company the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if
the Kentucky Business Corporation Act requires, an
advancement of expenses incurred by an indemnitee who at the
time of receiving such advance is a director of the Company
shall be made only upon: (i) delivery to the Company of an
undertaking (hereinafter an "undertaking"), by or on behalf
of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision
from which there is no further right to appeal (hereinafter,
a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Article or
otherwise; (ii) delivery to the Company of a written
affirmation of the indemnitee's good faith belief that he or
she has met the standard of conduct that makes
indemnification by the Company permissible under the
Kentucky Business Corporation Act; and (iii) a determination
that the facts then known to those making the determination
would not preclude indemnification under the Kentucky
Business Corporation Act. The right to indemnification and
advancement of expenses conferred in this Paragraph A shall
be a contract right.
B. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Paragraph A of this Article Thirteenth is not paid in full
by the Company within sixty days after a written claim has
been received by the Company (except in the case of a claim
for an advancement of expenses, in which case the applicable
period shall be twenty days), the indemnitee may at any time
thereafter bring suit against the Company to recover the
unpaid amount of the claim. If successful in whole or in
part in any such suit or in a suit brought by the Company to
recover an advancement of expenses pursuant to the terms of
an undertaking, the indemnitee also shall be entitled to be
paid the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (other than a suit to enforce a
right to an advancement of expenses brought by an indemnitee
who will not be a director of the Company at the time such
advance is made) it shall be a defense that, and in (ii) any
suit by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking the Company shall be
entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met the standard that makes it
permissible hereunder or under the Kentucky Business
Corporation Act (the "applicable standard") for the Company
to indemnify the indemnitee for the amount claimed. Neither
the failure of the Company (including its Board of
Directors, a
<PAGE>28
committee of the Board of Directors, independent legal
counsel or its shareholders) to have made a determination
prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard, nor an actual
determination by the Company (including its Board of
Directors, a committee of the Board of Directors,
independent legal counsel or its shareholders) that the
indemnitee has not met the applicable standard shall create
a presumption that the indemnitee has not met the applicable
standard or, in the case of such a suit brought by the
indemnitee, shall be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder,
or by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be
indemnified or to such advancement of expenses under this
Article Thirteenth or otherwise shall be on the Company.
C. NON-EXCLUSIVITY OF RIGHTS. The rights to
indemnification and to the advancement of expenses conferred
in this Article Thirteenth shall not be exclusive of any
other right which any person may have or hereafter acquire
under any statute, these Articles of Incorporation, any By-
Law, any agreement, any vote of shareholders or
disinterested directors or otherwise.
D. INSURANCE. The Company may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the
Company would have the power to indemnify such person
against such expense, liability or loss under the Kentucky
Business Corporation Act.
E. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The
Company may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and
to the advancement of expenses to any employee or agent of
the Company and to any person serving at the request of the
Company as an agent or employee of another corporation or of
a joint venture, trust or other enterprise to the fullest
extent of the provisions of this Article Thirteenth with
respect to the indemnification and advancement of expenses
of either directors or officers of the Company.
F. REPEAL OR MODIFICATION. Any repeal or modification
of any provision of this Article Thirteenth shall not
adversely affect any rights to indemnification and to
advancement of expenses that any person may have at the time
of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
<PAGE>29
G. SEVERABILITY. In case any one or more of the
provisions of this Article Thirteenth or any application
thereof, shall be invalid or unenforceable in any respect,
the validity, legality and enforceability of the remaining
provisions in this Article Thirteenth and any other
application thereof, shall not in any way be affected or
impaired thereby.
FOURTEENTH.
A. Terms of Preferred Stock, Auction Series A (without
par value). The Company has classified 500,000 shares of
the Preferred Stock (without par value) as a series of such
Preferred Stock designated as "Preferred Stock, Auction
Series A (without par value)." The preferences, rights,
qualifications and restrictions of the shares of the
"Preferred Stock, Auction Series A (without par value)"
shall be as follows:
(1) Authorized Shares: Units.
The shares of Preferred Stock, Auction Series A (without
par value) (hereinafter referred to as the "Series A Stock")
shall be purchased, sold, transferred and redeemed only in
Units of 1,000 shares per unit (a "Unit"), except as
provided in subsection (d) of Section (5).
(2) Dividends.
(a) The Holders shall be entitled to
receive, when and as declared by the Board of
Directors of the Company, out of funds legally
available therefor, cumulative cash dividends at the
dividend rate per annum, determined as, and payable
on the respective dates, set forth below.
(b) The dividend rate on shares of
Series A Stock shall be 3.30% per annum during the
period (the "Initial Dividend Period") from February
11, 1992 (the "Date of Original Issue") and ending
on April 14, 1992 and shall be payable on April 15,
1992 (the "Initial Dividend Payment Date").
Subsequent dividends shall be equal to the rate per
annum that results from implementation of the
Auction Procedures, except in the case of a Payment
Failure. Notwithstanding the results of any
Auction, however, and subject to subsection (1) of
this Section (2), the dividend rate on the Series A
Stock will not exceed 25% per annum for any Dividend
Period (as hereinafter defined). Dividends on
shares of Series A Stock shall accrue from February
11, 1992.
<PAGE>30
(c) As of the end of the Initial Dividend
Period and any subsequent Dividend Period, the Board
of Directors of the Company may designate either (i)
a Dividend Period of three months which shall
commence on the day immediately following the last
day of the preceding Dividend Period and shall end
on the fourteenth day of January, April, July or
October next succeeding (a "Quarterly Period") or
(ii) a Dividend Period of either 49 days or 13 weeks
(in either case, subject to adjustment for non-
Business Days and to meet the Minimum Holding
Period, as provided in subsection (g) of this
Section (2)) (a "Short-Term Period"). (The Initial
Dividend Period, each subsequent Quarterly Period
and any Short-Term Period, individually, is referred
to herein as a "Dividend Period".) If and when the
Board of Directors designates a Short-Term Period,
each subsequent Dividend Period shall be a Short-
Term Period. In the event of a change in law
altering the minimum holding period (currently found
in Section 246(c) of the Internal Revenue Code of
1986, as amended (the "Code")) (the "Minimum Holding
Period") required for taxpayers to be entitled to
the Dividends-Received Deduction, the length of each
Short-Term Period commencing after the effective
date of such change in law shall be adjusted so that
the number of days in such Short-Term Periods shall
exceed the then-current Minimum Holding Period;
provided that, (i) the Short-Term Period that
originally was a 49-day Short-Term Period shall not
exceed by more than nine days the length of the
then-current Minimum Holding Period, (ii) the number
of days in any Short-Term Period shall be evenly
divisible by seven, and (iii) the maximum number of
days in any Short-Term Period shall in no event
exceed 98 days. Upon any such change in the number
of days in a Short-Term Period, the Company shall
give notice of such change to the Trust Company, the
Securities Depository and each Existing Holder.
Notwithstanding the provisions of this subsection
(c), designation of a Short-Term Period shall be
permitted only after such amendments to these
Articles as are necessary to accommodate the payment
of dividends for a Short-Term Period have been duly
adopted.
(d) The initial Short-Term Period shall
end on a Wednesday designated by the Board of
Directors of the Company which will be no earlier
than the 46th day and no later than the 98th day
after the last day of the preceding Quarterly Period
(in any case, subject to adjustment for non-Business
Days and to meet the Minimum Holding Period, as
provided in subsection (g) of this Section (2)).
