May 15, 1996
Securities and Exchange Commission
Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
We are transmitting herewith Indiana Energy, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, pursuant to the requirements of Section 13
of the Securities Exchange Act of 1934.
Very truly yours,
Kathleen S. Morris
KSM:rs
Enclosures
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9091
INDIANA ENERGY, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1654378
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1630 North Meridian Street, Indianapolis, Indiana 46202
(Address of principal executive offices) (Zip Code)
317-926-3351
(Registrant's telephone number, including area code)
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
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.
Common Stock - Without par value 22,523,702 April 30, 1996
Class Number of shares Date
TABLE OF CONTENTS
Page
Numbers
Part I - Financial Information
Consolidated Balance Sheets
at March 31, 1996, and 1995
and September 30, 1995
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995,
Six Months Ended March 31, 1996 and 1995,
and Twelve Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1996 and 1995,
and Twelve Months Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Part II - Other Information
Item 1 - Legal Proceedings
Item 4 - Submission of Matters to a Vote of Security
Holders
Item 6 - Exhibits and Reports on Form 8-K
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands - Unaudited)
March 31 September 30
1996 1995 1995
<S> <C> <C> <C>
UTILITY PLANT:
Original cost $896,411 $846,963 $872,287
Less - Accumulated depreciation and amortization 334,684 304,077 316,991
561,727 542,886 555,296
NONUTILITY PLANT - NET 8,837 6,728 7,117
CURRENT ASSETS:
Cash and cash equivalents 36,694 20 20
Accounts receivable, less reserves of
$2,990, $1,511 and $1,662, respectively 67,940 42,724 13,793
Accrued unbilled revenues 33,300 14,460 6,405
Materials and supplies - at average cost 4,178 3,952 3,890
Liquefied petroleum gas - at average cost 527 887 883
Gas in underground storage - at last-in,
first-out cost 10,997 33,727 59,394
Prepayments and other 982 1,088 151
154,618 96,858 84,536
DEFERRED CHARGES:
Unamortized debt discount and expense 6,898 6,838 6,922
Other 9,799 10,109 9,526
16,697 16,947 16,448
$741,879 $663,419 $663,397
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
SHAREHOLDERS' EQUITY AND LIABILITIES
(Thousands - Unaudited)
March 31 September 30
1996 1995 1995
<S> <C> <C> <C>
CAPITALIZATION:
Common stock (no par value) - authorized 64,000,000
shares - issued and outstanding 22,531,102,
22,561,605 and 22,561,605 shares, respectively $145,231 $145,872 $145,872
Less unearned compensation - restricted stock grants 723 1,066 824
144,508 144,806 145,048
Retained earnings 168,646 147,783 135,667
Total common shareholders' equity 313,154 292,589 280,715
Long-term debt 197,118 155,584 176,296
510,272 448,173 457,011
CURRENT LIABILITIES:
Maturities and sinking fund requirements
of long-term debt 267 213 267
Notes payable 3,800 15,900 6,025
Accounts payable 68,404 25,287 48,071
Refundable gas costs 3,563 25,484 4,883
Customer deposits and advance payments 3,638 8,349 20,870
Accrued taxes 25,643 23,647 7,668
Accrued interest 2,910 2,807 2,834
Other current liabilities 27,773 23,325 21,664
135,998 125,012 112,282
DEFERRED CREDITS:
Deferred income taxes 65,787 61,491 65,096
Unamortized investment tax credit 11,639 12,569 12,103
Regulatory income tax liability 3,797 4,787 3,797
Other 14,386 11,387 13,108
95,609 90,234 94,104
COMMITMENTS AND CONTINGENCIES (see Notes 9 & 11) - - -
$741,879 $663,419 $663,397
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share data)
(Unaudited)
Three Months Six Months
Ended March 31 Ended March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
UTILITY OPERATING REVENUES $ 222,553 $ 150,468 $ 376,862 $ 263,530
COST OF GAS 144,017 82,549 233,214 145,060
MARGIN 78,536 67,919 143,648 118,470
UTILITY OPERATING EXPENSES:
Other operation and maintenance 23,018 19,282 41,708 37,450
Depreciation and amortization 8,230 7,744 16,348 15,393
Income taxes 14,593 12,693 25,998 19,204
Taxes other than income taxes 5,415 3,533 9,660 7,163
51,256 43,252 93,714 79,210
UTILITY OPERATING INCOME 27,280 24,667 49,934 39,260
INTEREST 4,088 3,829 8,080 7,823
OTHER (638) (323) (904) (503)
3,450 3,506 7,176 7,320
UTILITY INCOME 23,830 21,161 42,758 31,940
NONUTILITY INCOME 2,404 915 2,569 1,010
NET INCOME $ 26,234 $ 22,076 $ 45,327 $ 32,950
AVERAGE COMMON SHARES OUTSTANDING 22,535 22,561 22,537 22,559
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK $ 1.16 $ 0.98 $ 2.01 $ 1.46
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share data)
(Unaudited)
Twelve Months
Ended March 31
1996 1995
<S> <C> <C>
UTILITY OPERATING REVENUES $ 517,142 $ 391,263
COST OF GAS 306,649 210,563
MARGIN 210,493 180,700
UTILITY OPERATING EXPENSES:
Other operation and maintenance 79,866 76,655
Depreciation and amortization 32,220 30,300
Income taxes 26,010 16,553
Taxes other than income taxes 15,535 13,613
153,631 137,121
UTILITY OPERATING INCOME 56,862 43,579
INTEREST 15,787 15,577
OTHER (1,852) (1,638)
13,935 13,939
UTILITY INCOME 42,927 29,640
NONUTILITY INCOME 2,406 879
NET INCOME $ 45,333 $ 30,519
AVERAGE COMMON SHARES OUTSTANDING 22,549 22,558
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK $ 2.01 $ 1.35
</TABLE>
<TABLE>
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands - Unaudited)
Six Months Twelve Months
Ended March 31 Ended March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,327 $ 32,950 $ 45,333 $ 30,519
Adjustments to reconcile net income to cash
provided from operating activities -
Depreciation and amortization 16,459 15,504 32,440 30,521
Deferred income taxes 691 1,604 3,081 3,591
Investment tax credit (465) (465) (930) (930)
Undistributed earnings of unconsolidated affiliates (58) (69) (226) (179)
16,627 16,574 34,365 33,003
Changes in assets and liabilities -
Receivables - net (81,042) (33,742) (44,056) 28,091
Inventories 48,465 30,790 22,864 (12,406)
Accounts payable, customer deposits,
advance payments and other current liabilities 9,210 5,752 42,854 (4,922)
Accrued taxes and interest 18,051 3,315 2,099 (18,083)
Refundable/recoverable gas costs (1,320) (6,111) (21,921) 391
Prepayments (854) (829) 75 (21)
Other - net 2,051 10,702 5,416 13,405
Total adjustments 11,188 26,451 41,696 39,458
Net cash flows from operations 56,515 59,401 87,029 69,977
CASH FLOWS FROM (REQUIRED FOR) FINANCING
ACTIVITIES:
Repurchase of common stock (760) - (760) -
Sale of long-term debt 21,035 - 41,847 2,128
Reduction in long-term debt (213) (3,182) (259) (21,232)
Net change in short-term borrowings (2,225) (18,450) (12,100) 12,100
Dividends on common stock (12,348) (11,897) (24,470) (23,553)
Net cash flows from (required for) financing activities 5,489 (33,529) 4,258 (30,557)
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (23,610) (26,049) (52,504) (55,640)
Net change in nonutility plant and other investments (1,720) 177 (2,109) 349
Net cash flows required for investing activities (25,330) (25,872) (54,613) (55,291)
NET INCREASE (DECREASE) IN CASH 36,674 - 36,674 (15,871)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 20 20 15,891
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,694 $ 20 $ 36,694 $ 20
</TABLE>
Notes to Consolidated Financial Statements
1. Financial Statements.
The consolidated financial statements include the
accounts of Indiana Energy, Inc.'s (Indiana Energy)
wholly- and majority-owned subsidiaries. The
consolidated financial statements separate the regulated
utility operations, principally Indiana Gas Company,
Inc. (Indiana Gas), from nonutility operations. The
nonutility operations include IGC Energy, Inc. (IGC
Energy), Energy Realty, Inc. (Energy Realty) and Indiana
Energy Services, Inc. (IES), indirect wholly-owned
subsidiaries of Indiana Energy.
The interim condensed consolidated financial statements
included in this report have been prepared by Indiana
Energy, without audit, as provided in 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
omitted as provided in such rules and regulations.
Indiana Energy believes that the information in this
report reflects all adjustments necessary to fairly
state the results of the interim periods reported, that
all such adjustments are of a normally recurring nature,
and the disclosures are adequate to make the information
presented not misleading. These interim financial
statements should be read in conjunction with the
financial statements and the notes thereto included in
Indiana Energy's latest annual report on Form 10-K.
Because of the seasonal nature of Indiana Energy's gas
distribution operations, the results shown on a
quarterly basis are not necessarily indicative of annual
results.
2. Cash Flow Information.
For the purposes of the Consolidated Statements of Cash
Flows, Indiana Energy considers cash investments with an
original maturity of three months or less to be cash
equivalents. Cash paid during the periods reported for
interest and income taxes were as follows:
<TABLE>
Six Months Ended Twelve Months Ended
March 31 March 31
Thousands 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest (net of
amount capitalized) $ 7,679 $ 7,529 $14,588 $15,031
Income taxes $12,312 $12,676 $25,842 $25,476
</TABLE>
3. Revenues.
To more closely match revenues and expenses, revenues
are recorded for all gas delivered to customers but not
billed at the end of the accounting period.
4. Gas in Underground Storage.
Based on the cost of purchased gas during March 1996,
the cost of replacing the current portion of gas in
underground storage exceeded last-in, first-out cost at
March 31, 1996, by approximately $1,932,000.
5. Refundable or Recoverable Gas Costs.
The cost of gas purchased and refunds from suppliers,
which differ from amounts recovered through rates, are
deferred and are being recovered or refunded in
accordance with procedures approved by the Indiana
Utility Regulatory Commission (IURC).
6. Allowance For Funds Used During Construction.
An allowance for funds used during construction (AFUDC),
which represents the cost of borrowed and equity funds
used for construction purposes, is charged to
construction work in progress during the period of
construction and included in "Other" on the Consolidated
Statements of Income. An annual AFUDC rate of 7.5
percent was used for all periods reported.
The table below reflects the total AFUDC capitalized and
the portion of which was computed on borrowed and equity
funds for all periods reported.
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
March 31 March 31 March 31
<S> <C> <C> <C> <C> <C> <C>
Thousands 1996 1995 1996 1995 1996 1995
AFUDC-Borrowed Funds $ 71 $45 $155 $108 $262 $ 219
AFUDC-Equity Funds 58 37 127 88 215 178
Total AFUDC Capitalized $129 $82 $282 $196 $477 $397
</TABLE>
7. Long-Term Debt.
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes,
Series E (Notes) as follows: $5 million of 6.69% Notes
due June 10, 2013, $5 million of 6.69% Notes due
December 21, 2015, and $10 million of 6.69% Notes due
December 29, 2015. The net proceeds from the sale of
the Notes will be used to finance the refunding of
Indiana Gas' 9 3/8% Series M First Mortgage Bonds in
July 1996.
8. Common Stock.
On July 28, 1995, Indiana Energy's board of directors
authorized Indiana Energy to repurchase up to 700,000
shares of its outstanding common stock. The repurchases
will be made over time in open-market transactions. As
of March 31, 1996, Indiana Energy had repurchased 35,400
shares with an associated cost of $760,000.
On July 25, 1986, the board of directors of Indiana
Energy declared a dividend distribution of one common
share purchase right for each outstanding share of
common stock of Indiana Energy. The distribution was
made to shareholders of record August 11, 1986. In
addition, one right has been and will be distributed for
each share issued following August 11, 1986. On April
26, 1996, the board of directors of Indiana Energy
authorized the amendment and restatement of the
shareholder rights agreement relating to the common
share purchase rights. If and when the rights become
exercisable, each right will entitle the registered
holder to purchase from Indiana Energy one share of
common stock at a price of $60 per share, subject to
certain adjustments described in the rights agreement.
The rights become exercisable only when a person or
group acquires beneficial ownership of 15 percent or
more of Indiana Energy's common stock, or becomes the
beneficial owner of an amount of Indiana Energy's common
stock (but not less than 10%) which the board of
directors determines to be substantial and which
ownership the board of directors determines is intended
or may be reasonably anticipated, in general, to cause
Indiana Energy to take actions determined by the board
of directors to be not in Indiana Energy's best long-
term interests or when any person or group announces a
tender or exchange offer for 15 percent or more of
Indiana Energy's common stock.
In the event that (1) Indiana Energy is acquired in a
merger or other business combination transaction and
Indiana Energy is not the surviving corporation, or (2)
any person consolidates or merges with Indiana Energy
and all or part of Indiana Energy common shares are
exchanged for securities, cash or property of any other
person, or (3) 50 percent or more of Indiana Energy's
consolidated assets or earning power are sold, each
holder of a right will have the right to receive, upon
exercise at the then current exercise price of the
right, that number of shares of common stock of the
acquiring company having a market value of two times the
exercise price of the right. In the event that a person
(1) acquires 15 percent or more of the outstanding
common stock or (2) is declared an adverse person (i.e.,
a person who becomes the owner of at least 10 percent of
Indiana Energy's common stock, whose share ownership is
determined by the board of directors to be directed
towards causing Indiana Energy to take actions
determined by the board of directors not to be in
Indiana Energy's long term best interests) by the board
of directors of Indiana Energy, each holder of a right,
other than rights beneficially owned by the acquiring
person (which will thereafter be void), will have the
right to receive upon exercise that number of common
shares having a market value of two times the exercise
price of the right.
At any time after a person becomes an acquiring person,
and prior to the acquisition by such acquiring person of
50 percent or more of the outstanding common shares, the
board of directors of Indiana Energy may exchange the
rights (other than rights owned by such person or group
which have become void), in whole or in part, at an
exchange ratio of one common share per right (subject to
adjustment).
Under the terms and conditions provided in the rights
agreement, Indiana Energy may redeem the rights in
whole, but not in part, at a price of $.01 per right at
any time prior to the time a person or group of
affiliated or associated persons becomes an acquiring
person as defined by the rights agreement. As amended
and restated, the rights agreement will be executed and
filed with the Securities and Exchange Commission in the
latter part of May 1996, and will remain in effect for
an extended term of ten years.
9. Environmental Costs.
In the past, Indiana Gas and others, including
former affiliates, and/or previous landowners,
operated facilities for the manufacturing of gas
and storage of manufactured gas. These facilities
are no longer in operation and have not been
operated for many years. In the manufacture and
storage of such gas, various byproducts were
produced, some of which may still be present at the
sites where these manufactured gas plants and
storage facilities were located. Management
believes, and the IURC has found that, those
operations were conducted in accordance with the
then-applicable industry standards. However, under
currently applicable environmental laws and
regulations, Indiana Gas, and the others, may now
be required to take remedial action if certain
byproducts are found above a regulatory threshold
at these sites.
Indiana Gas has identified the existence, location
and certain general characteristics of 26 gas
manufacturing and storage sites. Removal activities
have been conducted at two sites and a remedial
investigation/feasibility study (RI/FS) is nearing
completion at one of the sites under an agreed
order between Indiana Gas and the Indiana
Department of Environmental Management. Indiana Gas
and others are assessing, on a site-by-site basis,
whether any of the remaining 24 sites require
remediation, to what extent it is required and the
estimated cost. Preliminary assessments (PAs) have
been completed on all but one of the sites. Site
investigations (SIs) have been completed at 20
sites and supplemental site investigations (SSIs)
have been conducted at 15 sites. Based upon the
site work completed to date, Indiana Gas believes
that a level of contamination that may require some
level of remedial activity may be present at a
number of the 24 sites. Indiana Gas is currently
conducting groundwater monitoring at many of the
sites. Indiana Gas has not begun an RI/FS at
additional sites, but expects to conduct further
investigation and evaluation in the future.
Based upon the work performed to date, Indiana Gas
has accrued remediation and related costs for the
two sites where remedial activities are taking
place. PA/SI, SSI and groundwater monitoring costs
have been accrued for the remaining sites where
appropriate. Estimated RI/FS costs and the costs of
certain remedial actions that may likely be
required have also been accrued. Costs associated
with environmental remedial activities are accrued
when such costs are probable and reasonably
estimable. Indiana Gas does not believe it can
provide an estimate of the reasonably possible
total remediation costs for any site prior to
completion of an RI/FS and the development of some
sense of the timing for implementation of the
potential remedial alternatives, to the extent such
remediation is required. Accordingly, the total
costs which may be incurred in connection with the
remediation of all sites, to the extent remediation
is necessary, cannot be determined at this time.
Indiana Gas has been pursuing recovery from three
separate sources for the costs it has incurred and
expects to incur relating to the 26 sites. Those
sources are insurance carriers, potentially
responsible parties (PRPs) and recovery through
rates from retail gas customers. On April 14, 1995,
Indiana Gas filed suit against a number of
insurance carriers for payment of claims for
investigation and clean-up costs already incurred,
as well as for a determination that those carriers
are obligated to pay these costs in the future.
Presently, that suit is set for trial to begin
October 21, 1996, in the United States District
Court for the Northern District of Indiana in Fort
Wayne, Indiana. Indiana Gas has obtained cash
settlements from some of the defendant insurance
carriers and, as a result, those carriers have been
dismissed from the suit.
Indiana Gas has also completed the process of
identifying PRPs for each site. PRPs include two
financially viable utilities, PSI Energy, Inc.
