SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-9187
IES INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Iowa 42-1271452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IES Tower, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 319-398-4411
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The aggregate market value of the registrant's voting stock
held by non-affiliates, as of February 28, 1995 was
approximately $788,404,517 based upon the Composite Tape
closing price as reported in The Wall Street Journal. (For
this purpose only, the individuals listed under "Security
Ownership of Management" in the Definitive Proxy Statement
incorporated herein by reference are considered to be
affiliates.)
Indicate the number of shares outstanding of each of the
registrant's classes of Common Stock, as of February 28, 1995.
Common Stock, no par value - 28,904,606 shares
Documents Incorporated by Reference
Part of this Form 10-K into
Document Which Document is Incorporated
Definitive proxy statement
as filed on March 20, 1995 III
PART I
Item l. Business
IES Industries Inc.
IES Industries Inc. (Industries) is a holding company
which is incorporated under the laws of Iowa. Industries'
wholly-owned subsidiaries are IES Utilities Inc. (Utilities)
and IES Diversified Inc. (Diversified). Utilities is primarily
an electric and natural gas utility company operating in the
State of Iowa which serves approximately 330,000 electric and
173,000 natural gas retail customers as well as 32 resale
customers in more than 550 Iowa communities. Diversified is a
holding company for subsidiaries engaged in non-utility
operations, including oil and natural gas production and
marketing, independent power generation, railroad and other
transportation businesses in the Midwest and local real estate
development.
Industries' consolidated assets and earnings are
predominantly those of Utilities.
Utilities
Utilities is primarily a public utility operating company
engaged in providing electric energy, natural gas and, to a
limited extent, steam used for heating and industrial
purposes, in the State of Iowa.
Utilities' only wholly-owned subsidiary as of December
31, 1994, was IES Ventures Inc. (Ventures), which is a holding
company for unregulated investments. Ventures' wholly-owned
subsidiary at December 31, 1994, was IES Midland Development
Inc. (Midland), which owns and operates a landfill in Ottumwa,
Iowa. Both Ventures and Midland were formed in December 1994
and neither had any operations in 1994. Ventures also has a
35% equity investment in Aqua Ventures L.C., which is an
aquaculture facility formed to raise fish for human
consumption.
Utilities' sales of electricity (in Kwh), excluding off-
system sales, increased (decreased) 4.3%, 24.9% and (1.5%),
during the years 1994-1992, respectively. The 1994 Kwh sales
were adversely affected by milder than normal weather,
particularly during the summer months. The 1993 increase is
attributable to the acquisition of the Iowa retail service
territory from Union Electric Company (UE) (See Note 2 of the
Notes to Consolidated Financial Statements) and a return to
more normal weather conditions. The 1992 results were
adversely affected by extremely mild weather conditions in
Utilities' service territory. Total gas delivered by
Utilities, including transported volumes, increased
(decreased) (2.7%), 5.3% and (0.3%) during the years
1994-1992, respectively.
The approximate percentages of Utilities' revenue and
operating income before income taxes and interest derived from
the sale of electricity and gas during the years 1994-1992 are
as follows:
1994 1993 1992
Revenues:
Electric 78% 77% 76%
Gas 20 22 23
Operating income before
income taxes and interest:
Electric 93% 90% 91%
Gas 6 10 8
The relationships between the electric and gas
percentages presented above are influenced by changes in
energy sales, timing of rate proceedings and changes in the
costs of fuel or purchased gas billed to customers through
related adjustment clauses.
There are seasonal variations in Utilities' electric and
gas businesses, which are principally related to the use of
energy for air conditioning and heating. In 1994, 40.2% of
Utilities' electric revenues were reported in June through
September, reflecting the use of electricity for cooling, and
60.1% of Utilities' gas revenues were reported in the months
of January, February, March and December, reflecting the use
of gas for heating.
For additional information concerning electric and gas
operations, see Item 1. "Other Information Relating to
Utilities Only", Item 7. "Management's Discussion and Analysis
of the Results of Operations and Financial Condition" and the
Electric and Gas Operating Comparisons.
Terra Comfort Corporation
Terra Comfort Corporation (Terra Comfort), which was a
wholly-owned subsidiary of Diversified and owned combustion
turbines with 114 Mw of capacity, had a contract through 1994
to provide generating capacity to Utilities. Effective
December 31, 1994, all of the assets of Terra Comfort were
sold to Utilities.
Diversified
Other than Utilities' unregulated investments, the non-
utility operations of the Company are organized under
Diversified. Diversified is a holding company whose wholly-
owned subsidiaries include IES Transportation Inc. (IES
Transportation), IES Energy Inc. (IES Energy) and IES
Investments Inc. (IES Investments).
IES Transportation is a holding company whose wholly-
owned subsidiaries at December 31, 1994, included the Cedar
Rapids and Iowa City Railway Company (CRANDIC), IES Railcar
Service Center Inc. (Railcar) and IES Transfer Services Inc.
(Transfer), which was formerly named Port of Cedar Rapids Inc.
CRANDIC is a short-line railway which renders freight service
between Cedar Rapids and Iowa City. Railcar's operations
consist of washing, repairing and painting railcars.
Transfer's operations include transloading and storage
services. IES Transportation has a 75% equity investment in
IEI Barge Services, Inc. (Barge) which provides barge terminal
and hauling service on the Mississippi River. IES
Transportation also has several other equity investments in
transportation related businesses. IES Transportation's 1994
operating revenues and assets at December 31, 1994 were as
follows:
Operating
Revenues Assets
(in 000's)
CRANDIC $ 15,341 $ 26,668
Railcar 4,373 7,301
Barge 1,897 7,996
Transfer 28 873
Other - 1,294
$ 21,639 $ 44,132
IES Energy is a holding company whose wholly-owned
subsidiaries at December 31, 1994, included Industrial Energy
Applications, Inc. (IEA) and Whiting Petroleum Corporation
(Whiting). IEA is involved in developing stand-by production
facilities for large users of electricity and markets natural
gas and steam to end-users. Whiting is organized to purchase,
explore for, develop and produce crude oil and natural gas, in
part through the formation and operation of limited
partnerships. IES Energy's 1994 operating revenues and assets
at December 31, 1994 were as follows:
Operating
Revenues Assets
(in 000's)
IEA $ 32,796 $ 23,709
Whiting 24,573 72,858
Other - 156
$ 57,369 $ 96,723
IES Investments is a holding company whose primary wholly-
owned subsidiaries at December 31, 1994, included Iowa Land
and Building Company (Iowa Land), IES Investco Inc.
(Investco), Southern Iowa Manufacturing Company (SIMCO) and
Village Lakeshares, Inc. (Lakeshares). Iowa Land is organized
to pursue real estate and economic development activities in
Utilities' service territory. Investco is a holding company
for certain equity investments. SIMCO manufactures hydraulic
rotary drill rigs. IES Investments purchased an additional
32.9% equity interest in Lakeshares during 1994, making it a
wholly-owned subsidiary. Lakeshares is a holding company for
resort properties in Iowa.
IES Investments has an equity investment of less than 20%
voting interest in McLeod, Inc., a holding company for various
telecommunications businesses. IES Investments also has
direct and indirect equity interests in various real estate
ventures, primarily concentrated in Cedar Rapids, and holds
other passive investments. IES Investments' 1994 operating
revenues and assets at December 31, 1994 were as follows:
Operating
Revenues Assets
(in 000's)
Iowa Land $ 2,504 $ 10,530
Investco - 3,507
SIMCO 2,650 1,227
Lakeshares 5,641 13,283
Real estate ventures 3,306 23,987
Other 5,085 8,541
$ 19,186 $ 61,075
Other Information Relating to the Company
CONSTRUCTION AND ACQUISITION PROGRAM AND FINANCING. The
capital requirements, including $3.1 million of sinking funds
that may be met by pledging additional utility property, for
the period 1995-1999 are estimated at $1.4 billion and are
summarized as follows:
Capital Requirements
1995 1996 1997 1998 1999
(in thousands)
Construction and
acquisition expenditures -
Electric:
Generation $ 52,687 $ 48,369 $ 47,992 $ 62,484 $ 72,965
Transmission 14,578 30,538 24,393 32,698 30,065
Distribution 37,504 42,910 40,250 40,820 42,525
Other 11,836 13,146 9,810 10,784 10,873
Gas and other 46,559 32,323 23,262 22,971 25,861
Total utility
expenditures 163,164 167,286 145,707 169,757 182,289
Non-utility
expenditures 38,642 62,299 63,707 64,899 44,680
Total construction
and acquisition
expenditures 201,806 229,585 209,414 234,656 226,969
Energy efficiency
expenditures 12,986 13,406 14,474 15,379 14,605
Long-term debt
maturities and
sinking funds:
Utilities 100,920 15,770 8,690 690 50,690
Diversified 80,500 - - - -
Other subsidiaries 282 305 331 357 10,393
181,702 16,075 9,021 1,047 61,083
Total capital
requirements $ 396,494 $ 259,066 $ 232,909 $ 251,082 $ 302,657
The Company intends to refinance the majority of the
debt maturities with long-term securities.
Approximately 34% of Utilities' construction expenditures
are related to generation. Of this amount, approximately 64%
represents capacity expansions and other improvements at
fossil generating stations and 36% represents modifications
and improvements at Utilities' nuclear generating station, the
Duane Arnold Energy Center (DAEC).
Included in non-utility construction and acquisition
expenditures for the five year period 1995-1999 are oil and
gas acquisition expenditures at Whiting of $128 million and
anticipated expenditures for energy-related business
expansions of $120 million.
For a discussion regarding the Company's assumptions in
financing future capital requirements, see the "Liquidity and
Capital Resources" section of Item 7. "Management's Discussion
and Analysis of the Results of Operations and Financial
Condition."
REGULATION. Because of its ownership of Utilities,
Industries is a "holding company" as defined by the Public
Utility Holding Company Act of 1935 (PUHCA). However,
Industries claims exemption from regulation under the PUHCA
(except for Section 9(a)2 thereof, which requires that any
acquisition of securities of a utility company by Industries
be approved by the Securities and Exchange Commission) on the
basis that Industries and Utilities are both organized in the
same state and Utilities conducts its business in that state.
Utilities operates pursuant to the laws of the State of
Iowa and is thereby subject to the jurisdiction of the Iowa
Utilities Board (IUB). The IUB has authority to regulate
rates and standards of service, to prescribe accounting
requirements and to approve the location and construction of
electric generating facilities having a capacity in excess of
25,000 Kw. The IUB is comprised of three Commissioners
appointed by the Governor and ratified by the State Senate.
Requests for rate relief are based on historical test periods,
adjusted for certain known and measurable changes. The IUB
must decide on requests for rate relief within 10 months of
the date of the application for which relief is filed or the
interim rates granted become permanent. Interim rates, if
allowed, are permitted to become effective, subject to refund,
no later than 90 days after the rate increase application is
filed.
In Iowa, non-exclusive franchises, which cover the use of
streets and alleys for public utility facilities in
incorporated communities, are granted for a maximum of
twenty-five years by a majority vote of local qualified
residents. In addition, the IUB defines the boundaries of
mutually exclusive service territories for all electric
utilities. The IUB has jurisdiction and grants franchises for
the use of public highway rights-of-way for electric and gas
facilities outside corporate limits.
Utilities is subject to the jurisdiction of the Federal
Energy Regulatory Commission (FERC) with respect to wholesale
electric sales and the issuance of securities. Revenues
derived from Utilities' wholesale and off-system sales
amounted to 6.9%, 9.0% and 10.1% of electric revenues for 1994-
1992, respectively. The 1994 decrease is primarily the result
of lower off-system sales to other utilities. Utilities'
consolidated subsidiaries are not subject to regulation by the
IUB or the FERC.
EMPLOYEES. At December 31, 1994, the Company had a total
of 2,763 (2,248 at Utilities) regular full-time employees. At
December 31, 1994, Utilities had 1,124 employees subject to
six collective bargaining arrangements, CRANDIC had 59
employees subject to four collective bargaining arrangements,
Railcar had 63 employees subject to one collective bargaining
arrangement and Barge had nine employees subject to one
collective bargaining arrangement.
ENVIRONMENTAL MATTERS. The Company is regulated in
environmental protection matters by a number of Federal, state
and local agencies. Such regulations are the result of a
number of environmental protection laws passed by the U. S.
Congress, state legislature and local governments and enforced
by Federal, state and county agencies. The laws impacting the
Company's operations include the Clean Water Act; Clean Air
Act, as amended by the Clean Air Act Amendments of 1990;
National Environmental Policy Act; Resource Conservation and
Recovery Act; Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), as amended by
the Superfund Amendments and Reauthorization Act of 1986;
Occupational Safety and Health Act; National Energy Policy Act
of 1992 and a number of others.
The Company regularly secures and renews Federal, state
and local permits to comply with the environmental protection
laws and regulations. Costs associated with such compliances
have increased in recent years and are expected to increase
moderately in the future. The Clean Air Act Amendments of
1990 calls for significant reductions in sulfur dioxide and
nitrogen oxide air emissions. The majority of such reductions
will be required from utilities. It is anticipated that any
costs incurred by Utilities will be recovered from its
ratepayers under current regulatory principles. Refer to
Notes 12(a) and 12(g) of the Notes to Consolidated Financial
Statements for additional information regarding Utilities'
expected capital expenditures.
In January 1995, Utilities received an Administrative
Compliance Order (ACO) from the United States Environmental
Protection Agency (EPA) alleging noncompliance and requiring
Utilities to satisfy certain monitoring, reporting, and
recordkeeping requirements of the Acid Rain Program at its
Phase II units. Utilities has since notified EPA that it is
currently in compliance with the specified requirements. EPA
has indicated that it is considering issuing an Administrative
Penalty Order to address the alleged noncompliance.
Management believes that any penalties incurred by Utilities
would not have a material adverse effect on its financial
position or results of operations.
At December 31, 1994, the Company had recorded
$44 million of environmental liabilities ($43 million at
Utilities), which, pursuant to generally accepted accounting
principles, represents either the best current estimate or the
minimum amount of the estimated range of such costs which the
Company expects to incur, depending on the information known
for each site. These estimates are subject to continuing
review and could ultimately exceed the recorded amounts.
Utilities has been named as a Potentially Responsible
Party (PRP) for certain former manufactured gas plant (FMGP)
sites by either the Iowa Department of Natural Resources
(IDNR), the Minnesota Pollution Control Agency (MPCA) or the
EPA. Utilities is working with the IDNR, MPCA and EPA to
investigate its sites and to determine the appropriate
remediation activities that may be needed to mitigate health
and environmental concerns.
Utilities is investigating the possibility of insurance
and third party cost sharing for FMGP clean-up costs. The
amount of shared costs, if any, cannot be reasonably
determined and, accordingly, no potential sharing has been
recorded at December 31, 1994. Considering the rate treatment
allowed by the IUB, management believes that the clean-up
costs incurred by Utilities for these FMGP sites will not have
a material adverse effect on its financial position or results
of operations. Refer to Note 12(f) of the Notes to
Consolidated Financial Statements for more information.
The Nuclear Waste Policy Act of 1982 assigned
responsibility to the U.S. Department of Energy (DOE) to
establish a facility for the ultimate disposition of high
level waste and spent nuclear fuel and authorized the DOE to
enter into contracts with parties for the disposal of such
material beginning in January 1998. Utilities entered into
such a contract and has made the agreed payments to DOE. The
DOE, however, has experienced significant delays in its
efforts and material acceptance is now expected to occur no
earlier than 2010. Utilities has been storing spent nuclear
fuel on-site since plant operations began in 1974 and has
current on-site capability to store spent fuel until 2002.
Utilities is aggressively reviewing options for additional
spent nuclear fuel storage capability, including expanding on-
site storage, pursuing other off-site storage and supporting
legislation to resolve the lack of progress by the DOE.
The Low-Level Radioactive Waste Policy Amendments Act of
1985 mandated that each state must take responsibility for the
storage of low-level radioactive waste produced within its
borders. The State of Iowa has joined the Midwest Interstate
Low-Level Radioactive Waste Compact Commission (Compact),
which is planning a storage facility to be located in Ohio to
store waste generated by the Compact's six member states. At
December 31, 1994, Utilities has prepaid costs of
approximately $1 million to the Compact for the building of
such a facility. Currently, Utilities is storing its low-
level radioactive waste generated at the DAEC on-site until
new disposal arrangements are finalized among the Compact
members. A Compact disposal facility is anticipated to be in
operation in approximately ten years. On-site storage
capability currently exists for low-level radioactive waste
expected to be generated until the Compact facility is able to
accept waste materials.
Utilities was notified in 1986 by the EPA of its
investigation and potential corrective action for the control
of releases and threatened releases of hazardous substances at
the Maxey Flats Nuclear Disposal site at Morehead, Kentucky.
The EPA action is being taken pursuant to CERCLA, and under
such act Utilities has been designated as a PRP (there are 832
in total) as defined under CERCLA. The EPA notice encouraged
all PRP's to undertake voluntary clean-up activities at the
site. A Steering Committee has been organized and Utilities
is participating in its activities. Low-level radioactive
wastes were the only materials contributed to the site by
Utilities. Such contributions comprise only 0.28% of the
total volumes deposited by all contributors. The Steering
Committee is nearing settlement of the issues with the EPA,
the State of Kentucky and deminimis parties. Proposed Consent
Decrees are currently being reviewed and, once executed, will
be submitted to the court for approval.
The environmental concern is that a release of hazardous
substances has occurred at the Maxey Flats site and that such
release may pose an environmental threat to local surface
waters, ground waters, wells and landowners. Utilities'
portion of the costs of the remedial activities, including the
ultimate clean-up, are currently estimated at $275,000 which
is included in the $44 million of environmental liabilities
the Company has recorded at December 31, 1994. Utilities has
notified its nuclear insurance carriers of the proceedings.
The possibility that exposure to electric and magnetic
fields emanating from power lines, household appliances and
other electric sources may result in adverse health effects
has been the subject of increased public, governmental and
media attention. A considerable amount of scientific research
has been conducted on this topic without definitive results.
Research is continuing in order to resolve scientific
uncertainties.
Whiting is responsible for certain dismantlement and
abandonment costs related to various off-shore oil and gas
properties, the most significant of which is located off the
coast of California. Whiting accrues these costs as reserves
are extracted and such costs are included in "Depreciation and
amortization" in the Consolidated Statements of Income. A
corresponding environmental liability, $0.1 million at
December 31, 1994, has been recognized in the Consolidated
Balance Sheets for the cumulative amount expensed.
Refer to Note 12 of the Notes to Consolidated Financial
Statements and Item 7. "Management's Discussion and Analysis
of the Results of Operations and Financial Condition" for
further discussion of environmental matters.
Other Information Relating to Utilities Only
RATE MATTERS. Refer to Note 3 of the Notes to
Consolidated Financial Statements for a discussion of
Utilities' rate matters.
ELECTRIC OPERATIONS. Utilities' net peak load (60
minutes integrated) of 1,779,627 kilowatts occurred on June
17, 1994. At the time of the peak load, no interruptible
customers were interrupted, however, 7,210 residential air
conditioning cycling customers were interrupted. The total
kilowatts interrupted was 5,840 of a possible 318,102
kilowatts available for interruption. Utilities' additional
reserve obligation at that time was 226,744 kilowatts. The
net capability of Utilities' generating stations at the time
of this peak load was 1,741,100 kilowatts, with an additional
280,000 kilowatts being available under purchase contracts,
thereby providing an aggregate capability of 2,021,100
kilowatts.
Utilities projects an electric sales growth rate of 2.0
to 2.5 percent per year over the next decade, which will be
met by a mix of its existing generation, capacity purchases
and new construction. The construction activities will be
undertaken in a fashion that best meets the needs of
individual customers and the system as a whole. See Note
12(b) of the Notes to Consolidated Financial Statements for a
discussion of Utilities' firm contracts for the purchase of
capacity.
Utilities is interconnected with other utilities in Iowa
and neighboring states and is a member of the Mid-Continent
Area Power Pool (MAPP). MAPP's purpose is to coordinate the
planning, construction and operation of generation and
transmission facilities, and the purchase and sale of power
and energy among its members.
In addition, Utilities, Midwest Power Systems Inc.
(Midwest) and Iowa-Illinois Gas and Electric Company (Iowa-
Illinois) are partners in ENEREX, a general partnership formed
to operate a common control system for dispatching
electricity. Through ENEREX, the most efficient electric
generating plants are used to meet the combined electric needs
of the customers of all of the partners. The ENEREX control
center recommends the specific generating units to be operated
each day in order to provide the most economical and efficient
use of such units at any particular time. The partnership is
being dissolved on June 30, 1995, due to the pending merger of
Midwest and Iowa-Illinois. After that time, there would only
be two members in the partnership, thus the diversity and
savings available would no longer justify the existence of the
partnership.
Utilities is a party to the Twin Cities-Iowa-St. Louis
345 Kv Interconnection Coordinating Agreement (the
Coordinating Agreement) with five other midwestern utilities,
three of which operate in the State of Iowa. The Coordinating
Agreement provides for the interconnection of the respective
systems of the companies through a 345 Kv transmission line
and for the interchange of power on various bases. The rates
under the Coordinating Agreement are primarily determined by
agreement between the delivering and receiving companies.
Utilities maintains and operates transmission and
substation facilities connecting with its high voltage
transmission systems pursuant to a non-cancellable operating
agreement (the Operating Agreement) with Central Iowa Power
Cooperative (CIPCO). The Operating Agreement, which will
terminate on December 31, 2035, provides for the joint use of
certain transmission facilities of Utilities and CIPCO.
For comments relating to agreements between Utilities and
its partners for the joint ownership of the DAEC, the Ottumwa
Generating Station (OGS), and Neal Unit No. 3, see Item 2.
"Properties" and Note 13 of the Notes to Consolidated
Financial Statements.
FUEL SUPPLY. The following table details the sources of
the electricity sold by Utilities during 1994 and expected
sources for the following three years:
Actual /-------- Expected --------/
1994 1995 1996 1997
Fossil, primarily coal 50% 61% 60% 60%
Nuclear 26 23 22 26
Purchases 24 16 18 14
100% 100% 100% 100%
The above percentages assume nuclear refueling outages
will occur during both 1995 and 1996. There was no refueling
outage in 1994. The 1994 purchases include purchases by
Utilities from Terra Comfort. The increase in the expected
fossil percentages from the 1994 actual is a function of lower
projected fuel costs for 1995-1997 as well as the timing of
the nuclear refueling outages. In addition, Utilities
anticipates the availability and efficiency of its fossil
generating stations to be greater in 1995-1997 due to capacity
improvements made at certain stations in recent years.
Utilities' primary fuel source is coal and the generation
mix is influenced directly by refueling outages at the DAEC.
The average cost of fuel used for generation by Utilities for
the years 1994-1992 is presented below:
1994 1993 1992
Average cost of fuel:
Nuclear, per million Btu's $ .67 $ .60 $ .55
Coal, per million Btu's .97 .97 1.08
Average for all fuels,
per million Btu's .89 .90 .93
The following table summarizes Utilities' minimum coal
contract commitments:
Average
Annual Maximum estimated base price
Quantity Termination Sulfur per ton of coal delivered
(Tons) Date Content 1995 1996 1997
Cordero Mining Co.
(OGS) (1) 780,571 12/31/01 0.6% $ 17.24 $ 17.76 $ 18.29
Koch Carbon Inc.
(Sutherland) 100,000 12/31/99 6.2% $ 19.23 $ 19.51 $ 19.77
Caballo Coal Co.
(OGS or
BGS) (2) 1,200,000 12/31/97 0.4% $ 12.41 $ 12.80 $ 13.19
Thunder Basin
(Sutherland) 320,000 12/31/96 0.3% $ 13.63 $ 13.95 $ N/A
Caballo Rojo
(BGS) 200,000 12/31/96 0.3% $ 14.83 $ 15.18 $ N/A
Caballo Rojo (3) 640,000 12/31/96 0.3% $ 16.17 $ 16.56 $ N/A
Short-term
contracts
(BGS) 27,000 04/30/95 1.0% $ 22.50 $ N/A $ N/A
(1) Cost under the contracts is comprised of base
contract prices plus specifically contracted
periodic adjustments for increases in certain
specific costs of producing the coal. The effect of
such adjustments to the base contract prices of
future coal cannot currently be predicted with any
certainty.
(2) The contract covers 1,200,000 to 1,550,000
annual tons delivered to either OGS or Burlington
Generating Station (BGS). The prices listed in the
table are for OGS; the BGS delivered price would be
slightly higher.
(3) Coal may be delivered to either Prairie Creek
Station or Sixth Street Station. The prices listed
in the table are for Prairie Creek; the Sixth Street
delivered price would be slightly higher.
During 1994, Utilities purchased a total of 3,761,000
tons of coal for its generating plants. At December 31, 1994,
Utilities had coal inventory at its principal generating
stations ranging from 58 to 119 days' usage during high demand
periods or a weighted average of 70 days' usage.
Utilities estimates that its existing coal fired
generating units will require approximately 13,292,000 tons of
coal to operate during the period 1995-1997. Utilities
believes that an ample supply of coal is available in the spot
market and intends to purchase such coal as necessary to
supplement its coal supply contracts and meet its generation
requirements.
Some of Utilities' contracted coal supply is provided by
surface mining operations which are regulated by the Federal
Strip Mine Act. Most of the surface mining coal contracts
contain clauses which pass reclamation and royalty costs
through to the respective utility; such costs billed to
Utilities are recoverable through its Energy Adjustment
Clauses (EAC). See Note 1(k) of the Notes to Consolidated
Financial Statements for discussion of the EAC.
Utilities has purchased a supply of UF6 pursuant to a
contract with Eldorado, Ltd. of Canada which, along with
previously purchased and contracted amounts, will provide
Utilities with sufficient UF6 to cover its needs through the
1995 refueling. Such uranium is being held without charge by
the United States Department of Energy (DOE) under a usage
agreement between the DOE and Utilities, which allows
Utilities to retrieve the material as needed. Bids are
currently being evaluated for purchase of additional uranium.
Enrichment services are being provided by the United States
Enrichment Corporation (USEC) under a contract which extends
to the year 2014 or the retirement of the plant, whichever
occurs first. Under provisions of that contract, Utilities is
exploring possibilities of obtaining lower cost enrichment
from non-USEC sources. Fabrication of the nuclear fuel is
being performed by General Electric Company for fuel through
the 2008 refueling of the DAEC. See Note 12(f) of the Notes
to Consolidated Financial Statements for a discussion of
Utilities' assessment under the National Energy Policy Act of
1992 for the "Uranium Enrichment Decontamination and
Decommissioning Fund," which is based upon prior nuclear fuel
purchases.
Refer to Item 1. "Environmental Matters" for a discussion
of nuclear waste disposal issues.
GAS OPERATIONS. With the advent of FERC Order 636 (Order
636), issued in 1992, the nature of Utilities' gas supply
portfolio has changed. Traditionally, Utilities' natural gas
was supplied by the following interstate pipelines - Northern
Natural Gas Company (Northern), Natural Gas Pipeline Company
of America (Natural) and ANR Pipeline Company (ANR). These
pipelines were obligated to supply natural gas to Utilities
under peak day conditions up to pre-determined contract
levels. Order 636, among other things, eliminated the
interstate pipelines obligation to serve and now requires
Utilities to purchase virtually 100% of its gas supply
requirements from non-pipeline suppliers.
Order 636, as modified on rehearing: 1) requires
Utilities' pipeline suppliers to unbundle their services so
that gas supplies are obtained separately from transportation
service, and transportation and storage services are operated
and billed as separate and distinct services; 2) requires the
pipeline suppliers to offer "no notice" transportation service
under which firm transporters (such as Utilities) can receive
delivery of gas up to their contractual capacity level on any
day without prior scheduling; 3) allows pipelines to abandon
long-term (one year or more) transportation service provided
to a customer under an expiring contract whenever the customer
fails to match the highest rate and longest term (up to 20
years) offered to the pipeline by other customers for the
particular capacity; and 4) provides for a mechanism under
which pipelines can recover prudently incurred transition
costs associated with the restructuring process. Utilities
has enhanced access to competitively priced gas supply and
more flexible transportation services as a result of Order
636. However, under Order 636, Utilities is required to pay
certain transition costs incurred and billed by its pipeline
suppliers.
Utilities' three pipeline suppliers have made filings
with the FERC to begin collecting their respective transition
costs, and additional filings are expected. Utilities began
paying the transition costs in 1993, and, at December 31,
1994, has recorded a liability of $8.0 million for those
transition costs that have been incurred by the pipelines to
date, including $3.0 million expected to be billed through
1995. Utilities is currently recovering the transition costs
from its customers through its Purchased Gas Adjustment
Clauses as such costs are billed by the pipelines. Transition
costs, in addition to the recorded liability, that may
ultimately be charged to Utilities could approximate $10
million. The ultimate level of costs to be billed to
Utilities depends on the pipelines' filings with the FERC and
other future events, including the market price of natural
gas. However, Utilities believes any transition costs that the
FERC would allow the pipelines to collect from Utilities would
be recovered from its customers, based upon regulatory
treatment of these costs currently and similar past costs by
the IUB. Accordingly, regulatory assets, in amounts
corresponding to the recorded liabilities, have been recorded
to reflect the anticipated recovery.
Contracts with the pipelines subsequent to Order 636 are
comprised primarily of firm transportation, firm storage and
no-notice service. Firm transportation contracts grant
Utilities access to firm pipeline capacity which is used to
transport gas supplies from non-pipeline suppliers on peak
day. Firm storage service allows Utilities to purchase gas
during off-peak periods and place this gas in an account with
the pipelines. When the gas is needed for peak day
deliveries, Utilities requests and the pipelines deliver the
gas back on a firm basis. No-notice service is a new service
offered as a result of Order 636. No-notice service grants
Utilities the right to take more or less gas than is actually
nominated up to the level of no-notice service. No-notice
service takes the form of transportation balancing or storage
service depending on the pipeline.
Utilities' portfolio of firm transportation, firm storage
and no-notice service from pipelines is as follows:
Firm Firm
Transportation Storage No-Notice
Northern:
Volume (Dth/day) 140,996 48,218 10,000
Expiration date 10/31/97 10/31/97 10/31/97
Natural:
Volume (Dth/day) 28,605 37,467 10,000
Expiration date 11/30/2000 11/30/95 11/30/95
ANR:
Volume (Dth/day) 60,737 19,180 5,000
Expiration date 10/31/2003 10/31/2003 10/31/2003
In addition to firm storage with pipelines, Utilities
also contracts for firm storage from Llano, Inc. This
contract calls for peak day deliveries of 18,667 Dth/day and
expires May 31, 1997.
Gas supply is purchased from a variety of non-pipeline
suppliers located in the United States and Canada having
access to virtually all major natural gas producing regions.
For the calendar year 1994, Utilities' maximum daily load
occurred on January 17, 1995, with total system flow of
approximately 289,000 dekatherms, including transported
volumes, and total contract availability of approximately
276,000 dekatherms.
As a result of Order 636, Utilities accepted assignment
of certain gas supply contracts previously held by Northern.
Accepting assignment of these contracts resulted in lower
costs to Utilities than would have been incurred had Northern
bought out the agreements and billed Utilities for its share
of such costs.
Contracts assigned to Utilities from Northern have
maximum delivery requirements of 23,147 Dth, and minimum take
requirements of 5,851 Dth, under contracts with remaining
lengths of up to six years.
Additional firm gas supply agreements were independently
negotiated by Utilities. These gas supply agreements have
maximum and minimum obligations as follows:
Maximum Minimum
Daily Quantity Daily Quantity
(Dth/day) (Dth/day)
Northern 55,410 29,983
Natural 21,575 18,812
ANR 25,000 18,500
These gas supply contracts have expiration dates ranging
from five months to five years.
Rates charged by Utilities' pipeline suppliers are
subject to regulation by the FERC. A purchased gas adjustment
clause (PGA) allows Utilities to adjust customer rates as a
result of changes in the cost of gas purchased. See Note 1(k)
of the Notes to Consolidated Financial Statements for
discussion of the PGA.
NUCLEAR REGULATORY COMMISSION (NRC) AND OTHER NUCLEAR
MATTERS. As an owner and the operator of a nuclear generating
unit at the DAEC, Utilities is subject to the jurisdiction of
the NRC. The NRC has broad supervisory and regulatory
jurisdiction over the construction and operation of nuclear
reactors, particularly with regard to public health, safety
and environmental considerations.
The operation and design of nuclear power plants is under
constant review by the NRC. Utilities has complied with and
is currently complying with all NRC requests for data relating
to these reviews. As a result of such reviews, further
changes in operations or modifications of equipment may be
required, the cost of which cannot currently be estimated.
Utilities will be conducting an inspection during the
1995 refueling outage of the DAEC reactor core internals.
This is in response to cracking identified in similar
reactors. If cracking is identified, repairs will be
completed either at the time discovered or during the 1996
refueling outage depending upon the type of repair required.
It is estimated that such repairs, if necessary, would cost
approximately $3.0 million.
The large amount of change in regulations, designs and
procedures that occur for a nuclear power plant over a period
of time presents a difficult task to ensure that all affected
design information documents, procedures and specifications
are continually updated. Utilities has developed a
Configuration Management Plan and a Design Basis Program which
are designed to coordinate control of the updating and
maintenance of plant documents to ensure regulatory
requirements are met. The first phase of this effort has been
completed and work is now under way on the second phase.
Through 1994, $4.3 million had been spent on the second phase.
It is expected that an additional $1.1 million will be
expended through 1996.
The NRC has expressed concern to licensees over use of
thermolag fire proofing material in nuclear power plants.
Utilities has spent $0.7 million through 1994 and anticipates
spending an additional $1.0 million through 1997 to identify
and resolve deficiencies.
Under the Price-Anderson Amendments Act of 1988 (1988
Act), Utilities currently has the benefit of $8.9 billion of
public liability coverage which would compensate the public in
the event of an accident at a commercial nuclear power plant.
The 1988 Act permits such coverage to rise with increased
availability of nuclear insurance and the changing number of
operating nuclear plants subject to retroactive premium
assessments. The 1988 Act provides for inflation indexing
(Consumer Price Index every fifth year) of the retroactive
premium assessments.
As an outgrowth of the Three Mile Island Nuclear Power
Plant (TMI) experience, nuclear plant owners have initiated a
cooperative insurance program designed to help cover
replacement power expenses for participating utilities arising
from a possible nuclear plant accident. Utilities is a
participant in this program. This type of insurance is an
industry response intended to lessen the cost burden on
customers in the event of a lengthy plant shutdown.
To provide this coverage, a nuclear utility mutual
insurance company known as Nuclear Electric Insurance Limited
(NEIL) was formed. Under Utilities' policy, following a 21
week waiting period from the time of an accident, coverage of
up to 100% of estimated replacement power costs for an ensuing
one year period is provided and up to 80% of that amount will
be provided for a second and third year. The annual premium
cost to Utilities is estimated to be less than the cost of
replacement power for one week.
Utilities currently carries primary property insurance
coverage on the DAEC facility of $500 million with the Nuclear
Insurance Pools (American Nuclear Insurers and Mutual Atomic
Energy Liability Underwriters). Following the TMI incident,
it became apparent to nuclear plant owners that the
commercially available property insurance was inadequate
considering the cost of decontamination. Consequently,
Utilities obtained excess property insurance through the
Nuclear Insurance Pools and NEIL as it became available. The
Nuclear Insurance Pools excess insurance now provides
$850 million of coverage after losses exceed $500 million.