Each subsequent Short-Term Period will commence on
the day immediately following the last day of
<PAGE>31
the preceding Short-Term Period and will end (i) on
the seventh Wednesday thereafter, in the case of a
49-day Short-Term Period or (ii) on the thirteenth
Wednesday thereafter, in the case of a 13-week Short
Term Period (in each case, subject to adjustment for
non-Business Days and to meet the Minimum Holding
Period as provided in subsection (g) of this Section
(2)). In the absence of a designation by the Board
of Directors of the Company to the contrary, each
49-day Short-Term Period will be followed by a 49-
day Short-Term Period and each 13-week Short-Term
Period will be followed by a 13-week Short-Term
Period.
(e) Following any amendment of these Articles
to permit dividend payments on a basis other than
quarterly, and without regard to the designation by
the Board of Directors of the Company of the
duration of the next succeeding Dividend Period, (i)
if Sufficient Clearing Bids do not result from an
Auction, then the Dividend Period to which such
Auction relates will be a 49-day Short-Term Period
or (ii) if a Payment Failure has occurred, then the
Dividend Period during which such Payment Failure
has occurred, and each subsequent Dividend Period
until such Payment Failure has been cured, will be a
49-day Short-Term Period (in each case, subject to
adjustment for non-Business Days and to meet the
Minimum Holding Period, as described in subsection
(g) of this Section (2)).
(f) Dividends with respect to any Quarterly
Period will be payable in arrears, when and as
declared, on the fifteenth day of each January,
April, July and October, unless such day is not a
Business Day, in which case they shall be payable on
the next succeeding Business Day (each a "Quarterly
Dividend Payment Date"). Dividends with respect to
any Short-Term Period shall be payable in arrears,
when and as declared, on the Thursday next following
the last day of the Short-Term Period (a Short-Term
Dividend Payment Date"), except as provided in
subsection (g) of this Section (2). (Each Quarterly
Dividend Payment Date and Short-Term Dividend
Payment Date, individually, is referred to herein as
a "Dividend Payment Date.")
(g) Notwithstanding the provisions of
subsections (c), (d), (e) and (f), with respect to
the Short-Term Dividend Payment Date:
1. If the Thursday is not a Business Day, then
the Short-Term Dividend Payment Date shall be the
preceding Tuesday if both such Tuesday and the
Wednesday following such Tuesday are Business
Days; or
<PAGE>32
2. If the Friday following such Thursday is not
a Business Day, then the Short-Term Dividend
Payment Date will be the Wednesday preceding such
Thursday if both such Wednesday and such Thursday
are Business Days; or
3. If either (a) such Thursday is not a Business
Day and either the preceding Tuesday or Wednesday
is not a Business Day or (b) such Thursday is a
Business Day and the Friday following such
Thursday and such preceding Wednesday are not
Business Days, then the Short-Term Dividend
Payment Date shall be the first Business Day
preceding such Thursday that is next succeeded by
a Business Day.
Even though any particular Short-Term Dividend
Payment Date may not occur on the originally
scheduled Short-Term Dividend Payment Date because
of the adjustments provided for in this subsection
(g), the next succeeding Short-Term Dividend Payment
Date shall occur, subject to such adjustments, on
the seventh or the thirteenth Thursday, as
applicable, following the originally scheduled
Short-Term Dividend Payment Date. Notwithstanding
the foregoing, if any Short-Term Dividend Payment
Date set pursuant to this subsection (g) would occur
in a number of days after the immediately preceding
Short-Term Dividend Payment Date that is less than
the number of days in the then-current Minimum
Holding Period, the Short-Term Dividend Payment Date
shall instead be the next Business Day that (i) is
at least a number of days after the preceding
Dividend Payment Date as to include the then-current
Minimum Holding Period and (ii) is next succeeded by
a Business Day. After any such adjustment pursuant
to this subsection (g) to the Dividend Payment Date
for any Short-Term Period, the last day of such
Short-Term Period shall also be adjusted so as to be
the day immediately preceding such Dividend Payment
Date.
(h) Any designation by the Board of Directors of
a Short-Term Period following a Quarterly Period
shall be effective upon written notice thereof given
by the Company to the Trust Company and to the
Securities Depository prior to 1:00 P.M., New York
City time, on the fifth Business Day prior to the
Auction Date. Any designation by the Board of
Directors of a change in the duration of the Short-
Term Period shall be effective upon written notice
thereof given by the Company to the Trust Company
and to the Securities Depository prior to 1:00 P.M.,
New York City time, on the third Business Day prior
to the Auction Date.
<PAGE>33
(i) Dividends shall be payable to the Holders as
their names appear on the stock books of the Company
or of the registrar of the Series A Stock on the
Business Day next preceding the Dividend Payment
Date in the case of a Short-Term Period and on such
date, not more than 30 days and not less than 10
days, as may be fixed by the Board of Directors,
next preceding the Dividend Payment Date in the case
of a Quarterly Period; provided that, if a Payment
Failure exists, then such dividends shall be paid to
the Holders as their names appear on the stock books
on such date, not exceeding 15 days preceding the
payment date thereof, as may be fixed by the Board
of Directors.
(j) Dividend rates for the shares of Series A
Stock for each Dividend Period (other than the
Initial Dividend Period) shall be equal to the rate
per annum that results from the Auction with respect
to such Dividend Period; provided that, (i) if a
Payment Failure shall have occurred, the dividend
rate for all Dividend Periods commencing on or after
such Dividend Payment Date or redemption date and
until such Payment Failure has been cured shall be a
rate per annum equal to 250% of the Applicable AA
Composite Commercial Paper Rate on the Business Day
next preceding the commencement of each such
Dividend Period (notwithstanding the results of any
Auction for any such Dividend Period); and (ii) if a
Payment Failure is remedied by reason of the Company
having paid all dividends accrued and unpaid, and
all unpaid redemption payments, on all shares of
Series A Stock, the dividend rate for each Dividend
Period commencing after the date on which the
Payment Failure is remedied shall again be
determined by an Auction. Notwithstanding the
foregoing, and subject to subsection (1) of this
Section (2), the dividend rate for any Dividend
Period shall not exceed 25% per annum. The rate per
annum at which dividends are payable on shares of
Series A Stock for any Dividend Period (other than
the Initial Dividend Period) is hereinafter referred
to as the "Applicable Rate."
(k) The dividend per share to accrue and be
payable on each share of Series A Stock for the
Initial Dividend Period shall be computed by
multiplying the product of 3.30% (the dividend rate
for the Initial Dividend Period) and $100 by a
fraction, the numerator of which shall be the number
of days in the Initial Dividend Period, including
the first and last days of such Initial Dividend
Period, and the denominator of which shall be
<PAGE>34
360. The dividend per share to accrue and be
payable on each share of Series A Stock for each
Quarterly Period shall be computed by dividing by
four the product of the Applicable Rate for such
Dividend Period and $100. The dividend per share to
accrue and be payable on each share of Series A
Stock for any Short-Term Period shall be computed by
multiplying the Applicable Rate for such Short-Term
Period by a fraction, the numerator of which shall
be the number of days in such Short-Term Period,
including the first and last days of such Dividend
Period, and the denominator of which shall be 360,
and multiplying by $100 the rate so obtained.