(PSI) and Northern Indiana Public Service Company
(NIPSCO). PSI has been identified as a PRP at 19 of
the sites. Indiana Gas has been negotiating with
PSI to determine PSI's share of responsibility,
although no agreement has been reached between the
parties. With the help of outside counsel, Indiana
Gas has prepared estimates of PSI's and other PRP's
share of environmental liabilities which may exist
at each of the sites based on equitable principles
derived from case law or applied by parties in
achieving settlements. NIPSCO has been identified
as an additional PRP at five of these 19 sites. On
September 27, 1995, Indiana Gas reached an
agreement with NIPSCO which provides for a
coordination of efforts and a sharing of
investigation and clean-up costs incurred and to be
incurred at the five sites in which they both have
an interest. The cost sharing estimates of PSI and
other PRPs, and the NIPSCO agreement, have been
utilized by Indiana Gas to record a receivable from
PRPs for their share of the liability for work
performed by Indiana Gas to date, as well as to
accrue Indiana Gas' proportionate share of the
estimated cost related to work not yet performed.
The receivable from PRPs of $3.5 million is
reflected in Accounts Receivable on the
Consolidated Balance Sheet at March 31, 1996.
In January 1992, Indiana Gas filed a petition with
the IURC seeking regulatory authority for, among
other matters, recovery through rates of all costs
Indiana Gas incurs in complying with federal, state
and local environmental regulations in connection
with past gas manufacturing activities. On May 3,
1995, the IURC concluded that the costs incurred by
Indiana Gas to investigate and, if necessary, clean-
up former manufactured gas plant sites are not
utility operating expenses necessary for the
provision of utility service and, therefore, are
not recoverable as operating expenses from utility
customers. The decision was contrary to rulings in
other states where utility regulatory commissions
have issued orders on the subject. The precedent
cited by the IURC was a ruling related to a
cancelled nuclear power plant which, unlike
manufactured gas plants, never provided service to
the public. Management believes applying the
nuclear power plant decision to Indiana Gas' case
was an incorrect application of the law and has
appealed the decision to the Indiana Court of
Appeals. The initial briefs for the appeal were
filed on April 23, 1996, with briefing scheduled to
conclude on June 25, 1996. The Commission did
indicate that during Indiana Gas' next rate case it
would be appropriate to quantify the effect of the
investigation and clean-up activities as part of
the business risk to be considered by the
Commission in establishing the overall rate of
return to be allowed.
Indiana Gas has recorded $12.4 million for its
share of environmental costs to date. As a result
of its pursuit of recovery of costs from PRPs and
insurance carriers, Indiana Gas has secured
settlements from insurers of approximately $13.4
million. Amounts recovered in excess of its share
of costs to date have been deferred. The May 3,
1995, order of the IURC has had no immediate impact
on Indiana Gas' earnings since settlements with
insurers exceed Indiana Gas' share of environmental
liability recorded to date.
The impact on Indiana Gas' financial position and
results of operations of complying with federal,
state and local environmental regulations related
to former manufactured gas plant sites is
contingent upon several uncertainties. These
include the costs of any compliance activities
which may occur and the timing of the actions
taken, the impact of joint and several liability
upon the magnitude of the contingency, the outcome
of proceedings which challenge the IURC ruling on
recovery of costs from customers, as well as any
additional recoveries of environmental and related
costs from insurance carriers. Although there can
be no assurance of success, to the extent possible
Indiana Gas will continue to manage the
manufactured gas plant remediation program so that
amounts received from insurance carriers and PRPs
will be sufficient to fund all such costs.
10. Regulatory Assets and Liabilities.
Indiana Gas is subject to the provisions of Statement of
Financial Accounting Standards No. 71, Accounting for
the Effects of Certain Types of Regulation (SFAS 71).
Regulatory assets represent probable future revenue to
Indiana Gas associated with certain costs which will be
recovered from customers through the ratemaking process.
Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are
to be credited to customers through the ratemaking
process. Regulatory assets and liabilities reflected in
the Consolidated Balance Sheets as of March 31 (in
thousands) relate to the following:
<TABLE>
1996 1995
<S> <C> <C>
Regulatory Assets:
Postretirement Benefits Other Than Pensions $ 7,182 $ 7,126
Unamortized Debt Discount and Expense 6,783 6,708
Deferred Acquisition Costs 730 751
Rate Case Costs 187 446
$14,882 $15,031
Regulatory Liabilities:
Gas Costs Due to Customers, Net $ 3,563 $25,484
Amounts Due to Customers - Income Taxes, Net 3,797 4,787
Pension Costs 1,348 585
$ 8,708 $30,856
</TABLE>
It is Indiana Gas' policy to continually assess the
recoverability of costs recognized as regulatory assets
and the ability to continue to account for its
activities in accordance with SFAS 71, based on the
criteria set forth in SFAS 71. Based on current
regulation, Indiana Gas believes that its use of
regulatory accounting is appropriate. If all or part of
Indiana Gas' operations cease to meet the criteria of
SFAS 71, a write-off of related regulatory assets and
liabilities would be required. In addition, Indiana Gas
would be required to determine any impairment to the
carrying costs of deregulated plant and inventory
assets.
11. Nonutility Income.
Nonutility income includes the earnings of Indiana
Energy Services, Inc. (IES), Indiana Energy's gas
marketing affiliate. IES provided natural gas and
services to other gas utilities and customers in Indiana
and surrounding states, and from January 1, 1996, to
March 31, 1996, to Indiana Gas. System supply gas was
provided to Indiana Gas with the commodity priced at
market index. IES' contribution to nonutility income
for the three-, six- and twelve-month periods as
compared to the same periods one year ago are listed
below.
<TABLE>
Three Months Ended Six Months Ended Twelve Months Ended
(Thousands) 3/31/96 3/31/95 3/31/96 3/31/95 3/31/96 3/31/95
<S> <C> <C> <C> <C> <C> <C>
Nonutility Income:
IES $2,521 $ 50 $2,684 $ 63 $2,710 $ 63
Other-net (117) 865 (115) 947 (304) 816
$2,404 $ 915 $2,569 $1,010 $2,406 $ 879
</TABLE>
On March 15, 1996, IGC Energy, Inc., an indirect wholly-
owned subsidiary of Indiana Energy, and Citizens By-
Products Coal Company, a wholly-owned subsidiary of
Citizens Gas and Coke Utility (Citizens Gas), formed a
jointly- and equally-owned limited liability corporation
to provide natural gas supply and related marketing
services. The new entity, Proliance Energy, LLC
(Proliance), assumed the business of IES effective April
1, 1996.
Three proceedings which may affect the formation,
operation or earnings of Proliance are currently pending
before the IURC. The first proceeding was initiated by
a small group of Indiana Gas' and Citizens Gas' large-
volume customers who contend that the formation and
operation of Proliance should be subject to IURC
oversight. The second proceeding involves the quarterly
gas cost adjustment applications of Indiana Gas and
Citizens Gas wherein those utilities are proposing to
recover the costs they will incur from their service
relationship with Proliance. That consolidated
proceeding will consider whether the recovery of those
costs is consistent with the Indiana law on gas cost
adjustments. The third proceeding was initiated by a
national gas marketing company and competitor of Indiana
Gas, Citizens Gas and Proliance. That proceeding
involves a request for a rulemaking to have the IURC
establish standards of conduct governing the
relationship between natural gas local distribution
companies and their marketing affiliates, and does not
specifically challenge any aspect of the formation or
operation of Proliance.
Management expects that these proceedings, to the extent
that they move forward, will be conducted over the
remainder of calendar year 1996. As a result of these
proceedings, the operations and earnings of Indiana
Energy's marketing affiliates and the ability of Indiana
Gas to recover all costs incurred in connection with its
outside service relationships with these affiliates are
subject to regulatory review.
12. Reclassifications.
Certain reclassifications have been made to the prior
periods' financial statements to conform to the current
year presentation. These reclassifications have no
impact on net income previously reported.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
Earnings
The majority of Indiana Energy Inc.'s (Indiana Energy)
consolidated earnings are from the operations of its gas
distribution subsidiary, Indiana Gas Company, Inc.
(Indiana Gas). Though Indiana Energy will continue to
consider nonutility opportunities for investment, its
principal business is expected to continue to be gas
distribution.
Net income and earnings per average share of common
stock for the three-, six- and twelve-month periods ended
March 31, 1996, when compared to the same periods one year
ago are listed below. The increases in earnings for all
periods reflect significantly colder weather than last
year, offset somewhat by higher operation and maintenance
expenses.
<TABLE>
Periods Ended March 31 1996 1995
(Millions except per Net Earnings Net Earnings
share data) Income Per Share Income Per Share
<S> <C> <C> <C> <C>
Three Months $26.2 $1.16 $22.1 $ .98
Six Months $45.3 $2.01 $33.0 $1.46
Twelve Months $45.3 $2.01 $30.5 $1.35
</TABLE>
The following discussion of operating results relates
primarily to the operations of Indiana Gas.
Margin (Revenues Less Cost of Gas)
Margin for the quarter ended March 31, 1996, increased
$10.6 million compared to the same period last year. The
increase was primarily due to weather 15 percent colder
than the same period last year and 5 percent colder than
normal.
Margin for the six-month period ended March 31, 1996,
increased $25.2 million compared to the same period last
year. The increase reflects weather 26 percent colder
than the same period last year and 7 percent colder than
normal.
Margin for the twelve-month period ended March 31,
1996, increased $29.8 million compared to the same period
last year. The increase reflects weather 23 percent
colder than the same period last year and 7 percent colder
than normal.
Additional residential and commercial customers, as
well as rate recovery (beginning May 1995) of
postretirement benefit costs recognized in accordance with
Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106) also contributed to the margin
increases for all periods reported.
Total system throughput (combined sales and
transportation) increased 16 percent (7.0 MMDth) for the
second quarter of fiscal 1996, 21 percent (15.9 MMDth) for
the six-month period and 16 percent (17.5 MMDth) for the
twelve-month period ended March 31, 1996, compared to the
same periods last year. The increases for all periods are
due primarily to increases in residential and commercial
space heating sales caused by colder weather.
Indiana Gas' rates for transportation generally
provide the same margins as are earned on the sale of gas
under its sales tariffs. Approximately one-half of total
system throughput represents gas used for space heating
and is affected by weather.
Total average cost per unit of gas purchased increased
to $3.56 for the three-month period ended March 31, 1996,
compared to $2.70 for the same period one year ago. For
the six-month period, cost of gas per unit increased to
$3.14 in the current period compared to $2.69 for the same
period last year. For the twelve-month period, cost of
gas per unit increased to $2.83 in the current period
compared to $2.62 for the same period last year.
Adjustments to Indiana Gas' rates and charges related
to the cost of gas are made through gas cost adjustment
(GCA) procedures established by Indiana law and
administered by the Indiana Utility Regulatory Commission
(IURC). The GCA passes through increases and decreases in
the cost of gas to Indiana Gas' customers dollar for
dollar.
Operating Expenses
Operation and maintenance expenses increased $3.7
million for the second quarter of fiscal 1996, $4.3
million for the six-month period and $3.2 million for the
twelve-month period ended March 31, 1996, when compared to
the same periods one year ago. The increases are
primarily attributable to higher performance-based
compensation, the recognition (beginning May 1995) of
postretirement benefit costs in accordance with SFAS 106,
as well as the intense cost control measures in place
during the prior periods due to very warm weather.
Depreciation and amortization expense increased for
the three-, six- and twelve-month periods ended March 31,
1996, when compared to the same periods one year ago as
the result of additions to utility plant to serve new
customers and to maintain dependable service to existing
customers.
Federal and state income taxes increased for the three-,
six- and twelve-month periods ended March 31, 1996, when
compared to the same periods one year ago due to higher
taxable utility income.
Taxes other than income taxes increased for the three-,
six- and twelve-month periods ended March 31, 1996, when
compared to the same periods one year ago due primarily to
higher gross receipts tax expense resulting from increased
revenue, and higher property tax expense.
Interest Expense
Interest expense increased for the three- and six-
month periods ended March 31, 1996, when compared to the
same periods one year ago due to an increase in average
debt outstanding slightly offset by a decrease in interest
rates. Interest expense remained approximately the same
for the twelve-month period when compared to the same
period one year ago.
Nonutility Income
Nonutility income increased for the three-, six- and
twelve-month periods ended March 31, 1996, when compared
to the same periods one year ago. The increases reflect
higher earnings from Indiana Energy Services, Inc.(IES),
Indiana Energy's gas marketing affiliate. IES'
contribution to nonutility income increased $2.5 million
for the three-month period, $2.6 million for the six-month
period and $2.6 million for the twelve-month period, when
compared to the same periods last year. IES has provided
natural gas and services to other gas utilities and
customers in Indiana and surrounding states, and from
January 1, 1996, to March 31, 1996, to Indiana Gas.
System supply gas was provided to Indiana Gas with the
commodity priced at market index. Proliance Energy, LLC
has assumed the business of IES (see Proliance Energy, LLC
below).
Other Operating Matters
Proliance Energy, LLC
On March 15, 1996, IGC Energy, Inc., an indirect
wholly-owned subsidiary of Indiana Energy, and Citizens
By-Products Coal Company, a wholly-owned subsidiary of
Citizens Gas and Coke Utility (Citizens Gas), formed a
jointly- and equally-owned limited liability
corporation to provide natural gas supply and related
marketing services. The new entity, Proliance Energy,
LLC (Proliance), began providing services to Indiana
Gas and Citizens Gas effective April 1, 1996.
Proliance will also market its products and services to
other gas utilities and customers in Indiana and
surrounding states. Proliance has assumed the business
of IES.
Three proceedings which may affect the formation,
operation or earnings of Proliance are currently
pending before the IURC. The first proceeding was
initiated by a small group of Indiana Gas' and Citizens
Gas' large-volume customers who contend that the
formation and operation of Proliance should be subject
to IURC oversight. The second proceeding involves the
quarterly gas cost adjustment applications of Indiana
Gas and Citizens Gas wherein those utilities are
proposing to recover the costs they will incur from
their service relationship with Proliance. That
consolidated proceeding will consider whether the
recovery of those costs is consistent with the Indiana
law on gas cost adjustments. The third proceeding was
initiated by a national gas marketing company and
competitor of Indiana Gas, Citizens Gas and Proliance.
That proceeding involves a request for a rulemaking to
have the IURC establish standards of conduct governing
the relationship between natural gas local distribution
companies and their marketing affiliates, and does not
specifically challenge any aspect of the formation or
operation of Proliance.
Management expects that these proceedings, to the
extent that they move forward, will be conducted over
the remainder of calendar year 1996. As a result of
these proceedings, the operations and earnings of
Indiana Energy's marketing affiliates and the ability
of Indiana Gas to recover all costs incurred in
connection with its outside service relationships with
these affiliates are subject to regulatory review.
1996 Settlement Agreement
As provided in the previous year's settlement
agreement among Indiana Gas, the Office of Utility
Consumer Counselor (OUCC) and a group of large-volume
users, the OUCC performed an investigation during
fiscal 1995 to consider an increase to Indiana Gas'
authorized utility operating income. These parties then
entered a series of negotiations designed to increase
Indiana Gas' opportunity to earn on its recent capital
investments while avoiding the necessity of a general
rate filing. As a result of these negotiations, the
IURC approved on November 9, 1995, a settlement
agreement which provided, among other things, for the
following: (1) an increase in Indiana Gas' authorized
utility operating income from $51.1 million to $54.2
million beginning in fiscal 1996; (2) with certain
specified exceptions, Indiana Gas may not file a
petition to increase its base rates until November 15,
1996; and (3) an agreement to a number of operational
and other service enhancements for large-volume
customers.
Environmental Matters
Indiana Gas is currently conducting environmental
investigations and work at certain sites that were the
locations of former manufactured gas plants. It is
seeking to recover the costs of the investigations and
work from insurance carriers, other potentially
responsible parties (PRPs) and customers. On May 3,
1995, Indiana Gas received an order from the IURC in
which the Commission concluded that the costs incurred
by Indiana Gas to investigate and, if necessary, clean-
up former manufactured gas plant sites are not utility
operating expenses necessary for the provision of
service and, therefore, are not recoverable as
operating expenses from utility customers. The order is
being appealed. The IURC order has had no immediate
impact on Indiana Gas' earnings since settlements with
insurers of $13.4 million exceed Indiana Gas' share of
environmental liability recorded to date. For further
information regarding the status of investigation and
remediation of the sites, PRPs, recovery from insurers,
financial reporting and ratemaking, see Note 9.
Indiana Legislative Matters
On April 26, 1995, the Indiana General Assembly
enacted legislation which provides new flexibility to
the IURC for future regulation of Indiana utilities and
modifies the application of the earnings test.
The new law recognizes that competition is
increasing in the provision of energy services and that
flexibility in the regulation of energy services
providers is essential to the well-being of the state,
its economy and its citizens. Under the law, an energy
utility can present to the IURC a broad range of
proposals from performance-based ratemaking to complete
deregulation of a utility's operations. The law gives
the IURC the authority to adopt alternative regulatory
practices, procedures, and mechanisms and establish
rates and charges that are in the public interest, and
will enhance or maintain the value of the energy
utility's retail energy services or property. It also
provides authority to the IURC to establish rates and
charges based on market or average prices that use
performance-based rewards or penalties, or which are
designed to promote efficiency in the rendering of
retail energy services.
The IURC applies the Indiana statute authorizing
the GCA procedures to reduce rates when necessary so as
to limit utility operating income to the level
authorized in the last general rate order. On a
quarterly basis, this earnings test is performed by
comparing Indiana Gas' authorized utility operating
income to its actual utility operating income (weather
normalized) for the previous 12 months. In the past,
one-fourth of the amounts over the authorized utility
operating income would be refundable to Indiana Gas'
customers each quarter. The new law revises the
earnings test to provide that no refund be paid to the
extent a utility has not earned its authorized utility
operating income over the previous 60 months (or during
the period since the utility's last rate order, if
longer). The revised test provides Indiana Gas a
greater opportunity to earn its authorized utility
operating income over the long term.
