UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant
is filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company
specific information with the reduced disclosure format.
As of October 31, 1996, shares of Common Stock outstanding for each registrant
were as listed:
Company Shares
Cinergy Corp., par value $.01 per share 157,679,129
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . .
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
PSI Energy, Inc.
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . .
Statements of Income. . . . . . . . . . . . . . . . .
Statements of Cash Flows. . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . .
Notes to Financial Statements . . . . . . . . . . . . .
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . .
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . .
4 Submission of Matters to a Vote of Security Holders . .
5 Other Information . . . . . . . . . . . . . . . . . . .
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION_________________________
1995 Form Combined 1995 Annual Report on Form 10-K filed separately by
10-K Cinergy, as amended, CG&E, PSI, and ULH&P
AEP American Electric Power Company, Inc.
Articles Amended Articles of Incorporation
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
Bankruptcy Court United States Bankruptcy Court for the Southern District of
Indiana
Bruwabel Beheer-En Belegginsmaatschappij Bruwabel B.V., a subsidiary
of Power International
CAC Citizens Action Coalition of Indiana, Inc.
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
Cinergy or Cinergy Corp.
Company
Cinergy U.K. Formerly M.E. Holdings, Inc., (a subsidiary of Investments)
which holds Cinergy's 50% investment in Avon Energy
Clean Coal A joint arrangement by PSI and Destec Energy, Inc. for a
Project 262-mw clean coal power generating facility located at
Wabash River Generating Station, which was placed in
service in November 1995
CWIP Construction work in progress
D&P Duff & Phelps Credit Rating Co.
DSM Demand-side management
Eagle Eagle Coal Company
Exxon Exxon Coal and Minerals Company
FASB Financial Accounting Standards Board
February 1995 An IURC order issued in February 1995
Order
FERC Federal Energy Regulatory Commission
FERC Order 888 FERC order which promotes wholesale competition through
open access non-discriminatory transmission services by
public utilities and recovery of stranded costs by public
utilities and transmitting utilities
FERC Order 889 FERC order which provides for open access same-time
information system
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION_________________________
Fitch Fitch Investors Service, Inc.
Gibson Gibson Generating Station
GPU General Public Utilities Corporation
IBEW International Brotherhood of Electrical Workers
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IURC Indiana Utility Regulatory Commission
IUU Independent Utilities Union
KO Transmission KO Transmission Company, a subsidiary of CG&E
KPSC Kentucky Public Service Commission
kwh Kilowatt-hour
May 1992 Order A PUCO order issued in May 1992
Mcf Thousand cubic feet
Mega-NOPR FERC's notice of proposed rulemaking which resulted in FERC
Order 888 and 889
Merger Costs Merger transaction costs and costs to achieve merger savings
Merger Order The FERC's order approving the merger of CG&E and Resources
to form Cinergy
Miami Fort Miami Fort Generating Station
Midlands Midlands Electricity plc
Money Pool Cinergy system companies with surplus short-term funds,
whether from internal or external sources, provide short-
term loans to other system companies at rates that reflect
(1) the actual costs of the external borrowing and/or (2)
the costs of the internal funds which are set at the 30-
day Federal Reserve "AA" industrial commercial paper
composite rate.
Moody's Moody's Investors Service
mw Megawatt
NOPR A FERC Notice of Proposed Rulemaking
Order 636 FERC order regarding gas purchases and transportation
Power
International Power International, Inc., a subsidiary of Investments
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PSI Recycling PSI Recycling, Inc. (a subsidiary of Investments)
PUCO Public Utilities Commission of Ohio
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION_________________________
PUHCA Public Utility Holding Company Act of 1935
RUS Rural Utilities Service, previously called the Rural
Electrification Administration
S&P Standard & Poor's
SEC Securities and Exchange Commission
September 1996 An IURC order issued in September 1996
Order
Statement 121 Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", issued in March
1995 by the FASB, is a new accounting standard requiring
impairment losses on long-lived assets to be recognized
when an asset's book value exceeds its expected future
cash flows
UCC The Indiana Office of the Utility Consumer Counselor
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
USWA United Steelworkers of America
Woodsdale Woodsdale Generating Station
WVPA Wabash Valley Power Association, Inc.
Zimmer William H. Zimmer Generating Station
<PAGE>
CINERGY CORP.
AND SUBSIDIARY COMPANIES
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $8 741 872 $8 617 695
Gas 699 566 680 339
Common 185 339 184 694
9 626 777 9 482 728
Accumulated depreciation 3 537 840 3 367 432
6 088 937 6 115 296
Construction work in progress 164 553 135 852
Total utility plant 6 253 490 6 251 148
Current Assets
Cash and temporary cash investments 28 622 35 052
Restricted deposits 1 720 2 336
Accounts receivable less accumulated
provision for doubtful accounts of
$12,415 at September 30, 1996, and
$10,360 at December 31, 1995 105 568 371 150
Materials, supplies, and fuel - at average
cost
Fuel for use in electric production 81 654 122 409
Gas stored for current use 37 215 21 493
Other materials and supplies 86 584 85 076
Property taxes applicable to subsequent year 29 206 116 822
Prepayments and other 26 299 32 347
396 868 786 685
Other Assets
Regulatory assets
Amounts due from customers - income taxes 380 519 423 493
Post-in-service carrying costs and
deferred operating expenses 188 370 187 190
Phase-in deferred return and depreciation 96 469 100 388
Coal contract buyout costs 137 686 -
Deferred DSM costs 134 832 129 400
Deferred merger costs 96 339 56 824
Unamortized costs of reacquiring debt 71 921 73 904
Other 95 393 74 911
Investment in Avon Energy 512 747 -
Other 233 927 136 121
1 948 203 1 182 231
$8 598 561 $8 220 064
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
<PAGE>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares
- 157,679,129 at September 30, 1996, and
157,670,141 at December 31, 1995 $ 1 577 $ 1 577
Paid-in capital 1 592 393 1 597 050
Retained earnings 993 039 950 216
Cumulative foreign currency translation
adjustment (584) -___
Total common stock equity 2 586 425 2 548 843
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 194 235 227 897
Subject to mandatory redemption - 160 000
Long-term Debt 2 383 827 2 530 766
Total capitalization 5 164 487 5 467 506
Current Liabilities
Long-term debt due within one year 140 400 201 900
Notes payable 817 454 165 800
Accounts payable 262 180 268 139
Litigation settlement 80 000 80 000
Accrued taxes 227 728 317 185
Accrued interest 46 269 55 995
Other 60 082 57 202
1 634 113 1 146 221
Other Liabilities
Deferred income taxes 1 120 145 1 120 900
Unamortized investment tax credits 177 959 185 726
Accrued pension and other postretirement
benefit costs 205 112 171 771
Other 296 745 127 940
1 799 961 1 606 337
$8 598 561 $8 220 064
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year to
Date Twelve Months Ended
September 30
September 30 September 30
1996 1995 1996
1995 1996 1995
(in thousands,
except per share amounts)
<S> <C> <C> <C>
<C>
Operating Revenues
Electric $ 724 917 $ 731 903 $2 060 471
$1 973 393 $2 699 657 $2 550 913
Gas 40 787 33 591 306 062
265 777 451 137 376 978
765 704 765 494 2 366 533
2 239 170 3 150 794 2 927 891
Operating Expenses
Fuel used in electric production 184 093 190 445 539 350
545 548 710 556 718 907
Gas purchased 17 133 13 155 150 313
130 235 226 328 189 469
Purchased and exchanged power 37 020 15 685 95 443
32 992 110 083 39 346
Other operation 129 009 131 453 423 769
371 983 572 376 550 039
Maintenance 45 903 39 851 137 709
127 834 192 055 184 931
Depreciation 70 811 68 680 211 603
210 351 281 011 286 304
Amortization of phase-in deferrals 3 399 3 409 10 198
5 682 13 607 5 682
Post-in-service deferred operating
expenses - net (930) (71) (2 637)
(2 140) (2 997) (3 500)
Income taxes 65 456 69 952 172 459
173 170 220 718 191 224
Taxes other than income taxes 63 549 64 380 196 095
192 066 259 562 251 241
615 443 596 939 1 934 302
1 787 721 2 583 299 2 413 643
Operating Income 150 261 168 555 432 231
451 449 567 495 514 248
Other Income and Expenses - Net
Allowance for equity funds used
during construction 358 (1 159) 1 206
726 2 444 153
Post-in-service carrying costs 391 602 1 228
3 183 1 231 6 205
Phase-in deferred return 2 093 2 135 6 279
6 403 8 413 8 349
Income taxes 2 677 2 366 7 963
5 950 9 371 10 425
Other - net 4 117 707 (6 815)
(2 224) (7 642) (21 306)
9 636 4 651 9 861
14 038 13 817 3 826
Income Before Interest and Other
Charges 159 897 173 206 442 092
465 487 581 312 518 074
Interest and Other Charges
Interest on long-term debt 46 522 54 154 143 678
160 654 196 935 215 645
Other interest 10 305 5 392 18 497
16 520 22 803 22 989
Allowance for borrowed funds used
during construction (1 455) (2 027) (4 235)
(6 324) (5 976) (9 191)
Preferred dividend requirements of
subsidiaries 6 495 6 770 19 941
24 084 26 710 32 742
61 867 64 289 177 881
194 934 240 472 262 185
Net Income $ 98 030 $ 108 917 $ 264 211
$ 270 553 $ 340 840 $ 255 889
Costs of reacquisition of preferred
stock of subsidiary (Note 6) (18 175) - (18 175)
- - (18 175) -___
Net Income Applicable to Common Stock $ 79 855 $ 108 917 $ 246 036
$ 270 553 $ 322 665 $ 255 889
Average Common Shares Outstanding 157 679 156 945 157 678
156 324 157 633 154 797
Earnings Per Common Share
Net Income $ .63 $.69 $ 1.68
$1.73 $ 2.17 $1.62
Costs of reacquisition of preferred
stock of subsidiary (Note 6) (.12) - (.12)
- - (.12) -__
Net Income Applicable to Common Stock $ .51 $.69 $ 1.56
$1.73 $ 2.05 $1.62
Dividends Declared Per Common Share $ .43 $.43 $ 1.29
$1.29 $ 1.72 $1.65
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Cumulative
Foreign
Currency
Common Paid-in
Retained Translation Total Common
Stock Capital
Earnings Adjustment Stock Equity
(dollars in
thousands)
<S> <C> <C> <C>
<C> <C>
Quarter Ended September 30, 1996
Balance July 1, 1996 $1 577 $1 594 920 $ 981
003 $(567) $2 576 933
Net income 98
030 98 030
Dividends on common stock (see page 9 for
per share amounts) (67
802) (67 802)
Translation adjustments
(17) (17)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (2 527)
(17) _____ (2 544)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Quarter Ended September 30, 1995
Balance July 1, 1995 $1 566 $1 570 873 $ 900
094 $ $2 472 533
Net income 108
917 108 917
Issuance of 572,455 shares of common
stock - net 6 14 597
14 603
Common stock issuance expenses (2)
(2)
Dividends on common stock (see page 9 for
per share amounts) (67
359) (67 359)
Other 2
_________ _____ 2
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Nine Months Ended September 30, 1996
Balance January 1, 1996 $1 577 $1 597 050 $ 950
216 $ $2 548 843
Net income 264
211 264 211
Issuance of 8,988 shares of common
stock - net 311
311
Dividends on common stock (see page 9 for
per share amounts) (203
402) (203 402)
Translation adjustments
(584) (584)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (4 968)
189 _____ (4 779)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Nine Months Ended September 30, 1995
Balance January 1, 1995 $1 552 $1 535 658 $ 877
061 $ $2 414 271
Net income 270
553 270 553
Issuance of 1,941,748 shares of common
stock - net 20 48 734
48 754
Common stock issuance expenses (191)
(191)
Dividends on common stock (see page 9 for
per share amounts) (201
251) (201 251)
Other ______ 1 269 (4
711) _____ (3 442)
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Twelve Months Ended September 30, 1996
Balance October 1, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
Net income 340
840 340 840
Issuance of 539,343 shares of common
stock - net 5 11 920
11 925
Common stock issuance expenses (38)
(38)
Dividends on common stock (see page 9 for
per share amounts) (271
002) (271 002)
Translation adjustments
(584) (584)
Costs of reacquisition of preferred stock
of subsidiary (Note 6) (18
175) (18 175)
Other ______ (4 959)
(276) _____ (5 235)
Balance September 30, 1996 $1 577 $1 592 393 $ 993
039 $(584) $2 586 425
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $1 473 $1 359 477 $ 945
679 $ $2 306 629
Net income 255
889 255 889
Issuance of 9,705,354 shares of common
stock - net 99 230 000
230 099
Common stock issuance expenses (5 298)
(5 298)
Dividends on common stock (see page 9 for
per share amounts) (255
637) (255 637)
Other 1 291 (4
279) _____ (2 988)
Balance September 30, 1995 $1 572 $1 585 470 $ 941
652 $ $2 528 694
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date Twelve
Months Ended
September 30
September 30
1996 1995 1996
1995
(in thousands)
<S> <C> <C> <C>
<C>
Operating Activities
Net income $ 264 211 $ 270 553 $ 340 840
$ 255 889
Items providing (using) cash currently
Depreciation 211 603 210 351 281 011
286 304
Deferred income taxes and investment
tax credits - net 34 061 27 836 34 636
28 590
Allowance for equity funds used
during construction (1 206) (726) (2 444)
(153)
Regulatory assets - net (27 444) (55) (26 363)
(13 294)
Changes in current assets and
current liabilities
Restricted deposits (357) 8 (1 400)
8 633
Accounts receivable, net of
reserves on receivables sold 227 237 32 034 123 562
(1 880)
Materials, supplies, and fuel 23 525 26 217 48 522
22 677
Accounts payable (5 959) (93 413) 89 126
(28 370)
Accrued taxes and interest (8 734) 28 223 19 678
56 040
Other items - net (43 003) (15 531) (15 336)
(976)
Net cash provided by (used in)
operating activities 673 934 485 497 891 832
613 460
Financing Activities
Issuance of common stock 311 48 563 11 887
224 801
Issuance of long-term debt - 344 280 -
344 280
Funds on deposit from issuance of
long-term debt 973 (75 316) 86 276
(68 630)
Retirement of preferred stock of
subsidiaries (209 559) (93 458) (209 567)
(93 474)
Redemption of long-term debt (207 583) (298 553) (307 863)
(298 988)
Change in short-term debt 651 654 55 100 533 454
(41 514)
Dividends on common stock (203 402) (201 251) (271 002)
(255 637)
Net cash provided by (used in)
financing activities 32 394 (220 635) (156 815)
(189 162)
Investing Activities
Construction expenditures (less
allowance for equity funds used
during construction) (203 977) (231 943) (296 939)
(386 233)
Deferred DSM costs - net (5 432) (17 356) (13 349)
(34 697)
Investment in Avon Energy (503 349) - (503 349)
- -
Equity investment in Argentine
utility - - 19 799
(32)
Net cash provided by (used in)
investing activities (712 758) (249 299) (793 838)
(420 962)
Net increase (decrease) in cash and
temporary cash investments (6 430) 15 563 (58 821)
3 336
Cash and temporary cash investments at
beginning of period 35 052 71 880 87 443
84 107
Cash and temporary cash investments at
end of period $ 28 622 $ 87 443 $ 28 622
$ 87 443
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</TABLE>
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter, nine months, and twelve months ended September 30,
1996. For information concerning the results of operations for each of the
other registrants for the same quarter and nine months ended, see the
discussion under the heading RESULTS OF OPERATIONS following the financial
statements of each company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 2.2% for the quarter ended September 30, 1996, from the
comparable period of last year primarily reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. Also, increased industrial sales primarily reflected growth in
the primary metals sector. These increases were partially offset by a return
to more normal weather for the third quarter of 1996, resulting in decreased
residential and commercial sales.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1996
increased 13.2% as compared to the same period in 1995. Increased residential
and commercial gas sales reflected, in part, increases in the average number
of customers. Higher gas transportation volumes reflected the continuing
trend of industrial customers purchasing gas directly from suppliers, using
transportation services provided by CG&E. The increase in transportation
volumes mainly reflects demand for gas transportation services in the primary
metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended September 30, 1996,
decreased $7 million (1.0%) as compared to the same period last year primarily
as a result of the decreased residential and commercial kwh sales previously
discussed. This decrease was almost wholly offset by increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale as previously discussed.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $732
Increase (Decrease) due to change in:
Price per kwh
Sales for resale
Firm power obligations (3)
Non-firm power transactions (1)
Total change in price per kwh (4)
Kwh sales
Retail (19)
Sales for resale
Firm power obligations (2)
Non-firm power transactions 17
Total change in kwh sales (4)
Other 1
Electric operating revenues - September 30, 1996 $725
Gas Operating Revenues
Gas operating revenues increased $7 million (21.4%) in the third quarter of
1996, when compared to the same period last year. This increase was primarily
a result of the operation of fuel adjustment clauses reflecting a higher
average cost of gas purchased and the previously discussed changes in gas
sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the quarter ended September 30, 1996, increased $4 million
(30.2%) when compared to the same period last year reflecting a higher average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $21 million for the quarter ended
September 30, 1996, when compared to the same period last year, primarily
reflecting increased purchases of non-firm power for resale to others as a
result of increased activity in Cinergy's power marketing operations.
Maintenance
The $6 million (15.2%) increase in maintenance expenses for the third quarter
of 1996 as compared to the same period of 1995 is primarily due to increased
maintenance on CG&E's electric production and transmission facilities.
Other Income and Expenses - Net
Other - net
Other - net increased $3 million for the three months ended September 30,
1996, from the same period of 1995 primarily due to Cinergy's equity in
earnings of Avon Energy. The effects of expenses associated with CG&E's and
ULH&P's sales of accounts receivables in 1996 and interest received in 1995
associated with a refund of an overpayment of Federal income taxes related to
prior years partially offset this increase.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $8 million (14.1%) for the three
months ended September 30, 1996, from the same period of 1995 primarily due to
the redemption of $161.5 million of long-term debt by CG&E and ULH&P during
the period from January 1996 through May 1996 and the redemption of $110
million by PSI during the period from August 1995 through July 1996.
Other Interest
Other interest increased $5 million (91.1%) for the third quarter of 1996, as
compared to the same period last year, primarily reflecting increased interest
expense on short-term borrowings used to fund Cinergy's investment in Avon
Energy.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the
difference between the par value of preferred stock of CG&E tendered pursuant
to Cinergy's tender offer in September of 1996 and the purchase price paid
(including tender fees paid to dealer managers) by Cinergy for these shares.
(See Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information.")
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 8.4% for the nine months ended September 30, 1996, from
the comparable period of last year primarily reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. The higher kwh sales levels reflected increased sales to all
retail customer classes. The increase to retail sales reflects a higher
average number of residential and commercial customers, while industrial sales
increased primarily due to growth in the primary metals sector. These
increases were partially offset by the return to more normal weather in the
third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first nine months of 1996
increased 13.9% as compared to the same period in 1995. Colder weather during
the winter heating season, cooler than normal weather early in the second
quarter of 1996, and increases in the average number of customers led to
increased gas sales to residential and commercial customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes mainly reflects demand for gas transportation services
in the primary metals sector.
.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the
nine months ended September 30, 1996, increased $87 million (4.4%) reflecting
the increased kwh sales, as previously discussed. In addition, PSI's 4.3%
retail rate increase approved in the February 1995 Order and a 1.9% increase
for carrying costs on CWIP property which was approved by the IURC in March
1995 contributed to the increase. The return of approximately $13 million to
PSI's customers in accordance with the February 1995 Order, which requires all
retail operating income above a certain rate of return to be refunded to
customers, slightly offset these increases.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $1 973
Increase (Decrease) due to change in:
Price per kwh
Retail (14)
Sales for resale
Firm power obligations (5)
Non-firm power transactions 3
Total change in price per kwh (16)
Kwh sales
Retail 51
Sales for resale
Firm power obligations 6
Non-firm power transactions 46
Total change in kwh sales 103
Electric operating revenues - September 30, 1996 $2 060
Gas Operating Revenues
Gas operating revenues increased $40 million (15.2%) in the first nine months
of 1996, when compared to the same period last year. This increase was
primarily a result of the previously discussed changes in gas sales and
transportation volumes. Also contributing to the increase was the operation
of fuel adjustment clauses reflecting a higher cost of gas purchased.
Operating Expenses
Gas Purchased
Gas purchased for the nine months ended September 30, 1996, increased $20
million (15.4%) when compared to the same period last year. This increase was
attributable to an increase in volumes purchased and a higher average cost per
Mcf of gas purchased as previously discussed.
Purchased and Exchanged Power
Purchased and exchanged power increased $62 million for the nine months
ended September 30, 1996, when compared to the same period last year,
primarily reflecting increased purchases of non-firm power for resale to
others as a result of increased activity in Cinergy's power marketing
operations.
Other Operation
Other operation expenses for the nine months ended September 30, 1996,
increased $52 million (13.9%), as compared to the same period last year. This
increase is due to a number of factors, including increased transmission
expenses and higher administrative and general expenses reflecting, in part,
charges of $17.4 million for early retirement and severance programs. Other
factors include the recognition by PSI of postretirement benefit costs on an
accrual basis, an increase in the ongoing level of DSM expenses, and the
amortization of deferred postretirement benefit costs and deferred DSM costs,
which are being recovered in revenues pursuant to the February 1995 Order.
Maintenance
The $10 million (7.7%) increase in maintenance expenses for the nine months
ended September 30, 1996, as compared to the same period last year, is
primarily attributable to increased maintenance on CG&E's electric production
facilities. Maintenance on the Clean Coal Project which began commercial
operation in November 1995 and increased transmission and distribution
expenses also contributed to the higher level of maintenance expenses.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer included in the May 1992 Order. In the first three years of the phase-
in plan, rates charged to customers did not fully recover depreciation expense
and return on investment. This deficiency was deferred and is being recovered
over a seven-year period that began in May 1995.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $2 million (61.4%) for the nine
months ended September 30, 1996, from the comparable period of 1995 as a
result of PSI's discontinuing the accrual of post-in-service carrying costs on
qualified environmental projects upon the inclusion in rates of the costs of
the projects pursuant to the February 1995 Order.
Other - net
Other - net decreased $5 million from the same period in 1995 due to a number
of factors, including the effects of interest received in 1995 on an income
tax refund related to prior years and expenses associated with CG&E's and
ULH&P's sales of accounts receivables in 1996, as previously mentioned. These
decreases were partially offset by Cinergy's equity in the earnings of Avon
Energy.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $17 million (10.6%) for the nine
months ended September 30, 1996, from the same period of 1995 primarily due to
the refinancing by CG&E and ULH&P of over $330 million of long-term debt
during the period from March 1995 through November 1995, the redemption of
$161.5 million by CG&E and ULH&P during the period from January 1996 through
May 1996, and the redemption of $110 million by PSI during the period from
August 1995 through July 1996.
Other Interest
Other interest increased $2 million (12.0%) for the nine months ended
September 30, 1996, as compared to the same period of 1995, primarily
reflecting increased interest expense on short-term borrowings used to fund
Cinergy's investment in Avon Energy.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $4 million (17.2%) for
the nine months ended September 30, 1996, from the same period of 1995 was due
to the early redemption in July 1995 of all 400,000 shares and 500,000 shares
of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred
stock, respectively.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the
difference between the par value of preferred stock of CG&E tendered pursuant
to Cinergy's tender offer in September of 1996 and the purchase price paid
(including tender fees paid to dealer managers) by Cinergy for these shares.