(l) Notwithstanding anything to the contrary
contained in subarticle A of this Article
Fourteenth, the dividend rate for any Dividend
Period on the Series A Stock shall not exceed 25%
per annum; provided, however, that if paragraph
(7)(B)(b) of Article Fifth hereof is amended to
provide a method for computing the dividend rate on
preferred stock having dividends determined pursuant
to an adjustable, floating or variable rate, then
from and after the date such amendment becomes
effective, this subsection (l), including the 25%
restriction contained in this subsection (l), shall
cease to be operative, and shall be of no force and
effect and all references to this subsection (l) in
subarticle A of this Article Fourteenth shall be of
no force and effect.
B. Terms of $5.875 Cumulative Preferred Stock (without
par value). The Company has classified 250,000 shares of the
Preferred Stock (without par value) as a series of such
Preferred Stock designated as "$5.875 Cumulative Preferred
Stock (without par value)." The preferences, rights,
qualifications and restrictions of the shares of the "$5.875
Cumulative Preferred Stock (without par value)," shall be as
follows:
(3) Definitions.
As used with respect to the shares of Series A Stock,
the following terms shall have the following meanings,
unless the context otherwise requires:
"Affiliate" shall mean any Person known to the Trust
Company to be controlled by, in control of or under
common control with the Company.
"Agent Member" shall mean a member of the Securities
Depository that will act on behalf of a Bidder and
is identified as such in such Bidder's Master
Purchaser's Letter.
<PAGE>35
"Applicable AA Composite Commercial Paper Rate," on
any date, shall mean (i) with respect to a 49-day
Short-Term Period, (A) the Interest Equivalent of
the 60-day rate on commercial paper placed on behalf
of issuers whose corporate bonds are rated "AA" by
Standard & Poor's Corporation or its successor
("S&P"), or the equivalent of such rating by S&P or
another rating agency, as such 60-day rate is made
available on a discount basis or otherwise by the
Federal Reserve Bank of New York for the Business
Day immediately preceding such date, or (B) in the
event that the Federal Reserve Bank of New York does
not make available such a rate, then the arithmetic
average of the Interest Equivalent of the 60-day
rate on commercial paper placed on behalf of such
issuers, and as quoted, on a discount basis or
otherwise, to the Trust Company for the close of
business on the Business Day immediately preceding
such date by the Commercial Paper Dealers or (ii)
with respect to a Quarterly Period or a 13-week
Short-Term Period, the Interest Equivalent of the
90-day rate on such commercial paper as so
determined. In the event that either of the
Commercial Paper Dealers does not quote a rate
required to determine the Applicable AA Composite
Commercial Paper Rate, the Applicable AA Composite
Commercial Paper Rate shall be determined on the
basis of the quotations furnished by the remaining
Commercial Paper Dealer and the Substitute
Commercial Paper Dealer selected by the Company to
provide such rate or, if the Company does not select
any such Substitute Commercial Paper Dealer, the
remaining Commercial Paper Dealer. If an adjustment
is made to the length of a Short-Term Period to
comply with the Minimum Holding Period pursuant to
subsection (c) of Section (2), then if the resulting
number of days in each subsequent Short-Term Period,
before any adjustment shall be (i) 70 or more days
but fewer than 85 days, such rate shall be the
arithmetic average of the Interest Equivalent of the
60-day and 90-day rates on such commercial paper, or
(ii) 85 or more days but 98 or fewer days, such rate
shall be the Interest Equivalent of the 90-day rate
on such commercial paper.
"Applicable Rate" shall have the meaning specified
in Section (2), subsection (j).
"Auction" shall mean periodic implementation of the
Auction Procedures set forth herein.
"Auction Date" shall mean the Business Day
immediately preceding a Dividend Payment Date.
"Auction Procedures" shall mean the procedures for
conducting Auctions set forth in Section (4).
<PAGE>36
"Available Units" shall have the meaning specified
in Section (4), subsection (c), paragraph 1,
subparagraph a.
"Bid" and "Bids" shall have the respective meanings
specified in Section (4), subsection (a), paragraph
1, subparagraph c.
"Bidder" and "Bidders" shall have the respective
meanings specified in Section (4), subsection (a),
paragraph l, subparagraph c.
"Board of Directors" shall mean the Board of
Directors of the Company or any committee authorized
by the Board of Directors to perform any or all of
the duties of the Board with respect to the Series A
Stock.
"Broker-Dealer" shall mean any broker-dealer or
other entity permitted by law to perform the
functions required of a Broker-Dealer in Sections
(4) and (5), that is a member of, or a participant
in, the Securities Depository and that has been
selected by the Company and has entered into a
Broker-Dealer Agreement with the Trust Company that
remains effective.
"Broker-Dealer Agreement" shall mean an agreement
between the Trust Company and a Broker-Dealer
pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Sections (4) and
(5).
"Business Day" shall mean a day on which the New
York Stock Exchange, Inc. is open for trading and
which is not a day on which banks in New York City
are authorized by law to close.
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Commercial Paper Dealers" shall mean Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated or, in
lieu thereof, their respective affiliates or
successors that are engaged in the business of
buying and selling commercial paper.
"Date of Original Issue" shall have the meaning
specified in Section (2), subsection (b).
"Dividend Payment Date" shall have the meaning
specified in Section (2), subsection (f).
"Dividend Period" shall have the meaning specified
in Section (2), subsection (c).
<PAGE>37
"Dividends-Received Deduction" shall mean the
dividends-received deduction on preferred stock held
by nonaffiliate corporations (currently found in
Section 243(a) of the Code).
"Existing Holder" shall mean a Person who has
executed a Master Purchaser's Letter and who is
listed as the beneficial owner of shares of Series A
Stock in the records of the Trust Company.
"Hold Order" and "Hold Orders" shall have the
respective meanings specified in Section (4),
subsection (a), paragraph 1, subparagraph c.
"Holders" shall mean the holders of shares of the
Series A Stock as the same appear on the stock books
of the Company or the registrar of the Series A
Stock.
"Initial Dividend Payment Date" shall have the
meaning specified in Section (2), subsection (b).
"Initial Dividend Period" shall have the meaning
specified in Section (2), subsection (b).
"Interest Equivalent" shall mean the equivalent
yield on a 360-day basis of a discount basis
security to an interest-bearing security.
"Master Purchaser's Letter" shall mean a letter
addressed to the Company, the Trust Company, the
remarketing agent, a Broker-Dealer and an Agent
Member in which the executing Person agrees, among
other things, to offer to purchase, to purchase, to
offer to sell and to sell shares of Series A Stock
as set forth in Section (4).
"Maximum Rate" for any Auction shall mean, subject
to subsection (l) of Section (2), the product of the
Applicable AA Composite Commercial Paper Rate on the
Auction Date for such Auction and the Rate Multiple.
"Minimum Holding Period" shall have the meaning
specified in Section (2), subsection (c).
"Minimum Rate" for any Auction shall mean, subject
to subsection (l) of Section (2), 58% of the
Applicable AA Composite Commercial Paper Rate on the
Auction Date for such Auction.
<PAGE>38
"Order" and "Orders" shall have the respective
meanings specified in Section (4), subsection (a),
paragraph 1, subparagraph c.