Liquidity and Capital Resources
New construction to provide service to a growing
customer base and normal system maintenance and
improvements will continue to require substantial capital
expenditures. For the twelve months ended March 31, 1996,
Indiana Gas' capital expenditures totaled $52.5 million.
Of this amount, 100 percent was provided by funds generated
internally (utility income less dividends plus charges to
utility income not requiring funds). Capital expenditures
for fiscal 1996 were estimated at $58.8 million of which
$23.6 million have been expended during the six-month
period ended March 31, 1996.
Indiana Gas' goal is to fund internally approximately
75 percent of its construction program. Capitalization
objectives for Indiana Gas are 55-65 percent common equity
and 35-45 percent long-term debt. This will help Indiana
Gas to maintain its high creditworthiness. The long-term
debt of Indiana Gas is currently rated Aa3 by Moody's
Investors Service and AA- by Standard & Poor's Corporation.
On April 5, 1995, Indiana Gas filed with the Securities
and Exchange Commission (SEC) a prospectus supplement for
the offering of its Medium-Term Notes, Series E (Notes)
with an aggregate principal amount of up to $55 million.
The Notes were registered under the existing shelf
registration statement filed November 20, 1992, with the
SEC with respect to the issuance of up to $90 million in
aggregate principal amount of debt securities ($35 million
was previously withdrawn from this shelf as a result of the
December 9, 1992, issuance of 6 5/8%, Series D Notes).
Indiana Gas plans to issue the Notes from time to time
through 1997. The Notes, when issued, will be due not less
than 9 months and not more than 40 years from the date of
issue, and will bear interest at a fixed or variable rate
as negotiated between the purchaser and Indiana Gas. The
net proceeds from the sale of the Notes will be used to
finance, in part, the refunding of long-term debt, Indiana
Gas' continuing construction program and for other
corporate purposes. During June 1995, $20 million in
aggregate principal amount of the Notes were issued as
follows: $5 million of the 7.15% Notes due March 15, 2015,
$5 million of 6.31% Notes due June 10, 2025, and $10
million of 6.53% Notes due June 27, 2025. During December
1995, an additional $20 million in aggregate principal
amount of the Notes were issued as follows: $5 million of
6.69% Notes due June 10, 2013, $5 million of 6.69% Notes
due December 21, 2015, and $10 million of 6.69% Notes due
December 29, 2015. The net proceeds from the December
issuances will be used to finance the refunding of Indiana
Gas' 9 3/8% Series M First Mortgage Bonds in July 1996.
On July 28, 1995, Indiana Energy's board of directors
authorized Indiana Energy to repurchase up to 700,000
shares of its outstanding common stock. The repurchases
will be made over time in open-market transactions. As of
March 31, 1996, Indiana Energy had repurchased 35,400
shares with an associated cost of $760,000.
The nature of Indiana Gas' business creates large short-
term cash working capital requirements primarily to finance
customer accounts receivable, unbilled utility revenues
resulting from cycle billing, gas in underground storage
and construction expenditures until permanently financed.
Short-term borrowings tend to be greatest during the
heating season when accounts receivable and unbilled
utility revenues are at their highest. Depending on cost,
commercial paper or bank lines of credit are used as
sources of short-term financing. Indiana Gas' commercial
paper is rated P-1 by Moody's and A-1+ by Standard &
Poor's. Long-term financial strength and flexibility
require maintaining throughput volumes, controlling costs
and, if absolutely necessary, securing timely increases in
rates to recover costs and provide a fair and reasonable
return to shareholders.
Part II - Other Information
Item 1. Legal Proceedings
See Note 9 of the Notes to Consolidated Financial
Statements for litigation matters involving insurance
carriers pertaining to Indiana Gas' former manufactured
gas plants and storage facilities.
Item 4. Submission of Matters to a Vote of Security
Holders
At the annual meeting of shareholders of Indiana
Energy, Inc. on January 26, 1996, (the "Annual
Meeting"), the shareholders elected the following
directors by the vote specified opposite each
director's name:
<TABLE>
Broker
Director Votes For Votes Withheld Abstentions Non-Vote
<S> <C> <C> <C> <C>
Gerald L. Bepko 19,206,834 191,708 - -
Lawrence A. Ferger 19,210,126 188,416 - -
Anton H. George 19,168,336 230,206 - -
James C. Shook 19,228,477 170,065 - -
</TABLE>
The terms of the other eight board members, Paul T.
Baker, Niel C. Ellerbrook, Loren K. Evans, Otto N.
Frenzel III, Don E. Marsh, Fred A. Poole, Richard P.
Rechter and Jean L. Wojtowicz will expire in January
1997 or January 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10-A Gas Sales and Management Services
Agreement between Indiana Gas Company,
Inc. and Indiana Energy Services,
Inc., effective January 1, 1996.
Incorporated by reference to Exhibit 10-A
to the Quarterly Report on Form 10-Q of
Indiana Gas Company, Inc. for the quarterly
period ended March 31, 1996.
10-B Fundamental Operating Agreement of
Proliance Energy, LLC between IGC
Energy, Inc. and Citizens By-Products Coal
Company, effective March 15, 1996, filed
herewith.
10-C Formation Agreement among Indiana
Energy, Inc., Indiana Gas Company, Inc.,
IGC Energy, Inc., Indiana Energy Services,
Inc., Citizens Gas & Coke Utility, Citizens
By-Products Coal Company, Citizens Energy
Services Corporation, and Proliance Energy,
LLC, effective March 15, 1996, filed
herewith.
10-D Gas Sales and Portfolio Administration
Agreement between Indiana Gas Company,
Inc. and Proliance Energy, LLC,
effective March 15, 1996, for services to
begin April 1, 1996. Incorporated by
reference to Exhibit 10-C to the Quarterly
Report on Form 10-Q of Indiana Gas Company,
Inc. for the quarterly period ended
March 31, 1996.
27 Financial Data Schedule, filed herewith.
(b) No Current Reports on Form 8-K were filed
during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
INDIANA ENERGY, INC.
Registrant
Dated May 15, 1996 /s/Niel C. Ellerbrook
Niel C. Ellerbrook
Vice President and Treasurer
and Chief Financial Officer
Dated May 15, 1996 /s/Jerome A. Benkert
Jerome A. Benkert
Controller
EXHIBIT 10-B
FUNDAMENTAL OPERATING AGREEMENT
OF
PROLIANCE ENERGY, LLC
BETWEEN
IGC ENERGY, INC.
AND
CITIZENS BY-PRODUCTS COAL COMPANY
Dated as of
March 15, 1996
INDEX
RECITALS 1
ARTICLE I.
Purposes of the Company 1
ARTICLE II.
Action by the Company; Board of Representatives 2
Section 2.01. Action by the Company 2
Section 2.02. Board of Representatives 2
Section 2.03. Chairman of the Board 2
Section 2.04. Meetings and Action 2
Section 2.05. Committees of the Board 3
ARTICLE III.
Day-to-Day Management of the Company 4
Section 3.01. Officers 4
Section 3.02. Duties of Officers 4
Section 3.03. Indemnification of Representatives and Officers 5
Section 3.04. Initial Officers 6
ARTICLE IV.
Capital Contributions 6
Section 4.01. Capital Account 6
Section 4.02. Contributions to Capital 6
Section 4.03. Return of Contributions 7
ARTICLE V.
Allocation of Profits, Losses and Distributions 7
Section 5.01. Allocation of Profits and Losses 7
Section 5.02. Distributions of Cash or Other Assets 7
Section 5.03. Special Allocation Provisions 7
ARTICLE VI.
Dissolution 8
Section 6.01. Events Causing Dissolution 8
Section 6.02. Priority of Dissolution 8
Section 6.03. Time to Dissolve 9
Section 6.04. Date of Termination 9
Section 6.05. Wind-Up 9
Section 6.06. Bankruptcy of a Member 12
ARTICLE VII.
Assignment of Interests; New Members 12
Section 7.01. Restriction on Transfer 12
Section 7.02. Transfers to Third Parties 12
Section 7.03. Transfer to Affiliate 13
Section 7.04. Continuing Responsibility 13
Section 7.05. New Members 13
ARTICLE VIII.
Miscellaneous 14
Section 8.01. Fiscal Year 14
Section 8.02. Company Accounting; Financial Statements 14
Section 8.03. Other Tax Matters 14
Section 8.04. Waiver of Partition 14
Section 8.05. Retention of Certain Rights; Dealings Outside
the Company 14
Section 8.06. Expenses 15
Section 8.07. Complete Agreement 15
Section 8.08. Terms 15
Section 8.09. Multiple Counterparts 15
Section 8.10. Applicable Law 15
Section 8.11. Partial Invalidity 15
Section 8.12. Company Obligations Binding 15
Section 8.13. Signatory Requirements 15
Section 8.14. Additional Documents and Acts 16
Section 8.15. Notices 16
Section 8.16. Disputes Not to Be Resolved by Arbitration 16
Section 8.17. Amendments and Supplements 16
SCHEDULE A RESERVED AUTHORITY 18
SCHEDULE B SCHEDULE OF SPECIAL ALLOCATIONS 20
FUNDAMENTAL OPERATING AGREEMENT
OF
PROLIANCE ENERGY, LLC
THIS FUNDAMENTAL OPERATING AGREEMENT (the "Agreement") is
made and entered into as of March 15, 1996 by and between IGC
ENERGY, INC., an Indiana corporation ("Energy"), and CITIZENS
BY-PRODUCTS COAL COMPANY, a West Virginia corporation authorized
to do business in the State of Indiana ("By-Products") (Energy
and By-Products collectively referred to as the "Members" and
individually as a "Member"), relating to Proliance Energy, LLC
(the "Company").
The Company was organized as a limited liability company
under the Indiana Business Flexibility Act, as amended, Ind. Code
23-18-1-1 et seq. (the "Act"). This Agreement, together with
the Company's Articles of Organization, set forth those terms and
conditions considered by the parties to be basic and fundamental
to its organization and operation. The Members may from time to
time enter into written agreements supplemental or amendatory to
this Agreement to the extent the parties determine more detailed
or comprehensive provisions are required. Such agreements,
together with this Agreement, as the same may be amended from
time to time, shall constitute the Company's "operating
agreement" within the meaning of the Act.
NOW, THEREFORE, the parties hereby state, confirm and agree
as follows:
1. Purposes of the Company
The Company was formed for the
principal business purpose of providing natural gas supply,
storage, transportation, acquisition, planning and related
services for Members and their Affiliates and natural gas supply,
marketing, sales, management and related services for non-Member
customers. Unless otherwise agreed by the Members, however, the
Company shall not own, operate, manage or control any facilities
or equipment used for the distribution at retail of natural or
manufactured gas or for the production, transmission, delivery or
furnishing of heat, light, water or power. In addition, the
Company may undertake any other lawful act or engage in any other
business permitted under the Act as may from time to time be
mutually agreed by the Members. For purposes of this Agreement,
the term "Affiliate" of a specified Member shall mean any entity
directly or indirectly controlling, controlled by or under common
control with such specified Member, and for this purpose
"control" shall mean direct or indirect ownership of not less
than fifty percent (50%) of total combined voting power or value.
2. Action by the Company; Board of Representatives
2.01. Action by the Company. The Company shall act only
by or under the authority of the unanimous approval of its
Members. Despite having statutory authority to act on behalf of
the Company, no Member shall undertake to bind the Company absent
unanimous approval of the Members. Action by the Members may be
taken at a meeting of designated representatives of the Members
(referred to below as the "Board of Representatives") or by
unanimous consent or agreement by the Members (such unanimous
consent or agreement by the Members shall be deemed action by the
Board of Representatives).
2.02. Board of Representatives. Each Member shall
designate representatives ("Representatives") to serve on the
Board of Representatives (the "Board"), which shall consist of
eight individuals, four of whom shall be designated by and serve
at the pleasure of Energy, and four of whom shall be designated
by and serve at the pleasure of By-Products. All of the
Representatives shall be appointed from the directors, officers
and employees of the respective designating Member or its
Affiliates. The initial Board shall consist of:
Name Representing Name Representing
Paul T. Baker Energy David N. Griffiths By-Products
Carl L. Chapman Energy Frederick L. Lekse By-Products
Niel C. Ellerbrook Energy Donald L. Lindemann By-Products
Lawrence A. Ferger Energy Carey B. Lykins By-Products
A Member may remove or redesignate one or more of its
Representatives on the Board at any time by giving written notice
to each other Member.
The Board shall be responsible for determining the ends
which the Company will pursue. Further, the Board shall
articulate the values, perspectives, and rules by which the
Company will guide its actions. The Board shall assure that the
Company performs in an ethical and prudent manner.
2.03. Chairman of the Board. The Board shall have a
Chairman who shall preside at all meetings of the Board, and have
such other powers and duties as the Board may prescribe. The
Chairman shall be a Representative on the Board and shall serve
as Chairman at the pleasure of the Member appointing him for a
full two-year term, beginning March 15, 1996. The power to
appoint the Chairman shall alternate between the Members as of
the end of each two-year term. The initial Chairman shall be
Donald L. Lindemann, as the appointee of By-Products.
2.04. Meetings and Action. Unless otherwise agreed, the
Board shall hold regular meetings at the principal office of the
Company at 2:00 o'clock P.M., Indianapolis time, on the third
Wednesday (or if such day is a holiday, the next succeeding
business day) of January, April, July and October of each year.
Meetings of the Board are and shall be deemed meetings of the
Members. Special meetings of the Board may be called by any
Member at any time upon ten days prior written notice of the
date, time and purpose of the meeting. Notice to a
Representative may be waived before or after the meeting by the
Representative and attendance at a meeting by the Representative
shall constitute waiver of such notice. Unless otherwise agreed
by the Members in writing, a quorum for any meeting of the Board
shall exist if there are two or more Representatives of each
Member present. Despite consisting of eight representatives,
action by the Board shall be approved only upon the unanimous
vote of each of the Members (each Member having one vote, despite
any then-existing disparity in the respective capital accounts of
the Members). At each meeting of the Board the Chairman shall
designate a person to act as secretary of the meeting for
purposes of keeping minutes thereof. Each Member shall announce
its vote on any matter submitted at a meeting through its Voting
Representative, who shall be one of its representatives on the
Board. The initial Voting Representative of Energy shall be
Lawrence A. Ferger. The initial Voting Representative of By-
Products shall be Donald L. Lindemann. A Member may change its
designated Voting Representative by written notice to each other
Member. If a Voting Representative is not in attendance at a
meeting, another Representative representing that Member may be
designated in writing by the Voting Representative as that
Member's Voting Representative for that particular meeting. Any
or all Representatives may participate in a meeting by conference
telephone or similar communication equipment, and all
Representatives so participating in the meeting shall be deemed
present in person.
2.05. Committees of the Board. The Board shall have two
committees, "Audit" and "Compensation." The committees' duties
and initial members are as follows:
(a) Audit Committee. The Audit Committee shall recommend
for appointment by the Board the independent certified public
accountants for the Company. The Audit Committee shall meet from
time to time on a schedule it determines with the independent
public accountants along with members of Company management to
ensure that adequate accounting systems, procedures, and internal
controls are in place to accurately reflect the financial status
of the Company and the financial results of the Company's
operation. The initial staffing of the Committee shall be Carey
B. Lykins, Chairman, representing By-Products and Niel C.
Ellerbrook, representing Energy.
(b) Compensation Committee. The Compensation Committee
shall determine the compensation of the officers of the Company,
including base pay and incentives. Further, it shall provide
oversight to the overall compensation plan for the Company. The
initial staffing of the Compensation Committee shall be Lawrence
A. Ferger, Chairman, representing Energy, and Donald L.
Lindemann, representing By-Products.
The chairmanship of the Committees shall alternate between
representatives of the Members every two (2) years commencing
March 15, 1996. Composition of any other committees established
by the Board shall reflect equal representation of the Members.
3. Day-to-Day Management of the Company
3.01. Officers. Subject always to the supervision and
control of the Board, the officers of the Company ("Officers")
shall be responsible for day-to-day operations of the business of
the Company, implementing the policies and decisions of the Board
and making recommendations to the Board. The officers of the
Company shall consist of the following: a President, two or more
Vice Presidents, a Secretary, a Treasurer, and any other officers
chosen by the Board at the times, in the manner and for the terms
(if any) as the Board may prescribe; provided that the initial
term of the President shall be for a full two years, beginning
March 15, 1996. At the end of this initial term, the President
may be removed unilaterally by the initial Chairman of the Board
(Mr. Lindemann), with or without cause. Each officer shall serve
at the pleasure of the Board, holding office until such officer's
death, disability, resignation or removal (with or without cause)
or until the officer's successor is appointed and qualified.
Except as the Board may otherwise determine from time to time,
the actions described in Schedule A (Reserved Authority) may not
be taken by the Officers on behalf of the Company unless
authorized or ratified by the Board.
3.02. Duties of Officers.
(a) President. Subject to the general control of the Board
and Section 3.01, the President shall manage and supervise all
the affairs and personnel of the Company and shall discharge all
the usual functions of the president of a corporation, as if the
Company were a corporation. The President shall exercise and
perform such other powers and duties as the Board may prescribe.
The President shall report directly to the Chairman. The
President shall have full authority to execute proxies, deeds,
contracts and other instruments in behalf of the Company, to vote
stock owned by it in any corporation, and to execute powers of
attorney appointing other entities or individuals the agent of
the Company, all subject to the provisions of the Act and this
Agreement. The President is hereby authorized to sign the
Formation Agreement (as hereinafter defined) and amendments and
supplements thereto or to this Agreement on behalf of the
Company.
(b) Vice Presidents. The Vice Presidents, in the order
designated by the President or the Board, shall exercise and
perform the powers and duties incumbent upon the President during
the President's absence or disability and shall exercise and
perform such other powers and duties as the Board or the
President may prescribe.
(c) Secretary. If requested by the Chairman, the Secretary
shall keep or cause to be kept a true and complete record of the
proceedings of meetings of the Board, and shall perform a like
duty, when required, for all committees created by the Board.