The NEIL excess insurance provides an additional $1.4 billion
of coverage after losses exceed $1.35 billion. These policies
bring the total property coverage to $2.75 billion. The NEIL
policy limits include $250 million for premature
decommissioning.
For information concerning the potential assessment of
retroactive premiums relating to the above described public
liability, replacement power and excess property insurance
coverages, refer to Note 12(e) of the Notes to Consolidated
Financial Statements. The NRC established requirements with
respect to guaranteeing the ability of owners to make such
retroactive payments on the public liability policy. Of the
various alternatives available, Utilities elected to submit
certified financial statements showing that sufficient cash
flow could be generated and would be available for payment of
the required assessments within a three month period. The
maximum of the annual retroactive premiums was approximately
$7 million at December 31, 1994.
The NRC has a backlog of generic and unresolved safety
issues which it is currently studying. Resolution of such
issues may require additional modifications to the DAEC.
Refer to Item 1. "Environmental Matters" for a discussion
of nuclear waste disposal issues.
NATIONAL ENERGY POLICY ACT. In 1992, the National Energy
Policy Act of 1992 (Energy Act) was enacted. In addition to
the assessments for the Uranium Enrichment Decontamination and
Decommissioning Fund discussed in Note 12(f) of the Notes to
Consolidated Financial Statements, the Energy Act addresses a
wide range of energy issues. Title VII of the Energy Act
creates exemptions from regulation under PUHCA and creates a
class of exempt wholesale generators consisting of utility
affiliates and nonutilities that are owners and operators of
facilities for the generation and transmission of power for
wholesale sales. In addition, PUHCA has been amended to allow
utilities to compete on a global scale with foreign entities
to own and operate generation, transmission and distribution
facilities. The Energy Act also gives FERC the authority to
order investor owned utilities to transmit power and energy to
or for wholesale purchasers and sellers. FERC may also
require electric utilities to increase their transmission
capacity to provide these services. The new law creates the
potential for electric utilities and other power producers to
gain increased access to the transmission systems of other
entities to facilitate wholesale sales.
The IUB has initiated a Notice of Inquiry (Docket No. NOI-
95-1) on the subject of "Emerging Competition in the Electric
Utility Industry." The purpose is to address all forms of
competition in the electric utility industry and to gather
information and perspectives on electric competition from all
persons and entities with an interest or stake in the issues.
Informal discussions among the parties will be held. Such
discussions are not expected to produce any specific actions
by the IUB at this time. The Company is unable to predict the
ultimate impact the Energy Act or the IUB's Notice of Inquiry
will have on its operations.
See Item 7. "Management's Discussion and Analysis of the
Results of Operations and Financial Condition" for more
information.
<TABLE>
ELECTRIC OPERATING COMPARISON
<CAPTION>
FIVE-YEAR
COMPOUND
RATE OF
1994 1993 1992 1991 1990 1989 GROWTH (1)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue (000's):
Residential and Rural $ 200,629 $ 206,561 $ 177,625 $ 189,194 $ 185,302 $ 175,899
Commercial 146,086 145,898 124,829 124,320 119,908 112,662
Industrial 143,944 137,595 103,886 100,733 97,788 94,222
Street lighting and public
authorities 6,504 6,098 5,410 6,332 6,478 6,282
Total from ultimate
consumers 497,163 496,152 411,750 420,579 409,476 389,065
Sales for resale 19,195 20,254 18,602 19,745 19,582 18,214
Off-system 18,077 29,400 28,304 36,596 31,144 28,281
Other 2,892 4,715 4,343 5,658 3,047 2,973
$ 537,327 $ 550,521 $ 462,999 $ 482,578 $ 463,249 $ 438,533
Energy sales (000's Kwh):
Residential and Rural 2,493,702 2,528,220 2,158,768 2,367,979 2,254,913 2,222,152 2.3%
Commercial 2,148,302 2,078,635 1,771,357 1,764,495 1,686,132 1,626,046 5.7%
Industrial 4,014,821 3,674,217 2,612,803 2,467,533 2,312,109 2,236,388 12.4%
Street lighting and public
authorities 67,029 63,174 60,991 87,022 88,305 86,635 -5.0%
Total to ultimate consumers 8,723,854 8,344,246 6,603,919 6,687,029 6,341,459 6,171,221 7.2%
Sales for resale 567,721 561,276 528,752 557,180 538,677 500,253 2.6%
Sales of electricity to
customers 9,291,575 8,905,522 7,132,671 7,244,209 6,880,136 6,671,474 6.8%
Off-system 1,137,219 2,068,015 2,275,616 2,738,159 2,282,204 1,959,828 -10.3%
10,428,794 10,973,537 9,408,287 9,982,368 9,162,340 8,631,302 3.9%
Sources of electric energy (000's Kwh):
Generation:
Fossil, primarily coal 5,522,966 5,356,930 4,317,154 4,758,720 4,354,697 4,063,974
Nuclear (2) 2,875,867 2,264,507 2,402,501 2,902,768 2,108,100 2,228,068
Hydro 8,205 7,201 7,579 6,547 4,195 1,902
8,407,038 7,628,638 6,727,234 7,668,035 6,466,992 6,293,944
Purchases 2,646,673 3,949,296 3,322,182 2,994,216 3,282,886 2,891,808
11,053,711 11,577,934 10,049,416 10,662,251 9,749,878 9,185,752
Net capability at time of peak load (Kw):
Generating capability 1,741,100 1,733,700 1,718,600 1,719,150 1,684,700 1,633,000
Purchase capability 280,000 248,000 207,000 227,000 179,000 170,000
Capacity credits (3) 0 0 0 0 18,960 20,650
2,021,100 1,981,700 1,925,600 1,946,150 1,882,660 1,823,650 2.1%
Net peak load (Kw) (4) 1,779,627 1,716,380 1,425,441 1,607,606 1,547,826 1,486,243 3.7%
Number of customers at year-end 330,405 327,265 325,172 305,663 304,265 302,632 1.8%
Revenue per Kwh (excluding
off-system) in cents 5.59 5.85 6.09 6.16 6.28 6.15 -1.9%
(1) The five-year compound growth rates include the effect of the acquisition of
the Iowa service territory from Union Electric Company on December 31, 1992.
(2) Represents IES Utilities' 70% undivided interest in the Duane Arnold Energy
Center, which is operated by IES Utilities Inc.
(3) Represents capacity credits from municipals served by IES Utilities Inc.
(4) 60 minutes integrated.
</TABLE>
<TABLE>
GAS OPERATING COMPARISON
<CAPTION>
FIVE-YEAR
COMPOUND
RATE OF
1994 1993 1992 1991 1990 1989 GROWTH
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue (000's):
IES Utilities Inc.:
Residential $ 82,795 $ 90,462 $ 78,685 $ 74,114 $ 66,513 $ 68,751
Commercial 40,912 45,528 39,780 37,613 35,378 38,035
Industrial 12,515 15,593 18,649 17,383 21,500 25,172
136,222 151,583 137,114 129,110 123,391 131,958
Other 2,811 2,735 2,341 1,908 1,884 1,923
Total revenues 139,033 154,318 139,455 131,018 125,275 133,881
Industrial Energy
Applications, Inc. 26,536 27,605 27,627 15,219 6,808 1,049
$ 165,569 $ 181,923 $ 167,082 $ 146,237 $ 132,083 $ 134,930
Energy sales (000's dekatherms):
IES Utilities Inc.:
Residential 15,766 16,971 15,098 15,571 14,315 15,878 -0.1%
Commercial 9,298 10,133 8,479 9,389 8,798 9,854 -1.2%
Industrial 4,010 4,618 6,175 5,980 6,640 7,409 -11.6%
29,074 31,722 29,752 30,940 29,753 33,141 -2.6%
Industrial - transported
volumes 8,901 7,284 7,283 6,189 6,733 6,909 5.2%
Total volumes delivered 37,975 39,006 37,035 37,129 36,486 40,050 -1.1%
Industrial Energy
Applications, Inc. 14,443 12,493 14,830 7,666 4,465 624 87.5%
52,418 51,499 51,865 44,795 40,951 40,674 5.2%
Operating statistics for IES Utilities Inc.:
Cost per dekatherm of gas
purchased for resale $ 3.31 $ 3.49 $ 3.36 $ 3.10 $ 3.23 $ 2.95
Peak daily sendout in dekatherms 288,352 268,419 254,989 266,344 272,089 311,600 -1.5%
Number of customers at year-end 172,829 170,719 167,813 164,078 161,794 160,792 1.5%
Revenue per dekatherm sold
for IES Utilities Inc.
(excluding transported volumes) $ 4.69 $ 4.78 $ 4.61 $ 4.17 $ 4.15 $ 3.98 3.3%
</TABLE>
Item 2. Properties
Industries has no significant properties other than
common stock of affiliates, temporary cash investments and
cash surrender value of corporate life insurance policies.
Utilities' principal electric generating stations at
December 31, 1994, are as follows:
Name and Location Major Fuel Net Kilowatts Accredited
of Station Type Generating Capability
Duane Arnold Energy Center,
Palo, Iowa Nuclear 360,500 (1)
Ottumwa Generating Station,
Ottumwa, Iowa Coal 343,440 (2)
Prairie Creek Station,
Cedar Rapids, Iowa Coal 234,000
Sutherland Station,
Marshalltown, Iowa Coal 143,000
Sixth Street Station,
Cedar Rapids, Iowa Coal 71,000
Burlington Generating Station,
Burlington, Iowa Coal 211,800
George Neal Unit 3,
Sioux City, Iowa Coal 144,200 (3)
Total Coal 1,147,440
Peaking Turbines,
Marshalltown, Iowa Oil 156,000
Centerville Combustion Turbines,
Centerville, Iowa Oil 49,000 (4)
Diesel Stations, all in Iowa Oil 12,200
Total Oil 217,200
Grinnell Station, Grinnell, Iowa Gas 47,200
Agency Street Combustion Turbines,
West Burlington, Iowa Gas 65,000 (4)
Burlington Combustion Turbines,
Burlington, Iowa Gas 16,600
Total Gas 128,800
Total generating capability 1,853,940
(1) Represents Utilities' 70% ownership interest in this
515,000 Kw generating station. The plant is
operated by Utilities.
(2) Represents Utilities' 48% ownership interest in this
715,500 Kw generating station. The plant is
operated by Utilities.
(3) Represents Utilities' 28% ownership interest in this
515,000 Kw generating station which is operated by
an unaffiliated utility.
(4) Effective December 31, 1994, all of the assets of
Terra Comfort were sold to Utilities, including the
Centerville and Agency Street Combustion Turbines.
At December 31, 1994, the transmission lines of
Utilities, operating from 34,000 to 345,000 volts,
approximated 4,390 circuit miles (all located in Iowa).
Utilities owned 108 transmission substations (all located in
Iowa) with a total installed capacity of 8,415.7 MVa and 466
distribution substations (all located in Iowa) with a total
installed capacity of 2,545.8 MVa.
Subsidiaries other than Utilities also own property which
primarily represents investments in transportation, oil and
gas and real estate properties.
The Company's principal properties are suitable for their
intended use. Utilities' principal properties are held
subject to liens of indentures relating to its First Mortgage
Bonds.
Item 3. Legal Proceedings
Industries, IES Energy, MicroFuel Corporation (the
Corporation) now known as Ely, Inc. in which IES Energy has a
69.40% equity ownership, and other parties have been sued in
Linn County District Court in Cedar Rapids, Iowa, by Allen C.
Wiley. Mr. Wiley claims money damages on various tort and
contract theories arising out of the 1992 sale of the assets
of the Corporation, of which Mr. Wiley was a director and
shareholder. All of the defendants in Mr. Wiley's suit have
answered the complaint and denied liability. All of the
defendants believe that the claims are without merit and are
vigorously contesting them. The trial has been continued to
an unspecified date, pending a decision in the appeal related
to a separate suit discussed below.
The Corporation commenced a separate suit to determine
the fair value of Mr. Wiley's shares under Iowa Code section
490. A decision was issued on August 31, 1994, by the Linn
County District Court ruling that the value of Mr. Wiley's
shares was $377,600 based on a 40 cent per share valuation.
The Corporation contended that the value of Mr. Wiley's shares
was 2.5 cents per share. The Decision has been appealed to
the Iowa Supreme Court by the Corporation on a number of
issues, including the Corporation's position that the trial
court erred as a matter of law in discounting the testimony of
the Corporation's expert witness. A decision on the appeal is
not expected before the fourth quarter of 1995.
Reference is made to Notes 3 and 12 of the Notes to
Consolidated Financial Statements for a discussion of
Utilities' rate proceedings and environmental matters. Also
see Item 1. "Business - Environmental Matters" and Item 7.
"Management's Discussion and Analysis of the Results of
Operations and Financial Condition."
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
(a) Price Range of Common Stock and Dividends
Declared
IES Industries Common Stock is listed on the New York
Stock Exchange (NYSE) under the symbol "IES." The table below
sets forth, for the calendar quarters indicated, the reported
high and low sales prices of IES Industries Common Stock as
reported on the NYSE Composite Tape based on published
financial sources, and the dividends declared per share on IES
Industries Common Stock.
IES Industries Common Stock
High Sale Low Sale Dividend (i)
1994
First Quarter $ 31 3/8 $ 27 $ .525
Second Quarter 29 25 1/2 .525
Third Quarter 28 3/8 24 7/8 .525
Fourth Quarter 26 5/8 24 3/4 .525
1993
First Quarter 31 1/8 28 3/8 .525
Second Quarter 32 5/8 28 5/8 .525
Third Quarter 34 1/4 31 1/4 .525
Fourth Quarter 34 29 1/8 .525
(i) The Company has paid regular quarterly
dividends on its common stock since April 1, 1950.
Although the Company's practice has been to pay
dividends quarterly, the time of payment and amount
of future dividends are necessarily dependent upon
earnings, financial requirements and other factors.
(b) Approximate Number of Equity Security Holders
Approximate Number of Record
Title of Class Holders (as of December 31, 1994)
Common Stock, no par value 32,567
(c) Restriction on Payment of Dividends
Under terms of the Fifty-fifth and Fifty-sixth
Supplemental Indentures relating to Utilities' Series W and
Series X First Mortgage Bonds, Utilities agreed that no cash
dividends shall be paid or declared, nor shall any
distribution be made on any capital stock, nor shall any
shares of such stock be purchased, redeemed or otherwise
acquired for any consideration by Utilities or any subsidiary
of Utilities, if after immediately giving effect to such
payment, distribution or retirements, (A) the principal amount
of all outstanding defined Unsecured Indebtedness of Utilities
exceeds 20% of defined Total Capitalization, or (B) the
aggregate amount of all such payments, distributions and
retirements made since December 31, 1987, exceeds net income
of Utilities since December 31, 1987, plus $50,000,000.
Pursuant to these terms, at December 31, 1994, $18,209,000 of
Utilities' retained earnings was restricted as to the payment
of cash dividends. Utilities may periodically pay cash
dividends on any shares of its preferred or preference stock
at any time issued and outstanding, provided that all such
payments shall be included in the above payments as determined
since December 31, 1987.
The Series W and Series X First Mortgage Bonds both
mature in 1995. Once such maturities are completed, there
will no longer be any restrictions on Utilities' retained
earnings.
Item 6. Selected Consolidated Financial Data
The following selected consolidated financial data, in
the opinion of the Company, includes adjustments, which are
normal and recurring in nature, necessary for the fair
presentation of the results of operations and financial
position. See Item 7. "Management's Discussion and Analysis
of the Results of Operations and Financial Condition" for a
discussion of transactions that affect the comparability of
the years 1994-1992.
The 1993 results were affected by the acquisition of the
Iowa service territory from Union Electric Company, as
discussed in Note 2 of the Notes to Consolidated Financial
Statements. The 1990 results were affected by a pre-tax gain
of $66 million on the sale of Telecom*USA stock. The 1989
results were affected by a $5.0 million pre-tax estimated
liability to pipeline suppliers recorded in 1988 and
eliminated in 1989 when the issue was favorably resolved.
The Selected Consolidated Financial Data should be read
in conjunction with the Consolidated Financial Statements, the
Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of the Results of Operations and
Financial Condition contained elsewhere in this report.
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Income statement data (000's):
Operating revenue $ 785,864 $ 801,266 $ 678,296 $ 661,538 $ 624,214 $ 599,838
Operating income 147,933 151,269 109,024 103,357 98,043 106,592
Net income 66,818 67,938 48,711 44,657 80,330* 53,565
Common stock data (per share
except percentages):
Earnings $ 2.34 $ 2.45 $ 1.92 $ 1.85 $ 3.37* $ 2.27
Dividends declared 2.10 2.10 2.10 2.03 1.82 1.77
Return on average common equity 11.5% 12.4% 10.3% 9.7% 18.4% 13.2%
Market price at year-end $ 25.25 $ 31.25 $ 29.50 $ 27.25 $ 27.75 $ 27.63
Book value at year-end 20.56 20.21 18.89 19.07 19.15 17.52
Ratio of market price to book value
at year-end 123% 155% 156% 143% 145% 158%
Capitalization:
Common equity 50% 51% 48% 50% 53% 49%
Preferred and preference stock 2 2 2 3 3 4
Long-term debt 48 47 50 47 44 47
100% 100% 100% 100% 100% 100%
Other selected financial data:
Total assets (000's) $ 1,843,989 $ 1,699,819 $ 1,594,382 $ 1,448,492 $ 1,400,802 $ 1,342,615
Non-utility assets (000's) 198,621 152,841 155,144 145,283 141,739 127,684
Long-term obligations (000's) 626,011 577,611 553,257 507,921 462,798 472,760
Construction and acquisition
expenditures (000's) 201,552 163,644 191,834** 119,821 103,154 87,381
Times interest earned before
income taxes 3.38 3.38 2.63 2.69 4.45 3.10
Selected financial data for
IES Utilities Inc.:
Utility plant in service (000's) $ 2,042,179 $ 1,932,558 $ 1,852,733 $ 1,680,108 $ 1,587,886 $ 1,475,550
Accumulated depreciation (000's) 880,888 813,312 759,754 691,015 639,211 579,160
Construction and acquisition
expenditures (000's) 148,062*** 113,212 171,013** 105,009 95,075 79,919
Times interest earned before
income taxes 3.39 3.64 2.67 2.93 3.04 3.36
Electric Kwh sales
(excluding off-system) (000's) 9,291,575 8,905,522 7,132,671 7,244,209 6,880,136 6,671,474
Gas Dth sales (including
transported volumes) (000's) 37,975 39,006 37,035 37,129 36,486 40,050
* Includes the effects of a $66 million pre-tax gain on sale of Telecom*USA
stock.
** Includes $61 million for the acquisition of the Iowa service territory
from Union Electric Company.
*** Includes $9.2 million of acquisitions from affiliated companies.
</TABLE>
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in
the components of net income and financial condition from the
prior periods for IES Industries Inc. (Industries) and its
consolidated subsidiaries (the Company).
RESULTS OF OPERATIONS
Industries' wholly-owned subsidiaries are IES Utilities
Inc. (Utilities) and IES Diversified Inc. (Diversified). The
Company's net income decreased $1.1 million during 1994 and
increased $19.2 million during 1993. Earnings per average
common share declined from $2.45 in 1993 to $2.34 in 1994
because of the lower net income and the effect of increased
average common shares outstanding. The 1994 results were
affected by milder than normal weather, particularly during
the summer months. The 1993 results reflect Utilities'
acquisition of the Iowa service territory of Union Electric
Company (UE) (as discussed in Note 2 of the Notes to
Consolidated Financial Statements) and a return to more normal
weather conditions in Utilities' service territory from that
experienced in 1992. The 1993 results also reflect the
recording of certain property write-downs at Diversified and a
$2.5 million contribution to the IES Industries Charitable
Foundation. The 1992 results were adversely affected by
extremely cool summer weather and a mild winter in Utilities'
service territory.
The Company's operating income decreased $3.3 million
during 1994 and increased $42.2 million during 1993. Reasons
for the changes in the results of operations are explained in
the following discussion.
ELECTRIC REVENUES
Electric revenues and Kwh sales for Utilities increased
or (decreased) as compared with the prior year as follows:
1994 1993
($ in millions)
Electric revenues $ (13.2) $ 87.5
Electric sales (excluding off-system sales):
Residential and Rural (1.4%) 17.1%
Commercial 3.4% 17.4%
Industrial 9.3% 40.6%
Total 4.3% 24.9%
The 1994 Kwh sales were adversely affected by milder than
normal weather, particularly during the summer months. The
largest effect of weather was on sales to residential and
rural customers. Under normal weather conditions, 1994 sales
would have been flat and total sales (excluding off-system
sales) would have increased 4.8%, compared to 1993 actual
sales. The growth in commercial and industrial sales
continues to reflect the underlying strength of the economy as
several major industrial expansions in Utilities' service
territory were announced in 1994.
The 1993 sales increases are attributable to the
acquisition of the UE territory and a return to more normal
weather conditions. After adjusting for these items,
underlying total electric sales (excluding off-system sales)
increased 6% in 1993, which reflects the economic growth in
the industrial and commercial customer base.
Utilities' electric tariffs include energy adjustment
clauses (EAC) that are designed to currently recover the costs
of fuel and the energy portion of purchased power billings to
customers. See Note 1(k) of the Notes to Consolidated
Financial Statements for discussion of the EAC.
The decrease in the 1994 electric revenues is
attributable to lower fuel costs collected through the EAC,
lower off-system sales to other utilities and the effect of
the mix of sales between lower margin industrial customers and
higher margin residential and rural customers. Increased
total sales (excluding off-system sales) partially offset the
effects of the above items. The increase in electric revenues
for 1993 is primarily because of the higher sales and
increased recovery of fuel costs through the EAC.
See Note 3(a) of the Notes to Consolidated Financial
Statements for a discussion of Utilities' 1994 electric rate
case.
GAS REVENUES
Gas revenues increased or (decreased) as compared with
the prior year as follows:
1994 1993
(in millions)
Gas revenues:
Utilities $ (15.3) $ 14.9
Industrial Energy Applications, Inc. (IEA) (1.1) (0.1)
$ (16.4) $ 14.8
Utilities' gas sales in therms (including transported
volumes), which also reflect the effects of weather, decreased
2.7% in 1994 and increased 5.3% in 1993. Adjusting for the
effects of weather, Utilities' gas sales decreased 1.8% and
1.5% in 1994 and 1993, respectively.
Utilities' gas tariffs include purchased gas adjustment
clauses (PGA) that are designed to currently recover the cost
of gas sold. See Note 1(k) of the Notes to Consolidated
Financial Statements for discussion of the PGA.
Utilities' gas revenues decreased in 1994 primarily
because of lower gas costs recovered through the PGA and, to a
lesser extent, the effect of the lower sales. Gas revenues
increased in 1993 substantially because of increased costs of
gas recovered through the PGA, the effect of gas rate
increases that became effective in September 1992 and the
sales increase.
The decrease in IEA's gas revenues in 1994 also reflects
the lower price of natural gas. Despite an increase of 16% in
gas volumes, revenues decreased by $1.1 million.
OTHER REVENUES
Other revenues increased $14.1 million and $20.6 million
during 1994 and 1993, respectively, largely because of
increased revenues at Whiting Petroleum Company (Whiting) and
Diversified's other subsidiaries, primarily in the energy and
transportation industries. In addition, approximately $10
million of the 1993 increase related to the acquisition of
certain resort properties in March 1993; Diversified
previously held an equity interest in a company that owned the
properties. Utilities' steam revenues also contributed to the
1993 increase.
OPERATING EXPENSES
Despite an increase in the amount of Kwh generation from
a year ago, fuel for production decreased $1.8 million in 1994
largely because of lower average fuel prices and the effect of
lower fuel cost recoveries through the EAC, which are included
in fuel for production. Generation at Utilities' generating
stations increased because of the increase in electric Kwh
sales and because of increased availability of Utilities'
nuclear generating station, the Duane Arnold Energy Center
(DAEC), which was down for part of 1993 because of a scheduled
refueling outage. There were refueling outages in 1993 and
1992, but no such outage in 1994. Fuel for production
increased $14.3 million in 1993 because of increased
availability of Utilities' fossil-fueled generating stations,
which experienced extended maintenance outages in 1992, and
because of increased sales.
Purchased power decreased $24.7 million in 1994 because
of lower off-system sales to other utilities, increased
generation at Utilities' generating stations and the
expiration, in April 1993, of a purchase power agreement with
the City of Muscatine. Purchased power increased $18.7
million in 1993, of which approximately $14.7 million
represents increased energy purchases and approximately
$4.0 million is a net increase in capacity charges. The
increase in energy purchases is because of the increased Kwh
sales. The increased capacity costs reflect the contracts
associated with the acquisition of the UE service territory,
partially offset by the expiration of the purchase power
agreement with the City of Muscatine. (See Note 12(b) of the
Notes to Consolidated Financial Statements).
Gas purchased for resale decreased $15.0 million in 1994
because of lower gas costs and lower gas sales at Utilities.
Gas purchased for resale increased $7.6 million during 1993
primarily because of increased per unit gas costs at Utilities
and the increased sales.
Other operating expenses increased $14.2 million and
$20.3 million in 1994 and 1993, respectively. The 1994
increase is primarily attributable to increases in labor and
benefits costs, nuclear operating costs, former manufactured
gas plant (FMGP) clean-up costs and information technology
costs at Utilities, and increased operating activities at
Whiting. The 1993 increase is primarily because of increased
labor and benefits costs at Utilities and increased operating
activities at several of Diversified's subsidiaries, including
IEA and Whiting. In addition, $9 million of the 1993 increase
is attributable to the resort properties acquired in March
1993.
Maintenance expenses increased $3.9 million and $7.5
million during 1994 and 1993, respectively. The 1994 increase
is primarily because of increased labor costs and maintenance
at the DAEC, partially offset by lower maintenance at
Utilities' fossil-fueled generating stations. The 1993
increase is primarily because of increased maintenance at
Utilities' fossil-fueled generating stations and the DAEC.
Depreciation and amortization increased during both years
because of increases in utility plant in service, increased
amortization and depreciation of oil and gas properties and,
in 1993, the acquisition of the UE territory on
December 31, 1992. An increase in the average gas utility
property depreciation rate, resulting from an updated
depreciation study, also contributed to the 1993 increase.
Depreciation and amortization expenses for all years include
$5.5 million for the DAEC decommissioning provision, which is
collected through rates.
The staff of the Securities and Exchange Commission (SEC)
has questioned certain of the current accounting practices of
the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for
nuclear generating stations in the financial statements of
electric utilities. In response to these questions, the
Financial Accounting Standards Board has agreed to review the
accounting for removal costs, including decommissioning. If
current electric utility industry accounting practices for
such decommissioning are changed: (1) annual provisions for
decommissioning could increase, (2) the estimated cost for
decommissioning could be recorded as a liability rather than
as accumulated depreciation, and (3) trust fund income from
the external decommissioning trusts could be reported as
investment income rather than as a reduction to
decommissioning expense. If such changes are required,
Utilities believes that there would not be an adverse effect
on its financial position or results of operations based on
current rate making practices. (See Note 1(g) of the Notes to
Consolidated Financial Statements for a discussion of
Utilities' proposal for collection of decommissioning costs
included in its current rate filing).
Taxes other than income taxes increased $1.9 million and
$4.8 million during 1994 and 1993, respectively, largely
because of increased property taxes. The 1993 increase is
related, in part, to the acquisition of the UE service
territory.
INTEREST EXPENSE AND OTHER
Interest expense increased $1.6 million during 1994
primarily because of an increase in the average amount of debt
outstanding. Interest expense decreased $1.0 million in 1993
because of a lower average interest rate, partially offset by
an increase in the average amount of debt outstanding. The
lower average interest rate reflects the refinancing of
certain long-term debt issues at lower rates and lower cost
short-term borrowings outstanding for interim periods between
the redemption of certain long-term debt series and the
issuance of their long-term replacements.
Miscellaneous, net reflects income of $3.5 million and
$7.5 million in 1994 and 1992, respectively, and expense of
$2.9 million in 1993. The comparability of the years was
significantly affected by the following 1993 transactions:
(1) certain property write-downs at Diversified, (2) a
contribution to the IES Industries Charitable Foundation, (3)
a loss on the defeasance of Industries' debentures, and (4)
gains on the sale of assets at Whiting and IEA aggregating
$2.6 million. In 1994, a gain on the sale of an investment by
one of Diversified's subsidiaries, net of lower interest
income, also contributed to the increase in income over 1993.
Federal and state income taxes increased $4.5 million and
$13.2 million in 1994 and 1993, respectively. The increase in
1994 is largely because of the effect of property related
temporary differences for which deferred taxes had not been
provided that are now becoming payable. The 1993 increase
results from an increase in taxable income and an increase of
1% in the Federal statutory income tax rate. Adjustments of
$1.5 million, recorded in the second quarter of 1992, to
previously recorded tax reserves also affected the
comparability of 1993 with the prior period.
OTHER MATTERS
The National Energy Policy Act of 1992 addresses several
matters designed to promote competition in the electric
wholesale power generation market, including mandated open
access to the electric transmission system and greater
encouragement of independent power production and
cogeneration. Although various states throughout the country
are currently exploring the possibility of expanded
competition in the retail electric energy market, there is no
significant activity underway in Iowa.
The Company cannot predict the long-term consequences of
these competitive issues on its results of operations or
financial condition. The Company's strategy for dealing with
these emerging issues includes seeking growth opportunities,
continuing to offer quality customer service, on-going cost
reductions and productivity enhancements. The Company
recently initiated a major project to review and redesign its
business processes with the primary goals being reduced
operating costs, increased efficiency and enhanced customer
service.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily
attributable to Utilities' construction programs, its debt
maturities and sinking fund requirements and the level of
Diversified's business opportunities. The Company's pre-tax
ratio of earnings to fixed charges was 3.38, 3.38 and 2.63 in
1994-1992, respectively. In 1994, cash flows from operating
activities were $216 million. These funds were primarily used
for construction and acquisition expenditures and for energy
efficiency program costs mandated by the Iowa Utilities Board
(IUB).
The Company anticipates that future capital requirements
will be met by cash generated from operations and external
financing. The level of cash generated from operations is
partially dependent upon economic conditions, legislative
activities, environmental matters and timely rate relief for
Utilities. (See Notes 3 and 12 of the Notes to Consolidated
Financial Statements).
Access to the long-term and short-term capital and credit
markets is necessary for obtaining funds externally. The
Company's debt ratings are as follows:
Moody's Standard & Poor's
Utilities - Long-term debt A1 A
- Short-term debt P1 A1
Diversified - Short-term debt P2 A2
Utilities' liquidity and capital resources will be
affected by environmental and legislative issues, including
the ultimate disposition of remediation issues surrounding the
FMGP issue, the Clean Air Act as amended, the National Energy
Policy Act of 1992 and Federal Energy Regulatory Commission
(FERC) Order 636, as discussed in Note 12 of the Notes to
Consolidated Financial Statements. Consistent with rate
making principles of the IUB, management believes that the
costs incurred for the above matters will not have a material
adverse effect on the financial position or results of
operations of the Company.
The IUB has adopted rules which require Utilities to
spend 2% of electric and 1.5% of gas gross retail operating
revenues annually for energy efficiency programs. Energy
efficiency costs in excess of the amount in the most recent
electric and gas rate cases are being recorded as regulatory
assets by Utilities. At December 31, 1994, Utilities had
$35 million of such costs recorded as regulatory assets.
Under provisions of the IUB rules, Utilities made its initial
filing for recovery of the costs in August 1994. See Note
3(b) of the Notes to Consolidated Financial Statements for a
discussion of the filing.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program
anticipates expenditures of approximately $202 million for
1995, of which approximately $163 million represents
expenditures at Utilities and approximately $39 million
represents expenditures at Diversified. Of the $163 million
of Utilities' expenditures, 32% represents expenditures for
electric transmission and distribution facilities, 23%
represents fossil-fueled generation expenditures, 15%
represents expenditures for steam distribution plant and 9%
represents nuclear generation expenditures. The remaining 21%
represents miscellaneous electric, gas and general
expenditures. Diversified's anticipated expenditures include
approximately $26 million at Whiting. In addition to the
$163 million, Utilities anticipates expenditures of
$13 million in connection with mandated energy efficiency
programs. Substantial commitments have been made in connection
with all such expenditures.
The Company's levels of construction and acquisition
expenditures are projected to be $230 million in 1996,
$209 million in 1997, $235 million in 1998 and $227 million in
1999. It is estimated that approximately 70% of construction
expenditures will be provided by cash from operating
activities (after payment of dividends) for the five-year
period 1995-1999.
Capital expenditure and investment and financing plans
are subject to continual review and change. The capital
expenditure and investment programs may be revised
significantly as a result of many considerations including
changes in economic conditions, variations in actual sales and
load growth compared to forecasts, requirements of
environmental, nuclear and other regulatory authorities,
acquisition opportunities, the availability of alternate
energy and purchased power sources, the ability to obtain
adequate and timely rate relief, escalations in construction
costs and conservation and energy efficiency programs.
LONG-TERM FINANCING
Other than Utilities' periodic sinking fund requirements,
which Utilities intends to meet by pledging additional
property, the following long-term debt will mature prior to
December 31, 1999:
(in millions)
Issue:
Utilities $ 173.7
Diversified's variable rate credit facility 80.5
Other subsidiaries' debt 11.7
$ 265.9
The Company intends to refinance the majority of the debt
maturities with long-term securities.
In order to provide an up-to-date instrument for the
issuance of bonds, notes or other evidence of indebtedness,
Utilities has entered into an Indenture of Mortgage and Deed
of Trust dated September 1, 1993 (New Mortgage). The lien of
the New Mortgage is subordinate to the lien of Utilities'
first mortgages until such time as all bonds issued under the
first mortgages have been retired and such mortgages
satisfied. The New Mortgage provides for, among other things,
the issuance of Collateral Trust Bonds upon the basis of First
Mortgage Bonds being issued by Utilities. Accordingly, to the
extent that Utilities issues Collateral Trust Bonds on the
basis of First Mortgage Bonds, it must comply with the
requirements for the issuance of First Mortgage Bonds under
Utilities' first mortgages. Under the terms of the New
Mortgage, Utilities has covenanted not to issue any additional
First Mortgage Bonds under its first mortgages except to
provide the basis for issuance of Collateral Trust Bonds.
The Indentures pursuant to which Utilities issues First
Mortgage Bonds constitute direct first mortgage liens upon
substantially all tangible public utility property and contain
covenants which restrict the amount of additional bonds which
may be issued. At December 31, 1994, such restrictions would
have allowed Utilities to issue $320 million of additional
First Mortgage Bonds. Utilities has received authority from
the FERC to issue $250 million of long-term debt and is
currently authorized by the SEC to issue $50 million of
long-term debt under an existing registration statement.
Utilities expects to replace two series of First Mortgage
Bonds that mature in 1995 with other long-term securities.
Diversified has a variable rate credit facility that
extends through November 9, 1997, with two one-year extensions
available to Diversified. The facility also serves as a stand-
by agreement for Diversified's commercial paper program. The
agreement provides for a combined maximum of $150 million of
borrowings under the agreement and commercial paper to be
outstanding at any one time. Interest rates and maturities
are set at the time of borrowing for direct borrowings under
the agreement and for issuances of commercial paper. The
interest rate options are based upon quoted market rates and
the maturities are less than one year. At December 31, 1994,
$12 million was borrowed under this facility, bearing an
interest rate of 6.44%, maturing in January 1995. Diversified
also had $68.5 million of commercial paper outstanding at
December 31, 1994, with interest rates ranging from 6.27% to
6.38% and maturity dates in the first quarter of 1995, which
was also supported by the facility. Diversified intends to
continue borrowing under the renewal options of the facility
and no conditions exist at December 31, 1994, that would
prevent such borrowings. Accordingly, this debt is classified
as long-term in the Consolidated Balance Sheets.