"Outstanding Shares" shall mean, as of any date,
shares of Series A Stock theretofore issued by the
Company except, without duplication, (i) any shares
theretofore canceled or delivered to the Trust
Company for cancellation or redeemed or deemed to
have been redeemed by the Company, (ii) any shares
as to which the Company or any Affiliate thereof
shall be an Existing Holder, and (iii) any shares
represented by any certificate in lieu of which a
new certificate has been executed and delivered by
the Company.
"Outstanding Units" shall mean Units comprised of
Outstanding Shares.
"Payment Failure" shall mean a failure by the
Company to pay to the Holders on or within three
Business Days (i) after any Dividend Payment Date,
the full amount of any dividends to be paid on such
Dividend Payment Date on any share of the Series A
Stock or (ii) after any redemption date, the
redemption price to be paid on that redemption date
on any share of the Series A Stock with respect to
which a notice of redemption has been given.
"Person" shall mean an individual, a partnership, a
corporation, a trust, an unincorporated association,
a joint venture or other entity or a government or
any agency or political subdivision thereof.
"Potential Holder" shall mean any Person, including
any Existing Holder, (i) who shall have executed a
Master Purchaser's Letter and (ii) who may be a
prospective purchaser of Units (or, in the case of
an Existing Holder, additional Units).
"Quarterly Dividend Payment Date" shall have the
meaning specified in Section (2), subsection (f).
"Quarterly Period" shall have the meaning specified
in Section (2), subsection (c).
<PAGE>39
"Rate Multiple," on any Auction Date, shall mean the
percentage determined as set forth below based on
the Prevailing Rating (as defined below) of the
Series A Stock in effect at the close of business on
the Business Day immediately preceding such Auction
Date:
Prevailing Rating Percentage
AA/aa or above 110%
A/a 150%
BBB/baa 200%
Below BBB/baa 250%
For purposes of this definition, the "Prevailing
Rating" of the Series A Stock shall be (i) AA/aa or
above, if the Series A Stock has a rating of AA- or
better by S&P and a rating of aa3 or better by
Moody's Investors Service, Inc. or its successor
("Moody's"), or the equivalent of both of such
ratings by a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if
not AA/aa or above, then A/a, if the Series A Stock
has a rating of A- or better by S&P and a rating of
a3 or better by Moody's, or the equivalent of both
of such ratings by a substitute rating agency or
substitute rating agencies selected as provided
below, (iii) if not AA/aa or above or A/a, then
BBB/baa, if the Series A Stock has a rating of BBB-
or better by S&P and a rating of baa3 or better by
Moody's, or the equivalent of both of such ratings
by a substitute rating agency or substitute rating
agencies selected as provided below, and (iv) if not
AA/aa or above, A/a or BBB/baa, then Below BBB/baa.
If both S&P and Moody's fail to make such a rating
available, Goldman, Sachs & Co. and Morgan Stanley &
Co. Incorporated, or their successors and assigns,
will select one or two nationally recognized
securities rating agencies to act as a substitute
rating agency or agencies. The Company will take
all reasonable action necessary to enable S&P and
Moody's, or such substitute rating agency or
agencies, to provide a rating for the Series A
Stock.
"Remaining Units" shall have the meaning specified
in Section (4), subsection (d), paragraph l,
subparagraph d.
"Securities Depository" shall mean The Depository
Trust Company and its successors and assigns or any
other securities depository selected by the Company
which agrees to follow the procedures required to be
followed by such securities depository in connection
with shares of the Series A Stock.
<PAGE>40
"Sell Order" and "Sell Orders" shall have the
respective meanings specified in Section (4),
subsection (a), paragraph 1, subparagraph c.
"Short-Term Dividend Payment Date" shall have the
meaning specified in Section (2), subsection (f).
"Short-Term Period" shall have the meaning specified
in Section (2), subsection (c).
"Submission Deadline" shall mean 1:00 P.M., New York
City time, on any Auction Date or such other time on
any Auction Date by which Broker-Dealers are
required to submit Orders to the Trust Company as
specified by the Trust Company from time to time.
"Submitted Bid" and "Submitted Bids" shall have the
respective meanings specified in Section (4),
subsection (c), paragraph l.
"Submitted Hold Order" and "Submitted Hold Orders"
shall have the respective meanings specified in
Section (4), subsection (c), paragraph l.
"Submitted Order" shall have the meaning specified
in Section (4), subsection (c), paragraph l.
"Submitted Sell Order" and "Submitted Sell Orders"
shall have the respective meanings specified in
Section (4), subsection (c), paragraph 1.
"Substitute Commercial Paper Dealer" shall mean any
commercial paper dealer that is a leading dealer in
the commercial paper market.
"Sufficient Clearing Bids" shall have the meaning
specified in Section (4), subsection (c), paragraph
1, subparagraph b.
"Trust Company" shall mean a bank or trust company
duly appointed as such with respect to the shares of
the Series A Stock.
"Unit" shall have the meaning specified in Section
(l).
"Winning Bid Rate" shall have the meaning specified
in Section (4), subsection (c) paragraph l,
subparagraph c.
<PAGE>41
(4) Auction Procedures.
(a) Orders by Existing Holders and Potential Holders.
1. Prior to the Submission Deadline on each
Auction Date:
a. Each Existing Holder may submit
to a Broker-Dealer by telephone information
as to:
(i) the number of Outstanding
Units, if any, held by such Existing
Holder that such Existing Holder desires
to continue to hold for the next
succeeding Dividend Period without regard
to the rate determined by the Auction
Procedures;
(ii) the number of Outstanding
Units, if any, that such Existing Holder
desires to continue to hold for the next
succeeding Dividend Period, if the rate
determined by the Auction procedures
shall not be less than the rate per annum
specified by such Existing Holder; and/or
(iii) the number of Outstanding
Units, if any, held by such Existing
Holder that such Existing Holder offers
to sell without regard to the rate
determined by the Auction Procedures for
the next succeeding Dividend Period; and
b. Each Broker-Dealer, using a list of
Potential Holders, in good faith for the
purpose of conducting a competitive Auction
in a commercially reasonable manner, shall
contact Potential Holders, including Persons
that are not Existing Holders, on such list
to determine the number of Outstanding Units,
if any, that each such Potential Holder
offers to purchase, if the rate determined by
the Auction Procedures for the next
succeeding Dividend Period shall not be less
than the rate per annum specified by such
Potential Holder.
<PAGE>42
c. For the purposes hereof, the
communication to a Broker-Dealer of
information referred to in subparagraph a or
subparagraph b of this paragraph 1 is
referred to hereinafter as an "Order" and
collectively as "Orders," and each Existing
Holder and each Potential Holder placing an
Order is referred to hereinafter as a
"Bidder" and collectively as "Bidders;" an
Order containing the information referred to
in clause (i) of subparagraph a of this
paragraph 1 is referred to hereinafter as a
"Hold Order" and collectively as "Hold
Orders;" an Order containing the information
referred to in clause (ii) of subparagraph a
or subparagraph b of this paragraph 1 is
referred to hereinafter as a "Bid" and
collectively as "Bids;" and an Order
containing the information referred to in
clause (iii) of subparagraph a of this
paragraph l is referred to hereinafter as a
"Sell Order" and collectively as "Sell
Orders."
d. On any Auction Date, a Bid submitted by
an Existing Holder shall constitute an
irrevocable offer to sell:
(i) the number of Outstanding
Units specified in such bid if the rate
determined by the Auction Procedures on
such Auction Date shall be less than the
rate specified in such Bid; or
(ii) such number or a lesser
number of Outstanding Units to be
determined as set forth in subsection
(d), paragraph 1, subparagraph d, of this
Section (4), if the rate determined by
the Auction Procedures on such Auction
Date shall be equal to the rate specified
in such Bid; or
(iii) a lesser number of
Outstanding Units than was specified in
such Bid, to be determined as set forth
in subsection (d), paragraph 2,
subparagraph c, of this Section (4), if
the rate specified therein shall be
higher than the Maximum Rate and
Sufficient Clearing Bids do not exist.