(See Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information.")
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales increased 9.1% for the twelve months ended September 30, 1996, from
the comparable period of last year partially reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. Also contributing to the higher kwh sales levels were increased
sales to residential and commercial customers as a result of colder weather
during the fourth quarter of 1995 and the first quarter of 1996, and cooler
than normal weather during the second quarter of 1996. Additionally, the
increase reflects a higher average number of residential and commercial
customers, while industrial sales increased primarily due to growth in the
primary metals sector. These increases were partially offset by the return to
more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended September
30, 1996, increased 18.8% as compared to the same period in 1995. Colder
weather during the winter heating season and cooler than normal weather early
in the second quarter of 1996 primarily contributed to this increase.
Industrial sales decreased as customers continued to purchase gas directly
from suppliers, using transportation services provided by CG&E. The increase
in transportation volumes, which more than offset the decline in industrial
sales, mainly reflects demand for gas transportation services in the primary
metals sector.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the
twelve months ended September 30, 1996, increased $149 million (5.8%),
reflecting increased kwh sales and PSI's rate increases, as previously
discussed. The return of approximately $16 million to customers in accordance
with the February 1995 Order, which requires all retail operating income above
a certain rate of return to be refunded to customers, slightly offset these
increases.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $2 551
Increase (Decrease) due to change in:
Price per kwh
Retail (10)
Sales for resale
Firm power obligations (9)
Non-firm power transactions 7
Total change in price per kwh (12)
Kwh sales
Retail 100
Sales for resale
Firm power obligations 8
Non-firm power transactions 53
Total change in kwh sales 161
Electric operating revenues - September 30, 1996 $2 700
Gas Operating Revenues
Gas operating revenues increased $74 million (19.7%) for the twelve months
ended September 30, 1996, when compared to the same period last year. This
increase was primarily a result of the previously discussed changes in gas
sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the twelve months ended September 30, 1996, increased $37
million (19.5%) when compared to the same period last year. This increase
reflects higher volumes purchased and an increase in the average cost per Mcf
of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $71 million for the twelve months
ended September 30, 1996, when compared to the same period of last year,
primarily reflecting increased purchases of non-firm power for resale to
others as a result of increased activity in Cinergy's power marketing
operations.
Amortization of Phase-in Deferrals
As previously discussed, amortization of phase-in deferrals reflect the PUCO-
ordered phase-in plan for Zimmer included in the May 1992 Order.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $5 million (80.2%) for the twelve
months ended September 30, 1996, from the comparable period of last year.
This decrease is a result of PSI's discontinuing the accrual of post-in-
service carrying costs on qualified environmental projects upon the inclusion
in rates of the costs of the projects pursuant to the February 1995 Order.
Partially offsetting the decrease is the accrual of the aforementioned costs
on the Clean Coal Project which began commercial operation in November 1995.
Other - net
Other - net increased $14 million (64.1%) for the twelve months ended
September 30, 1996, from the comparable period of 1995, reflecting a $10
million gain on the sale of an Argentine utility, Cinergy's equity in the
earnings of Avon Energy, and charges of $14 million in the fourth quarter of
1994 for merger-related and other expenditures which cannot be recovered from
customers. These items were partially offset by a number of factors,
including the effects of charges associated with winding-down certain non-
utility activities during 1995, interest received in 1995 on an income tax
refund related to prior years, and expenses associated with CG&E's and ULH&P's
sales of accounts receivables in 1996.
Interest and Other Charges
Interest on Long-term Debt
Interest charges on long-term debt decreased $19 million (8.7%) for the twelve
months ended September 30, 1996, from the same period of 1995 primarily due to
the refinancing of over $330 million of long-term debt by CG&E and ULH&P
during the period from March 1995 through November 1995, the redemption of
$161.5 million by CG&E and ULH&P during the period from January 1996 through
May 1996, and the redemption of $110 million by PSI during the period from
August 1995 through July 1996.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $6 million (18.4%) for
the twelve months ended September 30, 1996, from the same period of 1995 was
due to the early redemption in July 1995 of all 400,000 shares and 500,000
shares of CG&E's 7.44% Series and 9.15% Series $100 par value cumulative
preferred stock, respectively.
Costs of Reacquisition of Preferred Stock of Subsidiary
Costs of reacquisition of preferred stock of subsidiary represents the
difference between the par value of preferred stock of CG&E tendered pursuant
to Cinergy's tender offer in September of 1996 and the purchase price paid
(including tender fees paid to dealer managers) by Cinergy for these shares.
(See Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information.")
<PAGE>
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - Original Cost
In service
Electric $4 624 135 $4 564 711
Gas 699 566 680 339
Common 184 067 183 422
5 507 768 5 428 472
Accumulated depreciation 1 838 745 1 730 232
3 669 023 3 698 240
Construction work in progress 84 915 77 661
Total utility plant 3 753 938 3 775 901
Current Assets
Cash and temporary cash investments 16 718 6 612
Restricted deposits 1 171 1 144
Notes receivable from affiliated companies 54 480 24 715
Accounts receivable less accumulated
provision for doubtful accounts of
$12,042 at September 30, 1996, and
$9,615 at December 31, 1995 47 531 292 493
Accounts receivable from affiliated companies 5 970 17 162
Materials, supplies, and fuel - at average
cost
Fuel for use in electric production 28 636 40 395
Gas stored for current use 37 215 21 493
Other materials and supplies 53 804 55 388
Property taxes applicable to subsequent year 29 206 116 822
Prepayments and other 22 981 30 572
297 712 606 796
Other Assets
Regulatory assets
Amounts due from customers - income taxes 347 670 397 155
Post-in-service carrying costs and deferred
operating expenses 143 198 148 316
Phase-in deferred return and depreciation 96 469 100 388
Deferred DSM costs 29 628 19 158
Deferred merger costs 18 706 14 538
Unamortized costs of reacquiring debt 39 338 39 428
Other 25 483 41 025
Other 102 695 54 691
803 187 814 699
$4 854 837 $5 197 396
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $8.50 par value; authorized
shares - 120,000,000; outstanding shares -
89,663,086 at September 30, 1996, and
December 31, 1995 $ 762 136 $ 762 136
Paid-in capital 536 128 339 101
Retained earnings 264 297 427 226
Total common stock equity 1 562 561 1 528 463
Cumulative Preferred Stock
Not subject to mandatory redemption 21 145 40 000
Subject to mandatory redemption - 160 000
Long-term Debt 1 564 868 1 702 650
Total capitalization 3 148 574 3 431 113
Current Liabilities
Long-term debt due within one year 130 000 151 500
Notes payable 82 100 -
Notes payable to affiliated companies 1 500 -
Accounts payable 125 503 138 735
Accounts payable to affiliated companies 91 20 468
Accrued taxes 164 402 250 189
Accrued interest 32 611 31 299
Other 43 836 40 409
580 043 632 600
Other Liabilities
Deferred income taxes 782 084 795 385
Unamortized investment tax credits 124 307 129 372
Accrued pension and other postretirement
benefit costs 142 625 117 641
Other 77 204 91 285
1 126 220 1 133 683
$4 854 837 $5 197 396
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year to
Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
<S> <C> <C> <C>
<C>
Operating Revenues
Electric
Non-affiliated companies $ 382 718 $ 399 472 $1 109 300
$1 070 892
Affiliated companies 7 634 1 702 27 889
16 761
Gas
Non-affiliated companies 40 787 33 591 306 062
265 777
Affiliated companies 4 - 5
- -___
431 143 434 765 1 443 256
1 353 430
Operating Expenses
Fuel used in electric production 82 449 84 101 267 007
252 638
Gas purchased 17 133 13 155 150 313
130 235
Purchased and exchanged power
Non-affiliated companies 10 355 4 228 24 021
6 924
Affiliated companies 5 821 10 866 14 576
29 587
Other operation 66 786 69 834 235 513
204 557
Maintenance 22 844 18 994 68 745
63 973
Depreciation 40 322 39 836 120 557
119 060
Amortization of phase-in deferrals 3 399 3 409 10 198
5 682
Amortization of post-in-service
deferred operating expenses 786 823 2 431
2 468
Income taxes 41 675 40 730 115 902
108 293
Taxes other than income taxes 49 820 50 358 154 733
151 345
341 390 336 334 1 163 996
1 074 762
Operating Income 89 753 98 431 279 260
278 668
Other Income and Expenses - Net
Allowance for equity funds used
during construction 358 269 1 206
1 146
Phase-in deferred return 2 093 2 135 6 279
6 403
Income taxes 819 (31) 4 299
2 796
Other - net (1 505) 4 446 (6 095)
4 851
1 765 6 819 5 689
15 196
Income Before Interest 91 518 105 250 284 949
293 864
Interest
Interest on long-term debt 30 304 36 507 93 392
107 108
Other interest 522 679 1 466
2 926
Allowance for borrowed funds used
during construction (813) (894) (2 598)
(2 774)
30 013 36 292 92 260
107 260
Net Income 61 505 68 958 192 689
186 604
Preferred Dividend Requirement (3 475) (3 475) (10 423)
(14 199)
Costs of Reacquisition of Preferred
Stock (Note 6) (18 175) - (18 175)
- -
Net Income Applicable to Common Stock $ 39 855 $ 65 483 $ 164 091
$ 172 405
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1996 1995
(in thousands)
<S> <C> <C>
Operating Activities
Net income $ 192 689 $ 186 604
Items providing (using) cash currently
Depreciation 120 557 119 060
Deferred income taxes and investment tax
credits - net 31 408 24 597
Allowance for equity funds used during
construction (1 206) (1 146)
Regulatory assets - net 21 626 10 260
Changes in current assets and current
liabilities
Restricted deposits (27) (3)
Accounts and notes receivable, net of
reserves on receivables sold 201 972 54 133
Materials, supplies, and fuel (2 379) 9 499
Accounts payable (33 609) (41 110)
Accrued taxes and interest 5 974 25 114
Other items - net (9 326) (30 186)
Net cash provided by (used in)
operating activities 527 679 356 822
Financing Activities
Issuance of long-term debt - 344 280
Funds on deposit from issuance of long-term debt - (84 000)
Retirement of preferred stock - (93 450)
Redemption of long-term debt (157 583) (238 498)
Change in short-term debt 83 600 12 000
Dividends on preferred stock (10 423) (14 199)
Dividends on common stock (327 020) (162 950)
Net cash provided by (used in)
financing activities (411 426) (236 817)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (95 677) (99 661)
Deferred DSM costs - net (10 470) (6 315)
Net cash provided by (used in)
investing activities (106 147) (105 976)
Net increase (decrease) in cash and
temporary cash investments 10 106 14 029
Cash and temporary cash investments at
beginning of period 6 612 52 516
Cash and temporary cash investments at
end of period $ 16 718 $ 66 545
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the quarter ended September 30, 1996, decreased 2.5% from the
same period of 1995. A return to more normal weather for the third quarter of
1996 resulted in decreased residential and commercial sales. These decreases
were partially offset by increased industrial sales reflecting growth in the
primary metals sector and increased activity in Cinergy's power marketing
operations which led to higher non-firm power sales for resale.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1996
increased 13.2% as compared to the same period in 1995. Increased residential
and commercial gas sales reflected, in part, increases in the average number
of customers. Higher gas transportation volumes reflected the continuing
trend of industrial customers purchasing gas directly from suppliers, using
transportation services provided by CG&E. The increase in transportation
volumes mainly reflects demand for gas transportation services in the primary
metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $11 million (2.7%) for the quarter ended
September 30, 1996, from the comparable period of 1995. This decrease was
primarily attributable to the lower kwh sales as previously discussed.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $401
Increase (Decrease) due to change in:
Price per kwh
Retail (5)
Sales for resale
Non-firm power transactions 6
Total change in price per kwh 1
Kwh sales
Retail (12)
Total change in kwh sales (12)
Electric operating revenues - September 30, 1996 $390
Gas Operating Revenues
Gas operating revenues increased $7 million (21.4%) in the third quarter of
1996, when compared to the same period last year. This increase was primarily
a result of the operation of fuel adjustment clauses reflecting a higher
average cost of gas purchased and the previously discussed changes in gas
sales and transportation volumes.
Operating Expenses
Gas Purchased
Gas purchased for the quarter ended September 30, 1996, increased $4 million
(30.2%) when compared to the same period last year reflecting a higher average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power for the quarter ended September 30, 1996,
increased $1 million (7.2%) over the comparable period of 1995 reflecting
increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing operations. This increase is
partially offset by decreased power purchases from PSI.
Maintenance
The $4 million (20.3%) increase in maintenance expenses for the third quarter
of 1996, as compared to the same period of 1995, is primarily due to increased
maintenance on electric production and transmission facilities.
Other Income and Expenses - Net
Other - net
Other - net decreased $6 million primarily as a result of the effects of
expenses associated with the CG&E's and ULH&P's sales of accounts receivables
in 1996 and interest received in 1995 associated with a refund of an
overpayment of Federal income taxes related to prior years.
Interest
Interest on Long-term Debt
Interest charges decreased $6 million (17.0%) for the quarter ended September
30, 1996, from the same period of 1995 primarily due to the redemption of
$161.5 million of long-term debt during the period from January 1996 through
May 1996.
Costs of Reacquisition of Preferred Stock
Costs of reacquisition of preferred stock represents the difference between
the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender
offer in September 1996 and the purchase price paid (including tender fees
paid to dealer managers) by Cinergy for these shares. (See Note 6 of the
"Notes to Financial Statements" in "Part I. Financial Information.")
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the nine months ended September 30, 1996, increased 7.3% over
the same period of 1995. This increase reflected higher kwh sales to all
customer classes. Increased activity in Cinergy's power marketing operations
led to higher non-firm power sales for resale, while an increase in the
average number of residential and commercial customers and higher industrial
sales, primarily reflecting growth in the primary metals sector, also
contributed to the increase. These increases were partially offset by the
return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first nine months of 1996
increased 13.9% as compared to the same period in 1995. Colder weather during
the winter heating season, cooler than normal weather early in the second
quarter of 1996, and increases in the average number of customers led to
increased gas sales to residential and commercial customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes mainly reflects demand for gas transportation services
in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $49 million (4.6%) for the nine months
ended September 30, 1996, over the comparable period of 1995. This increase
primarily reflects the higher kwh sales discussed above.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1995 $1 088
Increase (Decrease) due to change in:
Price per kwh
Retail (3)
Sales for resale
Firm power transactions (3)
Total change in price per kwh (6)
Kwh sales
Retail 40
Sales for resale
Non-firm power transactions 15
Total change in kwh sales 55
Electric operating revenues - September 30, 1996 $1 137
Gas Operating Revenues
Gas operating revenues increased $40 million (15.2%) in the first nine months
of 1996, when compared to the same period last year. This increase was
primarily a result of the previously discussed changes in gas sales and
transportation volumes. Also contributing to the increase was the operation
of fuel adjustment clauses reflecting a higher cost of gas purchased.
Operating Expenses
Fuel Used in Electric Production
Fuel costs, CG&E's largest operating expense, increased $14 million (5.7%) for
the nine months ended September 30, 1996, when compared to the same period
last year as a result of an increase in kwh generation.
Gas Purchased
Gas purchased for the nine months ended September 30, 1996, increased $20
million (15.4%) when compared to the same period last year. This increase was
attributable to an increase in volumes purchased and a higher average cost per
Mcf of gas purchased as previously discussed.
Purchased and Exchanged Power
Purchased and exchanged power for the nine months ended September 30, 1996,
increased $2 million (5.7%) over the comparable period of 1995. This increase
primarily reflects increased purchases of non-firm power for resale to others
as a result of increased activity in Cinergy's power marketing operations.
This increase is partially offset by a decrease in purchases from PSI.
Other Operation
For the nine months ended September 30, 1996, other operation expenses
increased $31 million (15.1%) due to a number of factors, including higher
administrative and general expenses reflecting, in part, $16.2 million of
early retirement and severance program costs and increased transmission
expenses resulting from the formation of KO Transmission.
Maintenance
The $5 million (7.5%) increase in maintenance expenses for the nine months
ended September 30, 1996, is primarily due to increased maintenance on
electric production facilities.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals reflects the PUCO-ordered phase-in plan for
Zimmer included in the May 1992 Order. In the first three years of the phase-
in plan, rates charged to customers did not fully recover depreciation expense
and return on investment. This deficiency was deferred and is being recovered
over a seven-year period that began in May 1995.
Other - net
Other - net decreased $11 million from the same period in 1995 due to a number
of factors, including the effects of expenses associated with the sales of
accounts receivables in 1996 and interest received in 1995 associated with a
refund of an overpayment of Federal income taxes related to prior years, as
previously mentioned.
Interest
Interest on Long-term Debt
Interest charges decreased $14 million (12.8%) for the nine months ended
September 30, 1996, from the same period of 1995 primarily due to the
refinancing of over $330 million of long-term debt during the period from
March 1995 through November 1995 and the redemption of $161.5 million of long-
term debt during the period from January 1996 through May 1996.
Preferred Dividend Requirement
The decrease in the preferred dividend requirement of $4 million (26.6%) for
the nine months ended September 30, 1996, from the same period of 1995 was due
to the early redemption in July 1995 of all 400,000 shares and 500,000 shares
of the 7.44% Series and 9.15% Series $100 par value cumulative preferred
stock, respectively.
Costs of Reacquisition of Preferred Stock
Costs of reacquisition of preferred stock represents the difference between
the par value of preferred stock of CG&E tendered pursuant to Cinergy's tender
offer in September of 1996 and the purchase price paid (including tender fees
paid to dealer managers) by Cinergy for these shares. (See Note 6 of the
"Notes to Financial Statements" in "Part I. Financial Information.")
<PAGE>
PSI ENERGY, INC.
AND SUBSIDIARY COMPANIES
<PAGE>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Electric Utility Plant - Original Cost
In service $4 117 737 $4 052 984
Accumulated depreciation 1 698 969 1 637 169
2 418 768 2 415 815
Construction work in progress 76 999 58 191
Total electric utility plant 2 495 767 2 474 006
Current Assets
Cash and temporary cash investments 14 202 15 522
Restricted deposits 549 1 187
Notes receivable from affiliated companies 1 400 -
Accounts receivable less accumulated
provision for doubtful accounts of $202
at September 30, 1996, and $468 at
December 31, 1995 53 121 73 419
Accounts receivable from affiliated companies 2 499 20 568
Materials, supplies, and fuel - at average
cost
Fuel 53 018 82 014
Other materials and supplies 32 779 29 462
Prepayments and other 2 871 1 234
160 439 223 406
Other Assets
Regulatory assets
Amounts due from customers - income taxes 32 849 26 338
Post-in-service carrying costs and
deferred operating expenses 45 172 38 874
Coal contract buyout costs 137 686 -
Deferred DSM costs 105 204 110 242
Deferred merger costs 77 633 42 286
Unamortized costs of reacquiring debt 32 583 34 476
Other 69 910 33 886
Other 128 178 92 056
629 215 378 158
$3 285 421 $3 075 570
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
<PAGE>
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - without par value; $.01
stated value; authorized shares -
60,000,000; outstanding shares -
53,913,701 at September 30, 1996, and
December 31, 1995 $ 539 $ 539
Paid-in capital 402 945 403 253
Accumulated earnings subsequent to November
30, 1986, quasi-reorganization 627 354 625 275
Total common stock equity 1 030 838 1 029 067
Cumulative Preferred Stock
Not subject to mandatory redemption 173 090 187 897
Long-term Debt 818 959 828 116
Total capitalization 2 022 887 2 045 080
Current Liabilities
Long-term debt due within one year 10 400 50 400
Notes payable 209 354 165 800
Notes payable to affiliated companies 52 677 32 731
Accounts payable 128 455 116 817
Accounts payable to affiliated companies 5 420 -
Litigation settlement 80 000 80 000
Accrued taxes 65 419 65 851
Accrued interest 12 661 24 696
Other 16 246 16 000
580 632 552 295
Other Liabilities
Deferred income taxes 347 227 331 876
Unamortized investment tax credits 53 652 56 354
Accrued pension and other postretirement
benefit costs 62 487 54 130
Other 218 536 35 835
681 902 478 195
$3 285 421 $3 075 570
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year
to Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
<S> <C> <C> <C>
<C>
Operating Revenues
Non-affiliated companies $342 199 $332 431 $951 171
$902 501
Affiliated companies 5 856 10 866 14 691
29 587
348 055 343 297 965 862
932 088
Operating Expenses
Fuel 101 644 106 344 272 343
292 910
Purchased and exchanged power
Non-affiliated companies 26 665 11 457 71 422
26 068
Affiliated companies 7 669 1 702 28 004
16 761
Other operation 62 434 61 595 188 443
167 354
Maintenance 23 059 20 857 68 964
63 861
Depreciation 30 489 28 844 91 046
91 291
Post-in-service deferred operating
expenses - net (1 716) (894) (5 068)
(4 608)
Income taxes 23 445 29 222 55 597
64 877
Taxes other than income taxes 13 729 14 022 41 361
40 721
287 418 273 149 812 112
759 235
Operating Income 60 637 70 148 153 750
172 853
Other Income and Expenses - Net
Allowance for equity funds used during
construction - (1 428) -
(420)
Post-in-service carrying costs 391 602 1 228
3 183
Income taxes (2 438) 705 (3 332)
751
Other - net 3 280 545 1 420
(1 751)
1 233 424 (684)
1 763
Income Before Interest 61 870 70 572 153 066
174 616
Interest
Interest on long-term debt 16 218 17 647 50 286
53 546
Other interest 3 790 4 162 10 386
12 035
Allowance for borrowed funds used during
construction (642) (1 133) (1 637)
(3 550)
19 366 20 676 59 035
62 031
Net Income 42 504 49 896 94 031
112 585
Preferred Dividend Requirement (3 020) (3 295) (9 518)
(9 885)
Net Income Applicable to Common Stock $ 39 484 $ 46 601 $ 84 513
$102 700
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1996 1995
(in thousands)
<S> <C> <C>
Operating Activities
Net income $ 94 031 $ 112 585
Items providing (using) cash currently:
Depreciation 91 046 91 291
Deferred income taxes and investment tax
credits - net 5 145 5 342
Allowance for equity funds used during
construction - 420
Regulatory assets - net (49 070) (10 315)
Changes in current assets and current
liabilities
Restricted deposits (335) 16
Accounts and notes receivable, net
of reserves on receivables sold 23 039 (35 442)
Materials, supplies, and fuel 25 679 16 310
Accounts payable 17 058 (50 642)
Accrued taxes and interest (12 467) 4 490
Other items - net (810) 12 150
Net cash provided by (used in)
operating activities 193 316 146 205
Financing Activities
Funds on deposit from issuance of long-term debt 973 8 684
Retirement of preferred stock (15 114) (8)
Redemption of long-term debt (50 000) (60 055)
Change in short-term debt 63 500 42 927
Dividends on preferred stock (9 609) (9 885)
Dividends on common stock (82 363) -
Capital contribution from parent company - 12 721
Net cash provided by (used in)
financing activities (92 613) (5 616)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (107 061) (132 282)
Deferred DSM costs - net 5 038 (11 041)
Net cash provided by (used in)
investing activities (102 023) (143 323)
Net increase (decrease) in cash and
temporary cash investments (1 320) (2 734)
Cash and temporary cash investments at
beginning of period 15 522 6 341
Cash and temporary cash investments at
end of period $ 14 202 $ 3 607
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</TABLE>
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the third quarter of 1996 decreased 1.9% as a return to more
normal weather resulted in a decline in residential and commercial kwh sales,
when compared to the same period last year. Partially offsetting the decrease
was increased activity in Cinergy's power marketing operations which led to
higher non-firm power sales for resale. An increase in industrial sales
primarily reflects growth in the transportation equipment, bituminous coal
mining and primary metals sectors.