The Articles of Incorporation of Utilities authorize and
limit the aggregate amount of additional shares of Cumulative
Preferred Stock and Cumulative Preference Stock which may be
issued. At December 31, 1994, Utilities could have issued an
additional 700,000 shares of Cumulative Preference Stock and
100,000 additional shares of Cumulative Preferred Stock. In
addition, Industries had 5,000,000 shares of Cumulative
Preferred Stock, no par value, authorized for issuance, none
of which were outstanding at December 31, 1994.
The Company's capitalization ratios at year-end were as
follows:
1994 1993
Long-term debt 48% 47%
Preferred stock 2 2
Common equity 50 51
100% 100%
The 1994 ratios include $100 million of
Utilities' First Mortgage Bonds maturing in 1995
that are classified as a current liability in
the Consolidated Balance Sheets, but which are
expected to be refinanced with long-term
securities.
SHORT-TERM FINANCING
For interim financing, Utilities is authorized by the
FERC to issue, through 1996, up to $200 million of short-term
notes. In addition to providing for ongoing working capital
needs, this availability of short-term financing provides
Utilities flexibility in the issuance of long-term securities.
At December 31, 1994, Utilities had outstanding short-term
borrowings of $55.5 million, including $18.5 million of notes
payable to associated companies.
Utilities has an agreement, which expires in 1999, with a
financial institution to sell, with limited recourse, an
undivided fractional interest of up to $65 million in its pool
of utility accounts receivable. At December 31, 1994,
Utilities had sold $54 million under the agreement.
At December 31, 1994, the Company had bank lines of
credit aggregating $77.7 million (Industries - $1.5 million,
Utilities - $67.7 million, Diversified - $7.5 million and
Whiting - $1.0 million). Utilities was using $37 million of
its lines to support commercial paper (weighted average
interest rate of 6.13%) and $7.7 million to support certain
pollution control obligations. Commitment fees are paid to
maintain these lines and there are no conditions which
restrict the unused lines of credit. In addition to the
above, Utilities has an uncommitted credit facility with a
financial institution whereby it can borrow up to $40 million.
Rates are set at the time of borrowing and no fees are paid to
maintain this facility. At December 31, 1994, there were no
borrowings under this facility. Utilities also has a letter
of credit in the amount of $3.4 million supporting two of its
variable rate pollution control obligations.
ENVIRONMENTAL MATTERS
Utilities has been named as a Potentially Responsible
Party (PRP) by either the Iowa Department of Natural Resources
(IDNR), the Minnesota Pollution Control Agency (MPCA) or the
United States Environmental Protection Agency (EPA) for 28
FMGP sites. Utilities believes that it is not responsible for
two of the sites for which it has been designated a PRP.
Utilities has another FMGP site for which it has not yet been
formally designated as a PRP. Utilities is working pursuant
to the requirements of the IDNR, MPCA and EPA to investigate,
mitigate, prevent and remediate, where necessary, damage to
property, including damage to natural resources, at and around
the remaining 27 sites in order to protect public health and
the environment. In addition, Utilities has recently become
aware that two additional sites may exist, but it has not yet
been able to determine if any liability may exist.
Utilities has completed the remediation of three sites
and is in various stages of the investigation and/or
remediation processes for 22 sites. The investigation process
is scheduled to begin in 1995 or 1996 for the two other sites.
In 1994, Utilities received updated investigation reports on a
number of sites, which, at some sites, indicated a greater
volume of contaminated soil, surface and ground water needing
treatment, and a greater volume of substances requiring higher
cost incineration, than was anticipated in prior estimates.
It is possible that future cost estimates will be greater than
the current estimates as the investigation process proceeds
and as additional facts become known.
Utilities has recorded environmental liabilities related
to the FMGP sites of $31 million (including $4.3 million as
current liabilities) at December 31, 1994. These amounts are
based upon Utilities' best current estimate of the amount to
be incurred for investigation and remediation costs for those
sites where the investigation process has been or is
substantially completed. For those sites where the
investigation is in its earlier stages or has not started, the
liability represents the minimum of the estimated cost range.
All investigations are expected to be completed by 1999 and
site-specific remediations, based on recommendations from the
IDNR, MPCA and EPA, are anticipated to be completed within
three years after the completion of the investigations of each
site. Utilities may be required to monitor these sites for a
number of years upon completion of remediation, as is the case
with the three sites for which remediation has been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation and monitoring costs from
its insurance carriers and is investigating the potential for
third party cost sharing for FMGP investigation and clean-up
costs. The amount of shared costs, if any, can not be
reasonably determined and, accordingly, no potential sharing
has been recorded at December 31, 1994. Regulatory assets of
$31.0 million have been recorded in the Consolidated Balance
Sheets, which reflect the future recovery that is being
provided through Utilities' rates. Considering the rate
treatment allowed by the IUB, management believes that the
clean-up costs incurred by Utilities for these FMGP sites will
not have a material adverse effect on its financial position
or results of operations.
The Clean Air Act Amendments Act of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in
two phases with Phase I affecting two of Utilities' units
beginning in 1995 and Phase II affecting all units beginning
in the year 2000. Utilities is in the process of completing
the modifications necessary to meet the Phase I requirements.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital
expenditures primarily related to fuel burning equipment and
boiler modifications. Utilities estimates capital
expenditures at approximately $22.5 million, including $4.4
million in 1995, in order to meet the requirements of the Act.
The National Energy Policy Act of 1992 requires owners of
nuclear power plants to pay a special assessment into a
"Uranium Enrichment Decontamination and Decommissioning Fund."
The assessment is based upon prior nuclear fuel purchases and,
for the DAEC, averages $1.4 million annually through 2007, of
which Utilities' 70% share is $1.0 million. Utilities is
recovering the costs associated with this assessment through
its electric fuel adjustment clauses over the period the costs
are assessed. Utilities' 70% share of the future assessment,
$12.0 million payable through 2007, has been recorded as a
liability in the Consolidated Balance Sheets, including
$0.8 million included in "Current liabilities - Environmental
liabilities," with a related regulatory asset for the
unrecovered amount.
The Nuclear Waste Policy Act of 1982 assigned
responsibility to the U.S. Department of Energy (DOE) to
establish a facility for the ultimate disposition of high
level waste and spent nuclear fuel and authorized the DOE to
enter into contracts with parties for the disposal of such
material beginning in January 1998. Utilities entered into
such a contract and has made the agreed payments to DOE. The
DOE, however, has experienced significant delays in its
efforts and material acceptance is now expected to occur no
earlier than 2010. Utilities has been storing spent nuclear
fuel on-site since plant operations began in 1974 and has
current on-site capability to store spent fuel until 2002.
Utilities is aggressively reviewing options for additional
spent nuclear fuel storage capability, including expanding on-
site storage, pursuing other off-site storage and supporting
legislation to resolve the lack of progress by the DOE.
The Low-Level Radioactive Waste Policy Amendments Act of
1985 mandated that each state must take responsibility for the
storage of low-level radioactive waste produced within its
borders. The State of Iowa has joined the Midwest Interstate
Low-Level Radioactive Waste Compact Commission (Compact),
which is planning a storage facility to be located in Ohio to
store waste generated by the Compact's six member states. At
December 31, 1994, Utilities has prepaid costs of
approximately $1 million to the Compact for the building of
such a facility. Currently, Utilities is storing its low-
level radioactive waste generated at the DAEC on-site until
new disposal arrangements are finalized among the Compact
members. A Compact disposal facility is anticipated to be in
operation in approximately ten years. On-site storage
capability currently exists for low-level radioactive waste
expected to be generated until the Compact facility is able to
accept waste materials.
The possibility that exposure to electric and magnetic
fields emanating from power lines, household appliances and
other electric sources may result in adverse health effects
has been the subject of increased public, governmental and
media attention. A considerable amount of scientific research
has been conducted on this topic without definitive results.
Research is continuing in order to resolve scientific
uncertainties.
Whiting is responsible for certain dismantlement and
abandonment costs related to various off-shore oil and gas
properties, the most significant of which is located off the
coast of California. Whiting accrues these costs as reserves
are extracted and such costs are included in "Depreciation and
amortization" in the Consolidated Statements of Income. A
corresponding environmental liability, $0.1 million at
December 31, 1994, has been recognized in the Consolidated
Balance Sheets for the cumulative amount expensed.
EFFECTS OF INFLATION
Under the rate making principles prescribed by the
regulatory commissions to which Utilities is subject, only the
historical cost of plant is recoverable in revenues as
depreciation. As a result, Utilities has experienced economic
losses equivalent to the current year's impact of inflation on
utility plant.
In addition, the regulatory process imposes a substantial
time lag between the time when operating and capital costs are
incurred and when they are recovered. Utilities does not
expect the effects of inflation at current levels to have a
significant effect on its results of operations.
Selected Consolidated Quarterly Financial Data (unaudited)
The following unaudited consolidated quarterly data, in
the opinion of the Company, includes adjustments, which are
normal and recurring in nature, necessary for the fair
presentation of the results of operations and financial
position. Utilities' results of operations are a significant
portion of the consolidated results. The quarterly amounts
were affected by seasonal weather conditions. The
comparability of earnings per average common share is affected
by the sale of 2.3 million shares to the public in the first
quarter of 1993 as discussed in Note 8 of the Notes to
Consolidated Financial Statements.
Quarter Ended
March June September December
31 30 30 31
(in thousands, except per share amounts)
1994
Operating revenues $ 211,621 $ 171,117 $ 207,345 $ 195,781
Operating income 35,694 28,436 56,700 27,103
Net income 15,144 10,858 28,009 12,807
Earnings per average
common share 0.53 0.38 0.98 0.45
1993
Operating revenues $ 213,077 $ 170,470 $ 212,052 $ 205,667
Operating income 34,514 27,455 57,767 31,533
Net income 13,935 11,740 27,957 14,306
Earnings per average
common share 0.53 0.42 0.99 0.51
Item 8. Financial Statements and Supplementary Data
Information required by Item 8. begins on page 59.
REPORT OF MANAGEMENT
The Company's management has prepared and is responsible
for the presentation, integrity and objectivity of the
consolidated financial statements and related information
included in this report. The consolidated financial
statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
and, in some cases, include estimates that are based upon
management's judgment and the best available information,
giving due consideration to materiality. Financial information
contained elsewhere in this report is consistent with that in
the consolidated financial statements.
The Company maintains a system of internal accounting
controls which it believes is adequate to provide reasonable
assurance that assets are safeguarded, transactions are
executed in accordance with management authorization and the
financial records are reliable for preparing the consolidated
financial statements. The system of internal accounting
controls is supported by written policies and procedures, by a
staff of internal auditors and by the selection and training
of qualified personnel. The internal audit staff conducts
comprehensive audits of the Company's system of internal
accounting controls. Management strives to maintain an
adequate system of internal controls, recognizing that the
cost of such a system should not exceed the benefits derived.
In accordance with generally accepted auditing standards, the
independent public accountants (Arthur Andersen LLP) obtained
a sufficient understanding of the Company's internal controls
to plan their audit and determine the nature, timing and
extent of other tests to be performed. Management is not
aware of any material internal control weaknesses.
The Board of Directors, through its Audit Committee
comprised entirely of outside directors, meets periodically
with management, the internal auditor and Arthur Andersen LLP
to discuss financial reporting matters, internal control and
auditing. To ensure their independence, both the internal
auditor and Arthur Andersen LLP have full and free access to
the Audit Committee.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
IES Industries Inc.:
We have audited the accompanying consolidated balance sheets
and statements of capitalization of IES INDUSTRIES INC. (an
Iowa corporation) AND SUBSIDIARY COMPANIES as of
December 31, 1994 and 1993, and the related consolidated
statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1994.
These financial statements and the financial statement
schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of IES Industries Inc. and Subsidiary Companies as of
December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The financial
statement schedule listed in Item 14(a)2 is presented for purposes
of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly
states in all material respects, the financial data required to be
set forth therein in relation to the basic financial statements
taken as a whole.
As discussed in Note 7 to the consolidated financial
statements, effective January 1, 1993, IES Industries Inc. and
subsidiary companies changed their method of accounting for
postretirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 3, 1995
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
1994 1993 1992
(in thousands, except per share amounts)
Operating revenues:
Electric $ 537,327 $ 550,521 $ 462,999
Gas 165,569 181,923 167,082
Other 82,968 68,822 48,215
785,864 801,266 678,296
Operating expenses:
Fuel for production 85,952 87,702 73,368
Purchased power 68,794 93,449 74,794
Gas purchased for resale 120,795 135,830 128,259
Other operating expenses 176,863 162,642 142,348
Maintenance 52,841 48,913 41,415
Depreciation and amortization 86,378 77,012 69,392
Taxes other than income taxes 46,308 44,449 39,696
637,931 649,997 569,272
Operating income 147,933 151,269 109,024
Interest expense and other:
Interest expense 46,010 44,440 45,426
Allowance for funds used during
construction -3,910 -1,972 -3,177
Preferred dividend requirements of
IES Utilities Inc. 914 914 1,729
Miscellaneous, net -3,472 2,908 -7,495
39,542 46,290 36,483
Income before income taxes 108,391 104,979 72,541
Federal and state income taxes 41,573 37,041 23,830
Net income $ 66,818 $ 67,938 $ 48,711
Average number of common shares
outstanding 28,560 27,764 25,389
Earnings per average common share $ 2.34 $ 2.45 $ 1.92
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31
1994 1993 1992
(in thousands)
Balance at beginning of year $211,750 $ 202,919 $ 202,882
Add:
Net income 66,818 67,938 48,711
Acquisition of Whiting Petroleum
Corporation 0 0 5,233
Deduct:
Cash dividends declared on common
stock, at a per share rate of
$2.10 for all years 60,065 59,107 53,350
Other 210 0 557
Balance at end of year
($18,209,000 restricted as to
payment of cash dividends) $218,293 $ 211,750 $ 202,919
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31
ASSETS 1994 1993
(in thousands)
Property, plant and equipment, at original cost:
Utility -
Plant in service -
Electric $ 1,798,059 $ 1,708,757
Gas 158,115 147,956
Other 86,005 75,845
2,042,179 1,932,558
Less - Accumulated depreciation 880,888 813,312
1,161,291 1,119,246
Leased nuclear fuel, net of amortization 49,731 51,681
Construction work in progress 73,339 45,566
1,284,361 1,216,493
Other, net of accumulated depreciation
and amortization of $34,490,000
and $35,007,000, respectively 153,795 124,275
1,438,156 1,340,768
Current assets:
Cash and temporary cash investments 4,993 7,465
Accounts receivable -
Customer, less reserve 26,098 33,642
Other 10,388 10,421
Income tax refunds receivable 1,330 3,376
Production fuel, at average cost 13,988 14,338
Materials and supplies, at average cost 30,216 29,046
Adjustment clause balances 1,433 0
Regulatory assets 20,145 14,225
Prepayments and other 34,607 34,265
143,198 146,778
Investments:
Nuclear decommissioning trust funds 33,779 28,059
Cash surrender value of life insurance policies 8,867 7,562
Investment in McLeod, Inc. 7,500 4,500
Other 5,609 4,349
55,755 44,470
Other assets:
Regulatory assets 192,955 148,592
Deferred charges and other 13,925 19,211
206,880 167,803
$ 1,843,989 $ 1,699,819
December 31
CAPITALIZATION AND LIABILITIES 1994 1993
(in thousands)
Capitalization (See Consolidated Statements of
Capitalization):
Common stock $ 373,490 $ 360,301
Retained earnings 218,293 211,750
Total common equity 591,783 572,051
Cumulative preferred stock of IES Utilities Inc. 18,320 18,320
Long-term debt 473,206 522,343
1,083,309 1,112,714
Current liabilities:
Short-term borrowings 37,000 24,000
Capital lease obligations 14,385 15,345
Maturities and sinking funds 100,422 464
Accounts payable 78,582 53,980
Accrued interest 9,494 9,471
Accrued taxes 44,897 42,368
Accumulated refueling outage provision 15,196 2,660
Dividends payable 15,839 15,519
Adjustment clause balances 0 5,149
Provision for rate refund liability 0 8,670
Environmental liabilities 5,428 4,871
Other 21,844 23,127
343,087 205,624
Long-term liabilities:
Capital lease obligations 35,346 36,336
Environmental liabilities 38,288 21,324
Other 58,793 45,231
132,427 102,891
Deferred credits:
Accumulated deferred income taxes 245,365 236,131
Accumulated deferred investment tax credits 39,801 42,459
285,166 278,590
Commitments and contingencies (Note 12)
$ 1,843,989 $ 1,699,819
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31
1994 1993
(in thousands)
Common equity:
Common stock - no par value - authorized
48,000,000 shares; outstanding 28,777,046
and 28,304,188 shares, respectively $ 373,490 $ 360,301
Retained earnings 218,293 211,750
591,783 572,051
Cumulative preferred stock of IES Utilities Inc. 18,320 18,320
Long-term debt:
IES Utilities Inc. -
Collateral Trust Bonds -
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
119,400 119,400
First Mortgage Bonds -
Series J, 6-1/4%, due 1996 15,000 15,000
Series L, 7-7/8%, due 2000 15,000 15,000
Series M, 7-5/8%, due 2002 30,000 30,000
Series W, 9-3/4%, due 1995 50,000 50,000
Series X, 9.42%, due 1995 50,000 50,000
Series Y, 8-5/8%, due 2001 60,000 60,000
Series Z, 7.60%, due 1999 50,000 50,000
6-1/8% series, due 1997 8,000 8,000
9-1/8% series, due 2001 21,000 21,000
7-3/8% series, due 2003 10,000 10,000
7-1/4% series, due 2007 30,000 30,000
339,000 339,000
Pollution control obligations -
5.75%, due serially 1995 to 2003 3,696 3,920
5.95%, due 2007, secured by
First Mortgage Bonds 10,000 10,000
Variable rate (5.45% - 5.60% at
December 31, 1994), due 2000 to 2010 11,100 11,100
24,796 25,020
Total IES Utilities Inc. 483,196 483,420
IES Diversified Inc. -
Variable rate credit facility 80,500 32,000
Other subsidiaries' debt maturing
through 2013 12,584 10,510
576,280 525,930
Unamortized debt premium and (discount), net -2,652 -3,123
573,628 522,807
Less - Amount due within one year 100,422 464
473,206 522,343
$ 1,083,309 $ 1,112,714
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 66,818 $ 67,938 $ 48,711
Adjustments to reconcile net income to net cash flows
from operating activities -
Depreciation and amortization 86,378 77,012 69,392
Principal payments under capital lease obligations 16,246 11,429 11,725
Deferred taxes and investment tax credits 4,050 9,254 -1,374
Refueling outage provision 12,536 -4,889 -5,503
Allowance for equity funds used during construction -2,299 -824 -1,831
Other 4,859 8,764 1,761
Other changes in assets and liabilities -
Accounts receivable 6,777 -8,861 -4,000
Production fuel, materials and supplies -1,184 5,836 83
Accounts payable 21,871 7,984 -3,894
Accrued taxes 4,575 7,549 7,111
Provision for rate refunds -8,670 -350 7,528
Adjustment clause balances -6,582 6,366 -4,122
Gas in storage 1,135 -2,300 -7,908
Other 9,206 -7,669 7,136
Net cash flows from operating activities 215,716 177,239 124,815
Cash flows from financing activities:
Dividends declared on common stock -60,065 -59,107 -53,350
Dividends payable 320 1,727 13,679
Proceeds from issuance of common stock 16,426 79,746 10,726
Purchase of treasury stock -6,233 0 0
Proceeds from issuance of long-term debt 60,140 146,734 114,400
Reductions in long-term debt and preferred stock -9,790 -126,803 -70,158
Net change in short-term borrowings 13,000 -68,000 51,100
Principal payments under capital lease obligations -16,304 -11,276 -12,337
Sale of utility accounts receivable 800 10,490 7,710
Other -177 1,247 -29
Net cash flows from financing activities -1,883 -25,242 61,741
Cash flows from investing activities:
Construction and acquisition expenditures -
Utility -138,829 -113,212 -171,013
Other -62,723 -50,432 -20,821
Nuclear decommissioning trust funds -5,532 -5,532 -5,532
Deferred energy efficiency costs -16,157 -9,747 -6,877
Investments in unconsolidated affiliates -4,956 -5,373 -686
Proceeds from disposition of assets 8,803 28,790 1,106
Other 3,089 3,633 642
Net cash flows from investing activities -216,305 -151,873 -203,181
Net increase (decrease) in cash and temporary cash investments -2,472 124 -16,625
Cash and temporary cash investments at beginning of year 7,465 7,341 23,966
Cash and temporary cash investments at end of year $ 4,993 $ 7,465 $ 7,341
Supplemental cash flow information:
Cash paid during the year for -
Interest $ 47,094 $ 44,697 $ 41,747
Income taxes $ 36,097 $ 22,179 $ 23,539
Noncash investing and financing activities -
Capital lease obligations incurred $ 14,297 $ 14,605 $ 1,973
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of Consolidation -
The Consolidated Financial Statements include the
accounts of IES Industries Inc. (Industries) and its
consolidated subsidiaries (collectively the Company). All
subsidiaries for which Industries owns directly or indirectly
more than 50% of the voting stock are included as consolidated
subsidiaries. Industries' wholly-owned subsidiaries are IES
Utilities Inc. (Utilities) and IES Diversified Inc.
(Diversified). All significant intercompany balances and
transactions, other than energy related transactions affecting
Utilities, have been eliminated from the Consolidated
Financial Statements. Such energy related transactions are
made at prices that approximate market value and the
associated costs are recoverable from Utilities' customers
through the rate making process.
Investments for which the Company has at least a 20%
interest are generally accounted for under the equity method
of accounting. These investments are stated at acquisition
cost, increased or decreased for the Company's equity in
undistributed net income or loss, which is included in
"Interest expense and other - Miscellaneous, net" in the
Consolidated Statements of Income.
Certain prior period amounts have been reclassified on a
basis consistent with the 1994 presentation.
(b) Regulation -
Because of its ownership of Utilities, Industries is a
holding company under the Public Utility Holding Company Act of
1935, but claims an exemption from all provisions thereof except
Section 9(a)(2), which applies to the purchase of stock of other
utility companies. Utilities is subject to regulation by the
Iowa Utilities Board (IUB) and the Federal Energy Regulatory
Commission (FERC).
(c) Regulatory Assets -
Utilities is subject to the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). The
regulatory assets represent probable future revenue to Utilities
associated with certain incurred costs as these costs are
recovered through the rate making process. At
December 31, regulatory assets as reflected in the Consolidated
Balance Sheets were comprised of the following items:
1994 1993
(in millions)
Deferred income taxes (Note 1(d)) $ 90.1 $ 88.6
Environmental liabilities (Note 12(f)) 43.8 25.4
Energy efficiency programs (Note 3(b)) 34.7 18.5
Employee pension and benefit costs (Note 7) 25.0 14.1
FERC Order No. 636 transition costs (Note 12(h)) 8.0 5.0
Unamortized loss on reacquired debt 6.1 6.4
Cancelled plant costs 2.4 3.3
Other 3.0 1.5
213.1 162.8
Classified as "Current assets - regulatory assets" 20.1 14.2
Classified as "Other assets - regulatory assets" $ 193.0 $ 148.6
Refer to the individual footnotes referenced above for a
further discussion of certain items reflected in regulatory
assets.
(d) Income Taxes -
The Company follows the liability method of accounting for
deferred income taxes, which requires the establishment of
deferred tax liabilities and assets, as appropriate, for all
temporary differences between the tax basis of assets and
liabilities and the amounts reported in the financial statements.
Deferred taxes are recorded using currently enacted tax rates.
Except as noted below, income tax expense includes
provisions for deferred taxes to reflect the tax effects of
temporary differences between the time when certain costs are
recorded in the accounts and when they are deducted for tax
return purposes. As temporary differences reverse, the related
accumulated deferred income taxes are reversed to income.
Investment tax credits for Utilities have been deferred and are
subsequently credited to income over the average lives of the
related property.
Consistent with rate making practices for Utilities,
deferred tax expense is not recorded for certain temporary
differences (primarily related to utility property, plant and
equipment). Accordingly, Utilities has recorded deferred tax
liabilities and regulatory assets, as identified in Note 1(c).
(e) Temporary Cash Investments -
Temporary cash investments are stated at cost, which
approximates market value, and are considered cash equivalents
for the Consolidated Statements of Cash Flows. These investments
consist of short-term liquid investments which have maturities of
less than 90 days from the date of acquisition.
(f) Depreciation of Utility Property, Plant and Equipment -
The average rates of depreciation for electric and gas
properties of Utilities, including Utilities' nuclear generating
station, the Duane Arnold Energy Center (DAEC), which is being
depreciated over a 36-year life using a remaining life method,
consistent with current rate making practices, were as follows:
1994 1993 1992
Electric 3.6% 3.5% 3.5%
Gas 3.8% 3.5% 3.0%
(g) Decommissioning of the DAEC -
Included in Utilities' proposed electric rate increase
discussed in Note 3(a) is a proposal to increase the annual
recovery of anticipated costs to decommission the DAEC to
approximately $9 million annually from the current level of $5.5
million. Decommissioning expense is included in "Depreciation
and amortization" in the Consolidated Statements of Income and
the cumulative amount is included in "Accumulated depreciation"
in the Consolidated Balance Sheets to the extent recovered
through rates. The proposal is based on the following
assumptions: 1) cost to decommission the DAEC of $252.7 million
in 1993 dollars, based on the Nuclear Regulatory Commission (NRC)
minimum formula (which exceeds the amount in the current
site-specific study completed in 1994); 2) inflation of 4.91%
annually to the year 2014, when decommissioning is expected to
begin; 3) the prompt dismantling and removal method of
decommissioning; 4) monthly funding of all future collections
into external trust funds and funded on a tax-qualified basis to
the extent possible; 5) an average after-tax return of 6.82% for
all external investments; and 6) collection of the costs on a
straight-line basis, in real terms, through 2014. Current
levels of rate recovery: 1) do not recognize estimated future
inflation for the entire period prior to commencement of the
decommissioning process; 2) assume that decommissioning begins in
2010; and 3) provide recovery on a straight-line basis without
considering the effects of inflation. At December 31, 1994,
Utilities had $33.8 million invested in external decommissioning
trust funds as indicated in the Consolidated Balance Sheets, and
also had an internal decommissioning reserve of $21.7 million
recorded as accumulated depreciation. Earnings on the external
trust funds, which were $1.0 million in 1994, are recorded as
interest income and a corresponding interest expense payable to
the funds is recorded. The earnings accumulate in the external
trust fund balances and in accumulated depreciation on utility
plant.
See "Management's Discussion and Analysis of the Results of
Operations and Financial Condition" for a discussion of industry
issues raised by the staff of the SEC and a Financial Accounting
Standards Board review regarding the electric utility industry
method of accounting for decommissioning costs.
(h) Allowance for Funds Used During Construction -
The allowance for funds used during construction (AFC),
which represents the cost during the construction period of funds
used for construction purposes, is capitalized by Utilities as a
component of the cost of utility plant. The amount of AFC
applicable to debt funds and to other (equity) funds, a non-cash
item, is computed in accordance with the prescribed FERC formula.
The aggregate gross rates used by Utilities for 1994-1992 were
9.3%, 5.7% and 9.2%, respectively.
(i) Oil and Gas Properties -
Whiting Petroleum Company (Whiting), a wholly-owned
subsidiary of Diversified, uses the full
cost method of accounting for its oil and gas properties.
Accordingly, all costs of acquisition, exploration and
development of properties are capitalized. Amortization of
proved oil and gas properties is calculated using the units of
production method. At December 31, 1994, capitalized costs less
related accumulated amortization do not exceed the sum of (1) the
present value of future net revenue from estimated production of
proved oil and gas reserves (calculated using current prices);
plus (2) the cost of properties not being amortized, if any; plus
(3) the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any; less
(4) income tax effects related to differences in the book and tax
basis of oil and gas properties. See Note 12(f) for a discussion
of dismantlement and abandonment costs associated with certain
oil and gas properties.
(j) Operating Revenues -
The Company accrues revenues for services rendered but
unbilled at month-end in order to more properly match revenues
with expenses.
(k) Adjustment Clauses -
Utilities' tariffs provide for subsequent adjustments to its
electric and natural gas rates for changes in the cost of fuel
and purchased energy and in the cost of natural gas purchased for
resale. Changes in the under/over collection of these costs are
reflected in "Fuel for production" and "Gas purchased for resale"
in the Consolidated Statements of Income. The cumulative effects
are reflected in the Consolidated Balance Sheets as a current
asset or current liability, pending automatic reflection in
future billings to customers.
(l) Accumulated Refueling Outage Provision -
The IUB allows Utilities to collect, as part of its base
revenues, funds to offset other operating and maintenance
expenditures incurred during refueling outages at the DAEC. As
these revenues are collected, an equivalent amount is charged to
other operating and maintenance expenses with a corresponding
credit to a reserve. During a refueling outage, the reserve is
reversed to offset the refueling outage expenditures.
(2) ACQUISITION OF IOWA SERVICE TERRITORY OF UNION ELECTRIC
COMPANY:
Effective December 31, 1992, Utilities purchased the Iowa
distribution system and a portion of the Iowa transmission
facilities of Union Electric Company (UE) for approximately $65
million in cash. The net book value of the acquired assets was
approximately $35 million and the amount of the purchase price in
excess of the book value (approximately $30 million) has been
recorded as an acquisition adjustment. The acquisition adjustment
is being amortized over the life of the property and the
amortization is included in "Interest expense and
other - Miscellaneous, net" in the Consolidated Statements of
Income. Recovery of the acquisition adjustment through rates has
been requested in Utilities' current electric rate filing, which
is discussed in Note 3(a). See Note 12(b) for a discussion of
the purchase power contracts between Utilities and UE associated
with this acquisition.
(3) RATE MATTERS:
(a) 1994 Electric Rate Case -
In 1994, Utilities applied to the IUB for an increase in
retail electric rates of approximately $26 million annually, or
5.2%. Utilities' proposal includes approximately $12 million in
annual revenue requirement related to increased recovery levels
of depreciation expense and nuclear decommissioning expense. To
the extent these proposals are approved by the IUB, corresponding
increases in expense would be recorded and there would be no
effect on net income. No interim increase was requested.
The Office of Consumer Advocate (OCA) filed a petition in
connection with this proceeding to reduce the rates for retail
electric service by approximately $27 million or 5.5%. The
primary differences between the amount of the increase requested
by Utilities and the decrease proposed by the OCA are: 1) a 13.9%
return on common equity requested by Utilities compared to 11.1%
proposed by the OCA; 2) OCA's rejection of Utilities' proposal to
increase collections for decommissioning the DAEC; 3) OCA's
rejection of Utilities' proposal to increase depreciation rates;
4) OCA's proposal to reject most of Utilities' request to recover
an acquisition adjustment associated with its acquisition of the
Iowa service territory of UE; and 5) an adjustment to test year
sales levels proposed by the OCA. If a rate reduction is
ultimately ordered by the IUB, the reduction would be effective
from October 22, 1994, and revenues collected beyond that date
would be subject to refund to the extent of the reduction
approved by the IUB, if any. As of December 31, 1994, Utilities'
revenues collected subject to refund were approximately
$5 million.
Intervenors in the proceeding also submitted filings in
October 1994. These parties, which primarily represent
individual or groups of customers, generally object to particular
elements of the price increase and Utilities' price design
proposals. Those intervenors that quantified their positions
have generally argued for a price decrease, but none as large as
that proposed by the OCA.
Utilities expects to receive an order from the IUB in May
1995.
(b) 1994 Energy Efficiency Cost Recovery Filing -
The IUB has adopted rules that mandate Utilities to spend 2%
of electric and 1.5% of gas gross retail operating revenues for
energy efficiency programs. Under provisions of the IUB rules,
in August 1994, Utilities applied to the IUB for recovery of
approximately $23 million and $13 million for the electric and
gas programs, respectively, related to costs incurred through
1993 for such programs. The $36 million total for the electric
and gas programs is comprised of $21 million of direct
expenditures and carrying costs (recorded as a "Regulatory asset"
in the Consolidated Balance Sheets, including $3.6 million as
current), $7 million for a return on the expenditures over the
recovery period and $8 million for a reward based on a sharing of
the benefits of such programs.
In October 1994, the OCA and an intervenor in the proceeding
filed their direct testimony. The principal difference between
Utilities and the other parties is approximately $7 million in
the reward calculation. Hearings in the proceeding were held in
January 1995. Any increase approved by the IUB is not expected
to be effective before April 1995, and recovery will be over a
four-year period with a return allowed on the unrecovered portion
over the recovery period.
(4) LEASES:
Utilities has a capital lease covering its 70% undivided
interest in nuclear fuel purchased for the DAEC. Future
purchases of fuel may also be added to the fuel lease. This
lease provides for annual one-year extensions and Utilities
intends to exercise such extensions through the DAEC's operating
life. Interest costs under the lease are based on commercial
paper costs incurred by the lessor. Utilities is responsible for
the payment of taxes, maintenance, operating cost, risk of loss
and insurance relating to the leased fuel.
The lessor has an $80 million credit agreement with a bank
supporting the nuclear fuel lease. The agreement continues on a
year-to-year basis, unless either party provides at least a three-
year notice of termination; no such notice of termination has
been provided by either party.
Annual nuclear fuel lease expenses include the cost of fuel,
based on the quantity of heat produced for the generation of
electric energy, plus the lessor's interest costs related to fuel
in the reactor and administrative expenses. These expenses
(included in "Fuel for production" in the Consolidated Statements
of Income) for 1994-1992 were $17.8 million, $12.4 million and
$12.9 million, respectively.
The Company's operating lease rental expenses for 1994-1992
were $11.1 million, $9.1 million and $7.7 million, respectively.
The Company's future minimum lease payments by year are as
follows:
Capital Operating
Year Lease Leases
(in thousands)
1995 $ 15,634 $ 8,549
1996 15,653 8,479
1997 12,942 5,674
1998 6,394 4,245
1999 4,176 3,109
2000 - 2002 1,267 601
56,066 $ 30,657
Less: Amount representing interest 6,335
Present value of net minimum
capital lease payments $ 49,731
(5) UTILITY ACCOUNTS RECEIVABLE:
Customer accounts receivable, including unbilled revenues,
arise primarily from the sale of electricity and natural gas. At
December 31, 1994, Utilities was serving a diversified base of
residential, commercial and industrial customers consisting of
approximately 330,000 electric and 173,000 gas customers.
Utilities has entered into an agreement, which expires in
1999, with a financial institution to sell, with limited
recourse, an undivided fractional interest of up to $65 million
in its pool of utility accounts receivable. At
December 31, 1994, $54 million was sold under the agreement.
(6) INCOME TAXES:
The components of Federal and state income taxes for the
years ended December 31, were as follows:
1994 1993 1992
(in millions)
Current tax expense $ 37.5 $ 27.8 $ 25.2
Deferred tax expense 6.7 14.1 1.4
Amortization and adjustment
of investment tax credits (2.6) (4.9) (2.8)
$ 41.6 $ 37.0 $ 23.8
The overall effective income tax rates shown below for the
years ended December 31, were computed by dividing total income
tax expense by income before income taxes.