<PAGE>43
e. On any Auction Date, a Sell Order by an
Existing Holder shall constitute an
irrevocable offer to sell:
(i) the number of Outstanding
Units specified in such Sell Order; or
(ii) such number or a lesser
number of Outstanding Units as set forth
in subsection (d), paragraph 2,
subparagraph c, of this Section (4) if
Sufficient Clearing bids do not exist.
f. On any Auction Date, a Bid by a Potential
Holder shall constitute an irrevocable offer
to purchase:
(i) the number of Outstanding
Units specified in such Bid if the rate
determined by the Auction Procedures on
such Auction Date shall be higher than
the rate specified in such Bid; or
(ii) such number or a lesser
number of Outstanding Units as set forth
in subsection (d), paragraph l,
subparagraph e, of this Section (4) if
the rate determined by the Auction
Procedures on such Auction Date shall be
equal to the rate specified in such Bid.
g. On each Auction Date, the Trust Company
shall determine the Applicable AA Composite
Commercial Paper Rate and the Maximum Rate
and shall notify the Company and each Broker-
Dealer of each such rate not later than 9:30
A.M. on such Auction Date or such other time
on such Auction Date as specified by the
Trust Company with the consent of the Company
(which consent shall not be unreasonably
withheld).
(b) Submission of Orders by Broker-Dealers to Trust
Company.
1. Each Broker-Dealer shall submit in writing to
the Trust Company prior to the Submission
Deadline on each Auction Date all Orders obtained
by such Broker-Dealer and specifying with respect
to each Order:
a. The name of the Bidder placing such
Order;
<PAGE>44
b. The aggregate number of Units that are
the subject of such Order;
c. To the extent that such Bidder is an
Existing Holder:
(i) the number of Units, if any,
subject to any Hold Order placed by such
Existing Holder;
(ii) the number of Units, if any,
subject to any Bid placed by such
Existing Holder and the rate specified in
such Bid; and
(iii) the number of Units, if any,
subject to any Sell Order placed by such
Existing Holder; and
d. To the extent such Bidder is a Potential
Holder, the number of Units and the rate
specified in such Potential Holder's Bid.
2. If any rate specified in any Bid contains
more than three figures to the right of the
decimal point, the Trust Company shall round such
rate up to the next highest one thousandth (.001)
of 1%.
3. If, for any reason, an Order or Orders
covering all of the Outstanding Units held by any
Existing Holder is not submitted to the Trust
Company prior to the Submission Deadline, the
Trust Company shall deem a Hold Order to have
been submitted on behalf of such Existing Holder
covering the number of Outstanding Units held by
such Existing Holder and not subject to Orders
submitted to Trust Company.
4. If one or more Orders by an Existing Holder
covering in the aggregate more than the number of
Outstanding Units held by such Existing Holder
are submitted to the Trust Company by one or more
Broker-Dealers on behalf of such Existing Holder,
such Orders shall be considered valid as follows
and in the following order of priority:
<PAGE>45
a. Any Hold Orders submitted on behalf of
such Existing Holder shall be considered
valid up to and including, in the aggregate,
the number of Outstanding Units held by such
Existing Holder; provided that, if more than
one Hold Order is submitted on behalf of such
Existing Holder and the number of Units
subject to such Hold Orders exceeds the
number of Outstanding Units held by such
Existing Holder, the number of Units subject
to such Hold Orders shall be reduced pro rata
so that such Hold Orders shall cover only the
number of Outstanding Units held by such
Existing Holder;
b. (i) Any Bid submitted on
behalf of an Existing Holder shall be
considered valid up to and including the
excess of the number of Outstanding Units
held by such Existing Holder over the
number of Units subject to valid Hold
Orders of such Existing Holder referred
to in subparagraph a of this paragraph 4,
(ii) subject to clause (i) of this
subparagraph b, if more than one Bid with
the same rate is submitted on behalf of
such Existing Holder and the aggregate
number of Outstanding Units subject to
such Bids is greater than the excess
referred to in clause (i) of this
subparagraph b, such Bids shall be
considered valid up to the amount of such
excess and the number of Units subject to
such Bids shall be reduced pro rata so
that such Bids shall cover only the
number of Units equal to such excess,
(iii) subject to clause (i) of this
subparagraph b, if more than one Bid with
different rates is submitted on behalf of
such Existing Holder, such Bids shall be
considered valid in their entirety up to
the excess referred to in clause (i) of
this subparagraph b in the ascending
order of their respective rates, and
(iv) in any such event
specified in this subparagraph b, the
number, if any, of such Units subject to
Bids not valid under this subparagraph b
shall be treated as the subject of a Bid
by a Potential Holder; and
<PAGE>46
c. Any Sell Order shall be considered valid
up to and including, in the aggregate, the
excess of the number of Outstanding Units
held by such Existing Holder over the sum of
the Units subject to valid Hold Orders of
such Existing Holder referred to in
subparagraph a of this paragraph 4 and valid
Bids by such Existing Holder referred to in
subparagraph b of this paragraph 4.
5. In any Auction, if more than one Bid is
submitted on behalf of any Potential Holder, each
Bid submitted shall be a separate Bid with the
rate and number of Units therein specified.
6. Orders by Existing Holders and Potential
Holders must specify a whole number of Units. An
Order that does not specify a whole number of
Units will not be considered a Submitted Order
for purposes of the Auction.
(c) Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate.
1. Not earlier than the Submission Deadline on each
Auction Date, the Trust Company shall assemble
all Orders submitted or deemed submitted to it by
Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being
referred to hereinafter individually as a
"Submitted Hold Order," a "Submitted Bid" or a
"Submitted Sell Order," as the case may be, or as
a "Submitted Order") and shall determine:
a. The excess of the total number of
Outstanding Units over the number of
Outstanding Units that are the subject of
Submitted Hold Orders (such excess being
hereinafter referred to as the "Available
Units");
b. From the Submitted Orders, whether the
number of Outstanding Units that are the
subject of Submitted Bids by Existing Holders
and Potential Holders specifying one or more
rates equal to or lower than the Maximum Rate
exceeds or is equal to the sum of:
(i) the number of Outstanding
Units that are the subject of Submitted
Bids by Existing Holders specifying one
or more rates higher than the Maximum
Rate, and
<PAGE>47
(ii) the number of Outstanding
Units that are subject to Submitted Sell
Orders (in the event of such excess or of
such equality (other than because the
number of Units specified in each of
clauses (i) and (ii) of this subparagraph
b is zero because all of the Outstanding
Units are the subject of Submitted Hold
Orders) such Submitted Bids in this
subparagraph b are hereinafter referred
to collectively as "Sufficient Clearing
Bids"); and
c. If Sufficient Clearing Bids exist, the
lowest rate specified in the Submitted Bids
(the "Winning Bid Rate") which if:
(i) (A) Each Submitted Bid from
Existing Holders specifying such Winning
Bid Rate and (B) all other Submitted Bids
from Existing Holders specifying lower
rates were accepted, thus entitling such
Existing Holders to continue to hold the
Outstanding Units that are the subject of
such Submitted Bids, and
(ii) (A) Each Submitted Bid from
Potential Holders specifying such Winning
Bid Rate and (B) all other Submitted Bids
from Potential Holders specifying lower
rates were accepted, thus requiring the
Potential Holders to purchase the
Outstanding Units that are subject to
such Submitted Bids,
would result in such Existing Holders
described in clause (i) of this subparagraph
c continuing to hold an aggregate number of
Outstanding Units that, when added to the
numbers of Outstanding Units to be purchased
by such Potential Holders described in clause
(ii) of this subparagraph c, would at least
equal the Available Units.