Operating Revenues
Total operating revenues increased $5 million (1.4%) for the quarter ended
September 30, 1996, when compared to the same period last year, reflecting, in
part, the increased activity in Cinergy's power marketing operations
previously discussed. Partially offsetting this increase was the previously
mentioned decline in residential and commercial sales.
An analysis of operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Operating revenues - September 30, 1995 $343
Increase (Decrease) due to change in:
Price per kwh
Retail 5
Sales for resale
Firm power obligations (3)
Non-firm power transactions 10
Total change in price per kwh 12
Kwh sales
Retail (7)
Sales for resale
Firm power obligations (2)
Non-firm power transactions 1
Total change in kwh sales (8)
Other 1
Operating revenues - September 30, 1996 $348
Operating Expenses
Fuel
Fuel costs, PSI's largest operating expense, decreased $4 million (4.4%) for
the third quarter of 1996 as compared to the same period last year.
An analysis of fuel costs is shown below:
Quarter
Ended September 30
(in millions)
Fuel expense - September 30, 1995 $106
Increase (Decrease) due to change in:
Price of fuel 9
Kwh generation (13)
Fuel expense - September 30, 1996 $102
Purchased and Exchanged Power
For the quarter ended September 30, 1996, purchased and exchanged power
increased $21 million, as compared to the same period last year, due, in part,
to increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing operations and increased
purchases from CG&E as a result of the coordination of PSI's and CG&E's
electric dispatch systems.
Maintenance
The $2 million (10.6%) increase in maintenance expenses for the third quarter
of 1996, as compared to the same period of 1995, is due, in part, to
maintenance on the Clean Coal Project which began commercial operation in
November 1995.
Depreciation
Depreciation expense increased $2 million (5.7%) for the quarter ended
September 30, 1996, as compared to the third quarter of last year. This
increase primarily reflects additions to utility plant in service.
Post-in-service Deferred Operating Expenses - Net
Post-in-service deferred operating expenses - net reflects the deferral of
depreciation on certain major projects, primarily environmental in nature,
from the in-service date until the related projects are reflected in retail
rates, net of amortization of these deferrals as they are recovered.
Other Income and Expenses - Net
Other - net
The increase of $3 million for other - net for the quarter ended September 30,
1996, as compared to the same period of 1995, is primarily attributable to
amounts allowed by the IURC in its September 1996 Order which were not
previously recorded.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $1 million (8.1%) for the third quarter
of 1996, as compared to the third quarter of 1995, primarily due to the
redemption of $110 million of long-term debt during the period from August
1995 through July 1996.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
For the nine months ended September 30, 1996, kwh sales increased 8.8% when
compared to the same period last year due, in large part, to increased
activity in Cinergy's power marketing operations which led to higher
non-firm power sales for resale. Also contributing to the total kwh sales
levels were increased sales to all retail customer classes resulting from an
increase in the average number of residential and commercial customers while
increased industrial sales reflects growth in the food products, primary
metals, and transportation equipment sectors. These increases were partially
offset by the return to more normal weather in the third quarter of 1996.
Operating Revenues
Total operating revenues increased $34 million (3.6%) for the nine months
ended September 30, 1996, when compared to the same period last year. This
increase primarily reflects the increase in kwh sales previously discussed.
Also contributing to the increase was a 4.3% retail rate increase approved in
the February 1995 Order and a 1.9% rate increase for carrying costs on CWIP
property which was approved by the IURC in March 1995. Partially offsetting
these increases was the return of approximately $13 million to customers in
accordance with the February 1995 Order which requires all retail operating
income above a certain rate of return to be refunded to customers.
An analysis of operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Operating revenues - September 30, 1995 $932
Increase (Decrease) due to change in:
Price per kwh
Retail (14)
Sales for resale
Firm power obligations (4)
Non-firm power transactions 3
Total change in price per kwh (15)
Kwh sales
Retail 14
Sales for resale
Firm power obligations 6
Non-firm power transactions 29
Total change in kwh sales 49
Operating revenues - September 30, 1996 $966
Operating Expenses
Fuel
Fuel costs for the nine months ended September 30, 1996, decreased $21 million
(7.0%) when compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months
Ended September 30
(in millions)
Fuel expense - September 30, 1995 $293
Increase (Decrease) due to change in:
Price of fuel (9)
Kwh generation (12)
Fuel expense - September 30, 1996 $272
Purchased and Exchanged Power
For the nine months ended September 30, 1996, purchased and exchanged power
increased $57 million, as compared to the same period last year, due, in part,
to increased purchases of non-firm power for resale to others as a result of
increased activity in Cinergy's power marketing operations and increased
purchases from CG&E as a result of the coordination of PSI's and CG&E's
electric dispatch systems.
Other Operation
Other operation expenses increased $21 million (12.6%) for the nine months
ended September 30, 1996, as compared to the same period last year. This
increase was due to a number of factors, including the recognition of
postretirement benefit costs on an accrual basis, an increase in the ongoing
level of DSM expenses, and the amortization of deferred postretirement benefit
costs and deferred DSM costs, all of which are being recovered in revenues
pursuant to the February 1995 Order. Increased transmission expenses also
contributed to the higher level of other operation expenses.
Maintenance
Maintenance expenses for the first nine months of 1996, as compared to the
same period last year, increased $5 million (8.0%) partially as a result of
maintenance on the Clean Coal Project which began commercial operation in
November 1995. Increased transmission and distribution expenses also
contributed to the higher level of maintenance expenses.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $2 million (61.4%) for the nine
months ended September 30, 1996, from the comparable period of 1995 as a
result of discontinuing the accrual of post-in-service carrying costs on
qualified environmental projects upon the inclusion in rates of the costs of
the projects pursuant to the February 1995 Order.
Other - net
The increase of $3 million for other - net for the nine months ended September
30, 1996, as compared to the same period of 1995, is primarily attributable to
amounts allowed by the IURC in its September 1996 Order which were not
previously recorded.
Interest
Interest on Long-term Debt
Interest on long-term debt decreased $3 million (6.1%) for the nine months
ended September 30, 1996, as compared to the same period of 1995, due in part
to the redemption of $110 million of long-term debt during the period from
August 1995 through July 1996.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
<PAGE>
THE UNION LIGHT, HEAT & POWER COMPANY
BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1996 1995
(dollars in thousands)
Utility Plant - original cost
In service
Electric $193 903 $188 508
Gas 146 286 140 604
Common 19 026 19 068
359 215 348 180
Accumulated depreciation 120 500 112 812
238 715 235 368
Construction work in progress 7 936 7 863
Total utility plant 246 651 243 231
Current Assets
Cash and temporary cash investments 2 787 1 750
Notes receivable from affiliated companies 1 501 -
Accounts receivable less accumulated
provision for doubtful accounts of
$1,623 at September 30, 1996, and $1,140
at December 31, 1995 3 466 37 895
Accounts receivable from affiliated
companies 14 -
Materials, supplies, and fuel - at average
cost
Gas stored for current use 6 887 4 513
Other materials and supplies 1 462 1 215
Property taxes applicable to subsequent year 587 2 350
Prepayments and other 499 485
17 203 48 208
Other Assets
Regulatory assets
Deferred merger costs 1 785 1 785
Unamortized costs of reacquiring debt 3 803 2 526
Other 2 468 2 548
Other 6 439 1 499
14 495 8 358
$278 349 $299 797
The accompanying notes as they relate to The Union Light, Heat and Power
Company are an integral part of these financial statements.
THE UNION LIGHT, HEAT & POWER COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
(dollars in thousands)
Common Stock Equity
Common stock - $15.00 par value;
authorized shares - 1,000,000;
outstanding shares - 585,333 at
September 30, 1996, and December 31,
1995 $ 8 780 $ 8 780
Paid-in capital 18 839 18 839
Retained earnings 94 621 82 863
Total common stock equity 122 240 110 482
Long-term Debt 44 604 54 377
Total capitalization 166 844 164 859
Current Liabilities
Long-term debt due within one year - 15 000
Notes payable to affiliated companies 21 593 23 043
Accounts payable 5 120 11 057
Accounts payable to affiliated companies 16 139 21 665
Accrued taxes 2 311 1 993
Accrued interest 940 1 549
Other 6 159 5 505
52 262 79 812
Other Liabilities
Deferred income taxes 31 247 23 728
Unamortized investment tax credits 4 867 5 079
Accrued pension and other postretirement
benefit costs 12 915 12 202
Income taxes refundable through rates 5 017 4 717
Other 5 197 9 400
59 243 55 126
$278 349 $299 797
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT & POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year
to Date
September 30
September 30
1996 1995 1996
1995
(in thousands)
<S> <C> <C> <C>
<C>
Operating Revenues
Electric $ 52 704 $ 57 171 $147 970
$144 553
Gas 5 660 5 995 50 794
45 870
58 364 63 166 198 764
190 423
Operating Expenses
Electricity purchased from parent
company for resale 39 850 42 124 109 337
109 099
Gas purchased 2 129 2 168 26 252
23 884
Other operation 7 268 7 428 23 664
22 481
Maintenance 1 093 903 3 445
3 040
Depreciation 3 013 2 907 8 887
8 553
Income taxes 1 067 1 612 7 824
5 573
Taxes other than income taxes 986 986 3 092
2 965
55 406 58 128 182 501
175 595
Operating Income 2 958 5 038 16 263
14 828
Other Income and Expense - Net
Allowance for equity funds used during
construction 42 22 21
78
Income taxes 4 (10) 31
(48)
Other - net (436) (8) (1 079)
59
(390) 4 (1 027)
89
Income Before Interest 2 568 5 042 15 236
14 917
Interest
Interest on long - term debt 881 1 721 3 135
5 674
Other interest 167 157 433
376
Allowance for borrowed funds used during
construction (26) (24) (90)
(120)
1 022 1 854 3 478
5 930
Net Income $ 1 546 $ 3 188 $ 11 758
$ 8 987
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power
Company are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Year to
Date
September 30
1996
1995
(in
thousands)
<S> <C>
<C>
Operating Activities
Net income $ 11 758
$ 8 987
Items providing (using) cash currently
Depreciation 8 887
8 553
Deferred income taxes and investment tax
credits - net 7 607
1 147
Allowance for equity funds used during
construction (21)
(78)
Regulatory assets 80
128
Changes in current assets and current liabilities
Accounts and notes receivable, net of reserves on
receivables sold 29 590
5 066
Materials, supplies, and fuel (2 621)
608
Accounts payable (11 463)
248
Accrued taxes and interest 1 446
(1 515)
Other items - net (3 866)
1 969
Net cash provided by (used in)
operating activities 41 397
25 113
Financing Activities
Issuance of long-term debt -
14 704
Redemption of long-term debt (26 083)
(37 036)
Change in short-term debt (1 450)
12 000
Net cash provided by (used in)
financing activities (27 533)
(10 332)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (12 827)
(14 350)
Net cash provided by (used in)
investing activities (12 827)
(14 350)
Net increase (decrease) in cash and
temporary cash investment 1 037
431
Cash and temporary cash investments at
beginning of period 1 750
1 071
Cash and temporary cash investments at
end of period $ 2 787
$ 1 502
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power
Company are an integral part of these financial
statements.
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the quarter ended September 30, 1996, decreased 6.4% from the
comparable period of 1995. A return to more normal weather in the third
quarter of 1996 resulted in a decline in residential and commercial sales. An
increase in the average number of residential and commercial customers
partially offset the decline in sales.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $4.5 million (7.8%) for the quarter
ended September 30, 1996, from the comparable period of 1995. This decrease
primarily reflects the previously discussed decline in kwh sales. Also, on
July 3, 1996, the KPSC issued an order authorizing a decrease in electric
rates of approximately $1.8 million annually to reflect a reduction in the
cost of electricity purchased from CG&E.
Gas Operating Revenues
An increasing trend of industrial customers purchasing gas directly from
producers and utilizing ULH&P facilities to transport the gas continues to put
downward pressure on gas operating revenues. When ULH&P sells gas, the sales
price reflects the cost of gas purchased by ULH&P to support the sale plus the
costs to deliver the gas. When gas is transported, ULH&P does not incur any
purchased gas costs but delivers gas the customer has purchased from other
sources. Since providing transportation services does not necessitate
recovery of gas purchased costs, the revenue per Mcf transported is less than
the revenue per Mcf sold. As a result, a higher relative volume of gas
transported to gas sold translates into lower gas operating revenues.
Gas operating revenues declined $.3 million (5.6%) in the third quarter of
1996, when compared to the same period of last year. This decrease was the
result of the aforementioned trend toward increased transportation services.
This decrease was slightly offset by the operation of adjustment clauses
reflecting a higher average cost of gas purchased.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased expense, ULH&P's largest operating expense, decreased
$2.3 million (5.4.%) for the quarter ended September 30, 1996, as compared to
the same period last year. This decrease reflects the aforementioned
reduction in the cost of electricity purchased from CG&E.
Maintenance
The $.2 million (21.0%) increase in maintenance expenses for the third quarter
of 1996, as compared to the same period of 1995, is primarily due to increased
maintenance expenses associated with gas and electric distribution facilities.
Other Income and Expenses - Net
Other - net
The change of $.4 million for other - net for the quarter ended September 30,
1996, as compared to the same period of 1995, is primarily attributable to
expenses associated with the sales of accounts receivables in 1996.
Interest
Interest on Long-term Debt
Interest charges decreased $.8 million (48.8%) for the quarter ended September
30, 1996, as compared to the same period of 1995, primarily due to the
redemption of $25 million of long-term debt from January 1996 to May 1996.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Kwh Sales
Kwh sales for the nine months ended September 30, 1996, increased 5.3% as
compared to the same period of 1995. This increase was due to higher kwh
sales to all customer classes. Residential and commercial sales reflected an
increase in the average number of customers. Industrial sales increased due
to growth in the food products sector. These increases were partially offset
by the return to more normal weather in the third quarter of 1996.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the nine months ended September
30, 1996, increased 13.8% as compared to the same period in 1995. Colder
weather during the winter heating season, cooler than normal weather early in
the second quarter of 1996, and increases in the average number of customers
led to increases in gas sales to residential and commercial customers.
Industrial sales decreased as customers continued to purchase gas directly
from suppliers using transportation services provided by ULH&P. The increase
in transportation volumes, which more than offset the decline in industrial
sales, was primarily a result of growth in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $3.4 million (2.4%) for the nine months
ended September 30, 1996, over the comparable period of 1995. This increase
primarily reflects the previously discussed increase in kwh sales. Partially
offsetting this increase is a lower average cost of electricity purchased due,
in part, to the aforementioned reduction in the cost of electricity purchased
from CG&E retroactive to July 3, 1995.
Gas Operating Revenues
Gas operating revenues increased $4.9 million (10.7%) for the first nine
months of 1996 when compared to the same period of last year. This increase
was primarily a result of the previously discussed changes in gas sales
volumes.
Operating Expenses
Gas Purchased
Gas purchased increased $2.4 million (9.9%) for the nine months ended
September 30, 1996, as compared to the prior year. This increase reflects
higher volumes purchased.
Other Operation
The increase in other operation expenses of $1.2 million (5.3%) for the nine
months ended September 30, 1996, from the same period of 1995 is due to a
number of factors, including increased gas distribution expenses and higher
administrative and general expenses.
Maintenance
Maintenance expenses for the nine months ended September 30, 1996, increased
$.4 million (13.3%) when compared to the nine months ended September 30, 1995.
This increase was due, in part, to higher expenses associated with gas
distribution facilities.
Other Income and Expenses - Net
Other - net
The change of $1.1 million for other - net for the nine months ended September
30, 1996, as compared to the same period of 1995, is primarily attributable to
expenses associated with the sales of accounts receivables in 1996.
Interest
Interest on Long-term Debt
Interest charges decreased $2.5 million (44.7%) for the nine months ended
September 30, 1996, from the same period of 1995, primarily due to the
redemption of $25 million during the period from January 1996 to May 1996.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include only
normal, recurring adjustments) necessary in the opinion of the
registrants for a fair presentation of the interim results. These
statements should be read in conjunction with the Financial Statements
and the notes thereto included in the combined 1995 Form 10-K of the
registrants. Certain amounts in the 1995 Financial Statements have been
reclassified to conform to the 1996 presentation.
Cinergy, CG&E, and ULH&P
2. In May 1996, ULH&P redeemed the entire $10 million principal amount of
its 9 1/2% Series First Mortgage Bonds due December 1, 2008, at the
redemption price of 104.35%.
Cinergy and PSI
PSI redeemed $50 million principal amount of its 9 3/4% Series First
Mortgage Bonds on the maturity date of August 1, 1996.
Cinergy and PSI
A portion of PSI's 7.44% Series Cumulative Preferred Stock (591,000
shares representing 15%), totaling $15 million, was reacquired by PSI at
per share prices of $25.50 and $25.65 in May 1996.
Cinergy and PSI
3. On September 12, 1996, PSI's shelf registration for $250 million of debt
securities was made effective by the SEC.
On November 7, 1996, the City of Princeton, Indiana loaned the proceeds
from the sale of its $24,600,000 Pollution Control Revenue Refunding
Bonds, 1996 Series to PSI. The purpose of the sale is to refund the
$19,600,000 City of Princeton, Indiana Pollution Control Revenue Bonds,
1973 Series and the $5,000,000 City of Princeton, Indiana Pollution
Control Revenue Bonds, 1979 Series which were originally issued to
finance PSI's costs of acquiring and constructing certain pollution
control facilities at Gibson. These refunded bonds will be redeemed on
December 16, 1996 at a price of 100% of the principal amount thereof,
plus accrued interest to the redemption date.
The 1996 Series bonds bear interest at a variable rate and will mature
March 1, 2019, subject to redemption prior to maturity, including a
mandatory sinking fund redemption of $19,600,000 aggregate principal
amount on January 1, 2014. Pursuant to the loan agreement between PSI
and Princeton, PSI will make loan payments sufficient to pay when due the
principal of and interest on the 1996 Series bonds.
Cinergy and PSI
4. As discussed in Cinergy's and PSI's 1995 Form 10-K, RUS requested a
rehearing on the affirmation by the Seventh Circuit Court of Appeals of
WVPA's plan of reorganization which had been approved by the United
States Bankruptcy Court for the Southern District of Indiana and upheld
by the United States District Court for the Southern District of Indiana.
In April 1996, the Seventh Circuit Court of Appeals denied RUS' request
for rehearing. RUS' request that the United States Supreme Court accept
the appeal of this decision was denied November 4, 1996. There is a
short period for reconsideration of the denial. PSI cannot predict
whether RUS will request reconsideration of the denial or the outcome of
any such request. If the United States Supreme Court denies
reconsideration, or no reconsideration is requested by RUS, then Cinergy
and WVPA will commence implementation of the settlement agreement upon
final certification of the plan of reorganization by the Bankruptcy
Court.
Cinergy, CG&E, PSI, and ULH&P
5. In March 1995, the FASB issued Statement 121, which became effective in
January 1996 for Cinergy and its subsidiaries. Statement 121, which
addresses the identification and measurement of asset impairments for all
enterprises, is particularly relevant for electric utilities as a result
of the potential for deregulation of the generation segment of the
business. Statement 121 requires recognition of impairment losses on
long-lived assets when book values exceed expected future cash flows.
Based on the regulatory environment in which Cinergy's utility
subsidiaries currently operate, compliance with the provisions of
Statement 121 has not had nor is it expected to have an adverse effect on
their financial condition or results of operations. However, this
conclusion may change in the future as competitive pressures and
potential restructuring influence the electric utility industry.
Cinergy and CG&E
6. An amendment to the Articles of CG&E was adopted at a special meeting of
shareholders of CG&E, held on September 18, 1996. The amendment removes
a provision of the Articles that limits CG&E's ability to issue unsecured
debt, including short-term debt. Concurrently with the solicitation of
proxies for the special meeting, Cinergy commenced an offer to purchase,
for cash, any and all outstanding shares of preferred stock of CG&E. The
tender offer, which commenced August 20, 1996, and expired September 18,
1996, was conditioned upon, among other things, the proposed amendment
being approved and adopted at the special meeting. Approximately 90%
(1,788,544 of 2,000,000 shares) of the outstanding shares of preferred
stock of CG&E was tendered pursuant to Cinergy's offer. The source of
funds for Cinergy's purchase of the tendered shares was a special cash
dividend paid by CG&E to Cinergy on September 24, 1996. Cinergy made a
capital contribution to CG&E of all the shares it acquired and CG&E
canceled these shares. The difference between the par value of the
preferred stock tendered and the purchase price paid (including tender
fees paid to dealer managers) by Cinergy totaled $18.2 million, which is
reflected in "Costs of Reacquisition of Preferred Stock of Subsidiaries"
in the Consolidated Statements of Income.
The shares tendered and purchase price paid by Cinergy for each series of
preferred stock are as follows:
Series Shares Price Per
(Par value $100 per share) Tendered Share__
4% Series Cumulative Preferred Stock 100,165 $ 64.00
4.75% Series Cumulative Preferred Stock 88,379 $ 80.00
7.875% Series Cumulative Preferred Stock 800,000 $116.00
7.375% Series Cumulative Preferred Stock 800,000 $110.00
1,788,544
As a result of the tender offer and the subsequent cancellation of shares
by CG&E, CG&E currently has a total of 211,456 shares of preferred stock
outstanding, consisting of 169,835 shares of the 4% Series and 41,621
Shares of the 4.75% Series. The 4.75% Series no longer meets certain
listing requirements of the New York Stock Exchange and has been
delisted. (See "Part II - Other Information" - "Item 4. Submission of
Matters to a Vote of Security Holders.")
Cinergy, CG&E, PSI, and ULH&P
7. During 1996, Cinergy completed voluntary workforce reduction programs.
Under these programs, 418 Cinergy exempt and non-bargaining unit
employees and 201 PSI bargaining unit employees elected to terminate
their employment with Cinergy. These elections resulted in a pre-tax
cost for the non-bargaining unit program of approximately $38.2 million
(allocated $19.1 million to CG&E and its subsidiaries, including ULH&P,
and $19.1 million to PSI) and a pre-tax cost for the PSI bargaining unit
program of approximately $14 million. Consistent with the merger savings
sharing mechanisms previously approved by regulators, Cinergy has
classified these costs as costs to achieve merger savings which resulted
in approximately $14.6 million (pre-tax), allocable to Ohio electric
jurisdictional customers, being charged to earnings in the second quarter
of 1996. The remaining costs have been deferred for future recovery
through rates as an offset against merger savings. A significant portion
of these benefits is eligible for funding from qualified retirement plan
assets.
Additionally, voluntary workforce reduction programs similar to the
programs described above have been announced for bargaining unit
employees of CG&E and its subsidiaries, including ULH&P. Under these
programs, there are 232 bargaining unit employees who meet certain age
and service requirements that are eligible for enhanced retirement
benefits. Eligible employees who do not meet age and service requirements
will receive severance benefits upon resignation from their employment.