1994 1993 1992
Statutory Federal income tax rate 35.0% 35.0% 34.0%
Add (deduct):
State income taxes, net of
Federal benefits 5.9 5.5 5.8
Effect of property related
temporary differences for which
deferred taxes are not provided
under rate making principles 3.0 1.5 0.4
Amortization of investment tax credits (2.5) (2.6) (3.9)
Reversal through tariffs of
deferred taxes provided at rates in
excess of the current statutory
Federal income tax rate (1.4) (1.7) (2.4)
Adjustment of prior period taxes (1.6) (2.3) (1.6)
Other items, net - (0.1) 0.6
Overall effective income tax rate 38.4% 35.3% 32.9%
The accumulated deferred income taxes as set forth below in
the Consolidated Balance Sheets at December 31, arise from the
following temporary differences:
1994 1993
(in millions)
Property related $ 288 $ 280
Investment tax credit related (28) (30)
Decommissioning related (13) (12)
Other (2) (2)
$ 245 $ 236
(7) BENEFIT PLANS:
(a) Pension Plans -
The Company has one contributory and two non-contributory
retirement plans that, collectively, cover substantially all of
its employees. Plan benefits are generally based on years of
service and compensation during the employees' latter years of
employment. Payments made from the pension funds to retired
employees and beneficiaries during 1994 totaled $9.9 million.
The Company's policy is to fund the pension cost at an
amount that is at least equal to the minimum funding requirements
mandated by the Employee Retirement Income Security Act (ERISA)
and that does not exceed the maximum tax deductible amount for
the year.
Pursuant to the provisions of SFAS 71, certain adjustments
to Utilities' pension provision are necessary to reflect the
accounting for pension costs allowed in its most recent rate
cases.
The components of the pension provision for the years ended
December 31, were as follows:
1994 1993 1992
(in thousands)
Service cost $ 5,863 $ 4,342 $ 4,529
Interest cost on projected
benefit obligation 11,431 11,314 10,219
Assumed return on plans' assets (12,593) (12,363) (11,872)
Amortization of unrecognized gain (180) (767) (135)
Amortization of prior service cost 1,354 1,213 956
Amortization of unrecognized plans'
assets as of January 1, 1987 (333) (389) (389)
Pension cost 5,542 3,350 3,308
Adjustment to funding level (5,431) (2,940) 294
Total pension costs paid to
the Trustees $ 111 $ 410 $ 3,602
Actual return on plans'assets $ (97) $ 12,880 $ 8,949
A reconciliation of the funded status of the plans to the
amounts recognized in the Consolidated Balance Sheets at December
31, is presented below:
1994 1993
(in thousands)
Fair market value of plans' assets $ 167,535 $ 176,935
Actuarial present value of benefits
rendered to date -
Accumulated benefits based on
compensation to date,
including vested benefits of
$98,384,000 and $102,621,000, respectively 108,585 112,561
Additional benefits based on
estimated future salary levels 40,146 43,673
Projected benefit obligation 148,731 156,234
Plans' assets in excess of projected
benefit obligation 18,804 20,701
Remaining unrecognized net asset
existing at January 1, 1987, being amortized
over 20 years (3,844) (4,177)
Unrecognized prior service cost 18,260 16,985
Unrecognized net gain (34,420) (29,278)
Prepaid (accrued) pension cost recognized in
the Consolidated Balance Sheets $ (1,200) $ 4,231
Assumed rate of return, all plans 8.00% 8.00%
Weighted average discount rate of
projected benefit obligation, all plans 8.25% 7.50%
Range of assumed rates of increase in
future compensation levels for the plans 4.00-5.75% 4.00-5.75%
(b) Other Postemployment Benefit Plans -
The Company provides certain benefits to retirees (primarily
health care benefits). Through 1992, the Company expensed such
costs as benefits were paid ($2.2 million for 1992), which was
consistent with rate making practices at that time.
Effective January 1, 1993, the Company adopted SFAS 106,
which requires the accrual of the expected cost of postretirement
benefits other than pensions during the employees' years of
service. The IUB has adopted rules stating that postretirement
benefits other than pensions will be included in Utilities' rates
pursuant to the provisions of SFAS 106. The rules permit
Utilities to amortize the transition obligation as of
January 1, 1993, over 20 years and require that all amounts
collected are to be funded into an external trust to pay benefits
as they become due. Beginning in 1993, the gas portion of these
costs is being recovered in Utilities' gas rates, and is funded
in external trust funds. The IUB has adopted a rule that permits
a deferral of the incremental electric SFAS 106 costs until the
earlier of: 1) an order in an electric rate case, or 2)
December 31, 1995. Accordingly, pursuant to the provisions of
SFAS 71, Utilities had deferred $5.6 million of such costs at
December 31, 1994. Utilities has requested recovery of these
costs in the electric rate case discussed in Note 3(a).
The transition obligation for the non-regulated operations
was expensed in 1993 and is reflected in other operating
expenses.
The components of postretirement benefit costs for the years
ended December 31, were as follows:
1994 1993
(in thousands)
Service cost $ 1,838 $ 1,744
Interest cost on accumulated
postretirement benefit obligation 3,275 3,363
Actual return on plan assets (47) -
Amortization of transition obligation
existing at January 1, 1993, for
regulated operations 2,024 2,024
Amortization of unrecognized asset loss (13) -
Amortization of unrecognized gain (6) -
Amortization of prior service cost 19 -
Write-off of transition obligation
existing at January 1, 1993,
for non-regulated operations - 1,434
Postretirement benefit costs 7,090 8,565
Less: Deferred postretirement
benefit costs 2,732 2,858
Net postretirement benefit costs $ 4,358 $ 5,707
A reconciliation of the funded status of the plans to the
amounts recognized in the Consolidated Balance Sheets at December
31, is presented below:
1994 1993
(in thousands)
Fair market value of plans' assets $ 1,127 $ 1,171
Accumulated postretirement
benefit obligation -
Active employees not yet eligible 18,896 19,092
Active employees eligible 5,306 4,294
Retirees 18,602 20,739
Total accumulated postretirement
benefit obligation 42,804 44,125
Accumulated postretirement
benefit obligation in
excess of plans' assets (41,677) (42,954)
Unrecognized transition obligation 36,439 38,463
Unrecognized net gain (5,703) (1,175)
Unrecognized prior service cost 170 -
Accrued postretirement benefit cost in
in the Consolidated Balance Sheets $ (10,771) $ (5,666)
Assumed rate of return 8.00% 8.00%
Weighted average discount rate
of accumulated postretirement
benefit obligation 8.25% 7.50%
Medical trend on paid charges:
Initial trend rate 11.00% 12.00%
Ultimate trend rate 6.50% 6.50%
The assumed medical trend rates are critical assumptions in
determining the service cost and accumulated postretirement
benefit obligation related to postretirement benefit costs. A 1%
change in the medical trend rates, holding all other assumptions
constant, would have changed the 1994 service cost by
$1.0 million (20%) and the accumulated postretirement benefit
obligation at December 31, 1994, by $6.8 million (16%).
On January 1, 1994, the Company adopted the provisions of
SFAS 112, "Employers' Accounting for Postemployment Benefits,"
and its adoption did not have a material effect on the Company's
financial position or results of operations.
(8) COMMON STOCK:
The following table presents information relating to the
issuance of common stock.
Common Stock
Number of Shares
Outstanding Amount
(in thousands)
Balance, December 31, 1991 24,298,807 $ 260,414
Stock plan issuances* 404,324 11,473
Shares issued in connection
with the Whiting merger 853,832 7,923
Balance, December 31, 1992 25,556,963 279,810
Public offering 2,300,000 66,555
Stock plan issuances* 447,225 13,936
Balance, December 31, 1993 28,304,188 360,301
Shares issued in connection with
acquisition of Okie Companies 139,102 4,027
Purchases of treasury stock (213,300) (6,233)
Stock plan issuances* 547,056 15,395
Balance, December 31, 1994 28,777,046 $ 373,490
Shares reserved for issuance
pursuant to the Company's stock
plans at December 31, 1994* 2,457,397
* Dividend Reinvestment and Stock Purchase
Plan, Employee Stock Purchase Plan, Employee
Savings Plan, Long-Term Incentive Plan of
1987, IES Bonus Stock Ownership Plan and
Whiting Stock Option Plans
In 1994, Industries issued 139,102 shares of its common
stock for the purchase of certain companies, collectively
referred to as the Okie Companies, in a transaction that was
accounted for as a purchase. The Okie Companies hold oil and gas
properties in the United States and are now wholly-owned
subsidiaries of Whiting.
During 1994, Industries reacquired 213,300 shares of its
common stock on the open market, at an average price of $29.22
per share, which were subsequently issued to the Dividend
Reinvestment Plan and certain of its benefit plans. At
December 31, 1994, no shares remained held as treasury stock.
In the first quarter of 1993, Industries sold 2.3 million
shares of its common stock in a public offering. The shares were
priced at $30 per share. Net proceeds to Industries from this
sale were approximately $67 million.
(9) PREFERRED AND PREFERENCE STOCK:
Utilities has 466,406 shares of Cumulative Preferred Stock,
$50 par value, authorized for issuance at December 31, 1994, of
which the 6.10%, 4.80% and 4.30% Series had 100,000, 146,406 and
120,000 shares, respectively, outstanding at both December 31,
1994 and 1993. These shares are redeemable at the option of
Utilities upon 30 days notice at $51.00, $50.25 and $51.00 per
share, respectively, plus accrued dividends.
There are 5,000,000 shares of Industries Cumulative
Preferred Stock (no par value) and 700,000 shares of Utilities
Cumulative Preference Stock ($100 par value) authorized for
issuance, of which none were outstanding at December 31, 1994.
(10) DEBT:
(a) Long-Term Debt -
Utilities' Indentures and Deeds of Trust securing its First
Mortgage Bonds constitute direct first mortgage liens upon
substantially all tangible public utility property. Utilities'
Indenture and Deed of Trust securing its Collateral Trust Bonds
constitutes a second lien on substantially all tangible public
utility property while First Mortgage Bonds remain outstanding.
Diversified has a variable rate credit facility that extends
through November 9, 1997, with two one-year extensions available
to Diversified. The facility also serves as a stand-by agreement
for Diversified's commercial paper program. The agreement
provides for a combined maximum of $150 million of borrowings
under the agreement and commercial paper to be outstanding at any
one time. Interest rates and maturities are set at the time of
borrowing for direct borrowings under the agreement and for
issuances of commercial paper. The interest rate options are
based upon quoted market rates and the maturities are less than
one year. At December 31, 1994, $12 million was borrowed under
this facility, bearing an interest rate of 6.44%, maturing in
January 1995. Diversified also had $68.5 million of commercial
paper outstanding at December 31, 1994, with interest rates
ranging from 6.27% to 6.38% and maturity dates in the first
quarter of 1995, which was also supported by the facility.
Diversified intends to continue borrowing under the renewal
options of the facility and no conditions exist at December 31,
1994, that would prevent such borrowings. Accordingly, this debt
is classified as long-term in the Consolidated Balance Sheets.
Total sinking fund requirements, which Utilities intends to
meet by pledging additional property under the terms of
Utilities' Indentures and Deeds of Trust, and debt maturities for
1995-1999 are as follows:
Debt Maturities
(in thousands)
Debt Issue 1995 1996 1997 1998 1999
Utilities -
Sinking fund
requirements $ 780 $ 630 $ 550 $ 550 $ 550
Pollution control 140 140 140 140 140
Series W 50,000 - - - -
Series X 50,000 - - - -
Series J - 15,000 - - -
6-1/8% Series - - 8,000 - -
Series Z - - - - 50,000
Diversified -
Variable rate
credit facility 80,500 - - - -
Other subsidiaries'
debt 282 305 331 357 10,393
Total $ 181,702 $ 16,075 $ 9,021 $ 1,047 $ 61,083
The Company intends to refinance the majority of the debt
maturities with long-term securities.
(b) Long-Term Debt of McLeod, Inc. -
Diversified has a $7.5 million investment in Class B Common
Stock of McLeod, Inc. (McLeod), which represents a voting
interest of less than 20%. McLeod provides local and
long-distance telecommunication services to business customers
and other services related to fiber optics. In 1994, Diversified
entered into an agreement whereby it will guarantee $6 million
under a credit facility between McLeod and its bankers.
Diversified is paid an annual commitment fee and receives options
to purchase additional shares of Class B Common Stock for as long
as the guarantee remains outstanding. At December 31, 1994,
McLeod had $3.5 million outstanding under its facility.
(c) Short-Term Debt -
At December 31, 1994, the Company had bank lines of credit
aggregating $77.7 million (Industries - $1.5 million, Utilities -
$67.7 million, Diversified - $7.5 million and
Whiting - $1.0 million). Utilities was using $37 million to
support commercial paper (weighted average interest rate of
6.13%) and $7.7 million to support certain pollution control
obligations. Commitment fees are paid to maintain these lines
and there are no conditions which restrict the unused lines of
credit. In addition to the above, Utilities has an uncommitted
credit facility with a financial institution whereby it can
borrow up to $40 million. Rates are set at the time of borrowing
and no fees are paid to maintain this facility. At
December 31, 1994, there were no borrowings under this facility.
Utilities also has a letter of credit in the amount of
$3.4 million supporting two of its variable rate pollution
control obligations.
(11) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of financial instruments at
December 31, 1994, and the basis upon which they were estimated
are as follows:
(a) Current Assets and Current Liabilities -
The carrying amount approximates fair value because of the
short maturity of such financial instruments.
(b) Nuclear Decommissioning Trust Funds -
The carrying amount represents the fair value of these trust
funds, as reported by the trustee. On January 1, 1994, the
Company adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities." This standard, which applies to
Utilities' nuclear decommissioning trust funds, requires that
unrealized gains and losses on such investments be included in
the reported balance of such investments. At December 31, 1994,
the balance of the "Nuclear decommissioning trust funds" as shown
in the Consolidated Balance Sheets included $0.8 million of
unrealized losses on the investments held in the trust funds.
The accumulated reserve for decommissioning costs was adjusted by
a corresponding amount and there was no effect on net income or
earnings per average common share from adopting this standard.
(c) Cumulative Preferred Stock of Utilities -
The estimated fair value of this stock of $10.2 million is
based upon the market yield of similar securities.
(d) Long-Term Debt -
The carrying amount of long-term debt was $576 million
compared to estimated fair value of $551 million. The estimated
fair value of long-term debt is based upon quoted market prices.
Since Utilities is subject to regulation, any gains or
losses related to the difference between the carrying amount and
the fair value of financial instruments may not be realized by
the Company's shareholders.
(12) COMMITMENTS AND CONTINGENCIES:
(a) Construction Program -
The Company's construction and acquisition program
anticipates expenditures of approximately $202 million for 1995,
which includes $163 million at Utilities and $39 million at
Diversified. In addition to the $163 million, Utilities
anticipates expenditures of approximately $13 million for
mandated energy efficiency programs. These expenditures will be
deferred pursuant to IUB rules as discussed in Note 3(b).
Substantial commitments have been made in connection with all
such expenditures.
(b) Purchase Power Contracts -
In connection with the acquisition of the UE properties
discussed in Note 2, Utilities is purchasing power from UE under
a firm capacity contract with a 1995 requirement of 100 Mw of
delivered capacity declining to 60 Mw in 1997. Utilities will
also purchase an additional annual maximum interruptible capacity
of up to 54 Mw of 25 Hz power, which extends through 1998 and
will continue thereafter unless either party gives a three-year
notice of cancellation. The costs of capacity purchases for
these contracts are reflected in "Purchased power" in the
Consolidated Statements of Income.
Utilities has a contract to purchase capacity of 50 Mw from
the City of Muscatine for the period May 1, 1995, through
October 31, 1995. Utilities has also entered into an agreement
with Basin Electric Power Cooperative to purchase capacity of 50
Mw, 75 Mw, 100 Mw and 100 Mw during the annual six-month summer
season for the years 1996 through 1999, respectively.
Total capacity charges under all existing contracts will
approximate $16.3 million, $14.3 million, $12.3 million,
$4.7 million and $3.4 million for the years 1995-1999,
respectively.
(c) Coal Contract Commitments -
Utilities has entered into coal supply contracts which
expire between 1996 and 2001 for its fossil-fueled generating
stations. At December 31, 1994, the contracts cover
approximately $199 million of coal over the life of the
contracts, which includes $50 million expected to be incurred
in 1995. Utilities expects to supplement these coal contracts
with spot market purchases to fulfill its future fossil fuel
needs.
(d) Information Technology Services -
The Company entered into an agreement, expiring in 2004,
with Electronic Data Systems Corporation (EDS) for information
technology services. The contract is subject to declining
termination fees. The Company's anticipated expenditures under
the agreement for 1995 are estimated to be approximately
$9.5 million. Future costs under the agreement are variable and
are dependent upon the Company's level of usage of technological
services from EDS.
(e) Nuclear Insurance Programs -
The Price-Anderson Amendments Act of 1988 (1988 Act)
provides Utilities with the benefit of $8.9 billion of public
liability coverage consisting of $200 million of insurance and
$8.7 billion of potential retroactive assessments from the owners
of nuclear power plants. Based upon its ownership of the DAEC,
under the 1988 Act, Utilities could be assessed a maximum of
$79.3 million per nuclear incident, with a maximum of $10 million
per year (of which Utilities' 70% ownership portion would be
approximately $55 million and $7 million, respectively) if losses
relating to the incidents exceeded $200 million. These limits
are subject to adjustments for inflation in future years.
Utilities is a member of Nuclear Electric Insurance Limited
(NEIL), which provides insurance coverage for the cost of certain
property losses at nuclear generating stations and for the cost
of replacement power during certain outages. Companies insured
through NEIL are subject to retroactive premium adjustments if
losses exceed accumulated reserve funds. NEIL's accumulated
reserve funds are currently sufficient to more than cover its
exposure in the event of a single incident under the property
damage or replacement power coverages. However, Utilities could
be assessed annually a maximum of $8.5 million for certain
property losses and $0.7 million for replacement power if NEIL's
losses relating to accidents exceeded its accumulated reserve
funds. Utilities is not aware of any losses that it believes are
likely to result in an assessment.
(f) Environmental Liabilities -
The Company has recorded environmental liabilities of
approximately $44 million, including $5.4 million as current
liabilities, in its Consolidated Balance Sheets at December 31,
1994. The significant items are discussed below.
Former Manufactured Gas Plant (FMGP) Sites
Utilities has been named as a Potentially Responsible Party
(PRP) by either the Iowa Department of Natural Resources (IDNR),
the Minnesota Pollution Control Agency (MPCA) or the United
States Environmental Protection Agency (EPA) for 28 FMGP sites.
Utilities believes that it is not responsible for two of the
sites for which it has been designated a PRP. Utilities has
another FMGP site for which it has not yet been formally
designated as a PRP. Utilities is working pursuant to the
requirements of the IDNR, MPCA and EPA to investigate, mitigate,
prevent and remediate, where necessary, damage to property,
including damage to natural resources, at and around the
remaining 27 sites in order to protect public health and the
environment. In addition, Utilities has recently become aware
that two additional sites may exist, but it has not yet been able
to determine if any liability may exist.
Utilities has completed the remediation of three sites and
is in various stages of the investigation and/or remediation
processes for 22 sites. The investigation process is scheduled
to begin in 1995 or 1996 for the two other sites. In 1994,
Utilities received updated investigation reports on a number of
sites, which, at some sites, indicated a greater volume of
contaminated soil, surface and ground water needing treatment,
and a greater volume of substances requiring higher cost
incineration, than was anticipated in prior estimates. It is
possible that future cost estimates will be greater than the
current estimates as the investigation process proceeds and as
additional facts become known.
Utilities has recorded environmental liabilities related to
the FMGP sites of $31 million (including $4.3 million as current
liabilities) at December 31, 1994. These amounts are based upon
Utilities' best current estimate of the amount to be incurred for
investigation and remediation costs for those sites where the
investigation process has been or is substantially completed.
For those sites where the investigation is in its earlier stages
or has not started, the liability represents the minimum of the
estimated cost range. All investigations are expected to be
completed by 1999 and site-specific remediations, based on
recommendations from the IDNR, MPCA and EPA, are anticipated to
be completed within three years after the completion of the
investigations of each site. Utilities may be required to monitor
these sites for a number of years upon completion of remediation,
as is the case with the three sites for which remediation has
been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation and monitoring costs from its
insurance carriers and is investigating the potential for third
party cost sharing for FMGP investigation and clean-up costs.
The amount of shared costs, if any, cannot be reasonably
determined and, accordingly, no potential sharing has been
recorded at December 31, 1994. Regulatory assets of
$31.0 million have been recorded in the Consolidated Balance
Sheets, which reflect the future recovery that is being provided
through Utilities' rates. Considering the rate treatment allowed
by the IUB, management believes that the clean-up costs incurred
by Utilities for these FMGP sites will not have a material
adverse effect on its financial position or results of
operations.
National Energy Policy Act of 1992
The National Energy Policy Act of 1992 requires owners of
nuclear power plants to pay a special assessment into a "Uranium
Enrichment Decontamination and Decommissioning Fund." The
assessment is based upon prior nuclear fuel purchases and, for
the DAEC, averages $1.4 million annually through 2007, of which
Utilities' 70% share is $1.0 million. Utilities is recovering
the costs associated with this assessment through its electric
fuel adjustment clauses over the period the costs are assessed.
Utilities' 70% share of the future assessment, $12.0 million
payable through 2007, has been recorded as a liability in the
Consolidated Balance Sheets, including $0.8 million included in
"Current liabilities - Environmental liabilities," with a related
regulatory asset for the unrecovered amount.
Oil and Gas Properties Dismantlement and Abandonment
Costs
Whiting is responsible for certain dismantlement and
abandonment costs related to various off-shore oil and gas
properties, the most significant of which is located off the
coast of California. Whiting accrues these costs as reserves are
extracted and such costs are included in "Depreciation and
amortization" in the Consolidated Statements of Income. A
corresponding environmental liability, $0.1 million at December
31, 1994, has been recognized in the Consolidated Balance Sheets
for the cumulative amount expensed.
(g) Clean Air Act -
The Clean Air Act Amendments Act of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in two
phases with Phase I affecting two of Utilities' units beginning
in 1995 and Phase II affecting all units beginning in the year
2000. Utilities is in the process of completing the
modifications necessary to meet the Phase I requirements.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital expenditures
primarily related to fuel burning equipment and boiler
modifications. Utilities estimates capital expenditures at
approximately $22.5 million, including $4.4 million in 1995, in
order to meet the requirements of the Act.
(h) FERC Order No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992. Order
636, as modified on rehearing: 1) requires Utilities' pipeline
suppliers to unbundle their services so that gas supplies are
obtained separately from transportation service, and
transportation and storage services are operated and billed as
separate and distinct services; 2) requires the pipeline
suppliers to offer "no notice" transportation service under which
firm transporters (such as Utilities) can receive delivery of gas
up to their contractual capacity level on any day without prior
scheduling; 3) allows pipelines to abandon long-term (one year or
more) transportation service provided to a customer under an
expiring contract whenever the customer fails to match the
highest rate and longest term (up to 20 years) offered to the
pipeline by other customers for the particular capacity; and 4)
provides for a mechanism under which pipelines can recover
prudently incurred transition costs associated with the
restructuring process. Utilities has enhanced access to
competitively priced gas supply and more flexible transportation
services as a result of Order 636. However, under Order 636,
Utilities is required to pay certain transition costs incurred
and billed by its pipeline suppliers.
Utilities' three pipeline suppliers have made filings with
the FERC to begin collecting their respective transition costs,
and additional filings are expected. Utilities began paying the
transition costs in 1993, and, at December 31, 1994, has recorded
a liability of $8.0 million for those transition costs that have
been incurred by the pipelines to date, including $3.0 million
expected to be billed through 1995. Utilities is currently
recovering the transition costs from its customers through its
Purchased Gas Adjustment Clauses as such costs are billed by the
pipelines. Transition costs, in addition to the recorded
liability, that may ultimately be charged to Utilities could
approximate $10 million. The ultimate level of costs to be
billed to Utilities depends on the pipelines' filings with the
FERC and other future events, including the market price of
natural gas. However, Utilities believes any transition costs
that the FERC would allow the pipelines to collect from Utilities
would be recovered from its customers, based upon regulatory
treatment of these costs currently and similar past costs by the
IUB. Accordingly, regulatory assets, in amounts corresponding to
the recorded liabilities, have been recorded to reflect the
anticipated recovery.
(13) JOINTLY-OWNED ELECTRIC UTILITY PLANT:
Under joint ownership agreements with other Iowa utilities,
Utilities has undivided ownership interests in jointly-owned
electric generating stations and related transmission facilities.
Each of the respective owners is responsible for the financing of
its portion of the construction costs. Kilowatt-hour generation
and operating expenses are divided on the same basis as ownership
with each owner reflecting its respective costs in its Statements
of Income. Information relative to Utilities' ownership interest
in these facilities at December 31, 1994 is as follows:
Ottumwa Neal
DAEC Unit 1 Unit 3
($ in millions)
Utility plant in service $ 490.8 $ 187.9 $ 55.5
Accumulated depreciation $ 242.4 $ 80.6 $ 25.7
Construction work in progress $ 5.3 $ - $ 1.3
Plant capacity - Mw 515 716 515
Percent ownership 70% 48% 28%
In-service date 1974 1981 1975
(14) SEGMENTS OF BUSINESS:
The principal business segments of Industries are the
generation, transmission, distribution and sale of electric
energy by Utilities and the purchase, distribution and sale of
natural gas by Utilities and Industrial Energy Applications,
Inc., a wholly-owned subsidiary of Diversified. Certain
financial information relating to Industries' significant
segments of business is presented below:
Year Ended December 31
1994 1993 1992
(in thousands)
Operating results:
Revenues -
Electric $ 537,327 $ 550,521 $ 462,999
Gas 165,569 181,923 167,082
Operating income -
Electric 125,487 128,994 90,891
Gas 8,762 13,673 9,164
Other information:
Depreciation and amortization -
Electric 68,640 63,832 59,707
Gas 6,214 5,186 4,024
Construction and acquisition
expenditures -
Electric 99,543 84,720 154,902
Gas 12,719 12,582 17,323
Assets -
Identifiable assets -
Electric 1,347,024 1,288,505 1,226,614
Gas 192,397 168,800 147,395
1,539,421 1,457,305 1,374,009
Other corporate assets 304,568 242,514 220,373
Total consolidated assets $ 1,843,989 $ 1,699,819 $ 1,594,382
Item 9. Changes and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors, Executive Officers, Promoters and Control
Persons of the Registrant
Information regarding the identification of directors of
Industries and compliance with Section 16(a) reporting
requirements of the Securities and Exchange Commission is
included in Industries' definitive proxy statement prepared
for the 1995 annual meeting of stockholders, which was filed
on March 20, 1995, (Proxy Statement under the captions
"Proposal Number 1 - Nomination and Election of Directors" and
"Certain SEC Filings") and is incorporated herein by
reference. The executive officers of the registrant are as
follows:
Executive Officers of the Registrant (Effective February 7, 1995)
Lee Liu, 61, Chairman of the Board, President & Chief
Executive Officer. First elected officer in 1975.
Blake O. Fisher, Jr., 50, Executive Vice President &
Chief Financial Officer and Director. First elected
officer in 1991. (i)
Larry D. Root, 58, Executive Vice President. First
elected officer in 1979.
Dr. Robert J. Latham, 52, Senior Vice President, Finance.
First elected officer in 1985.
Stephen W. Southwick, 48, Vice President, General Counsel
& Secretary. First elected officer in 1982.
Thomas R. Seldon, 56, Vice President, Human Resources.
First elected officer in 1987.
Dean E. Ekstrom, 47, Vice President, Management Systems.
First elected officer in 1991.
Peter W. Dietrich, 55, Vice President, Corporate
Development. First elected officer in 1988.
Richard A. Gabbianelli, 38, Controller & Chief Accounting
Officer. First elected officer in 1994.
Dennis B. Vass, 45, Treasurer. First elected officer in
1995. (ii)
Officers are elected annually by the Board of Directors
and each of the officers named above, except Blake O. Fisher,
Jr. and Dennis B. Vass, have been employed by Industries or
one of its significant subsidiaries as an officer or in other
responsible positions at such companies for at least five
years. There are no family relationships among these
officers. There are no arrangements or understandings with
respect to election of any person as an officer.
(i) Prior to the appointment of Blake O. Fisher,
Jr. as Executive Vice President & Chief Financial
Officer of the Company in January 1991, he was
employed by Consumers Power Company as Vice
President Finance and Treasurer.
(ii) Prior to the appointment of Dennis B. Vass as
Treasurer of the Company in February, 1995, he was
employed by Consumers Power Company as Financial
Projects Director and by the Company in April, 1991,
as Manager of Finance.
Item 11. Executive Compensation
Information regarding executive compensation and
transactions is included in the Proxy Statement under the
captions "Compensation of Directors", "Summary Compensation
Table", "Compensation Committee Interlocks and Insider
Participation" and "IES Industries Plans" and is incorporated
herein by reference, except for the "Report of the
Compensation Committee on Executive Compensation," the
"Performance Graph" and "Proposal Number 2 - To Amend the IE
Industries Inc. Long-Term Incentive Plan of 1987" included
therein, which are not incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain
beneficial owners and management is included in the Proxy
Statement under the captions "Security Ownership of Beneficial
Owners" and "Security Ownership of Management" and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions is included in the Proxy Statement under the
captions "Other Transactions" and "Compensation of Directors"
and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
Page No.
(a) 1. Financial Statements -
Included in Part II of this report -
Report of Management. 56 - 57
Report of Independent Public Accountants. 58
Consolidated Statements of Income for the
years ended December 31, 1994, 1993 and 1992. 59
Consolidated Statements of Retained Earnings
for the years ended December 31, 1994, 1993 and 1992. 60
Consolidated Balance Sheets at December 31, 1994 and
1993. 61 - 62
Consolidated Statements of Capitalization at
December 31, 1994 and 1993. 63
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992. 64
Notes to Consolidated Financial Statements. 65 - 97
(a) 2. Financial Statement Schedules -
Included in Part IV of this report -
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 1994,
1993 and 1992. 103
Other schedules are omitted as not required
under Rules of Regulation S-X.
(a) 3. Exhibits -
See Exhibit Index beginning on page 106.
(b) Reports on Form 8-K -
None.
IES INDUSTRIES INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column E
Balance Balance
Description January 1 December 31
(in thousands)
IES Industries Inc. and Non-utility Subsidiaries:
1994:
Reserve for economic development loans $ 49 $ 49
Accumulated provision for uncollectible
accounts and other $ 457 $ 323
1993:
Reserve for economic development loans $ 247 $ 49
Accumulated provision for uncollectible
accounts and other $ - $ 457
1992:
Reserve for economic development loans $ 1,388 $ 247
Accumulated provision for uncollectible
accounts and other $ 3,757 $ -
IES Utilities Inc.:
1994:
Accumulated provision for
uncollectible accounts $ 409 $ 650
Accumulated provision for rate refunds $ 8,670 $ -
1993:
Accumulated provision for
uncollectible accounts $ 567 $ 409
Accumulated provision for rate refunds $ 9,020 $ 8,670
1992:
Accumulated provision for
uncollectible accounts $ 804 $ 567
Accumulated provision for rate refunds $ 1,492 $ 9,020
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 29th day of
March 1995.
IES INDUSTRIES INC.
(Registrant)
By /s/ Blake O. Fisher, Jr.
Blake O. Fisher, Jr.
Executive Vice President &
Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities indicated on March 29, 1995:
/s/ Lee Liu Chairman of the Board, President &
Lee Liu Chief Executive Officer
(Principal Executive Officer)
/s/ Blake O. Fisher, Jr. Executive Vice President & Chief
Blake O. Fisher, Jr. Financial Officer and Director
(Principal Financial Officer)
/s/ Richard A. Gabbianelli Controller & Chief Accounting Officer
Richard A. Gabbianelli (Principal Accounting Officer)
/s/ C.R.S. Anderson Director
C.R.S. Anderson
/s/ J. Wayne Bevis Director
J. Wayne Bevis
/s/ Dr. George Daly Director
Dr. George Daly
/s/ G. Sharp Lannom, IV Director
G. Sharp Lannom, IV
/s/ Jack R. Newman Director
Jack R. Newman
/s/ Robert D. Ray Director
Robert D. Ray
/s/ David Q. Reed Director
David Q. Reed
/s/ Henry Royer Director
Henry Royer
/s/ Robert W. Schlutz Director
Robert W. Schlutz
/s/ Anthony R. Weiler Director
Anthony R. Weiler
EXHIBIT INDEX
The Exhibits designated by an asterisk are filed herewith and
all other Exhibits as stated to be filed are incorporated
herein by reference.
Exhibit
3(a) Articles of Incorporation of Registrant, Amended
and Restated as of May 4, 1993 (Filed as Exhibit 3(a)
to Company's Form 10-K for the year 1993).
3(b) Bylaws of Registrant, as amended
November 2, 1994 (Filed as Exhibit 3 to Company's
Registration Statement, File No. 33-56981).
4(a) Indenture of Mortgage and Deed of Trust,
dated as of September 1, 1993, between Utilities
(formerly Iowa Electric Light and Power Company (IE))
and the First National Bank of Chicago, as Trustee
(Mortgage) (Filed as Exhibit 4(c) to IE's Form 10-Q for
the quarter ended September 30, 1993).
4(b) Supplemental Indentures to the Mortgage:
Number Dated as of IE File Reference Exhibit
First October 1, 1993 Form 10-Q, 11/12/93 4(d)
Second November 1, 1993 Form 10-Q, 11/12/93 4(e)
4(c) Indenture of Mortgage and Deed of Trust,
dated as of August 1, 1940, between Utilities (formerly
IE) and the First National Bank of Chicago, Trustee
(1940 Indenture) (Filed as Exhibit 2(a) to IE's
Registration Statement, File No. 2-25347).