The Secretary shall authenticate the records of the Company when
necessary and shall exercise and perform such other powers and
duties as the Board or the President may prescribe.
(d) Treasurer. The Treasurer shall keep correct and
complete records of account, showing accurately at all times the
financial condition of the Company. The Treasurer shall be the
legal custodian of all moneys, notes, securities, and other
valuables which may from time to time come into the possession of
the Company. The Treasurer shall open and maintain bank accounts
in the name of the Company, and shall immediately deposit all
funds of the Company coming into his or her hands in such bank
accounts. The Treasurer shall furnish at meetings of the Board,
or whenever requested by the Board or any Member, a statement of
the financial condition of the Company, and shall exercise and
perform such other powers and duties as the Board or the
President may prescribe.
(e) Assistant Officers. The Board or an officer duly
appointed by the Board may from time to time appoint assistant
officers who shall exercise and perform such powers and duties as
the officers whom they are elected to assist shall specify and
delegate to them, and such other powers and duties as the Board
or the President may prescribe. An Assistant Secretary may, in
the absence or disability of the Secretary, attest the execution
of all documents by the Company.
(f) Delegation of Authority. In case of the absence of any
officer of the Company, or for any other reason that the Board
may deem sufficient, the Board may delegate the powers or duties
of such officer to any other officer or to any Representative,
for the time being.
3.03. Indemnification of Representatives and Officers.
The Company shall indemnify every person who is or was a
Representative or Officer of the Company (each of whom, together
with such person's heirs, estate, executors, administrators and
personal representatives, is hereinafter referred to as an
"Indemnitee") against liability to the fullest extent which would
be permitted by Ind. Code 23-1-37 if the Company were a
corporation organized under the Indiana Business Corporation Law
and the Indemnitee were a director or officer of such
corporation. Such indemnification shall be provided, however,
only if such person is determined in the manner specified by Ind.
Code 23-1-37 to have met the standard of conduct specified in
Ind. Code 23-1-37. The Company shall, to the fullest extent
which would be permitted by Ind. Code 23-1-37, pay for or
reimburse the reasonable expenses incurred by every Indemnitee
who is a party to a proceeding in advance of final disposition of
the proceeding, in the manner specified by Ind. Code 23-1-37.
The foregoing indemnification and advance of expenses for each
Indemnitee shall apply to service in the Indemnitee's official
capacity with the Company, and to service at the Company's
request, while also acting in an official capacity with the
Company, as a director, officer, partner, member, manager,
trustee, employee, or agent of another foreign or domestic
corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise,
whether for profit or not. The provisions of this Section 3.03
shall be binding upon any successor to the Company so that each
Indemnitee shall be in the same position with respect to any
resulting, surviving, or succeeding entity as the Indemnitee
would have been had the separate legal existence of the Company
continued; provided, that unless expressly provided or agreed
otherwise, this sentence shall be applicable only to an
Indemnitee acting in an official capacity or in another capacity
heretofore described prior to termination of the separate legal
existence of the Company. The foregoing provisions shall be
deemed to create a contract right for the benefit of every
Indemnitee if (a) any act or omission complained of in a
proceeding against the Indemnitee, (b) any portion of a
proceeding, or (c) any determination or assessment of liability
occurs while this Section 3.03 is in effect. All references in
this Section 3.03 to Ind. Code 23-1-37 shall be deemed to
include any amendment or successor thereto. When a word or
phrase used in this paragraph is defined in Ind. Code 23-1-37,
such word or phrase shall have the same meaning in this Section
3.03 that it has in Ind. Code 23-1-37. Nothing contained in
this Section 3.03 shall limit or preclude the exercise of any
right relating to indemnification or advance of expenses to any
Indemnitee or the ability of the Company to otherwise indemnify
or advance expenses to any Indemnitee. If any word, clause, or
sentence of the foregoing provisions regarding indemnification or
advancement of expenses shall be held invalid as contrary to law
or public policy, it shall be severable and the provisions
remaining shall not be otherwise affected. If any court holds
any word, clause, or sentence of this paragraph invalid, the
court is authorized and empowered to rewrite these provisions to
achieve their purpose to the extent possible.
3.04. Initial Officers. The initial Officers of the
Company shall be as follows:
President: Carl L. Chapman
Vice President - Marketing: Terrence F. Peak
Vice President - Supply: John R. Talley
Secretary and Treasurer: Jacquelyn K. Groth
4. Capital Contributions
4.01. Capital Account. An individual capital account
shall be established and maintained by the Company for each
Member, as provided in Treasury Regulations Section 1.704-1(b).
4.02. Contributions to Capital. Each Member shall make
an initial capital contribution to the Company in cash in the
amount of $500,000. Thereafter, any additional capital
contributions shall be only as mutually agreed by the Members,
and to the extent practicable the respective contributions of the
Members shall be equal. In the event that either Member's
contribution is materially altered or changed hereafter, or
either Member contributes significant additional value to the
Company, which causes the present allocation to be inequitable or
inappropriate to a material extent, the Members hereby agree to
negotiate in good faith to adjust such allocation or to determine
a compensating contribution so as to cause such ownership
percentages to be as close as reasonably possible to being equal.
At the closing of the transactions contemplated by that certain
Formation Agreement (the "Formation Agreement") among the
Company, the Members and certain of the Member's respective
Affiliates, the initial capital contribution referred to above
was made and, in addition, certain contracts (the "Assigned
Contracts") have been or are to be assigned or released to the
Company by the Members or their respective Affiliates or
administered as agent by the Company for the Members or their
respective Affiliates. The Members agree that for purposes of
Articles IV and V the agreed fair market value of the Assigned
Contracts is zero.
4.03. Return of Contributions. No Member shall have any
right to the return or withdrawal of such Member's capital
contribution until dissolution of the Company, unless the
withdrawal is consented to by all the other Members, or is
otherwise provided for in this Agreement.
5. Allocation of Profits, Losses and Distributions
5.01. Allocation of Profits and Losses. Profits and
losses of the Company shall be allocated equally between the
Members.
5.02. Distributions of Cash or Other Assets.
Distributions of cash or other assets shall be made equally
between the Members, and only as authorized by the Board.
5.03. Special Allocation Provisions. If and at such
time as there is a Special Allocation Event (as hereinafter
defined), the provisions of Schedule B (Schedule of Special
Allocations) shall become effective as of the first day of the
Company's taxable year in which such Special Allocation Event
occurred. For purposes of this Agreement, a Special Allocation
Event shall be the first to occur of:
(a) The making of a capital contribution of cash or
tangible property by, or a distribution of cash or tangible
property to, any Member, except equally between the Members;
(b) The making of a capital contribution of tangible
property by, or a distribution of tangible property to, any
Member where there is a variation between the basis of the
tangible property and its fair market value at the time thereof,
except where such variation is attributable equally to the
Members;
(c) The incurrence of any indebtedness of the Company from,
or guaranteed by, any member or an Affiliate thereof, except
equally between the Members or their respective Affiliates
(taking into account reasonable economic equivalents); or
(d) The occurrence of any other event which, in the opinion
of counsel for the Company or any Member, could reasonably be
expected to jeopardize the equal allocation (before taxes) of the
Company's income, gains, losses, deductions or credits between
the Members under Section 704(b) of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor provision) but
for the effectiveness and application of the provisions of
Schedule B (Schedule of Special Allocations) hereto.
6. Dissolution
6.01. Events Causing Dissolution. The occurrence of the
first of any of the following events shall cause the dissolution
of the Company:
(a) the mutual consent in writing executed by each Member;
(b) except for and subject to Sections 7.02 and 7.03, the
occurrence of an event of dissociation as specified in the Act
with respect to any Member;
(c) the election of any Member to cause a dissolution, upon
ninety days prior written notice to the Company and each other
Member;
(d) an election of any Member to cause a dissolution
pursuant to Section 7.02; or
(e) the adjudication of bankruptcy of a Member or the entry
of a decree of dissolution under the Act.
A Member may exercise its right to cause a dissolution
of the Company without penalty. A withdrawal by a Member from
the Company (other than incident to a permitted transfer pursuant
to Sections 7.02 or 7.03) shall be deemed to be an election by
the Member to cause dissolution pursuant to Section 6.01(d)
above, and in such event, the withdrawing Member's rights shall
be limited to the rights of a Member upon dissolution.
6.02. Priority of Dissolution. Upon the occurrence of
any of the events set forth in Section 6.01 above, the Company
shall be dissolved, the affairs of the Company wound up and the
property of the Company, subject to the provisions of
Section 6.05 below, distributed and applied in the following
order of priority:
(a) First, to the payment of any debts and liabilities of
the Company owing to persons other than any of the Members;
(b) Second, to the payment of any debts and liabilities of
the Company owing to any Member, but in the event the amount
available for such payment is insufficient to satisfy all such
debts and liabilities, then to such Members in the proportion
which their respective claims bear to the claims of all such
Members; and
(c) Last, to the Members in the proportion which the
positive balance in each Member's positive capital account bears
to the aggregate capital account balance of all Members at that
time.
No Member shall have a priority over any other Member with
respect to the distribution under subparagraph (c) above.
Distributions made in accordance with this Section 6.02 shall be
in full satisfaction of the Member's claim against the Company
for distribution and liquidation. In making distributions to the
Members, the positive capital account balances of the Members
shall be determined after taking into account all capital account
adjustments required by Treas. Reg. 1.704-1(b)(2).
6.03. Time to Dissolve. Following the event of
dissolution, except as otherwise may be agreed in writing by the
parties, a reasonable time up to one year immediately following
the first October 31 occurring after the date of the event of
dissolution shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to
creditors so as to minimize the normal losses attendant upon such
liquidation and to effectuate the wind-up process set forth in
Section 6.05 below. Each of the Members during the course of
winding up the Company affairs and dissolution shall be furnished
with a statement prepared by the Officers which shall set forth
the assets and liabilities of the Company as of the date of the
termination of the Company.
6.04. Date of Termination. The Company shall be
terminated when all of its assets have been applied and
distributed in accordance with the provisions of Sections 6.02
and 6.03 above. The establishment of any reserves for the
payment of any contingent or unforeseen liabilities or
obligations of the Company shall not have the effect of extending
the term of the Company, and such reserve shall be applied and
distributed in the manner otherwise provided in Section 6.02
above upon the expiration of the period of such reserve.
6.05. Wind-Up.
(a) Contract Turnover. After an event of dissolution and
during the period specified in Section 6.03 above, in order to
ensure the continued provision of high quality payment remittance
services to the Members or their Affiliates, and to enable other
customers who have subscribed to service from the Company to
continue to receive such service, the following shall take place
as soon as is reasonably practicable:
(1) Subject to ensuring the continued reliable provision of
gas supply service to the local gas distributor Affiliates of the
Members during the period specified in Section 6.03, all pipeline
transportation and storage contracts previously assigned,
released, or transferred to the Company by an Affiliate of the
Member shall, at the request of such Member, be assigned or
reassigned, or released or rereleased, or transferred or
retransferred to that Affiliate, or such other party that is
designated by the Member. Absent the ability to effectuate such
action, the Members, including their Affiliates, agree that the
contracts will continue to be jointly administered to equitably
allocate their costs and usage in a manner that will best achieve
the continued reliable provision of gas supply service to the
local gas distributor Affiliates of the Members for the remaining
terms of such contracts;
(2) Subject to ensuring the continued reliable provision of
gas supply service to the local gas distributor Affiliates of the
Members during the period specified in Section 6.03 above, all
gas administration contracts by and between the Company and the
Members, including Affiliates of the Members, will be terminated;
(3) Subject to ensuring the continued reliable provision of
gas supply service to the local gas distributor Affiliates of the
Members during the period specified in Section 6.03 above, all
pipeline transportation and storage contracts entered into by the
Company in its own name to provide gas supply service to the
local gas distribution Affiliate of a Member shall at the request
of such Member, be assigned to such Affiliate or such other party
that is designated by the Member (and to the extent a contract
provides transportation or storage service to delivery points of
local gas distributor Affiliates of more than one (1) Member,
each such Affiliate (or other designated party) shall be assigned
the portion of the contract related to the service provided to
the local gas distributor Affiliate at its delivery points).
Absent the ability to effectuate such an assignment, the Members,
including their Affiliates, agree that the contracts will
continue to be jointly administered to equitably allocate their
costs and usage in a manner that will best achieve the continued
reliable provision of gas supply service to the local gas
distributor Affiliates of the Members for the remaining terms of
such contracts;
(4) Subject to ensuring the continued reliable provision of
gas supply service to the local gas distributor Affiliates of the
Members during the period specified in Section 6.03 above, all
gas supply contracts held by the Company shall be apportioned
among the local gas distributor Affiliates of Members or such
other party that is designated by each Member in a manner which,
to the extent possible, (i) ensures that each local gas
distributor Affiliate receives an allocation of gas supply
contracts sufficient to provide it with a reliable and adequate
supply of gas, and (ii) provides each local gas distributor
Affiliate with gas supply at the same average cost. In
effectuating such an apportionment and measuring the fulfillment
of the principles specified in the preceding sentence, the gas
supply contracts shall be apportioned on a pipeline by pipeline
basis. On each pipeline system, to the extent the use of supply
contracts is dependent upon the use of pipeline service
entitlements, then those gas supply contracts shall be
apportioned in the same manner that the pipeline service
entitlements are apportioned under this section 6.05(a). After
that apportionment is completed, the balance of the gas supply
contracts shall be apportioned consistent with the principles
specified in the first sentence of this Section 6.05(a)(4).
Absent the ability to effectuate such an apportionment, the
Members, including their Affiliates, agree that with respect to
those gas supply contracts they will continue to be jointly
administered to equitably allocate their costs and usage in a
manner that will best achieve the continued reliable provision of
gas supply service to the local gas distributor Affiliates of the
Members for the remaining terms of such contracts;
(5) If necessary or appropriate to ensure the continued
provision of reliable and adequate gas supply service to the
local gas distributor Affiliates of the Members, those local gas
distributor Affiliates will enter into one or more agreements by
and between them to accomplish, during the wind-up period, any
joint operational synchronization and other results to achieve
this objective. Such agreements would include, but not be
limited to the joint use of contracts, as discussed above in
Section 6.05(a)(3) and (4), the continued physical
interconnection of the local gas distributor Affiliates' systems
and the joint dispatching of their respective gas supply assets
and requirements in such a manner that there is a continued
realization of joint operational benefits. During the wind-up
period, the amounts to be assessed for these agreements will be
no more than the amounts assessed by the Company to each local
gas distributor Affiliate immediately prior to the wind-up
period.
(6) All marketing contracts with respect to (a) sales or
services within the service area of a local gas distributor
Affiliate of a Member or (b) sales or services to customers by
the Member or its Affiliate as of the date of this Agreement,
shall be assigned to an Affiliate of the Member or other assignee
designated by the Member to receive the contracts. All pipeline
transportation and storage contracts and supply contracts
utilized to service those marketing contracts shall be
apportioned among Affiliates of Members or such other parties
designated by the Members in the following manner: (i) to the
extent such contracts are expressly and solely tied to marketing
contracts being assigned to the Affiliate or other designee of
one Member or the other, those contracts will be assigned to that
Affiliate or designee; or (ii) if the contracts are not expressly
and solely tied to marketing contracts being transferred to one
Affiliate or designee of one Member or the other, then such
contracts shall be apportioned among each of the Affiliates or
designees in a manner which equally apportions the contracts by
and between the Affiliate or designees, and provides each
Affiliate or designee with gas supply at the same average costs.
Absent the ability to effectuate such an apportionment of
pipeline transportation and storage contracts and supply
contracts, the Members, including their Affiliates, agree that
the contracts will continue to be jointly administered to
equitably allocate their costs and usage in a manner that will
best achieve the continued fulfillment of the obligations under
the marketing contracts for the remaining terms of such
contracts;
(7) All remaining contracts shall be sold or assigned on
the best terms available and the proceeds thereof divided equally
between the parties; and
(8) After the completion of the wind-up period in
Section 6.03, the Officers' terms shall expire and to the extent
joint administration of contracts is required by this
Section 6.05(a), each Member or its Affiliate shall designate a
representative to facilitate such joint administration on its
behalf.
(b) Board Action. Throughout the wind-up period, the Board
shall continue to act on behalf of the Company and shall take all
reasonable actions necessary to effectuate the turnover of
contracts as set forth in Section 6.05(a) above and to ensure the
continued provision of reliable and adequate gas supply service
to the local gas distribution Affiliates of the Members. Unless
otherwise provided in the contracts or by applicable law, an
event of dissolution shall neither cancel or terminate any
Company contracts nor excuse the performance thereof. Following
dissolution and during the wind-up period, should the Members
become deadlocked on one or more issues in connection with
performance of this Section 6.05(b), the Officers shall have
exclusive authority notwithstanding Section 3.01, in good faith,
to carry out the requirements of Section 6.05(a) and this
Section 6.05(b) only with respect to such deadlocked issue or
issues, recognizing their duties to each Member consistent with
insuring the continued provision of reliable and adequate gas
supply service to the local gas distribution Affiliate of the
Members.
(c) Employment Agreements. Following an event of
dissolution, the Members jointly and severally agree to honor (or
cause an Affiliate to honor), on an equitable and equal basis
between the Members and subject to any applicable statutory
limitations, any employment agreements between the Company and
its employees; provided, however, that the Members or their
Affiliates in honoring any such agreements shall inherit the
Company's rights thereunder, including without limitation any
termination rights.
6.06. Bankruptcy of a Member. Upon the adjudication of
bankruptcy of a Member, then the trustee of such bankrupt Member
shall be considered an assignee of such Member's interest in this
Company and, unless admitted to the Company as a new or
substituted Member pursuant to Section 7.05, such trustee shall
be entitled only to the rights and benefits not inconsistent with
this Agreement as are presently provided by the Act for a
creditor of a person having an interest.