Program costs will not be known until after the participation election
periods end in December 1996. The costs will be treated as costs to
achieve merger savings, with the majority being charged to fourth quarter
earnings and the remaining portion being deferred for future recovery.
Cinergy and PSI
8. On September 27, 1996, the IURC approved an overall average retail
electric rate increase for PSI of 7.6% ($75.7 million annually). PSI had
requested a retail rate increase of 10.5% ($104.8 million annually).
Among other things, the IURC authorized a return on equity of 11.0%
(before the 100 basis points additional common equity return allowed as a
merger savings sharing mechanism) with an 8.21% overall rate of return on
net original cost rate base, and the inclusion in rates of the Clean Coal
Project, an ongoing level of DSM costs of $23 million, and a scrubber at
Gibson. Consideration of the Company's requested increase in the ongoing
level of DSM costs to $39 million was deferred to a separate currently
pending proceeding specifically established to review PSI's current and
proposed DSM programs. On October 17, 1996, the UCC and CAC filed with
the IURC a Joint Petition for Reconsideration and Rehearing of the IURC's
September 1996 Order. PSI has filed a response in opposition to the
requested rehearing and reconsideration. PSI cannot predict what action
the IURC may take with respect to the requested rehearing and
reconsideration.
Cinergy and CG&E
9. In October 1996, the PUCO concluded hearings on CG&E's gas rate increase
request of 7.8% ($26.7 million annually). The increase is being
requested, in part, to recover capital investments made since CG&E's last
gas rate increase in 1993. In July 1996, the Staff of the PUCO issued
its Report of Investigation on the rate request recommending that CG&E
receive an annual increase in gas revenues ranging from $3.5 million to
$6.3 million. The differences between the Staff's recommendation and
CG&E's request are primarily attributable to a decrease in working
capital allowance, a lower rate of return, and the disallowance of
certain capitalized information systems development costs and deferred
merger costs. An order in the rate proceeding is anticipated by the end
of the first quarter of 1997; however, Cinergy cannot predict what action
the PUCO may take with respect to the proposed rate increase.
Cinergy and CG&E
10. On November 1, 1996, CG&E entered into a sale-leaseback agreement for
certain equipment at Woodsdale. The lease is a capital lease with an
initial lease term of five years. At the end of the initial lease term,
the lease may be renewed at mutually agreed upon terms or the equipment
may be repurchased by CG&E at the original sale amount. The monthly
lease payment, comprised of interest only, will be based on the
applicable LIBOR rate plus .30% and, therefore, the capital lease
obligation will not be amortized over the initial lease term. The
property under the capital lease will continue to be depreciated at the
same rate as if the property were still owned by CG&E. CG&E will record a
capital lease obligation of $21.6 million.
Cinergy
11. Avon Energy, a 50/50 joint venture between Cinergy and GPU, completed
its acquisition of all of the outstanding common stock of Midlands during
the third quarter of 1996. The total consideration paid by Avon Energy
was approximately $2.6 billion. The funds for the acquisition were
obtained from Cinergy's and GPU's investment in Avon Energy of
approximately $500 million each, with the remainder being obtained by
Avon Energy through the issuance of non-recourse debt. Cinergy has used
debt to fund its entire investment in Avon Energy. Based on a
preliminary allocation of the purchase price, Avon Energy has recorded
goodwill of approximately $1.9 billion in connection with this
acquisition.
Cinergy accounts for its investment in Avon Energy under the equity
method. Avon Energy's results for the quarter ended September 30, 1996,
include 100% of Midlands' results for the quarter as substantially all of
the Midlands' stock had been acquired by Avon Energy as of the beginning
of the quarter. Cinergy's equity in Avon Energy's earnings is 50%, the
same as its ownership share.
The pro forma financial information presented below assumes 100% of
Midlands was acquired on the first day of each respective period. The
pro forma adjustments include recognition of equity in the estimated
earnings of Avon Energy, an adjustment for interest expense on debt
associated with Cinergy's investment in Avon Energy, and related income
taxes. The estimated earnings of Avon Energy include the historical
earnings of Midlands prior to its acquisition by Avon Energy, adjusted
for the estimated effect of purchase accounting (including the
amortization of goodwill) and conversion to United States generally
accepted accounting principles, interest expense on debt issued by Avon
Energy associated with the acquisition, and related income taxes. Sales
of electricity are affected by seasonal weather patterns and, therefore,
the results of Avon Energy/Midlands will not be distributed evenly during
the year. (Equity in earnings of Avon Energy has been converted using
the average exchange rates for the nine month and twelve month periods of
$1.549/, and $1.556/, respectively.)
Nine Months Ended Twelve Months Ended
September 30, 1996 September 30, 1996
Net Earnings Net Earnings
Income Per Share* Income Per Share*
(millions) (millions)
(unaudited)
Cinergy $264 $1.56 (1) $341 $2.05 (1)
Pro forma adjustments:
Equity in Earnings
of Avon Energy 31 54
Interest expense (14) (23)
Income taxes (6) (11)
Pro forma result $275 $1.63 $361 $2.18
* Based on the average number of common shares outstanding for the
period.
(1) Earnings per share after a charge of $.12 per share for the cost of
reacquiring preferred stock of CG&E through a tender offer.
Cinergy and PSI
12. On August 7, 1996, PSI entered into a coal supply agreement with Eagle
for the supply of approximately 3 million tons of coal per year. The
agreement (which runs through
December 31, 2000) provides for the payment by PSI of a buy-out fee of
$179 million (including interest). This represents the fee paid by Eagle
to Exxon to buy out the coal supply agreement between PSI and Exxon.
Pursuant to the terms of the agreements, the price of coal paid by PSI
will include a monthly buy-out charge which will be paid to Eagle through
December 2000.
As a result of the new coal supply agreement with Eagle, on the same
day, PSI and the UCC entered into a settlement agreement which provides,
in part, for PSI to recover the retail electric portion of the buy-out
fee through the quarterly fuel adjustment clause, with carrying costs on
unrecovered amounts, through December 2002. PSI and the UCC have filed a
joint petition with the IURC for approval of this settlement agreement.
In, addition, PSI filed a petition with the FERC for waiver of fuel adjustment
clause
regulations. PSI cannot predict what actions the IURC or the FERC may
take with respect to these petitions.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Recent Developments
Cinergy
Joint Venture In May 1996, Cinergy, GPU, and Midlands announced the terms of
a recommended cash offer for Midlands to be made by Avon Energy. Cinergy and
GPU each own 50% of Avon Energy. Midlands, one of 12 regional electric
companies in the United Kingdom, is headquartered in Birmingham, England.
Midlands' principal business is the distribution of electricity to
approximately 2.2 million customers. Avon Energy commenced the offer to
acquire all of the shares of Midlands on the terms and subject to conditions
set out in an offering document. On June 6, 1996, Cinergy and GPU announced
that Avon Energy declared the cash offer wholly unconditional in all respects
and thereby was committed to purchase all outstanding shares of Midlands.
During the third quarter of 1996, Avon Energy completed the acquisition of all
outstanding shares of Midlands. The total acquisition price of Midlands is
approximately (Pound Sterling) 1.7 billion (or approximately $2.6 billion -
U.S.). For further information, reference is made to Cinergy's Current
Reports on Form 8-K dated May 7, 1996, and June 6, 1996, as amended.
See Note 11 of the "Notes to Financial Statements" in "Part I. Financial
Information" for pro forma financial information relating to the acquisition
of Midlands.
Cinergy, CG&E, PSI, and ULH&P
Securities Ratings Following the announcement of the potential acquisition of
Midlands, major credit rating agencies, D&P, Fitch, and S&P, affirmed the
current ratings of Cinergy's operating subsidiaries, after their consideration
of the effects of the potential acquisition. The other major credit rating
agency, Moody's, placed the credit ratings of Cinergy's operating
subsidiaries, CG&E, PSI, and ULH&P, under review for possible downgrade.
Moody's indicated that its review will focus on the likelihood of the
transaction being completed and will assess the operating strategies of the
combined companies and the anticipated benefits of the transaction. It will
also focus on the financial impact the transaction will have on Cinergy and
its operating subsidiaries, including the credit implications. Cinergy cannot
predict the outcome of this review.
On September 27, 1996, Fitch raised its ratings of PSI's first mortgage bonds,
secured medium-term notes, and secured pollution control revenue bonds to A
from A- and PSI's unsecured pollution control notes to A- from BBB+.
Additionally, the preferred stock ratings were reaffirmed at BBB+. Fitch
stated that these ratings reflect PSI's competitive profile, which is based
upon various factors that has prepared it to compete effectively in an
unregulated electric marketplace.
Cinergy, CG&E, PSI, and ULH&P
Competitive Pressures As discussed in the 1995 Form 10-K, the primary factor
influencing the future profitability of Cinergy is the changing competitive
environment for energy services, including the impact of emerging
technologies, and the related commoditization of electric power markets.
Changes in the industry include increased competition in wholesale power
markets and ongoing pressure for "customer choice" by large industrial
customers, and ultimately, by all retail customers. Cinergy supports
increased competition in the electric utility industry and has chosen to take
a leadership role in state and Federal debates on industry reform.
As the electric utility industry moves toward a competitive environment,
Cinergy is reassessing its corporate structure, including the issue of whether
to remain vertically integrated. As a first step toward "unbundling" the
business for a competitive environment, Cinergy has reorganized into strategic
business units. This functional reorganization separated Cinergy's utility
businesses into an energy services business unit, an energy delivery business
unit, and an energy commodities business unit. Cinergy continues to analyze
what benefits, if any, may exist in the future for its various stakeholders of
separating the business units into different corporations.
Cinergy, CG&E, PSI, and ULH&P
Contract Negotiations As previously reported, members of IBEW Local No. 1393
ratified a new labor agreement with PSI effective May 24, 1996, and expiring
April 30, 1999. Additionally, members of IBEW Local No. 1347, USWA Local Nos.
12049 and 14214, and the IUU approved new contracts with CG&E expiring April
1, 2001, May 15, 2002, and April 1, 2001, respectively.
Regulatory Matters
Cinergy, CG&E, PSI, and ULH&P
FERC Orders 888 and 889 In April 1996, the FERC issued final orders relating
to its previously issued mega-NOPR. The unanimously-passed final rules, which
contain essentially the same provisions as the mega-NOPR, provide for
mandatory filing of open access/comparability transmission tariffs, provide
for functional unbundling of all services, require utilities to use the filed
tariffs for their own bulk power transactions, establish an electronic
bulletin board for transmission availability and pricing information, and
establish a contract-based approach to recovering any potential stranded costs
as a result of customer choice at the wholesale level. The FERC expects the
rules to "accelerate competition and bring lower prices and more choices to
energy customers." The final rules became effective in July 1996. CG&E, PSI,
and ULH&P have made compliance filings with the FERC and are now operating
under open access/comparability tariffs.
Concurrent with the issuance of the final orders, the FERC also issued a
related NOPR which establishes a new system for utilities to use in reserving
capacity on their own and others' transmission systems. Cinergy has filed
formal comments with the FERC which, generally, support several of the broad
policy goals
of the NOPR but raise implementation and prioritization issues. The FERC
proposed in the NOPR that a capacity reservation tariff replace open access
tariffs by December 31, 1997.
Cinergy and CG&E
Legislation On June 18, 1996, House Bill 476 (HB 476) was signed into law by
the Governor of Ohio. HB 476 addresses regulatory reform of the natural gas
industry at the state level and thus, is an extension of Order 636 for local
distribution companies. The Ohio law, among other things, provides that
natural gas commodity sales services may be exempted from PUCO regulation and
that the PUCO allow alternative ratemaking methodologies in connection with
other regulated services. The PUCO has initiated a rulemaking proceeding to
promulgate administrative rules necessary to implement the law.
Cinergy and PSI
PSI's Retail Rate Proceeding See Note 8 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy and CG&E
CG&E's Gas Rate Proceeding See Note 9 of the "Notes to Financial Statements"
in "Part I. Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standard See Note 5 of the "Notes to Financial Statements" in
"Part I. Financial Information."
CAPITAL REQUIREMENTS
Cinergy and CG&E
Preferred Stock Tender Offer See Note 6 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Other Commitments
Cinergy and PSI
WVPA Litigation See Note 4 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Cinergy, CG&E, PSI, and ULH&P
1996 Voluntary Workforce Reduction Programs See Note 7 of the "Notes to
Financial Statements" in "Part I. Financial Information."
CAPITAL RESOURCES
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt and Preferred Stock For information regarding recent
securities redemptions, see Notes 2, 3, and 6 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt The operating subsidiary companies of Cinergy have the
following short-term debt authorizations and lines of credit:
Committed Unused
Authorized Lines__ Lines
(in millions)
Cinergy & Subsidiaries $838 $280 $64
CG&E & Subsidiaries 435 80 11
PSI 400 200 53
ULH&P 35 - -
Additionally, Cinergy has established a $600 million credit facility, which
expires in May 2001, of which $96 million remained unused as of November 11,
1996. This new credit facility was established, in part, to fund the
acquisition of Midlands through Avon Energy ($500 million has been designated
for this purpose) with the remaining portion available for general corporate
purposes. The prior $100 million credit facility, which would have expired in
September 1997, has been terminated.
In addition, Cinergy U.K. entered into a $40 million non-recourse credit
agreement, of which $27 million is outstanding as of November 11, 1996. This
new credit agreement was also used to fund the acquisition of Midlands.
Cinergy has borrowed approximately $500 million under the two agreements to
fund its equity investment in Avon Energy.
Cinergy, CG&E, PSI, and ULH&P
Sales of Accounts Receivables As discussed in each registrant's 1995 Form 10-
K, in January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on
a revolving basis, undivided percentage interests in certain of their accounts
receivables. Under the agreement, the companies have the authority to sell up
to an aggregate maximum of $350 million of which $257 million has been sold as
of October 31, 1996.
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I. FINANCIAL
INFORMATION."
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Merger Litigation The United States Court of Appeals for the District of
Columbia Circuit will hear oral arguments in connection with AEP's petition
for review of the FERC's Merger Order. AEP has objected to the Merger Order
alleging that the post-merger operations of Cinergy would require the use of
AEP's transmission facilities on a continuous basis without compensation. AEP
contends that the FERC, in issuing the Merger Order, did not adequately
evaluate the impact on AEP or whether the need to use AEP's transmission
facilities would interfere with Cinergy achieving merger benefits. In
addition, AEP claims that the FERC failed to evaluate the extent to which the
merged facilities' operations would be consistent with the integrated public
utility concept of the PUHCA. CG&E and PSI have intervened in this action.
At this time, Cinergy, CG&E, and PSI cannot predict the outcome of the appeal.
Additionally, see Notes 4, 8, 9, and 12 of the "Notes to Financial
Statements" in "Part I. Financial Information."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
CG&E
(a) A special meeting of shareholders of CG&E was held September 18, 1996
in Cincinnati, Ohio.
(c) An amendment to CG&E's Articles was approved. The amendment removes a
provision of the Articles that limited the amount of unsecured debt,
including short-term debt, that could be incurred by CG&E. There were
89,663,086 common shares that voted for the amendment. There were
1,800,315 affirmative votes of preferred stock, 35,677 negative votes,
and 21,077 abstentions. A two-thirds affirmative vote of both common
and preferred shares, each voting as a separate class, was required to
approve the amendment.
<PAGE>
ITEM 5. OTHER INFORMATION
Cinergy
On June 25, 1996, Power International sold its ownership interest in Bruwabel
and its subsidiaries, including Power Development s.r.o. which owns the
Vytopna Kromeriz Heating Plant. Power International (formerly Enertech
Associates International, Inc.) had acquired Bruwabel and its subsidiaries in
July 1994 for the purpose of pursuing design, engineering, and development
work involving energy privatization projects, primarily in the Czech Republic.
Cinergy, CG&E, and ULH&P
KO Transmission acquired a 32.67% interest in a 90-mile interstate natural gas
pipeline and began flowing gas June 1, 1996, from southeast Kentucky northward
to the service territories of CG&E and ULH&P.
Cinergy, CG&E, and PSI
In August 1996, Cinergy sold its ownership interests in PSI Recycling which
recycled metal from CG&E and paper, metal, and other materials from PSI.
Cinergy and CG&E
In October 1996, Cinergy sold certain electric generating equipment for
removal from Miami Fort.
Cinergy, CG&E, PSI, and ULH&P
Additionally, refer to the "Recent Developments" and "Regulatory Matters"
sections in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in "Part I. Financial Information" for
information concerning new contracts between CG&E (including ULH&P), PSI
and certain of the union organizations, Cinergy's Joint Venture, the status
of the CG&E gas rate proceeding, and the Company's functional
restructuring.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit
Designation Nature of Exhibit
CG&E
3-a Amended Articles of Incorporation of CG&E
effective October 23, 1996.
PSI
3-b By-laws of PSI, as amended on October 22, 1996.
Cinergy and PSI
4-a Loan Agreement between PSI and the City of
Princeton, Indiana dated November 7, 1996.
Cinergy
10-a Amendment to Cinergy's Stock Option Plan, adopted
on October 22, 1996.
10-b Amendment to Cinergy's Performance Shares Plan,
adopted on October 22, 1996.
10-c Amendment to Cinergy's 1996 Long-Term Incentive
Compensation Plan adopted on October 22, 1996.
10-d Amendment to Cinergy's Employee Stock Purchase
and Savings Plan, adopted on October 22, 1996.
10-e Amendment to Cinergy's Directors' Deferred
Compensation Plan, adopted on October 22, 1996.
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in
electronic submission only).
Cinergy
(b) No reports on Form 8-K were filed during the quarter.
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the
disclosures are adequate to make the information presented not misleading. In
the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all
adjustments (which include only normal, recurring adjustments) necessary to
reflect the results of operations for the respective periods. The unaudited
statements are subject to such adjustments as the annual audit by independent
public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: November 12, 1996 J. Wayne Leonard _________
Duly Authorized Officer
Date: November 12, 1996 Charles J. Winger __
Chief Accounting Officer
LOAN AGREEMENT
between
CITY OF PRINCETON, INDIANA
and
PSI ENERGY, INC.
_______________________________
$24,600,000
City of Princeton, Indiana
Pollution Control
Revenue Refunding Bonds, 1996 Series
(PSI Energy, Inc. Project)
_______________________________
Dated
as of
November 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
Section 1.1. Use of Defined Terms
Section 1.2. Definitions
Section 1.3. Interpretation
Section 1.4. Captions and Headings
ARTICLE II REPRESENTATIONS
Section 2.1. Representations of the Issuer
Section 2.2. No Warranty by Issuer of Condition or
Suitability of the Project
Section 2.3. Representations and Covenants of the Company
ARTICLE III COMPLETION OF THE PROJECT; ISSUANCE
OF THE BONDS
Section 3.1. Acquisition, Construction and Installation
Section 3.2. Project Description
Section 3.3. Issuance of the Bonds; Application of
Proceeds
Section 3.4. Investment of Fund Moneys
Section 3.5. Rebate Fund
ARTICLE IV LOAN BY ISSUER; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT
FACILITY
Section 4.1. Loan Repayment
Section 4.2. Additional Payments
Section 4.3. Place of Payments
Section 4.4. Obligations Unconditional
Section 4.5. Assignment of Revenues and Agreement
Section 4.6. Credit Facility; Alternate Credit Facility;
Cancellation
Section 4.7. Company's Option to Elect Rate Period
Section 4.8. Company's Obligation to Purchase Bonds
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. Right of Inspection
Section 5.2. Maintenance
Section 5.3. Removal of Portions of the Project
Facilities
Section 5.4. Operation of Project Facilities
Section 5.5. Insurance
Section 5.6. Workers' Compensation Coverage
Section 5.7. Damage; Destruction and Eminent Domain
Section 5.8. Company to Maintain its Corporate
Existence; Conditions Under Which
Exceptions Permitted
Section 5.9. Indemnification
Section 5.10. Company Not to Adversely Affect
Exclusion of Interest on Bonds
From Gross Income For Federal
Income Tax Purposes
Section 5.11. Use of Project Facilities
Section 5.12. Assignment by Company
ARTICLE VI REDEMPTION
Section 6.1. Optional Redemption
Section 6.2. Extraordinary Optional Redemption
Section 6.3. Mandatory Redemption
Section 6.4. Notice of Redemption
Section 6.5. Actions by Issuer
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default
Section 7.2. Remedies on Default
Section 7.3. No Remedy Exclusive
Section 7.4. Agreement to Pay Attorneys' Fees and
Expenses
Section 7.5. No Waiver
Section 7.6. Notice of Default
ARTICLE VIII MISCELLANEOUS
Section 8.1. Term of Agreement
Section 8.2. Amounts Remaining in Funds
Section 8.3. Notices
Section 8.4. Extent of Covenants of the Issuer; No
Personal Liability
Section 8.5. Binding Effect
Section 8.6. Amendments and Supplements
Section 8.7. References to Credit Facility
Section 8.8. Execution Counterparts
Section 8.9. Severability
Section 8.10. Governing Law
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of November 1, 1996
between the CITY OF PRINCETON, INDIANA (the "Issuer"), a municipal corporation
organized and existing under the laws of the State of Indiana, and PSI ENERGY,
INC. (the "Company"), a public utility and corporation duly organized and
validly existing under the laws of the State of Indiana. Capitalized terms
used in the following recitals are used as defined in Article I of this
Agreement.
Pursuant to Indiana Code, Title 36, Article 7, Chapters 11.9 and 12, and
Indiana Code, Title 5, Article 1, Chapter 5 (collectively, the "Act"), the
Issuer has determined to issue, sell and deliver the Bonds, and to lend the
proceeds derived from the sale thereof to the Company to assist in the
refunding of the Refunded Bonds as defined below. The Refunded Bonds were
originally issued to provide funds to make loans to the Company to assist in
the financing of its portion of the costs of the Project as defined below.
The Company and the Issuer each have full right and lawful authority to
enter into this Agreement and to perform and observe the provisions hereof on
their respective parts to be performed and observed.
NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Issuer and the
Company agree as follows (provided that any obligation of the Issuer or the
State created by or arising out of this Agreement shall never constitute a
general debt of the Issuer or the State or give rise to any pecuniary
liability of the Issuer or the State but shall be payable solely out of
Revenues, including the Loan Payments made pursuant hereto and moneys drawn
under any Credit Facility):
ARTICLE I
DEFINITIONS
Section I.1. Use of Defined Terms. In addition to the words and terms
defined elsewhere in this Agreement or by reference to another document, the
words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.
Section I.2. Definitions. As used herein:
"Act" means, collectively, Indiana Code, Title 36, Article 7, Chapters
11.9 and 12, and Title 5, Article 1, Chapter 5 as amended.
"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 4.2 hereof.
"Administration Expenses" means the compensation (which compensation
shall not be greater than that typically charged in similar circumstances) and
reimbursement of reasonable expenses and advances payable to the Trustee, the
Registrar, the Remarketing Agent, any Paying Agent and any Authenticating
Agent.
"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.
"Alternate Credit Facility" means an Alternate Credit Facility as defined
in the Indenture.
"Authenticating Agent" means the Authenticating Agent as defined in the
Indenture.
"Bank" means the Bank as defined in the Indenture.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Purchase Fund" means the Bond Purchase Fund as defined in the
Indenture.
"Bond Resolution" means the ordinance of the Issuer providing for the
issuance of the Bonds and approving this Agreement, the Indenture and related
matters, as amended or supplemented from time to time.