4(d) Supplemental Indentures to the 1940 Indenture:
Number Dated as of IE File Reference Exhibit
First March 1, 1941 2-25347 2(a)
Second July 15, 1942 2-25347 2(a)
Third August 2, 1943 2-25347 2(a)
Fourth August 10, 1944 2-25347 2(a)
Fifth November 10, 1944 2-25347 2(a)
Sixth August 8, 1945 2-25347 2(a)
Seventh July 1, 1946 2-25347 2(a)
Eighth July 1, 1947 2-25347 2(a)
Ninth December 15, 1948 2-25347 2(a)
Tenth November 1, 1949 2-25347 2(a)
Eleventh November 10, 1950 2-25347 2(a)
Twelfth October 1, 1951 2-25347 2(a)
Thirteenth March 1, 1952 2-25347 2(a)
Fourteenth November 5, 1952 2-25347 2(a)
Fifteenth February 1, 1953 2-25347 2(a)
Sixteenth May 1, 1953 2-25347 2(a)
Seventeenth November 3, 1953 2-25347 2(a)
Eighteenth November 8, 1954 2-25347 2(a)
Nineteenth January 1, 1955 2-25347 2(a)
Twentieth November 1, 1955 2-25347 2(a)
Twenty-first November 9, 1956 2-25347 2(a)
Twenty-second November 6, 1957 2-25347 2(a)
Twenty-third November 4, 1958 2-25347 2(a)
Twenty-fourth November 3, 1959 2-25347 2(a)
Twenty-fifth November 1, 1960 2-25347 2(a)
Twenty-sixth January 1, 1961 2-25347 2(a)
Twenty-seventh November 7, 1961 2-25347 2(a)
Twenty-eighth November 6, 1962 2-25347 2(a)
Twenty-ninth November 5, 1963 2-25347 2(a)
Thirtieth November 4, 1964 2-25347 2(a)
Thirty-first November 2, 1965 2-25347 2(a)
Thirty-second September 1, 1966 Form 10-K, 1966 4.10
Thirty-third November 30, 1966 Form 10-K, 1966 4.10
Thirty-fourth November 7, 1967 Form 10-K, 1967 4.10
Thirty-fifth November 5, 1968 Form 10-K, 1968 4.10
Thirty-sixth November 1, 1969 Form 10-K, 1969 4.10
Thirty-seventh December 1, 1970 Form 8-K, 12/70 1
Thirty-eighth November 2, 1971 2-43131 2(g)
Thirty-ninth May 1, 1972 Form 8-K, 5/72 1
Fortieth November 7, 1972 2-56078 2(i)
Forty-first November 7, 1973 2-56078 2(j)
Forty-second September 10,1974 2-56078 2(k)
Forty-third November 5, 1975 2-56078 2(l)
Forty-fourth July 1, 1976 Form 8-K, 7/76 1
Forty-fifth November 1, 1976 Form 8-K, 12/76 1
Forty-sixth December 1, 1977 2-60040 2(o)
Forty-seventh November 1, 1978 Form 10-Q, 6/30/79 1
Forty-eighth December 1, 1979 Form S-16, 2-65996 2(q)
Forty-ninth November 1, 1981 Form 10-Q, 3/31/82 2
Fiftieth December 1, 1980 Form 10-K, 1981 4(s)
Fifty-first December 1, 1982 Form 10-K, 1982 4(t)
Fifty-second December 1, 1983 Form 10-K, 1983 4(u)
Fifty-third December 1, 1984 Form 10-K, 1984 4(v)
Fifty-fourth March 1, 1985 Form 10-K, 1984 4(w)
Fifty-fifth March 1, 1988 Form 10-Q, 5/12/88 4(b)
Fifty-sixth October 1, 1988 Form 10-Q, 11/10/88 4(c)
Fifty-seventh May 1, 1991 Form 10-Q, 8/13/91 4(d)
Fifty-eighth March 1, 1992 Form 10-K, 1991 4(c)
Fifty-ninth October 1, 1993 Form 10-Q, 11/12/93 4(a)
Sixtieth November 1, 1993 Form 10-Q, 11/12/93 4(b)
4(e) Indenture or Deed of Trust dated as of
February 1, 1923, between Utilities (successor to Iowa
Southern Utilities Company (IS) as result of merger of
IS and IE) and The Northern Trust Company (The First
National Bank of Chicago, successor) and Harold H.
Rockwell (Richard D. Manella, successor), as Trustees
(1923 Indenture) (Filed as Exhibit B-1 to File No. 2-
1719).
4(f) Supplemental Indentures to the 1923 Indenture:
Dated as of File Reference Exhibit
May 1, 1940 2-4921 B-1-k
May 2, 1940 2-4921 B-1-l
October 1, 1945 2-8053 7(m)
October 2, 1945 2-8053 7(n)
January 1, 1948 2-8053 7(o)
September 1, 1950 33-3995 4(e)
February 1, 1953 2-10543 4(b)
October 2, 1953 2-10543 4(q)
August 1, 1957 2-13496 2(b)
September 1, 1962 2-20667 2(b)
June 1, 1967 2-26478 2(b)
February 1, 1973 2-46530 2(b)
February 1, 1975 2-53860 2(aa)
July 1, 1975 2-54285 2(bb)
September 2, 1975 2-57510 2(bb)
March 10, 1976 2-57510 2(cc)
February 1, 1977 2-60276 2(ee)
January 1, 1978 0-849 2
March 1, 1979 0-849 2
March 1, 1980 0-849 2
May 31, 1986 33-3995 4(g)
July 1, 1991 0-849 4(h)
September 1, 1992 0-849 4(m)
December 1, 1994 0-4117-1 4(f)
4(g) Credit Agreement dated as of March 5,
1992 among IES Diversified Inc. as Borrower, certain
banks and Citibank, N.A., as Agent. (Filed as Exhibit
4(p) to Company's Form 10-K for the year 1991).
4(h) Amended and Restated Credit Agreement
dated as of January 7, 1993 among IES Diversified Inc.
as Borrower, certain banks and Citibank, N.A., as
Agent. (Filed as Exhibit 4(v) to the Company's Form 10-
K for the year 1992).
* 4(i) Second Amended and Restated Credit
Agreement dated as of November 9, 1994 among IES
Diversified Inc. as Borrower, certain banks and
Citibank, N.A., as Agent.
10(a) Agreement dated December 15, 1971
between Central Iowa Power Cooperative and IE. (Filed
as Exhibit 5(a) to IE's Registration Statement, File
No. 2-43131).
10(b) Duane Arnold Energy Center Ownership
Participation Agreement dated June 1, 1970 between
Central Iowa Power Cooperative, Corn Belt Power
Cooperative and IE. (Filed as Exhibit 5(kk) to IE's
Registration Statement, File No. 2-38674).
10(c) Duane Arnold Energy Center Operating
Agreement dated June 1, 1970 between Central Iowa Power
Cooperative, Corn Belt Power Cooperative and IE.
(Filed as Exhibit 5(ll) to IE's Registration Statement,
File No. 2-38674).
10(d) Duane Arnold Energy Center Agreement for
Transmission, Transformation, Switching, and Related
Facilities dated June 1, 1970 between Central Iowa
Power Cooperative, Corn Belt Power Cooperative and IE.
(Filed as Exhibit 5(mm) to IE's Registration Statement,
File No. 2-38674).
10(e) Basic Generating Agreement dated April
16, 1975 between Iowa Public Service Company, Iowa
Power and Light Company, Iowa-Illinois Gas and Electric
Company and IS for the joint ownership of Ottumwa
Generating Station-Unit 1 (OGS-1). (Filed as Exhibit 1
to IE's Form 10-K for the year 1977).
10(f) Addendum Agreement to the Basic
Generating Agreement for OGS-1 dated December 7, 1977
between Iowa Public Service Company, Iowa-Illinois Gas
and Electric Company, Iowa Power and Light Company, IS
and IE for the purchase of 15% ownership in OGS-1.
(Filed as Exhibit 3 to IE's Form 10-K for the year
1977).
10(g) Fuel Lease dated August 21, 1973, as
amended by Amendment No. 1 dated August 29, 1973, and
by Amendment dated September 17, 1987, between Arnold
Fuel, Inc. and IE for the procurement and financing of
nuclear fuel. (Filed as Exhibit 10(l) to IE's Form
10-K for the year 1984).
10(h) Amendment dated as of September 17, 1987
to the Fuel Lease dated as of August 21, 1973 between
Arnold Fuel, Inc. and IE. (Filed as Exhibit 10(i) to
IE's Form 10-K for the year 1987).
10(i) Second Amended and Restated Credit
Agreement dated as of September 17, 1987 between Arnold
Fuel, Inc. and the First National Bank of Chicago and
the Amended and Restated Consent and Agreement dated as
of September 17, 1987 by IE. (Filed as Exhibit 10(j)
to IE's Form 10-K for the year 1987).
Management Contracts and/or Compensatory Plans (Exhibits 10(j)
through 10(t))
10(j) Service Contract between S. Levy,
Incorporated and IE. (Filed as Exhibit 10(m) to IE's
Form 10-K for the year 1985).
10(k) Supplemental Retirement Plan. (Filed as
Exhibit 10(l) to the Company's Form 10-K for the year
1987).
10(l) Management Incentive Compensation Plan.
(Filed as Exhibit 10(m) to the Company's Form 10-K for
the year 1987).
10(m) Key Employee Deferred Compensation Plan.
(Filed as Exhibit 10(n) to the Company's Form 10-K for
the year 1987).
10(n) Long-Term Incentive Plan. (Filed as
Exhibit 10(o) to the Company's Form 10-K for the
year 1987).
10(o) Executive Guaranty Plan. (Filed as
Exhibit 10(p) to the Company's Form 10-K for the
year 1987).
10(p) Executive Change of Control Severance
Agreement. (Filed as Exhibit 10(s) to the Company's
Form 10-K for the year 1989).
10(q) Amendments to Key Employee Deferred
Compensation Agreement for Directors. (Filed as
Exhibit 10(u) to the Company's Form 10-Q for the
quarter ended March 31, 1990).
10(r) Amendments to Key Employee Deferred
Compensation Agreement for Key Employees. (Filed as
Exhibit 10(v) to the Company's Form 10-Q for the
quarter ended March 31, 1990).
10(s) Amendments to Management Incentive
Compensation Plan. (Filed as Exhibit 10(y) to the
Company's Form 10-Q for the quarter ended March 31,
1990).
10(t) Director Retirement Plan. (Filed as
Exhibit 10(t) to the Company's Form 10-K for the year
1993).
10(u) Agreement and Plan of Merger, dated as
of February 27, 1991, by and between IE Industries Inc.
and Iowa Southern Inc. (Filed as Exhibit 2 to the
Company's Form 8-K dated February 27, 1991).
10(v) IES Industries Inc. Shareholders' Rights
Plan. (Filed as Exhibit I-2 to the Company's
Registration Statement on Form 8-A filed November 13,
1991).
10(w) Restated Agreement and Plan of Merger
among IES Industries Inc., WPC Acquisition Corp. and
Whiting Petroleum Corporation dated November 15, 1991.
(Filed as Annex A to the Company's Form S-4
Registration Statement No. 33-44495).
10(x) Agreement for Purchase and Sale of
Certain Assets and Real Estate and Assignment of
Easements, Leases and Licenses between Union Electric
Company (Seller) and IE (Buyer). (Filed as exhibit
10(t) to IE's Form 10-K for the year 1991).
10(y) Lease and Security Agreement, dated
October 1, 1993, between IES Diversified Inc., as
lessee, and Sumitomo Bank Leasing and Finance, Inc., as
lessor. (Filed as Exhibit 10(z) to the Company's Form
10-K for the year 1993).
10(z) Receivables Purchase and Sale Agreement dated as
of June 30, 1989, as Amended and Restated as of April
15, 1994, among IES Utilities Inc. (as Seller) and
CIESCO L.P. (as the Investor) and Citicorp North
America, Inc. (as Agent). (Filed as Exhibit 10(a) to
Utilities' Form 10-Q for the quarter ended March 31,
1994 (File No. 0-4117-1)).
10(aa) Agreement and Plan of Merger among IES Industries
Inc., WOC Acquisition Company, Okie Crude Company, Elba
Gas Company, Kimble Gas Gathering Company, Thomas M.
Atkinson and Joan B. Atkinson, dated as of March 25,
1994. (Filed as Exhibit 10(b) to Company's Form 10-Q
for the quarter ended March 31, 1994).
10(ab) IES Diversified Inc. Guaranty with McLeod, Inc.,
dated May 16, 1994 (Filed as Exhibit 10(c) to Company's
Form 10-Q for the quarter ended June 30, 1994).
10(ac) Agreement Regarding Guarantee Between McLeod, Inc.
and IES Diversified Inc., dated May 16, 1994 (Filed as
Exhibit 10(d) to Company's Form 10-Q for the quarter
ended June 30, 1994).
10(ad) Guaranty (IES Utilities Trust No. 1994-A) from IES
Utilities Inc., dated as of June 29, 1994. (Filed as
Exhibit 10(b) to Utilities' Form 10-Q for the quarter
ended June 30, 1994 (File No. 0-4117-1)).
10(ae) Agreement and Plan of Merger between IE and IS
dated as of June 4, 1993 (Agreement and Plan of Merger)
(Filed as Exhibit 2 to the Company's Current Report on
Form 8-K, dated June 4, 1993).
10(af) Amendment 1 dated June 16, 1993, to the Agreement
and Plan of Merger (Filed as Exhibit 2(b) to the IE
Registration Statement on Form S-3, dated September 14,
1993 (File No. 33-68796)).
10(ag) Amendment 2 dated September 8, 1993, to the
Agreement and Plan of Merger (Filed as Exhibit 2(c) to
the IE Registration Statement on Form S-3, dated
September 14, 1993 (File No. 33-68796)).
10(ah) Amendment 3 dated September 27, 1993, to the
Agreement and Plan of Merger (Filed as Exhibit 2(d) to
the Company's Current Report on Form 8-K, dated
December 9, 1993).
* 21 Subsidiaries of the Registrant.
* 23 Consent of Independent Public Accountants.
* 27 Financial Data Schedule
Note: Pursuant to (b)(4)(iii)(A) of Item 601 of
Regulation S-K, the Company has not filed as an exhibit
to this Form 10-K certain instruments with respect to
long-term debt that has not been registered if the
total amount of securities authorized thereunder does
not exceed 10% of total assets of the Company but
hereby agrees to furnish to the Commission on request
any such instruments.
EXHIBIT 4(i)
[EXECUTION COPY]
-----------------------------------------------------------------------------
$150,000,000
SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 9, 1994
Among
IES DIVERSIFIED INC.
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Agent
-----------------------------------------------------------------------------
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms . . . . . . . . . . 1
1.02. Computation of Time Periods . . . . . . . 17
1.03. Computations of Outstandings . . . . . . . 17
1.04. Accounting Terms . . . . . . . . . . . . . 17
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The A Advances . . . . . . . . . . . . . . 18
2.02. Making the A Advances . . . . . . . . . . 18
2.03. The B Advances . . . . . . . . . . . . . . 20
2.04. Fees . . . . . . . . . . . . . . . . 24
2.05. Reduction of the Commitments . . . . . . . 24
2.06. Repayment of A Advances . . . . . . . . . 24
2.07. Interest on A Advances . . . . . . . . . . 24
2.08. Additional Interest on Eurodollar Rate
Advances . . . . . . . . . . . . . . . . 25
2.09. Interest Rate Determination . . . . . . . 26
2.10. Voluntary Conversion of A Advance . . . . 28
2.11. Optional Prepayments of Advances . . . . . 29
2.12. Mandatory Prepayments . . . . . . . . . . 29
2.13. Increased Costs . . . . . . . . . . . . . 30
2.14. Illegality . . . . . . . . . . . . . . . . 31
2.15. Payments and Computations . . . . . . . . 32
2.16. Taxes . . . . . . . . . . . . . . . . 33
2.17. Sharing of Payments, Etc. . . . . . . . . 35
2.18. Extension of Termination Date . . . . . . 36
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Closing . . . . . 37
3.02. Conditions Precedent to Each
A Borrowing . . . . . . . . . . . . . . 39
3.03. Conditions Precedent to Each39
B Borrowing . . . . . . . . . . . . . . 39
3.04. Reliance on Certificates . . . . . . . . . 41
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the
Borrower . . . . . . . . . . . . . . . . 41
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants . . . . . . . . . . 44
5.02. Negative Covenants . . . . . . . . . . . . 49
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default . . . . . . . . . . . . 54
ARTICLE VII
THE AGENT
7.01. Authorization and Action . . . . . . . . . 57
7.02. Agent's Reliance, Etc. . . . . . . . . . . 57
7.03. Citibank, N.A. and Affiliates . . . . . . 58
7.04. Lender Credit Decision . . . . . . . . . . 58
7.05. Indemnification . . . . . . . . . . . . . 58
7.06. Successor Agent . . . . . . . . . . . . . 59
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc. . . . . . . . . . . . . . 60
8.02. Notices, Etc. . . . . . . . . . . . . . . 60
8.03. No Waiver; Remedies . . . . . . . . . . . 61
8.04. Costs, Expenses, Taxes and Indemnification . 61
8.05. Right of Set-off . . . . . . . . . . . . . 63
8.06. Binding Effect . . . . . . . . . . . . . . 63
8.07. Assignments and Participations . . . . . . 64
8.08. Confidentiality . . . . . . . . . . . . . 67
8.09. Waiver of Jury Trial . . . . . . . . . . . 68
8.10. Consent . . . . . . . . . . . . . . . 68
8.11. Governing Law . . . . . . . . . . . . . . 69
8.12. Relation of the Parties; No Beneficiary . . 69
8.13. Execution in Counterparts . . . . . . . . 69
Exhibits
EXHIBIT 1.01A-1 - Form of A Note
EXHIBIT 1.01A-2 - Form of B Note
EXHIBIT 1.01B - Form of Support Agreement
EXHIBIT 2.02(a) - Form of Notice of A Borrowing
EXHIBIT 2.03(a)(i) - Form of Notice of B Borrowing
EXHIBIT 2.10 - Form of Notice of Conversion
EXHIBIT 3.01(a)(xii)-1 - Form of Opinion of Winthrop, Stimson,
Putnam & Roberts, Special New York
Counsel for the Borrower and the
Parent
EXHIBIT 3.01(a)(xii)-2 - Form of Opinion of the General
Counsel of the Borrower and the
Parent
EXHIBIT 3.01(a)(xii)-3 - Form of Opinion of King & Spalding,
Special New York Counsel to the Agent
EXHIBIT 8.07 - Form of Lender Assignment
Schedules
SCHEDULE I - List of Applicable Lending Offices
SCHEDULE II - Liens
SCHEDULE III - Debt
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 9, 1994
THIS CREDIT AGREEMENT is made by and among:
(i) IES DIVERSIFIED INC., an Iowa corporation
(the Borrower ), all of whose common
stock is owned on the date hereof by the
Parent (as hereinafter defined),
(ii) the banks (the Banks ) listed on the
signature pages hereof and the other
Lenders (as hereinafter defined) from
time to time party hereto, and
(iii) Citibank, N.A., as agent (the
Agent ) for the Lenders hereunder.
PRELIMINARY STATEMENTS
(1) The Borrower, certain banks (the
Existing Banks ) and Citibank, N.A., as agent for the Existing
Banks, are parties to that certain Amended and Restated Credit
Agreement, dated as of January 7, 1993 (the Existing Facility ).
(2) The Borrower has requested that the
Existing Facility be amended and restated so as to (i) increase
the Commitments (as defined therein) to $150,000,000 and (ii)
effect certain other amendments and modifications as set forth
herein.
(3) The Banks and the Agent have agreed to
such request, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the
premises and the mutual covenants herein contained, the parties
hereto hereby agree that the Existing Facility is hereby amended
and restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As
used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
A Advance means an advance by a Lender
to the Borrower as part of an A Borrowing and
refers to an Adjusted CD Rate Advance, a Base
Rate Advance or a Eurodollar Rate Advance,
each of which shall be a Type of A Advance.
A Borrowing means a borrowing
consisting of simultaneous A Advances of the
same Type, having the same Interest Period and
ratably made or Converted on the same day by
each of the Lenders pursuant to Section 2.02
or 2.10, as the case may be. All Advances of
the same Type, having the same Interest Period
and made or Converted on the same day shall be
deemed a single Borrowing hereunder until
repaid or next Converted.
A Note means a promissory note of the
Borrower payable to the order of any Lender,
in substantially the form of Exhibit 1.01A-1
hereto, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from
the A Advances made by such Lender.
Adjusted CD Rate means, for any
Interest Period for each Adjusted CD Rate
Advance made as part of the same A Borrowing,
an interest rate per annum equal to the sum
of:
(a) the rate per annum obtained
by dividing (i) the rate of interest
determined by the Agent to be the average
(rounded upward to the nearest whole
multiple of 1/100 of 1% per annum, if
such average is not such a multiple) of
the consensus bid rate determined by each
of the Reference Banks for the bid rates
per annum at 9:00 A.M. (New York City
time) (or as soon thereafter as
practicable) on the first day of such
Interest Period of New York certificate
of deposit dealers of recognized standing
selected by such Reference Bank for the
purchase at face value of certificates of
deposit of such Reference Bank in an
amount substantially equal to such
Reference Bank's Adjusted CD Rate Advance
made as part of such A Borrowing and
maturing on the last day of such Interest
Period, by (ii) a percentage equal to
100% minus the Adjusted CD Rate Reserve
Percentage (as defined below) for such
Interest Period, plus
(b) the Assessment Rate (as
defined below) for such Interest Period.
The Adjusted CD Rate Reserve Percentage for
the Interest Period for each Adjusted CD Rate
Advance comprising part of the same A
Borrowing means the reserve percentage
applicable on the first day of such Interest
Period, as determined by the Agent, under
regulations issued from time to time by the
Board of Governors of the Federal Reserve
System (or any successor) for determining the
maximum reserve requirement (including, but
not limited to, any emergency, supplemental or
other marginal reserve requirement) for a
member bank of the Federal Reserve System in
New York City with deposits exceeding one
billion dollars with respect to liabilities
consisting of or including (among other
liabilities) U.S. dollar nonpersonal time
deposits in the United States with a maturity
equal to such Interest Period. The
Assessment Rate for the Interest Period for
each Adjusted CD Rate Advance comprising part
of the same A Borrowing means the annual
assessment rate estimated by the Agent on the
first day of such Interest Period for
determining the then current annual assessment
payable by the Agent to the Federal Deposit
Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of the Agent in
the United States. The Adjusted CD Rate for
the Interest Period for each Adjusted CD Rate
Advance comprising part of the same A
Borrowing shall be determined by the Agent on
the basis of applicable rates furnished to and
received by the Agent from the Reference Banks
on the first day of such Interest Period,
subject, however, to the provisions of Section
2.09.
Adjusted CD Rate Advance means an A
Advance which bears interest as provided in
Section 2.07(b).
Advance means an A Advance or a B
Advance.
Affiliate means, with respect to any
Person, any other Person directly or
indirectly controlling (including but not
limited to all directors and officers of such
Person), controlled by, or under direct or
indirect common control with such Person. A
Person shall be deemed to control another
entity if such Person possesses, directly or
indirectly, the power to direct or cause the
direction of the management and policies of
such entity, whether through the ownership of
voting securities, by contract, or otherwise.
Alternate Base Rate means a fluctuating
interest rate per annum as shall be in effect
from time to time which rate per annum shall
at all times be equal to the higher of:
(a) the rate of interest
announced publicly by Citibank, N.A. in
New York, New York, from time to time, as
Citibank, N.A.'s base rate; and
(b) 1/2 of one percent per annum
above the Federal Funds Rate.
Each change in the Alternate Base Rate shall
take effect concurrently with any change in
such base rate or the Federal Funds Rate.
Applicable Lending Office means, with
respect to each Lender, such Lender's Domestic
Lending Office in the case of a Base Rate
Advance, such Lender's CD Lending Office in
the case of an Adjusted CD Rate Advance and
such Lender's Eurodollar Lending Office in the
case of a Eurodollar Rate Advance and, in the
case of a B Advance, the office of such Lender
notified by such Lender to the Agent as its
Applicable Lending Office with respect to such
B Advance.
Applicable Margin means, on any date of
determination (i) for a Base Rate Advance,
0.000% per annum, (ii) for an Adjusted CD Rate
Advance, 0.4375% per annum, and (iii) for a
Eurodollar Rate Advance, 0.3125% per annum.
Notwithstanding the foregoing, each of the
foregoing Applicable Margins shall be
increased by 0.25% per annum in the event
that, and at all times during which, either
the Moody's Rating shall be lower than Baa3 or
the S&P Rating shall be lower than BBB-. The
Applicable Margins shall be increased or
decreased in accordance with this definition
upon any change in the applicable ratings, and
such increased or decreased Applicable Margins
shall be effective from the date of
announcement of such new Moody's Rating or S&P
Rating, as the case may be. The Borrower
agrees to notify the Agent promptly after each
change in the Moody's Rating or the S&P
Rating.
Applicable Rate means:
(i) in the case of each Base Rate
Advance, a rate per annum equal at all times
to the sum of the Alternate Base Rate in
effect from time to time plus the Applicable
Margin in effect from time to time;
(ii) in the case of each Adjusted CD
Rate Advance comprising part of the same A
Borrowing, a rate per annum during each
Interest Period equal at all times to the sum
of the Adjusted CD Rate for such Interest
Period plus the Applicable Margin in effect
from time to time during such Interest Period;
and
(iii) in the case of each Eurodollar
Rate Advance comprising part of the same A
Borrowing, a rate per annum during each
Interest Period equal at all times to the sum
of the Eurodollar Rate for such Interest
Period plus the Applicable Margin in effect
from time to time during such Interest Period.
Available Commitment means, for each
Lender at any time on any day, the unused
portion of such Lender's Commitment, computed
after giving effect to all Extensions of
Credit theretofore made on such day and the
application of proceeds therefrom.
Available Commitments means the
aggregate of the Lenders' Available
Commitments hereunder.
B Advance means an advance by a Lender
to the Borrower as part of a B Borrowing
resulting from the auction bidding procedure
described in Section 2.03.
B Borrowing means a borrowing
consisting of simultaneous B Advances from
each of the Lenders whose offer to make one or
more B Advances as part of such borrowing has
been accepted by the Borrower under the
auction bidding procedure described in Section
2.03.
B Note means a promissory note of the
Borrower payable to the order of any Lender,
in substantially the form of Exhibit 1.01A-2
hereto, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from
a B Advance(s) made by such Lender.
B Reduction has the meaning assigned to
that term in Section 2.01.
Base Rate Advance means an A Advance
that bears interest as provided in Section
2.07(a).
Borrowing means an A Borrowing or a B
Borrowing. Any A Borrowing consisting of A
Advances of a particular Type may be referred
to as being an A Borrowing of such Type .
Business Day means a day of the year on
which banks are not required or authorized to
close in New York City, Chicago, Illinois or
Cedar Rapids, Iowa, and, if the applicable
Business Day relates to any Eurodollar Rate
Advance, on which dealings are carried on in
the London interbank market.
CD Lending Office means, with respect
to any Lender, the office or affiliate of such
Lender specified as its CD Lending Office
opposite its name on Schedule I hereto or in
the Lender Assignment pursuant to which it
became a Lender (or, if no such office is
specified, its Domestic Lending Office) or
such other office or affiliate of such Lender
as such Lender may from time to time specify
to the Borrower and the Agent.
Capitalized Lease Obligations means
obligations to pay rent or other amounts under
any lease of (or other arrangement conveying
the right to use) real and/or personal
property which obligation is required to be
classified and accounted for as a capital
lease on a balance sheet prepared in
accordance with generally accepted accounting
principles, and for purposes hereof the amount
of such obligations shall be the capitalized
amount determined in accordance with such
principles.
Cash and Cash Equivalents means, with
respect to any Person, the aggregate amount of
the following, to the extent owned by such
Person free and clear of all Liens,
encumbrances and rights of others and not
subject to any judicial, regulatory or other
legal constraint: (i) cash on hand; (ii)
Dollar demand deposits maintained in the
United States with any commercial bank and
Dollar time deposits maintained in the United
States with, or certificates of deposit having
a maturity of one year or less issued by, any
commercial bank which has its head office in
the United States and which has a combined
capital and surplus of at least $100,000,000;
(iii) eurodollar time deposits maintained in
the United States with, or eurodollar
certificates of deposit having a maturity of
one year or less issued by, any commercial
bank having outstanding unsecured indebtedness
that is rated (on the date of acquisition
thereof) A- or better by S&P or A3 or better
by Moody's (or an equivalent rating by another
nationally-recognized credit rating agency of
similar standing if neither of such
corporations is then in the business of rating
unsecured bank indebtedness); (iv) direct
obligations of, or unconditionally guaranteed
by, the United States and having a maturity of
one year or less; (v) commercial paper rated
(on the date of acquisition thereof) A-1 or P-
1 or better by S&P or Moody's, respectively
(or an equivalent rating by another
nationally-recognized credit rating agency of
similar standing if neither of such
corporations is then in the business of rating
commercial paper), and having a maturity of
one year or less; (vi) obligations with any
Lender or any other commercial bank in respect
of the repurchase of obligations of the type
described in clause (iv), above, provided that
such repurchase obligations shall be fully
secured by obligations of the type described
in said clause (iv) and the possession of such
obligations shall be transferred to, and
segregated from other obligations owned by,
such Lender or such other commercial bank; and
(vii) preferred stock of any Person that is
rated A- or better by S&P or A3 or better by
Moody's (or an equivalent rating by another
nationally-recognized credit rating agency of
similar standing if neither of such
corporations is then in the business of rating
preferred stock of entities engaged in such
businesses).
Closing means the day upon which each
of the applicable conditions precedent
enumerated in Section 3.01 shall be fulfilled
to the satisfaction of, or waived with the
consent of, the Lenders, the Agent and the
Borrower. All transactions contemplated by
the Closing shall take place on a Business Day
on or prior to November 9, 1994, at the
offices of King & Spalding, 120 West 45th
Street, New York, New York 10036, at 10:00
A.M., or such later Business Day as the
parties hereto may mutually agree.
Commitment means, for each Lender, the
obligation of such Lender to make Advances to
the Borrower in an amount no greater than the
amount set forth opposite such Lender's name
on the signature pages hereof or, if such
Lender has entered into one or more Lender
Assignments, set forth for such Lender in the
Register maintained by the Agent pursuant to
Section 8.07(c), in each such case as such
amount may be reduced from time to time
pursuant to Section 2.05. Commitments means
the total of the Lenders' Commitments
hereunder. The Commitments shall in no event
exceed $150,000,000.
Consolidated Capital means, with
respect to any Person, at any date of
determination, the sum of (a) Consolidated
Debt of such Person, (b) consolidated equity
of the common stockholders of such Person and
its Consolidated Subsidiaries,
(c) consolidated equity of the preference
stockholders of such Person and its
Consolidated Subsidiaries and (d) consolidated
equity of the preferred stockholders of such
Person and its Consolidated Subsidiaries, in
each case determined at such date in
accordance with generally accepted accounting
principles.
Consolidated Debt means, with respect
to any Person, at any date of determination,
the aggregate Debt of such Person and its
Consolidated Subsidiaries determined on a
consolidated basis in accordance with
generally accepted accounting principles.
Consolidated Subsidiary means, with
respect to any Person, any Subsidiary of such
Person whose accounts are or are required to
be consolidated with the accounts of such
Person in accordance with generally accepted
accounting principles.
Convert , Conversion and Converted
each refers to a conversion of Advances of one
Type into Advances of another Type, or to the
selection of a new, or the renewal of the
same, Interest Period for Advances, as the
case may be, pursuant to Section 2.09 or 2.10.
Debt means, for any Person, any and all
indebtedness, liabilities and other monetary
obligations of such Person (i) for borrowed
money or evidenced by bonds, debentures, notes
or other similar instruments, (ii) to pay the
deferred purchase price of property or
services (except trade accounts payable
arising and repaid in the ordinary course of
business), (iii) Capitalized Lease
Obligations, (iv) under reimbursement or
similar agreements with respect to letters of
credit (other than trade letters of credit)
issued to support indebtedness or obligations
of such Person or of others of the kinds
referred to in clauses (i) through (iii),
above, and clause (v), below, (v) reasonably
quantifiable obligations under direct
guaranties or indemnities, or under support
agreements, in respect of, and reasonably
quantifiable obligations (contingent or
otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss
in respect of, or to assure an obligee against
failure to make payment in respect of,
indebtedness or obligations of others of the
kinds referred to in clauses (i) through (iv),
above, and (vi) in respect of unfunded vested
benefits under Plans. In determining Debt for
any Person, there shall be included accrued
interest on the principal amount thereof to
the extent such interest has accrued for more
than six months.
Default Rate means a rate per annum
equal at all times to 2% per annum above the
Applicable Rate in effect from time to time
for Base Rate Advances.
Direct Subsidiary means, with respect
to any Person, any Subsidiary directly owned
by such Person.
Dollars and the sign $ each means
lawful money of the United States.
Domestic Lending Office means, with
respect to any Lender, the office or affiliate
of such Lender specified as its Domestic
Lending Office opposite its name on Schedule
I hereto or in the Lender Assignment pursuant
to which it became a Lender, or such other
office or affiliate of such Lender as such
Lender may from time to time specify in
writing to the Borrower and the Agent.
Eligible Assignee means (a) a
commercial bank or trust company organized
under the laws of the United States, or any
State thereof; (b) a commercial bank organized
under the laws of any other country that is a
member of the OECD, or a political subdivision
of any such country, provided that such bank
is acting through a branch or agency located
in the United States; (c) the central bank of
any country that is a member of the OECD; and
(d) any other commercial bank or other
financial institution engaged generally in the
business of extending credit or purchasing
debt instruments; provided, however, that (A)
any such Person shall also (i) have
outstanding unsecured indebtedness that is
rated A- or better by S&P or A3 or better by
Moody's (or an equivalent rating by another
nationally-recognized credit rating agency of
similar standing if neither of such
corporations is then in the business of rating
unsecured indebtedness of entities engaged in
such businesses) or (ii) have combined capital
and surplus (as established in its most recent
report of condition to its primary regulator)
of not less than $250,000,000 (or its
equivalent in foreign currency), (B) any
Person described in clause (b), (c), or (d),
above, shall, on the date on which it is to
become a Lender hereunder, (i) be entitled to
receive payments hereunder without deduction
or withholding of any United States Federal
income taxes (as contemplated by Section 2.16)
and (ii) not be incurring any losses, costs or
expenses of the type for which such Person
could demand payment under Section 2.13, and
(C) any Person described in clauses (b), (c)
and (d), above, shall, in addition, be
reasonably acceptable to the Agent and the
Borrower.
ERISA means the Employee Retirement
Income Security Act of 1974, as amended from
time to time, and the regulations promulgated
and rulings issued thereunder.
ERISA Affiliate means, with respect to
any Person, any trade or business (whether or
not incorporated) which is a member of a group
of which such Person is a member and which is
under common control within the meaning of the
regulations under Section 414(b) or (c) of the
Internal Revenue Code of 1986, as amended from
time to time.
ERISA Event means (i) the occurrence of
a reportable event, within the meaning of
Section 4043 of ERISA, unless the 30-day
notice requirement with respect thereto has
been waived by the PBGC; (ii) the provision by
the administrator of any Plan of notice of
intent to terminate such Plan, pursuant to
Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA);
(iii) the cessation of operations at a
facility in the circumstances described in
Section 4062(e) of ERISA; (iv) the withdrawal
by the Borrower or an ERISA Affiliate of the
Borrower from a Multiple Employer Plan during
a plan year for which it was a substantial
employer , as defined in Section 4001(a)(2) of
ERISA; (v) the failure by the Borrower or an
ERISA Affiliate of the Borrower to make a
payment to a Plan required under Section
302(f)(1) of ERISA, which failure results in
the imposition of a lien for failure to make
required payments; (vi) the adoption of an
amendment to a Plan requiring the provision of
security to such Plan, pursuant to Section 307
of ERISA; or (vii) the institution by the PBGC
of proceedings to terminate a Plan, pursuant
to Section 4042 of ERISA, or the occurrence of
any event or condition which might reasonably
be expected to constitute grounds under
Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer,
a Plan.
Eurocurrency Liabilities has the
meaning assigned to that term in Regulation D
of the Board of Governors of the Federal
Reserve System, as in effect from time to
time.
Eurodollar Lending Office means, with
respect to any Lender, the office or affiliate
of such Lender specified as its Eurodollar
Lending Office opposite its name on Schedule
I hereto or in the Lender Assignment pursuant
to which it became a Lender (or, if no such
office is specified, its Domestic Lending
Office), or such other office or affiliate of
such Lender as such Lender may from time to
time specify in writing to the Borrower and
the Agent.