<PAGE>48
2. In connection with any Auction and promptly
after the Trust Company has made the
determinations pursuant to paragraph 1 of this
subsection (c), the Trust Company shall advise
the Company of the Applicable AA Composite
Commercial Paper Rate and the Maximum Rate and,
based on such determinations, of the Applicable
Rate for the next succeeding Dividend Period and
such other information as follows:
a. If Sufficient Clearing Bids exist, that
the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Winning
Bid Rate so determined;
b. If Sufficient Clearing Bids do not exist
(other than because all of the Outstanding
Units are the subject of Submitted Hold
Orders), that the Applicable Rate for the
next succeeding Dividend Period shall be the
Maximum Rate; or
c. If all of the Outstanding Units are the
subject of Submitted Hold Orders, that the
Applicable Rate for the next succeeding
Dividend Period shall be equal to the Minimum
Rate.
(d) Acceptance and Rejection of Submitted
Bids and Submitted Sell Orders and Allocation of
Units.
Based on the determinations made pursuant to
subsection (c), paragraph l, of this Section (4),
the Submitted Bids and Submitted Sell Orders
shall be accepted or rejected and the Trust
Company shall take such other action as set forth
below:
1. If Sufficient Clearing Bids have been
made, subject to the provisions of paragraphs
4 and 5 of this subsection (d), Submitted
Bids and Submitted Sell Orders shall be
accepted or rejected in the following order
of priority and all other Submitted Bids
shall be rejected:
a. The Submitted Sell Orders of each
Existing Holder shall be accepted and the
Submitted Bids of each Existing Holder
specifying any rate that is higher than
the Winning Bid Rate shall be rejected,
thus requiring each such Existing Holder
to sell the Outstanding Units that are
the subject of such Submitted Sell Orders
or Submitted Bids;
<PAGE>49
b. The Submitted Bids of each Existing
Holder specifying any rate that is lower
than the Winning Bid Rate shall be
accepted, thus entitling each such
Existing Holder to continue to hold the
Outstanding Units that are the subject of
such Submitted Bids;
c. The Submitted Bids of each Potential
Holder specifying any rate that is lower
than the Winning Bid Rate shall be
accepted, thus requiring such Potential
Holder to purchase the number of
Outstanding Units that are the subject of
such Submitted Bids;
d. The Submitted Bids of each Existing
Holder specifying a rate that is equal to
the Winning Bid Rate shall be accepted,
thus entitling such Existing Holder to
continue to hold the Outstanding Units
that are the subject of each such
Submitted Bid, unless the number of
Outstanding Units subject to all such
Submitted Bids of Existing Holders shall
be greater than the number of Outstanding
Units ("Remaining Units") equal to the
excess of the Available Units over the
number of Outstanding Units subject to
Submitted Bids described in subparagraphs
b and c of this paragraph 1, in which
event the Submitted Bids of each such
Existing Holder shall be rejected, and
each such Existing Holder shall be
required to sell Units, but only in an
amount equal to the difference between
(i) the number of Outstanding Units then
held by such Existing Holder subject to
such Submitted Bid and (ii) the number of
Outstanding Units obtained by multiplying
(x) the number of Remaining Units by (y)
a fraction (the numerator of which shall
be the number of Outstanding Units held
by such Existing Holder subject to such
Submitted Bid and the denominator of
which shall be the sum of the number of
Outstanding Units subject to such
Submitted Bids made by all such Existing
Holders that specified a rate equal to
the Winning Bid Rate); and
<PAGE>50
e. The Submitted Bid of each Potential
Holder specifying a rate that is equal to
the Winning Bid Rate shall be accepted,
but only in an amount equal to the number
of Outstanding Units obtained by
multiplying (x) the difference between
the Available Units and the number of
Outstanding Units subject to Submitted
Bids described in subparagraphs b, c, and
d of this paragraph l by (y) a fraction
(the numerator of which shall be the
number of Outstanding Units subject to
such Submitted Bid of such Potential
Holder and the denominator of which shall
be the sum of the number of Outstanding
Units subject to Submitted Bids that
specified rates equal to the Winning Bid
Rate submitted by all such Potential
Holders).
2. If Sufficient Clearing Bids have not been
made (other than because all of the
Outstanding Units are subject to Submitted
Hold Orders), subject to the provisions of
paragraph 4 of this subsection (d), Submitted
Orders shall be accepted or rejected in the
following order of priority and all other
Submitted Bids shall be rejected:
a. The Submitted Bids of each Existing
Holder specifying any rate that is equal
to or lower than the Maximum Rate shall
be accepted, thus entitling such Existing
Holder to continue to hold the
Outstanding Units that are the subject of
such Submitted Bids;
b. The Submitted Bids of each Potential
Holder specifying any rate that is equal
to or lower than the Maximum Rate shall
be accepted, thus requiring such
Potential Holder to purchase the
Outstanding Units that are the subject of
such Submitted Bids; and
<PAGE>51
c. The Submitted Bids of each Existing
Holder specifying any rate that is higher
than the Maximum Rate shall be rejected,
and each Submitted Sell Order of each
Existing Holder shall be accepted, thus
requiring such Existing Holder to sell
the Outstanding Units that are the
subject of each such Submitted Bid or
Submitted Sell Order, in both cases only
in an amount equal to the difference
between (i) the number of Outstanding
Units then held by such Existing Holder
subject to such Submitted Bid or
Submitted Sell Order and (ii) the number
of Outstanding Units obtained by
multiplying (x) the difference between
the Available Units and the aggregate
number of Outstanding Units subject to
Submitted Bids described in subparagraphs
a and b of this paragraph 2 by (y) a
fraction (the numerator of which shall be
the number of Outstanding Units held by
such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and
the denominator of which shall be the
number of Outstanding Units subject to
all such Submitted Bids and Submitted
Sell Orders of Existing Holders).
3. If all of the Outstanding Units are the
subject of Submitted Hold Orders, all
Submitted Bids shall be rejected.
4. If, as a result of the procedures
described in paragraph 1 or 2 of this
subsection (d), any Existing Holder would be
entitled to hold or required to sell, or any
Potential Holder would be required to
purchase, a fraction of a Unit on any Auction
Date, the Trust Company shall, in such manner
as, in its sole discretion, it shall
determine, round up or down the number of
Units to be held or sold by any Existing
Holder or purchased by any Potential Holder
on such Auction Date so that the number of
Units held or sold by each Existing Holder or
purchased by any Potential Holder on such
Auction Date shall be a whole number of
Units.