"Bond Service Charges" means, for any period or time, the principal of,
premium, if any, and interest due on the Bonds for that period or payable at
that time whether due at maturity or upon acceleration or redemption or
otherwise.
"Bonds" means the $24,600,000 Pollution Control Revenue Refunding Bonds,
1996 Series (PSI Energy, Inc. Project), issued by the Issuer pursuant to the
Bond Resolution and the Indenture.
"Bonds Outstanding" or "Outstanding Bonds" means Outstanding Bonds as
defined in the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code and Sections of the Code include relevant
applicable regulations and proposed regulations thereunder and under the
Internal Revenue Code of 1954, as amended, and any successor provisions to
those Sections, regulations or proposed regulations and, in addition, all
applicable official rulings and judicial determinations under the foregoing
applicable to the Bonds.
"Conversion Date" means the Conversion Date as defined in the Indenture.
"Credit Facility" means a Credit Facility as defined in the Indenture.
"Credit Facility Account" means the Credit Facility Account as defined in
the Indenture.
"Credit Facility Issuer" means a Credit Facility Issuer as defined in the
Indenture.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
"Engineer" means an engineer (who may be an employee of the Company) or
engineering firm qualified to practice the profession of engineering under the
laws of the State and who or which is acceptable to the Trustee.
"EPA" means the Department of Environmental Management of the State and
any successor body, agency, commission or department.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.
"Government Obligations" means Government Obligations as defined in the
Indenture.
"Holder" or "Holder of a Bond" means the Person in whose name a Bond is
registered on the Register.
"Indenture" means the Trust Indenture, dated as of the same date as this
Agreement, between the Issuer and the Trustee, as amended or supplemented from
time to time.
"Interest Rate for Advances" means the interest rate per year payable on
the Bonds.
"Letter of Credit" means the Letter of Credit as defined in the
Indenture.
"Loan" means the loan by the Issuer to the Company of the proceeds
received from the sale of the Bonds.
"Loan Payment Date" means any date on which any Bond Service Charges are
due and payable.
"Loan Payments" means the amounts required to be paid by the Company in
repayment of the Loan pursuant to Section 4.1 hereof.
"1954 Code" means the Internal Revenue Code of 1954 as amended from time
to time through the date of enactment of the Code. References to the 1954
Code and Sections of the 1954 Code include relevant applicable regulations
(including temporary regulations) and proposed regulations thereunder and any
successor provisions to those Sections, regulations or proposed regulations.
"Notice Address" means:
(a) As to the Issuer: City of Princeton, Indiana
City Building
Princeton, Indiana 47670
Attention: Mayor
(b) As to the Company: PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana 46168
Attention: Treasurer
with a copy to:
PSI Energy, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
Attention: Treasurer
(c) As to the Trustee: The Fifth Third Bank of Central Indiana
Fifth Third Center
38 Fountain Square
Cincinnati, Ohio 45263
Attention: Corporate Trust Administration
or such additional or different address, notice of which is given under
Section 8.3 hereof.
"Opinion of Bond Counsel" means a written opinion of nationally
recognized bond counsel selected by the Company and acceptable to the Trustee
who is experienced in matters relating to the exclusion from gross income for
federal income tax purposes of interest on obligations issued by states and
their political subdivisions. Bond Counsel may be counsel to the Trustee or
the Company.
"Original Purchaser" means the Original Purchaser as defined in the
Indenture.
"Paying Agent" means the Paying Agent as defined in the Indenture.
"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited partnerships),
limited liability entities, joint ventures, societies, estates, trusts,
corporations, public or governmental bodies, other legal entities and natural
persons.
"Plant" means the Gibson Generating Station.
"Pollution Control Facility" or "Pollution Control Facilities" means
those facilities which are pollution control facilities as defined in Section
9 of Chapter 11.9 of the Act.
"Project" or "Project Facilities" means the real, personal or real and
personal property, including undivided or other interests therein, identified
in the Project Description, financed with the proceeds of the Series 1973
Bonds and Series 1979 Bonds, respectively.
"Project Description" means collectively the description of the Project
Facilities financed with the proceeds of the Series 1973 Bonds and the Project
Facilities financed with the proceeds of the Series 1979 Bonds, attached
hereto as Exhibit A, as the same may be amended in accordance with this
Agreement.
"Project Purposes" means the purposes of Pollution Control Facilities as
described in the Act and as particularly described in Exhibit A hereto.
"Project Site" means the Gibson Generating Station in Princeton, Indiana.
"Rate Period" means a Rate Period as defined in the Indenture.
"Rebate Fund" means the Rebate Fund created in the Indenture.
"Refunded Bonds" means collectively the Series 1973 Bonds and the Series
1979 Bonds.
"Refunded Bonds Indenture" means collectively the Series 1973 Indenture
for the Series 1973 Bonds and the Series 1979 Indenture for the Series 1979
Bonds.
"Refunded Bonds Loan Agreement" means collectively the Series 1973 Loan
Agreement and the Series 1979 Loan Agreement.
"Refunded Bonds Trustee" means Bank One, Indianapolis, National
Association (as successor to American Fletcher National Bank and Trust
Company), as trustee under the Refunded Bonds Indenture.
"Refunding Fund" means the Refunding Fund created in the Indenture.
"Register" means the books kept and maintained for the registration and
transfer of Bonds pursuant to Section 3.05 of the Indenture.
"Registrar" means the Registrar as defined in the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement as defined in
the Indenture.
"Remarketing Agent" means the Remarketing Agent as defined in the
Indenture.
"Revenues" means (a) the Loan Payments, (b) all other moneys received or
to be received by the Issuer (excluding the Issuer Fee) or the Trustee in
respect of repayment of the Loan, including without limitation, all moneys and
investments in the Bond Fund, (c) any moneys and investments in the Refunding
Fund, and (d) all income and profit from the investment of the foregoing
moneys. The term "Revenues" does not include any moneys or investments in the
Rebate Fund or the Bond Purchase Fund.
"Series 1973 Bonds" means the City of Princeton, Indiana Pollution
Control Revenue Bonds 1973 Series (Public Service Company of Indiana, Inc.
Project A).
"Series 1979 Bonds" means the City of Princeton, Indiana Pollution
Control Revenue Bonds 1979 Series (Public Service Company of Indiana, Inc.
Project B).
"Series 1973 Indenture" means the Trust Indenture dated as of December
15, 1973 between Bank One, Indianapolis, National Association (as successor to
American Fletcher National Bank and Trust Company) and Public Service Company
of Indiana, Inc.
"Series 1979 Indenture" means the Trust Indenture dated as of March 1,
1979 between Bank One, Indianapolis, National Association (as successor to
American Fletcher National Bank and Trust Company) and Public Service Company
of Indiana, Inc.
"Series 1973 Loan Agreement" means the Loan Agreement dated as of
December 15, 1973 between the City of Princeton, Indiana and Public Service
Company of Indiana, Inc.
"Series 1979 Loan Agreement" means the Loan Agreement dated as of March
1, 1979 between the City of Princeton, Indiana and Public Service Company of
Indiana, Inc.
"State" means the State of Indiana.
"Term Rate Period" means a Term Rate Period as defined in the Indenture.
"Trustee" means The Fifth Third Bank of Central Indiana located in
Indianapolis, Indiana, a corporation duly organized and validly existing under
the laws of the State, until a successor Trustee shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter
"Trustee" shall mean the successor Trustee. "Principal Office" of the Trustee
shall mean the principal corporate trust office of the Trustee, which office
at the date of issuance of the Bonds is located at its Notice Address.
"Unassigned Issuer Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to inspection pursuant
to Section 5.1 hereof, to be held harmless and indemnified under Section 5.9
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof and to give or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.6 hereof and its
right to enforce such rights.
"Variable Rate" means a Variable Rate as defined in the Indenture.
Section I.3. Interpretation. Any reference herein to the State, to the
Issuer or to any member or officer of either includes entities or officials
succeeding to their respective functions, duties or responsibilities pursuant
to or by operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the State
or the Act, or to a section, provision or chapter of the Indiana Code, or to
any statute of the United States of America, includes that section, provision
or chapter as amended, modified, revised, supplemented or superseded from time
to time; provided, that no amendment, modification, revision, supplement or
superseding section, provision or chapter shall be applicable solely by reason
of this provision, if it constitutes in any way an impairment of the rights or
obligations of the Issuer, the State, the Holders, the Trustee, the Registrar,
an Authenticating Agent, a Paying Agent, the Credit Facility Issuer, the
Remarketing Agent, or the Company under this Agreement, the Indenture or the
Bonds.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof",
"hereby", "herein", "hereto", "hereunder" and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore"
means before, the date of delivery of the Bonds. Words of any gender include
the correlative words of the other genders, unless the sense indicates
otherwise.
Section I.4. Captions and Headings. The captions and headings in this
Agreement are used solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs or subparagraphs or clauses hereof.
(End of Article I)
ARTICLE II
REPRESENTATIONS
Section II.1. Representations of the Issuer. The Issuer represents
that: (a) it is a municipal corporation duly organized and validly existing
under the laws of the State; (b) it has duly accomplished all conditions
necessary to be accomplished by it prior to the issuance and delivery of the
Bonds and the execution and delivery of this Agreement and the Indenture; (c)
it is not in violation of or in conflict with any provisions of the laws of
the State which would impair its ability to carry out its obligations
contained in this Agreement or the Indenture; (d) it is empowered to enter
into the transactions contemplated by this Agreement and the Indenture; (e) it
has duly authorized the execution, delivery and performance of this Agreement
and the Indenture; (f) it will do all things in its power in order to maintain
its existence or assure the assumption of its obligations under this Agreement
and the Indenture by any successor municipal corporation; and (g) following
reasonable notice, a public hearing was held on October 21, 1996 with respect
to the issuance of the Bonds as required by Section 147(f) of the Code.
Section II.2. No Warranty by Issuer of Condition or Suitability of the
Project. The Issuer makes no warranty, either express or implied, as to the
suitability or utilization of the Project for the Project Purposes, or as to
the condition of the Project Facilities or that the Project Facilities are or
will be suitable for the Company's purposes or needs.
Section II.3. Representations and Covenants of the Company. The Company
represents that:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State, with power and
authority (corporate and other) to own its properties and conduct its business,
to execute and deliver this Agreement and to perform its obligations under this
Agreement.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and this Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(c) The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
violate any provision of law or regulation applicable to the Company, or of any
writ or decree of any court or governmental instrumentality, or of the Articles
of Incorporation, as amended, or the Regulations of the Company, or of any
mortgage, indenture, contract, agreement or other undertaking to which the
Company is a party or which purports to be binding upon the Company or upon any
of its assets.
(d) Substantially all (at least 90%) of the proceeds of each of the
Series 1973 Bonds and the Series 1979 Bonds were used to provide "pollution
control facilities" within the meaning of Section 103(b)(4)(F) of the 1954
Code, the original use of which facilities commenced with the Company, and
which facilities were described in inducement resolutions adopted by the Issuer
on August 27, 1973 with respect to those facilities financed with the proceeds
of the Series 1973 Bonds and on January 19, 1976 with respect to those
facilities financed with the proceeds of the Series 1979 Bonds. Construction
of the cooling lake financed with the proceeds of the Series 1973 Bonds was
commenced by the Company prior to August 31, 1972 and such cooling lake was not
placed in service by the Company prior to August 27, 1973. Construction of the
other pollution control facilities financed with the proceeds of the Series
1973 Bonds and the construction of the pollution control facilities financed
with the proceeds of the Series 1979 Bonds was not commenced prior to August
27, 1973 and January 19, 1976, respectively. All of the proceeds of the Series
1973 Bonds have been spent for the Series 1973 Bonds portion of the Project
pursuant to the Series 1973 Loan Agreement or to pay costs of issuance of the
Series 1973 Bonds, and all of the proceeds of the Series 1979 Bonds have been
spent for the Series 1979 Bonds portion of the Project pursuant to the Series
1979 Loan Agreement or to pay costs of issuance of the Series 1979 Bonds. The
proceeds of the Bonds (other than any accrued interest thereon) will be used
exclusively to refund the Refunded Bonds; any investment earnings thereon will
be used to pay principal, premium or interest on the Refunded Bonds; and none
of the proceeds of the Bonds will be used to pay for any costs of issuance of
the Bonds. The Refunded Bonds were issued prior to August 16, 1986. The
principal amount of the Bonds does not exceed the outstanding principal amount
of the Refunded Bonds. The proceeds of the Bonds will be used to retire the
Refunded Bonds not later than 90 days after the date of issuance of the Bonds.
(e) It has caused the Project to be substantially completed. The
Project constitutes Pollution Control Facilities under the Act and is
consistent with the purposes of the Act. The Project is being, and the Company
will cause the Project to be, operated and maintained in such manner to conform
with all applicable zoning, planning, building, environmental and other
applicable governmental regulations and all permits, variances and orders
issued or granted pursuant thereto, including the permit-to-install for the
Project, which permits, variances and orders have not been withdrawn or
otherwise suspended, and to be consistent with the Act.
(f) It has used or operated or has caused to be used or operated, and
presently intends to use or operate or cause to be used or operated the Project
Facilities in a manner consistent with the Project Purposes until the date on
which the Bonds have been fully paid and knows of no reason why the Project
Facilities will not be so operated. The Company does not intend to sell or
otherwise dispose of the Project or any portion thereof.
(g) None of the proceeds of the Refunded Bonds were used and none of
the proceeds of the Bonds will be used to provide any airplane, skybox or other
private luxury box, or health club facility, any facility primarily used for
gambling or any store the principal business of which is the sale of alcoholic
beverages for consumption off premises.
(h) Less than 25% of the proceeds of the Series 1973 Bonds and less
than 25% of the proceeds of the Series 1979 Bonds have been used and less than
25% of the proceeds of the Bonds will be used directly or indirectly to acquire
land or any interest therein, and none of such proceeds has been or will be
used to provide land which is to be used for farming purposes.
(i) No portion of the proceeds of the Refunded Bonds has been used and
no portion of the proceeds of the Bonds will be used to acquire existing
property or any interest therein unless the first use of such property was by
the Company and was pursuant to and followed such acquisition.
(j) After the expiration of any applicable temporary period under
Section 148(d)(3) of the Code, at no time during any bond year will the
aggregate amount of gross proceeds of the Bonds invested in higher yielding
investments (within the meaning of Section 148(b) of the Code) exceed 150
percent of the debt service on the Bonds for such bond year and the aggregate
amount of gross proceeds of the Bonds invested in higher yielding investments,
if any, will be promptly and appropriately reduced as the outstanding amount
of the Bonds is reduced, provided however that the foregoing shall not require
the sale or disposition of any investments in higher yielding investments if
such sale or disposition would result in a loss which exceeds the amount which
would be paid to the United States (but for such sale or disposition) at the
time of such sale or disposition if a payment were due at such time. At no
time will any funds constituting gross proceeds of the Bonds be used in a
manner as would constitute failure of compliance with Section 148 of the Code.
The terms "bond year", "gross proceeds", "higher yielding investments",
"yield", and "debt service" have the meanings assigned to them for purposes of
Section 148 of the Code.
(k) The Refunded Bonds were not, and the Bonds will not be, "federally
guaranteed" within the meaning of Section 149(b) of the Code.
(l) It is not anticipated that as of the date hereof, there will be
created any "replacement proceeds", within the meaning of Section 1.148-1(c) of
the Treasury Regulations, with respect to the Bonds; however, in the event that
any such replacement proceeds are deemed to have been created, such amounts
will be invested in compliance with Section 148 of the Code.
(m) On the dates of issuance and delivery of each of the Series 1973
Bonds and the Series 1979 Bonds, the Company reasonably expected that at least
85% of the spendable proceeds of each of the Series 1973 Bonds and the Series
1979 Bonds would be expended to carry out the respective governmental purpose
of each such issue within the 3-year period beginning on the respective date
each such issue was issued. All of the spendable proceeds of the Refunded
Bonds have been expended as of the date of issuance of the Bonds. None of the
proceeds of either the Series 1973 Bonds or the Series 1979 Bonds were invested
in nonpurpose investments having a substantially guaranteed yield for four
years or more.
(n) The average maturity of the Bonds does not exceed 120% of the
average reasonably expected economic life of the Project Facilities financed by
the proceeds of the Refunded Bonds (determined under Section 147(b) of the
Code).
(o) The information furnished by the Company and used by the Issuer in
preparing the certifications and statements pursuant to Sections 148 and 149(e)
of the Code or their statutory predecessors with respect to the Refunded Bonds
was accurate and complete as of the respective dates of issuance of the
Refunded Bonds, and the information furnished by the Company and used by the
Issuer in preparing the certification pursuant to Section 148 of the Code and
in preparing the information statement pursuant to Section 149(e) of the Code,
both referred to in the Bond Resolution, will be accurate and complete as of
the date of issuance of the Bonds.
(p) The Project Facilities do not include any office except for
offices (i) located on the Project Site and (ii) not more than a de minimis
amount of the functions to be performed at which is not directly related to the
day-to-day operations of the Project Facilities.
(End of Article II)
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
Section III.1. Acquisition, Construction and Installation. The Company
represents that it has caused the Project Facilities to be acquired,
constructed and installed on the Project Site, substantially in accordance with
the Project Description and in conformance with all applicable zoning,
planning, building and other similar regulations of all governmental
authorities having jurisdiction over the Project and all permits, variances and
orders issued in respect of the Project by EPA, and that the proceeds derived
from the Refunded Bonds, including any investment thereof, were expended in
accordance with the Refunded Bonds Indenture and the Refunded Bonds Loan
Agreement.
Section III.2. Project Description. The Project Description may be
changed from time to time by, or with the consent of, the Company provided that
any such change shall also be filed with the Issuer and provided further that
no change in the Project Description shall materially change the function of
the Project Facilities unless the Trustee shall have received (i) an Engineer's
certificate that such changes will not impair the significance or character of
the Project Facilities as Pollution Control Facilities and (ii) an Opinion of
Bond Counsel or ruling of the Internal Revenue Service to the effect that such
amendment will not adversely affect the exclusion of interest on the Bonds from
gross income for federal income tax purposes.
Section III.3. Issuance of the Bonds; Application of Proceeds. To
provide funds to make the Loan to the Company to assist the Company in the
refunding of the Refunded Bonds, the Issuer will issue, sell and deliver the
Bonds to the Original Purchaser. The Bonds will be issued pursuant to the
Indenture in the aggregate principal amount, will bear interest, will mature
and will be subject to redemption as set forth therein. The Company hereby
approves the terms and conditions of the Indenture and the Bonds, and the terms
and conditions under which the Bonds will be issued, sold and delivered.
The Company hereby requests that the Issuer notify the Refunded Bonds
Trustee (unless the Refunded Bonds Trustee has already received such notice),
pursuant to the Refunded Bonds Indenture, that the entire outstanding principal
amount of the Refunded Bonds is to be redeemed on December 16, 1996 at a
redemption price of 100% of the principal amount thereof plus accrued interest
to that redemption date.
The proceeds from the sale of the Bonds (other than any accrued interest)
shall be loaned to the Company to assist the Company in refunding the Refunded
Bonds in order to reduce the interest cost payable by the Company; those
proceeds shall be deposited in the Refunding Fund. On December 13, 1996 all
moneys on deposit in the Refunding Fund shall be disbursed by the Trustee as
provided in Section 5.02 of the Indenture to the Refunded Bonds Trustee for
deposit in the Bond Fund created in the Series 1973 Indenture and the Series
1979 Indenture and applied by the Refunded Bonds Trustee to the payment of
principal of and interest on the Series 1973 Bonds and the Series 1979 Bonds on
their redemption on December 16, 1996.
Pending disbursement pursuant to this Section, the proceeds so deposited
in the Refunding Fund, together with any investment earnings thereon, shall
constitute a part of the Revenues assigned by the Issuer to the Trustee for the
payment of Bond Service Charges. Any accrued interest shall be deposited in
the Bond Fund.
Section III.4. Investment of Fund Moneys. At the oral (confirmed
promptly in writing) or written request of the Company, any moneys held as part
of the Bond Fund, the Refunding Fund or the Rebate Fund shall be invested or
reinvested by the Trustee in Eligible Investments; provided, that such moneys
shall be invested or reinvested by the Trustee only in Eligible Investments
which shall mature, or which shall be subject to redemption by the holder
thereof at the option of such holder, not later than the date upon which the
moneys so invested are needed to make payments from those Funds. The Issuer
(to the extent it retained or retains direction or control) and the Company
each hereby represents that the investment and reinvestment and the use of the
proceeds of the Refunded Bonds were restricted in such manner and to such
extent as was necessary so that the Refunded Bonds would not constitute
arbitrage bonds under the statutory predecessor of the Code and each hereby
covenants that it will restrict that investment and reinvestment and the use of
the proceeds of the Bonds in such manner and to such extent, if any, as may be
necessary so that the Bonds will not constitute arbitrage bonds under Section
148 of the Code.
The Company shall provide the Issuer with, and the Issuer may base its
certificate and statement, each as authorized by the Bond Resolution, on a
certificate of an appropriate officer, employee or agent of or consultant to
the Company for inclusion in the transcript of proceedings for the Bonds,
setting forth the reasonable expectations of the Company on the date of
delivery of and payment for the Bonds regarding the amount and use of the
proceeds of the Bonds and the facts, estimates and circumstances on which those
expectations are based.
Section III.5. Rebate Fund. To the extent required by Section 5.08 of
the Indenture, within five days after the end of the fifth Bond Year (as
defined in the Indenture) and every fifth Bond Year thereafter, and within five
days after payment in full of all outstanding Bonds, the Company shall
calculate the amount of Excess Earnings (as defined in the Indenture) as of the
end of that Bond Year or the date of such payment and shall notify the Trustee
of that amount. If the amount then on deposit in the Rebate Fund created under
the Indenture is less than the amount of Excess Earnings (computed by taking
into account the amount or amounts, if any, previously paid to the United
States pursuant to Section 5.08 of the Indenture and this Section), the Company
shall, within five days after the date of the aforesaid calculation, pay to the
Trustee for deposit in the Rebate Fund an amount sufficient to cause the Rebate
Fund to contain an amount equal to the Excess Earnings. The obligation of the
Company to make such payments shall remain in effect and be binding upon the
Company notwithstanding the release and discharge of the Indenture. The
Company shall obtain and keep such records of the computations made pursuant to
this Section as are required under Section 148(f) of the Code.
(End of Article III)
ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section IV.1. Loan Repayment. Upon the terms and conditions of this
Agreement, the Issuer agrees to make the Loan to the Company. The proceeds of
the Loan shall be deposited with the Trustee pursuant to Section 3.3 hereof.
In consideration of and in repayment of the Loan, the Company shall make, as
Loan Payments, to the Trustee for the account of the Issuer, payments which
correspond, as to time, and are equal in amount as of the Loan Payment Date, to
the corresponding Bond Service Charges payable on the Bonds. All Loan Payments
received by the Trustee shall be held and disbursed in accordance with the
provisions of the Indenture and this Agreement for application to the payment
of Bond Service Charges.
The Company shall be entitled to a credit against the Loan Payments
required to be made on any Loan Payment Date to the extent that the balance of
the Bond Fund is then in excess of amounts required (a) for the payment of
Bonds theretofore matured or theretofore called for redemption, or to be called
for redemption pursuant to Section 6.1 hereof (b) for the payment of interest
for which checks or drafts have been drawn and mailed by the Trustee or Paying
Agent, and (c) to be deposited in the Bond Fund by the Indenture for use other
than for the payment of Bond Service Charges due on that Loan Payment Date.