Eurodollar Rate means, for each
Interest Period for each Eurodollar Rate
Advance made as part of the same A Borrowing,
an interest rate per annum equal to the
average (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rate
per annum at which deposits in U.S. dollars
are offered by the principal office of each of
the Reference Banks in London, England to
prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days
before the first day of such Interest Period
in an amount substantially equal to such
Reference Bank's Eurodollar Rate Advance made
as part of such A Borrowing and for a period
equal to such Interest Period. The Eurodollar
Rate for the Interest Period for each
Eurodollar Rate Advance made as part of the
same A Borrowing shall be determined by the
Agent on the basis of applicable rates
furnished to and received by the Agent from
the Reference Banks two Business Days before
the first day of such Interest Period,
subject, however, to the provisions of Section
2.09.
Eurodollar Rate Advance means an A
Advance that bears interest as provided in
Section 2.07(c).
Eurodollar Reserve Percentage of any
Lender for each Interest Period for each
Eurodollar Rate Advance means the reserve
percentage applicable to such Lender during
such Interest Period (or if more than one such
percentage shall be so applicable, the daily
average of such percentages for those days in
such Interest Period during which any such
percentage shall be so applicable) under
Regulation D or other regulations issued from
time to time by the Board of Governors of the
Federal Reserve System (or any successor) for
determining the maximum reserve requirement
(including, without limitation, any emergency,
supplemental or other marginal reserve
requirement) then applicable to such Lender
with respect to liabilities or assets
consisting of or including Eurocurrency
Liabilities having a term equal to such
Interest Period.
Events of Default has the meaning
assigned to that term in Section 6.01.
Exempt Subsidiary means each of SIMCO
and Terra Comfort, provided that SIMCO and/or
Terra Comfort shall no longer constitute an
Exempt Subsidiary if all or any substantial
part of the assets of any other Subsidiary of
the Borrower is, directly or indirectly, sold,
leased, transferred, assigned or otherwise
disposed of to SIMCO or Terra Comfort,
respectively.
Existing Banks has the meaning assigned
to that term in Preliminary Statement (1) to
this Agreement.
Existing Facility has the meaning
assigned to that term in Preliminary Statement
(1) to this Agreement.
Extension of Credit means the making of
a Borrowing. For purposes of this Agreement,
a Conversion shall not constitute an Extension
of Credit.
Federal Funds Rate means, for any
period, a fluctuating interest rate per annum
equal for each day during such period to the
weighted average of the rates on overnight
Federal funds transactions with members of the
Federal Reserve System arranged by Federal
funds brokers, as published for such day (or,
if such day is not a Business Day, for the
next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is
not so published for any day which is a
Business Day, the average of the quotations
for such day on such transactions received by
the Agent from three Federal funds brokers of
recognized standing selected by it.
Fee Letter means that certain letter
agreement, dated the date hereof, between the
Borrower and the Agent.
Governmental Approval means any
authorization, consent, approval, license,
franchise, lease, ruling, tariff, rate,
permit, certificate, exemption of, or filing
or registration with, any governmental
authority or other legal or regulatory body
required in connection with the execution,
delivery or performance of any Loan Document.
Hazardous Substance means any waste,
substance, or material identified as
hazardous, dangerous or toxic by any office,
agency, department, commission, board, bureau,
or instrumentality of the United States or of
the State or locality in which the same is
located having or exercising jurisdiction over
such waste, substance or material.
IES Utilities means IES Utilities Inc.,
an Iowa corporation, all of whose common stock
is owned on the date hereof by the Parent.
Increasing Lender means each Existing
Bank whose Commitment exceeds its Commitment
under the Existing Facility.
Information Memorandum means the
financial statements and projections with
respect to the Parent and its Subsidiaries
previously delivered (i) to the Agent by the
Parent under cover of a letter dated February
7, 1992, (ii) to the Lenders by the Parent
under cover of a letter dated December 7, 1992
and (iii) to the Agent by the Parent under
cover of a letter dated August 26, 1994.
Interest Period means, for each A
Advance made as part of the same A Borrowing,
the period commencing on the date of such A
Advance or the date of the Conversion of any A
Advance into such an A Advance and ending on
the last day of the period selected by the
Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing
on the last day of the immediately preceding
Interest Period and ending on the last day of
the period selected by the Borrower pursuant
to the provisions below. The duration of each
such Interest Period shall be 30, 60, 90 or
180 days in the case of an Adjusted CD Rate
Advance, and 1, 2, 3 or 6 months in the case
of a Eurodollar Rate Advance, in each case as
the Borrower may, upon notice received by the
Agent not later than 12:00 noon (New York City
time) (a) on the third Business Day prior to
the first day of such Interest Period in the
case of a Eurodollar Rate Advance and (b) on
the second Business Day prior to the first day
of such Interest Period in the case of an
Adjusted CD Rate Advance, select; provided,
however, that:
(i) the Borrower may not select
any Interest Period that ends after the
Termination Date;
(ii) Interest Periods commencing
on the same date for A Advances
comprising part of the same A Borrowing
shall be of the same duration; and
(iii) whenever the last day of any
Interest Period would otherwise occur on
a day other than a Business Day, the last
day of such Interest Period shall be
extended to occur on the next succeeding
Business Day, provided, in the case of
any Interest Period for a Eurodollar Rate
Advance, that if such extension would
cause the last day of such Interest
Period to occur in the next following
calendar month, the last day of such
Interest Period shall occur on the next
preceding Business Day.
Lenders means the Banks listed on the
signature pages hereof and each Eligible
Assignee that shall become a party hereto
pursuant to Section 8.07.
Lender Assignment means an assignment
and acceptance agreement entered into by a
Lender and an Eligible Assignee, and accepted
by the Agent, in substantially the form of
Exhibit 8.07.
Lien has the meaning assigned to that
term in Section 5.02(a).
Loan Documents means this Agreement,
the Notes, the Support Agreement, the Fee
Letter and all other agreements, instruments
and documents now or hereafter executed and/or
delivered pursuant hereto or thereto.
Majority Lenders means, on any date of
determination, Lenders that, collectively, on
such date (i) hold at least 66-2/3% of the
then aggregate unpaid principal amount of the
A Advances owing to Lenders and (ii) if no A
Advances are then outstanding, have
Percentages in the aggregate of at least
66-2/3%. Any determination of those Lenders
constituting the Majority Lenders shall be
made by the Agent and shall be conclusive and
binding on all parties absent manifest error.
Moody's means Moody's Investors
Service, Inc. or any successor thereto.
Moody's Rating means, on any date of
determination, the rating of the long-term
senior secured Debt of IES Utilities most
recently announced by Moody's.
Multiemployer Plan means a
multiemployer plan, as defined in Section
4001(a)(3) of ERISA, which is subject to Title
IV of ERISA and to which the Borrower or any
ERISA Affiliate of the Borrower is making or
accruing an obligation to make contributions,
or has within any of the preceding five plan
years made or accrued an obligation to make
contributions, such plan being maintained
pursuant to one or more collective bargaining
agreements.
Multiple Employer Plan means a single
employer plan, as defined in Section
4001(a)(15) of ERISA, which is subject to
Title IV of ERISA and which (i) is maintained
for employees of the Borrower or an ERISA
Affiliate of the Borrower and at least one
Person other than the Borrower and its ERISA
Affiliates or (ii) was so maintained and in
respect of which the Borrower or an ERISA
Affiliate of the Borrower could have liability
under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be
terminated.
New Lenders means the Banks other than
the Existing Banks.
Note means an A Note or a B Note.
Notice of A Borrowing has the meaning
assigned to that term in Section 2.02(a).
Notice of B Borrowing has the meaning
assigned to that term in Section 2.03(a).
Notice of Conversion has the meaning
assigned to that term in Section 2.10.
OECD means the Organization for
Economic Cooperation and Development.
Parent means IES Industries Inc., an
Iowa corporation.
PBGC means the Pension Benefit Guaranty
Corporation (or any successor entity)
established under ERISA.
Percentage means, for any Lender on any
date of determination, the percentage obtained
by dividing such Lender's Commitment on such
day by the total of the Commitments on such
date, and multiplying the quotient so obtained
by 100%.
Person means an individual,
partnership, corporation (including a business
trust), joint stock company, trust,
unincorporated association, joint venture or
other entity, or a government or any political
subdivision or agency thereof.
Plan means a Single Employer Plan or a
Multiple Employer Plan.
PUHCA means the Public Utility Holding
Company Act of 1935, as amended from time to
time.
Reference Banks means Citibank, N.A.,
CIBC Inc. and The Sanwa Bank, Ltd., or any
additional or substitute Lenders as may be
selected from time to time to act as Reference
Banks hereunder by the Agent, the Majority
Lenders and the Borrower.
Register has the meaning assigned to
that term in Section 8.07(c).
S&P means Standard & Poor's Corporation
or any successor thereto.
S&P Rating means, on any date of
determination, the rating of the long-term
senior secured Debt of IES Utilities most
recently announced by S&P.
Senior Financial Officer means the
President, the Chief Executive Officer, the
Chief Financial Officer or the Treasurer of
the Borrower.
Significant Subsidiary means the Cedar
Rapids and Iowa City Railway Company or any
other Subsidiary of the Borrower that, on a
consolidated basis with any of its
Subsidiaries as of any date of determination,
accounts for more than 20% of the consolidated
assets (valued at book value) of the Borrower
and its Subsidiaries.
SIMCO means Southern Iowa Manufacturing
Co., an Iowa corporation, all of whose capital
stock is owned on the date hereof by the
Borrower.
Single Employer Plan means a single
employer plan, as defined in Section
4001(a)(15) of ERISA, which is subject to
Title IV of ERISA and which (i) is maintained
for employees of the Borrower or an ERISA
Affiliate of the Borrower and no Person other
than the Borrower and its ERISA Affiliates, or
(ii) was so maintained and in respect of which
the Borrower or an ERISA Affiliate of the
Borrower could have liability under Section
4069 of ERISA in the event such plan has been
or were to be terminated.
Subsidiary means, with respect to any
Person, any corporation or unincorporated
entity of which more than 50% of the
outstanding capital stock (or comparable
interest) having ordinary voting power
(irrespective of whether at the time capital
stock (or comparable interest) of any other
class or classes of such corporation or entity
shall or might have voting power upon the
occurrence of any contingency) is at the time
directly or indirectly owned by said Person
(whether directly or through one of more other
Subsidiaries). In the case of an
unincorporated entity, a Person shall be
deemed to have more than 50% of interests
having ordinary voting power only if such
Person's vote in respect of such interests
comprises more than 50% of the total voting
power of all such interests in the
unincorporated entity.
Support Agreement means the Second
Amended and Restated Support Agreement, dated
as of the date hereof, between the Parent and
the Borrower, substantially in the form of
Exhibit 1.01B.
Terra Comfort means Terra Comfort
Corporation, an Iowa corporation, all of whose
capital stock is owned on the date hereof by
the Parent.
Termination Date means the earlier to
occur of (i) the third anniversary of the date
of this Agreement or such later date to which
the Termination Date is extended in accordance
with Section 2.18, and (ii) the date of
termination or reduction in whole of the
Commitments pursuant to Section 2.05 or 6.01.
Type has the meaning assigned to that
term (i) in the definition of A Advance when
used in such context and (ii) in the
definition of Borrowing when used in such
context.
Unmatured Default means an event that,
with the giving of notice or lapse of time, or
both, would constitute an Event of Default.
SECTION 1.02. Computation of Time
Periods. Unless otherwise indicated, each reference in this
Agreement to a specific time of day is a reference to New York
City time. In the computation of periods of time under this
Agreement, any period of a specified number of days or months
shall be computed by including the first day or month occurring
during such period and excluding the last such day or month. In
the case of a period of time from a specified date to or
until a later specified date, the word from means from and
including and the words to and until each means to but
excluding .
SECTION 1.03. Computations of
Outstandings. Whenever reference is made in this Agreement to
the principal amount outstanding on any date under this
Agreement, such reference shall refer to the aggregate principal
amount of all Advances outstanding on such date after giving
effect to all Extensions of Credit to be made on such date and
the application of the proceeds thereof.
SECTION 1.04. Accounting Terms. All
accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting
principles consistent with those applied in the preparation of
the financial statements referred to in Section 5(d) of the
Support Agreement.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances. (a) Each
Lender severally agrees, on the terms and conditions hereinafter
set forth, to make A Advances to the Borrower from time to time
on any Business Day during the period from the Closing until the
Termination Date in an aggregate outstanding amount not to exceed
at any time such Lender's Available Commitment, provided that the
aggregate amount of the Commitments of the Lenders shall be
deemed used from time to time to the extent of the aggregate
amount of the B Advances then outstanding and such deemed use of
the aggregate amount of the Commitments shall be applied to the
Lenders ratably according to their respective Percentages (such
deemed use of the aggregate amount of the Commitments being a B
Reduction ). Each A Borrowing shall be in an aggregate amount
not less than $5,000,000 (or, if lower, the amount of the
Available Commitments) or an integral multiple of $1,000,000 in
excess thereof and shall consist of A Advances of the same Type
made on the same day by the Lenders ratably according to their
respective Percentages. Within the limits of each Lender's
Commitment and as hereinabove and hereinafter provided, the
Borrower may request Extensions of Credit hereunder, and repay or
prepay Advances pursuant to Section 2.11 and utilize the
resulting increase in the Available Commitments for further
Extensions of Credit in accordance with the terms hereof.
(b) In no event shall the Borrower be
entitled to request or receive any Extensions of Credit that
would cause the principal amount outstanding hereunder to exceed
the Commitments.
SECTION 2.02. Making the A Advances.
(a) Each A Borrowing shall be made on notice, given not later
than 12:00 noon (i) on the third Business Day prior to the date
of the proposed A Borrowing, in the case of an A Borrowing
comprised of Eurodollar Rate Advances, (ii) on the second
Business Day prior to the date of the proposed A Borrowing, in
the case of an A Borrowing comprised of Adjusted CD Rate
Advances, and (iii) on the date of the proposed A Borrowing, in
the case of an A Borrowing comprised of Base Rate Advances, in
each case by the Borrower to the Agent, which shall give to each
Lender prompt notice thereof by telecopier, telex or cable. Each
such notice of an A Borrowing (a Notice of A Borrowing ) shall
be by telecopier, telex or cable, in substantially the form of
Exhibit 2.02(a) hereto, specifying therein the requested (A) date
of such A Borrowing, (B) Type of A Advances comprising such A
Borrowing, (C) aggregate amount of such A Borrowing and (D) in
the case of an A Borrowing comprised of Adjusted CD Rate Advances
or Eurodollar Rate Advances, initial Interest Period for each
such A Advance. Each Lender shall, before (x) 12:00 noon on the
date of such A Borrowing, in the case of an A Borrowing comprised
of Eurodollar Rate Advances or Adjusted CD Rate Advances, and (y)
1:00 P.M. on the date of such A Borrowing, in the case of an A
Borrowing comprised of Base Rate Advances, make available for the
account of its Applicable Lending Office to the Agent at its
address referred to in Section 8.02, in same day funds, such
Lender's ratable portion of such A Borrowing. After the Agent's
receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will promptly make
such funds available to the Borrower at the Agent's aforesaid
address.
(b) Each Notice of A Borrowing shall
be irrevocable and binding on the Borrower. In the case of any A
Borrowing which the related Notice of A Borrowing specifies is to
be comprised of Adjusted CD Rate Advances or Eurodollar Rate
Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any
failure to fulfill on or before the date specified in such Notice
of A Borrowing for such A Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender
to fund the A Advance to be made by such Lender as part of such A
Borrowing when such A Advance, as a result of such failure, is
not made on such date.
(c) Unless the Agent shall have
received notice from a Lender prior to the date of any A
Borrowing that such Lender will not make available to the Agent
such Lender's A Advance as part of such A Borrowing, the Agent
may assume that such Lender has made such A Advance available to
the Agent on the date of such A Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such
Lender shall not have so made such A Advance available to the
Agent, such Lender and the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to A Advances comprising
such A Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such
Lender's A Advance as part of such A Borrowing for purposes of
this Agreement.
(d) The failure of any Lender to make
the A Advance to be made by it as part of any A Borrowing shall
not relieve any other Lender of its obligation, if any, hereunder
to make its A Advance on the date of such A Borrowing, but no
Lender shall be responsible for the failure of any other Lender
to make the A Advance to be made by such other Lender on the date
of any A Borrowing.
SECTION 2.03. The B Advances. (a) Each
Lender severally agrees that the Borrower may request B
Borrowings under this Section 2.03 from time to time on any
Business Day during the period from the date hereof until the
date occurring 30 days prior to the Termination Date in the
manner, and subject to the terms and conditions, set forth below.
The rates of interest offered by the Lenders and accepted by the
Borrower for each B Borrowing shall be fixed rates per annum.
(i) The Borrower may request a B
Borrowing under this Section 2.03 by
delivering to the Agent, by telecopier, telex
or cable, a notice of a B Borrowing (a Notice
of B Borrowing ), in substantially the form of
Exhibit 2.03(a)(i) hereto, specifying the date
and aggregate amount of the proposed B
Borrowing, the maturity date for repayment of
each B Advance to be made as part of such B
Borrowing (which maturity date may not be
earlier than the date occurring 30 days after
the date of such B Borrowing nor later than
the earlier to occur of the then scheduled
Termination Date and the date occurring 180
days following the date of such B Borrowing),
the interest payment date or dates relating
thereto, and any other terms to be applicable
to such B Borrowing, not later than 3:00 P.M.
at least one Business Day prior to the date of
the proposed B Borrowing. The Agent shall in
turn promptly notify each Lender of each
request for a B Borrowing received by it from
the Borrower by sending such Lender a copy of
the related Notice of B Borrowing.
(ii) Each Lender may, if, in its sole
discretion, it elects to do so, irrevocably
offer to make one or more B Advances to the
Borrower as part of such proposed B Borrowing
at a rate or rates of interest specified by
such Lender in its sole discretion, by
notifying the Agent (which shall give prompt
notice thereof to the Borrower), before 11:00
A.M., on the date of such proposed B
Borrowing, of the minimum amount and maximum
amount of each B Advance which such Lender
would be willing to make as part of such
proposed B Borrowing (which amounts may,
subject to the limitation contained in
subsection (d), below, exceed such Lender's
Commitment), the rate or rates of interest
therefor and such Lender's Applicable Lending
Office with respect to such B Advance;
provided that if the Agent in its capacity as
a Lender shall, in its sole discretion, elect
to make any such offer, it shall notify the
Borrower of such offer before 10:30 A.M. on
the date on which notice of such election is
to be given to the Agent by the other Lenders.
If any Lender shall elect not to make such an
offer, such Lender shall so notify the Agent
before 11:00 A.M. on the date on which notice
of such election is to be given to the Agent
by the other Lenders, and such Lender shall
not be obligated to, and shall not, make any B
Advance as part of such B Borrowing; provided
that the failure by any Lender to give such
notice shall not cause such Lender to be
obligated to make any B Advance as part of
such proposed B Borrowing.
(iii) The Borrower shall, in turn,
before 12:00 noon on the date of such proposed
B Borrowing either
(x) cancel such B Borrowing by
either giving the Agent notice to that
effect or failing to accept one or more
offers as provided in clause (y), below,
or
(y) accept one or more of the
offers made by any Lender or Lenders
pursuant to paragraph (ii), above, in its
sole discretion, by giving written notice
to the Agent of the amount of each B
Advance (which amount shall be equal to
or greater than the minimum amount, and
equal to or less than the maximum amount,
notified to the Borrower by the Agent on
behalf of such Lender for such B Advance
pursuant to paragraph (ii), above) to be
made by each Lender as part of such B
Borrowing, and reject any remaining
offers made by Lenders pursuant to
paragraph (ii), above, by giving the
Agent written notice to that effect.
(iv) If the Borrower cancels such B
Borrowing pursuant to paragraph (iii)(x),
above, the Agent shall give prompt notice
thereof to the Lenders and such B Borrowing
shall not be made.
(v) If the Borrower accepts one or
more of the offers made by any Lender or
Lenders pursuant to paragraph (iii)(y), above,
such acceptance shall be irrevocable and
binding on the Borrower and, subject to the
satisfaction of the applicable conditions set
forth in Article III, on such Lender or
Lenders. The Borrower shall indemnify each
such Lender against any loss, cost or expense
incurred by such Lender as a result of any
failure to fulfill, on or before the date
specified in the notice provided pursuant to
paragraph (vi)(A), below, the applicable
conditions set forth in Article III,
including, without limitation, any loss, cost
or expense incurred by reason of the
liquidation or reemployment of deposits or
other funds acquired by such Lender to fund
the B Advance to be made by such Lender as
part of such B Borrowing when such B Advance,
as a result of such failure, is not made on
such date.
(vi) Unless the Agent shall have
received notice from a Lender prior to the
date of any B Borrowing in which such Lender
is required to participate that such Lender
will not make available to the Agent such
Lender's B Advance as part of such B
Borrowing, the Agent may assume that such
Lender has made such B Advance available to
the Agent on the date of such B Borrowing in
accordance with paragraph (vii), below, and
the Agent may, in reliance upon such
assumption, make available to the Borrower on
such date a corresponding amount. If and to
the extent that such Lender shall not have so
made such B Advance available to the Agent,
such Lender and the Borrower severally agree
to repay to the Agent forthwith on demand such
corresponding amount together with interest
thereon, for each day from the date such
amount is made available to the Borrower until
the date such amount is repaid to the Agent,
at (i) in the case of the Borrower, the
interest rate applicable to such B Advance and
(ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount
so repaid shall constitute such Lender's B
Advance as part of such B Borrowing for
purposes of this Agreement.
(vii) If the Borrower accepts one or
more of the offers made by any Lender or
Lenders pursuant to paragraph (iii)(y), above,
the Agent shall in turn promptly notify (A)
each Lender that has made an offer as
described in paragraph (ii), above, of the
date and aggregate amount of such B Borrowing
and whether or not any offer or offers made by
such Lender pursuant to paragraph (ii), above,
have been accepted by the Borrower, (B) each
Lender that is to make a B Advance as part of
such B Borrowing of the amount of the B
Advance to be made by such Lender as part of
such B Borrowing and (C) each Lender that is
to make a B Advance as part of such B
Borrowing, upon receipt, that the Agent has
received forms of documents appearing to
fulfill the applicable conditions set forth in
Article III. Each Lender that is to make a B
Advance as part of such B Borrowing shall,
before 1:00 P.M. on the date of such B
Borrowing specified in the notice received
from the Agent pursuant to clause (A) of the
preceding sentence or any later time when such
Lender shall have received notice from the
Agent pursuant to clause (C) of the preceding
sentence, make available for the account of
its Applicable Lending Office to the Agent at
its address referred to in Section 8.02 such
Lender's B Advance, in same day funds. Upon
fulfillment of the applicable conditions set
forth in Article III and after receipt by the
Agent of such funds, the Agent will promptly
make such funds available to the Borrower at
the Agent's aforesaid address. Promptly after
each B Borrowing the Agent will notify each
Lender of the amount of the B Borrowing, the
consequent B Reduction and the dates upon
which such B Reduction commenced and will
terminate.
(b) Each B Borrowing shall be in an
aggregate amount not less than $5,000,000 or an integral multiple
of $1,000,000 in excess thereof.
(c) Within the limits and on the
conditions set forth in this Section 2.03, the Borrower may from
time to time borrow under this Section 2.03, repay pursuant to
subsection (e), below, prepay pursuant to Section 2.11 and
reborrow under this Section 2.03, provided that a B Borrowing
shall not be made within three Business Days of the date of any
other B Borrowing.
(d) In no event shall the Borrower be
entitled to request or receive any B Advances that would cause
the principal amount outstanding hereunder to exceed the
Commitments.
(e) The Borrower shall repay to the
Agent for the account of each Lender which has made a B Advance,
or each other holder of a B Note, on the maturity date of each B
Advance (such maturity date being that specified by the Borrower
for repayment of such B Advance in the related Notice of B
Borrowing delivered pursuant to subsection (a)(i), above, and
provided in the B Note evidencing such B Advance), the then
unpaid principal amount of such B Advance.
(f) The Borrower shall pay interest
on the unpaid principal amount of each B Advance from the date of
such B Advance to the date the principal amount of such B Advance
is repaid in full, at the rate of interest for such B Advance
specified by the Lender making such B Advance in its notice with
respect thereto delivered pursuant to subsection (a)(ii), above,
payable on the interest payment date or dates specified by the
Borrower for such B Advance in the related Notice of B Borrowing
delivered pursuant to subsection (a)(i), above, as provided in
the B Note evidencing such B Advance.
(g) The indebtedness of the Borrower
resulting from each B Advance made to the Borrower as part of a B
Borrowing shall be evidenced by a separate B Note of the Borrower
payable to the order of the Lender making such B Advance.
SECTION 2.04. Fees. (a) The Borrower
agrees to pay to the Agent for the account of each Lender a
facility fee on the average daily Commitment of such Lender
(without giving effect to any B Reduction) from the date hereof,
in the case of each Bank, and from the effective date specified
in the Lender Assignment pursuant to which it became a Lender, in
the case of each other Lender, until the Termination Date,
payable quarterly in arrears on the last day of each March, June,
September and December during the term of such Lender's
Commitment, commencing December 31, 1994, and on the Termination
Date, at the rate of 0.1875% per annum.
(b) In addition to the fee provided
for in subsection (a), above, the Borrower shall pay to the
Agent, for the account of the Agent, such fees as are provided
for in the Fee Letter.
(c) The Borrower further agrees to
pay to the Agent a competitive bid auction fee of $1,000 at the
time of delivery of each Notice of B Borrowing.
SECTION 2.05. Reduction of the
Commitments. (a) The Borrower shall have the right, upon at
least three Business Days' notice to the Agent, to terminate in
whole or reduce ratably in part the unused portions of the
respective Commitments of the Lenders; provided that the
aggregate amount of the Commitments of the Lenders shall not be
reduced to an amount which is less than the aggregate principal
amount of the B Advances then outstanding; and provided, further,
that each partial reduction shall be in an aggregate amount equal
to the product of (A) $1,000,000 and (B) the number of Lenders on
the effective date of such reduction, or an integral multiple in
excess thereof.
(b) On the Termination Date, the
Commitments of the Lenders shall be reduced to zero.
SECTION 2.06. Repayment of A Advances.
The Borrower shall repay the principal amount of each A Advance
made by each Lender in accordance with the A Note to the order of
such Lender.
SECTION 2.07. Interest on A Advances.
The Borrower shall pay interest on the unpaid principal amount of
each A Advance owing to each Lender from the date of such A
Advance until such principal amount shall be paid in full, at the
Applicable Rate for such A Advance (except as otherwise provided
in this Section 2.07), payable as follows:
(a) Base Rate Advances. If such A
Advance is a Base Rate Advance, interest
thereon shall be payable quarterly in arrears
on the last day of each March, June, September
and December, on the date of any Conversion of
such Base Rate Advance and on the date such
Base Rate Advance shall become due and payable
or shall otherwise be paid in full; provided
that any amount of principal that is not paid
when due (whether at stated maturity, by
acceleration or otherwise) shall bear
interest, from the date on which such amount
is due until such amount is paid in full,
payable on demand, at a rate per annum equal
at all times to the Default Rate.
(b) Adjusted CD Rate Advances. If
such A Advance is an Adjusted CD Rate Advance,
interest thereon shall be payable on the last
day of such Interest Period and, if the
Interest Period for such A Advance has a
duration of more than 90 days, on each day
that occurs during such Interest Period every
90 days from the first day of such Interest
Period; provided that any amount of principal
that is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall
bear interest, from the date on which such
amount is due until such amount is paid in
full, payable on demand, at a rate per annum
equal at all times to the Default Rate.
(c) Eurodollar Rate Advances. If
such A Advance is a Eurodollar Rate Advance,
interest thereon shall be payable on the last
day of such Interest Period and, if the
Interest Period for such A Advance has a
duration of more than three months, on that
day of each third month during such Interest
Period that corresponds to the first day of
such Interest Period (or, if any such month
does not have a corresponding day, then on the
last day of such month); provided that any
amount of principal that is not paid when due
(whether at stated maturity, by acceleration
or otherwise) shall bear interest, from the
date on which such amount is due until such
amount is paid in full, payable on demand, at
a rate per annum equal at all times to the
Default Rate.
SECTION 2.08. Additional Interest on
Eurodollar Rate Advances. The Borrower shall pay to Agent for
the account of each Lender any costs actually incurred by such
Lender with respect to Eurodollar Rate Advances which are
attributable to such Lender's compliance with regulations of the
Board of Governors of the Federal Reserve System requiring the
maintenance of reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities. Such costs
shall be paid to the Agent for the account of such Lender in the
form of additional interest on the unpaid principal amount of
each Eurodollar Rate Advance of such Lender, from the date of
such A Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest
Period for such A Advance from (ii) the rate obtained by dividing
such Eurodollar Rate by a percentage equal to 100% minus the
Eurodollar Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such
A Advance. Such additional interest shall be determined by such
Lender and notified to the Borrower through the Agent. A
certificate as to the amount of such additional interest,
submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error,
provided that the determination thereof shall have been made by
such Lender in good faith.
SECTION 2.09. Interest Rate
Determination. (a) Each Reference Bank agrees to furnish to the
Agent timely information for the purpose of determining each
Adjusted CD Rate or Eurodollar Rate, as applicable. If any one
or more of the Reference Banks shall not furnish such timely
information to the Agent for the purpose of determining any such
interest rate, the Agent shall determine such interest rate on
the basis of timely information furnished by the remaining
Reference Banks.
(b) The Agent shall give prompt
notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.07(a), (b)
or (c), and the applicable rate, if any, furnished by each
Reference Bank for the purpose of determining the applicable
interest rate under Section 2.07(b) or (c).
(c) If fewer than two Reference Banks
furnish timely information to the Agent for determining the
Adjusted CD Rate for any Adjusted CD Rate Advances, or the
Eurodollar Rate for any Eurodollar Rate Advances, due to the
unavailability of funds to such Reference Banks in the relevant
financial markets:
(i) the Agent shall forthwith notify
the Borrower and the Lenders that the interest
rate cannot be determined for such Adjusted CD
Rate Advances or Eurodollar Rate Advances, as
the case may be;
(ii) each such Advance will
automatically, on the last day of the then
existing Interest Period therefor, Convert
into a Base Rate Advance (or if such Advance
is then a Base Rate Advance, will continue as
a Base Rate Advance); and
(iii) the obligation of the Lenders to
make, or to Convert A Advances into, Adjusted
CD Rate Advances or Eurodollar Rate Advances,
as the case may be, shall be suspended until
the Agent shall notify the Borrower and the
Lenders that the circumstances causing such
suspension no longer exist.
(d) If, with respect to any
Eurodollar Rate Advances, the Majority Lenders notify the Agent
that the Eurodollar Rate for any Interest Period for such
Advances will not adequately reflect the cost to such Majority
Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Agent
shall forthwith so notify the Borrower and the Lenders,
whereupon:
(i) each Eurodollar Rate Advance will
automatically, on the last day of the then
existing Interest Period therefor, Convert
into a Base Rate Advance or, if requested by
the Borrower in accordance with Section 2.10,
an Adjusted CD Rate Advance; and
(ii) the obligation of the Lenders to
make, or to Convert A Advances into,
Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Borrower and
the Lenders that the circumstances causing
such suspension no longer exist.
(e) If the Borrower shall fail to (i)
select the duration of any Interest Period for any Adjusted CD
Rate Advances or any Eurodollar Rate Advances in accordance with
the provisions contained in the definition of Interest Period
in Section 1.01, (ii) provide a Notice of Conversion with respect
to any Eurodollar Rate Advances or Adjusted CD Rate Advances on
or prior to 12:00 noon (A) on the third Business Day prior to the
last day of the Interest Period applicable thereto, in the case
of a Conversion to or in respect of Eurodollar Rate Advances, or
(B) on the second Business Day prior to the last day of the
Interest Period applicable thereto, in the case of a Conversion
to or in respect of Adjusted CD Rate Advances, or (iii) satisfy
the applicable conditions precedent set forth in Section 3.02
with respect to the Conversion to or in respect of any Eurodollar
Rate Advances or Adjusted CD Rate Advances, the Agent will
forthwith so notify the Borrower and the Lenders and such
Advances will automatically, on the last day of the then existing
Interest Period therefor, Convert into Base Rate Advances;
provided, however, that if, in the case of any failure by the
Borrower pursuant to clause (iii), above, the Majority Lenders do
not notify the Borrower within 30 days after such Conversion into
Base Rate Advances that they have agreed to waive, or have
decided not to waive, the applicable conditions precedent set
forth in Section 3.02 that the Borrower failed to satisfy, the
Majority Lenders shall be deemed to have waived such conditions
precedent solely with respect to the Advances so Converted, and
the Borrower shall, at any time after such 30-day period, be
permitted to Convert such Advances into Eurodollar Rate Advances
or Adjusted CD Rate Advances; and provided further, however, that
such deemed waiver shall be of no further force or effect if, at
any time after such 30-day period, the Majority Lenders notify
the Borrower that they no longer agree to waive such conditions
precedent, in which case any such Advances so Converted into
Eurodollar Rate Advances or Adjusted CD Rate Advances shall
automatically Convert into Base Rate Advances on the last day of
the then existing Interest Period therefor.
(f) On the date on which the
aggregate unpaid principal amount of A Advances comprising any A
Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than the product of (i) $1,000,000 and (ii)
the number of Lenders on such date, such A Advances shall, if
they are Advances of a Type other than Base Rate Advances,
automatically Convert into Base Rate Advances, and on and after
such date the right of the Borrower to Convert such A Advances
into Advances of a Type other than Base Rate Advances shall
terminate; provided, however, that if and so long as each such A
Advance shall be of the same Type and have the same Interest
Period as A Advances comprising another A Borrowing or other A
Borrowings, and the aggregate unpaid principal amount of all such
A Advances shall equal or exceed the product of (i) $1,000,000
and (ii) the number of Lenders on such date, the Borrower shall
have the right to continue all such A Advances as, or to Convert
all such A Advances into, Advances of such Type having such
Interest Period.
SECTION 2.10. Voluntary Conversion of A
Advances. Subject to the applicable conditions set forth in
Section 3.02, the Borrower may on any Business Day, by delivering
a notice of Conversion (a Notice of Conversion ) to the Agent
not later than 12:00 noon (i) on the third Business Day prior to
the date of the proposed Conversion, in the case of a Conversion
to or in respect of Eurodollar Rate Advances, (ii) on the second
Business Day prior to the date of the proposed Conversion, in the
case of a Conversion to or in respect of Adjusted CD Rate
Advances and (iii) on the date of the proposed Conversion, in the
case of a Conversion to or in respect of Base Rate Advances, and
subject to the provisions of Sections 2.09 and 2.13, Convert all
A Advances of one Type comprising the same A Borrowing into
Advances of another Type; provided, however, that, in the case of
any Conversion of any Adjusted CD Rate Advances or Eurodollar
Rate Advances into Advances of another Type on a day other than
the last day of an Interest Period for such Adjusted CD Rate
Advances or Eurodollar Rate Advances, the Borrower shall be
obligated to reimburse the Lenders in respect thereof pursuant to
Section 8.04(b). Each such Notice of Conversion shall be in
substantially the form of Exhibit 2.10 and shall, within the
restrictions specified above, specify (A) the date of such
Conversion, (B) the A Advances to be Converted, (C) if such
Conversion is into Adjusted CD Rate Advances or Eurodollar Rate
Advances, the duration of the Interest Period for each such A
Advance, and (D) the aggregate amount of A Advances proposed to
be Converted.