7. Assignment of Interests; New Members
7.01. Restriction on Transfer. Except as otherwise
provided by Sections 7.02 or 7.03 hereof, no interest in the
Company may be assigned, transferred, encumbered, hypothecated or
otherwise disposed of without the prior written consent of all
Members (which consent may be given or withheld, conditioned or
delayed as the remaining such Members may determine in their sole
and absolute discretion), and any attempted transfer, assignment,
encumbrance, hypothecation or other disposition without such
written consent shall be null and void and have no force or
effect whatsoever.
7.02. Transfers to Third Parties. A Member may sell
all, but not less than all, its interest to a third party if, but
only if, the sale is for an all cash purchase price, and the
following requirements are met:
(a) The Member desiring to sell must provide at least
ninety days written notice of the proposed sale, which notice
must set forth the name, address and corporate affiliation of the
proposed purchaser, the proposed purchase price and the other
terms of the proposed sale, and include with the notice all
documentation with respect thereto. Any notice given pursuant to
the preceding sentence shall constitute an irrevocable offer by
the Member to sell its entire interest in the Company to the
Member receiving such notice (or any Affiliate thereof) for the
same price and on the same terms set forth in the notice.
(b) Upon receipt of such notice, the non-selling Member
shall have not less than sixty days to elect, in its sole
discretion, one of the following three options:
(1) To consent and agree to the other Member's
proposed sale to the third party, in which case the other Member
shall have ninety days from the date of receipt of the election
notice from the non-selling Member in which to complete the sale
to the third party for the purchase price and on the terms set
forth in the notice. If the sale is not so completed within that
ninety-day period, the sale of the other Member's interest shall
again be subject to the restrictions on transfer set forth in
Section 7.01.
(2) To exercise the option to purchase directly
or through any Affiliate and match the purchase price and terms
(or reasonably applied equivalent to the terms) of the other
Member's proposed sale, in which case the sale shall be completed
within ninety days from the date of receipt of the election
notice from the non-selling Member.
(3) To elect to cause a dissolution of the
Company, in which case the proposed third-party sale shall be
prohibited and the Company promptly shall be dissolved, wound up
and its assets distributed in accordance with Article VI of this
Agreement.
Failure by the non-selling Member to timely make an
election under this Section 7.02 shall constitute an election to
consent to the sale under Section 7.02(b)(1) above.
7.03. Transfer to Affiliate. Notwithstanding anything
to the contrary in this Agreement, all (but not less than all) of
the interest of a Member may, without the consent of the other
Members, be transferred to an Affiliate of such Member, whether
by sale, dividend, capital contribution, merger, operation of law
or otherwise, provided the transferee agrees in writing to be
bound by this Agreement. Any transferee pursuant to this
Section 7.03 shall, without the consent of the other Members, be
substituted or added as a Member and shall be treated as though
such transferee were an initial party to this Agreement in the
place and stead of the transferor.
7.04. Continuing Responsibility. Notwithstanding any
assignment or transfer of its interest in the Company or the
substitution of the assignee or transferee as a Member, a Member
shall not be relieved of any of such Member's responsibilities
under this Agreement without the prior written consent of all
other Members.
7.05. New Members. With the consent of all Members, new
Members may be admitted to the Company upon such terms and
conditions, in exchange for ownership percentages, and with such
representation on the Board as the then-existing Members and each
such new Member may find mutually acceptable.
8. Miscellaneous
8.01. Fiscal Year. The fiscal year of the Company shall
end August 31, unless otherwise determined by the Board.
8.02. Company Accounting; Financial Statements. An
accounting shall be made of all Company transactions (for each
fiscal year and quarter or lesser period of time) and the
Officers shall cause to be prepared for the Company a balance
sheet, a statement of cash receipts and disbursements, a
statement of net profits and losses, and a statement of each
Member's share of Company net profits and losses (collectively,
"Financial Statements"). Except as the Board may otherwise from
time to time determine, the Officers shall cause monthly and
quarterly unaudited Financial Statements to be sent to all
Representatives and Members not later than thirty days after the
end of the month or quarter, as applicable, and shall cause
annual audited Financial Statements, as certified by the
Company's independent public accountants, to be sent to all
Representatives and Members not later than forty-five days after
the end of the fiscal year. The Officers shall cause the
necessary federal, state and local income tax returns and reports
required of the Company to be prepared and filed no later than
required by law.
8.03. Other Tax Matters. The Officers will make such
elections and shall take such other action as the Officers
believe necessary (a) to extend the statute of limitations for
assessment of tax deficiencies against the Members with respect
to any adjustment to the Company's federal and state income tax
returns, (b) to cause the Company to be represented before the
Service, any other taxing authorities or any courts in matters
affecting the Company, and (c) to cause to be executed any
agreements or other documents that bind the Company with respect
to such tax matters or otherwise affect the rights of the
Company; provided, however, that no elections, submissions or
positions will be made without reasonable prior notice to and the
opportunity for input from each Member. Any reasonable changes
proposed by a Member shall be made. Energy is specifically
authorized to act as the "Tax Matters Partner" under the Code and
in any similar matter under state law.
8.04. Waiver of Partition. Each Member on behalf of
such Member, and its successors and permitted assigns, hereby
waives any rights to have Company property partitioned.
8.05. Retention of Certain Rights; Dealings Outside the
Company.
(a) Each Member and its Affiliates shall retain complete
unilateral control of that Member's or Affiliate's own physical
gas delivery, distribution, transportation and storage
facilities.
(b) During the continuance of the Company, each Member,
Representative and Officer shall, at any time and from time to
time, devote such time and effort to the Company business as may
be necessary to promote adequately the interests of the Company
and the mutual interests of the Members. During the continuance
of the Company, except as otherwise specified in the Formation
Agreement, the Members and their respective Affiliates
individually or collectively may, at any time and from time to
time, engage in and possess an interest in other business
ventures of any and every type and description, independently or
with others, and neither the Company nor any Member shall by
virtue of this Agreement have any right, title or interest in or
to such independent ventures of the Members or their respective
Affiliates.
8.06. Expenses. Unless otherwise mutually agreed in
advance, each of the Members shall pay or cause to be paid its
own fees and expenses, including without limitation attorneys'
fees, incurred in connection with the organization of the
Company.
8.07. Complete Agreement. This Agreement, the Articles
of Organization and the Formation Agreement constitute the
complete and exclusive statement of agreement between the Members
with respect to the subject matter of this Agreement. This
Agreement, the Articles of Organization and the Formation
Agreement supersede all prior written and oral statements, and no
representation, statement, or condition or warranty not contained
in this Agreement, the Articles of Organization or the Formation
Agreement will be binding on the Members or have any force or
effect whatsoever.
8.08. Terms. Any reference to the Act, the Code or
other statutes or laws will include all amendments,
modifications, or replacements of the specific sections and
provisions concerned. Terms used in this Agreement unless
otherwise defined herein or unless the context otherwise
dictates, shall have the meanings set forth in the Act.
8.09. Multiple Counterparts. This Agreement may be
executed in several counterparts, each of which will be deemed an
original but all of which will constitute one and the same
instrument. However, in making proof of this Agreement, it will
be necessary to produce only one copy of this Agreement signed by
the party to be charged.
Section 1. Applicable Law. This Agreement shall be
construed in accordance with the laws of the State of Indiana.
Section 2. Partial Invalidity. If any of the terms and
provisions of this Agreement are determined to be invalid, such
invalid term or provision shall not affect or impair the
remainder of this Agreement, but such remainder shall continue in
full force and effect to the same extent as though such invalid
term or provision were not contained therein.
Section 3. Company Obligations Binding. Each Member
agrees that the promises, covenants and conditions contained
herein are given separately and as a Member inure to and are
binding upon its successors and assigns. The Company shall be
bound by this Agreement.
Section 4. Signatory Requirements. Each Member, or each
additional or substitute Member permitted under this Agreement,
may become a signatory hereof by signing a Company Signature Page
to this Agreement and such other instruments as the Board shall
determine. By so signing, each Member, or each such additional
or substitute Member, shall be deemed to have adopted and agreed
to be bound by all the provisions of this Agreement, as amended
from time to time in accordance with the provisions of this
Agreement.
Section 5. Additional Documents and Acts. Each Member
agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out, and perform
all of the terms, provisions, and conditions of this Agreement
and the transactions contemplated by this Agreement.
Section 6. Notices. Any notice to be given or to be
served upon the Company or any party to this Agreement in
connection with this Agreement must be in writing and will be
deemed to have been given and received when delivered to the
address specified by the party to receive the notice. Such
notices will be given to a Member at the address specified on the
signature page(s) hereto, or with respect to the Company, at the
address of its principal office. Any member or the Company may,
at any time by giving five (5) days' prior written notice to the
other Member and the Company, designate any other address in
substitution of the then current address to which such notice
will be given. Notice mailed by United States mail shall be
deemed given three days after proper deposit in the United States
mail. Notice by courier or expedited delivery service shall be
deemed given when actually received.
Section 7. Disputes Not to Be Resolved by Arbitration.
The parties agree that in the event of a dispute relating to the
governance of the Company, the resolution of that dispute will
not be subject to arbitration.
Section 8. Amendments and Supplements All amendments
and supplements to this Agreement shall be in writing and
executed by each of the Members. Amendments and supplements
executed by each of the Members shall be binding on the Company,
whether or not executed by an officer of the Company.
IN WITNESS WHEREOF, the Members have caused this Agreement
to be executed by their duly authorized representatives.
CITIZENS BY-PRODUCTS COAL
COMPANY
2020 North Meridian Street
Indianapolis, Indiana 46202-1306
Attn: President of Citizens By-Products By: /s/Donald L. Lindemann
Coal Company Donald L. Lindemann, President
IGC ENERGY, INC.
1630 North Meridian Street
Indianapolis, Indiana 46202-1496
Attn: President of IGC Energy, Inc. By: /s/Paul T. Baker
Paul T. Baker, President
SCHEDULE A
(Reserved Authority)
Officers of the Company shall not have the authority to
undertake the following actions on behalf of the Company unless
authorized or ratified by the Board:
1. Engaging in any act in contravention or violation of
this Agreement or outside the principal purpose of the Company as
set forth in Article I of this Agreement;
2. Engaging in any act which would make it impossible to
carry on the ordinary business of the Company;
3. Selling all or substantially all of the assets of the
Company, or causing the Company to merge with or into any other
limited liability company, corporation, partnership or other
entity; or
4. Admitting any substitute or additional Member to the
Company;
5. Commencement, termination or settlement of any claim,
other than a claim arising in the ordinary course of the
Company's business, or lawsuit or other legal action, arbitration
or administrative proceeding brought by or against the Company
involving an amount in controversy in excess of Five Hundred
Thousand Dollars;
6. Voluntary dissolution of the Company;
7. A. The incurrence of indebtedness with a nominal
maturity of one year or less in excess of a maximum amount
approved by the Board;
B. The incurrence of indebtedness with a nominal
maturity in excess of one year;
8. Calling for additional capital contributions or loans
from Members;
9. Approval of all employment contracts (other than
at-will employments), employee benefit plans, parameters for
collective bargaining and other material labor agreements,
fundamental personnel policies and all material amendments
thereto;
10. Approval of the annual capital and operating budgets,
cash flow plans and related schedules of the Company and all
material amendments thereto;
11. Any distribution, whether in cash or in kind, to the
Members;
12. Appointment of the independent public accountants of
the Company;
13. Entering into or materially amending any material
contract between the Company and a Member or Affiliate thereof,
unless the terms of the Contract are equivalent to those arrived
at on the basis of arm's length negotiations with unrelated
parties or are made available to both Members and their
respective Affiliates;
14. Appointment, removal and replacement of Officers of the
Company and members of Committees of the Board;
15. Confessing a judgment against the Company;
16. Possessing any Company property, or assigning the
rights of the Members in specific Company property, for other
than a Company purpose;
17. Assigning any Company property or assets in trust for
creditors or on the basis of an assignee's promise or undertaking
to pay the debts or obligations of the Company;
18. Causing the Company to make loans to or borrow money
from the Members or their respective Affiliates (other than
indebtedness for property sold in the ordinary course of business
pursuant to contracts duly approved by the Board or for which
Board approval is not required by this Agreement) or to commingle
Company funds with the funds of Members or their respective
Affiliates;
19. Approval of financial risk management policies and
procedures for the Company;
20. Any matter for which Board action is otherwise
expressly provided for under this Agreement; and
21. Such other material policy decisions as the Board may
determine on a case by case basis.
SCHEDULE B
SCHEDULE OF SPECIAL ALLOCATIONS
1. Net Income and Net Loss. The terms "Net Income" or
"Net Loss," as the case may be, of the Company shall mean the
Company's taxable income or taxable loss for Federal income
taxation purposes as determined by the accountants then employed
by the Company in accordance with Section 703(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), with the items
required to be separately stated by Section 703(a)(1) of the Code
combined into a single net amount; provided, however, that in the
event the taxable income or taxable loss of the Company for such
fiscal year is later adjusted in any manner, as a result of an
audit by the Internal Revenue Service (the "Service") or
otherwise, then the taxable income or taxable loss of the Company
shall be adjusted to the same extent. "Net Income" and "Net
Loss" shall be further adjusted as follows:
(a) "Net Income" and "Net Loss," as the case may be, shall
be adjusted to treat items of tax-exempt income described in
Section 705(a)(1)(B) of the Code as items of gross income, and to
treat as deductible items all non-deductible, non-capital
expenditures described in Section 705(a)(2)(B) of the Code,
including any items treated under Treas. Reg. 1.704-1(b)(2)(iv)
as items described in Section 705(a)(2)(B) of the Code.
(b) In lieu of depreciation, depletion, cost recovery and
amortization deductions allowable for Federal income taxation
purposes to the Company with respect to property contributed to
the Company by a Member, there shall be taken into account an
amount equal to the product derived by multiplying the Book Value
of such property at the beginning of such fiscal year by a
fraction, the numerator of which is the amount of depreciation,
depletion, cost recovery or amortization deductions allowable
with respect to such property for Federal income taxation
purposes and the denominator of which is the adjusted basis for
Federal income taxation purposes of such property at the
beginning of such fiscal year.
(c) In lieu of actual gain or loss recognized by the
Company for Federal income taxation purposes as a result of the
sale or other disposition of property of the Company, there shall
be taken into account the gain or loss that would have been
recognized by the Company for Federal income taxation purposes if
the Book Value of such property as of the date sold or otherwise
disposed of by the Company were its adjusted basis for Federal
income taxation purposes.
2. Allocation of Net Income and Net Loss. After giving
effect to the special allocations set forth in Sections 3, 4 and
6 hereof:
(a) Net Income. Net Income for the fiscal year shall be
allocated equally between the Members.
(b) Net Loss. Net Loss for the fiscal year shall be
allocated equally between the Members.
3. Special Allocations. The following special
allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided
in Treas. Reg. 1.704-2(f), notwithstanding any other provision
of this Schedule B, if there is a net decrease in Company Minimum
Gain during any Company fiscal year, each Member and assignee or
transferee of an interest of a Member ("Interest") shall be
specially allocated items of Company income and gain for such
fiscal year (and, if necessary, subsequent years) in an amount
equal to the portion of such Member's or assignee's or
transferee's share of the net decrease in Company Minimum Gain,
determined in accordance with Treas. Reg. 1.704-2(g)(1) that is
allocable to the disposition of Company property subject to
nonrecourse liabilities (as defined in Treas. Reg. 1.704-
2(b)(3)), determined in accordance with Treas. Reg. 1.704-2(d).
The items to be so allocated shall be determined in accordance
with Treas. Reg. 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 3(a) is intended to comply with the minimum gain
chargeback requirement in such section of the Regulations and
shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided in Treas. Reg. 1.704-2(i)(4), notwithstanding any
other provision of this Schedule B except Section 3(a), if there
is a net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Company fiscal year, each Member or
assignee or transferee of an Interest who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Treas. Reg. 1.704-2(i)(5), shall
be specially allocated items of Company income and gain for such
year (and, if necessary, subsequent years) in an amount equal to
the portion of such Member's or assignee's or transferee's share
of the net decrease in Member Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Treas.
Reg. 1.704-2(i)(5), that is allocable to the disposition of
Company property subject to such Member Nonrecourse Debt,
determined in accordance with Treas. Reg. 1.704-2(i)(4). The
items to be so allocated shall be determined in accordance with
Treas. Reg. 1.704-2(i)(4) and 1.704-2(j)(2). This Section
3(b) is intended to comply with the minimum gain chargeback
requirement in such section and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Member or
assignee or transferee of an Interest unexpectedly receives any
adjustments, allocations, or distributions described in Treas.
Reg. 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Company income and gain shall be
specially allocated to each such Member or assignee or transferee
of an Interest in an amount and manner sufficient to eliminate,
to the extent required by Treas. Reg. 1.704-1(b)(2)(ii)(d), the
Adjusted Capital Account Deficit of such Member or assignee or
transferee of an Interest as quickly as possible, provided that
an allocation pursuant to this Section 3(c) shall be made only if
and to the extent that such Member or assignee or transferee of
an Interest would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Schedule B have been
tentatively made as if this Section 3(c) were not in the
Agreement.
(d) Gross Income Allocation. In the event any Member or
assignee or transferee of an Interest has a deficit capital
account at the end of any Company fiscal year which is in excess
of the sum of the amount such Member or assignee or transferee of
an Interest is obligated to restore or is deemed to be obligated
to restore pursuant to the penultimate sentences of Treas. Regs.
1.704-2(g)(1) and 1.704-2(i)(5), each such Member or assignee
or transferee of an Interest shall be specially allocated items
of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this
Section 3(d) shall be made only if and to the extent that such
Member or assignee or transferee of an Interest would have a
deficit capital account in excess of such sum after all other
allocations provided for in this Schedule B have been tentatively
made as if Section 3(c) above and this Section 3(d) were not in
the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other period shall be specially allocated as
provided in Section 2(b) above.