The Company's obligation to make Loan Payments shall be reduced to the
extent of any payments made by any Credit Facility Issuer to the Trustee in
respect of the principal of, premium, if any, or interest on the Bonds when due
pursuant to any Credit Facility, provided, that the Credit Facility Issuer has
been reimbursed for such payments in accordance with the terms of the
Reimbursement Agreement.
Except for such interest of the Company as may hereafter arise pursuant to
Section 8.2 hereof or Sections 5.06 or 5.07 of the Indenture, the Company and
the Issuer each acknowledge that neither the Company, the State nor the Issuer
has any interest in the Bond Fund or the Bond Purchase Fund, and any moneys
deposited therein shall be in the custody of and held by the Trustee in trust
for the benefit of the Holders.
Section IV.2. Additional Payments. The Company shall pay to the Issuer,
as Additional Payments hereunder, any and all costs and expenses incurred or to
be paid by the Issuer in connection with the issuance and delivery of the Bonds
or otherwise related to actions taken by the Issuer under this Agreement or the
Indenture.
The Company shall pay the Administration Expenses to the Trustee, the
Registrar, the Remarketing Agent, and any Paying Agent or Authenticating Agent,
as appropriate, as Additional Payments hereunder.
The Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such cost or expense incurred or to be paid by
the Issuer and any Administration Expenses claimed to be due to the Trustee,
the Registrar, the Remarketing Agent, any Paying Agent or any Authenticating
Agent.
In the event the Company should fail to pay any Loan Payments, Additional
Payments or Administration Expenses when due, the payment in default shall
continue as an obligation of the Company until the amount in default shall have
been fully paid together with interest thereon during the default period at the
Interest Rate for Advances.
Section IV.3. Place of Payments. The Company shall make all Loan
Payments directly to the Trustee at its Principal Office. Additional Payments
shall be made directly to the person or entity to whom or to which they are
due.
Section IV.4. Obligations Unconditional. The obligations of the Company
to make Loan Payments, Additional Payments and any payments required of the
Company under Section 5.09 of the Indenture shall be absolute and
unconditional, and the Company shall make such payments without abatement,
diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or counterclaim
which the Company may have or assert against the Issuer, the Trustee, the
Registrar, the Remarketing Agent or any other Person.
Section IV.5. Assignment of Revenues and Agreement. To secure the
payment of Bond Service Charges, the Issuer shall, by the Indenture, (a)
absolutely and irrevocably assign to the Trustee, its successors in trust and
its and their assigns forever, (1) all right, title and interest of the Issuer
in and to all moneys and investments (including, without limitation, the
proceeds of the Credit Facility) in the Bond Fund and (2) all of the Issuer's
rights and remedies under this Agreement (except for the Unassigned Issuer
Rights), and (b) grant a security interest to the Trustee, its successors in
trust and its and their assigns forever, in all of its rights to and interest
in the Revenues including, without limitation, all Loan Payments and other
amounts receivable by or on behalf of the Issuer under the Agreement in respect
of repayment of the Loan (other than the Credit Facility Account, all moneys
and investments therein and the proceeds of the Credit Facility). The Company
hereby agrees and consents to those assignments and that grant of a security
interest.
Section IV.6. Credit Facility; Alternate Credit Facility; Cancellation.
(a) The Company agrees to provide for the payment of the principal of and
interest on the Bonds and for payment of the purchase price of Bonds delivered
to the Trustee or Paying Agent pursuant to the Indenture by causing the Letter
of Credit to be delivered to the Trustee on the date of the delivery of the
Bonds. The Company hereby authorizes and directs the Trustee to draw moneys
under the Letter of Credit, in accordance with its terms and the terms of the
Indenture, to the extent necessary to pay the principal of and interest on the
Bonds when due and to pay the purchase price of Bonds as provided in the
Indenture. The Company may, at its election and with the consent of the Bank,
provide for one or more extensions of the Letter of Credit beyond its then
stated date of expiration.
(b) Upon satisfaction of the requirements contained in Section 14.03
of the Indenture, the Company may provide for the delivery of an Alternate
Credit Facility.
(c) Upon satisfaction of the conditions contained in Section 14.02 of
the Indenture, the Company may cancel any Credit Facility in effect at such
time and direct the Trustee in writing to surrender such Credit Facility to
the Credit Facility Issuer by which it was issued in accordance with the
Indenture; provided, that no such cancellation shall become effective and no
such surrender shall take place until all Bonds subject to purchase pursuant to
Section 4.07(d) of the Indenture have been so purchased or redeemed with the
proceeds of such Credit Facility.
Section .1. Company's Option to Elect Rate Period. The Company shall
have, and is hereby granted, the option to elect to convert on any Conversion
Date the interest rate borne by the Bonds to another Variable Rate to be
effective for a Rate Period pursuant to the provisions of Article II of the
Indenture and subject to the terms and conditions set forth therein. To
exercise such options, the Company shall give the written notice required by
the Indenture.
Section .2. Company's Obligation to Purchase Bonds. The Company hereby
agrees to pay or cause to be paid to the Trustee or the Paying Agent, on or
before each day on which Bonds may be or are required to be tendered for
purchase, amounts equal to the amounts to be paid by the Trustee or the Paying
Agent with respect to the Bonds tendered for purchase on such dates pursuant to
Article IV of the Indenture; provided, however, that the obligation of the
Company to make any such payment under this Section shall be reduced by the
amount of (A) moneys paid by the Remarketing Agent as proceeds of the
remarketing of such Bonds by the Remarketing Agent, (B) moneys drawn under any
Credit Facility, for the purpose of paying such purchase price and (C) other
moneys made available by the Company, as set forth in Section 4.08(b)(ii) of
the Indenture.
(End of Article IV)
ARTICLE I
ADDITIONAL AGREEMENTS AND COVENANTS
Section I.1. Right of Inspection. The Company agrees that, subject to
reasonable security and safety regulations and to reasonable requirements as to
notice, the Issuer and the Trustee and their or any of their respective duly
authorized agents shall have the right at all reasonable times to enter upon
the Project Site to examine and inspect the Projects.
Section I.2. Maintenance. The Company shall use its best efforts to keep
and maintain the Project Facilities, including all appurtenances thereto and
any personal property therein or thereon, in good repair and good operating
condition so that the Project Facilities will continue to constitute Pollution
Control Facilities, for the purposes of the operation thereof as required by
Section 5.4 hereof.
So long as such shall not be in violation of the Act or impair the
character of the Project Facilities as Pollution Control Facilities, and
provided there is continued compliance with applicable laws and regulations of
governmental entities having jurisdiction thereof, the Company shall have the
right to remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to
be desirable for its uses and purposes, the cost of which remodeling,
additions, modifications and improvements shall be paid by the Company and the
same shall, when made, become a part of the Project Facilities.
Section I.3. Removal of Portions of the Project Facilities. The Company
shall not be under any obligation to renew, repair or replace any inadequate,
obsolete, worn out, unsuitable, undesirable or unnecessary portions of the
Project Facilities, except that, subject to Section 5.4 hereof, it will use its
best efforts to ensure the continued character of the Project Facilities as
Pollution Control Facilities. The Company shall have the right from time to
time to substitute personal property or fixtures for any portions of the
Project Facilities, provided that the personal property or fixtures so
substituted shall not impair the character of the Project Facilities as
Pollution Control Facilities. Any such substituted property or fixtures shall,
when so substituted, become a part of the Project Facilities. The Company
shall also have the right to remove any portion of the Project Facilities,
without substitution therefor; provided, that the Company shall deliver to the
Trustee a certificate signed by an Engineer describing said portion of the
Project Facilities and stating that the removal of such property or fixtures
will not impair the character of the Project Facilities as Pollution Control
Facilities.
Section I.4. Operation of Project Facilities. The Company will, subject
to its obligations and rights to maintain, repair or remove portions of the
Project Facilities, as provided in Sections 5.2 and 5.3 hereof, use its best
efforts to continue operation of the Project Facilities so long as and to the
extent that operation thereof is required to comply with laws or regulations of
governmental entities having jurisdiction thereof or unless the Issuer shall
have approved the discontinuance of such operation (which approval shall not be
unreasonably withheld). The Company agrees that it will, within the design
capacities thereof, use its best efforts to operate and maintain the Project
Facilities in accordance with all applicable, valid and enforceable rules and
regulations of governmental entities having jurisdiction thereof; provided,
that the Company reserves the right to contest in good faith any such laws or
regulations.
Nothing in this Agreement shall prevent or restrict the Company, in its
sole discretion, at any time, from discontinuing or suspending either
permanently or temporarily its use of any facility of the Company served by the
Project Facilities and in the event such discontinuance or suspension shall
render unnecessary the continued operation of the Project Facilities, the
Company shall have the right to discontinue the operation of the Project
Facilities during the period of any such discontinuance or suspension.
Section I.5. Insurance. The Company shall cause the Project Facilities
to be kept insured against fire or other casualty to the extent that property
of similar character is usually so insured by companies similarly situated and
operating like properties, to a reasonable amount by reputable insurance
companies or, in lieu of or supplementing such insurance in whole or in part,
adopt some other method or plan of protection against loss by fire or other
casualty at least equal in protection to the method or plan of protection
against loss by fire or other casualty of companies similarly situated and
operating properties subject to similar or greater fire or other hazards or on
which properties an equal or higher primary fire or other casualty insurance
rate has been set by reputable insurance companies.
Section I.6. Workers' Compensation Coverage. Throughout the term of this
Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the State.
Section I.7. Damage; Destruction and Eminent Domain. If, during the term
of this Agreement, the Project Facilities or any portion thereof is destroyed
or damaged in whole or in part by fire or other casualty, or title to, or the
temporary use of, the Project Facilities or any portion thereof shall have been
taken by the exercise of the power of eminent domain, the Company (unless it
shall have exercised its option to prepay the Loan Payments pursuant to Section
6.2 hereof) shall promptly repair, rebuild or restore the portion of the
Project Facilities so damaged, destroyed or taken with such changes,
alterations and modifications (including the substitution and addition of other
property) as may be necessary or desirable for the administration and operation
of the Project Facilities as Pollution Control Facilities and as shall not
impair the character or significance of the Project Facilities as furthering
the purposes of the Act.
Section I.8. Company to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted. The Company agrees that, during the term of
this Agreement, it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets and will not
consolidate with or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it; provided that the Company
may, without violating its agreement contained in this Section, consolidate
with or merge into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or sell or otherwise
transfer to another corporation all or substantially all of its assets as an
entirety and thereafter dissolve, provided the surviving, resulting or
transferee corporation, as the case may be (if other than the Company), is a
corporation organized and existing under the laws of one of the states of the
United States, and assumes in writing all of the obligations of the Company
herein, and, if not an Indiana corporation, is qualified to do business in the
State.
If consolidation, merger or sale or other transfer is made as provided in
this Section, the provisions of this Section shall continue in full force and
effect and no further consolidation, merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.
Section I.9. Indemnification. The Company releases the Issuer from,
agrees that the Issuer shall not be liable for, and indemnifies the Issuer
against, all liabilities, claims, costs and expenses imposed upon or asserted
against the Issuer on account of: (a) any loss or damage to property or injury
to or death of or loss by any person that may be occasioned by any cause
whatsoever pertaining to the construction, maintenance, operation and use of
the Project Facilities; (b) any breach or default on the part of the Company in
the performance of any covenant or agreement of the Company under this
Agreement or any related document, or arising from any act or failure to act by
the Company, or any of its agents, contractors, servants, employees or
licensees; (c) the authorization, issuance and sale of the Bonds, and the
provision of any information furnished in connection therewith concerning the
Project Facilities or the Company (including, without limitation, any
information furnished by the Company for inclusion in any certifications made
by the Issuer under Section 3.4 hereof or for inclusion in, or as a basis for
preparation of, the Form 8038 information statement to be filed by the Issuer);
and (d) any claim or action or proceeding with respect to the matters set forth
in (a), (b) and (c) above brought thereon.
The Company agrees to indemnify the Trustee, the Paying Agent, the
Remarketing Agent and the Registrar (each hereinafter referred to in this
section as an "indemnified party") for and to hold each of them harmless
against all liabilities, claims, costs and expenses incurred without negligence
or willful misconduct on the part of the indemnified party, on account of any
action taken or omitted to be taken by the indemnified party in accordance with
the terms of this Agreement, the Bonds or the Indenture or any action taken at
the request of or with the consent of the Company, including the costs and
expenses of the indemnified party in defending itself against any such claim,
action or proceeding brought in connection with the exercise or performance of
any of its powers or duties under this Agreement, the Bonds or the Indenture.
In case any action or proceeding is brought against the Issuer or an
indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or proceeding
to the Company, and the Company upon receipt of that notice shall have the
obligation and the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not relieve the
Company from any of its obligations under this Section unless that failure
prejudices the defense of the action or proceeding by the Company. At its own
expense, an indemnified party may employ separate counsel and participate in
the defense; provided, however, where it is ethically inappropriate for one
firm to represent the interests of the Issuer and any other indemnified party
or parties, the Company shall pay the Issuer's legal expenses in connection
with the Issuer's retention of separate counsel. The Company shall not be
liable for any settlement made without its consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees of
the Issuer, the Trustee, the Paying Agent, the Remarketing Agent and the
Registrar, respectively. That indemnification is intended to and shall be
enforceable by the Issuer, the Trustee, the Paying Agent, the Remarketing Agent
and the Registrar, respectively, to the full extent permitted by law.
Section I.10. Company Not to Adversely Affect Exclusion of Interest on
Bonds From Gross Income For Federal Income Tax Purposes. The Company hereby
covenants and represents that it has taken and caused to be taken and shall
take and cause to be taken all actions that may be required of it for the
interest on the Bonds to be and remain excluded from the gross income of the
Holders for federal income tax purposes, and that it has not taken or permitted
to be taken on its behalf, and covenants that it will not take, or permit to be
taken on its behalf, any action which, if taken, would adversely affect that
exclusion under the provisions of the Code.
Section I.11. Use of Project Facilities. The Issuer agrees that it will
not take any action, or cause any action to be taken on its behalf, to
interfere with the Company's ownership interest in the Project or to prevent
the Company from having possession, custody, use and enjoyment of the Project
other than pursuant to Article VII of this Agreement or Article VII of the
Indenture.
Section I.12. Assignment by Company. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of either the Issuer or the Trustee, subject, however, to each of the following
conditions:
(a) No assignment (other than pursuant to Section 5.8 hereof) shall
relieve the Company from primary liability for any of its obligations
hereunder, and in the event of any such assignment the Company shall continue
to remain primarily liable for the payment of the Loan Payments and Additional
Payments and for performance and observance of the agreements on its part
herein provided to be performed and observed by it.
(b) Any assignment by the Company must retain for the Company such
rights and interests as will permit it to perform its obligations under this
Agreement, and any assignee from the Company shall assume the obligations of
the Company hereunder to the extent of the interest assigned.
(c) The Company shall, within 30 days after execution thereof, furnish
or cause to be furnished to the Issuer and the Trustee a true and complete copy
of each such assignment together with any instrument of assumption.
(d) Any assignment from the Company shall not materially impair
fulfillment of the Project Purposes to be accomplished by operation of the
Project as herein provided.
(End of Article V)
ARTICLE II
REDEMPTION
Section II.1. Optional Redemption. Provided no Event of Default shall
have occurred and be subsisting, at any time and from time to time, the Company
may deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made and direct the Trustee to use the moneys so
delivered for the purpose of calling Bonds for optional redemption in
accordance with the applicable provisions of the Indenture providing for
optional redemption at the redemption price stated in the Indenture. Pending
application for those purposes, any moneys so delivered shall be held by the
Trustee in a special account in the Bond Fund and delivery of those moneys
shall not, except as set forth in Section 4.1 hereof, operate to abate or
postpone Loan Payments or Additional Payments otherwise becoming due or to
alter or suspend any other obligations of the Company under this Agreement.
Section II.2. Extraordinary Optional Redemption. The Company shall have,
subject to the conditions hereinafter imposed, the option during a Term Rate
Period to direct the redemption of the Bonds in whole in accordance with the
applicable provisions of the Indenture upon the occurrence of any of the
following events:
(a) The Project or the Plant shall have been damaged or destroyed to
such an extent that (1) the Project or the Plant cannot reasonably be expected
to be restored, within a period of six consecutive months, to the condition
thereof immediately preceding such damage or destruction or (2) the Company is
reasonably expected to be prevented from carrying on its normal use and
operation of the Project or the Plant for a period of six consecutive months.
(b) Title to, or the temporary use of, all or a significant part of
the Project or the Plant shall have been taken under the exercise of the power
of eminent domain to such an extent (1) that the Project or the Plant cannot
reasonably be expected to be restored within a period of six consecutive months
to a condition of usefulness comparable to that existing prior to the taking or
(2) the Company is reasonably expected to be prevented from carrying on its
normal use and operation of the Project or the Plant for a period of six
consecutive months.
(c) As a result of any changes in the Constitution of the State, the
Constitution of the United States of America or any state or federal laws or as
a result of legislative or administrative action (whether state or federal) or
by final decree, judgment or order of any court or administrative body
(whether state or federal) entered after any contest thereof by the Issuer or
the Company in good faith, this Agreement shall have become void or
unenforceable or impossible of performance in accordance with the intent and
purpose of the parties as expressed in this Agreement.
(d) Unreasonable burdens or excessive liabilities shall have been
imposed upon the Issuer or the Company with respect to the Project or the Plant
or the operation thereof, including, without limitation, the imposition of
federal, state or other ad valorem, property, income or other taxes other than
ad valorem taxes at the rates presently levied upon privately owned property
used for the same general purpose as the Project or the Plant.
(e) Changes in the economic availability of raw materials, operating
supplies, energy sources or supplies or facilities (including, but not limited
to, facilities in connection with the disposal of industrial wastes) necessary
for the operation of the Project or the Plant for the Project Purposes occur or
technological or other changes occur which the Company cannot reasonably
overcome or control and which in the Company's reasonable judgment render the
Project or the Plant uneconomic or obsolete for the Project Purposes.
(f) Any court or administrative body shall enter a judgment, order or
decree, or shall take administrative action, requiring the Company to cease all
or any substantial part of its operations served by the Project or the Plant to
such extent that the Company is or will be prevented from carrying on its
normal operations at the Project or the Plant for a period of six consecutive
months.
(g) The termination by the Company of operations at the Plant.
The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:
(i) An amount of money which, when added to the moneys and
investments held to the credit of the Bond Fund, will be sufficient pursuant to
the provisions of the Indenture to pay, at 100% of the principal amount thereof
plus accrued interest to the redemption date, and discharge, all Outstanding
Bonds on the earliest applicable redemption date, that amount to be paid to the
Trustee, plus
(ii) An amount of money equal to the Additional Payments relating
to those Bonds accrued and to accrue until actual final payment and redemption
of those Bonds, that amount or applicable portions thereof to be paid to the
Trustee or to the Persons to whom those Additional Payments are or will be due.
The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
The rights and options granted to the Company in this Section may be
exercised whether or not the Company is in default hereunder; provided, that
such default will not relieve the Company from performing those actions which
are necessary to exercise any such right or option granted hereunder.
Section II.3. Mandatory Redemption. The Company shall deliver to the
Trustee the moneys needed to redeem the Bonds in accordance with any mandatory
redemption provisions relating thereto as may be set forth in Sections 4.01(b)
and 4.01(d) of the Indenture.
Section II.4. Notice of Redemption. In order to exercise an option
granted in, or to consummate a redemption required by, this Article VI, the
Company shall, within 180 days following the event authorizing the exercise of
such option, or at any time during the continuation of the condition referred
to in paragraphs (c), (d) or (e) of Section 6.2 hereof, or at any time that
optional redemption of the Bonds is permitted under the Indenture as provided
in Section 6.1 hereof, or promptly upon the occurrence of a Determination of
Taxability (as defined in the Indenture), give written notice to the Issuer and
the Trustee that it is exercising its option to direct the redemption of Bonds,
or that the redemption thereof is required by Section 4.01(b) of the Indenture
due to the occurrence of a Determination of Taxability, as the case may be, in
accordance with the Agreement and the Indenture, and shall specify therein the
date on which such redemption is to be made, which date shall not be more than
180 days from the date such notice is mailed. No notice from the Company will
be required in connection with a redemption of Bonds pursuant to the mandatory
sinking fund redemption pursuant to Section 4.01(d) of the Indenture. The
Company shall make arrangements satisfactory to the Trustee for the giving of
the required notice of redemption to the Holders of the Bonds, in which
arrangements the Issuer shall cooperate.
Section II.5. Actions by Issuer. At the request of the Company or the
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article VI.
(End of Article VI)
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
Section III.1. Events of Default. Each of the following shall be an
Event of Default:
(a) The occurrence of an event of default as defined in Section 7.01
(a), (b), (c) or (d) of the Indenture;
(b) The Company shall fail to observe and perform any other agreement,
term or condition contained in this Agreement, other than such failure as will
have resulted in an event of default described in (a) above and the
continuation of that failure for a period of 90 days after notice thereof shall
have been given to the Company by the Issuer or the Trustee, or for such longer
period as the Issuer and the Trustee may agree to in writing; provided, that
failure shall not constitute an Event of Default so long as the Company
institutes curative action within the applicable period and diligently pursues
that action to completion within 150 days after the expiration of initial cure
period as determined above, or within such longer period as the Issuer and the
Trustee may agree to in writing; and
(c) By decree of a court of competent jurisdiction the Company shall
be adjudicated a bankrupt, or an order shall be made approving a petition or
answer filed seeking reorganization or readjustment of the Company under the
federal bankruptcy laws or other law or statute of the United States of America
or of the state of incorporation of the Company or of any other state, or, by
order of such a court, a trustee in bankruptcy, a receiver or receivers shall
be appointed of all or substantially all of the property of the Company, and
any such decree or order shall have continued unstayed on appeal or otherwise
and in effect for a period of sixty (60) days; and
(d) The Company shall file a petition in voluntary bankruptcy or shall
make an assignment for the benefit of creditors or shall consent to the
appointment of a receiver or receivers of all or any part of its property, or
shall file a petition seeking reorganization or readjustment under the Federal
bankruptcy laws or other law or statute of the United States of America or any
state thereof, or shall file a petition to take advantage of any debtors' act.
Notwithstanding the foregoing, if, by reason of Force Majeure, the Company
is unable to perform or observe any agreement, term or condition hereof which
would give rise to an Event of Default under subsection (b) hereof, the Company
shall not be deemed in default during the continuance of such inability.
However, the Company shall promptly give notice to the Trustee and the Issuer
of the existence of an event of Force Majeure and shall use its best efforts to
remove the effects thereof; provided that the settlement of strikes or other
industrial disturbances shall be entirely within its discretion.
The term Force Majeure shall mean the following:
(i) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind of the
government of the United States of America or of the State or any of their
departments, agencies, political subdivisions or officials, or any civil or
military authority; insurrections; civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; tornados; storms;
droughts; floods; arrests; restraint of government and people; explosions;
breakage, nuclear accidents or other malfunction or accident to facilities,
machinery, transmission pipes or canals; partial or entire failure of a
utility serving the Project; shortages of labor, materials, supplies or
transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Company.
The exercise of remedies hereunder shall be subject to any applicable
limitations of federal bankruptcy law affecting or precluding that declaration
or exercise during the pendency of or immediately following any bankruptcy,
liquidation or reorganization proceedings.