<PAGE>52
5. If, as a result of the procedures
described in paragraph l of this subsection
(d), any Potential Holder would be entitled
or required to purchase less than a whole
Unit on any Auction Date, the Trust Company
shall, in such manner as, in its sole
discretion, it shall determine, allocate
Units for purchase among Potential Holders so
that only whole Units are purchased on such
Auction Date by any Potential Holder, even if
such allocation results in one or more of
such Potential Holders not purchasing Units
on such Auction Date.
6. Based on the results of each Auction, the
Trust Company shall determine the aggregate
number of Outstanding Units to be purchased
and the aggregate number of Outstanding Units
to be sold by Potential Holders and Existing
Holders on whose behalf each Broker-Dealer
submitted Bids or Sell Orders and, with
respect to each Broker-Dealer, to the extent
that such aggregate number of Units to be
sold differ, determine to which other Broker-
Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or
Broker-Dealers acting for one or more sellers
such Broker-Dealer shall receive, as the case
may be, Units.
(5) Miscellaneous.
(a) So long as the Applicable Rate is based on
the results of an Auction, an Existing Holder (i)
may sell, transfer or otherwise dispose of shares of
Series A Stock only in Units and only pursuant to a
Bid or Sell Order in accordance with the Auction
Procedures, or to or through a Broker-Dealer or to a
Person that has delivered a signed copy of a Master
Purchaser's Letter to the Trust Company; provided
that, in the case of all transfers other than
pursuant to Auctions, such Existing Holder or its
Broker-Dealer or its Agent Member advises the Trust
Company of such transfer, and (ii) shall have the
ownership of the shares of Series A Stock held by it
maintained in book entry form by the Securities
Depository in the account of its Agent Member, which
in turn will maintain account records of such
Existing Holder's beneficial ownership.
<PAGE>53
(b) Neither the Company nor any Affiliate thereof
may submit an Order in any Auction.
(c) All references to time of day refer to New
York City time.
(d) From and during the continuance of a Payment
Failure and during any period in which there shall
not be a Securities Depository, shares of Series A
Stock may be registered for transfer or exchange and
new certificates issued upon surrender of the old
certificates properly endorsed for transfer, with
(i) all necessary endorsers' signatures guaranteed
in such manner and form as the Trust Company (or
such other transfer agent or registrar) may require
by a guarantor reasonably believed by the Trust
Company (or such other transfer agent or registrar)
to be responsible, (ii) accompanied by such
assurances as the Trust Company (or such other
transfer agent or registrar) shall deem necessary or
appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and
(iii) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes
or funds necessary for the payment of such taxes.
(e) Commencing with the Dividend Payment Date for
which a Payment Failure occurs, the Company or an
Affiliate thereof, at the option of the Company, may
perform any of the functions to be performed by the
Trust Company or the Securities Depository set forth
herein.
(f) The Board of Directors of the Company may
interpret the provisions of the Auction Procedures
as set forth herein to resolve any inconsistency or
ambiguity which may arise or be revealed in
connection therewith, and, if such inconsistency or
ambiguity reflects an inaccurate provision hereof,
the Board of Directors of the Company may, in
appropriate circumstances, authorize the filing of a
corrected Articles of Amendment.
(g) Shares of Series A Stock which have been
redeemed or otherwise acquired by the Company or any
Affiliate are not subject to reissuance as Series A
Stock.
<PAGE>54
(6) Redemption.
The shares of Series A Stock shall be subject to
redemption, in whole or in part on any Dividend Payment
Date, upon the notice and in the manner and with the
effect provided in Article Fifth of these Articles;
provided that if such Article Fifth is amended to grant
the Company's Board of Directors in certain instances
the authority to determine the time, form and manner of
a notice of redemption, from and after the date such
amendment becomes effective, publication of notice of
the redemption of the Series A Stock shall not be
required and notice of such redemption shall be
sufficient if mailed at least thirty (30) days' prior to
redemption to the holders of record of the Series A
Stock so to be redeemed, at their respective addresses
as the same shall appear on the books of the Company,
but no failure to mail a particular notice nor any
defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of
those shares of Series A Stock for which proper notice
has been given; provided further that all other terms of
Article Fifth, as amended, relating to the redemption of
shares of Preferred Stock and Preferred Stock (without
par value) shall continue to apply to the redemption of
the Series A Stock. The notice of redemption shall
include a statement setting forth (i) the number of
shares of the Series A Stock to be redeemed (if
applicable to be denominated in Units), (ii) the date
fixed for redemption and (iii) the redemption price. So
long as shares of Series A Stock are held of record by
the nominee of the Securities Depository, the Company
need only give notice to the Securities Depository of
any such redemption. The redemption price or prices
applicable to shares of said series shall be $100.00 per
share plus accrued and unpaid dividends to the date of
redemption. Unless the shares of Series A Stock shall
have been registered for transfer and exchange as
provided in subsection (d) of Section (5), redemptions
shall be made only in whole Units.
(7) Voluntary or Involuntary Liquidation.
The preferential amounts to which the holders of
Series A Stock shall be entitled upon any voluntary or
involuntary liquidation, dissolution or winding up of
the Company, in addition to dividends accumulated but
unpaid thereon, shall be $100 per share.
<PAGE>55
(8) Stated Value.
The stated value of the Series A Stock shall be $100
per share.
B. Terms of $5.875 Cumulative Preferred Stock (without
par value). The Company has classified 250,000 shares of
the Preferred Stock (without par value) as a series of such
Preferred Stock designated as "$5.875 Cumulative Preferred
Stock (without par value)." The preferences, rights,
qualifications and restrictions of the shares of the "$5.875
Cumulative Preferred Stock (without par value)," shall be as
follows:
(1) The annual dividend payable in respect of
each share of said series shall be $5.875; and the initial
dividend in respect of each share of said series shall be
payable on July 15, 1993, when and as declared by the Board
of Directors of this Company, to holders of record on June
30, 1993, and will accrue from the date of original issuance
of said series; thereafter, such dividends shall be payable
on January 15, April 15, July 15 and October 15 in each year
(or the next business date thereafter in each case), when
and as declared by the Board of Directors of this Company,
for the quarter-yearly period ending on the last business
day of the preceding month.
(2) The shares of said series are not subject to
redemption prior to July 1, 1998. On and after July 1,
1998, the shares of said series shall be subject to
redemption, in whole or in part, in the manner and with the
effect provided in these Articles; and the redemption price
or prices applicable to shares of said series shall be
$105.875 per share plus accrued and unpaid dividends to the
date of redemption if such date of redemption is on or
subsequent to July 1, 1998, and prior to July 1, 1999;
$104.700 per share plus accrued and unpaid dividends to the
date of redemption if such date of redemption is on or
subsequent to July 1, 1999, and prior to July 1, 2000;
$103.525 per share plus accrued and unpaid dividends to the
date of redemption if such date of redemption is on or
subsequent to July 1, 2000, and prior to July 1, 2001;
$102.350 per share plus accrued and unpaid dividends to the
date of redemption if such date of redemption is on or
subsequent to July 1, 2001, and prior to July 1, 2002;
$101.175 per share plus accrued and unpaid dividends to the
date of redemption if such date of redemption is on or
subsequent to July 1, 2002, and prior to July 1, 2003; and
$100.000 per share plus accrued and unpaid dividends
thereafter.