SECTION 2.11. Optional Prepayments of
Advances. The Borrower may, upon at least three Business Day's
notice to the Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given
the Borrower shall, prepay the outstanding principal amounts of
the Advances comprising part of the same Borrowing in whole or
ratably in part, together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided,
however, that each partial prepayment shall be in an aggregate
principal amount not less than $1,000,000 (or, if lower, the
principal amount outstanding hereunder on the date of such
prepayment) or an integral multiple of $1,000,000 in excess
thereof. In the case of any such prepayment of an Adjusted CD
Rate Advance, Eurodollar Rate Advance or a B Advance, the
Borrower shall be obligated to reimburse the Lender(s) in respect
thereof pursuant to Section 8.04(b). Except as provided in this
Section 2.11, the Borrower shall have no right to prepay any
principal amount of any Advances.
SECTION 2.12. Mandatory Prepayments.
(a) On the date of any termination or reduction of the
Commitments pursuant to Section 2.05, the Borrower shall pay or
prepay for the ratable accounts of the Lenders so much of the
principal amount outstanding under this Agreement as shall be
necessary in order that the principal amount outstanding (after
giving effect to such prepayment) will not exceed the amount of
Commitments following such termination or reduction, together
with (A) accrued interest to the date of such prepayment on the
principal amount repaid or prepaid and (B) in the case of
prepayments of Eurodollar Rate Advances, Adjusted CD Rate
Advances or B Advances, any amount payable to the Lenders
pursuant to Section 8.04(b).
(b) All prepayments required to be
made pursuant to this Section 2.12 shall be applied by the Agent
as follows:
(i) first, to the prepayment of
the A Advances (without reference to
minimum dollar requirements), applied to
outstanding Base Rate Advances up to the
full amount thereof before they are
applied to the ratable prepayment of
Eurodollar Rate and Adjusted CD Rate
Advances; and
(ii) second, to the prepayment of
the B Advances (without reference to
minimum dollar requirements), applied
ratably among all the Lenders holding B
Advances.
(c) In lieu of prepaying any
Eurodollar Rate Advances, Adjusted CD Rate Advances or B Advances
under any provision (other than Sections 2.14 and 6.01) of this
Agreement, the Borrower may, upon notice to the Agent, deliver
such funds to the Agent, to be held as additional cash collateral
securing the obligations hereunder and under the Notes. The
Agent shall deposit all amounts delivered to it in a non-
interest-bearing special purpose cash collateral account, to be
governed by a cash collateral agreement in form and substance
satisfactory to the Borrower and the Agent, and shall apply all
such amounts in such account against such Advances on the last
day of the Interest Period therefor. The Agent shall promptly
notify the Lenders of any election by the Borrower to deliver
funds to the Agent under this subsection (c).
SECTION 2.13. Increased Costs. (a) If,
due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve
requirements, in the case of Adjusted CD Rate Advances, included
in the definition of Adjusted CD Rate or, in the case of
Eurodollar Rate Advances, included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation
or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost
to any Lender of agreeing to make or making, funding or
maintaining Adjusted CD Rate Advances or Eurodollar Rate
Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Agent), pay to
the Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to
the Borrower and the Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error, provided
that the determination thereof shall have been made by such
Lender in good faith.
(b) If any Lender determines that
compliance with any law or regulation or any guideline or request
from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount
of capital required or expected to be maintained by such Lender
or any corporation controlling such Lender and that the amount of
such capital is increased by or based upon the existence of such
Lender's commitment to lend hereunder and other commitments of
this type, then, upon demand by such Lender (with a copy of such
demand to the Agent), the Borrower shall immediately pay to the
Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts sufficient to
compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the
existence of such Lender's Commitment. A certificate as to such
amounts submitted to the Borrower and the Agent by such Lender,
describing in reasonable detail the manner in which such amounts
have been calculated, shall be conclusive and binding for all
purposes, absent manifest error, provided that the determination
and allocation thereof shall have been made by such Lender in
good faith.
(c) Notwithstanding the provisions of
subsections (a) or (b), above, to the contrary, no Lender shall
be entitled to demand compensation or be compensated thereunder
to the extent that such compensation relates to any period of
time more than 60 days prior to the date upon which such Lender
first notified the Borrower of the occurrence of the event
entitling such Lender to such compensation (unless, and to the
extent, that any such compensation so demanded shall relate to
the retroactive application of any event so notified to the
Borrower).
SECTION 2.14. Illegality.
Notwithstanding any other provision of this Agreement to the
contrary, if any Lender (the Affected Lender ) shall notify the
Agent and the Borrower that the introduction of or any change in
or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for the Affected Lender or its
Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) all Eurodollar Rate Advances of the
Affected Lender shall, on the fifth Business Day following such
notice from the Affected Lender, automatically be Converted into
a like number of Base Rate Advances, each in the amount of the
corresponding Eurodollar Rate Advance of the Affected Lender
being so Converted (each such Advance, as so Converted, being an
Affected Lender Advance ), and the obligation of the Affected
Lender to make, maintain, or Convert A Advances into Eurodollar
Rate Advances shall thereupon be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist, or the Affected Lender
has been replaced pursuant to Section 8.07(g), and (ii) in the
event that, on the last day of each of the then-current Interest
Periods for each Eurodollar Rate Advance (each such Advance being
an Unaffected Lender Advance ) of each of the other Lenders
(each such Lender being an Unaffected Lender ), the Agent shall
have yet to notify the Borrower and the Lenders that the
circumstances causing such suspension of the Affected Lender's
obligations as aforesaid no longer exist, or the Affected Lender
has not yet been replaced pursuant to Section 8.07(g), such
Unaffected Lender Advance shall be Converted by the Borrower in
accordance with Section 2.10 into an Advance of another Type (or,
in the event that the Borrower shall fail to duly deliver a
Notice of Conversion with respect thereto, into a Base Rate
Advance), and the obligation of such Unaffected Lender to make,
maintain, or Convert A Advances into Eurodollar Rate Advances
shall be suspended until the Agent shall so notify the Borrower
and the Lenders, or the Affected Lender shall be so replaced.
For purposes of any prepayment under this Agreement, each
Affected Lender Advance shall be deemed to continue to be part of
the same Borrowing as the Unaffected Lender Advance to which it
corresponded at the time of the Conversion of such Affected
Lender Advance pursuant to clause (i), above.
SECTION 2.15. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the
Notes not later than 1:00 P.M. on the day when due in Dollars to
the Agent at its address referred to in Section 8.02 in same day
funds. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or
interest or fees ratably (other than amounts payable pursuant to
Section 2.03, 2.08, 2.12(b)(iii), 2.16 or 8.04(b)) to the Lenders
for the account of their respective Applicable Lending Offices,
and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its
Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance
of a Lender Assignment and recording of the information contained
therein in the Register pursuant to Section 8.07(d), from and
after the effective date specified in such Lender Assignment, the
Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Lender Assignment shall make
all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) The Borrower hereby authorizes
each Lender, if and to the extent payment owed to such Lender is
not made when due hereunder or under any Note held by such
Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on
the Alternate Base Rate and the Federal Funds Rate and of fees
shall be made by the Agent on the basis of a year of 365 or 366
days, as the case may be, and all computations of interest based
on the Adjusted CD Rate and the Eurodollar Rate shall be made by
the Agent, and all computations of interest pursuant to Section
2.08 shall be made by a Lender, on the basis of a year of 360
days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for
which such interest or fees are payable. Each determination by
the Agent (or, in the case of Section 2.08, by a Lender) of an
interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error, provided that such determination
shall have been made by the Agent or such Lender, as the case may
be, in good faith.
(d) Whenever any payment hereunder or
under the Notes shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as
the case may be; provided, however, that if such extension would
cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next following calendar month, such
payment shall be made on the next preceding Business Day.
(e) Unless the Agent shall have
received notice from the Borrower prior to the date on which any
payment is due to the Lenders hereunder that the Borrower will
not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date
and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent that the
Borrower shall not have so made such payment in full to the
Agent, each Lender shall repay to the Agent forthwith on demand
such amount distributed to such Lender together with interest
thereon, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.16. Taxes. (a) Any and all
payments by the Borrower hereunder and under the other Loan
Documents shall be made, in accordance with Section 2.15, free
and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes
imposed on its overall net income and franchise taxes imposed on
it by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes
imposed on its overall net income and franchise taxes imposes on
it by the jurisdiction of such Lender's Applicable Lending Office
or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as Taxes ); provided,
however, that, notwithstanding the foregoing, Taxes shall not
include any taxes otherwise required to be deducted by the
Borrower pursuant to this subsection (a) as a result of
activities of any Lender or the Agent in the State of Iowa (other
than as a result, or in respect, of this Agreement). If the
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan
Document to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 2.16) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Borrower agrees
to pay any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan
Document (hereinafter referred to as Other Taxes ).
(c) The Borrower will indemnify each
Lender and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.16)
paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand
therefor. Nothing herein shall preclude the right of the
Borrower to contest any such Taxes or Other Taxes so paid, and
the Lenders in question or the Agent (as the case may be) will,
following notice from, and at the expense of, the Borrower,
reasonably cooperate with the Borrower to preserve the Borrower's
rights to contest such Taxes or Other Taxes.
(d) Within 30 days after the date of
any payment of Taxes, the Borrower will furnish to the Agent, at
its address referred to in Section 8.02, the original or a
certified copy of a receipt evidencing payment thereof.
(e) Each Lender agrees that, on or
prior to the date upon which it shall become a party hereto, and
upon the reasonable request from time to time of the Borrower or
the Agent, such Lender will deliver to the Borrower and the Agent
either (i) a statement that it is organized under the laws of a
jurisdiction within the United States or (ii) duly completed
copies of such form or forms as may from time to time be
prescribed by the United States Internal Revenue Service
indicating that such Lender is entitled to receive payments
without deduction or withholding of any United States federal
income taxes, as permitted by the Internal Revenue Code of 1986,
as amended from time to time. Each Lender that delivers to the
Borrower and the Agent the form or forms referred to in the
preceding sentence further undertakes to deliver to the Borrower
and the Agent further copies of such form or forms, or successor
applicable form or forms, as the case may be, as and when any
previous form filed by it hereunder shall expire or shall become
incomplete or inaccurate in any respect. Each Lender represents
and warrants that each such form supplied by it to the Agent and
the Borrower pursuant to this subsection (e), and not superseded
by another form supplied by it, is or will be, as the case may
be, complete and accurate.
(f) Any Lender claiming any
additional amounts payable pursuant to this Section 2.16 shall
use its best efforts (consistent with its internal policy and
legal and regulatory restrictions) to change the jurisdiction of
its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such
additional amounts which may thereafter accrue and would not, in
the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(g) Without prejudice to the survival
of any other agreement of the Borrower hereunder, the agreements
and obligations of the Borrower contained in this Section 2.16
shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.17. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) on account of the A Advances made by it (other than
pursuant to Section 2.08, 2.16 or 8.04(b)) in excess of its
ratable share of payments on account of the A Advances obtained
by all the Lenders, such Lender shall forthwith purchase from the
other Lenders such participations in the A Advances made by them
as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each
Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such
recovery, together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid
or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section 2.17 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of
such participation.
SECTION 2.18. Extension of Termination
Date. (a) At least 90 but not more than 120 days before each of
November 9, 1995 and November 9, 1996, the Borrower may, by
delivering a written request to the Agent (each such request
being irrevocable), request that each Lender extend for one year
the Termination Date with respect to such Lender's Commitment.
The Agent shall, upon its receipt of such a request, promptly
notify each Lender thereof, and request that each Lender promptly
advise the Agent of its approval or rejection of such request.
(b) Upon receipt of such notification from
the Agent, each Lender may (but shall not be required to), in its
sole and absolute discretion, agree to extend the Termination
Date with respect to its Commitment for a period of one year, and
shall (should it determine to do so), no later than 60 days
following its receipt of such notification, notify the Agent of
its approval concerning such request. If any Lender shall not so
notify the Agent, such Lender shall be deemed not to have
consented to such request. The Agent shall thereupon notify the
Borrower as to the Lenders, if any, that have consented to such
request.
(c) If all of the Lenders agree to extend the
Termination Date, the Commitments shall be extended for a period
of one year, commencing on the then-scheduled Termination Date;
provided, however, that the Commitments shall be so extended
notwithstanding the existence of one or more Lenders (the
Nonextending Lenders ) which have elected not to extend (or
failed to notify the Agent of its consent to extend) their
Commitment if (i) such Nonextending Lender(s) have been replaced
in the full amount of its (or their) Commitment(s) pursuant to
Section 8.07(g) and (ii) no Event of Default or Unmatured Default
shall then have occurred and be continuing. If a Nonextending
Lender is not so replaced pursuant to Section 8.07(g), the
Commitments of all of the Lenders shall automatically terminate
on the then-scheduled Termination Date.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to
Closing. The Commitments of the Lenders shall not become
effective unless the following conditions precedent shall have
been fulfilled on or prior to November 9, 1994 (or such later
Business Day as the parties hereto may mutually agree):
(a) The Agent shall have received the
following, each dated the date of the Closing, in form and
substance satisfactory to the Lenders and (except for the Notes)
in sufficient copies for each Lender:
(i) this Agreement, duly executed by
the Borrower, each Bank and the Agent;
(ii) the A Notes payable to the order
of the Lenders, respectively, duly completed
and executed by the Borrower;
(iii) certified copies of the
resolutions of the Board of Directors of the
Borrower approving this Agreement, the Notes
and the other Loan Documents to which it is,
or is to be, a party, and of all documents
evidencing other necessary corporate action
with respect to this Agreement, the Notes and
such Loan Documents;
(iv) certified copies of the
resolutions of the Board of Directors of the
Parent approving the Support Agreement and the
other Loan Documents to which it is, or is to
be, a party, together with a certificate of
the Secretary or an Assistant Secretary of the
Parent certifying that the credit facility
evidenced by this Agreement is the only credit
facility of the Borrower having the benefit of
a guaranty or other support arrangement from
the Parent pursuant to such resolutions, and
of all documents evidencing other necessary
corporate action with respect to the Support
Agreement and such Loan Documents;
(v) a certificate of the Secretary or
an Assistant Secretary of the Borrower
certifying the names, true signatures and
incumbency of the officers of the Borrower
authorized to sign this Agreement, the Notes
and the other Loan Documents to which it is,
or is to be, a party;
(vi) a certificate of the Secretary or
an Assistant Secretary of the Parent
certifying the names, true signatures and
incumbency of the officers of the Parent
authorized to sign the Support Agreement and
the other Loan Documents to which it is, or is
to be, a party;
(vii) copies of the Certificate of
Incorporation (or comparable charter document)
and by-laws of the Borrower, together with all
amendments thereto, certified by the Secretary
or an Assistant Secretary of the Borrower;
(viii) copies of the Certificate of
Incorporation (or comparable charter document)
and by-laws of the Parent, together with all
amendments thereto, certified by the Secretary
or an Assistant Secretary of the Parent;
(ix) certified copies of all
Governmental Approvals, if any, with respect
to this Agreement and the other Loan
Documents;
(x) certified copies of the financial
statements referred to in Section 5(d) of the
Support Agreement;
(xi) the Support Agreement duly
executed by the Parent and the Borrower,
together with (A) a letter from the Parent to
the Agent affirming that the Lenders are
Lenders under the Support Agreement and (B)
proper Financing Statements (Form UCC-1 or
UCC-3) to be filed under the Uniform
Commercial Code in all jurisdictions as may be
necessary or, in the opinion of the Agent,
desirable to perfect the security interests
created by the Support Agreement;
(xii) favorable opinions of:
(A) Winthrop, Stimson, Putnam
& Roberts, special New York counsel
for the Borrower and the Parent, in
substantially the form of Exhibit
3.01(a)(xii)-1 and as to such other
matters as the Majority Lenders,
through the Agent, may reasonably
request;
(B) Stephen W. Southwick,
Vice President and General Counsel of
the Borrower and the Parent, in
substantially the form of Exhibit
3.01(a)(xii)-2 and as to such other
matters as the Majority Lenders,
through the Agent, may reasonably
request;
(C) King & Spalding, special
New York counsel to the Agent, in
substantially the form of Exhibit
3.01(a)(xii)-3 and as to such other
matters as the Majority Lenders,
through the Agent, may reasonably
request; and
(xiii) such other approvals, opinions
and documents as any Lender, through the
Agent, may reasonably request.
(b) The following statements shall be
true and correct and the Agent shall have received a certificate
of a duly authorized officer of the Borrower, dated the date of
the Closing and in sufficient copies for each Lender, stating
that:
(i) the representations and
warranties set forth in Section 4.01 of this
Agreement are true and correct on and as of
the date of the Closing as though made on and
as of such date, and
(ii) no event has occurred and is
continuing that constitutes an Unmatured
Default or an Event of Default.
(c) The Agent shall have received a
certificate (the statements in which shall be true) of a duly
authorized officer of the Parent, dated the date of the Closing
and in sufficient copies for each Lender, stating that the
representations and warranties set forth in Section 5 of the
Support Agreement are true and correct on and as of the date of
the Closing as though made on and as of such date.
(d) The Borrower shall have paid (i)
all fees under or referenced in Section 2.04 hereof, to the
extent then due and payable, and (ii) all costs and expenses of
the Agent (including counsel fees and disbursements) incurred
through (and for which statements have been provided prior to)
the Closing.
(e) Each New Lender and Increasing
Lender shall, on the date of the Closing, have purchased by
assignment from the Existing Banks that are parties hereto such
portion of the A Advances owing to them as shall be designated by
the Agent such that, after giving effect to all such purchases
and assignments, the outstanding A Advances owing to each Lender
shall equal such Lender's Percentage of the aggregate amount of A
Advances owing to all Lenders.
SECTION 3.02. Conditions Precedent to
Each A Borrowing. The obligation of each Lender to make an A
Advance on the occasion of each A Borrowing (including the
initial A Borrowing) shall be subject to the conditions precedent
that, on the date of such A Borrowing,
(a) the following statements shall be
true and correct (and each of the giving of the applicable Notice
of A Borrowing and the acceptance by the Borrower of the proceeds
therefrom shall constitute a representation and warranty by the
Borrower that, on the date of such A Borrowing, such statements
are true and correct):
(i) the representations and
warranties contained in Section 4.01
(excluding those contained in subsections (e),
(f), (g), (h) and (j) thereof if such A
Borrowing does not increase the aggregate
outstanding principal amount of A Advances
over the aggregate outstanding principal
amount of all Advances immediately prior to
making such A Borrowing) and in Section 5 of
the Support Agreement are true and correct on
and as of the date of such A Borrowing, before
and after giving effect to the application of
the proceeds therefrom, as though made on and
as of such date; and
(ii) no event has occurred and is
continuing, or would result from such A
Borrowing or from the application of the
proceeds therefrom, which constitutes an Event
of Default or an Unmatured Default; and
(b) the Agent shall have received
such other approvals, opinions, or documents as the Agent, or the
Majority Lenders through the Agent, may reasonably request, and
such approvals, opinions, and documents shall be satisfactory in
form and substance to the Agent.
SECTION 3.03. Conditions Precedent to
Each B Borrowing. The obligation of each Lender to make a B
Advance on the occasion of a B Borrowing (including the initial B
Borrowing) shall be subject to the conditions precedent that (a)
the Agent shall have received the written confirmatory Notice of
B Borrowing with respect thereto; (b) on or before the date of
such B Borrowing, but prior to such B Borrowing, the Agent shall
have received a B Note payable to the order of such Lender for
each of the one or more B Advances to be made by such Lender as
part of such B Borrowing, in a principal amount equal to the
principal amount of the B Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such B Advance in
accordance with Section 2.03; (c) on the date of such B Borrowing
the following statements shall be true and correct (and each of
the giving of the applicable Notice of B Borrowing and the
acceptance by the Borrower of the proceeds therefrom shall
constitute a representation and warranty by the Borrower that, on
the date of such B Borrowing, such statements are true and
correct):
(i) the representations and
warranties contained in Section 4.01
(excluding those contained in subsections (e),
(f), (g), (h) and (j) thereof if such B
Borrowing does not increase the aggregate
amount of Advances over the aggregate amount
of all Advances outstanding immediately prior
to such B Borrowing) and in Section 5 of the
Support Agreement are true and correct on and
as of the date of such B Borrowing, before and
after giving effect to such B Borrowing and to
the application of the proceeds therefrom, as
though made on and as of such date; and
(ii) no event has occurred and is
continuing, or would result from such B
Borrowing or from the application of the
proceeds therefrom, which constitutes an Event
of Default or an Unmatured Default; and
(d) the Agent shall have received such other approvals,
opinions, or documents as the Agent, or the Majority Lenders
through the Agent, may reasonably request, and such approvals,
opinions, and documents shall be satisfactory in form and
substance to the Agent.
SECTION 3.04. Reliance on Certificates.
The Lenders and the Agent shall be entitled to rely conclusively
upon the certificates delivered from time to time by officers of
the Borrower and the Parent as to the names, incumbency,
authority and signatures of the respective Persons named therein
until such time as the Agent may receive a replacement
certificate, in form acceptable to the Agent, from an officer of
such Person identified to the Agent as having authority to
deliver such certificate, setting forth the names and true
signatures of the officers and other representatives of such
Person thereafter authorized to act on behalf of such Person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and
Warranties of the Borrower. The Borrower represents and warrants
as follows:
(a) The Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation and is duly qualified to do business in, and is in
good standing in, all other jurisdictions where the nature of its
business or the nature of property owned or used by it makes such
qualification necessary (except where the failure to so qualify
would not have a material adverse affect on the business,
financial condition, operations, results of operations or
prospects of the Borrower and its Subsidiaries, taken as a
whole).
(b) The execution, delivery and
performance by the Borrower of this Agreement, the Notes and the
other Loan Documents to which it is or will be a party are within
the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not and will not contravene
(i) the Borrower's charter or by-laws, (ii) law, or (iii) any
legal or contractual restriction binding on or affecting the
Borrower; and such execution, delivery and performance do not and
will not result in or require the creation of any Lien (other
than pursuant to the Loan Documents) upon or with respect to any
of its properties.
(c) No Governmental Approval is
required.
(d) This Agreement is, and each other
Loan Document to which the Borrower will be a party when executed
and delivered hereunder will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, subject to the
qualifications, however, that the enforcement of the rights and
remedies herein and therein is subject to bankruptcy and other
similar laws of general application affecting rights and remedies
of creditors and that the remedy of specific performance or of
injunctive relief is subject to the discretion of the court
before which any proceedings therefor may be brought.
(e) Since December 31, 1993, there
has been no material adverse change in the business, financial
condition, operations, results of operations or prospects of the
Borrower and its Subsidiaries, taken as a whole, or in the
Borrower's ability to perform its obligations under this
Agreement or any other Loan Document to which it is or will be a
party.
(f) The pro forma unaudited
consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries as at December 31, 1993, and the related pro
forma unaudited consolidated and consolidating statements of
income of the Borrower and its Subsidiaries for the fiscal year
then ended, and the unaudited consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as at June
30, 1994 and the related unaudited consolidated and consolidating
statements of income for the six-month period then ended, copies
of each of which have been furnished to each Bank, fairly present
(subject, in the case of such balance sheets and statements of
income for the six months ended June 30, 1994, to year-end
adjustments) the consolidated financial condition of the Borrower
and its Subsidiaries as at such dates and the consolidated
results of operations of the Borrower and its Subsidiaries for
the periods ended on such dates, all in accordance, in all
material respects, with generally accepted accounting principles
consistently applied (except that the financial condition and
results of operations of Terra Comfort are reflected in such
balance sheets and statements of income although it is not, as of
the date hereof, a Subsidiary of the Borrower).
(g) Except as disclosed in the
Parent's Report on Form 10-K for the year ended December 31, 1993
and Report on Form 10-Q for the period ended June 30, 1994, there
is no pending or threatened action or proceeding affecting the
Borrower or any of its Subsidiaries or properties before any
court, governmental agency or arbitrator, that might reasonably
be expected to materially adversely affect (i) the business,
financial condition, results of operations or prospects of the
Borrower and its Subsidiaries, taken as a whole, or (ii) the
ability of the Borrower to perform its obligations under this
Agreement or any other Loan Document to which the Borrower or the
Parent is or is to be a party; and since June 30, 1994 there have
been no material adverse developments in any action or proceeding
so disclosed.
(h) No ERISA Event has occurred or is
reasonably expected to occur with respect to any Plan of the
Borrower or any of its ERISA Affiliates which would result in a
material liability to the Borrower. Since the date of the most
recent Schedule B (Actuarial Information) to the annual report of
Plans maintained by the Borrower (Form 5500 Series), if any,
there has been no material adverse change in the funding status
of the Plans referred to therein and no prohibited transaction
has occurred with respect thereto which is reasonably expected to
result in a material liability to the Borrower. Neither the
Borrower nor any of its ERISA Affiliates has incurred nor
reasonably expects to incur any material withdrawal liability
under ERISA to any Multiemployer Plan.
(i) The Support Agreement is in full
force and effect without having been amended, modified, waived or
terminated in any manner, except in each case in accordance with
the terms thereof.
(j) The Borrower has filed all tax
returns (Federal, state and local) required to be filed and paid
all taxes shown thereon to be due, including interest and
penalties, or, to the extent the Borrower is contesting in good
faith an assertion of liability based on such returns, has
provided adequate reserves for payment thereof in accordance with
generally accepted accounting principles.
(k) Following application of the
proceeds of each Advance, not more than 25 percent of the value
of the assets of the Borrower and its Subsidiaries on a
consolidated basis will be margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal
Reserve System).
(l) The Borrower is not an
investment company or a company controlled by an investment
company , within the meaning of the Investment Company Act of
1940, as amended.
(m) As of the date hereof, the
Borrower is not a holding company within the meaning of PUHCA.
(n) From and after the date upon
which, and at all times during which, any Subsidiary of the
Borrower shall be a public-utility company within the meaning
of PUHCA, the Borrower will be a holding company within the
meaning of PUHCA, but the Borrower and its Subsidiaries will be
exempt from the provisions of that Act, except Section 9(a)(2)
thereof, by virtue of having filed with the Securities and
Exchange Commission a Statement by Holding Company Claiming
Exemption Under Rule U-2 from the Provisions of the Public
Utility Holding Company Act of 1935 on Form U-3A-2.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So
long as any amount in respect of any Note shall remain unpaid or
any Lender shall have any Commitment, the Borrower will, unless
the Majority Lenders shall otherwise consent in writing:
(a) Payment of Taxes, Etc. Pay and
discharge, and cause each of its Subsidiaries to pay and
discharge, before the same shall become delinquent, all taxes,
assessments and governmental charges, royalties or levies imposed
upon it or upon its property except, in the case of taxes, to the
extent the Borrower or such Subsidiary is contesting the same in
good faith and by appropriate proceedings and has set aside
adequate reserves for the payment thereof in accordance with
generally accepted accounting principles.
(b) Maintenance of Insurance.
Maintain, or cause to be maintained, insurance covering the
Borrower and each of its Subsidiaries and their respective
properties in effect at all times in such amounts and covering
such risks as is usually carried by companies of a similar size
(based on the aggregate book value of the Parent's assets, as
determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied), engaged in
similar businesses and owning similar properties in the same
general geographical area in which the Borrower and each such
Subsidiary operates, either with reputable insurance companies
or, in whole or in part, by establishing reserves of one or more
insurance funds, either alone or with other corporations or
associations.
(c) Preservation of Existence, Etc.
Preserve and maintain, and cause each of its Subsidiaries to
preserve and maintain, its corporate existence, material rights
(statutory and otherwise) and franchises; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be
required to preserve and maintain any such right or franchise,
and no such Subsidiary shall be required to preserve and maintain
its corporate existence, unless the failure to do so would have a
material adverse effect on the business, financial condition,
operations, results of operations or prospects of the Borrower
and its Subsidiaries, taken as a whole, or on the Borrower's
ability to perform its obligations under this Agreement or any
other Loan Document to which it is or will be a party.
(d) Compliance with Laws, Etc.
Comply, and cause each of its Subsidiaries to comply, with the
requirements of all applicable laws, rules, regulations and
orders of any governmental authority, including without
limitation any such laws, rules, regulations and orders relating
to zoning, environmental protection, use and disposal of
Hazardous Substances, land use, ERISA, construction and building
restrictions, and employee safety and health matters relating to
business operations, the non-compliance with which would have a
material adverse effect on the business, financial condition,
operations, results of operations or prospects of the Borrower
and its Subsidiaries, taken as a whole, or on the Borrower's
ability to perform its obligations under this Agreement or any
other Loan Document to which it is or will be a party.
(e) Inspection Rights. At any time
and from time to time upon reasonable notice, permit or arrange
for the Agent, the Lenders and their respective agents and
representatives to examine and make copies of and abstracts from
the records and books of account of, and the properties of, the
Borrower and each of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and its
Subsidiaries with the Borrower and its Subsidiaries and their
respective officers, directors and accountants.
(f) Keeping of Books. Keep, and
cause its Subsidiaries to keep, proper records and books of
account, in which full and correct entries shall be made of all
financial transactions of the Borrower and its Subsidiaries and
the assets and business of the Borrower and its Subsidiaries, in
accordance with generally accepted accounting principles
consistently applied.
(g) Maintenance of Properties, Etc.
Maintain, and cause each of its Subsidiaries to maintain, good
and marketable title to, and preserve, maintain, develop, and
operate in substantial conformity with all laws and material
contractual obligations, all of its properties which are used or
useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, except where the
failure to do so would not have a material adverse effect on the
business, financial condition, operations, results of operations
or prospects of the Borrower and its Subsidiaries, taken as a
whole, or on the Borrower's ability to perform its obligations
under this Agreement or any other Loan Document to which it is or
will be a party.
(h) Reporting Requirements. Furnish
to each Lender:
(i) as soon as possible and in
any event within five Business Days after the
occurrence of each Unmatured Default or Event
of Default continuing on the date of such
statement, a statement of a Senior Financial
Officer setting forth details of such
Unmatured Default or Event of Default and the
action that the Borrower proposes to take with
respect thereto;
(ii) as soon as available and in
any event within 60 days after the end of each
of the first three quarters of each fiscal
year of the Borrower, a consolidated balance
sheet of the Borrower and its Subsidiaries as
at the end of such quarter and consolidated
statements of income, retained earnings and
cash flows of the Borrower and its
Subsidiaries for the period commencing at the
end of the previous fiscal year and ending
with the end of such quarter, all in
reasonable detail and duly certified (subject
to year-end audit adjustments) by a Senior
Financial Officer as having been prepared in
accordance (in all material respects) with
generally accepted accounting principles
consistent with those applied in the
preparation of the financial statements
referred to in Section 5(d) of the Support
Agreement, together with (A) a certificate of
said officer stating that no Unmatured Default
or Event of Default has occurred and is
continuing or, if an Unmatured Default or
Event of Default has occurred and is
continuing, a statement as to the nature
thereof and the action that the Borrower
proposes to take with respect thereto, and (B)
a schedule in form satisfactory to the
Majority Lenders of the computations used by
the Borrower in determining compliance with
the covenant contained in Section 5.02(j);
(iii) as soon as available and in
any event within 120 days after the end of
each fiscal year of the Borrower, a copy of
the consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of such
fiscal year and consolidated statements of
income, retained earnings and cash flows of
the Borrower and its Subsidiaries for such
fiscal year, in each case (x) accompanied by
the audit report of Arthur Andersen & Co. or
another nationally-recognized independent
public accounting firm acceptable to the
Majority Lenders if at any time during such
fiscal year the Moody's Rating was Baa2 or
lower or the S&P Rating was BBB or lower or
(y) in reasonable detail and duly certified by
a Senior Financial Officer as having been
prepared in accordance (in all material
respects) with generally accepted accounting
principles consistent with those applied in
the preparation of the financial statements
referred to in Section 5(d) of the Support
Agreement, together with (A) a certificate of
a Senior Financial Officer stating that no
Unmatured Default or Event of Default has
occurred and is continuing or, if an Unmatured
Default or Event of Default has occurred and
is continuing, a statement as to the nature
thereof and the action that the Borrower
proposes to take with respect thereto, and (B)
a schedule in form satisfactory to the
Majority Lenders of the computations used by
the Borrower or such accounting firm, as
applicable, in determining, as of the end such
fiscal year, compliance with the covenant
contained in Section 5.02(j);
(iv) as soon as possible and in
any event (A) within 30 days after any ERISA
Event described in clause (i) of the
definition of ERISA Event with respect to any
Plan of the Borrower or any ERISA Affiliate of
the Borrower has occurred and (B) within 10
days after any other ERISA Event with respect
to any Plan of the Borrower or any ERISA
Affiliate of the Borrower has occurred, a
statement of a Senior Financial Officer
describing such ERISA Event and the action, if
any, which the Borrower or such ERISA
Affiliate proposes to take with respect
thereto;
(v) promptly after receipt
thereof by the Borrower or any of its ERISA
Affiliates from the PBGC copies of each notice
received by the Borrower or such ERISA
Affiliate of the PBGC's intention to terminate
any Plan of the Borrower or such ERISA
Affiliate or to have a trustee appointed to
administer any such Plan;
(vi) promptly and in any event
within 30 days after the filing thereof with
the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) with respect
to each Plan (if any) to which the Borrower or
any ERISA Affiliate of the Borrower is a
contributing employer;
(vii) promptly after receipt
thereof by the Borrower or any ERISA Affiliate
of the Borrower from a Multiemployer Plan
sponsor, a copy of each notice received by the
Borrower or such ERISA Affiliate concerning
the imposition or amount of withdrawal
liability in an aggregate principal amount of
at least $250,000 pursuant to Section 4202 of
ERISA in respect of which the Borrower or such
ERISA Affiliate is reasonably expected to be
liable;
(viii) promptly after the Borrower
becomes aware of the occurrence thereof,
notice of all actions, suits, proceedings or
other events (A) of the type described in
Section 4.01(g) or (B) for which the Agent,
the Lenders will be entitled to indemnity
under Section 8.04(c);
(ix) promptly after the sending or
filing thereof, copies of all such proxy
statements, financial statements, and reports
which the Borrower sends to its public
security holders (if any), and copies of all
regular, periodic and special reports, and all
registration statements and periodic or
special reports, if any, which the Borrower or
the Parent files with the Securities and
Exchange Commission or any governmental
authority which may be substituted therefor,
or with any national securities exchange; and
(x) promptly after requested,
such other information respecting the
business, properties, results of operations,
prospects, revenues, condition or operations,
financial or otherwise, of the Borrower or any
of its Subsidiaries as the Agent or any Lender
through the Agent may from time to time
reasonably request.
(i) Further Assurances. At the
expense of the Borrower, promptly execute and deliver, or cause
to be promptly executed and delivered, all further instruments
and documents, and take and cause to be taken all further
actions, that may be necessary or that the Majority Lenders
through the Agent may reasonably request to enable the Lenders
and the Agent to enforce the terms and provisions of this
Agreement and to exercise their rights and remedies hereunder or
under any other Loan Document. In addition, the Borrower will
use all reasonable efforts to duly obtain Governmental Approvals
required from time to time on or prior to such date as the same
may become legally required, and thereafter to maintain all such
Governmental Approvals in full force and effect.