Section III.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, either or both of the following remedial steps
may be taken:
(a) The Issuer or the Trustee may have access to, inspect, examine and
make copies of the books, records, accounts and financial data of the Company,
only, however, insofar as they pertain to the Project; or
(b) The Issuer or the Trustee may pursue all remedies now or hereafter
existing at law or in equity to recover all amounts, including all Loan
Payments and Additional Payments and under Section 4.8 hereof the purchase
price of Bonds tendered for purchase, then due and thereafter to become due
under this Agreement, or to enforce the performance and observance of any other
obligation or agreement of the Company under this Agreement.
Notwithstanding the foregoing, the Issuer shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Bond Service Charges collected pursuant
to action taken under this Section shall be paid into the Bond Fund and applied
in accordance with the provisions of the Indenture or, if the outstanding Bonds
have been paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in Section 5.07 of the Indenture for
transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further limitation that
the rescission and annulment by the Trustee of its declaration that all of the
Bonds are immediately due and payable also shall constitute a rescission and
annulment of any corresponding declaration made pursuant to this Section and a
rescission and annulment of the consequences of that declaration and of the
Event of Default with respect to which that declaration has been made, provided
that no such rescission and annulment shall extend to or affect any subsequent
or other default or impair any right consequent thereon.
Section III.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement, or now or hereafter existing at law, in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default
shall impair that right or power or shall be construed to be a waiver thereof,
but any such right or power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Issuer or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice, other than any notice required by law or for which express
provision is made herein.
Section III.4. Agreement to Pay Attorneys' Fees and Expenses. If an
Event of Default should occur and the Issuer or the Trustee should incur
expenses, including attorneys' fees, in connection with the enforcement of this
Agreement or the collection of sums due hereunder, the Company shall be
required, to the extent permitted by law, to reimburse the Issuer and the
Trustee, as applicable, for the expenses so incurred upon demand.
Section III.5. No Waiver. No failure by the Issuer or the Trustee to
insist upon the strict performance by the Company of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy
the failure by the Company to observe or comply with any provision hereof.
Section III.6. Notice of Default. The Company shall notify the Trustee
immediately if it becomes aware of the occurrence of any Event of Default
hereunder or of any fact, condition or event which, with the giving of notice
or passage of time or both, would become an Event of Default.
(End of Article VII)
ARTICLE IV
MISCELLANEOUS
Section IV.1. Term of Agreement. This Agreement shall be and remain in
full force and effect from the date of delivery of the Bonds to the Original
Purchaser until such time as (i) all of the Bonds shall have been fully paid
(or provision made for such payment) and the Indenture has been released
pursuant to Section 9.01 thereof and (ii) all other sums payable by the Company
under this Agreement shall have been paid.
Section IV.2. Amounts Remaining in Funds. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for four years after the due date
thereof (whether at stated maturity, by redemption, upon acceleration or
otherwise), at the option of the Company, shall be deemed to belong to and
shall be paid, subject to Section 5.06 of the Indenture, at the written request
of the Company, to the Company by the Trustee. With respect to that principal
of and any premium and interest on the Bonds to be paid from moneys paid to the
Company pursuant to the preceding sentence, the Holders of the Bonds entitled
to those moneys shall look solely to the Company for the payment of those
moneys. Further, any amounts remaining in the Bond Fund and any other special
funds or accounts created under this Agreement or the Indenture, except the
Rebate Fund, after all of the Bonds shall be deemed to have been paid and
discharged under the provisions of the Indenture and all other amounts required
to be paid under this Agreement and the Indenture have been paid, shall be paid
to the Company to the extent that those moneys are in excess of the amounts
necessary to effect the payment and discharge of the Outstanding Bonds.
Section IV.3. Notices. All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section 3.4
hereof, and shall be deemed to be sufficiently given when mailed by registered
or certified mail, postage prepaid, and addressed to the appropriate Notice
Address. A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Issuer, the Company, any Credit Facility
Issuer or the Trustee shall also be given to the others. The Company, the
Issuer, any Credit Facility Issuer and the Trustee, by notice given hereunder,
may designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section IV.4. Extent of Covenants of the Issuer; No Personal Liability.
All covenants, obligations and agreements of the Issuer contained in this
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall
be deemed to be a covenant, obligation or agreement of any present or future
member, officer, agent or employee of the Issuer in other than his official
capacity, and neither the members of the Issuer nor any official executing the
Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof or by reason of
the covenants, obligations or agreements of the Issuer contained in this
Agreement or in the Indenture.
Section IV.5. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Issuer, the
Company and their respective permitted successors and assigns provided that
this Agreement may not be assigned by the Company (except as permitted under
Sections 5.8 or 5.12 hereof) and may not be assigned by the Issuer except to
(i) the Trustee pursuant to the Indenture or as otherwise may be necessary to
enforce or secure payment of Bond Service Charges or (ii) any successor public
body to the Issuer.
Section IV.6. Amendments and Supplements. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and prior to all conditions provided for in the Indenture for release of
the Indenture having been met, this Agreement may not be effectively amended,
changed, modified, altered or terminated by the parties hereto except with the
consents required by, and in accordance with, the provisions of Article XI of
the Indenture, as applicable.
Section IV.7. References to Credit Facility. During such time or times
as no Credit Facility is in effect, and during the continuation of any event of
default under the Indenture due to a failure by the Credit Facility Issuer to
honor a drawing by the Trustee under the Credit Facility then in effect in
accordance with the terms thereof, references herein to the Credit Facility
Issuer shall be ineffective.
Section IV.8. Execution Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section IV.9. Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a judicial
or administrative authority to be invalid or unenforceable, that determination
shall not affect any other provision, covenant, obligation or agreement, each
of which shall be construed and enforced as if the invalid or unenforceable
portion were not contained herein. That invalidity or unenforceability shall
not affect any valid and enforceable application thereof, and each such
provision, covenant, obligation or agreement shall be deemed to be effective,
operative, made, entered into or taken in the manner and to the full extent
permitted by law.
Section IV.10. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be
governed by and construed in accordance with the laws of the State.
(End of Article VIII)
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be duly executed in their respective names, all as of the date hereinbefore
written.
CITY OF PRINCETON, INDIANA
By: /s/ George B. Taylor
Mayor
Attest:
/s/ Shirley Robb
Clerk-Treasurer
PSI ENERGY, INC.
By: /s/ William L. Sheafer
Treasurer
<PAGE>
Exhibit A
DESCRIPTION OF POLLUTION CONTROL FACILITIES
AT
GIBSON GENERATING STATION
Financed by Series 1973 Bonds
Financed by Series 1979 Bonds
BY-LAWS
OF
PSI ENERGY, INC.
_____________________________
AS ADOPTED SEPTEMBER 6, 1941
AND AMENDED TO OCTOBER 22, 1996
<PAGE>
BY-LAWS
OF
PSI ENERGY, INC.
__________
ARTICLE I
OFFICES
SECTION 1. The principal office of PSI Energy, Inc. shall
be at 1000 East Main Street, in the town of Plainfield, county of
Hendricks and state of Indiana; and the corporation may have such
other offices at such other places as the board of directors may
from time to time designate, or as the business of the
corporation may require.
ARTICLE II
SEAL
SECTION 1. The corporate seal shall be circular in form and
shall have inscribed thereon the words "PSI ENERGY, INC.-
CORPORATE SEAL-INDIANA.''
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 1. Any meeting of the shareholders may be held at
the office of the corporation in the town of Plainfield, Indiana,
or at such other place within or outside the state of Indiana
through the use of any means of communication by which all
shareholders participating may simultaneously hear each other at
the meeting. The place and manner of the meeting shall be
specified in the notice of such meeting, or if such meeting is
held upon waiver of notice, specified in the waiver of notice
signed by all of the shareholders.
SECTION 2. Except as otherwise directed by the board of
directors, all annual meetings of shareholders shall be held at
10:00 A.M. on the third Wednesday of April of each year if not a
legal holiday, and if a legal holiday, then on the next
succeeding day not a legal holiday, for the purpose of electing
directors and for the transaction of such other business as may
legally come before the meeting. The business to be transacted
at any annual meeting may be transacted at any special meeting
called for that purpose.
SECTION 3. Written or printed notice of the annual meeting,
stating the place, manner, day and hour of the meeting, shall be
delivered or mailed by the secretary or an assistant secretary to
each shareholder of record entitled to vote at such meeting, at
such address as appears on the records of the corporation, at
least ten days, but not more than sixty days, before the date of
the meeting.
SECTION 4. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute,
shall be held if called by the chairman, the president, an
executive vice president or a vice president, by the board of
directors, or by the shareholders holding of record such number
of the outstanding shares of the corporation as represents not
less than one-fourth of the aggregate number of votes that would
be voted at such meeting if there were voted thereat all the
outstanding shares entitled to vote on the business proposed to
be transacted thereat. All requests for special meetings of
shareholders shall state the time, manner, place and purpose
thereof. Only business within the purpose stated in such request
shall be conducted at such meeting.
SECTION 5. Written or printed notice of all special
meetings of shareholders, stating (i) the place, manner, day and
hour of the meeting, and (ii) the purpose or purposes for which
such meeting is called, shall be delivered or mailed by the
secretary or by the officers or persons calling the meeting to
each shareholder of record entitled to vote at such meeting at
such address as appears on the records of the corporation, at
least ten days before the date of such meeting.
SECTION 6. Notice of any meeting of shareholders may be
waived in writing by any shareholder if the waiver sets forth in
reasonable detail the purpose or purposes for which the meeting
is called and the time and place thereof. Attendance at any
meeting in person or by proxy shall constitute a waiver of notice
of such meeting.
SECTION 7. At any meeting of the shareholders, the holders
of record (present in person or represented by proxy) of such
number of the outstanding shares of the corporation as represents
a majority of the aggregate number of votes that would be voted
at such meeting if there were voted thereat all the outstanding
shares entitled to vote at such meeting, shall be requisite to
constitute a quorum for the election of directors or for the
transaction of other business, unless otherwise provided by law.
If, however, the holders of such majority shall not be present or
represented at any meeting of the shareholders of the
corporation, the shareholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than
announcement at the meeting, until the holders of such majority
shall be present or represented. At such adjourned meeting at
which the holders of such majority shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 8. Every shareholder shall have the right at every
shareholders' meeting to one vote for each share of stock
standing in his name on the books of the corporation, except as
otherwise provided by law or by the amended articles of
consolidation and except that no shares shall be voted at any
meeting upon which any installment is due and unpaid, or which
belongs to the corporation, or which shall have been transferred
on the books of the corporation within such number of days, not
exceeding seventy, next preceding the date of such meeting as the
board of directors shall determine, or, in the absence of such
determination, within ten days next preceding the date of such
meeting. At any adjourned meeting of shareholders, the board of
directors shall fix a record date for shareholders entitled to
vote at such adjourned meeting which must be a new date if the
meeting is adjourned for more than one hundred twenty days.
Voting for directors and, upon the demand of any
shareholder, voting upon any other question shall be by ballot.
On any vote by ballot, each ballot voted shall be signed either
by the shareholder voting the same, or, if the proxy of such
shareholder is on file with the secretary and
unrevoked, by the duly appointed agent or attorney of such
shareholder. The ballot of each shareholder voting shall be
deemed to be a vote of all the shares owned of record by such
shareholder and entitled to be voted on the matter unless such
shareholder or his duly appointed agent or attorney shall
designate on such ballot that a lesser number of shares are
voted. A plurality vote shall be sufficient to elect any
director.
SECTION 9. The secretary shall make, or cause the agent
having charge of the stock transfer books of the corporation to
make, at least five days before each election of directors, a
complete list of the shareholders entitled by the amended
articles of consolidation to vote at such election, arranged in
alphabetical order, with the address and number of shares so
entitled to vote held by each, which list shall be on file at the
principal office of the corporation and subject to inspection by
any shareholder within the usual business hours during said five
days. Such list shall be produced and kept open at the time and
place of election and subject to the inspection of any
shareholder or shareholder's agent or attorney authorized in
writing during the holding of such election. The original stock
register or transfer book, or the duplicate thereof kept in the
state of Indiana, shall be the only evidence as to who are the
shareholders entitled to examine such list or the stock ledger or
transfer book or to vote at any meeting of the shareholders.
SECTION 10. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or a duly authorized
agent or attorney in fact. No proxy shall be valid after eleven
months from the date of its execution, unless a longer time is
expressly provided therein.
SECTION 11. The secretary, who may call on any officer or
officers of the corporation for assistance, shall make all
necessary and appropriate arrangements for the meetings of the
shareholders, receive all proxies, and ascertain and report by
certificate to each meeting of the shareholders the number of
shares present in person or by proxy and entitled to vote at such
meeting. In the absence of the secretary, an assistant secretary
shall perform said duties. The certificate report of the
secretary or an assistant secretary as to the regularity of such
proxies and as to the number of shares present in person or by
proxy and entitled to vote at such meeting shall be received as
prima facie evidence of the number of shares, which are present
in person and by proxy and entitled to vote, for the purpose of
establishing the presence of a quorum at such meeting, for the
purpose of organizing such meeting, and for all other purposes.
SECTION 12. The chairman, when present, shall preside at
the meetings of the shareholders. In the event of the absence or
disability of the chairman, the president, if present, shall so
preside, and if he is not present, an executive vice president,
if present, shall so preside, and if an executive vice president
is not present, a vice president, if present, shall so preside.
In the event no such officers are present, the meeting shall
choose a presiding officer.
SECTION 13. At each meeting of the shareholders, (i) the
proxies shall be received and taken in charge by three
inspectors, (ii) where voting is to be by ballot on any question,
the polls shall be opened and closed and the ballots shall be
taken in charge by such inspectors, and (iii) all questions
touching the qualification of voters, the validity of proxies and
the acceptance or rejection of votes shall be decided by such
three inspectors or a majority thereof. Such inspectors may be
appointed by the board of directors before such meeting, or, if
no such appointment shall have been made, then by the presiding
officer at such meeting. In the event for any reason any of the
inspectors previously appointed shall fail to attend such
meeting, or being present will not or cannot act in such
capacity, then an inspector or inspectors in place of such
inspector or inspectors failing to attend or not acting shall be
appointed by the presiding officer.
SECTION 14. The order of business at each annual meeting of
the shareholders, and, as far as applicable, at each special
meeting of the shareholders, shall be as follows:
(1) call to order by the presiding officer,
(2) presentation of proofs of due call and notice of the
meeting, provided, however, that the certificate of the
secretary or assistant secretary that such notices were
mailed, or the affidavit of such other person or
persons who mailed the notices of such meeting, shall
be conclusive evidence of such mailing,
(3) submission of an alphabetical list of shareholders
entitled to vote,
(4) certificate and report of the secretary or assistant
secretary as to the number of shares present in person
or by proxy and entitled to vote,
(5) ruling by presiding officer as to the presence of a
quorum and the due organization of the meeting for the
transaction of business,
(6) announcement by the presiding officer of the persons
to act as inspectors at such meeting,
(7) reading or presentation of the minutes of previous
meeting of shareholders,
(8) presentation of annual report to shareholders,
(9) election of directors and announcement in respect of
annual meeting of directors,
(10) unfinished business,
(11) new business, and
(12) adjournment.
SECTION 15. The chairman shall have the right and authority
to prescribe such rules, regulations and procedures and to do all
such acts and things as are necessary or desirable
for the proper conduct of meetings of the shareholders,
including, without limitation, the establishment of procedures
for the maintenance of order, safety, limitations on the time
allotted to questions or comments on the affairs of the
corporation, restrictions on entry to such meeting of the
shareholders after the time prescribed for the commencement
thereof, and the opening and closing of the voting polls.
SECTION 16. The annual meeting of shareholders shall be
held at such time as is provided in Section 2 of this Article for
the purpose of electing directors and for the transaction of only
such other business as is properly brought before the meeting in
accordance with these by-laws. To be properly brought before the
annual meeting, business must be either (a) specified in the
notice of the annual meeting (or any supplement thereto) given by
or at the direction of the board, (b) otherwise properly brought
before the annual meeting by or at the direction of the board, or
(c) otherwise properly brought before the annual meeting by a
shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation. To be
timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the corporation,
not less than fifty days nor more than seventy-five days prior to
the annual meeting; provided, however, that in the event that
less than sixty-five days' notice or prior public disclosure of
the date of the annual meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth day following
the date on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first
occurs. A shareholder's notice to the secretary shall set forth
as to each matter the shareholder proposes to bring before the
annual meeting, (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and
record address of the shareholder proposing such business, (iii)
the class and number of shares of the corporation which are
beneficially owned by the shareholder, and (iv) any material
interest of the shareholder in such business.
Notwithstanding anything in the by-laws to the contrary, no
business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Article III,
provided, however, that nothing in this Article III shall be
deemed to preclude discussion by any shareholder of any business
properly brought before the annual meeting.
The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the annual meeting that
business was not properly brought before the annual meeting in
accordance with the provisions of this Article III, and if he
should so determine, he shall so declare to the annual meeting,
and any such business not properly brought before the annual
meeting shall not be transacted.
SECTION 17. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the board of
the corporation at the annual meeting may be made at the annual
meeting of shareholders by or at the direction of the board of
directors, by any nominating committee or person appointed by the
board, or by any shareholder of the corporation, entitled to vote
for the election of directors at the annual meeting, who complies
with the notice procedures set forth in this Article III. Such
nominations, other than those made by or at the direction of the
board, shall be made pursuant to timely notice in writing to the
secretary of the corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than
fifty days nor more than seventy-five days prior to the annual
meeting; provided, however, that in the event that less than
sixty-five days' notice or prior public disclosure of the date of
the annual meeting is given or made to shareholders, notice to
the secretary shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a
director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of
capital stock of the corporation which are beneficially owned by
the person, (iv) a written statement that the person is willing
to serve as a director filed with the secretary at least five (5)
days prior to the date of the annual meeting and (v) any other
information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Rule 14a under the Securities Exchange Act of 1934,
as amended; and (b) as to the shareholder giving the notice (i)
the name and record address of the shareholder, and (ii) the
class and number of shares of capital stock of the corporation
which are beneficially owned by the shareholder. The corporation
may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee to serve as
director of the corporation. No person shall be eligible for
election as a director of the corporation unless nominated in
accordance with the procedures set forth herein.
The chairman of the annual meeting shall, if the facts
warrant, determine and declare to the annual meeting that a
nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to
the annual meeting, and the defective nomination shall be
disregarded.
SECTION 18. An annual meeting of shareholders may be
adjourned or postponed to a different time or place, and notice
of the new date, time or place need not be given if such
adjournment or postponement is announced at the annual meeting
before adjournment.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of this
corporation managed under the direction of, a board of not less
than one (1) nor more than seven (7) directors. The directors
shall be elected by the shareholders at each annual meeting of
the shareholders. Each director shall be elected for a term of
one year and shall hold office until his successor is chosen and
qualified. Any vacancy occurring in the board of directors
caused by death, resignation, increase in number of directors or
otherwise, may be filled by a majority vote of the remaining
members of the board of directors until the next annual meeting
of the shareholders. No person shall be eligible for election,
reelection or appointment as a member of the board of directors
if the time of such election, reelection or appointment is a date
subsequent to the end of the calendar year in which such person
attained the age of seventy (70) years. No person shall remain a
director after reaching the age of seventy (70) years; provided,
however, that such director shall continue as a director until
January 1 of the year following the year in which the director
reached the age of seventy (70) years. Subject to the provisions
of the preceding paragraphs, any and all of the directors may
only be removed for cause. The directors shall receive such
reasonable compensation as shall from time to time be provided
for by resolution of the board of directors or a committee
thereof.
SECTION 2. In addition to the powers and authority by these
by-laws expressly conferred upon it, the board of directors may
do all such lawful acts and things as are not by the laws of the
state of Indiana, by the amended articles of consolidation of the
corporation, or by these by-laws directed or required to be
exercised or done by the shareholders of the corporation.
SECTION 3. A meeting of the directors, to be known as the
annual meeting of the board of directors, shall be held at the
principal office of the corporation at such time and date as the
board of directors may determine, or at such other place, within
or without the state of Indiana, and at such other time as shall
be fixed by the shareholders at their annual meeting, or as shall
be fixed by the consent in writing of all of such newly elected
directors, for the election of officers and for the transaction
of such other business as may properly come before the meeting.
No notice of such annual meeting shall be necessary or required
in order legally to constitute the meeting if a majority of the
newly elected directors shall be present. If a majority shall
not be present at such meeting, those present shall adjourn the
meeting to a specified time and place, and the secretary or an
assistant secretary shall at once notify each of the newly
elected directors of the time and place of holding such adjourned
annual meeting.
SECTION 4. Regular meetings of the board of directors or
any committee thereof may be held at stated times, or from time
to time, and at such place, either within or without the state of
Indiana, as the board of directors or any committee may
determine, without call and without notice. Any or all members
of the board of directors or a committee thereof may participate
in any meeting of the board or committee by any means of a
communication by which all persons participating in the meeting
can simultaneously communicate with each other, and participation
in this manner constitutes presence in person at the meeting.
SECTION 5. Special meetings of the board of directors may
be called at any time, or from time to time, by the chairman, the
president, an executive vice president or a vice president by
causing the secretary or an assistant secretary to give to each
director, either personally or by telephone, mail or telegraph,
at least two days' notice of the time and place of such meeting.
Special meetings of the board of directors shall be called by the
chairman, the president, an executive vice president or a vice
president in like manner and on like notice at the written
request of at least two directors. Special meetings of the board
of directors may be held at the principal office of the
corporation or at such other place, within or without the state
of Indiana, as shall be specified in the notice of the meeting,
or, if held upon waiver of notice, as shall be specified in such
waiver.
SECTION 6. Any meeting of the board of directors or any
committee thereof, wheresoever held, at which all of the members
are present, shall be as valid as if held pursuant to proper
notice, and in case a meeting shall be held without notice when
all are not present but the absent directors shall have signed a
waiver of notice of such meeting, whether before or after the
time stated in said waiver, or shall thereafter sign the minutes
of the meeting, the same shall be as valid and binding as though
called upon due notice.
SECTION 7. The board of directors may take any action
pursuant to these by-laws without a meeting if the action is
taken by all members of the board. The action shall be evidenced
by one or more written consents describing the action taken,
signed by each director and included in the minutes or filed with
the corporate records reflecting the action taken. Action taken
without a meeting shall be effective when the last director signs
the consent, unless the consent specifies a different prior or
subsequent effective date.
SECTION 8. At all meetings of the board of directors, a
majority of the members of the board of directors shall be
necessary to constitute a quorum for the transaction of any
business except the filling of vacancies, but a less number may
adjourn the meeting from time to time until a quorum is present.
The act of a majority of the board of directors present at a
meeting at which a quorum is present shall be the act of the
board of directors, unless the act of a greater number is
required by law or by the amended articles of consolidation or by
the by-laws.