(f) Member Loan Nonrecourse Deductions. Any Member Loan
Nonrecourse Deductions for any fiscal year or other period shall
be specially allocated to the Member or assignee or transferee of
an Interest who bears the economic risk of loss with respect to
the Member Nonrecourse Debt to which such Member Loan Nonrecourse
Deductions are attributable in accordance with Treas. Reg.
1.704-2(i).
(g) Section 754 Adjustments. To the extent Treas. Reg.
1.704-1(b)(2)(iv)(m) requires an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) to be taken into account in determining
capital accounts, the amount of such adjustment to the capital
accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially
allocated to the Members and assignees or transferees of an
Interest in a manner consistent with the manner in which their
capital accounts are required to be adjusted pursuant to such
Section of the Regulations.
4. Curative Allocations. The allocations set forth in
Section 3 hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items
of Company income, gain, loss or deduction pursuant to this
Section 4. Therefore, notwithstanding any other provision of
this Schedule B (other than the Regulatory Allocations), the
Members shall make such offsetting special allocations of Company
income, gain, loss, or deduction so that, after such offsetting
allocations are made, each Member's capital account balance is,
to the extent possible, equal to the capital account balance such
Member would have had if the Regulatory Allocations were not part
of the Agreement and all Company items were allocated pursuant to
Section 2.
5. Effects of Varying Company Interests During a
Company Year. In the event a Member's interest as a Member
varies during any fiscal year of the Company (whether by reason
of withdrawal, additional capital contributions or otherwise),
Net Income and Net Loss shall be computed and allocated in
accordance with this Schedule B as if periods between such
variations were each a separate fiscal year of the Company.
6. Allocation of Income, Gain, Loss and Deduction;
Section 704(c). Upon the sale of any property contributed by any
Member, the gain or loss represented by the difference between
the adjusted basis for Federal income taxation purposes and Book
Value of the property to the Company shall be allocated to the
Member who contributed such property, and the gain or loss in
excess of that so allocated shall be allocated among the Members
as provided in Sections 1, 2, 3 and 4 above. In addition, any
other item of income, gain, loss or deduction with respect to
such property shall be allocated in a manner consistent with the
requirements of Section 704(c) of the Code and Treas. Reg.
1.704-1(b)(2)(iv)(g), as amended from time to time.
7. Allocation of Tax Items. All items of depreciation,
gain, loss, deduction or credit that are taken into account in
determining Net Income or Net Loss, shall be allocated among the
Members in the same proportion as is provided in this Schedule B.
8. Definitions. Capitalized words and phrases used in
this Schedule B have the following meanings:
(a) Adjusted Capital Account Deficit means, with respect to
any Member, the deficit balance, if any, in such Member's capital
account as of the end of the relevant fiscal year, after giving
effect to the following adjustments:
(1) Credit to such capital account any amounts which such
Member is obligated to restore or is deemed to be obligated to
restore pursuant to the penultimate sentence of Treas. Reg.
5 1.704-2(g)(1) or would be deemed obligated to restore if Member
Loan Nonrecourse Deductions were treated as Nonrecourse
Deductions; and
(2) Debit to such capital account the items described in
Treas. Regs. 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of Treas. Reg.
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(b) Book Value of any item of Company property as of any
particular date shall be determined as follows: (a) the Book
Value of any item of property contributed by a Member to the
capital of the Company shall be the agreed-upon gross fair market
value of such item of property as of the date such property was
contributed to the Company, as adjusted for depreciation,
depletion, cost recovery and amortization deductions with respect
to such property computed in the manner provided in Section 1(b)
above; and (b) the Book Value of any other item of Company
property shall be its adjusted basis for Federal income taxation
purposes.
(c) Company Minimum Gain has the meaning set forth in
Treas. Reg. 1.704-2(b)(2) and 1.704-2(d).
(d) Member Loan Nonrecourse Deductions has the meaning set
forth in Treas. Reg. 1.704-2(i)(2). The amount of Member Loan
Nonrecourse Deductions with respect to a Member Nonrecourse Debt
for a Company fiscal year equals the excess, if any, of the net
increase, if any, in the amount of Member Minimum Gain
attributable to such Member Nonrecourse Debt during that fiscal
year over the aggregate amount of any distributions during that
fiscal year to the Members or assignees or transferees of an
Interest that bear the economic risk of loss for such Member
Nonrecourse Debt to the extent such distributions are from the
proceeds of such Member Nonrecourse Debt and are allocable to an
increase in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treas. Reg.
1.704-2(i)(2).
(e) Member Minimum Gain means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Company Nonrecourse Debt were treated
as a nonrecourse liability (as defined in Treas. Reg. 1.704-
2(b)(3)), determined in accordance with Treas. Reg. 1.704-2(i).
(f) Member Nonrecourse Debt has the meaning set forth in
Treas. Reg. 1.704-2(b)(4).
(g) Nonrecourse Deductions has the meaning set forth in
Treas. Reg. 1.704-2(b)(1). The amount of Nonrecourse
Deductions for a Company fiscal year equals the net increase, if
any, in the amount of Company Minimum Gain during that fiscal
year, determined according to the provisions of Treas. Reg.
1.704-2(c) and 1.704-2(d).
(h) Regulations means the regulations promulgated under the
Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
EXHIBIT 10-C
FORMATION AGREEMENT
AMONG
INDIANA ENERGY, INC.,
INDIANA GAS COMPANY, INC.,
IGC ENERGY, INC.,
INDIANA ENERGY SERVICES, INC.,
CITIZENS GAS & COKE UTILITY,
CITIZENS BY-PRODUCTS COAL COMPANY,
CITIZENS ENERGY SERVICES CORPORATION,
AND
PROLIANCE ENERGY, LLC
Dated as of
March 15, 1996
INDEX
RECITALS 1
AGREEMENT 2
ARTICLE 1
CAPITAL CONTRIBUTION 2
ARTICLE 2
GAS SALES AND PORTFOLIO ADMINISTRATION AGREEMENTS 2
2.1 Execution of Agreements 2
2.2 Contracts to be Assigned or Released 2
2.3 Assumed Liabilities 3
2.4 Satisfaction of Assumed Liabilities by the Company 4
ARTICLE 3
PRORATIONS AND ADJUSTMENTS 4
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF IEI 5
4.1 Organization 5
4.2 Authority; Enforceability 5
4.3 Consents 5
4.4 No Conflicts 5
4.5 Subsidiaries 6
4.6 Financial Statements 6
4.7 Claims 6
4.8 No Misrepresentations 7
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CITIZENS 7
5.1 Organization 7
5.2 Authority; Enforceability 7
5.3 Consents 8
5.4 No Conflicts 8
5.5 Subsidiaries 8
5.6 Financial Statements 8
5.7 Claims 9
5.8 No Misrepresentations 9
ARTICLE 6
CLOSING 9
ARTICLE 7
COVENANTS 9
7.1 Miscellaneous Covenants 9
7.2 Covenants of the IEI Companies 10
7.2A Covenants of the Citizens Companies 11
ARTICLE 8
SURVIVAL 12
8.1Survival of Representations, Warranties and Covenants 12
8.2 Hold Harmless by IEI 12
8.3 Hold Harmless by Citizens 13
8.4 Hold Harmless by the Company 14
8.5 Administration of Claims 14
8.6 The Company's Right of Setoff 15
ARTICLE 9
CONSTRUCTION; MISCELLANEOUS 16
9.1 Definitions 16
9.2 Notices 18
9.3 Binding Effect 20
9.4 Headings 20
9.5 Exhibits and Schedules 20
9.6 Counterparts 20
9.7 Governing Law 20
9.8 Waivers 20
9.9 Pronouns 20
9.10 Time Periods 20
9.11 No Strict Construction 20
9.12 Modification 20
9.13 Entire Agreement 21
FORMATION AGREEMENT
THIS FORMATION AGREEMENT (the "Agreement"), dated as of
March 15, 1996 is made and entered into by and among Indiana
Energy, Inc., an Indiana corporation ("IEI"), Indiana Gas
Company, Inc., an Indiana gas utility corporation and wholly-
owned subsidiary of IEI ("IGC"), IGC Energy, Inc., an Indiana
corporation and indirect wholly-owned subsidiary of IEI
("Energy"), Indiana Energy Services, Inc., an Indiana corporation
and wholly owned subsidiary of Energy ("IES"), City of
Indianapolis by and through its Board of Directors for Utilities
of the Department of Public Utilities, as successor trustee of a
public charitable trust, d/b/a Citizens Gas & Coke Utility
("Citizens"), Citizens By-Products Coal Company, a West Virginia
corporation and wholly-owned subsidiary of Citizens ("By-
Products"), Citizens Energy Services Corporation, an Indiana
corporation and wholly owned subsidiary of By-Products ("CESCO"),
and Proliance Energy, LLC, an Indiana limited liability company
(the "Company"), the sole members of which are Energy and By-
Products.
RECITALS
A. Each of IGC and Citizens is a local gas distribution
company which purchases gas transportation and related services
from affiliated and non-affiliated third parties.
B. Energy and By-Products have caused the formation of the
Company for the purpose of providing administration and sales
service related to natural gas supply, storage, transportation,
acquisition, planning and marketing, for the benefit of IGC,
Citizens and other potential customers. Energy and By-Products
entered into a Fundamental Operating Agreement dated March 15,
1996, with respect to the Company (the "Operating Agreement").
C. As part of the formation of the Company, (i) each of
IGC and Citizens will enter into assignment, release or agency
contracts with the Company for all of the pipeline services and
gas supply contracts to which it is a party, (ii) each of IES and
CESCO will enter into assignment, release or agency contracts
with the Company for all of the gas marketing, management, and
pipeline services contracts to which it is a party and (iii)
Energy and By-Products will contribute capital to the Company in
the amount of $500,000 each.
D. The parties acknowledge that in measuring the success
of the Company they will employ multiple criteria, including, but
not limited to, the Company's earnings performance, the quality
of the services the Company provides to the parties, and the
quality of the services the Company provides to other customers.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual
covenants and promises contained herein, and for other good and
valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows (certain
capitalized terms are defined in Section 9.1):
ARTICLE 1
CAPITAL CONTRIBUTION
On the Closing Date, Energy and By-Products shall contribute
capital to the Company in the amount of $500,000 each in cash and
in exchange therefor shall receive a 50% Limited Liability
Company Interest in the Company.
ARTICLE 2
GAS SALES AND PORTFOLIO ADMINISTRATION AGREEMENTS
2.1 Execution of Agreements. At the Closing, IGC and
Citizens shall each enter into a Gas Sales and Portfolio
Administration Agreement with the Company in a form mutually
agreeable to the parties.
2.2 Contracts to be Assigned or Released.
(a) As of the Closing, IGC shall enter into
assignment, release or agency contracts with the Company for, and
the Company shall, subject to the terms and conditions of the
applicable assignment, release or agency contracts delivered at
Closing, accept all of the gas transportation, storage and supply
Contracts to which IGC is a party (the "IGC Contracts"). The IGC
Contracts are listed on Schedule 2.2(a), as hereafter
supplemented by IGC from time to time.
(b) As of the Closing, IES shall enter into
assignment, release or agency contracts with the Company for, and
the Company shall, subject to the terms and conditions of the
applicable assignment, release or agency contracts delivered at
Closing, accept all gas marketing, management and transportation
Contracts to which it is a party (the "IES Contracts"). The IES
Contracts are listed on Schedule 2.2(b), as hereafter
supplemented by IES from time to time.
(c) As of the Closing, Citizens shall assign or
release to the Company, and the Company shall, subject to the
terms and conditions of the applicable assignment, release or
agency contracts delivered at Closing, accept, all of the gas
transportation, storage and supply Contracts to which Citizens is
a party (the "Citizens Contracts"). The Citizens Contracts are
listed on Schedule 2.2(c), as hereafter supplemented by Citizens
from time to time.
(d) As of the Closing, CESCO shall enter into
assignment, release or agency contracts with the Company for, and
the Company shall, subject to the terms and conditions of the
applicable assignment, release or agency contracts delivered at
Closing, accept, all gas marketing, management and transportation
contracts to which it is a party (the "CESCO Contracts"). The
CESCO Contracts are listed on Schedule 2.2(d), as hereafter
supplemented by CESCO from time to time.
(e) Anything herein to the contrary notwithstanding,
to the extent that the parties intend for a particular Contract
to be assigned to the Company and a required third party consent
to assignment has not been obtained prior to Closing, the
assigning party shall execute and deliver as of the Closing a
form of assignment with respect thereto and shall use
commercially reasonable efforts to obtain the consent of the
third party thereto on terms and conditions contained in such
assignment or such other terms and conditions as are reasonably
acceptable to the Citizens Companies and the IEI Companies.
Further, in the event that as of the Closing the Company and the
appropriate party cannot obtain a third party consent for the
assignment or release of any Contract or an assignment or release
would not be economically desirable or timely for the Company or
such party, such party as of the Closing hereby appoints the
Company as agent for all purposes to administer such contract
until such time as an assignment or release is effected.
2.3 Assumed Liabilities. As of the Closing, the Company
hereby assumes, subject to the terms and conditions of the
applicable assignment, release or agency contract delivered at
Closing, only the following liabilities with respect to the IGC
Contracts, IES Contracts, Citizens Contracts and CESCO Contracts:
(a) Obligations with respect to each of the IGC
Contracts which relate to supplies or service provided from and
after April 1, 1996 under the IGC Contracts, but only to the
extent such obligations are not attributable to any breach of or
default under such Contracts by IGC (including, but not limited
to, defaults arising from or related to the consummation of the
transactions contemplated hereby, but excluding defaults
attributable to any elections by the Company at or subsequent to
Closing) (collectively, the "IGC Assumed Liabilities").
(b) Obligations with respect to each of the IES
Contracts which relate to supplies or service provided from and
after April 1, 1996 under the IES Contracts, but only to the
extent such obligations are not attributable to any breach of or
default under such Contracts by IES (including, but not limited
to, defaults arising from or related to the consummation of the
transactions contemplated hereby, but excluding defaults
attributable to any elections by the Company at or subsequent to
Closing) (collectively, the "IES Assumed Liabilities").
(c) Obligations with respect to each of the Citizens
Contracts which relate to supplies or service provided from and
after April 1, 1996 under the Citizens Contracts, but only to the
extent such obligations are not attributable to any breach or
default under any such Contracts by Citizens (including, but not
limited to, defaults arising from or related to the consummation
of the transactions contemplated hereby, but excluding defaults
attributable to any elections by the Company at or subsequent to
Closing) (collectively, the "Citizens Assumed Liabilities").
(d) Obligations with respect to each of the CESCO
Contracts which relate to supplies or service provided from and
after April 1, 1996 under the CESCO Contracts, but only to the
extent such obligations are not attributable to any breach or
default under any such Contracts by CESCO (including, but not
limited to, defaults arising from or related to the consummation
of the transactions contemplated hereby, but excluding defaults
attributable to any elections by the Company at or subsequent to
Closing) (collectively, the "CESCO Assumed Liabilities").
(e) Nothing in this Agreement shall be construed to
impose upon the Company any Liabilities of IGC, IES, Citizens or
CESCO (including, but not limited to, any liabilities which
relate to supplies or service provided on or before March 31,
1996, including, but not limited to, refund obligations to
customers for supplies or service provided on or before March 31,
1996) except as expressly set forth in this Section 2.1.
2.4 Satisfaction of Assumed Liabilities by the Company.
The Company agrees to pay or otherwise satisfy and discharge in
accordance with their terms all of the IGC Assumed Liabilities,
IES Assumed Liabilities, Citizens Assumed Liabilities and CESCO
Assumed Liabilities.
ARTICLE 3
PRORATIONS AND ADJUSTMENTS
Except as otherwise provided in the applicable Gas Sales and
Portfolio Administration Agreement, each of IGC, IES, Citizens
and CESCO shall be entitled to receive the proceeds of billings
and related adjustments with respect to supplies or service
provided by it on or before March 31, 1996 and the Company shall
be entitled to receive the proceeds of billings and related
adjustments with respect to supplies or service provided by it
from and after April 1, 1996. Each of IGC, IES, Citizens, CESCO
and the Company agrees to make any adjusting payment to the other
as shall be necessary to reflect this proration.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF IEI
IEI, represents and warrants to Citizens, By-Products
and CESCO (sometimes herein referred to individually as a
"Citizens Company" or collectively as the "Citizens Companies")
as follows:
4.1 Organization. Each of IEI, IGC, Energy and IES
(sometimes herein referred to individually as an "IEI Company" or
collectively as the "IEI Companies") is a corporation, or in the
case of IGC, a public utility corporation, duly organized and
validly existing under the laws of the State of Indiana, with
full corporate and other power and authority to carry on its
business as it is now being conducted, to own or hold under lease
the properties which it owns or holds under lease and perform all
of its obligations under the agreements and instruments to which
it is a party or by which it is bound. Each of the IEI Companies
is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other
jurisdiction in which the ownership or leasing of the properties
owned by it or the nature of the activities conducted by it
requires such qualification. Schedule 4.1 lists each such
jurisdiction.
4.2 Authority; Enforceability. Each of the IEI Companies
has full corporate power and authority to execute, deliver and
perform this Agreement and all other agreements and documents to
be executed and delivered by it in connection herewith. All
requisite corporate action to approve, execute, deliver and
perform this Agreement and each other agreement and document
delivered or to be delivered by the IEI Companies in connection
herewith has been or will be taken by each of the IEI Companies
and copies of all requisite corporate records and approvals,
certified by the Secretary or Assistant Secretary of each of IEI,
IGC, Energy or IES, have been or will be delivered to the
Citizens Companies. This Agreement and each other agreement and
document delivered by the IEI Companies in connection herewith
have been or will be duly executed and delivered by the IEI
Company which is a party thereto and constitute or will
constitute the legal, valid and binding obligations of the IEI
Company which is a party thereto enforceable in accordance with
their respective terms.