SECTION 5.02. Negative Covenants. So
long as any amount in respect of any Note shall remain unpaid or
any Lender shall have any Commitment, the Borrower will not,
without the written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur,
assume, or suffer to exist, or permit any of its Subsidiaries to
create, incur, assume, or suffer to exist, any lien, security
interest, or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any kind, or
any other type of arrangement intended or having the effect of
conferring upon a creditor a preferential interest upon or with
respect to any of its properties of any character (including,
without limitation, accounts) (any of the foregoing being
referred to herein as a Lien ), excluding, however, from the
operation of the foregoing restrictions the Liens created under
the Loan Documents and the following:
(i) Liens for taxes, assessments or
governmental charges or levies to the extent
not past due;
(ii) Liens imposed by law, such as
materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other
similar Liens arising in the ordinary course
of business securing obligations which are not
overdue or which are being contested in good
faith, provided that any such contested Lien
securing an amount claimed in excess of
$1,000,000 shall be fully bonded within 90
days after the imposition of such Lien;
(iii) pledges or deposits to secure
obligations under workmen's compensation laws
or similar legislation, to secure public or
statutory obligations of the Borrower or such
Subsidiary, or to secure the utility
obligations of any such Subsidiary incurred in
the ordinary course of business;
(iv) (A) purchase money Liens upon or
in property now owned or hereafter acquired by
the Borrower or any of its Subsidiaries in the
ordinary course of business (consistent with
present practices) to secure (1) the purchase
price of such property or (2) Debt incurred
solely for the purpose of financing the
acquisition, construction or improvement of
any such property to be subject to such Liens,
or (B) Liens existing on any such property at
the time of acquisition, or extensions,
renewals or replacements of any of the
foregoing for the same or a lesser amount,
provided that no such Lien shall extend to or
cover any property other than the property
being acquired, constructed or improved and
replacements, modifications and proceeds of
such property, and no such extension, renewal
or replacement shall extend to or cover any
property not theretofore subject to the Lien
being extended, renewed or replaced;
(v) Liens on the capital stock of any
of the Borrower's single-purpose Subsidiaries
or any such Subsidiary's assets to secure the
repayment of project financing for such
Subsidiary;
(vi) attachment, judgment or other
similar Liens arising in connection with court
proceedings, provided that the execution or
other enforcement of such Liens is effectively
stayed and the claims secured thereby are
being actively contested in good faith by
appropriate proceedings or the payment of
which is covered in full (subject to customary
deductible amounts) by insurance maintained
with responsible insurance companies and the
applicable insurance company has acknowledged
its liability therefor in writing;
(vii) Liens securing obligations under
agreements entered into pursuant to the Iowa
Industrial New Jobs Training Act or any
similar or successor legislation, provided
that such obligations do not exceed $1,000,000
in the aggregate at any one time outstanding;
and
(viii) other Liens set forth in Schedule
II hereto, and any extensions or renewals of
any such Liens upon or in the same property
theretofore subject thereto.
(b) Debt. (i) Create, incur,
assume, or suffer to exist any Debt other than:
(A) Debt hereunder and under the
other Loan Documents; and
(B) other Debt of the Borrower;
provided, however, that both immediately
before and after the incurrence of any
such other Debt, the Borrower shall be in
compliance with the covenant set forth in
subsection (j), below, and the Parent
shall be in compliance with the covenant
set forth in Section 2(a) of the Support
Agreement.
(ii) Permit any of its Subsidiaries to
create, incur, assume, or suffer to exist any
Debt other than:
(A) Debt of any Person acquired
by the Borrower or any such Subsidiary
(whether by merger, stock or asset
purchase, or otherwise) that was in
effect and outstanding at the time of
acquisition;
(B) Debt owing by any such
Subsidiary to the Borrower or to any
other such Subsidiary;
(C) Debt of such Subsidiaries
under working capital lines and with
respect to Capitalized Lease Obligations
not to exceed $5,000,000 in the aggregate
at any one time outstanding (such dollar
limitation to apply to the Debt of any
Persons acquired by and merged into any
such Subsidiary to the extent of any
surviving working capital lines and
Capitalized Lease Obligations of any such
Person which shall survive such
acquisition and merger);
(D) Debt secured by Liens
permitted by Section 5.02(a)(iv) and (v);
(E) Debt under agreements entered
into pursuant to the Iowa Industrial New
Jobs Training Act or any similar or
successor legislation, provided that such
Debt does not exceed $1,000,000 in the
aggregate at any one time outstanding;
and
(F) existing Debt set forth in
Schedule III hereto;
provided, however, that both immediately before and after the
incurrence of any Debt described in clauses (A), (B), (C), (D)
and (E), above, the Borrower shall be in compliance with the
covenant set forth in subsection (j), below, and the Parent shall
be in compliance with the covenant set forth in Section 2(a) of
the Support Agreement.
(c) Compliance with ERISA. (i)
Permit to exist any accumulated funding deficiency (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as
amended from time to time) (unless such deficiency exists with
respect to a Multiple Employer Plan or Multiemployer Plan and the
Borrower has no control over the reduction or elimination of such
deficiency), (ii) terminate, or permit any ERISA Affiliate of the
Borrower to terminate, any Plan of the Borrower or such ERISA
Affiliate so as to result in any material (in the opinion of the
Majority Lenders) liability of the Borrower to the PBGC, or (iii)
permit to exist any occurrence of any Reportable Event (as
defined in Title IV of ERISA), or any other event or condition,
which presents a material (in the opinion of the Majority
Lenders) risk of such a termination by the PBGC of any Plan of
the Borrower or such ERISA Affiliate and such a material
liability to the Borrower.
(d) Transactions with Affiliates.
Enter into, or permit any of its Subsidiaries to enter into, any
transaction with an Affiliate of the Borrower, unless such
transaction is on terms no less favorable to the Borrower or such
Subsidiary, as the case may be, than if the transaction had been
negotiated in good faith on an arm's length basis with a Person
which was not an Affiliate of the Borrower.
(e) Mergers, Etc. (i) Merge with or
into or consolidate with or into any other Person, except that
the Borrower may merge with or into or consolidate with or into
any of its Subsidiaries or the Parent, provided that immediately
after giving effect thereto, (A) no event shall occur and be
continuing which constitutes an Unmatured Default or an Event of
Default, (B) the Borrower is the surviving corporation or, with
respect to any merger or consolidation of the Borrower with or
into the Parent, the surviving (if not the Borrower) or resulting
corporation shall have expressly assumed the obligations of the
Borrower under this Agreement, the Notes and the other Loan
Documents to which the Borrower is a party, (C) the Parent
(unless it shall be the surviving corporation) shall reaffirm its
obligations to the surviving or resulting corporation under the
Support Agreement and (D) the Borrower shall not be liable with
respect to any Debt or allow its property to be subject to any
Lien which it could not become liable with respect to or allow
its property to become subject to under this Agreement or any
other Loan Document on the date of such transaction, and (ii)
permit any of its Subsidiaries to merge with or into or
consolidate with or into any other Person, except that any such
Subsidiary may merge with or into any other Person, provided that
immediately after giving effect thereto, (x) the surviving
corporation is a Subsidiary of the Borrower, (y) no event shall
occur and be continuing which constitutes an Unmatured Default or
an Event of Default and (z) the Borrower or any of its
Subsidiaries shall not be liable with respect to any Debt or
allow its property to be subject to any Lien which it could not
become liable with respect to or allow its property to become
subject to under this Agreement or any other Loan Document on the
date of such transaction.
(f) Sales, Etc., of Assets. Sell,
lease, transfer, assign or otherwise dispose of all or any
substantial part of its assets, or permit any of its Subsidiaries
(other than the Exempt Subsidiaries) to sell, lease, transfer,
assign or otherwise dispose of all or any substantial part of its
assets, except (i) sales, leases, transfers and assignments from
one Subsidiary of the Borrower to another such Subsidiary, (ii)
in any transaction in which the proceeds from such sale, lease,
transfer, assignment or disposition are solely in Cash and Cash
Equivalents and such proceeds are (A) reinvested, or held for no
more than 180 days in Cash and Cash Equivalents pending
reinvestment, in lines of business (other than real estate) in
which the Borrower or any of its Subsidiaries is engaged in at
the time of the Closing, (B) applied as a reduction of the
Commitments and an optional prepayment pursuant to Sections 2.05
and 2.11, respectively, or (C) applied to pay or prepay Debt
incurred by the Borrower or any such Subsidiary in connection
with the project comprising such assets, or (iii) in connection
with a sale and leaseback transaction entered into by any
Subsidiary of the Borrower, provided in each case that no
Unmatured Default or Event of Default shall have occurred and be
continuing after giving effect thereto, and provided, further,
that, notwithstanding the foregoing, so long as no Unmatured
Default or Event of Default shall have occurred and be
continuing, the Borrower and its Subsidiaries may sell, lease,
transfer, assign or otherwise dispose of up to $5,000,000 (in
book value) in the aggregate of their collective assets
(exclusive of the assets and capital stock of the Exempt
Subsidiaries) during any 12-calendar-month period in any single
or series of transactions, whether or not related.
(g) Modification of Support
Agreement. Agree to amend, modify, terminate, or waive any
provision of the Support Agreement.
(h) Letter of Credit Obligations.
Incur, or permit any of its Subsidiaries to incur, any
indebtedness, liabilities or obligations (whether contingent or
otherwise) in excess of $1,000,000 in the aggregate at any one
time outstanding under reimbursement or similar agreements with
respect to letters of credit issued to support obligations that
do not constitute Debt.
(i) Maintenance of Ownership of
Significant Subsidiaries. Sell, assign, transfer, pledge or
otherwise dispose of any shares of capital stock of any of its
Significant Subsidiaries or any warrants, rights or options to
acquire such capital stock, or permit any of its Significant
Subsidiaries to issue, sell or otherwise dispose of any shares of
its capital stock or the capital stock of any other of its
Subsidiaries or any warrants, rights or options to acquire such
capital stock, except (and only to the extent) as may be
necessary to give effect to a transaction permitted by subsection
(e), above.
(j) Consolidated Leverage Ratio.
Allow the ratio of (i) the sum of (A) Consolidated Debt of the
Borrower and (B) Debt of the Parent to (ii) the sum of (A)
Consolidated Capital of the Borrower and (B) Debt of the Parent,
to exceed 0.65 to 1.00 at any time.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any
of the following events (each an Event of Default ) shall occur
and be continuing after the applicable grace period and notice
requirement (if any):
(a) The Borrower shall fail to pay
any principal of any Note when the same becomes due and payable;
or
(b) The Borrower shall fail to pay
any interest on any Note or any other amount due under this
Agreement for two days after the same becomes due; or
(c) Any representation or warranty
made by or on behalf of the Borrower in any Loan Document or in
any certificate or other writing delivered pursuant thereto shall
prove to have been incorrect in any material respect when made or
deemed made; or
(d) Any representation or warranty
made by or on behalf of the Parent in the Support Agreement or in
any certificate or other writing delivered pursuant thereto shall
prove to have been incorrect in any material respect when made or
deemed made; or
(e) The Borrower shall fail to
perform or observe any term or covenant on its part to be
performed or observed contained in Section 5.02 (other than
subsections (c), (d), (g), (i) or (j) thereof), or the Parent
shall fail to perform or observe any term or covenant on its part
to be performed or observed contained in Section 1, 2 or 4 of the
Support Agreement; or
(f) The Borrower shall fail to
perform or observe any other term or covenant on its part to be
performed or observed contained in Section 5.01, Section 5.02 or
in any other Loan Document, or the Parent shall fail to perform
or observe any other term or covenant on its part to be performed
or observed contained in the Support Agreement, and any such
failure shall remain unremedied, after written notice thereof
shall have been given to the Borrower by the Agent, for a period
of 30 days; or
(g) The Parent or any of its
Subsidiaries (including the Borrower but excluding IES Utilities)
shall fail to pay any of its Debt (including any interest or
premium thereon but excluding Debt evidenced by the Notes)
aggregating $5,000,000 or more when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace
period, if any, specified in any agreement or instrument relating
to such Debt; or any other default under any agreement or
instrument relating to any such Debt, or any other event, shall
occur and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of
such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof as a result of a default or
other similar adverse event; or
(h) IES Utilities shall fail to pay
any of its Debt (including any interest or premium thereon)
aggregating $5,000,000 or more when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace
period, if any, specified in any agreement or instrument relating
to such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity
thereof as a result of a default or other similar adverse event;
or
(i) The Borrower, the Parent or IES
Utilities shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts
generally, or shall make an assignment for the benefit of
creditors; or any proceeding shall be instituted by or against
the Borrower, the Parent or IES Utilities seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any
substantial part of its property and, in the case of a proceeding
instituted against the Borrower, the Parent or IES Utilities,
either such proceeding shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding
(including without limitation the entry of an order for relief
against the Borrower, the Parent or IES Utilities or the
appointment of a receiver, trustee, custodian or other similar
official for the Borrower, the Parent or IES Utilities or any of
its property) shall occur; or the Borrower, the Parent or IES
Utilities shall take any corporate or other action to authorize
any of the actions set forth above in this subsection (i); or
(j) Any judgment or order for the
payment of money equal to or in excess of $5,000,000 shall be
rendered against the Parent or any of its Direct Subsidiaries
(including, without limitation, the Borrower and IES Utilities)
or their respective properties and either (i) enforcement
proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(k) The Support Agreement, after
delivery thereof under Article III, shall for any reason, except
to the extent permitted by the terms thereof, cease to be valid
and binding on the Parent or the Borrower; or
(l) Any Governmental Approval shall
be rescinded, revoked, otherwise terminated, or amended or
modified in any manner which is materially adverse to the
interests of the Lenders and the Agent; or
(m) Any ERISA Event shall have
occurred with respect to a Plan which could reasonably be
expected to result in a material liability to the Borrower, and,
30 days after notice thereof shall have been given to the
Borrower by the Agent or any Lender, such ERISA Event shall still
exist;
then, and in any such event, the Agent (i) shall at the request,
or may with the consent, of the holders of at least 66-2/3% in
principal amount of the A Advances then outstanding or, if no A
Advances are then outstanding, Banks having at least 66-2/3% of
the Commitments (without giving effect to any B Reduction), by
notice to the Borrower, declare the obligation of each Lender to
make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with
the consent, of the holders of at least 66-2/3% in principal
amount of the Advances then outstanding or, if no Advances are
then outstanding, Lenders having at least 66-2/3% of the
Commitments, by notice to the Borrower, declare the Notes (if
any), all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of
an actual or deemed entry of an order for relief with respect to
the Borrower under the Federal Bankruptcy Code, (A) the
Commitments and the obligation of each Lender to make Advances
shall automatically be terminated and (B) the Notes, all such
interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action.
Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto.
As to any matters not expressly provided for by this Agreement or
any other Loan Document (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, and such instructions shall
be binding upon all Lenders and all holders of Notes; provided,
however, that the Agent shall not be required to take any action
which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law. The Agent agrees
to give to each Lender prompt notice of each notice given to it
by the Borrower pursuant to the terms of this Agreement. The
Agent shall be deemed to have exercised reasonable care in the
administration and enforcement of this Agreement and the other
Loan Documents if it undertakes such administration and
enforcement in a manner substantially equal to that which
Citibank, N.A. accords credit facilities similar to the credit
facility hereunder for which it is the sole lender.
SECTION 7.02. Agent's Reliance, Etc.
Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement or
any other Loan Document, except for its or their own gross
negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (i) may treat the payee
of any Note as the holder thereof until the Agent receives and
accepts a Lender Assignment entered into by the Lender which is
the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (ii) may consult with
legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement or any other
Loan Document; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or any other Loan
Document on the part of the Borrower or the Parent or to inspect
the property (including the books and records) of the Borrower or
the Parent; (v) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document
or any other instrument or document furnished pursuant hereto or
thereto; and (vi) shall incur no liability under or in respect of
this Agreement or any other Loan Document by acting upon any
notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram, cable or telex) believed
by it to be genuine and signed or sent by the proper party or
parties.
SECTION 7.03. Citibank, N.A. and
Affiliates. With respect to its Commitment, the Advances made by
it and the Notes issued to it, Citibank, N.A. shall have the same
rights and powers under this Agreement as any other Lender and
may exercise the same as though it were not the Agent; and the
term Bank or Banks and Lender or Lenders shall, unless
otherwise expressly indicated, include Citibank, N.A. in its
individual capacity. Citibank, N.A. and its Affiliates may
accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with,
the Borrower, the Parent any of its Subsidiaries and any Person
who may do business with or own securities of the Borrower, the
Parent or any such Subsidiary, all as if Citibank, N.A. were not
the Agent and without any duty to account therefor to the
Lenders.
SECTION 7.04. Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on the
financial statements referred to in Section 5(d) of the Support
Agreement and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any
other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. The
Lenders agree to indemnify the Agent (to the extent not
reimbursed by the Borrower), ratably according to (a) on or
before the Termination Date, the respective principal amounts of
the A Notes then held by each of them (or if no A Notes are at
the time outstanding or if any A Notes are held by Persons which
are not Lenders, ratably according to the respective Percentages
of the Lenders), or (b) after the Termination Date, the
respective principal amounts of the Notes then held by each of
them (or if no Notes are at the time outstanding or if any Notes
are held by Persons which are not Lenders, ratably according to
the respective unpaid principal amounts of the Advances made by
each Lender), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel
fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The
Agent may resign at any time by giving written notice thereof to
the Lenders and the Borrower and may be removed at any time with
or without cause by the Majority Lenders, with any such
resignation or removal to become effective only upon the
appointment of a successor Agent pursuant to this Section 7.06.
Upon any such resignation or removal, the Majority Lenders shall
have the right to appoint a successor Agent, which shall be a
Lender or shall be another commercial bank or trust company
reasonably acceptable to the Borrower organized under the laws of
the United States or of any State thereof. If no successor Agent
shall have been so appointed by the Majority Lenders, and shall
have accepted such appointment, within 30 days after the retiring
Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be
a Lender or shall be another commercial bank or trust company
organized under the laws of the United States of any State
thereof reasonably acceptable to the Borrower. Upon the
acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article VII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No
amendment or waiver of any provision of any Loan Document, nor
consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed
by the Majority Lenders and, in the case of any amendment, the
Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent
shall, unless in writing and signed by all the Lenders, do any of
the following: (a) waive, modify or eliminate any of the
conditions specified in Article III, (b) increase the Commitments
of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the A
Notes, any Applicable Margin or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the A Notes or any fees or other
amounts payable hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the A
Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action hereunder or (f) amend
this Section 8.01; and provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by the
Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Agent under this
Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices
and other communications provided for hereunder and under the
other Loan Documents shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed,
telecopied, telegraphed, telexed, cabled or delivered, if to the
Borrower, at its address at 200 First Street, Cedar Rapids, Iowa
52401, Attention: Treasurer; if to the Parent, at its address at
200 First Street, Cedar Rapids, Iowa 52401, Attention: Treasurer;
if to any Bank, at its Domestic Lending Office specified opposite
its name on Schedule I hereto; if to any other Lender, at its
Domestic Lending Office specified in the Lender Assignment
pursuant to which it became a Lender; and if to the Agent, at its
address at 399 Park Avenue, New York, New York 10043, Attention:
Utilities Department Head; or, as to each party, at such other
address as shall be designated by such party in a written notice
to the other parties. All such notices and communications shall,
when mailed, telecopied, telegraphed, telexed or cabled, be
effective five days after being deposited in the mails, or when
delivered to the telegraph company, telecopied, confirmed by
telex answerback or delivered to the cable company, respectively,
except that notices and communications to the Agent pursuant to
Article II or VII shall not be effective until received by the
Agent.
SECTION 8.03. No Waiver; Remedies. No
failure on the part of any Lender or the Agent to exercise, and
no delay in exercising, any right hereunder or under any Note
shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.04. Costs, Expenses, Taxes and
Indemnification. (a) The Borrower agrees to pay on demand all
costs and expenses of the Agent in connection with the
preparation (including, without limitation, printing costs),
negotiation, execution, delivery, modification and amendment of
this Agreement and the other Loan Documents, and the other
documents and instruments to be delivered hereunder and
thereunder, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for the Agent with respect
thereto and with respect to the administration of, and advising
the Agent as to its rights and responsibilities under, this
Agreement and the other Loan Documents. The Borrower further
agrees to pay on demand all costs and expenses, if any
(including, without limitation, reasonable counsel fees and
expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement
and the other Loan Documents and the other documents and
instruments to be delivered hereunder and thereunder, including,
without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section
8.04(a). In addition, the Borrower shall pay any and all stamp
and other taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement and the other
Loan Documents, and the other documents and instruments to be
delivered hereunder and thereunder, and agrees to save the Agent
and each Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission
to pay such taxes.
(b) If any payment of principal of,
or Conversion of, any Adjusted CD Rate Advance, Eurodollar Rate
Advance or B Advance is made other than on the last day of the
Interest Period for such A Advance or other than on the maturity
date of such B Advance, as a result of a payment or Conversion
pursuant to Section 2.09(f), 2.10, 2.11, 2.12 or 2.14 or
acceleration of the maturity of the Notes pursuant to Section
6.01 or for any other reason, the Borrower shall, upon demand by
any Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such
payment or Conversion, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to
fund or maintain such Advance.
(c) The Borrower hereby agrees to
indemnify and hold each Lender, the Agent and their respective
officers, directors, employees, professional advisors and
affiliates (each, an Indemnified Person ) harmless from and
against any and all claims, damages, losses, liabilities, costs
or expenses (including reasonable attorney's fees and expenses,
whether or not such Indemnified Person is named as a party to any
proceeding or is otherwise subjected to judicial or legal process
arising from any such proceeding) which any of them may incur or
which may be claimed against any of them by any Person (except
for such claims, damages, losses, liabilities, costs and expenses
resulting from such Indemnified Person's gross negligence or
willful misconduct):
(i) by reason of or in connection
with the execution, delivery or performance of
any of the Loan Documents or any transaction
contemplated thereby, or the use by the
Borrower of the proceeds of any Extension of
Credit;
(ii) in connection with any
documentary taxes, assessments or charges made
by any governmental authority by reason of the
execution and delivery of any of the Loan
Documents; or
(iii) in connection with or resulting
from the utilization, storage, disposal,
treatment, generation, transportation, release
or ownership of any Hazardous Substance (i)
at, upon, or under any property of the
Borrower or any of its Affiliates or (ii) by
or on behalf of the Borrower or any of its
Affiliates at any time and in any place.
(d) The Borrower's obligations under
this Section 8.04 shall survive the repayment of all amounts
owing to the Lenders under the Notes and the termination of the
Commitments. If and to the extent that the obligations of the
Borrower under this Section 8.04 are unenforceable for any
reason, the Borrower agrees to make the maximum contribution to
the payment and satisfaction thereof which is permissible under
applicable law.
SECTION 8.05. Right of Set-off. (a)
Upon (i) the occurrence and during the continuance of any Event
of Default and (ii) the making of the request or the granting of
the consent by the Majority Lenders specified by Section 6.01 to
authorize the Agent to declare the Notes due and payable pursuant
to the provisions of Section 6.01, each Lender is hereby
authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower
now or hereafter existing under any Loan Document and any Note
held by such Lender, irrespective of whether or not such Lender
shall have made any demand under such Loan Document or such Note
and although such obligations may be unmatured. Each Lender
agrees promptly to notify the Borrower after any such set-off and
application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off
and application. The rights of each Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
(b) The Borrower agrees that it shall
have no right of set-off, deduction or counterclaim in respect of
its obligations hereunder, and that the obligations of the
Lenders hereunder are several and not joint. Nothing contained
herein shall constitute a relinquishment or waiver of the
Borrower's rights to any independent claim that the Borrower may
have against the Agent or any Lender for the Agent's or such
Lender's, as the case may be, gross negligence or wilful
misconduct, but no Lender shall be liable for the conduct of the
Agent or any other Lender, and the Agent shall not be liable for
the conduct of any Lender.
SECTION 8.06. Binding Effect. This
Agreement shall become effective when it shall have been executed
by the Borrower and the Agent and when the Agent shall have been
notified in writing by each Bank that such Bank has executed it
and thereafter shall be binding upon and inure to the benefit of
the Borrower, the Agent and each Lender and their respective
successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and
Participations. (a) Each Lender may assign to one or more
Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage
of all of the assigning Lender's rights and obligations under
this Agreement, (ii) the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Lender Assignment with respect
to such assignment) shall in no event be less than the lesser of
the amount of such Lender's then remaining Commitment and
$5,000,000 (except in the case of assignments between Lenders at
the time already parties hereto), and (iii) the parties to each
such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, a Lender Assignment,
together with any Note or Notes subject to such assignment and a
processing and recordation fee of $2,500. Promptly following its
receipt of such Lender Assignment, Note or Notes and fee, the
Agent shall accept and record such Lender Assignment in the
Register. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Lender Assignment, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Lender Assignment, have
the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Lender Assignment, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of a Lender
Assignment covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto). Notwithstanding anything to
the contrary contained in this Agreement, any Lender may at any
time assign all or any portion of the Advances owing to it to any
Affiliate of such Lender. No such assignment, other than to an
Eligible Assignee, shall release the assigning Lender from its
obligations hereunder.
(b) By executing and delivering a
Lender Assignment, the Lender assignor thereunder and the
assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in
such Lender Assignment, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with any Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document
furnished pursuant thereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the Parent
or the performance or observance by the Borrower or the Parent of
any of its obligations under any Loan Document or any other
instrument or document furnished pursuant thereto; (iii) such
assignee confirms that it has received a copy of each Loan
Document, together with copies of the financial statements
referred to in Section 5(d) of the Support Agreement and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Lender Assignment; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan
Documents; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations
which by the terms of the Loan Documents are required to be
performed by it as a Lender. Anything in this Section 8.07 to
the contrary notwithstanding, this Section 8.07 shall not apply
to any of the assignments contemplated by Section 3.01(e).
(c) The Agent shall maintain at its
address referred to in Section 8.02 a copy of each Lender
Assignment delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to,
each Lender from time to time (the Register ). The entries in
the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Parent, the Agent
and the Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of a Lender
Assignment executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with any
Note or Notes subject to such assignment, the Agent shall, if
such Lender Assignment has been completed and is in substantially
the form of Exhibit 8.07 hereto, (i) accept such Lender
Assignment, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
Within 10 Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the
Agent in exchange for the surrendered Note or Notes a new Note to
the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Lender Assignment and,
if the assigning Lender has retained a Commitment hereunder, a
new Note to the order of the assigning Lender in an amount equal
to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes,
shall be dated the effective date of such Lender Assignment and
shall otherwise be in substantially the form of Exhibit 1.01A-1
hereto.
(e) Each Lender may sell
participations to one or more banks, financial institutions or
other entities in all or a portion of its rights and obligations
under the Loan Documents (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement (including, without limitation,
its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii)
such Lender shall remain the holder of any such Note for all
purposes of this Agreement, and (iv) the Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and
obligations under this Agreement.
(f) Any Lender may, in connection
with any assignment or participation or proposed assignment or
participation pursuant to this Section 8.07, disclose to the
assignee or participant or proposed assignee or participant, any
information relating to the Borrower or the Parent furnished to
such Lender by or on behalf of the Borrower or the Parent;
provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree, in
accordance with the terms of Section 8.08, to preserve the
confidentiality of any Confidential Information relating to the
Borrower or the Parent received by it from such Lender.
(g) If any Lender (or any bank,
financial institution, or other entity to which such Lender has
sold a participation) shall (i) make any demand for payment under
Section 2.08 or 2.13, (ii) give notice to the Agent pursuant to
Section 2.14 or (iii) determine not to extend the Termination
Date in response to any request by the Borrower pursuant to
Section 2.18, then (A) in the case of any demand made under
clause (i), above, or the occurrence of the event described in
clause (ii), above, within 30 days after any such demand or
occurrence (if, but only if, in the case of any demanded payment
described in clause (i), such demanded payment has been made by
the Borrower), and (B) in the case of the occurrence of the event
described in clause (iii), above, at any time prior to the then-
scheduled Termination Date, the Borrower may, with the approval
of the Agent (which approval shall not be unreasonably withheld),
and provided that no Event of Default or Unmatured Default shall
then have occurred and be continuing, demand that such Lender
assign in accordance with this Section 8.07 to one or more
Eligible Assignees designated by the Borrower all (but not less
than all) of such Lender's Commitment and the Advances owing to
it within the period ending on the latest to occur of (x) the
last day in the period described in clause (A) or (B), above, as
applicable, (y) the last day of the longest of the then current
Interest Periods for such Advances, and (z) the latest maturity
date of any B Advances owing to such Lender. If any such
Eligible Assignee designated by the Borrower shall fail to
consummate such assignment on terms acceptable to such Lender, or
if the Borrower shall fail to designate any such Eligible
Assignees for all or part of such Lender's Commitment or
Advances, then such demand by the Borrower shall become
ineffective; it being understood for purposes of this subsection
(g) that such assignment shall be conclusively deemed to be on
terms acceptable to such Lender, and such Lender shall be
compelled to consummate such assignment to an Eligible Assignee
designated by the Borrower, if such Eligible Assignee (1) shall
agree to such assignment by entering into a Lender Assignment
with such Lender and (2) shall offer compensation to such Lender
in an amount equal to all amounts then owing by the Borrower to
such Lender hereunder and under the Note made by the Borrower to
such Lender, whether for principal, interest, fees, costs or
expenses (other than the demanded payment referred to above and
payable by the Borrower as a condition to the Borrower's right to
demand such assignment), or otherwise.
(h) Anything in this Section 8.07 to
the contrary notwithstanding, any Lender may assign and pledge
all or any portion of its Commitment and the Advances owing to it
to any Federal Reserve Bank (and its transferees) as collateral
security pursuant to Regulation A of the Board of Governors of
the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank. No such assignment shall release the
assigning Lender from its obligations hereunder.
SECTION 8.08. Confidentiality. In
connection with the negotiation and administration of this
Agreement and the other Loan Documents, the Borrower and the
Parent have furnished and will from time to time furnish to the
Agent and the Lenders (each, a Recipient ) written information
which is identified to the Recipient in writing when delivered as
confidential (such information, other than any such information
which (i) was publicly available, or otherwise known to the
Recipient, at the time of disclosure, (ii) subsequently becomes
publicly available other than through any act or omission by the
Recipient or (iii) otherwise subsequently becomes known to the
Recipient other than through a Person whom the Recipient knows to
be acting in violation of his or its obligations to the Borrower
or the Parent, being hereinafter referred to as Confidential
Information ). The Recipient will maintain the confidentiality
of any Confidential Information in accordance with such
procedures as the Recipient applies generally to information of
that nature. It is understood, however, that the foregoing will
not restrict the Recipient's ability to freely exchange such
Confidential Information with current or prospective participants
in or assignees of the Recipient's position herein, but the
Recipient's ability to so exchange Confidential Information shall
be conditioned upon any such prospective participant's or
assignee's entering into an understanding as to confidentiality
similar to this provision. It is further understood that the
foregoing will not prohibit the disclosure of any or all
Confidential Information if and to the extent that such
disclosure may be required (i) by a regulatory agency or
otherwise in connection with an examination of the Recipient's
records by appropriate authorities, (ii) pursuant to court order,
subpoena or other legal process or in connection with any pending
or threatened litigation, (iii) otherwise as required by law, or
(iv) in order to protect its interests or its rights or remedies
hereunder or under the other Loan Documents; in the event of any
required disclosure under clause (ii) or (iii), above, the
Recipient agrees to use reasonable efforts to inform the Borrower
and the Parent as promptly as practicable.
SECTION 8.09. WAIVER OF JURY TRIAL. THE
AGENT, THE LENDERS, THE BORROWER AND THE PARENT HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF
THE AGENT, SUCH LENDERS, THE BORROWER OR THE PARENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS
ENTERING INTO THIS AGREEMENT.
SECTION 8.10. Consent. Unless otherwise
specified as being within the sole discretion of the Agent, the
Lenders the Majority Lenders or the Borrower, whenever the
consent or approval of the Agent, the Lenders, the Majority
Lenders or the Borrower, respectively, is required herein, such
consent or approval shall not be unreasonably withheld or
delayed.
SECTION 8.11. Governing Law. This
Agreement and the other Loan Documents shall be governed by, and
construed in accordance with, the laws of the State of New York.
The Borrower, the Parent, each Lender, and the Agent (i)
irrevocably submits to the non-exclusive jurisdiction of any New
York State court or Federal court sitting in New York City in any
action arising out of any Loan Document, (ii) agrees that all
claims in such action may be decided in such court, (iii) waives,
to the fullest extent it may effectively do so, the defense of an
inconvenient forum and (iv) consents to the service of process by
mail. A final judgment in any such action shall be conclusive
and may be enforced in other jurisdictions. Nothing herein shall
affect the right of any party to serve legal process in any
manner permitted by law or affect its right to bring any action
in any other court.
SECTION 8.12. Relation of the Parties;
No Beneficiary. No term, provision or requirement, whether
express or implied, of any Loan Document, or actions taken or to
be taken by any party thereunder, shall be construed to create a
partnership, association, or joint venture between such parties
or any of them. No term or provision of the Loan Documents shall
be construed to confer a benefit upon, or grant a right or
privilege to, any Person other than the parties thereto.
SECTION 8.13. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
IES DIVERSIFIED INC.
By
Title:
CITIBANK, N.A.,
as Agent
By
Vice President
EXHIBIT 21
IES INDUSTRIES INC.
SUBSIDIARIES OF THE REGISTRANT
The following are deemed to be significant subsidiaries of Industries --
Name of Subsidiary State of Incorporation
IES Utilities Inc. Iowa
IES Diversified Inc. Iowa
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into IES
Industries Inc.'s (the "Company") previously filed Form S-8
Registration Statement (File No. 33-57088) for the Company's
Employee Stock Purchase Plan, Form S-8 Registration Statement
(File No. 33-32468) for the Company's Employee Savings Plan
and Form S-3 Registration Statement (File No. 33-56981) for the
Company's Dividend Reinvestment and Stock Purchase Plan.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1994 and the Consolidated Statement
of Income and the Consolidated Statement of Cash Flows for the twelve months
ended December 31, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,284,361
<OTHER-PROPERTY-AND-INVEST> 209,550
<TOTAL-CURRENT-ASSETS> 143,198
<TOTAL-DEFERRED-CHARGES> 13,925
<OTHER-ASSETS> 192,955
<TOTAL-ASSETS> 1,843,989
<COMMON> 373,490
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 218,293
<TOTAL-COMMON-STOCKHOLDERS-EQ> 591,783
0
18,320
<LONG-TERM-DEBT-NET> 473,206
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 37,000
<LONG-TERM-DEBT-CURRENT-PORT> 100,422
0
<CAPITAL-LEASE-OBLIGATIONS> 35,346
<LEASES-CURRENT> 14,385
<OTHER-ITEMS-CAPITAL-AND-LIAB> 573,527
<TOT-CAPITALIZATION-AND-LIAB> 1,843,989
<GROSS-OPERATING-REVENUE> 785,864
<INCOME-TAX-EXPENSE> 41,573<F1>
<OTHER-OPERATING-EXPENSES> 637,931
<TOTAL-OPERATING-EXPENSES> 637,931<F1>
<OPERATING-INCOME-LOSS> 147,933
<OTHER-INCOME-NET> 7,382
<INCOME-BEFORE-INTEREST-EXPEN> 155,315
<TOTAL-INTEREST-EXPENSE> 46,010
<NET-INCOME> 66,818<F2>
914<F2>
<EARNINGS-AVAILABLE-FOR-COMM> 66,818
<COMMON-STOCK-DIVIDENDS> 60,065
<TOTAL-INTEREST-ON-BONDS> 37,276
<CASH-FLOW-OPERATIONS> 215,716
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
<FN>
<F1>Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income for IES Industries Inc. (Industries).
<F2> Since the preferred dividends are for a subsidiary of Industries, they are
considered a fixed charge on Industries' Consolidated Statement of Income.
</FN>
</TABLE>