SECTION 9. The board of directors may, by resolution
adopted by a majority of the members of the board of directors,
designate two or more of their number to constitute a committee
of the board of directors. The board of directors shall form an
executive committee, which committee shall have and exercise all
of the authority of the board of directors in the management of
the corporation to the fullest extent permitted by the laws of
the state of Indiana, including the power to declare dividends
and distributions from time to time within guidelines to be
established by the board of directors. Neither such guidelines
nor the powers granted to the executive committee hereby may be
amended in any way by the board of directors, and the members of
the executive committee appointed by the board of directors may
not be changed by the board of directors, without the affirmative
vote of 75% of the directors then in office, rounded upwards.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall consist of
a chairman of the board, a chief executive officer, a president,
a secretary, a treasurer, a comptroller and may consist of a vice
chairman, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, or one or more
assistant comptrollers. If deemed advisable by the board of
directors, any two or more offices may be held by the same
person, except that the duties of the chairman, the vice
chairman, the chief executive officer, or the president shall not
be performed by the same person who performs the duties of
secretary.
SECTION 2. The officers of the corporation hereinabove
provided for shall be elected by the board of directors at its
annual meeting and shall hold office for one year and/or until
their respective successors shall have been duly elected and
shall have qualified.
SECTION 3. The board of directors may, from time to time,
elect or appoint such other officers and agents as it shall deem
necessary, who shall hold their respective offices for such terms
and shall exercise such powers and perform such duties as may be
prescribed from time to time by the by-laws, or as in absence of
provision in the by-laws in respect thereto may be prescribed
from time to time by the board of directors.
SECTION 4. Any vacancy among the officers or agents of the
corporation, duly elected or appointed by the board of directors
shall be filled for the unexpired term by the board of directors.
Any officer or agent elected or appointed by the board of
directors, may be removed at any time, with or without cause, by
the affirmative vote of a majority of the whole board of
directors.
SECTION 5. In the case of the absence, disability, death,
resignation or removal from office of any officer of the
corporation, or for any other reason that the board of directors
shall deem sufficient, the board of directors may delegate, for
the time being, the powers and/or duties, or any of them, of such
officer to any other officer or to any director.
SECTION 6. The chairman of the board shall be a director
and shall preside at all meetings of the board of directors and,
in the absence or inability to act of the chief executive
officer, meetings of shareholders and shall, subject to the
board's direction and control, be the board's representative and
medium of communication, and shall perform such other duties as
may from time to time be assigned to the chairman of the board by
the board of directors. The chairman of the board shall direct
the long-term strategic planning process of the corporation and
shall also lend his or her expertise to such other officers as
may be requested from time to time by such officers. The
chairman shall be a member of the executive committee.
SECTION 7. The vice chairman of the board, if there be one,
shall be a director and shall preside at meetings of the board of
directors in the absence or inability to act of the chairman of
the board or meetings of shareholders in the absence or inability
to act of the chief executive officer and the chairman of the
board. The vice chairman shall perform such other duties as may
from time to time be assigned to him or her by the board of
directors. The vice chairman shall be a member of the executive
committee.
SECTION 8. The chief executive officer shall be a director
and shall preside at all meetings of the shareholders, and, in
the absence or inability to act of the chairman of the board and
the vice chairman, at all meetings of the board of directors.
The chief executive officer shall submit a report of the
operations of the corporation for the fiscal year to the
shareholders at their annual meeting and from time to time shall
report to the board of directors all matters within his or her
knowledge which the interests of the corporation may require be
brought to their notice. The chief executive officer shall be
the chairman of the executive committee and ex officio a member
of all standing committees.
SECTION 9. The president shall, subject to the control of
the board of directors, the executive committee, the chairman,
the vice chairman, and the chief executive officer, have general
supervision over the management and direction of the affairs of
the corporation, and supervision of all departments and of all
officers of the corporation. The president shall, subject to the
other provisions of these by-laws, have such other powers and
perform such other duties as usually devolve upon the president
of a corporation, and such further duties as may be prescribed by
the board of directors, the executive committee, the chairman,
the vice chairman, or the chief executive officer. The president
shall report to the chief executive officer. In the absence or
incapacity of the chairman, vice chairman or chief executive
officer, the president may preside at
meetings of the board of directors and/or meetings of the
shareholders. In case of the absence, disability, death,
resignation or removal from office of the president, the powers
and duties of the president shall, for the time being, devolve
upon and be exercised by a vice president, unless otherwise
ordered by the board of directors, the executive committee, the
chairman, the vice chairman, or the chief executive officer.
SECTION 10. Each of the vice presidents shall have such
powers and duties as may be prescribed by the board of directors
or the executive committee, or be delegated by the chairman, the
vice chairman, the chief executive officer, or the president. In
the absence or incapacity of the president, the vice president
designated by the board of directors or executive committee,
chairman, vice chairman, chief executive officer, or president
shall exercise the powers and duties of the president.
SECTION 11. The secretary shall have the custody and care
of the corporate seal, records, minutes and stock books of the
corporation and shall be responsible for authentication of such
records. The secretary shall attend the meetings of the board of
directors and of the shareholders and duly record, prepare and
keep the minutes of their proceedings in a book or books to be
kept for that purpose. The secretary shall give or cause to be
given notice of all meetings of the shareholders and the board of
directors when such notice shall be required. The secretary shall
file and take charge of all papers and documents belonging to the
corporation and shall have such other powers and duties as are
incident to the office of secretary of a corporation, subject at
all times to the direction and control of the board of directors,
the executive committee, the chairman, the vice chairman, the
chief executive officer, and the president. In case of the
absence, disability, death, resignation or removal from office of
the secretary, the powers and duties of the secretary shall, for
the time being, devolve upon and be exercised by an assistant
secretary, unless otherwise ordered by the board of directors,
the executive committee, the chairman, the vice chairman, the
chief executive officer, or the president.
SECTION 12. Each of the assistant secretaries (if assistant
secretaries be elected or appointed by the board of directors)
shall assist the secretary in his or her duties and shall have
such other powers and duties as may be prescribed by the board of
directors or the executive committee, or be delegated by the
chairman, the vice chairman, the chief executive officer, or the
president. In case of the absence, disability, death,
resignation or removal from office of the secretary, the powers
and duties shall, for the time being, devolve upon such one of
the assistant secretaries as the board of directors, the
executive committee, the chairman, the vice chairman, the chief
executive officer, the president or the secretary may designate,
or, if there be but one assistant secretary, then upon such
assistant secretary; and he or she shall thereupon, during such
period, exercise and perform all of the powers and duties of the
secretary, except as may be otherwise provided by the board of
directors, the executive committee, the chairman, the vice
chairman, the chief executive officer, or the president.
SECTION 13. The treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and
disbursement of the funds of the corporation, and shall have the
custody also of all securities belonging to the corporation. The
treasurer shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation. The
treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors or the executive committee,
taking proper receipts or making proper vouchers for such
disbursements and shall preserve the same at all times during his
or her term of office. When necessary or proper, the treasurer
shall endorse on behalf of the corporation all checks, notes or
other obligations payable to the corporation or coming into his
or her possession for or on behalf of the corporation and shall
deposit the funds arising therefrom together with all other funds
and valuable effects of the corporation coming into his or her
possession in the name and to the credit of the corporation in
such depositories as the board of directors or the executive
committee from time to time, by resolution, shall direct. The
treasurer shall have such other powers and duties as are incident
to the office of treasurer of a corporation, subject at all times
to the direction and control of the board of directors, the
executive committee, the chairman, the vice chairman, the chief
executive
officer, and the president.
The treasurer shall render to the chairman, the vice
chairman, the chief executive officer, the president, the
executive committee, and the board of directors, at meetings of
the board of directors or the executive committee, or whenever
the same shall be required, an account of all
transactions as treasurer and of the financial condition of the
corporation. The treasurer shall give the corporation a bond, if
required by the board of directors or the executive committee, in
such an amount and with such surety or sureties as may be ordered
by the board of directors or the executive committee, for the
faithful performance of the duties of the office and for the
restoration to the corporation, in case of death, resignation,
retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the
possession or under the control of the treasurer and belonging to
the corporation.
In case of the absence, disability, death, resignation or
removal from office of the treasurer, the powers and duties of
the treasurer shall, for the time being, devolve upon and be
exercised by an assistant treasurer, unless otherwise ordered by
the board of directors, the executive committee, the chairman,
the vice chairman, the chief executive officer, or the president.
SECTION 14. Each of the assistant treasurers (if assistant
treasurers be elected or appointed by the board of directors)
shall assist the treasurer in his or her duties, and shall have
such other powers and duties as may be prescribed by the board of
directors or the executive committee, or be delegated by the
chairman, the vice chairman, the chief executive officer, or the
president. In case of the absence, disability, death,
resignation or removal from office of the treasurer, the powers
and duties shall, for the time being, devolve upon such one of
the assistant treasurers as the board of directors, the executive
committee, the chairman, the vice chairman, the chief executive
officer, the president or the treasurer may designate, or, if
there be but one assistant treasurer, then upon such assistant
treasurer; and he or she shall thereupon, during such period,
exercise and perform all of the powers and duties of the
treasurer, except as may be otherwise provided by the board of
directors, the executive committee, the chairman, the vice
chairman, the chief executive officer, or the president. Each or
any assistant treasurer shall likewise give the corporation a
bond, if required by the board of directors, in such amount and
with such surety or sureties as may be ordered by the board of
directors.
SECTION 15. The comptroller shall have control over all
accounts and records of the corporation pertaining to moneys,
properties, materials and supplies. The comptroller shall have
executive direction of the bookkeeping and accounting departments
and shall have general supervision over the records in all other
departments pertaining to moneys, properties, materials and
supplies. The comptroller shall have such other powers and
duties as are incident to the office of comptroller of a
corporation, subject at all times to the direction and control of
the board of directors, the executive committee, the chairman,
the vice chairman, the chief executive officer, and the
president. In case of the absence, disability, death,
resignation or removal from office of the comptroller, the powers
and duties of the comptroller shall, if an assistant comptroller
has been elected by the board of directors or the executive
committee, for the time being, devolve upon and be exercised by
an assistant comptroller, unless otherwise ordered by the board
of directors, the executive committee, the chairman, the vice
chairman, the chief executive officer, or the president.
SECTION 16. Each of the assistant comptrollers (if
assistant comptrollers be elected or appointed by the board of
directors) shall assist the comptroller in his or her duties, and
shall have such other powers and duties as may be prescribed by
the board of directors or the executive committee, or be
delegated by the chairman, the vice chairman, the chief executive
officer, or the president. In case of the absence, disability,
death, resignation or removal from office of the comptroller, the
powers and duties shall, for the time being, devolve upon such
one of the assistant comptrollers as the board of directors, the
executive committee, the chairman, the vice chairman, the chief
executive officer, the president or the comptroller may
designate, or, if there be but one assistant comptroller, then
upon such assistant comptroller; and he or she shall thereupon,
during such period, exercise and perform all of the powers and
duties of the comptroller, except as may be otherwise provided by
the board of directors, the executive committee, the chairman,
the vice chairman, the chief executive officer, or the president.
ARTICLE VI
CERTIFICATES FOR SHARES
SECTION 1. Each certificate for shares of stock of the
corporation shall be in such form, consistent with law, as shall
be approved by the board of directors, shall be numbered
consecutively as issued, shall state the name of the registered
holder, the number of shares represented thereby, and such other
matters and things as are required by law or by the amended
articles of consolidation to be stated in such certificate. Each
such certificate shall be signed by the chairman, the chief
executive officer, the president, or a vice president, and the
secretary or an assistant secretary; and may have affixed thereto
the seal of the corporation. In any case where the seal of the
corporation is affixed to such a certificate, such seal may be a
facsimile, engraved or printed. In any case where such a
certificate is also signed by a transfer agent and a registrar or
either of them, the respective signatures of the chairman, the
chief executive officer, the president, or a vice president, and
of the secretary or an assistant secretary thereon may be
facsimiles, engraved or printed.
The board of directors or the finance committee may, by
resolution duly adopted, authorize the issue of some or all of
the shares of any or all classes or series of stock of the
corporation without certificates.
SECTION 2. Shares of stock of the corporation shall be
entered in the books of the corporation as they are issued, and
shall be transferable on the books of the corporation by the
holder thereof in person, or by his, her or its attorney duly
authorized thereto in writing, upon the surrender of the
outstanding certificate therefor properly endorsed.
SECTION 3. The corporation and its officers shall be
entitled to treat the holder of record of any share or shares of
stock of the corporation as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person or persons, whether or not it shall have express
or other notice thereof, save as expressly provided by the laws
of Indiana, or except as in the amended articles of consolidation
or in these by-laws provided to the contrary.
SECTION 4. Shares of the capital stock of the corporation
may be issued and disposed of by the corporation from time to
time for such consideration as may be fixed from time to time by
resolution of the board of directors.
SECTION 5. The purchase price of all stock subscribed or
purchased shall be paid as from time to time determined by
resolution of the board of directors, either wholly or partly in
money, labor or property. Said payments shall be made within
such time and in such installments or upon such terms as the
board of directors may from time to time determine and direct.
SECTION 6. Before the corporation shall issue, in place of
any certificate of stock in the corporation claimed to have been
mislaid, lost, stolen or destroyed (such a certificate being
hereinafter referred to as a "Lost Certificate''), a new
certificate or certificates to replace the Lost Certificate, the
person seeking the issue of such new certificate or certificates
shall make affidavit or affirmation of the fact of such
mislaying, loss, theft or destruction, shall furnish such, if
any, other proof of ownership, interest, and disappearance of the
Lost Certificate as the corporation or any transfer agent for it
shall require, and shall at the option of the corporation in
each such case either:
(i) give the corporation either a bond of indemnity with one
or more sureties satisfactory to the board of directors of
the corporation or a sole obligor indemnity bond executed by
a corporation then authorized to transact the business of
indemnity and suretyship in the state of Illinois or the
state of New York and satisfactory to said board which
surety or sole obligor bond shall be in form and substance
satisfactory to said board and shall be (as said board may
direct in any case) either (a) an "open penalty bond'' or
(b) a bond having a fixed maximum amount of liability
specified therein which amount shall be such amount as said
board may direct that is not in excess of twice the par
value of the shares represented by the Lost Certificate if
such shares have a par value, or of twice the market value
of such shares at the date replacement of the Lost
Certificate is requested if the shares represented by such
Lost Certificate be shares without par value, or
(ii) if there is then in force and effect a Blanket Lost
Original Instruments Bond which appertains to such Lost
Certificate, protects the corporation from liability growing
out of the issue of a new stock certificate or certificates
in lieu of such Lost Certificate and has been executed and
delivered by a corporation then authorized to transact the
business of indemnity and suretyship in the state of
Illinois or the state of New York, furnish the corporation
or one of its transfer agents with such instruments or
information as are required in order that the indemnity
provisions of such bond will apply to the new stock
certificate or certificates issued in lieu of such Lost
Certificate.
When the aforesaid conditions shall have been satisfied, a
new stock certificate or certificates of the same tenor and for
the same total number of shares as the Lost Certificate shall be
issued by the corporation in the name of the record owner of the
Lost Certificate.
SECTION 7. Every shareholder shall furnish the secretary
with an address to which notices of meetings and all other
notices may be served upon him or mailed to him, and in default
thereof notices may be addressed to him at his last known address
or at the office of the corporation at Plainfield, Indiana.
ARTICLE VII
CORPORATE BOOKS
SECTION 1. Except as hereinafter or by the amended articles
of consolidation or by law otherwise provided, the books and
records of the corporation may be kept at such place or places,
within or without the state of Indiana, as the board of directors
may from time to time by resolution determine.
SECTION 2. The original or duplicate stock register or
transfer book, or, in case a stock registrar or transfer agent
shall be employed by the corporation either within or without the
state of Indiana, a complete and accurate shareholders' list,
alphabetically arranged, giving the names and addresses of all
shareholders, the number and classes of shares held by each and
the time each became the record owner of his shares, shall be
kept at the principal office of the corporation in the state of
Indiana.
SECTION 3.
(a) A shareholder or his agent or attorney, if
authorized in writing, may inspect and copy, during
regular business hours at the principal office of the
corporation, any of the following records of the
corporation if the shareholder meets the requirements
of subsection (b) and gives the corporation written
notice of the shareholder's demand at least five (5)
business days before the date on which the shareholder
wishes to inspect and copy:
(1) excerpts from minutes of any meeting of the
board of directors, records of any action of a
committee of the board of directors while acting
in place of the board of directors on behalf of
the corporation, minutes of any meeting of the
shareholders, and records of action taken by the
shareholders or board of directors without a
meeting;
(2) accounting records of the corporation; and
(3) the record of shareholders.
(b) A shareholder may inspect and copy the records
identified in subsection (a) only if:
(1) the shareholder's demand is made in good faith
and for a proper purpose;
(2) the shareholder describes with reasonable
particularity the shareholder's purpose and the
records the shareholder desires to inspect; and
(3) the records are directly connected with the
shareholder's purpose.
SECTION 4. The stock transfer books of the corporation may
from time to time be closed by order of the board of directors
for any lawful purpose, and for such periods consistent with law,
but not exceeding seventy days at any one time, as the board of
directors may deem advisable. In lieu of closing the stock
transfer books as aforesaid, the board of directors may, in its
discretion, fix in advance a date not exceeding seventy days (or
such lesser number of days as may in any case be the maximum
number allowed under any applicable statute) next preceding the
date of any meeting of shareholders or the date for the payment
of any dividend or the date for the allotment of rights or the
date when any change or conversion or exchange of capital stock
shall go into effect, as the record date for the determination of
the shareholders entitled to notice of and to vote at any such
meeting or entitled to receive any such dividend or to any such
allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock; and, in
such case, only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to notice of and to
vote at such meeting or to receive such payment of dividend or to
receive such allotment of rights or to exercise such rights as
the case may be, notwithstanding any transfer of stock on the
books of the corporation after such record date fixed as
aforesaid.
SECTION 5. All books and records of the corporation shall
be kept and maintained in such manner and for such periods as
required by statute.
ARTICLE VIII
CHECKS, DRAFTS AND WRITTEN INSTRUMENTS-
STOCK OWNED IN OTHER CORPORATIONS
SECTION 1. All mortgage bonds and all debentures of the
corporation shall, unless otherwise directed by the board of
directors or unless otherwise required by law, be signed by the
chairman, the chief executive officer, the president, a vice
president or the treasurer, and the secretary or an assistant
secretary of the corporation, and may have affixed thereto the
seal of the corporation or a facsimile thereof: provided,
however, that in any case where there appears on such bond or
debenture a Trustee's Certificate, which states in substance that
the bond or debenture is one of the bonds or debentures issued
under the indenture or supplemental indenture described therein
and which is manually signed by an authorized officer of such
trustee, the signatures of the aforementioned authorized officers
of the corporation on such bond or debenture may be a facsimile
signature, engraved or printed; and provided, further, that in
case of the issue by the corporation of a bond or debenture with
an interest coupon or coupons attached thereto such interest
coupon or coupons shall be signed by the treasurer or an
assistant treasurer of the corporation and such signature may be
a facsimile signature, engraved or printed.
SECTION 2. Except as provided in the immediately succeeding
sentence of this Section 2, all checks, drafts, notes, demands or
orders for the payment of money of the corporation shall be
signed by one or more of such officers or other employees of this
corporation and the signature of any such officer or other
employee may be a facsimile signature, all as the board of
directors shall at any time and from time to time by resolution
or resolutions specify; provided, however, that in the cases of
drafts not exceeding $3,000 for any one such draft, used by this
corporation, the board of directors may empower the chairman, the
chief executive officer, the president, and the vice presidents,
or any of them, to designate in writing the one or more officers
or other employees authorized to sign such drafts. To the extent
that the board of directors may by resolution or resolutions
authorize from time to time the signature of this corporation, on
checks of this corporation which are used solely for the purpose
of transferring funds from the account of this corporation in any
bank or trust company to the account of this corporation in any
other bank or trust company, may be only the printed name of this
corporation.
SECTION 3. Except as otherwise provided by these by-laws,
(i) all deeds and mortgages made by this corporation shall be
executed in its name by the chairman, the chief executive
officer, the president, a vice president or the treasurer and
shall be attested by the secretary or an assistant secretary, and
such secretary or assistant secretary shall affix the corporate
seal thereto, and (ii) all other written agreements to which this
corporation shall be a party shall be executed in its name by the
chairman, the chief executive officer, the president, a vice
president or the treasurer, and may be (but need not be) attested
by the secretary or an assistant secretary who may affix the
corporate seal thereto. Notwithstanding the immediately
preceding sentence of this Section 3, written agreements of this
corporation (other than deeds and mortgages made by this
corporation), which pertain to the routine operations of this
corporation and are regularly being made in the ordinary course
of carrying on such operations, may be executed for and on behalf
of this corporation by any officer or officers of this
corporation, or by any other agent or agents of this corporation,
to the extent that such person or persons may, from time to time,
be so authorized to act by either resolution of the board of
directors or by written authorization of an officer of this
corporation who has been authorized by resolution of the board of
directors to execute such written authorization.
SECTION 4. Subject always to the further orders and
directions of the board of directors, any share or shares of
stock issued by any corporation and owned by this corporation
(including reacquired shares of stock of this corporation) may,
for sale or transfer, be endorsed in the name of this corporation
by the chairman, the chief executive officer, the president, a
vice president or the treasurer of this corporation, and said
endorsement shall be duly attested by the secretary or an
assistant secretary of this corporation either with or without
affixing thereto the corporate seal.
SECTION 5. Subject always to the further orders and
directions of the board of directors, any share or shares of
stock issued by any other corporation and owned or controlled by
this corporation may be voted at any shareholders' meeting of
such other corporation by the chairman of this corporation, or in
his or her absence by the chief executive officer of this
corporation, or in his or her absence by the president of this
corporation, or in the absence of any of such officers by any
vice president or by the treasurer of this corporation.
Whenever, in the judgment of the chairman, the chief executive
officer, the president, a vice president or the treasurer of this
corporation, it is desirable for this corporation to execute a
proxy or give a shareholder's consent in respect of any share or
shares of stock issued by any other corporation and owned by this
corporation, such proxy or consent shall be executed in the name
of this corporation by the chairman, the chief executive officer,
the president, a vice president or the treasurer of this
corporation, and shall be attested by the secretary or an
assistant secretary of this corporation under the corporate seal.
Any person or persons designated in the manner above stated as
the proxy or proxies of this corporation shall have full right,
power and authority to vote the share or shares of stock issued
by such other corporation and owned by this corporation the same
as such share or shares might be voted by this corporation.
ARTICLE IX
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the
corporation, when earned, may be declared by the board of
directors at any annual, regular or special meeting or by any
committee thereof. Such dividends may be paid in cash, in
property or in shares of the capital stock of the corporation, in
the case of shares with par value at par, and in the case of
shares without par value at such price as may be fixed by the
board of directors.
SECTION 2. Before payment of any dividend or before making
any distribution of profits, there may be set aside out of the
surplus or net profits of the corporation such sum or sums as the
board of directors from time to time, in their absolute
discretion, may deem proper, as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for working
capital, or for such other purpose as the board of directors
shall think conducive to the interests of the corporation.
ARTICLE X
FISCAL YEAR
SECTION 1. The fiscal year of the corporation shall cover a
twelve-month period commencing on the first day of such month as
the board of directors shall, by resolution, provide.
ARTICLE XI
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or
repealed, in whole or in part, and new by-laws may be adopted, at
any annual, regular or special meeting of the shareholders of the
corporation or at any annual, regular or special meeting of the
board of directors of the corporation by the affirmative vote of
a majority of the board of directors; provided, however, that the
board of directors of the corporation may not unilaterally amend
any by-laws which were amended by the affirmative vote of the
shareholders of the corporation within the preceding twenty-four
months.
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<TOTAL-DEFERRED-CHARGES> 501,037
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173,090
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