4.3 Consents. Except to the extent not having a material
adverse effect on the business, properties, financial condition
or results of the Company or the IEI Companies taken as a whole,
and except as set forth in Schedule 4.3 and for any approvals
from, or filings with, the Indiana Utility Regulatory Commission
("IURC") or any taxing authorities, no approval or consent of, or
filing with, any Person or Governmental Authority is required to
be made by the IEI Companies in connection with the transactions
contemplated hereby or the execution, delivery or performance by
any of the IEI Companies of this Agreement or any other agreement
or document delivered by or on behalf of the IEI Companies in
connection herewith.
4.4 No Conflicts. Except to the extent not having a
material adverse effect on the business, properties, financial
condition or results of the Company or the IEI Companies taken as
a whole, and except as set forth in Schedule 4.4, no action taken
by or on behalf of any of the IEI Companies in connection
herewith, including, but not limited to, the execution, delivery
and performance of this Agreement, and each other agreement and
document delivered by any of them in connection herewith:
(a) contravenes, conflicts with or results in a
violation or breach of any of the provisions of, or gives any
Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or
cancel, terminate or modify, any IGC Contract or IES Contract;
(b) contravenes, conflicts with or violates: (i) any
Law; (ii) the Articles of Incorporation or Bylaws of any IEI
Company; (iii) any Contract by which any of the IEI Companies or
their assets is bound; or (iv) any order, arbitration award,
judgment, decree or other similar restriction to which any of the
IEI Companies or their assets is subject, if such contravention,
conflict or violation has or can reasonably be expected to have a
material adverse effect on the business, properties, financial
position or results of operations of the Company or the IEI
Companies taken as a whole;
(c) constitutes an event which, after notice or lapse
of time or both, would result in any of the foregoing.
4.5 Subsidiaries. IEI owns of record and beneficially all
of the outstanding shares of capital stock of each of IGC and IEI
Investments, Inc. free and clear of all Liens. IEI Investments,
Inc. owns of record and beneficially all of the outstanding
capital stock of Energy free and clear of all Liens. Energy owns
of record and beneficially all of the outstanding shares of
capital stock of IES free and clear of all Liens.
4.6 Financial Statements. IES has delivered to Citizens an
unaudited balance sheet of IES as of September 30, 1995 and the
related unaudited statement of income, common shareholders'
equity and cash flow for the year ended September 30, 1995. Such
financial statements fairly present the financial position and
results of operations, changes in common shareholders' equity and
cash flows of IES as of and for the periods indicated, in each
case in conformity with generally accepted accounting principles
consistently applied, except, in the case of the interim
unaudited financial statements, for normal and recurring year end
audit adjustments which will not have a material adverse effect
on the financial condition or business of IES. Since September
30, 1995, there has not been any material adverse change in the
business or financial condition of IES.
4.7 Claims. There is no litigation, claim, governmental or
other proceeding or investigation pending or, to the Knowledge of
the IEI Companies, threatened against any of the IEI Companies
which if adversely determined would have a material adverse
effect on the business properties, financial condition or results
of operations of the Company or the IEI Companies taken as a
whole or hinder the consummation of the transactions contemplated
hereby.
4.8 No Misrepresentations. No representation or warranty
made by any of the IEI Companies in this Agreement or in the
Exhibits or Schedules hereto contains any untrue statement of a
material fact or omits to state a material fact required to be
stated herein or therein to make the statements contained in any
such representation or warranty, in light of the circumstances
under which they were made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CITIZENS
Citizens represents and warrants to the IEI Companies as
follows:
5.1 Organization. Citizens is the Trustee of a public
charitable trust duly organized and existing under the laws of
the State of Indiana and operates pursuant to the authority of
IND. CODE 8-1-11.1-1 et seq. By-Products is a corporation
duly organized, validly existing and in good standing under the
laws of the State of West Virginia. CESCO is a corporation duly
organized and validly existing under the laws of the State of
Indiana. Each of the Citizens Companies has full corporate and
other power and authority to carry on its business as it is now
being conducted, to own or hold under lease the properties which
it owns or holds under lease and perform all of its obligations
under the agreements and instruments to which it is a party or by
which it is bound. Each of By-Products and CESCO is duly
qualified to do business as a foreign corporation and is in good
standing (where relevant) under the laws of each state or other
jurisdiction in which the ownership or leasing of the properties
owned by it or the nature of the activities conducted by it
require such qualification. Schedule 5.1 lists each such
jurisdiction.
5.2 Authority; Enforceability. Each of the Citizens
Companies has full corporate or trust power and authority (as
applicable) to execute, deliver and perform this Agreement and
all other agreements and documents to be executed and delivered
by it in connection herewith. All requisite corporate or trust
and other action (as applicable) to approve, execute, deliver and
perform this Agreement and each other agreement and document
delivered or to be delivered by the Citizens Companies in
connection herewith has been or will be taken by each of the
Citizens Companies and copies of all requisite records and
corporate or trust approvals (as applicable), certified by the
Secretary or Assistant Secretary of each of Citizens, By-Products
and CESCO, have been or will be delivered to the IEI Companies.
This Agreement and each other agreement and document delivered by
the Citizens Companies in connection herewith have been or will
be duly executed and delivered by the Citizens Company which is a
party thereto and constitute or will constitute the legal, valid
and binding obligations of the Citizens Company which is a party
thereto enforceable in accordance with their respective terms.
5.3 Consents. Except to the extent not having a material
adverse effect on the business, properties, financial condition
or results of the Company or the Citizens Companies taken as a
whole, and except as set forth in Schedule 5.3 and for any
approvals from, or filings with, the IURC or any taxing
authorities, no approval or consent of, or filing with, any
Person or Governmental Authority is required to be made by the
Citizens Companies in connection with the transactions
contemplated hereby or the execution, delivery or performance by
any of the Citizens Companies of this Agreement or any other
agreement or document delivered by or on behalf of the Citizens
Companies in connection herewith.
5.4 No Conflicts. Except to the extent not having a
material adverse effect on the business, properties, financial
condition or results of the Company or the Citizens Companies
taken as a whole, and except as set forth in Schedule 5.4, no
action taken by or on behalf of any of the Citizens Companies in
connection herewith, including, but not limited to, the
execution, delivery and performance of this Agreement, and each
other agreement and document delivered by any of them in
connection herewith:
(a) contravenes, conflicts with or results in a
violation or breach of any of the provisions of, or gives any
Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or
cancel, terminate or modify, any Citizens Contract or CESCO
Contracts;
(b) contravenes, conflicts with or violates: (i) any
Law; (ii) the Articles of Incorporation, Bylaws or other
organizational documents of any Citizens Company; (iii) any
Contract by which any of the Citizens Companies or their assets
is bound; (iv) any order, arbitration award, judgment, decree or
other similar restriction to which any of the Citizens Companies
or their assets is subject, if such contravention, conflict or
violation has, or can reasonably be expected to have, a material
adverse effect on the business, properties, financial condition
or results of operations of the Company or the Citizens Companies
taken as a whole;
(c) constitutes an event which, after notice or lapse
of time or both, would result in any of the foregoing.
5.5 Subsidiaries. Citizens owns of record and beneficially
all of the outstanding shares of capital stock of By-Products
free and clear of all Liens, except for Liens securing Citizens
revenue bonds and commercial paper. By-Products owns of record
and beneficially all of the outstanding shares of capital stock
of CESCO free and clear of all Liens, except for Liens securing
Citizens revenue bonds and commercial paper.
5.6 Financial Statements. Citizens has delivered to IEI an
unaudited balance sheet of CESCO as of September 30, 1995 and the
related unaudited statement of income and cash flow for the year
ended September 30, 1995. Such financial statements fairly
present the financial position and results of operations and cash
flows of CESCO as of and for the periods indicated, in each case
in conformity with generally accepted accounting principles
consistently applied, except, in the case of the interim
unaudited financial statements, for normal and recurring year end
audit adjustments which will not have a material adverse effect
on the financial condition or business of CESCO. Since September
30, 1995, there has not been any material adverse change in the
business or financial condition of CESCO.
5.7 Claims. There is no litigation, claim, governmental or
other proceeding or investigation pending or, to the Knowledge of
the Citizens Companies, threatened against any of the Citizens
Companies which if adversely determined would have a material
adverse effect on the business, properties, financial condition
or results of operations of the Company or the Citizens Companies
taken as a whole or hinder the consummation of the transactions
contemplated hereby.
5.8 No Misrepresentations. No representation or warranty
made by any of the Citizens Companies in this Agreement or in the
Exhibits or Schedules hereto contains any untrue statement of a
material fact or omits to state a material fact required to be
stated herein or therein to make the statements contained in any
such representation or warranty, in light of the circumstances
under which they were made, not misleading.
ARTICLE 6
CLOSING
Consummation of the transactions contemplated hereby
(the "Closing") shall take place on March 15, 1996, the date of
execution of this Agreement (the "Closing Date").
ARTICLE 7
COVENANTS
7.1 Miscellaneous Covenants.
7.1.1 Publicity. All public announcements relating to
this Agreement or the transactions contemplated hereby will be
made only as may be agreed upon by the Board of Representatives
of the Company as provided in Article II of the Operating
Agreement or as required by Law. If public disclosure or notice
is required by Law, the disclosing party will use its best
efforts to give the other prior written notice of the disclosure
to be made.
7.1.2 Expenses. The IEI Companies shall pay all of the
expenses incident to the transactions contemplated by this
Agreement which are incurred by the IEI Companies or their
representatives and the Citizens Companies shall pay all of the
expenses incident to the transactions contemplated by this
Agreement which are incurred by the Citizens Companies or their
representatives.
7.1.3 No Assignment. No assignment by any party of this
Agreement or any right or obligation hereunder may be made
without the prior written consent of all other parties and any
assignment attempted without that consent will be void.
7.1.4 Affiliate Contracts. To the extent required by
Law, each of IGC and Citizens shall cause to be filed with the
IURC all contracts with the Company.
7.1.5. Start-Up Assistance. To facilitate the initial
planning and operation of the Company's business, each of IEI
Companies and the Citizens Companies shall provide to the Company
such employees, facilities, supplies and other property as the
Company may reasonably request. Each of IGC and Citizens shall
reserve the right to designate which of its employees shall be
provided to the Company. It is contemplated that the IEI
Companies and the Citizens Companies shall be requested to
provide such assistance on a roughly equal basis, and shall be
compensated on the basis of their direct out-of-pocket costs or
on such other fair and reasonable basis as the Company may
determine.
7.1.6. Wind-Up Provisions. The parties hereto incorporate
by reference the provisions of Section 6.05 of the Operating
Agreement and agree to comply with, and be bound by, such
provisions. The parties further agree that such provisions shall
not be amended without the consent of all parties to this
Agreement.
7.1.7 Credit Enhancements for the Company. If the Company
is required to provide Affiliate guaranties or equivalent
assurances ("Credit Enhancements") to unrelated parties to enable
the Company to obtain lines of credit, enter into contracts or
otherwise engage in activities in the normal course of its
business, each of IEI and Citizens agrees that it shall provide,
on a several and not joint basis, fifty percent (50%) of the
required Credit Enhancements, directly or through an Affiliate
thereof, in form and substance acceptable to each such unrelated
party.
7.2 Covenants of the IEI Companies.
7.2.1 Confidentiality. Except as may be required by
Law, the IEI Companies agree not to disclose, or use to the
detriment of the Company, directly or indirectly, any
Confidential Information, at any time after the Closing. If the
disclosure of Confidential Information is required by Law, the
IEI Companies agree to use their best efforts to provide the
Company and the Citizens Companies an opportunity to object to
the disclosure and as much prior written notice as is possible
under the circumstances. The IEI Companies acknowledge that
following the Closing all of the Confidential Information will be
the exclusive proprietary property of the Company, whether or not
prepared in whole or in part by the IEI Companies and whether or
not disclosed to or entrusted to the custody of the IEI
Companies.
7.2.2 IEI Companies Restrictive Covenant. Unless
Citizens otherwise agrees in writing, during the term of the
existence and prior to the dissolution of the Company, (a) the
IEI Companies shall refer and provide exclusively to the Company,
and the Company shall have the exclusive right (as between the
IEI Companies and the Company) to pursue all opportunities
available to the IEI Companies, or any of them, to provide
natural gas or natural gas marketing, sales, management or
related services to customer locations outside the service areas
of IEI's utility Affiliates as in effect from time to time, and
(b) the IEI Companies and each of them shall not, directly or
indirectly, whether as owner, principal, shareholder, partner,
member, investor, manager, operator, consultant or otherwise,
compete with the Company in the provision of natural gas or of
natural gas marketing, sales, management or related services to
customer locations outside the service areas of IEI's utility
Affiliates as in effect from time to time. The restriction set
forth above shall not, however, apply to the sale, lease or
promotion of gas appliances.
7.2.3 Equitable Relief. The IEI Companies agree that
money damages alone will not be a sufficient remedy for any
breach of the provisions of this Section 7.2, and that in
addition to all other remedies the Company shall be entitled to
specific performance and injunctive or other equitable relief as
a remedy for any such breach, and the IEI Companies waive the
securing or posting of any bond in connection with such remedy.
7.2.4 Reformation. If any of the covenants contained in
this Section 7.2 is found by a court of competent jurisdiction to
be invalid or unenforceable as against public policy or for any
other reason, such court is directed to exercise its discretion
to reform such covenant to the end that the IEI Companies shall
be subject to confidentiality and noninterference covenants that
are reasonable under the circumstances and are enforceable by the
Company.
7.2A Covenants of the Citizens Companies.
7.2A.1 Confidentiality. Except as may be required by
Law, the Citizens Companies agree not to disclose, or use to the
detriment of the Company, directly or indirectly, any
Confidential Information, at any time after the Closing. If the
disclosure of Confidential Information is required by Law, the
Citizens Companies agree to use their best efforts to provide the
Company and the IEI Companies an opportunity to object to the
disclosure and as much prior written notice as is possible under
the circumstances. The Citizens Companies acknowledge that
following the Closing all of the Confidential Information will be
the exclusive proprietary property of the Company, whether or not
prepared in whole or in part by the Citizens Companies and
whether or not disclosed to or entrusted to the custody of the
Citizens Companies.
7.2A.2 Citizens Companies Restrictive Covenant. Unless
IEI otherwise expressly agrees in writing, during the term of the
existence and prior to dissolution of the Company, (a) the
Citizens Companies shall refer and provide exclusively to the
Company, and the Company shall have the exclusive right (as
between the Citizens Companies and the Company) to pursue all
opportunities available to the Citizens Companies, or any of
them, to provide natural gas or natural gas marketing, sales,
management or related services to customer locations outside the
service area of Citizens, and (b) the Citizens Companies and each
of them shall not, directly or indirectly, whether as owner,
principal, shareholder, partner, member, investor, manager,
operator, consultant or otherwise, compete with the Company in
the provision of natural gas or of natural gas supply, marketing,
sales, management or related services to customer locations
outside the service area of Citizens. The restriction set forth
above shall not, however, apply to the sale, lease or promotion
of gas appliances or to natural gas wellhead sales by Citizens
Resource Development Corporation.
7.2A.3 Equitable Relief. The Citizens Companies agree
that money damages alone will not be a sufficient remedy for any
breach of the provisions of this Section 7.2A, and that, in
addition to all other remedies, the Company shall be entitled to
specific performance and injunctive or other equitable relief as
a remedy for any such breach, and the Citizens Companies waive
the securing or posting of any bond in connection with such
remedy.
7.2A.4 Reformation. If any of the covenants contained in
this Section 7.2A is found by a court of competent jurisdiction
to be invalid or unenforceable as against public policy or for
any other reason, such court is directed to exercise its
discretion to reform such covenant to the end that the Citizens
Companies shall be subject to confidentiality and noninterference
covenants that are reasonable under the circumstances and are
enforceable by the Company.
ARTICLE 8
SURVIVAL
8.1 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants of the IEI
Companies and the Citizens Companies in this Agreement shall
survive the Closing and continue to be binding regardless of any
investigation made at any time by any party.
8.2 Hold Harmless by IEI. Each of the IEI Companies,
jointly and severally, agrees to hold harmless the Company, its
Affiliates and partners, employees and agents ("the Company
Parties") and the Citizens Companies and their Affiliates,
shareholders, directors, employees and agents from, and reimburse
them for:
(a) Representations. All Liability, loss, damage or
deficiency resulting from or arising out of any inaccuracy in or
breach of any representation or warranty by IEI in this Agreement
or in any other agreement or document delivered by or on behalf
of IEI in connection herewith;
(b) Covenants. All Liability, loss, damage or
deficiency resulting from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by
the IEI Companies herein or in any other agreement or document
delivered by or on behalf of the IEI Companies in connection
herewith;
(c) Liabilities. Any imposition or attempted imposi
tion by a third party upon any of the Company Parties or the
Citizens Companies of any Liability of the IEI Companies which
the Company has not specifically agreed to assume under Section
2.3 of this Agreement, regardless of whether any such Liability
results from or arises out of any inaccuracy in or breach of any
representation or warranty by the IEI Companies herein;
(d) Brokers and Finders. All Liability, loss, damage
or deficiency resulting from or arising out of the claims of any
broker, finder or other Person acting in a similar capacity on
behalf of the IEI Companies in connection with the transactions
herein contemplated; and
(e) Costs. Any and all reasonable costs and expenses
(including, but not limited to, legal and accounting fees)
related to any of the foregoing.
(f) Savings Clause. IEI agrees that, if any provision
of this Section 8.2 is held invalid or unenforceable by any court
of competent jurisdiction, IEI will agree to such valid and
enforceable construction or revision of this Section 8.2 as shall
maximize the ability of the Citizens Companies and their
Affiliates, directors, shareholders, employees and agents to
realize the benefits and rights intended to be granted to them by
this Section 8.2.