Notice of every such redemption shall be mailed at
least thirty (30) days prior to redemption to the holders of
record of the $5.875 Cumulative Preferred Stock (without par
value) so to be redeemed, at their respective addresses as
the same shall appear on the books of the Company, but no
failure to mail a particular notice nor any defect therein
or in the mailing thereof shall affect the validity of the
proceedings for the redemption of those shares of $5.875
Cumulative Preferred Stock (without par value) for which
proper notice has been given.
<PAGE>56
(3) So long as any shares of said series shall
remain outstanding, the Company shall on or before July 15,
2003, and on or before July 15 of each year thereafter to
and including July 15, 2007, set aside, separate and apart
from its other funds, an amount equal to $1,250,000 (or such
lesser amount as may be sufficient to redeem all of the
shares of said series then outstanding) and shall on or
before July 15, 2008 (each such July 15 being hereinafter in
this Section 3 called a "Sinking Fund Redemption Date"), set
aside, separate and apart from its other funds, an amount
equal to $18,750,000 (or such lesser amount as may be
sufficient to redeem all the shares of said series then
outstanding) as a mandatory sinking fund payment for the
exclusive benefit of shares of said series, plus such
further amount as shall equal the accrued and unpaid
dividends on the shares of said series to be redeemed out of
such payment (as hereinafter in this Section 3 provided)
through the day preceding the applicable Sinking Fund
Redemption Date. The obligation of the Company to make such
payment shall be cumulative, so that if for any reason the
full amount thereof shall not be set aside for any year, the
amount of the deficiency from time to time shall be added to
the amount due from the Company on subsequent Sinking Fund
Redemption Dates (or, if such deficiency exists on July 15,
2008, on subsequent quarterly dividend payment dates
thereafter for such series) until the deficiency shall have
been fully satisfied. The Company shall be entitled to
credit against any such mandatory sinking fund payment
shares of said series redeemed by the Company at the
Company's option, purchased by the Company in the open
market or otherwise acquired by the Company, except through
application of any sinking fund payment, and not theretofore
so credited, at the sinking fund redemption price
hereinafter specified in this Section 3.
Any amounts set aside by the Company pursuant to
this Section 3 shall be applied on the date of such setting
aside if a Sinking Fund Redemption Date or otherwise on the
first Sinking Fund Redemption Date occurring thereafter to
the redemption of shares of said series at $100.000 per
share, plus accrued and unpaid dividends through the day
preceding the applicable Sinking Fund Redemption Date, in
the manner and upon the notice provided in Section 2 of this
subarticle B. If any Sinking Fund Redemption Date shall be
a Saturday, Sunday or other day on which banking
institutions in Louisville, Kentucky are authorized or
obligated to remain closed, such term shall be construed to
refer to the next preceding business day.
Notwithstanding anything to the contrary set forth
above, no sinking fund payments on the shares of said series
of $5.875 Cumulative Preferred Stock shall be made: (i)
unless the full dividends on all shares of Preferred Stock
and Preferred Stock (without par value) at the time
outstanding for all past dividend periods shall have been
paid or declared and set apart for payment or (ii) if such
sinking fund payment would be contrary to applicable law.
<PAGE>57
(4) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the Company in
addition to dividends accumulated but unpaid thereon, shall
be $100.000 per share in the event of any voluntary
liquidation, dissolution or winding up of the Company,
except that if such voluntary liquidation, dissolution or
winding up of the Company shall have been approved by the
vote in favor thereof given at a meeting called for that
purpose or by the written consent of the holders of a
majority of the total shares of the $5.875 Cumulative
Preferred Stock (without par value) then outstanding, the
amount so payable on such voluntary liquidation, dissolution
or winding up shall be $100.000 per share; or $100.000 per
share, in the event of any involuntary liquidation,
dissolution or winding up of the Company.
(5) The shares of said series of $5.875
Cumulative Preferred Stock (without par value) shall be
subject to all other terms, provisions and restrictions set
forth in these Articles with respect to the shares of the
Preferred Stock (without par value) and, excepting only as
to the rates of dividend payable in respect of the shares of
said series, the dividend periods and dividend payment
dates, the redemption price or prices applicable to the
shares of said series, the sinking fund provisions
applicable to the shares of said series, and the liquidation
price applicable to shares of said series, shall have the
same relative rights and preferences as, shall be of equal
rank with, and shall confer rights equal to those conferred
by, all other shares of the Preferred Stock (without par
value) of the Company.
(6) The stated value of the shares of said series
shall be $100.00 per share."
The undersigned hereby certifies that the Articles of
Amendment and Restated Articles of Incorporation correctly
sets forth the corresponding Articles of Incorporation as
amended and that these Articles of Amendment and Restated
Articles of Incorporation supersede the original Articles of
Incorporation and any amendments and corrections thereto.
Louisville Gas and Electric Company
By: John R. McCall
______________________
John R. McCall, Executive
Vice President,
Secretary and General Counsel
<PAGE>58
ARTICLES OF AMENDMENT AND
RESTATED ARTICLES OF INCORPORATION
OF
LOUISVILLE GAS AND ELECTRIC COMPANY
Pursuant to the provisions of KRS 271B.10-030 and KRS
271B.10-060, Louisville Gas and Electric Company, a
Kentucky corporation (the "Company"), hereby adopts the
following Articles of Amendment to its Amended and Restated
Articles of Incorporation, as amended, and restates its
Articles of Incorporation, as amended:
FIRST: The name of the Company is Louisville Gas and
Electric Company.
SECOND: These Articles of Amendment and Restated
Articles of Incorporation (the "Restatement" ) do
not contain any amendments to the Company's
Amended and Restated Articles of Incorporation as
amended, requiring shareholder approval and were
adopted by the Company's Board of Directors on
September 4, 1996.
THIRD: The amendments contained in the Restatement do
not provide for an exchange, reclassification or
cancellation of issued shares of stock of the
Company.
FOURTH: The Restatement together with the amendments
contained therein, supersede the original Amended
and Restated Articles of Incorporation, as
amended.
FIFTH: The Restatement, containing the amendments
adopted, shall read in its entirety as set forth
on Exhibit A attached hereto.
Dated: September 4, 1996
LOUISVILLE GAS AND ELECTRIC
COMPANY
By: John R. McCall
_______________________
John R. McCall
Title: Executive Vice
President, General Counsel
and Corporate Secretary
<PAGE>59
CERTIFICATE
Pursuant to the provisions of KRS 271B.10-070,
Louisville Gas and Electric Company, a Kentucky corporation
(the "Company"), files herewith Articles of Amendment and
Restated Articles of Incorporation and hereby certifies
that:
FIRST: The name of the Company is Louisville Gas and
Electric Company.
SECOND: The Articles of Amendment and Restated
Articles of Incorporation (the
"Restatement") filed herewith contains
no amendments to the Company's Articles
of Incorporation which require
shareholder approval.
THIRD: Articles First through Fourteenth of the
Company's Articles of Incorporation are
restated in their entirety as set forth
in the Restatement filed herewith, a
copy of which is attached hereto.
FOURTH: The Restatement of the Company's
Articles of Incorporation was adopted by
the Company's Board of Directors as of
September 4, 1996.
Dated: September 4, 1996.
LOUISVILLE GAS AND ELECTRIC
COMPANY
By: John R. McCall
________________________
John R. McCall
Title: Executive Vice
President, General Counsel
and Corporate Secretary