8.3 Hold Harmless by Citizens. To the maximum extent
permitted by law, each of the Citizens Companies, jointly and
severally, agrees to hold harmless the Company Parties and the
IEI Companies and their Affiliates, directors, shareholders,
employees and agents from and reimburse them for:
(a) Representations. All Liability, loss, damage or
deficiency resulting from or arising out of any inaccuracy in or
breach of any representation or warranty by Citizens in this
Agreement or in any other agreement or document delivered by or
on behalf of Citizens in connection herewith;
(b) Covenants. All Liability, loss, damage or
deficiency resulting from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by
the Citizens Companies herein or in any other agreement or
document delivered by or on behalf of the Citizens Companies in
connection herewith;
(c) Liabilities. Any imposition or attempted imposi
tion by a third party upon any of the Company Parties or the IEI
Companies of any Liability of the Citizens Companies which the
Company has not specifically agreed to assume under Section 2.3
of this Agreement, regardless of whether any such Liability
results from or arises out of any inaccuracy in or breach of any
representation or warranty by the Citizens Companies herein;
(d) Brokers and Finders. All Liability, loss, damage
or deficiency resulting from or arising out the claims of any
broker, finder or other Person acting in a similar capacity on
behalf of the Citizens Companies in connection with the
transactions herein contemplated; and
(e) Costs. Any and all reasonable related costs and
expenses (including, but not limited to, legal and accounting
fees) related to any of the foregoing.
(f) Savings Clause. Citizens agrees that, if any
provision of this Section 8.3 is held invalid or unenforceable by
any court of competent jurisdiction, Citizens will agree to such
valid and enforceable construction or revision of this Section
8.3 as shall maximize the ability of the IEI Companies and their
Affiliates, directors, shareholders, employees and agents to
realize the benefits and rights intended to be granted to them by
this Section 8.3.
8.4 Hold Harmless by the Company. The Company shall
indemnify each of the IEI Companies and the Citizens Companies
and their respective Affiliates, shareholders, directors,
employees and agents (collectively, "Indemnitees" or
individually, "Indemnitee") from and against:
(a) Covenants. All Liability, loss, damage or
deficiency suffered by an Indemnitee resulting from or arising
out of any breach or nonperformance of any covenant or obligation
made or incurred by the Company herein or in any other agreement
or document delivered by or on behalf of the Company in
connection herewith;
(b) Third Party Claims. All Liability, loss, damage
or deficiency suffered by an Indemnitee resulting from or arising
out of any third party claim against such Indemnitee attributable
to the acts or omissions of the Company, unless such Liability,
loss or damage resulted from the gross negligence or willful
misconduct of the Indemnitee;
(c) Costs. Any and all reasonable related costs and
expenses (including, but not limited to, legal and accounting
fees) related to any of the foregoing.
8.5 Administration of Claims.
(a) Defense. If any claim ("Claim") is hereafter made
by a third party which might result in a right under this Article
8, the party or parties entitled (or claiming entitlement) to
such right (the "Affected Party") may make demand for
indemnification hereunder by giving written notice to the party
or parties required (or claimed to be required) to provide such
indemnification (the "Responsible Party") stating in reasonable
detail the nature of the Claim so far as known to the Affected
Party. Such notice shall be given within a reasonable time after
the Affected Party shall become aware of the Claim, adequate to
permit timely defensive action if such time is available.
Failure to give timely notice will not affect the obligations of
the Responsible Party to hold harmless and reimburse the Affected
Party except to the extent that such failure causes prejudice to
the Responsible Party. The Affected Party shall permit the
Responsible Party to participate in the defense of such Claim or
any litigation resulting therefrom, but such participation shall
be at the expense of the Responsible Party. The Affected Party
shall also permit the Responsible Party to assume the defense of
such Claim or any litigation resulting therefrom (unless the
Claim or litigation seeks injunctive or other equitable relief),
provided that (i) counsel selected to conduct the defense of such
Claim or litigation shall be reasonably satisfactory to the
Affected Party and (ii) the Responsible Party shall irrevocably
acknowledge in writing complete responsibility for such claim or
litigation and agree to hold harmless and reimburse the Affected
Party therefor and furnishes, upon request by Affected Party,
reasonable evidence of its financial ability to indemnify. After
such assumption of the defense by the Responsible Party, the
Responsible Party shall not be liable under this Article 8 for
any legal or other expenses subsequently incurred by the Affected
Party in connection with such defense, but the Affected Party may
participate in such defense at its expense. If a Responsible
Party assumes the defense of a proceeding, (a) no compromise or
settlement thereof or consent to entry of a judgment may be
effected by the Responsible Party without the consent of the
Affected Party unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any Person and
no effect on any other claims that may be made against the
Affected Party and (ii) the sole relief provided is monetary
damages that are paid in full by the Responsible Party; (b) the
Responsible Party shall have no liability with respect to any
settlement or compromise effected without its consent.
(b) Consent. If the Responsible Party does not assume
control of the defense of such a proceeding or claim, the entire
defense of the proceeding or claim by the Affected Party, any
settlement made by the Affected Party, and any judgment entered
in the proceeding or claim shall be deemed to have been consented
to by, and shall be binding on, the Responsible Party as fully as
though it alone had assumed the defense thereof and a judgment
had been entered in the proceeding or claim in the amount of such
settlement or judgment, except that the right of the Responsible
Party to contest the right of the Affected Party to
indemnification under this Agreement with respect to the
proceeding or claim shall not be extinguished.
(c) Exception. Notwithstanding the provisions of
Sections 8.5(a) and (b), if the Responsible Party may not assume
such control by reason of the fact that an injunction or other
equitable relief is being sought, but irrevocably acknowledges in
writing complete responsibility for the money damages, the
Affected Party may not settle the money damage portion of such
claim without the consent (not to be unreasonably withheld) of
the Responsible Party.
(d) Cooperation. The parties hereto agree to
cooperate fully with each other in connection with the defense,
negotiation or settlement of any such proceeding or claim.
8.6 The Company's Right of Setoff. The Company shall have
the right, following liquidation of any claim for indemnification
under this Agreement to setoff against any amount payable to
either the IEI Companies or the Citizens Companies pursuant to
the Operating Agreement (including, but not limited to,
distributions of cash and property by the Company), any other
agreement referenced hereby or otherwise any amount for which the
Company is entitled to indemnification hereunder.
ARTICLE 9
CONSTRUCTION; MISCELLANEOUS
9.1 Definitions. Accounting terms used herein and not
otherwise defined herein shall have the meanings attributed to
them under generally accepted accounting principles. When used
in this Agreement, the following terms in all of their tenses and
cases shall have the meanings assigned to them below or elsewhere
in this Agreement as indicated below:
"Affected Party" is defined in Section 8.5(a).
"Affiliate" of any Person means any person directly or
indirectly controlling, controlled by or under common control
with any such Person, and any officer, director or controlling
person of such Person.
"Agreement" is this Formation Agreement, dated as of
March 15, 1996 by and among IEI, IGC, Energy, IES, Citizens, By-
Products, CESCO and the Company.
"By-Products" means Citizens By-Products Coal Company,
a West Virginia corporation and wholly-owned subsidiary of
Citizens.
"CESCO" means Citizens Energy Services Corporation, an
Indiana corporation and wholly owned subsidiary of By-Products.
"CESCO Assumed Liabilities" is defined in Section
2.3(d).
"Citizens" means City of Indianapolis by and through
its Board of Directors for Utilities of the Department of Public
Utilities, as successor trustee of a public charitable trust,
d/b/a Citizens Gas & Coke Utility.
"Citizens Companies" or "Citizens Company" is defined
in Article 4, preamble.
"Citizens Assumed Liabilities" is defined in
Section 2.3(c).
"CESCO Contracts" is defined in Section 2.2(d).
"Citizens Contracts" is defined in Section 2.2(c).
"Claim" is defined in Section 8.5(a).
"Closing" and "Closing Date" are defined in Article 6.
"The Company" means Proliance Energy, LLC, an Indiana
limited liability company.
"The Company Parties" is defined in Section 8.2.
"Confidential Information" means all information
relating to the business of the Company to the extent such
information is not intended to be disseminated to the public or
is otherwise not generally available for lawful use by the
competitors of the IEI Companies, the Citizens Companies or the
Company, including, but not limited to, information relating to
the Company's present or proposed products, services, strategies,
pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software
and hardware, inventions, developments, or Trade Secrets.
"Contract" means any commitment, understanding,
instrument, lease, pledge, mortgage, indenture, note, license,
agreement, purchase or sale order, contract, promise, or similar
arrangement evidencing or creating any obligation, whether
written or oral.
"Credit Enhancement" is defined in Section 7.1.7.
"Energy" means IGC Energy, Inc., an Indiana corporation
and wholly-owned subsidiary of IEI.
"Governmental Authority" means any foreign, federal,
state, regional or local authority, agency, body, court or
instrumentality, regulatory or otherwise, which, in whole or in
part, was formed by or operates under the auspices of any
foreign, federal, state, regional or local government and has on
the Closing Date jurisdiction over any of the IEI Companies, the
Citizens Companies and the Company.
"Governmental Authorization" means any permit, license,
franchise, approval, consent, ratification, permission,
confirmation, endorsement, waiver, certification, registration,
qualification or other authorization issued, granted or given by
or under the authority of any Governmental Authority or pursuant
to any legal requirement.
"IEI" means Indiana Energy, Inc., an Indiana
corporation.
"IEI Companies" or "IEI Company" is defined in Section
4.1.
"IES" means Indiana Energy Services, Inc., an Indiana
corporation and wholly owned subsidiary of Energy.
"IES Assumed Liabilities" is defined in Section 2.3(b).
"IES Contracts" is defined in Section 2.2(b).
"IGC" means Indiana Gas Company, Inc., an Indiana gas
utility corporation and wholly-owned subsidiary of IEI.
"IGC Assumed Liabilities" is defined in Section 2.3(a).
"IGC Contracts" is defined in Section 2.2(a).
"IURC" is defined in Section 4.3.
"Law" means any common law and any federal, state,
regional, local or foreign law, rule, statute, ordinance, rule,
order or regulation, in force on the Closing.
"Liabilities" means responsibilities, obligations,
duties, commitments, claims and liabilities of any and every
kind, whether known or unknown, accrued, absolute, contingent or
otherwise.
"Liens" means any lien, charge, covenant, condition,
easement, adverse claim, demand, encumbrance, limitation,
security interest, option, pledge or any other title defect or
restriction of any kind.
"The Operating Agreement" is defined in Recital B.
"Person" means any individual, corporation,
partnership, association or any other entity or organization.
"Responsible Party" is defined in Section 8.5(a).
"to the Knowledge of" a corporate entity means the
actual knowledge of any officer, director, key employee or
manager of such entity and also means the knowledge such a Person
would have had after a diligent review of the relevant books and
records.
"Trade Secret" means any information which if known to
a competitor of the owner of the information could be harmful to
the owner of the information.
9.2 Notices. All notices shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail,
postage prepaid as follows:
(a) If to the IEI Companies, to:
Indiana Energy, Inc.
1630 N. Meridian Street
Indianapolis, Indiana 46202
Attention: Lawrence A. Ferger
Chairman, President and
Chief Executive Officer
With a copy to:
Ronald E. Christian
Secretary
Indiana Energy, Inc.
1630 N. Meridian Street
Indianapolis, Indiana 46202
(b) If to the Citizens Companies, to:
Citizens Gas & Coke Utility
2020 N. Meridian Street
Indianapolis, Indiana 46202
Attention: Donald L. Lindemann
President and Chief Executive Officer
With a copy to:
Harry V. Huffman
Assistant Secretary
Citizens Gas & Coke Utility
2020 N. Meridian Street
Indianapolis, Indiana 46202
(c) If to the Company:
Proliance Energy, LLC
One North Capitol Avenue
Indianapolis, Indiana 46204
Attention: CT Corporation System
With a copy to:
Carl L. Chapman
President
Proliance Energy, LLC
1630 N. Meridian Street
Indianapolis, Indiana 46202
or to such other address as may have been designated in a prior
notice. Notices sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed to have been
given two (2) business days after being mailed, and otherwise
notices shall be deemed to have been given when received by the
Person to whom the notice is addressed or any other Person with
apparent authority to accept notices on behalf of the Person to
whom the notice is addressed.
9.3 Binding Effect. Except as may be otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement is intended or
shall be construed to confer on any Person other than the parties
any rights or benefits hereunder.
9.4 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
9.5 Exhibits and Schedules. The Exhibits and Schedules
referred to in this Agreement shall be deemed to be a part of
this Agreement.
9.6 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same
document.
9.7 Governing Law. This Agreement shall be governed by and
construed under Indiana law, without regard to conflict of laws
principles.
9.8 Waivers. Compliance with the provisions of this
Agreement may be waived only by a written instrument specifically
referring to this Agreement and signed by the party waiving
compliance. No course of dealing, nor any failure or delay in
exercising any right, shall be construed as a waiver, and no
single or partial exercise of a right shall preclude any other or
further exercise of that or any other right.
9.9 Pronouns. The use of a particular pronoun herein shall
not be restrictive as to gender or number but shall be
interpreted in all cases as the context may require.
9.10 Time Periods. Any action required hereunder to be
taken within a certain number of days shall be taken within that
number of calendar days; provided, however, that if the last day
for taking such action falls on a weekend or a holiday, the
period during which such action may be taken shall be
automatically extended to the next business day.
9.11 No Strict Construction. The language used in this
Agreement has been negotiated by the parties and shall not be
construed against either party.
9.12 Modification. No supplement, modification or
amendment of this Agreement shall be binding unless made in a
written instrument which is signed by all of the parties and
which specifically refers to this Agreement.
9.13 Entire Agreement. This Agreement and the agreements
and documents referred to in this Agreement or delivered
hereunder are the exclusive statement of the agreement among the
parties concerning the subject matter hereof. All negotiations
among the parties are merged into this Agreement, and there are
no representations, warranties, covenants, understandings or
agreements, oral or otherwise, in relation thereto among the
parties other than those incorporated herein and to be delivered
hereunder.
INTENDING TO BE LEGALLY BOUND, the parties have signed this
Agreement as of the date first above written.
PROLIANCE ENERGY, LLC
an Indiana limited liability company
("the Company")
By: /s/Carl L. Chapman
Printed: Carl L. Chapman
Title: President
INDIANA ENERGY, INC., an Indiana IGC ENERGY, INC., an
corporation ("IEI") Indiana corporation
("Energy")
By: /s/Lawrence A. Ferger By: /s/Paul T. Baker
Printed: Lawrence A. Ferger Printed: Paul T. Baker
Title: Chairman, President and Title: President
Chief Executive Officer
INDIANA GAS COMPANY, INC., INDIANA ENERGY SERVICES, INC.,
an Indiana corporation ("IGC") an Indiana corporation
("IES")
By: /s/Niel C. Ellerbrook By: /s/Stephen E. Williams
Printed: Niel C. Ellerbrook Printed: Stephen E. Williams
Title: Senior Vice President and Title: Vice President
Chief Financial Officer
<TABLE>
<S> <C>
City of Indianapolis by and through its CITIZENS BY-PRODUCTS COAL COMPANY.
Board of Directors for Utilities of its a West Virginia corporation ("By-Products")
Department of Public Utilities, a
municipal corporation of the State of Indiana,
as successor trustee of a public charitable trust,
d/b/a CITIZENS GAS & COKE UTILITY By: /s/Donald L. Lindemann
("Citizens")
Printed: Donald L. Lindemann
By: /s/Donald L. Lindemann Title: President
Donald L. Lindemann, President
CITIZENS ENERGY SERVICES CORPORATION,
an Indiana corporation ("CESCO")
ATTEST:
/s/Harry V. Huffman By: /s/Fredrick L. Lekse
Harry V. Huffman, Assistant Secretary
Printed: Fredrick L. Lekse
Title: President
</TABLE>
Schedules
Schedule 2.2(a) IGC Contracts
Schedule 2.2(b) IES Contracts
Schedule 2.2(c) Citizens Contracts
Schedule 2.2(d) CESCO Contracts
Schedule 4.1 IEI Companies Jurisdictions
Schedule 4.3 IEI Companies Consents
Schedule 4.4 IEI Companies Conflicts
Schedule 5.1 Citizens Companies Jurisdictions
Schedule 5.3 Citizens Companies Consents
Schedule 5.4 Citizens Companies Conflicts
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Indiana
Energy, Inc.'s consolidated financial statements as of March 31, 1996, and for
the six months then ended and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 561,727
<OTHER-PROPERTY-AND-INVEST> 8,837
<TOTAL-CURRENT-ASSETS> 154,618
<TOTAL-DEFERRED-CHARGES> 16,697
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 741,879
<COMMON> 144,508
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 168,646
<TOTAL-COMMON-STOCKHOLDERS-EQ> 313,154
0
0
<LONG-TERM-DEBT-NET> 197,118
<SHORT-TERM-NOTES> 3,800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 267
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 227,540
<TOT-CAPITALIZATION-AND-LIAB> 741,879
<GROSS-OPERATING-REVENUE> 376,862
<INCOME-TAX-EXPENSE> 25,998
<OTHER-OPERATING-EXPENSES> 300,930
<TOTAL-OPERATING-EXPENSES> 326,928
<OPERATING-INCOME-LOSS> 49,934
<OTHER-INCOME-NET> 3,473
<INCOME-BEFORE-INTEREST-EXPEN> 53,407
<TOTAL-INTEREST-EXPENSE> 8,080
<NET-INCOME> 45,327
0
<EARNINGS-AVAILABLE-FOR-COMM> 45,327
<COMMON-STOCK-DIVIDENDS> 12,348
<TOTAL-INTEREST-ON-BONDS> 7,468
<CASH-FLOW-OPERATIONS> 56,515
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 0
</TABLE>
